Keeping on with it – Step 3 Draft

Hi! As promised, the latest update of my step #3 draft is ready to go, i’ll be deleting the old entry once it is all submitted, for now, feel free to click the link and take a look at my latest assignment draft! Feedback is appreciated! Dan Rehbein COMPLETED TASK 3 WORKSHEET

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Task 5: Where are we now?

It’s been only three weeks since I sat down to writing my first piece of this Accounting Assignment, it’s hard to believe. Over the past two weeks, I’ve learned a completely different range of skills in focusing on Accounting on a more personal level, and learning how to properly study and learn new material.

The insight I gained from completing Step 3 of the assignment through studying Clinuvel Pharmaceuticals’ financial situations, I believe, aided me in understanding chapters 2, 3.1 and 3.2. “Playing the game” and having to “learn the rules” as such, in my opinion, are a significant factor within any business environment.

Regulation

This relates to me quite strongly as a student who completed Legal Studies in high school. I never really considered how important it is for firms to provide these reports to the public. However, isn’t withholding information that could potentially make or break another party, whether it is a shareholder, a member of the public, or even a separate company, potentially damaging? I would assume as much. I would still like to further consider these standards and legislation, as I wish to know what sort of environment I am operating in, should I continue and find a career in business and accounting.

The Financial Statements

This was an obstacle for me to overcome for a time, especially because of how it differed from high school. Balance Sheets and Income Statements were our primary focus in High School, and we generally focused on a standard chart of accounts.

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The balance sheets, income statements, changes in equity and cash flow statements are not new to me, but it isn’t enough for me to be able to know them back to front. Clearly, I need to do some more reading into them, understanding the items within the reports, only then can I really get the right angle on figuring it all out. Memorising items is useless if I don’t understand them, obviously, so I will fully intend on reading into unknown items in said reports. It’s the only way I can get it right, by knowing what I’m entering in.

As a result, it did take some deciphering and further understanding of items within the financial reports before I could proceed with my assignment. This situation made me think about what other individuals would do should they receive the reports to read. Naturally, I’m beginning to assume that if someone could not successfully read a financial report, they would not attempt to acquire them in the first place. Shareholders and other companies with significant interest in the business, even if they are competition, would also need to do some deciphering to understand what assets, liabilities, expenses, revenues and equities other firms possessed.

Financial Accounting and Management Accounting

Two forms of accounting were surprising to me, I wasn’t even aware that these two denominations existed. I can now clearly see it applied in various places. I’d like to think this doesn’t relate to accountants primarily. Instead, I see this as a method of applying a wider range of knowledge to one specific area. For example, you may be a Charted Accountant, but you aren’t a Chartered Financial Accountant, or a Chartered Management Accountant. In theory, you may spend the first half of the week working on management accounting tasks for the business. This could involve providing the manager with the latest figures situating the financial position. The second half could be spent supplying shareholders and other members of society with income statements. This can clearly portray the firm’s current standing profits, definitely enticing to someone like J P Morgan, a major shareholder in Clinuvel Pharmaceuticals.

Too many rules? Possibly

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“Don’t over think it!” A statement I’ve learned too well over the years, which I can apply to chapter 2.2 easily. Still, it is who I am. Even this assignment began to be a problematic situation for me after overthinking things too much. Thankfully, I’ve managed to get my mind on track with it now. I’ve made sense of the word Accounting before and, if I have to reread and study to make sense of it once again, I will, because I do agree with this being my one chance, and I want to get this right on the first attempt.

One step at a time

Accrual accounting? A definite plus. This is something I remember from school, and I can get behind it completely, it’s a wonderful idea in my opinion. At my place of employment, we undergo our own sort of Accrual system. We take note each day of what enters the tills the moment we either process the customer’s card or cash, as it helps keep track of what we’ve sold for the day. We can then, at least, refer to it to correct any mistakes. It might not be as formal as other accrual accounting systems, but I feel as though it helps keep a business running efficiently in the short term.

Information, is it legitimate?

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One of the most disastrous things for a business, in my opinion, is miscommunication, especially miscommunication derived from misinformation and poor quality presentation of said information. I see this particularly with life in general, not talking to people when something is wrong, or being blinded by opinions, it’s visible in racism, discrimination and abuse to extremes. The idea of relevance and faithful representation was something I could agree with very openly. If I were a manager, I would prefer having information provided completely unbiased, such as financial results. These would be relayed to me correctly, rather than risk losing my business in failing to compete with other companies, or even keeping my firm from collapsing.

What did I find in my Firm?

Comparability, I was pleased to see it mentioned in chapter 2, why? Because Clinuvel was an impressive business in regards to how consistent it was in keeping comparable financial reports. Without this comparability, half of my step 3 would have been significantly more difficult to complete. This is also something my year 11 and 12 Accounting teachers taught us diligently, consistency was the key. Of course, if we were consistent, we remembered what to do, better yet, we understood what we were doing, and by then it became almost second nature to me and my peers. Is it something I wish to continue? I wouldn’t be consistent if I didn’t!

Footnotes, Parent Companies, the list goes on!

Plenty of reading was to be done of these financial reports, but so much of it makes sense after reading these chapters.

I disregarded my footnotes for too long, but I only just realised how effective they are in understanding specific issues. I used Clinuvel Pharmaceuticals’ footnotes particularly to understand why the business was losing too much in expenses and, as expected, the footnotes provided me with ample reason as to why this was happening. “They’re the wall of text that is worth reading”.

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Parent companies are big factors that I am interested in, but their concept isn’t familiar with me. I like the idea of consolidated and parent companies, as it shows me that group work ranges from small university based networks to multi-billion dollar firms and their allegiances.

Conclusion

It’s been a roller coaster, these first three weeks at least, and I don’t doubt there are still big challenges ahead. This assignment has opened my eyes so much more to a whole new world of business and accounting. This learning and understanding I am doing today will definitely serve as a brilliant foundation for my future endeavours.