KCQ – Chapter 6

Understanding Key Cost Relationships

With this chapter I found myself having to re-read some sections and really taking the time to read carefully to understand what Martin was trying to teach me. I don’t know if I am just having one of those days where my brain is a little bit foggy of if this content was actually hard to digest. None the less, I persevered and kept reading on, trying my best to grasp the content as much as I could. I feel like it seems so simple, so I don’t know why I am struggling with it so much? I suppose I am more of a visual learner not so much of a reading-type of learner. I was never one of those kids in high school who could just be told something once or read something and just understand it straight away. I guess my mind runs off into too many directions or maybe those kids are just way smarter than me ha-ha.

Although it was a bit difficult for me to comprehend in the beginning, but I did like the analogy that Martin used for cost objects, how it is like cleaning your room and how you always find where the stray things belong. This made me understand that cost objects are the different parts of a firm which managers want an understanding of their costs.

The next part that I found quite interesting was something that I have done a lit bit of at work, so the familiarity was pleasant for me. I work as a trainee accountant and lately I have been learning how to do quarterly BAS’s for our clients and when we do a BAS we run a GST Reconciliation report from 01/07/2019 to the end of the quarter we are doing (at the moment it is the end of December) and we will run 2 of those GST Reconciliation reports, one cash basis and the other accrual basis. In the beginning I was unsure about what those terms meant but from my understanding on what my co-workers have told me, cash basis shows the amount that is currently in the client’s bank and what GST has already been collected/paid. Whereas Accrual is all of the GST paid/collected even if it has not reached the clients bank account yet. To my knowledge, not many of our clients run on accrual basis. I think you would find that more in larger companies though. So being able to see accrual come up was really satisfying for me since I felt like I could apply some of my knowledge from my job into my assignments. I also had a familiarity of the word Accrual since it came up in chapter 2. According to Martin’s study accrual accounting is helping a firm arrive at their profit, this requires matching expected costs and benefits of economic activities. Well, that’s a little bit different to how I explained it and what Accrual accounting was to my knowledge, but Martin’s version gives me a deeper understanding about Accrual accounting. Maybe there’s a possibility that my knowledge of Accrual accounting may still be right but since I am referring to GST on a BAS and not Accrual accounting as a general concept for business maybe they could have different applications or meanings…. If that makes sense? Either way, reading Martin’s version of accrual accounting was still intriguing none the less and made me re-think a couple things about some of the jobs I do at work.

Some other things that were in the chapter like attaching costs to cost objects and how costs change were a little trickier to get my head around but luckily for me the diagram for attaching costs to cost objects had a diagram that was not too confronting and had text showing how to attach indirect costs and direct costs to cost objects. However, with the ‘how costs change’ re-run my head around the formulas a few times to grasp the content and I’m not too sure im confident with them yet either. Overall, I liked this chapter because it was very interesting again and it got my brain working. I like the familiarity that I had with the Accrual Accounting, but the other subjects did make that little hamster wheel in the brain of mine spin a bit.