Assignment One – Step One

What an interesting concept, accounting can change, or perhaps should be the way we view business. I have been working as a bank teller for around seven months now. It was not until I have read this week’s chapter that I really understood my job role and why I undertake the tasks that I do. This epiphany moment has changed the way I approach my job role and has helped me train other tellers.

Each of our daily transactions in the bank is recorded in the ‘EJ’, an electronic journal. This is a list of transactions of every teller in time order. It allows me to search transactions by debts, credits, person, amount and a number of other key search fields. This function is critical at the end of the day when we are not able to balance our cash draw. I use the search fields to discern what data entry error, or cash-counting error has been made.

At the end of the day, we post our money for the cash draw. This means the EJ is transferred onto our ledgers and is reviewed by cash management. Each morning there are a number of reports I print to view if us tellers have made a teller error. The most important is the GL Report. This report will show if all our debits and credits matched up for the branch the previous day. For every debit, there must be a corresponding credit and, for every credit there must be a corresponding debit. When there has been a mismatched serial number for an entry or one of our cash accounts is in debit or credit it will show on the report. It is a consuming task problem solving where an error has occurred and resolving the error by debiting or crediting the relevant accounts.

This way of undertaking business in the bank has evolved from double-entry accounting (I am so glad I am not hand writing debits and credits, hallelujah). In our daily work we use a combination of debits and credits in our EJ, and also keep a cash inventory to balance our cash draw. Though balancing our cash draw does not necessarily indicate that we did not make a data entry error during the day. It is not until the EJ is transferred on to the GL that we see if our books really balance.

The concept of proprietorship seems easy enough to understand from my years working in a law firm. When a business is established, it is its own identity. It will have its own name, or if the directors are unimaginative, an ACN (Australian Company Number), which is set up by the business director(s). So basically owners of a firm are different from the business itself. This is usually set out in the business agreement or constitution when a business is established.

We use the accounting equation to work out what a proprietorship is worth.

Assets = liabilities + equity

It was not until this weeks reading that I have started to understand what the personal bankers and home finance manger mean when they talk about needing enough equity in a home to refinance or use as security for another loan. So basically, you will have equity in your property if its market value increases or if you place extra monies on the home loan, so that you are ahead on your repayments.

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Assets = Liabilities + Equity
What you actually own. If you were to sell your home (less real estate, legal fees and tax), this would be the cash amount you have placed into your bank account. What you owe the bank. This is what you still have left to pay the bank until you own your home and the bank releases the security over the property. Your interest in the property. So this is what the house is valued at in the market minus what loan monies you owe the bank. Equity is a relative term because it is hard to place a value on what a property is worth until it is actually sold.



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