Post by: eeps on December 24, 2010, 07:34:12 pm
VCE ACCOUNTING STUDIES Q&A THREAD
To go straight to posts from 2020, click here.
What is this thread for?
If you have general questions about the VCE Legal Studies course or how to improve in certain areas, this is the place to ask!
Who can/will answer questions?
Everyone is welcome to contribute; even if you're unsure of yourself, providing different perspectives is incredibly valuable.
Please don't be dissuaded by the fact that you haven't finished Year 12, or didn't score as highly as others, or your advice contradicts something else you've seen on this thread, or whatever; none of this disqualifies you from helping others. And if you're worried you do have some sort of misconception, put it out there and someone else can clarify and modify your understanding!
There'll be a whole bunch of other high-scoring students with their own wealths of wisdom to share with you, including TuteSmart tutors! So you may even get multiple answers from different people offering their insights - very cool.
To ask a question or make a post, you will first need an ATAR Notes account. You probably already have one, but if you don't, it takes about four seconds to sign up - and completely free!
Original post
Following the success of the Accounting Question Thread, this last year (2010) that I made - I've decided to make another one. Post any questions you may have on this thread, and I'm sure people will help you out. It will save people the hassle of making new threads every time they have a question. Don't hesitate to ask a question, even if you think it is stupid or whatever - that's the worst thing you can do - not asking when you're unsure.
Having done Accountingthis last year (2010), I can help out from time to time (though, I do have my own subjects as well). I'm sure the Business Studies moderators can help out more than I can - all of them (_avO, sam.utute and mba) did Accounting as well, so you can be sure that they know their stuff.
Good luck and post away!
Having done Accounting
Good luck and post away!
Post by: mba on December 24, 2010, 07:55:57 pm
Post by: eeps on December 24, 2010, 08:05:43 pm
If you know the answer to a question, then good for you - consolidates your knowledge. If you have a question that you're unsure of, then you can get it answered here. It's really a "win-win" for everyone involved. In most cases, your question may have already been asked!
I reinforce what mba said, between us (anyone & everyone), you'll 99.9% of the time get an answer. That 0.1% may be due to laziness or some left-field question which isn't necessarily/covered-in-detail on the course. In any case, we'll try to answer your questions as best we can!
Post by: chuckjefster90 on December 28, 2010, 12:31:43 pm
Thanks! :D
Post by: chuckjefster90 on December 28, 2010, 01:59:34 pm
Does anyone have a more clearer answer??
Thanks
Post by: mba on December 28, 2010, 02:18:20 pm
Quote
Bit confused, what is the role/purpose of accounting?
The role of an accounting system is to help decision makers record, classify and report financial information. It provides a means to asssit the decision making capabilities of stakeholders (owners/managers/creditors) when it comes to making decisions relating to the business, i.e.: managing expenses, deciding whether enough revenues are being generated, assessing the need for a new employee, deciding whether a marketing program has been succesful.
Quote
Is it that financial data refers to raw facts and figures, on which financial information will be based on, and that this data becomes financial information, that once sorted and process is more useable and understandable information?
Does anyone have a more clearer answer??
Thanks
Pretty much the same as what you wrote above, it is pretty simple so I don't know another way of explaining the difference. Pretty much the data are the numbers entered into the records (i.e.: journals) and the info (B/S, PLS, CFS) is created from this data so people with a non-financial background can use the info to try and make rational accounting decisions.
----
Financial data is used in the recording process, i.e.: an invoice received from a suppler is entered into the accounting system to reflect a transaction that alters the accounting equation. The combination of this data (that has been entered into the entities records, i.e.: CRJ and CPJ) is then used to create financial information.
Financial information (i.e.: B/S, Profit & Loss and CFS) can be used by by decision makers (i.e.: business owners), as the presentation of financial information can increase the ability of users of the financial information to make rational accounting decisions, as they may not be able to understand the raw finnacial data itself but can understand a well presented balance sheet or cash flow statement.
Post by: EMAHER on January 03, 2011, 03:09:05 pm
I was wondering if anyone could help me with the question "referring to the definition of an asset, explain why one should recognize goodwill as an asset".
Thanks!
Post by: davyp3 on January 03, 2011, 04:10:09 pm
If the business has goodwill, customers will return thus increasing sales for the firm. Therefore it is of great value leading to future economic benefits.
I wouldn't think you would place it in the balance sheet though.
What do you think fellow VNer's?
Post by: pop0008 on January 03, 2011, 04:25:07 pm
Thanks
xxkp
Post by: eeps on January 03, 2011, 05:07:41 pm
Can anyone please explain what "shelving" means?
Thanks
xxkp
Shelving is like an item which a business purchases (i.e. John's business "Pots R Us" bought shelvings for $5,000). It's commonly used in many Accounting questions. It's not really necessary to know what the item actually is, but if you want, here is a picture of a shelving.
Post by: davyp3 on January 03, 2011, 05:44:04 pm
Post by: eeps on January 03, 2011, 08:41:08 pm
Goodwill will lead to future economic benefits for the business.
If the business has goodwill, customers will return thus increasing sales for the firm. Therefore it is of great value leading to future economic benefits.
I wouldn't think you would place it in the balance sheet though.
What do you think fellow VNer's?
I agree with that. From what I learnt this year in Accounting, goodwill is an intangible asset - so you wouldn't put it in the Balance Sheet.
Post by: Fyrefly on January 03, 2011, 08:46:17 pm
Quote
Goodwill will lead to future economic benefits for the business.
If the business has goodwill, customers will return thus increasing sales for the firm. Therefore it is of great value leading to future economic benefits.
I wouldn't think you would place it in the balance sheet though.
What do you think fellow VNer's?
Because goodwill fits the definition of an asset:
An asset is a resource:
(a) controlled by an entity as a result of past events; and
(b) from which future economic benefits are expected to
flow to the entity.
In fact, goodwill is (by definition) an unidentifiable, intangible asset.
However, goodwill is not recognised in the balance sheet of an entity because of its very nature. It is unidentifiable, and thus cannot by reliably measured in most circumstances. Goodwill is not recognised in the balance sheet of an entity unless said entity has been purchased at a value in excess of its net assets. In such a case, the excess value is recognised as goodwill. Also, goodwill is no longer amortised, but is tested annually for impairment. This is uni stuff though... I don't understand why you've been asked about goodwill.
Post by: Fyrefly on January 03, 2011, 08:47:05 pm
Goodwill will lead to future economic benefits for the business.
If the business has goodwill, customers will return thus increasing sales for the firm. Therefore it is of great value leading to future economic benefits.
I wouldn't think you would place it in the balance sheet though.
What do you think fellow VNer's?
I agree with that. From what I learnt this year in Accounting, goodwill is an intangible asset - so you wouldn't put it in the Balance Sheet.
Identifiable intangible assets go in the balance sheet.
Unidentifiable intangible assets don't (read: goodwill).
Post by: EMAHER on January 03, 2011, 09:44:31 pm
Yeah, the question confused me, but I guess I'll just talk about how it is a future economic benefit, past events etc.
Thanks again =]
Post by: Furbob on January 04, 2011, 02:30:19 pm
How did they get the figure ($17,800) for the Bank in the Trial Balance? I tried referring to the texbook but it didn't make sense? or is the book wrong? When I was footing the Bank Account I got $25900 so do I use that figure instead?
Post by: _avO on January 04, 2011, 02:46:44 pm
huzzah I have a quick question regarding the Cambridge workbook Q3.4cIt is $17,800. Did you make sure you didn't DR/CR any credit related transactions or stock drawings in the bank account?
How did they get the figure ($17,800) for the Bank in the Trial Balance? I tried referring to the texbook but it didn't make sense? or is the book wrong? When I was footing the Bank Account I got $25900 so do I use that figure instead?
Post by: Furbob on January 04, 2011, 02:58:12 pm
how embarrassing :(
Post by: nacho on January 04, 2011, 03:01:30 pm
huzzah I have a quick question regarding the Cambridge workbook Q3.4cThese are my workings, from the ledgers:
How did they get the figure ($17,800) for the Bank in the Trial Balance? I tried referring to the texbook but it didn't make sense? or is the book wrong? When I was footing the Bank Account I got $25900 so do I use that figure instead?
Bank(A)
DR:
Aug 1. Capital:30,000
Aug 3. Sales: 400
Aug 9. Debtors Control: 500
TOTAL: 30900
CR
Aug 2. Premises: 10000
Aug 4. Shelving: 2500
Aug 7. Wages: 600
TOTAL: 13100
When i foot the account, my bank was 17800 (30900 - 13100)
EDIT: nvm, you've realised your fault
Post by: _avO on January 04, 2011, 03:01:40 pm
Post by: Furbob on January 06, 2011, 12:50:26 pm
Can someone explain what the "Days Outstanding" and "Amount Outstanding" means? :(
Post by: nacho on January 06, 2011, 11:42:38 pm
DR
July. 31 - Bank - 120
July. 31 - Creditors Control - 520
July. 31 - Balance - 1170
______
1810
______
CR
July. 1 - Balance - 610
July. 31 - Bank - 400
July. 31 - Debtors Control - 800
________
1810
________
Aug. 1 - Balance - 1170
This does not match the solutions, and i cannot figure out why..
(solution attached)
EDIT: Nvm, i completely missed the GST settlement in the purchases journal, it camouflaged so well.
However, I've got another question, if you could refer to the Capital account (which i've attached below) the solutions have omitted a DR of 1000, as the owner withdraws 1000 in the CPJ, is there any reason as to why this is?
Anyways, the next exercise has done the same thing, I thought Drawings reduced capital?
Post by: Furbob on January 07, 2011, 06:52:09 pm
Post by: eeps on January 07, 2011, 10:00:03 pm
However, I've got another question, if you could refer to the Capital account (which i've attached below) the solutions have omitted a DR of 1000, as the owner withdraws 1000 in the CPJ, is there any reason as to why this is?
Anyways, the next exercise has done the same thing, I thought Drawings reduced capital?
Yes, Drawings reduces Capital. It's probably just an error in the solutions - it's best to confirm with your teacher, when you get back to school about it.
@Furbob (though the question was not directed at me specifically), cover the whole of Unit 3, if you can. Though it may be tedious doing it now in the holidays, trust me, it's worth it in the long run.
Post by: nacho on January 07, 2011, 11:39:01 pm
^ how much of exercises are you trying to cover before school starts? I was planning to finish off the first 7 chapters (almost finished chapter 5~ but its too bloody hot to keep on working atm)Yea i know, i got really lazy, i should ahve finished unit 3 before january started, but now i'll probably aim to finish it before the 11th. Then i'll jump straight into checkpoints, neap and practice exams when school starts
Post by: Furbob on January 08, 2011, 12:00:08 am
what would you do during class when everyone is doing the exercise? (if you get time)
PS. I wouldn't call not-finishing-12-chapters-worth-of-exercises-before-Jan "really lazy" :o
Post by: nacho on January 08, 2011, 12:18:20 am
woah now you're making me feel like a bum :( I'm just worried that i'll end up using most resources way before the exam comes~ but I will have completed all Unit 3 exercises before term 1 endsWell, class time will be used to complete study guides, and re-enforce the stuff i was having difficulties with,
what would you do during class when everyone is doing the exercise? (if you get time)
PS. I wouldn't call not-finishing-12-chapters-worth-of-exercises-before-Jan "really lazy" :o
don't worry about the resources, there are like 50+ accounting exams on this forum lol
And damn, correcting entries is hard.
But yea, I was lazy in that I could have finished unit 3 a lot earlier if I worked on it properly..
EDIT: Could someone help me with ex 7.10?
It's so hard for me... I made the correct corrections, but in the answer they use 'cleaning expenses' in the details whilst I used 'cleaning supplies', as the book clearly states "$120 of equipment was incorrectly debited to cleaning supplies."
Post by: Hellhole on January 08, 2011, 08:23:29 pm
woah now you're making me feel like a bum :( I'm just worried that i'll end up using most resources way before the exam comes~ but I will have completed all Unit 3 exercises before term 1 endsWell, class time will be used to complete study guides, and re-enforce the stuff i was having difficulties with,
what would you do during class when everyone is doing the exercise? (if you get time)
PS. I wouldn't call not-finishing-12-chapters-worth-of-exercises-before-Jan "really lazy" :o
don't worry about the resources, there are like 50+ accounting exams on this forum lol
And damn, correcting entries is hard.
But yea, I was lazy in that I could have finished unit 3 a lot earlier if I worked on it properly..
EDIT: Could someone help me with ex 7.10?
It's so hard for me... I made the correct corrections, but in the answer they use 'cleaning expenses' in the details whilst I used 'cleaning supplies', as the book clearly states "$120 of equipment was incorrectly debited to cleaning supplies."
Use 'cleaning supplies.' A lot of the text books I had tend to show the wrong entries, but they were generally along the same lines as each other. You did make the correct entries though, didn't you? (Sorry, I don't have the text book - just thought I'd throw it out there).
Post by: eeps on January 08, 2011, 09:49:34 pm
Post by: Tan on January 09, 2011, 11:21:29 am
Post by: _avO on January 09, 2011, 11:45:44 am
Cash purchase = Chq. XX (Cheque butt)
Cash sale = Rec. XX (Receipt)
Credit purchase/sale = Inv. XXX (Invoices)
Post by: Tan on January 09, 2011, 11:53:01 am
Post by: nacho on January 09, 2011, 06:14:09 pm
I'm having difficulty in getting the correct answer..
Sales:
Oct. 10 : 5 x 900 = 1400
Oct. 14 : 2 x 900 = 1800
+ stock gain = 650
total = 6950
Cost of sales:
Oct. 10 : 2400 + 650
Oct. 14 : 1300
Total = 4350
Sales+stockgain less cost of sales = 2600
The answers have :
Sales revenue $6 930 (7 units $990 per unit)
less Cost of sales 4 350 (3 050 + 1 300)
Gross profit 2 580
add Stock gain 650
_______
Adjusted Gross profit $3 230
I think i'd have the same answer, except, in the answers they've multiplied the 7 units by 990, even though it was only sold for 900 plus 90 for each unit, is this correct? I thought GST did not count towards our sales since it is only collected on behalf of the ATO.
Post by: _avO on January 09, 2011, 06:25:02 pm
Post by: nacho on January 09, 2011, 09:47:45 pm
Post by: _avO on January 09, 2011, 09:52:27 pm
Post by: eeps on January 10, 2011, 08:09:38 pm
Post by: nacho on January 11, 2011, 08:20:12 pm
I thought BDA was fun, we touched on it last year, more calculations, but not really tough or anything, so i'm happy, just need to nail the theory and get used to correcting entries and narrations
Post by: Furbob on January 12, 2011, 04:18:01 pm
Stock that Betty had used for advertising (worth $500) had been incorrectly recorded as Drawings
I originally thought "Stock Control" + "Drawings" but it was really "Advertising" + "Drawings" :(
Post by: lilaznkev1n on January 12, 2011, 07:51:55 pm
im on exercise 7.10 and I found this a little vague in Correcting Entries
Stock that Betty had used for advertising (worth $500) had been incorrectly recorded as Drawings
I originally thought "Stock Control" + "Drawings" but it was really "Advertising" + "Drawings" :(
If I remembered correctly, looking at this there should be 4 entries. Two for Reversing the mistake of incorrectly recording it as drawings and two more entries for correcting the entry as advertising. I haven't done any accounting for like 2 months so this might be wrong:
Stock Control 500
Drawings 500 (this is correcting the mistake)
Advertising 500
Stock Control 500 (correcting entry as advertising expense)
Post by: nacho on January 13, 2011, 12:16:36 am
If I remembered correctly, looking at this there should be 4 entries. Two for Reversing the mistake of incorrectly recording it as drawings and two more entries for correcting the entry as advertising. I haven't done any accounting for like 2 months so this might be wrong:I'm a little confused as to why there should be a correcting entry for stock control.
Stock Control 500
Drawings 500 (this is correcting the mistake)
Advertising 500
Stock Control 500 (correcting entry as advertising expense)
It wasn't incorrectly debited in the first place and seeing that they both cancel each other out, isn't this a bit redundant?
Sigh..I hate correcting entries.. O_O
Post by: Furbob on January 13, 2011, 12:18:54 am
I mainly get confused with the GST component since one exercise questioned why the GST didnt need to be accounted for then on the othe exercises they counted the GST in *rips out hair* but on 7.12 and I can have a "rest" on Stock Cards
Post by: nacho on January 13, 2011, 12:21:06 am
*raises hand* me too.What question? I want to look at it
I mainly get confused with the GST component since one exercise questioned why the GST didnt need to be accounted for then on the othe exercises they counted the GST in *rips out hair* but on 7.12 and I can have a "rest" on Stock Cards
Post by: Furbob on January 13, 2011, 12:29:36 am
Post by: lilaznkev1n on January 13, 2011, 06:49:29 pm
That is what I did last year but I'm not sure if you can just debit advertising expense and credit drawings.If I remembered correctly, looking at this there should be 4 entries. Two for Reversing the mistake of incorrectly recording it as drawings and two more entries for correcting the entry as advertising. I haven't done any accounting for like 2 months so this might be wrong:I'm a little confused as to why there should be a correcting entry for stock control.
Stock Control 500
Drawings 500 (this is correcting the mistake)
Advertising 500
Stock Control 500 (correcting entry as advertising expense)
It wasn't incorrectly debited in the first place and seeing that they both cancel each other out, isn't this a bit redundant?
Sigh..I hate correcting entries.. O_O
I did Stock Control twice so that my General Ledger for stock control would look correct.
If I just did:
General Journal
Advertising 500
Drawings 500
In my Stock Control general ledger it will still appear as drawings: (I just added random numbers)
Stock Control
Debit Credit
1/1 Balance 3700 31/1 Stock Loss 450
31/1 Bank 12500 31/1 Drawings 500
Notice that if I just debited advertising and credit Drawings it has no effect on Stock Control and still appears as drawings.
If I did this however in the General Journal it would remove the drawings of 500 in the stock control ledger and replace it with Advertising instead.
General Journal
Stock Control 500
Drawings 500
Advertising 500
Stock Control 500
Stock Control
Debit Credit
1/1 Balance 3700 31/1 Stock Loss 450
31/1 Bank 12500 31/1 Advertising 500
I'm not sure if just doing two entries (debiting Advertising and crediting Drawings) is correct, but this is how my teacher taught me so if the solutions has two entries and it probably is correct as well.
Post by: Fyrefly on January 13, 2011, 09:28:32 pm
GST and stock control are usually omitted because their correcting entries cancel each other out.
Take note of this example, for instance:
im on exercise 7.10 and I found this a little vague in Correcting Entries
Stock that Betty had used for advertising (worth $500) had been incorrectly recorded as Drawings
I originally thought "Stock Control" + "Drawings" but it was really "Advertising" + "Drawings" :(
If I remembered correctly, looking at this there should be 4 entries. Two for Reversing the mistake of incorrectly recording it as drawings and two more entries for correcting the entry as advertising. I haven't done any accounting for like 2 months so this might be wrong:
Stock Control 500
Drawings 500 (this is correcting the mistake)
Advertising 500
Stock Control 500 (correcting entry as advertising expense)
There is an identical DR and CR for stock control.
You could do this:
Drawings 500
Advertising 500
|
|
V
Drawings 500
Advertising 500
...and you'll still get the same overall result.
Do you guys sort of get that now?
Like I said before, GST entries usually cancel themselves out too.
Post by: Fyrefly on January 13, 2011, 09:42:18 pm
That is what I did last year but I'm not sure if you can just debit advertising expense and credit drawings.If I remembered correctly, looking at this there should be 4 entries. Two for Reversing the mistake of incorrectly recording it as drawings and two more entries for correcting the entry as advertising. I haven't done any accounting for like 2 months so this might be wrong:I'm a little confused as to why there should be a correcting entry for stock control.
Stock Control 500
Drawings 500 (this is correcting the mistake)
Advertising 500
Stock Control 500 (correcting entry as advertising expense)
It wasn't incorrectly debited in the first place and seeing that they both cancel each other out, isn't this a bit redundant?
Sigh..I hate correcting entries.. O_O
I did Stock Control twice so that my General Ledger for stock control would look correct.
If I just did:
General Journal
Advertising 500
Drawings 500
In my Stock Control general ledger it will still appear as drawings: (I just added random numbers)
Stock Control
Debit Credit
1/1 Balance 3700 31/1 Stock Loss 450
31/1 Bank 12500 31/1 Drawings 500
Notice that if I just debited advertising and credit Drawings it has no effect on Stock Control and still appears as drawings.
If I did this however in the General Journal it would remove the drawings of 500 in the stock control ledger and replace it with Advertising instead.
General Journal
Stock Control 500
Drawings 500
Advertising 500
Stock Control 500
Stock Control
Debit Credit
1/1 Balance 3700 31/1 Stock Loss 450
31/1 Bank 12500 31/1 Advertising 500
I'm not sure if just doing two entries (debiting Advertising and crediting Drawings) is correct, but this is how my teacher taught me so if the solutions has two entries and it probably is correct as well.
You second stock control T-account would actually look like this:
Stock Control
Debit Credit
1/1 Balance 3700 31/1 Stock Loss 450
31/1 Bank 12500 31/1 Drawings 500
31/1 Drawings 500 31/1 Advertising 500
Also... even though the stock control account would technically have the incorrect cross-reference if you do the two entries only (DR Advertising, CR Drawings)... the whole point of a correcting entry is to note a mistake and make a correction. That is, despite the fact that the cross-reference is wrong in the stock control account, you'll be able to see from the correcting entry and its accompanying note (eg. "$500 advertising incorrectly recorded as drawings") that it wasn't actually drawings.
Edit: Wait, just give me a second to think about this...
Edit 2: Yeah... I think I'm right... I'm kind of tired though. You know what my problem is? Believe it or not, I was kind of thrown off by the fact there are so few entries in the stock control account... I'm used to seeing quite a few more ^_^;
Post by: Furbob on January 13, 2011, 09:53:28 pm
GST and stock control are usually omitted because their correcting entries cancel each other out.
Take note of this example, for instance:im on exercise 7.10 and I found this a little vague in Correcting Entries
Stock that Betty had used for advertising (worth $500) had been incorrectly recorded as Drawings
I originally thought "Stock Control" + "Drawings" but it was really "Advertising" + "Drawings" :(
If I remembered correctly, looking at this there should be 4 entries. Two for Reversing the mistake of incorrectly recording it as drawings and two more entries for correcting the entry as advertising. I haven't done any accounting for like 2 months so this might be wrong:
Stock Control 500
Drawings 500 (this is correcting the mistake)
Advertising 500
Stock Control 500 (correcting entry as advertising expense)
There is an identical DR and CR for stock control.
You could do this:Stock Control 500
Drawings 500
Advertising 500
Stock Control 500
|
|
V
Drawings 500
Advertising 500
...and you'll still get the same overall result.
Do you guys sort of get that now?
Like I said before, GST entries usually cancel themselves out too.
I think I understand now :D
thanks future-me.
Post by: eeps on January 13, 2011, 09:58:39 pm
... and yes, that's what our class did for fun. :p
Post by: nacho on January 13, 2011, 10:10:23 pm
There is an identical DR and CR for stock control.YAY!!
You could do this:Stock Control 500
Drawings 500
Advertising 500
Stock Control 500
|
|
V
Drawings 500
Advertising 500
...and you'll still get the same overall result.
Do you guys sort of get that now?
Like I said before, GST entries usually cancel themselves out too.
Not to go off-topic, but, if you want a "fun" exercise related to Accounting, try putting down all DEBIT and CREDIT entries that you can think of, that go in the Stock Control account. I found 16. We spent one whole class doing this, debating the entries.my god, is that really your idea of fun, hopefully i don't have to be like that to get a 45+ lol.. accounting will ruin all of us..
... and yes, that's what our class did for fun. :p
Post by: eeps on January 13, 2011, 10:42:19 pm
my god, is that really your idea of fun, hopefully i don't have to be like that to get a 45+ lol.. accounting will ruin all of us..
What's there not to like about Accounting? :p
I thoroughly enjoyed Accounting and although at times tedious, it was a good subject. If you're aiming for 45+ in Accounting, be sure to score well on SACs and the exams. You don't need to ace SACs to get 45+. My friend last year got 50 for Accounting and he rarely got 100% on any SAC. It's about constant practice and minimising your mistakes.
Post by: nacho on January 13, 2011, 11:01:45 pm
Oh that's nice.. Except i tend to make a lot of silly mistakes (i think i've managed to correctly balance a balance sheet like twice out of all the ones i've attempted since last year.. lol)my god, is that really your idea of fun, hopefully i don't have to be like that to get a 45+ lol.. accounting will ruin all of us..
What's there not to like about Accounting? :p
I thoroughly enjoyed Accounting and although at times tedious, it was a good subject. If you're aiming for 45+ in Accounting, be sure to score well on SACs and the exams. You don't need to ace SACs to get 45+. My friend last year got 50 for Accounting and he rarely got 100% on any SAC. It's about constant practice and minimising your mistakes.
A school like mine, with a really crap cohort, do you think i'd need to maintain very high SAC scores and probably rank 1?
I know for IT my SS got pulled down a lot because of my cohotrt (but we only had 10 people, really really weak cohort, compared to other subs, and i was ranked lower than i should have been)
Post by: eeps on January 13, 2011, 11:09:52 pm
Quote
A school like mine, with a really crap cohort, do you think i'd need to maintain very high SAC scores and probably rank 1?
Yes, probably. If you are Rank 1 at your school for Accounting, then you'll have every chance of getting 45+. The moderation of SACs won't affect you as such.
Post by: Furbob on January 14, 2011, 12:25:13 am
and @nacho, I forgot who on this site, but their siggy says "ACCOUNTING IS MAH HAWT SECKS" in a massive font LOLOL.
Post by: lilaznkev1n on January 14, 2011, 12:16:03 pm
Not to go off-topic, but, if you want a "fun" exercise related to Accounting, try putting down all DEBIT and CREDIT entries that you can think of, that go in the Stock Control account. I found 16. We spent one whole class doing this, debating the entries.haha you beat me
... and yes, that's what our class did for fun. :p
i only found 13
Post by: Hodgeyhodgey on January 14, 2011, 01:36:05 pm
I have the pdf version of the cambridge textbook and I've just found out that my class is using the neville box textbook, which I won't get until the 20th. My question is, should I start doing work out of the cambridge book until I get the neville box book, or should I just wait until the 20th and then get ahead in that work? OR should I do work out of both textbooks during the year? :D
Post by: eeps on January 14, 2011, 09:53:02 pm
Post by: Hodgeyhodgey on January 14, 2011, 09:59:22 pm
Start on the Cambridge textbook. It doesn't matter what textbook you use, just start. Then, when you get the Neville Box textbook use that in conjunction with the Cambridge one. I suggest using the Neville Box textbook mainly, since it's the one prescribed by your school and use the Cambridge textbook to supplement it. If you don't understand a concept in the Neville Box textbook, then read through the other one and vice versa. I don't think there is any point in doing all the exercises from both textbooks.Sounds fair enough :)
I'll be doing physics over the next few days just to get questions and a few prac write-ups done, so it may not even be worth starting in Cambridge.. :/
I'm sure I'll figure out a compromise, even if that means seeing/emailing my teacher and see what he thinks :)
Post by: eeps on January 14, 2011, 10:22:00 pm
I'll be doing physics over the next few days just to get questions and a few prac write-ups done, so it may not even be worth starting in Cambridge.. :/
I'm sure I'll figure out a compromise, even if that means seeing/emailing my teacher and see what he thinks :)
That's probably the best thing to do; email your teacher if you have any concerns/questions. Good luck for Accounting this year; work hard and put in the effort and anything is possible.
Post by: Hodgeyhodgey on January 14, 2011, 10:31:13 pm
Will do, Accounting and Further should be my best scores since I actually enjoy studying for them, it's going to make it that much easier :)I'll be doing physics over the next few days just to get questions and a few prac write-ups done, so it may not even be worth starting in Cambridge.. :/
I'm sure I'll figure out a compromise, even if that means seeing/emailing my teacher and see what he thinks :)
That's probably the best thing to do; email your teacher if you have any concerns/questions. Good luck for Accounting this year; work hard and put in the effort and anything is possible.
Post by: nacho on January 15, 2011, 12:18:13 pm
It's from Exercise 10.12 (page 205) and it's about the Interest expense on the general ledger.
We are given the following information for the adjustment (i believe so):
Pre-adjustment trial balance as at 31 December 2010:
Interest expense - DR: 1800
Mortgage HH Finance - CR: 180000
___________
Additional information:
Monthly repayments of $2000 are made on the principal of the mortgage - HH finance.
interest is charged at 6% p.a and payable on 28 February and 31 August each year.
___________
When i attempted the question, I recorded in the general ledger:
Mortgage - HH Finance - DR: 2000
Bank. - CR: 2000
___
Interest expense - DR: (6/% of 180,000 plus 1800 (current expense)
Accr interest exp - CR: [same as above]
_________________________________________
I get really confused in doing recordings like these, and almost never get them correct...
The answer:
Interest Expense - DR: 3600
Accrud interest.. - CR: 3600
_____
I don't understand why you don't :
- make the adjustment for the payment of $2000 towards the mortgage..
- why the interest is doubled?( Is the info not vague? It says 6% p.a, 6% of the mortgage is not 1800, but 10800) so then why is only 1800 addded?
Any help would be much appreciated! :D Thanks
Post by: _avO on January 15, 2011, 12:42:57 pm
*Pre-adjustments are made as at 31st Dec
*Mortgage of $180,000 was taken out
*6% interest per annum, payable on 28th Feb and 31st Aug every year
*Monthly repayments are made of $2,000
The purpose of adjustments are to record entries that have been incurred but not yet payed. In this case the mortgage repayment is monthly, you do not need to adjust the entry as it is correct every month (and as a rule Bank should never go into the G.J). However the interest is incurred every month but there are only 2 dates when the payments can be made. So from the 31st August to the 31st December, interest has been incurred but not accounted for.
Firstly to make things easier, when you get a question like this find the interest and then divide it by 12 (months)
interest x principal loan
= 6% x $180,000
= $10,800 p.a.
$10,800/12 = $900/month
From the end of Aug to the end of December you get:
31stAug|__________|30thSept|_________|31stSept|_________|30thNov|_________|31stDec, 4 months
(Drawing it out makes it a lot easier and reduces the chance of including an extra month by accident)
$900/month x 4 months
= $3600
Because this payment was incurred it is referred to as an 'Accrued' expense (incurred but not yet payed), and after you account for it it is then referred to as an expense (incurred and payed)
DR | CR
Interest expense $3,600
Accrued Int $3,600
Hope this makes sense
Post by: nacho on January 15, 2011, 12:51:33 pm
Also, are there any notes on the general journal uploaded anywhere here? I know that i'll be going over this stuff in school, which will aid in understanding, but i also know that for subjects like chemistry, i will also need to go over some concepts, so it's best to save time
Thanks again avo, for clearing things up
Post by: _avO on January 15, 2011, 01:00:02 pm
I don't think I have any notes specifically for the GJ, but you will see that most GJ entries for BDAs (and unit 4 stuff including trade-ins, sales returns) are just repeats with different creditor/debtor names, or different transaction details but have the same exact two-fold effect (i.e. DR expense, CR accrued) so it's not very difficult.
Post by: nacho on January 15, 2011, 01:09:51 pm
you said bank cannot go into the general journal right? But what about when you're showing the opening entry/commencement of double entry
Post by: _avO on January 15, 2011, 01:12:44 pm
Post by: hello_kitty on January 16, 2011, 11:09:41 am
1. Referring to one Accounting principle, explain why owner’s equity is said to be what the ‘business owes the owner’. Is it the Entity Principle? Because the owner and the business are two separate accounting entities?
2. Explain the difference between liabilities and owner’s equity.
Liabilities are what the business owes to external parties and owner's equity is what the business owes the owner?
3. Referring to the definition of owner’s equity, explain why the Accounting equation must always balance.??
4. Role of Balance Sheet?
Details a firm’s financial position at a particular point in time by listing its assets and liabilities and the owner’s equity
5. Explain the relationship between the Balance Sheet and the Accounting equation.
The elements of the Accounting equation – assets, liabilities and owner’s equity provide the headings within the Balance Sheet
Post by: Fyrefly on January 16, 2011, 06:30:34 pm
Hey Guys, I have some really silly questions that I just need some clarification on :/
1. Referring to one Accounting principle, explain why owner’s equity is said to be what the ‘business owes the owner’. Is it the Entity Principle? Because the owner and the business are two separate accounting entities?
2. Explain the difference between liabilities and owner’s equity.
Liabilities are what the business owes to external parties and owner's equity is what the business owes the owner?
3. Referring to the definition of owner’s equity, explain why the Accounting equation must always balance.??
4. Role of Balance Sheet?
Details a firm’s financial position at a particular point in time by listing its assets and liabilities and the owner’s equity
5. Explain the relationship between the Balance Sheet and the Accounting equation.
The elements of the Accounting equation – assets, liabilities and owner’s equity provide the headings within the Balance Sheet
1. Owner's equity is the owner's residual interest in a business. It represents the owner's interest in the business; the owner's investment, if you will. In this sense, the "business owes the owner". Yes, you'd refer to the entity principle.
2. Go straight back to the definitions. You're correct, but expand on that a little bit. Remember, owner's equity is the residual interest held in a business (OE = A - L).
3. Again, the residual interest thing. By definition, OE = A - L... thus... the balance sheet must always balance, because OE is the "fill in the blank, missing figure" in the OE = A - L equation.
4. That's good. You could write an extra sentence about non-current and current assets and liabilities if you'd like... about how it's also useful to have indications like this handy.
5. Yep. Balance sheet is based on the accounting equation. OE = A - L. (Or, rearranged, A = L + OE... you probably do balance sheets in this format most of the time).
I'm sorry I didn't provide more comprehensive answers, I'm about to head off to a friend's house... if you need more information, please ask.
Post by: nacho on January 17, 2011, 08:47:16 pm
I have a question, seeing that I was unable to answer a lot of the theory questions after chapter 8ish, (60% questions required me to look at answers or skip)
should i then read over unit 3 lightly throughout the holidays, or, should i put it aside and just focus on my other subs and once school starts, the revision then will be enough.
Post by: eeps on January 17, 2011, 08:50:42 pm
Post by: hello_kitty on January 17, 2011, 10:43:38 pm
Explain the practical consequences of adopting the Entity principle
Explain why the implementation of the Going concern principle requires the adoption of the reporting period principle
Thanks!
Post by: eeps on January 17, 2011, 10:52:45 pm
Quote
Explain why the implementation of the Going concern principle requires the adoption of the reporting period principle
I didn't come across this question when I did Accounting last year; but, I'll give it a crack. The Going Concern principle states that the life of the business is assumed to be continuous. Hence, to give financial information to the owner; that is useful for decision-making, the life of the business is divided into periods of time, so that financial reports can be produced - which will then assist the owner. That's my take on the question. I could be right or wrong. Other people can help you out. As for your first question; I have no idea. Sorry I can't be of further help!
Post by: Furbob on January 18, 2011, 02:50:03 pm
I know COGS are expenses incurred in order to get stock in condition and position ready for sale but what exactly are "buying expenses" ? :o
Post by: eeps on January 18, 2011, 03:43:59 pm
Quote from: July 25, 2010, 11:40:02 PM
Question:
What's the difference between 'Buying Expenses' and 'Selling Expenses'... like the definitions. Buying Expenses go under COGS right? and Selling Expenses go under 'Other Expenses'? [in the P/L Statement.]
Quote from: July 25, 2010, 11:55:00 PM
Yeah, I would assume buying expenses relate to all the costs required to prepare stock, and selling expenses is everything else such as freight out, delivery.
I asked this exact question a while ago. I don't know if there is an exact definition of "Buying expenses", but I think it's things like Freight In, Delivery costs (getting stock into the business), Modification costs; items like that. It's not necessary to know what it is in Unit 3.
Post by: hello_kitty on January 18, 2011, 06:28:52 pm
Post by: nacho on January 18, 2011, 09:03:29 pm
on Cambridge exercise 9.5... with the Profit and Loss Statement why was "buying expenses" listed under COGS?I remember that exercise, the only reason I put buying expenses under COGS was because i'd never seen it before as a regular expense.
I know COGS are expenses incurred in order to get stock in condition and position ready for sale but what exactly are "buying expenses" ? :o
But I'm also assuming, that if you must pay an extra amount to purchase that stock ( a buying expense ), then it is techincally an expense which is necessary to get the stock ready for sale.
I know I can't provide a definitive answer, so sorry, the logical one will have to do!
Post by: sam.utute on January 19, 2011, 12:47:32 am
on Cambridge exercise 9.5... with the Profit and Loss Statement why was "buying expenses" listed under COGS?I remember that exercise, the only reason I put buying expenses under COGS was because i'd never seen it before as a regular expense.
I know COGS are expenses incurred in order to get stock in condition and position ready for sale but what exactly are "buying expenses" ? :o
But I'm also assuming, that if you must pay an extra amount to purchase that stock ( a buying expense ), then it is techincally an expense which is necessary to get the stock ready for sale.
I know I can't provide a definitive answer, so sorry, the logical one will have to do!
That pretty much sums it up. Buying expenses fit the definition of COGS (i.e. they are incurred in order to bring the stock into a location etc. etc.). The word "buying" refers to the actual purchase of the stock, which is usually collated under COS, but in this case, can be separated from the actual cost price of the stock. An example could be Agents Commission or a Credit Payment Surcharge.
Post by: Hodgeyhodgey on January 21, 2011, 11:23:29 am
I know this seems a basic question, but I'm finding the neville box textbook lacking a little with the theory. In this part, it just craps on about the history of creating the standards, with very little detail into what they are..
Post by: mba on January 21, 2011, 03:45:24 pm
One of the purposes of accounting standards is to ensure consistent methods of preparing reports are used so comparisons can be made between the performance of differing business entities.
You can get an idea of what the standards entitle by going to this website ... http://www.aasb.com.au/Pronouncements/Current-standards.aspx.
MBA
Post by: Hodgeyhodgey on January 24, 2011, 07:26:10 pm
Another query (regarding DEA),
"Outline how the rules of debit and credit can be determined from the accounting equation"
I know this is referring to how each transaction as 2< effects on the balance sheet, hence it always remains balanced, but I just can't seem to find the right wording to relate back to the question. Help? :D
Post by: hello_kitty on January 28, 2011, 01:35:51 pm
Is it that it shows all the transactions that affect a particular item??
Thanks :D
Post by: nacho on January 28, 2011, 05:00:47 pm
Could anyone clarify what the role of a ledger account is?roughly, the role of a ledger account is to create an accounting system which allows you to make changes to the accounting equation, without having to re-write it every time.
Is it that it shows all the transactions that affect a particular item??
Thanks :D
Once you do a few ledger accounts yourself (chapter 3 i believe) you'll see how it works!
Post by: hello_kitty on January 28, 2011, 08:36:21 pm
I was also wondering if anyone could create some questions that need me to identify why it's the Conservatism Principe??
These are some examples from the book that I have trouble explaining when it is Conservatism:
- In October 2008, Mark Larkin, the owner of Larkin Lighting, decided that the firm's stock should be valued at its selling price rather than its cost price because, according to Mark, 'That's what it is actually worth'
a) Referring to two Accounting principle, explains why the stock must be valued at its cost price.
I know that one is the Historical Cost Principle, but the other one is suppose to be Conservatism but I'm unsure why???
- Erica Carr's business has been sued for false advertising, and her solicitor has indicated that she is likely to lose the forthcoming court case. Damages have been estimated at $55 000, but Erica has not reported the damages in the Profit and Loss statement.
a) Referring to one accounting principle, explain why Erica should disclose the damages in the Profit and Loss Statement..
Again its Conservatism but why??
So if anyone has any practice questions of determining Conservatism would be great :)!!
Thanks!
Post by: eeps on January 28, 2011, 08:56:56 pm
a) It's Conservatism because if stock is valued at its' selling price, you're recognising the gain before it's certain. There is no guarantee that the stock will be sold at its' selling price, hence stock should be valued at its' cost price. By doing so, this satisfies the Historical Cost principle as well.
b) If Erica doesn't report the damages in the P/L Statement this would breach the Conservatism principle. The loss should be recorded in the report, otherwise it doesn't give Erica (the owner) a true indication of the business' financial position. By reporting the loss, this satisfies the Conservatism principle; that losses should be recorded when probable.
Post by: hello_kitty on January 28, 2011, 09:09:12 pm
that clarified it for me :)
Could you by any chance create a similar question?? relating to Conservatism??
Or have any in other texts??
THanks again!
Post by: eeps on January 28, 2011, 09:22:41 pm
Post by: Furbob on January 28, 2011, 10:40:14 pm
Post by: nacho on January 28, 2011, 10:55:54 pm
Okay, well put simply - it fits the definiton of the conservatism principle - which is: "Losses should be reported when ever there is a chance [or as the book says, "when probable"] and gains only when certain..."
- Erica Carr's business has been sued for false advertising, and her solicitor has indicated that she is likely to lose the forthcoming court case. Damages have been estimated at $55 000, but Erica has not reported the damages in the Profit and Loss statement.
a) Referring to one accounting principle, explain why Erica should disclose the damages in the Profit and Loss Statement..
Again its Conservatism but why??
Thanks!
In this scenario she is likely to lose the case, therefore the loss is probable and must be reported.
In a way, the conservatism principle makes it so you know what your profits will be at their worst, hope that helps.
Post by: david10d on January 28, 2011, 11:07:14 pm
During Unit 4 the principle comes up quite frequently so it's best if you perfect it early.
Post by: hello_kitty on January 29, 2011, 01:15:47 pm
and the if possible incorporate what the question is asking??
Post by: sam.utute on January 29, 2011, 02:54:06 pm
so do you all recommend me just to always include the 'LOsses should be reported when probable and gains when certain, so that libailities and expenses are not understated, and assets and revenues are not overstated?'You only include the section that relates to the question; meaning, either "Losses should be reported when probable so that liabilities and expenses etc. etc." or "Gains should be recorded only when certain so that assets etc. etc.".
and the if possible incorporate what the question is asking??
By writing out the full definition, you are basically showing the examiner that you have "rote-learned" and they will assume that you do not understand the concept being tested.
Follow IDL and do use definitions, but be smart when you use them and only use the parts pertaining to the question.
Another example would be Reporting Period.
Post by: hello_kitty on January 29, 2011, 05:31:38 pm
I've been finding Cash Sales and Credit Sales a bit difficult! I'm unsure on how to answer the Review questions:
1. Show the and credit entries necessary to record:
- A Cash Sale (of stock)
- A credit sale (of stock)
- a receipt from a debtor
- cash drawings
2. Explain why a receipt from a debtor does not increase profit.
THanks!
Post by: hello_kitty on January 29, 2011, 05:38:01 pm
Post by: iNerd on January 29, 2011, 05:45:45 pm
Also, How do I avoid from 'rote-learning'???Not that I have any experience with Accounting or anything but what's wrong with it? - as long as you have the time and understand what your memorising.
Post by: sam.utute on January 29, 2011, 06:16:13 pm
As ATAR says, if you have already understood the concepts, there is nothing wrong with rote-learning. In fact, it will be beneficial if you can memorise/rote-learn the accounting course as well as understand it.Also, How do I avoid from 'rote-learning'???Not that I have any experience with Accounting or anything but what's wrong with it? - as long as you have the time and understand what your memorising.
Rote-learning becomes "wrong" so-to-speak, when you use memorised definitions as the bulk of your answers to theory questions. If you cannot adapt and link to each individual question, it will not only stand out, but also probably cost you marks.
Post by: sam.utute on January 29, 2011, 06:22:25 pm
Thanks!This is the kind of response I think they are after:
I've been finding Cash Sales and Credit Sales a bit difficult! I'm unsure on how to answer the Review questions:
1. Show the and credit entries necessary to record:
- A Cash Sale (of stock)
- A credit sale (of stock)
- a receipt from a debtor
- cash drawings
2. Explain why a receipt from a debtor does not increase profit.
THanks!
Cash Sale:
Bank xxxx
Sales xxxx
GST Clearing xxxx
Cost of Sales xxxx
Stock Control xxxx
Let me know if that made any sense.
Post by: nacho on January 29, 2011, 06:42:11 pm
Thanks!Hey, okay for question one.
I've been finding Cash Sales and Credit Sales a bit difficult! I'm unsure on how to answer the Review questions:
1. Show the and credit entries necessary to record:
- A Cash Sale (of stock)
- A credit sale (of stock)
- a receipt from a debtor
- cash drawings
2. Explain why a receipt from a debtor does not increase profit.
THanks!
You have to think of the effects each transaction has on the accounting equation ( A = L + OE)
so, let's take a cash sale (of stock)
Since it is a cash sale:
ASSETS:
- Bank goes up (you receive cash + GST)
- Stock goes down (however, this will be less than the amount of which the bank will go up, as stock goes down by the amount of it's purchse price, not sale price, because that is the value of stock)
- That is all for Assets, there are no further changes
LIABILITIES:
-GST goes up (each sale you make, you charge 10% GST, which you collect for the ATO, and must give it to them. In short, when you receive GST, you have a liability, when you pay for an item including GST, your liability for GST goes down)
OWNER'S EQUITY:
- Capital goes up (Revenue has been earned as a sale has been made.)
So if we were to put this into perspective with an example with numbers:
Eg. $300 (Plus $30 GST) was received from a cash sale of stock (worth $150):
ASSETS:
- Bank goes up by $330
- Stock goes down by $150
LIABILITIES
- GST goes up by 30
OWNER'S EQUITY
Capital goes up by $150
______________
Try the others by yourself.
______
Q.2
"Revenue is earned at the time of the transaction, not when cash is received."
So, if you receive cash from a debtor, it means two things:
- They are a debtor as a result of past events (i.e they bought something on credit [not necessarily though])
- They are only paying what they owe, the revenue was earned when they made the purchase.
Also think about the accounting equation again.
When a debtor pays you back:
ASSETS
Bank goes up (by x amount)
Debtors goes down (by x amount)
LIABILITIES and OWNER'S EQUITY show no change.
Also, How do I avoid from 'rote-learning'???And lol.
Post by: hello_kitty on January 30, 2011, 11:02:38 pm
- Explain why the entries required to balance a ledger account are shown with different dates.
Thanks! Hello_kitty :D
Post by: hello_kitty on February 01, 2011, 04:14:05 pm
Post by: mba on February 02, 2011, 09:09:22 pm
What is the difference between Cash and Profit???
This is a good question as it pretty much comes up in some shape or form in either the Unit 3 or 4 exam every year.
Cash is the difference between inflows (receipts) and outflows (payments). The movements of cash are recorded in the Statement of cash flows. Under the accural accounting method, profit is the difference between revenues earnt and expenses incurred in a given reporting period as shown in the Statement of Profit and Loss.
Could anyone help me with this:
- Explain why the entries required to balance a ledger account are shown with different dates.
Thanks! Hello_kitty :D
When we close a ledger we are also transferring the balance to the next reporting period. Therefore, we close the ledger on the 31st of Jan the balance is transferred to a new ledger for the next reporting period, which commences on the 1st of Feb. That's why there are two different dates, one on the last day of the reporting period (closing entry) and the other on the first day of the reporting period.
Post by: Ematuro on February 19, 2011, 09:12:45 am
Post by: _avO on February 19, 2011, 09:54:01 am
Post by: Ematuro on February 24, 2011, 07:02:07 pm
Post by: Hodgeyhodgey on February 24, 2011, 09:30:25 pm
Oh okay. And also, for GST (ch 4 in cambridge book), I don't understand why when you purchase things and pay GST, the ATO refunds you the GST. Isn't it just neutral? You pay GST to the supplier to give to the ATO so why would the ATO give you back what you paid to them. I understand how it becomes a liability but how an asset?
You're correct in the way that it becomes neutral, but what they mean by it becoming an asset is if the business pays more GST than is owed. Once this happens, the ATO then owes that difference to the business :)
Post by: sam.utute on February 24, 2011, 11:11:02 pm
When you make a payment or incur GST on any purchase, you should think of the business that you are/will make the payment to as the ATO (technically they are another collector, but its easier to think of them as the ATO). So any liability you have to the ATO is reduced when you make payments of GST, because its like actually physically paying off your debt. The tricky part for most people is when you have an excess of payments compared to GST received. In this case, again think of it like you have "accidentally" paid the ATO (the other business) too much money; so much extra that your liability has been wiped and the ATO now has some of your money for "no reason". Thus, the business is now entitled to a GST refund from the ATO to offset the extra GST it has paid.
Please note that I'm just making up examples and the like to help my explanations. I know that its not 100% true, but it sometimes helps people to understand GST a bit better. Apologies in advance to any I just confused.
Post by: Ematuro on February 24, 2011, 11:51:44 pm
Post by: nacho on February 25, 2011, 12:08:27 am
think of it this way.
On day 1 when the business opens and it has not purchased anything, all it has is money in it's bank account (which is contributed by the owner) lets say $10,000.
Say now, if the business sells sport equipment, it decides to buy stock on Jan 1 , so that it can sell and earn revenue. (this is the aim of the business).
The business buy 10 tennis racquets, costing $50 dollars each, plus $5 dollars GST. All in all it has paid $550 dollars ($500 for the 10 tennis racuets, and $50 for the GST.)
At this point, the business has paid $50 to the tax office, and so the Tax office owes the business $50 - as the when the business paid the tax office, it had a GST Liability of $0.
Now on Jan 2 , if the business were to sell all these tennis racquets for $100 dollars each, plus $10 dollars GST, it will have received $1100 dollars in total. $1000 of this is from the sale and the extra $100 is the GST it charges on the sale. Please note that it does not earn revenue of $1100, it only RECEIVES $1100. The revenue it has earned is $1000 as the other $100 is to be given to the ATO.
So, since the business must forward this $100 to the ATO, it can be said the Business has a GST Liablity of $50.
Why?
Well, on our first transaction in Jan.1 we paid $50 in GST to the ATO, and as our GST Clearing balance at this stage was zero, the ATO owed us $50.
THEN, the transaction on Jan.2 the business colelcted $100 dollars in GST. Since it collected this GST, it must give it to the Tax office.
Since the tax office owes the business $50 dollars, we only have to pay them $50 ($100[GST Liability] - $50[GST Asset]),
The business therefore has a GST Liability of $50.
If on Jan.3 the business purchased 5 racquets at $100 each + $10 dollars GST. then, the business has further paid $50 dollars in GST.
This means that we have paid off our GST Liability of $50 and thus owe nothing to the tax office.
hopefully that makes sense
Post by: Ematuro on February 26, 2011, 08:55:43 pm
Post by: Hodgeyhodgey on March 02, 2011, 08:00:54 pm
Can anyone top that or is that just about it?
Thanks
Post by: nacho on March 02, 2011, 08:37:21 pm
Oh I get that.. so does that mean the business overall doesn't actually pay GST at all? They just literally act as a collector?In a way, but not exactly.
You see, EVERYONE pays GST, it's just that a registered business is able to claim it back as they buy things.
If you don't get what i mean, think of it this way:
for ex, a business which sells speakers
BUSINESS:
- buys 10 speakers (at $100 each, plus $10 GST)
As of the moment, this business has paid $100 in GST to the tax office ( 10 x 10 = 100), which is fair enough, as every citizen must pay GST on all goods and services (except fresh food)
- now, the business sells these ten speakers at ($200 each, plus $20 GST). BUT WAIT A SECOND! The business charged 10% GST, and so it doesn't get to keep this money, because it collects GST on behalf of the government. So, it must forward this $200 the GST (20 x 10 = 200). Correct? INCORRECT! It must only forward $100 of this in GST, can you tell me why?
now, moving on to the average person, named joe
PERSON:
A person (not a business/firm) does not collect GST on behalf on anyone, so any GST paid by the person is paid directly on purchases.
______________
Does anyone have a detailed definition of depreciation? All I can get out of both textbooks (neville box + cambridge) is 'the allocation of the cost of a non-current asset over its effective (or useful) working life'.(Refer below to sammy's post)
Can anyone top that or is that just about it?
Thanks
__________
I've a question of my own.
If a business sells stock on credit, for lets says, $1000 on credit + $100 GST, and the debtor is then recognised to be a bad debt, does our GST liability remain, or decrease?
Because, techincally, if we have no way of receiving our money, isn't this similar to a drawing/donation, because the business hasn't actually collected GST?
e.g, if a business decides to donate $1000 worth of stock to a local school, (and thus not receive anything)
thanks
Post by: sam.utute on March 02, 2011, 10:19:52 pm
I'm pretty sure GST remains unaffected.
Regarding the depreciation question:
Depreciation is NOT a method of finding the value of the asset at a particular point in time. The textbook is very clear about this. It actually involves allocating the cost of the asset, dependent on its estimated revenue generation, over the life of the asset. Some assets are depreciated rapidly due to being used up very quickly. While some, such as heavy machinery, will be depreciated at a slower rate due to the fact they will contribute to revenue generation for a lengthy period.
You must avoid assuming that depreciation is an attempt to revalue assets. It is nothing of the sort. It does exactly what its definition states: allocates its cost over its effective (revenue generating) life.
Post by: Ematuro on March 03, 2011, 08:55:03 pm
Post by: soopertaco on March 12, 2011, 08:43:16 am
okay so for the most part general journals are easy as pie but i do tend to sometimes get stuck on the entries that involve more than two accounts or the ones that aren't your standard 'withdrawal of stock', 'donation/advertising expense' or recording error i.e. 248 recorded as 284
for example: a receipt of $800 from a debtor - B. Billiten had been incorrectly recorded as a payment to a creditor - B. Bolton (memo19)
so i was just wondering if anyone can help me with making sure i have a strategy in taking these on? any tips or tricks that anyone can dish out that would cut the time i spend on these sort of problems would be much appreciated :D
Post by: nacho on March 12, 2011, 09:38:52 am
GENERAL JOURNALS! D;yep they are a bit confusing.
okay so for the most part general journals are easy as pie but i do tend to sometimes get stuck on the entries that involve more than two accounts or the ones that aren't your standard 'withdrawal of stock', 'donation/advertising expense' or recording error i.e. 248 recorded as 284
for example: a receipt of $800 from a debtor - B. Billiten had been incorrectly recorded as a payment to a creditor - B. Bolton (memo19)
so i was just wondering if anyone can help me with making sure i have a strategy in taking these on? any tips or tricks that anyone can dish out that would cut the time i spend on these sort of problems would be much appreciated :D
What you will be doing is called a 'correcting entry'
Basically, you have to make sure the account you've incorrectly debited/credited is returned to a neutral balance (i.e it's correct balance)
and then you have to make the actual credit/debit you should have done in the first place.
so in this instance,
the question says you incorrectly recorded $800 as a payment to a creditor - B. Bolton which basically means you've debited creditor - B. Bolton by $800 right? But in actual fact, you have not paid your creditors, so as of this stage, your Creditors control account is understated by $800.
Therefore, you have to increase it, and in order to do this, you have to credit it by $800.
and if you think about it, what you've done is this:
Creditor - B. Bolton
__DR____________|_________CR_________
$800 | $800
Both of them cancel each other out, and you've returned to a neutral account, which is the correct account.
But we're not finished yet.
Because you've received $800 from a debtor - B. Billiten, he/she will owe you $800 less. But this has not yet been recorded.
So apply the following:
Debtor - B. Billiten
_____DR__________|_____CR__________
$800
Credit the debtor - B. Billiten by $800, as this should have been done in the first place.
Now you are finished.
Notice that you don't need to make an adjustment to the bank. Why? Because the question never says you did it incorrectly, it just said you Debited your creditor account incorrectly.
Hope that helped
Post by: Hodgeyhodgey on March 12, 2011, 08:06:50 pm
On 12 August 2010, Wendy donated to her business a computer that she had purchased for herself a year ago for $2000. The business will have exclusive use of the computer, which was professionally valued on 12 August 2010 at $1100.
a. Show the General Journal entries necessary to record this transaction. (Narration not required.)
b. Referring to one Qualitative characteristic, explain your valuation of the computer.
MY ANSWERS
a. Computer 2000
Capital 2000
b. Characteristic = Historical Cost
Explanation = The computer is valued at its original cost ($2000) as this is the unbiased and verifiable value, whereas the value of $1100 is simply an estimate and has no evidence to verify the value.
CAMBRIDGE ANSWERS
a. Computer 1100
Capital 1100
b. Characteristic = Relevance
Explanation = As far as the business is concerned, the new value of $1100 is more useful for decision making; $2000 was the price paid by the owner, but the business is a separate entity.
My question; why is this so? Is the value of $1100 used because it's assumed that the professional who valued it accounted for depreciation of the asset? Or is it as simple as 'this is the value at which the asset entered the business'. I was under the impression that the historical cost should be used as the $1100 has no source document or any distinguishable evidence to support it..
Post by: _avO on March 12, 2011, 08:31:28 pm
Say for example you purchased a building in 1989 for 100k, and now its market value (appreciated) to 750k, it would be more relevant to record the 750k into the statement of financial position because its worth more now (dw about inflation/real terms and all that) and if you were to sell the building you would make the market value (or close to), as opposed to the initial value of 100k.
So for this question the computer contributed by the owner should be valued at its market value of $1,100. Also if it says 'professionally valued' then you can assume that the value is market value or is relevant to the current period.
The only reason why it should be $2000 is if the owner specifically stated that it uses the historical cost method of valuation (accurate valuation) as opposed to revaluation over time (fair value) and is consistently using it in all their reports, otherwise Relevance>Reliability
Post by: Hodgeyhodgey on March 12, 2011, 08:41:00 pm
Post by: marr on March 12, 2011, 09:14:34 pm
Question 1:
In a small local business, the 4 business owners have decided to donate their wages for a day to a charity. They each earn $100 a day.
i) Name the accounts effected
ii) Classify each account as an asset, liability, owner's equity, revenue or expense.
iii) What effect does this have on the accounting equation?
iv) Classify the accounts in the cash flow statement (ie. operating outflow)
- Not sure about this one, is it deemed to be advertising? drawings? is it even supposed to be recorded?
Question 2:
The business has also decided to donate 100 items of stock (apples as it is an apple orchard company) for the charity. As the apples were grown by the business the cost price of each apple is considered to be $0. The selling price of the apples is $2 each.
i) Name the accounts effected
ii) Classify each account as an asset, liability, owner's equity, revenue or expense.
iii) What effect does this have on the accounting equation?
iv) Classify the accounts in the cash flow statement (ie. operating outflow)
- Once again I can't remember recording anything like this in VCE
Any ideas?
Post by: _avO on March 12, 2011, 09:39:11 pm
I think its a trick question? My guess is that it's just
DR Payment for wages $400
CR Cash $400
As for how the money is used by the owners its their own discretion and it doesn't affect the business
Question 2:
Refer back to the Conceptual Framework definition of an expense.
Expenses are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants.
In this case the 'depletions of assets' would be your supplies (apples) which does result in a 'decrease in owner's equity'. So thus donation is an expense. As long as you can elaborate on your thoughts then you can say donations is also considered as advertising (the apples might have the company logo sticker which is a direct method of advertising).
i) The accounts affected would be Debit Advertising and Credit Supplies... but there is no cost price so I'm not quite sure what you do when you value it.
ii) Advertising = expense, Supplies = asset
iii) Decrease Assets (supplies), Decrease Owner's Equity (advertising)
iv) In the Statement of Cash Flows under Operating Activities
Operating outflow
Advertising ($__)
Post by: marr on March 13, 2011, 12:36:10 pm
Sorry I wrote the wrong thing for question 1, it's actually supposed to be:
"In a small local business, the 4 business owners have decided to donate a day's work to help a local charity. They usually earn $100 a day which will be deducted from their week's pay".
Is it still the same principle/solution even though they are not giving money and the business is actually saving $400? (If that makes sense?)
The second question I understand although I'm unsure as to what amount to enter as the cost was $0. If I use cost price then the transaction would have no effect on accounts at all would they? Or do I use the selling price but wouldn't this go against the historical cost principle? I'm really not sure what to do with this one.
Also I have a couple of other questions (not in VCE Accounting syllabus however):
- If there is damage to a non current asset that makes it unusable, what is the name of this account? Ie. for stock it is called stock loss but what do you call the account if it does not involve stock?
- Do you happen to know how to account for a 'lease' of a non current asset?
Post by: _avO on March 13, 2011, 01:22:16 pm
Thanks for your help _avO!!I'm unsure of the answer as the only thing the business is losing is 'time' which can't really be valued. What I would do is just recognise the event as irrelevant to the business' entity. The business loses productivity but you don't record that in your statements.
Sorry I wrote the wrong thing for question 1, it's actually supposed to be:
"In a small local business, the 4 business owners have decided to donate a day's work to help a local charity. They usually earn $100 a day which will be deducted from their week's pay".
Is it still the same principle/solution even though they are not giving money and the business is actually saving $400? (If that makes sense?)
Quote
The second question I understand although I'm unsure as to what amount to enter as the cost was $0. If I use cost price then the transaction would have no effect on accounts at all would they? Or do I use the selling price but wouldn't this go against the historical cost principle? I'm really not sure what to do with this one.Yeah since there is no monetary effect then I wouldn't record it
Quote
- If there is damage to a non current asset that makes it unusable, what is the name of this account? Ie. for stock it is called stock loss but what do you call the account if it does not involve stock?Under the AASB 136 - Impairment of Assets, when an asset is damaged it is recognised as depreciation, it is then deducted from the initial value of the asset. In this case if an asset is damaged to the extent that it is unusable, then the Recoverable amount is $0, and the useful life is 0 years.
EG.
Depreciation Expense = (Historical cost - Recoverable amount)/Useful life
= ($10,000 - 0)/0
= $10,000
Carrying value = HC - Dep'n Exp
= $10000 - $10000
= $0
So you basically write off the asset as it no longer holds any future economic benefit and theres no probable outcome of liquidating the asset
Quote
- Do you happen to know how to account for a 'lease' of a non current asset?No idea ><
IF i were to guess, then I would record it as this
DR - NCA $20000
CR - Lease liability $25000
DR - Lease charges/interest $5000
And when you make a repayment at any point it would be
DR - Lease liability $$$$
CR Cash at bank $$$$
When you repay interest
DR - Lease charges/interest $$$
CR - Cash at bank $$$
As well as during the Balance Day adjustment period
DR - Depreciation expense: NCA $$$$$
CR - Accumulated Dep'n: NCA $$$$$
Post by: marr on March 13, 2011, 03:56:16 pm
I hope you don't mind me asking but how did you know all of that? In your signature it says you did accouting last year so did you learn it through VCE? Kudos to you anyway and all the best in the future!
Post by: marr on March 13, 2011, 04:25:25 pm
Debit: 'Impairment of -insert asset name here-' (E)
Credit: Non current asset
or is it:
Debit: Depreciation of -insert asset name here-(E)
Credit: Non current asset
Post by: nacho on March 13, 2011, 04:26:10 pm
A motor vehicle is bought on credit for $30,000.
Explain with reference to the motor vehilce the following parts of the asset definition:
(A) Controlled by the entity as a result of past transactions:
(B) Future economic benefits are expected to flow:
Explain with reference to this transaction the following parts of the liability definition:
(C) A present obligation arising from past events
(D) Outflow of resources embodying economic benefits.
thanks!
Post by: marr on March 13, 2011, 04:35:05 pm
(A) The business legall owns the motor vehicle as a result of its purchase (past transaction) and thus are the only ones who are able to utilise (control) the economic benefit.
(B) The motor vehicle can be used by the business to deliver goods thus assisting the business in earnign more revenue
(C) The business has a present obligation to pay the creditor as a result of the purchase (past event)
(D) This is expected to result in an outflow of an economic benefit in the form of cash when the creditor is repaid
Post by: _avO on March 13, 2011, 04:38:31 pm
Sorry for the impairment of assets question, do you create an 'impairment of asset' account so that it would be:It's the bolded one, 'Impairment of Assets' is just the category in which damaged assets are classified under the Australian Accounting Standards Board (the standards and guidelines to which financial reports are to be prepared). Other impairments include obsolete goods and worse than expected economic performance.
Debit: 'Impairment of -insert asset name here-' (E)
Credit: Non current asset
or is it:
Debit: Depreciation of -insert asset name here-(E)
Credit: Non current asset
Question
A motor vehicle is bought on credit for $30,000.
Explain with reference to the motor vehilce the following parts of the asset definition:
(A) Controlled by the entity as a result of past transactions:
Motor Vehicle
(B) Future economic benefits are expected to flow:
Transporting persons/goods
Explain with reference to this transaction the following parts of the liability definition:
(C) A present obligation arising from past events
Sundry Creditors $30000 payable
(D) Outflow of resources embodying economic benefits.
Decrease in cash ($30000)
thanks!
Post by: nacho on March 13, 2011, 05:05:04 pm
I noticed in this thread:
Quote
http://vce.atarnotes.com/forum/index.php/topic,38980.0.htmlthat hello_kitty used 'we' a fair bit. I generally find myself doing this, but i try to avoid it, do the examiners dislike this style in answering questions?
Post by: _avO on March 13, 2011, 05:33:04 pm
Post by: ech_93 on March 16, 2011, 09:14:20 pm
1. If the GST clearing account balance thing at the end of the reporting period is a debit... what does that mean? Is it that we owe the government more/less money, or something?
2. In the general journal we just put the extra things that don't fit into the other journals , yeah? And then in the general journal, what is the difference between the general ledger and subsidiary ledger? What do we put in them :S
(i hope that makes sense)
Thanks!
Post by: sam.utute on March 17, 2011, 07:45:19 am
I have two questions...1. We owe the ATO so much less money, now in fact, they end up owing us. Remember that an asset is a resource that will bring about an inflow of economic benefits in the future. In this case, we are entitled to received a GST REFUND from the ATO as we have paid or incurred more GST than we have received or charged.
1. If the GST clearing account balance thing at the end of the reporting period is a debit... what does that mean? Is it that we owe the government more/less money, or something?
2. In the general journal we just put the extra things that don't fit into the other journals , yeah? And then in the general journal, what is the difference between the general ledger and subsidiary ledger? What do we put in them :S
(i hope that makes sense)
Thanks!
2. The general ledger columns are used to record the effects of transactions that affect accounts in the General Ledger (such as Bank, Stock Control, Drawings etc.). The subsidiary ledger column is used to record the changes in the Creditors and Debtors Ledger. So, for example, when debtor B. Hill declares bankruptcy on his debt of $500, the General Ledger accounts affected are Debtors Control and Bad Debts. So the general ledger column is used to change these accounts.
In the subsidiary ledger, the account, Debtor- B. Hill has decreased, so the subsidiary column is used to reduce this account.
DR. Bad Debts 500
CR. Debtors Control 500
CR. Debtor - B. Hill 500
Post by: minimum on March 19, 2011, 06:19:11 pm
A business usually earns $50 a day from providing it's services,
however it decides to donate a day worth of services to a charity.
First i thought it should be an expense then i realised it doesn't meet the definition.
As, there is no decrease in assets nor is there an increase in Liabilities.
If so, i think it shouldn't effect any element.
Is my thinking correct? Please help!
Post by: soopertaco on April 09, 2011, 10:57:53 pm
for example a debt written of as irrecoverable will result in a reduction of inflow of cash from debtors.
i may be wrong so please correct me before i commit this to long term memory haha
but using this logic, since they aren't working for payment this could be a 'reduction in inflow' thus this expense could be entered into the general journal as a debit to advertising/donations and credit to ______ im actually blank here on the other side of the double entry.
i have a feeling that i'm totally wrong but now i'm curious, someone help :)
Post by: minimum on April 10, 2011, 02:41:54 pm
couldn't an expense also be defined as a decrease in inflow or increase in outflow of assets??
for example a debt written of as irrecoverable will result in a reduction of inflow of cash from debtors.
i may be wrong so please correct me before i commit this to long term memory haha
but using this logic, since they aren't working for payment this could be a 'reduction in inflow' thus this expense could be entered into the general journal as a debit to advertising/donations and credit to ______ im actually blank here on the other side of the double entry.
i have a feeling that i'm totally wrong but now i'm curious, someone help :)
Well, i completed my assignment and said "there was no effect on the accounting elements"
and i was correct.
So, in the circumstances there was no transation held. The revenue were not earned (so cannot cancel them out by categorising them as "donations" etc.
And as there was no inflow there cannot be a reduction.
Post by: soopertaco on April 12, 2011, 05:02:47 pm
Post by: nacho on April 18, 2011, 12:56:55 pm
Is this a particularly good one to mention? I've always thought of it as kind of dodgy/weak, still not seeing how the allocation of responsibility serves as a benefit, and i don't see why you can't have the allocation of responsibility prior to whatever change in method we've used (e.g without subsidiary ledgers)
Plus, you'd have to have an extra employee, or pay the existing one more as well.
Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports
And just a question regarding in recording in ledgers.
Is it sufficient to just write "GST" instead of "GST clearing" when cross-referencing? Or will the VCAA Examiners not like me taking any shortcuts?
Furthermore, do they make the exam so that if I lost a mark for not cross-referencing in the conventional way (used shorthand) and I did this 4 times in the whole exam, will i only lose one mark?
Post by: eeps on April 18, 2011, 05:27:08 pm
Post by: nacho on April 18, 2011, 06:26:20 pm
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports
Post by: eeps on April 18, 2011, 07:47:15 pm
Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports
Control accounts and subsidiary ledgers assist in the preparation of reports in that only one figure has to be transferred to the reports. It simplifies and makes it easier. For example, once you balance the Stock Control account, you're left with one figure; which is generally on the debit side. That figure can then be transferred to the Balance Sheet under "Current Assets", assisting in the preparation of reports.
Post by: Fyrefly on April 18, 2011, 10:53:06 pm
Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports
Control accounts and subsidiary ledgers assist in the preparation of reports in that only one figure has to be transferred to the reports. It simplifies and makes it easier. For example, once you balance the Stock Control account, you're left with one figure; which is generally on the debit side. That figure can then be transferred to the Balance Sheet under "Current Assets", assisting in the preparation of reports.
Also: cross-check mechanism.
Post by: nacho on April 20, 2011, 12:05:33 pm
- $120 of equipment was incorrectly debited to cleaning supplies (please note that it is cleaning supplies)
A payment of $100 interest was incorrectly debited to Loan - HBM
Question. Explain the effect on the Net Profit of Blue Lines for June 2010 if the error regarding equipment had not been corrected.
My answer - There is no effect, as there is still an overall increase in assets by $120.
The book's answer - " Cleaning expenses would be overstated by $120, meaning Net profit would be understated by $120.
(Equipment is an asset, not an expense.)"
____
How did it even become an expense..
Q2. State the effect on owner's equity of the entries to correct the error regarding stock.
Post by: Hodgeyhodgey on April 20, 2011, 09:51:11 pm
This question is doing my head in...
- $120 of equipment was incorrectly debited to cleaning supplies (please note that it is cleaning supplies)
A payment of $100 interest was incorrectly debited to Loan - HBM
Question. Explain the effect on the Net Profit of Blue Lines for June 2010 if the error regarding equipment had not been corrected.
My answer - There is no effect, as there is still an overall increase in assets by $120.
The book's answer - " Cleaning expenses would be overstated by $120, meaning Net profit would be understated by $120.
(Equipment is an asset, not an expense.)"
____
How did it even become an expense..
Q2. State the effect on owner's equity of the entries to correct the error regarding stock.
In that case, I'd assume the book has made a typo and put 'supplies' instead of 'expenses'.
Post by: luffy on April 23, 2011, 12:13:35 am
Is there another method of calculating profit, which is not accrual accounting?
Also:
Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports
Control accounts and subsidiary ledgers assist in the preparation of reports in that only one figure has to be transferred to the reports. It simplifies and makes it easier. For example, once you balance the Stock Control account, you're left with one figure; which is generally on the debit side. That figure can then be transferred to the Balance Sheet under "Current Assets", assisting in the preparation of reports.
How do subsidiary ledgers assist in the preparation of reports though?
Post by: sam.utute on April 23, 2011, 12:25:48 am
Post by: luffy on April 23, 2011, 12:43:09 pm
Another method used by mainly by small sole trader businesses is "cash accounting." This is basically when you record revenues when you receive that cash, and expenses when you pay them. In contrast, accrual accounting involves recording revenues when earned, and expenses when incurred.
Ah... right - I can't believe I didn't self-realize that. Thanks Sam.Utute.
Post by: nacho on April 24, 2011, 01:08:47 pm
I thought that errors were always corrected in the general journal?
Also, what are three types of errors which are corrected in the general journal
Post by: luffy on April 24, 2011, 01:30:48 pm
1. Explain why in some situations errors may be corrected in the appropriate special journal, but in others a General Journal entry is required.
I thought that errors were always corrected in the general journal?
Also, what are three types of errors which are corrected in the general journal
Logically speaking, you only make a correcting entry once the special journals have been posted to the ledger accounts. Therefore, if they haven't yet been posted (i.e. before the last day of the reporting period) you can simply fix the part in the special journal by "erasing" the incorrect part and fixing it to what should have been there.
Types of errors (in my opinion) would include:
- Omission of a transaction
- Reversing Debit/Credit entries
- Debiting/Crediting the wrong amount (the only one which would be picked up by the Trial Balance)
- Debiting/Crediting the wrong ledger account.
Post by: nacho on April 24, 2011, 01:40:56 pm
Post by: luffy on April 24, 2011, 01:50:01 pm
1. Explain why expense and revenue accounts are not included in the general journal when we recorded a commencing entry.
I know the answer - but its hard to explain (as are most theory questions in accounting lol). Can someone confirm if this is correct?
A commencing entry takes place only during the start of a reporting period. Revenue and expense accounts exist only during the Reporting Period when they are respectively earned/incurred. Therefore, as they do not have a balance at the start of the reporting period, they should not be recorded as a commencing entry.
Post by: nacho on April 24, 2011, 02:59:58 pm
sounds good.1. Explain why expense and revenue accounts are not included in the general journal when we recorded a commencing entry.
I know the answer - but its hard to explain (as are most theory questions in accounting lol). Can someone confirm if this is correct?
A commencing entry takes place only during the start of a reporting period. Revenue and expense accounts exist only during the Reporting Period when they are respectively earned/incurred. Therefore, as they do not have a balance at the start of the reporting period, they should not be recorded as a commencing entry.
1. Identify three details that are provided when transactions are recorded in teh stock card but not provided in the Stock Control Account.
Post by: luffy on April 24, 2011, 06:08:23 pm
- Source Documents
- Location in the store
- Details of particular lines of stock
- Common Suppliers
- Individual transaction dates (i.e. I like to look at stock cards, as if they are subsidiary ledger accounts, while stock control is the respective general ledger account)
There are probably more details - my brain just isn't functioning.
Post by: cibicl on April 24, 2011, 07:32:47 pm
"Explain with reference to a QC the reason for preparing Memo 8 (it is a memo of a physical stockstake where a stock loss occured"
Thanks :)
Post by: luffy on April 24, 2011, 07:55:34 pm
Hey! Could anyone help me with this question?
"Explain with reference to a QC the reason for preparing Memo 8 (it is a memo of a physical stockstake where a stock loss occured"
Thanks :)
This would be my answer to the question:
Relevance - All information relevant to decision-making should be included in accounting reports. The preparation of memo 8, including the stock take, is conducted to detect any stock losses in the reporting period, so that an accurate profit figure can be calculated, which would be more useful for decision-making.
The reason I didn't say Reliability was because it wasn't asking for why we need to have a memo, but why it is prepared. I'm not 100% sure of my answer, and there is a chance my answer could be wrong.
Tell me if I was right. Hope I helped.
Post by: cibicl on April 24, 2011, 08:03:40 pm
Hey! Could anyone help me with this question?
"Explain with reference to a QC the reason for preparing Memo 8 (it is a memo of a physical stockstake where a stock loss occured"
Thanks :)
This would be my answer to the question:
Relevance - All information relevant to decision-making should be included in accounting reports. The preparation of memo 8, including the stock take, is conducted to detect any stock losses in the reporting period, so that an accurate profit figure can be calculated, which would be more useful for decision-making.
The reason I didn't say Reliability was because it wasn't asking for why we need to have a memo, but why it is prepared. I'm not 100% sure of my answer, and there is a chance my answer could be wrong.
Tell me if I was right. Hope I helped.
Yeah I did think it was relevance. Just wasn't a 100% sure. Thanks heaps :)
Post by: luffy on April 24, 2011, 08:26:33 pm
- I know my answer is wrong, I just don't understand why its wrong.
So the question is:
"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."
Anyone got any thoughts on this question?
Post by: eeps on April 24, 2011, 08:33:49 pm
I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):
- I know my answer is wrong, I just don't understand why its wrong.
So the question is:
"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."
Anyone got any thoughts on this question?
I came across this question last year, it's understandability from what I remember.
Post by: luffy on April 24, 2011, 08:46:10 pm
I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):
- I know my answer is wrong, I just don't understand why its wrong.
So the question is:
"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."
Anyone got any thoughts on this question?
I came across this question last year, it's understandability from what I remember.
Yes, it is understandability. But why? How does classifying information make it more understandable? The asset is still an asset; you have just informed the owner that it is current/non-current, making it more useful for decision-making, which would be Relevance.
Post by: eeps on April 24, 2011, 08:58:39 pm
Post by: luffy on April 24, 2011, 09:05:56 pm
Both answers are correct, I agree with you. It's an ambiguous question. My teacher told me last year that at a meeting of VCAA markers, this particular question was debated at length. The "more" correct answer according to Neville Box was understandability. I don't know why it's understandability, just is. If anything, it should be relevance. Understandability is the characteristic VCAA will only accept. I realise what I've said doesn't answer your question; it's more-so a grey area in VCE Accounting.
From my current perception of the question, not only should understandability not be the "more correct answer," but it shouldn't really even be an option. Neville Box must have a reason behind why he wanted that answer.
I guess there must be more to classifying an asset/liability than we are realizing. I guess I need to do more research.
Post by: nacho on April 25, 2011, 12:10:03 pm
Details would include:im kind of unsure if this is the answer the book requires.
- Source Documents
- Location in the store
- Details of particular lines of stock
- Common Suppliers
- Individual transaction dates (i.e. I like to look at stock cards, as if they are subsidiary ledger accounts, while stock control is the respective general ledger account)
There are probably more details - my brain just isn't functioning.
the previous question was "What is in the top section of the stock cards which isnt in the stock control account" or something along htose lines..
for which i putwhat you just said
All i could get was the Individual transactions..
Post by: luffy on April 25, 2011, 12:47:24 pm
Details would include:im kind of unsure if this is the answer the book requires.
- Source Documents
- Location in the store
- Details of particular lines of stock
- Common Suppliers
- Individual transaction dates (i.e. I like to look at stock cards, as if they are subsidiary ledger accounts, while stock control is the respective general ledger account)
There are probably more details - my brain just isn't functioning.
the previous question was "What is in the top section of the stock cards which isnt in the stock control account" or something along htose lines..
for which i putwhat you just said
All i could get was the Individual transactions..
Well, source documents aren't stated in the "top section" of stock cards either.
Also, stock cards also state the individual cost prices of stock, whereas the stock control account merely states a total stock value.
That, along with the individual transaction dates, should cover all the details in the stock card, which are not in the control account.
Post by: nacho on April 25, 2011, 06:47:12 pm
Another question:
"Explain how the profit and losss summary account would be classified in the balance sheet."
Okay, well the profit and loss summary account isn't actually classified in the balance sheet, however, the end profit/loss is added/subtracted to/from the capital account.
So how would one go about wording this?
I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):I probably would have said relevance, but looking at the definitions I can see where VCAA was going with this question.
- I know my answer is wrong, I just don't understand why its wrong.
So the question is:
"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."
Anyone got any thoughts on this question?
Understandability: Reports should be presented in a manner in which it is easy to understand. They may perhaps reject "relevance" because the question does not ask why we include assets and liabilities in the balance sheet (which is a represenation of the accounting equation for the business).
rather it's asking why we group assets and liabilites together as current/non-current (classify). And i guess it's cause it's clearer to read with all our assets grouped together on one side and our liabilities on the other side, furthermore in their respective current and non-current ways, we can see how it balances, thus making it easier to comprehend the information presented to us.
Fairly debateable question though, they should accept both answers, but i dont think understandability is wrong, it is technically right, and more correct
Edit: (lol my 4th edit..) i actually think relevance is wrong, because the accounting equation isn't split into current assets + non-current assets = NCL + CL + OE
it's technically not relevant at all to include classified stuff
Quote
Yes, it is understandability. But why? How does classifying information make it more understandable? The asset is still an asset; you have just informed the owner that it is current/non-current, making it more useful for decision-making, which would be Relevance.yea, you've made it easier for the user to comprehend the meaning. i dont think the real reason is to aid in decision making, for the exact same reason as to why we exclude the individual debtors and creditors (its' irrelevant to decision making). int heory we shouldnt classify, because it doesnt effect decision making, so therefore, we classify to increase understandability
Post by: eeps on April 25, 2011, 07:02:44 pm
Post by: luffy on April 25, 2011, 08:36:29 pm
- Tell me if I'm wrong, but by classifying the Balance Sheet, we are allowing for the calculation of statistics, such as Working Capital Ratio, and Quick Asset Ratio, making it more useful for decision-making.
- I don't understand you. How does the Accounting Equation relate to this?
- In their respective current/non-current groupings, how does it make us see how it balances? All the individual assets/liabilities are still there, if we don't classify them, the only addition is they are categorized.
- However, I am starting to see where VCAA is coming from.... so Thank you for your post!
Post by: nacho on April 25, 2011, 09:00:55 pm
- Tell me if I'm wrong, but by classifying the Balance Sheet, we are allowing for the calculation of statistics, such as Working Capital Ratio, and Quick Asset Ratio, making it more useful for decision-making.
- I don't understand you. How does the Accounting Equation relate to this?
- In their respective current/non-current groupings, how does it make us see how it balances? All the individual assets/liabilities are still there, if we don't classify them, the only addition is they are categorized.
- However, I am starting to see where VCAA is coming from.... so Thank you for your post!
In regards to the Working Capital Ratio and Quick Asset ratio - this is a fair point actually and I didn't know the meanings of these terms, are they in the vce accounting course?
Even then, however, this only aids the point of understandability. Because, even if the information isn't classified, we can still work out the working capital ratio and quick asset ratio.
Consider the following scenario:
"An experienced accountant (as opposed to the average business manager, with little accounting knowledge) will be able to identify that "Equipment" and "Vehicle" are non-current assets and that "Stock control" and "bank" are current assets. So, even if the balance sheet did not classify the stuff, he is still able to work out the Working Capital Ratio and quick asset ratio, it'll just take him longer. Now, in contrast, the average business manager would have difficulty in identifying the current assets and non-current assets (same goes for liabilities) and in turn would have difficulty in working out the working capital ratio and quick asset ratio. Therefore, the balance sheet classifies information, so as to allow the inexperienced manager to identify current and non-current assets and liabilities."
In regards to why i was talking about the accounting equation, it relates because the Balance Sheet is the accounting equation. And, because the accounting equation does not specifically state that "Current Assets + Non-current assets = Current Liabilities + non-current liabiliteis + owner's equity" It isn't in fact "relevant" to classify in the balance sheet. We only classify to have a more understandable blaance sheet.
As to your third inquiry, i think i was a bit confused. When i thought of classifying, i thought of grouping in general, in addition to grouping in terms of non-current and current (assets on side, divided into non-current and current assets, liabilites on the other side, divided into current and non-current, plus owner's equity)
from which you can add the totals on each side and see if your accounting equation balances.
Idk, im just rambling on lol :P
Also, i had a question.
In the balance sheet, do we write "Stock control" or simply "stock" ?
Sames goes for debtors and creditors.
Also, if the business has undertaken two seperate loans, both with <12months repayments (eg quarterly, every semester etc), do would you just write two seperate entires in the non-current and current liabilities?
Eg:
Current Liabilties:
Loan - Goku $9001
Loan - SS Vegeta $9000
Non-current Liabilities:
Loan - Goku $ 100,000
Loan - SS Vegeta $ 99,999
?
Is this correct?
Also, in the general journal, is it acceptable to abbreviate "profit and loss summary account" to "P&L Summary account" ?
The textbook does this, but my teacher warned me not to abbreviate - ever.
Post by: eeps on April 25, 2011, 09:45:11 pm
Also, i had a question.
In the balance sheet, do we write "Stock control" or simply "stock" ?
Sames goes for debtors and creditors.
Also, if the business has undertaken two seperate loans, both with <12months repayments (eg quarterly, every semester etc), do would you just write two seperate entires in the non-current and current liabilities?
Eg:
Current Liabilties:
Loan - Goku $9001
Loan - SS Vegeta $9000
Non-current Liabilities:
Loan - Goku $ 100,000
Loan - Vegeta $ 99,999
In the Balance Sheet, you must write "Stock Control" not just "Stock". Same goes for Debtors and Creditors; must be "Debtors Control" and "Creditors Control". To answer your second question, yes, you would do that. Though you'll find in most exams, they'll only give you one loan which is spilt into "Current" and "Non-current". Rarely two. Sidenote; your Dragon Ball Z references are quite amusing. :p
Post by: eeps on April 25, 2011, 10:07:21 pm
Also, in the general journal, is it acceptable to abbreviate "profit and loss summary account" to "P&L Summary account" ?
The textbook does this, but my teacher warned me not to abbreviate - ever.
Write it out in full as what your teacher said. In the chance that there isn't enough room to write the whole thing out, then yes, you can abbreviate. In most cases, VCAA and the commercial companies will give enough room to write "Profit and Loss Summary account" in the General Journal.
Post by: nacho on April 25, 2011, 10:14:25 pm
Post by: luffy on April 25, 2011, 10:33:04 pm
1. Explain why you are unlikely to find "Commission revenue" under the "Other Revenue" heading in the Profit and Loss statement for a business.
Where did you get that question from? It doesn't make sense to me lol. Commission Revenue is meant to go under the Other Revenue column....
Post by: nacho on April 25, 2011, 11:00:10 pm
1. Explain why you are unlikely to find "Commission revenue" under the "Other Revenue" heading in the Profit and Loss statement for a business.
Where did you get that question from? It doesn't make sense to me lol. Commission Revenue is meant to go under the Other Revenue column....
Actually I made it up. The question just says "Unlikely" not "why it doesn't..." I didn't think it was likely that one would ever see "commission revenue". My own answer would be that the business itself does not earn commission (unless working under another entity, in that case, i'm not sure what this type of business would be called), rather its' employees do.
Furthermore, would commission owed to employees be listed under wages, or would it be a seperate expense? Seeing that commission is only incurred upon sales, whereas employees need not necessarily have to sell something to be paid. I'm probably completely forgetting something or steering off-track though lol..
I didn't want to state that i made this question up so as to not introduce bias into your thinking and to maintain reliability in your answer which would be a direct result of you wondering as to why "commision revenue" is rarely seen in a business' profit and loss statement, rather than holding the knowledge that by definition "Commission revenue" will be listed under "Other revenue"
Don't lose me here, but i understand there if there is a category for which a business working under another business is listed, then one cannot say that "these businesses rarely exist and thus it is rare to see "Commission revenue". Is there honestly another way in which commission revenue can be earned, have i completely missed something? My own answer is based on the basis that business generally don't work under other businesses..
Also, in light of the 2007 VCAA Question you asked,
i was wondering, if a question ever asked
2. "Explain why that although the profit and loss summary account shows net profit earned, it is still essential to have a profit and loss statement."
I know that the profit and loss statement allows us to see gross profit earned and thus assess the adequacy of our mark-up applied, but, techincally, using the same reasoning as I did before, you don't need the profit and loss statement to evaluate the gross profit, or the other goodies, such as how we earned our profit
you can do it just through ledgers, except it would be harder.
So therefore this could also relate to understandability?
sorry if my logic doesn't make sense, i've been doing too much accounting today and slowly becoming a freak.
Post by: luffy on April 25, 2011, 11:27:40 pm
1. Explain why you are unlikely to find "Commission revenue" under the "Other Revenue" heading in the Profit and Loss statement for a business.
Where did you get that question from? It doesn't make sense to me lol. Commission Revenue is meant to go under the Other Revenue column....
Actually I made it up. The question just says "Unlikely" not "why it doesn't..." I didn't think it was likely that one would ever see "commission revenue". My own answer would be that the business itself does not earn commission (unless working under another entity, in that case, i'm not sure what this type of business would be called), rather its' employees do.
Furthermore, would commission owed to employees be listed under wages, or would it be a seperate expense? Seeing that commission is only incurred upon sales, whereas employees need not necessarily have to sell something to be paid. I'm probably completely forgetting something or steering off-track though lol..
I didn't want to state that i made this question up so as to not introduce bias into your thinking and to maintain reliability in your answer which would be a direct result of you wondering as to why "commision revenue" is rarely seen in a business' profit and loss statement, rather than holding the knowledge that by definition "Commission revenue" will be listed under "Other revenue"
Don't lose me here, but i understand there if there is a category for which a business working under another business is listed, then one cannot say that "these businesses rarely exist and thus it is rare to see "Commission revenue". Is there honestly another way in which commission revenue can be earned, have i completely missed something? My own answer is based on the basis that business generally don't work under other businesses..
Also, in light of the 2007 VCAA Question you asked,
i was wondering, if a question ever asked
2. "Explain why that although the profit and loss summary account shows net profit earned, it is still essential to have a profit and loss statement."
I know that the profit and loss statement allows us to see gross profit earned and thus assess the adequacy of our mark-up applied, but, techincally, using the same reasoning as I did before, you don't need the profit and loss statement to evaluate the gross profit, or the other goodies, such as how we earned our profit
you can do it just through ledgers, except it would be harder.
So therefore this could also relate to understandability?
sorry if my logic doesn't make sense, i've been doing too much accounting today and slowly becoming a freak.
1. When a business earns commission, employees only earn part of that commission. Yes, the employees earn the commission, but they are working under the business, the entity of which will receive the majority of the money. This is evident in real estate agencies and investment areas. Therefore, for these companies, of course the business would have commission. Also, note that this is not a small majority of businesses. They are called service businesses (to my knowledge). Not all business are retail stores! However, nice to know you're thinking logically.
2. The whole concept of Understandability seems vague to me, for which I clearly need to do more research. However, while I can see your point towards this, Relevance could also be argued. In fact, now that I think about it, Relevance covers the whole purpose of accounting itself!! and therefore, could be applied to almost any qualitative characteristic question. However, as the other three characteristics are technically just more "specific" forms of Relevance, they would be most suitable in some situations. But for your question, I would prefer not to give my opinion because I would likely be incorrect.
Post by: nacho on April 26, 2011, 10:46:03 am
I know the answer to the following question, but i thought it was a pretty good one, so i wanted to share it:
1. Referring to one accounting principle, explain why the ledger must be closed.
Post by: Fyrefly on April 26, 2011, 05:22:06 pm
Also, in the general journal, is it acceptable to abbreviate "profit and loss summary account" to "P&L Summary account" ?
The textbook does this, but my teacher warned me not to abbreviate - ever.
Write it out in full as what your teacher said. In the chance that there isn't enough room to write the whole thing out, then yes, you can abbreviate. In most cases, VCAA and the commercial companies will give enough room to write "Profit and Loss Summary account" in the General Journal.
Anal VCE is anal.
Post by: nacho on April 27, 2011, 04:24:06 pm
I've a question in regards to balancing in the general ledger and dates.
Given the following information:
On 1 March 2010 nacho paid $6000 (plus $600 GST) to cover the next six months' rent (ch.01). Nacho closes her ledger accounts and prepares her financial reports on 30 June each year.
So if, after recording the balance day adjustment in the general journal, i go onto balance my Prepaid rent account, would it go like this:
(all my figures are correct btw, just concerned with the date for the final step in balancing
Date | Cross-reference | Amount $ || Date | Cross-reference | Amount $|
Mar.1 Bank 6000 June 30 Rent expense 4000
30 Balance 2000
6000 6000
?? Balance 2000
In regards to the "blue 30" recorded in date on the credit side. It's not necessary to write out the same date over and over again is it? As long as you've written it once before? As in i can simply write a 30 there?
In regards to the "red ??" This does not have to be the next month all the time, correct? Just the next day, after the end of the current reporting period.
I think i know the answer now, it occurs to me as i type this question, but now that i've gotten so far, i'd like to make sure anyway.. lol
Post by: BoredSatan on April 27, 2011, 04:37:07 pm
and the red should be the first day of the next reporting period. So July 1 in your case
Post by: nacho on April 27, 2011, 05:18:08 pm
1. Referring to one qualitive characteristic, explain why the advertisiing owning shold be included in the Advertising expense for 2010.
(For reference, page 202 exercise 10.6 question b for the cambrdige textbook)
My answer:
Relevance.
All information useful for decision making should be included in our reports. As the expense was incurred in 2010, it needs to be recorded as such, despite the fact that it was not paid for, so that we can accurately calculate our profit for this reporting period.
book answer:
Balance day adjustments ensure that all information that is useful for decision-making is included in the reports. The advertising has been incurred/consumed in the period ending 31 December 2010,, and so should be included as an expense in this reporting period.
Do you think i'd still get full marks, even though I did not mention Balance day adjustments?
EDIT: ANOTHER QUESTION on formalities...
I know when recording in ledgers, it's acceptable to split the payments for something which includes GST, and you can also have them merged
eg. Jan. 31 Stock control/GST clearing $4400
Or you could put
Jan. 31 Stock control $4000
Jan. 31 GST Clearing $400
(According to my teacher anyway)
But in cases of recording a payment, for a prepaid expense and an accrued expense,
is it acceptable to do the same thing?
I've noticed in the examples in the book, they've split them,
yet in the answers provided, they've joined them.
And, in the case of the split ones, it just seemed as if they did it on two lines, because they ran out of room? (see reference)
But i thought another possible reason was that they split it too show the individual payments, rather than running out of room.
Also, for the Wages example they've provided, in the Ch. No column, are we expected to put "BS" (Bank statement?)
And is it also a possibility that they did not split the payments, because they can show the different payments in just one column?
(the idea of splitting to show different columns seems more appropriate now, but im going to ask just for the sake of it anyway. Would we ever get penalised if we split the payments into two different rows, bar the fact that they used different columns anyway? Eg. if we split the wage/accr wages payment)
Post by: luffy on April 27, 2011, 05:30:00 pm
Thanks, would someone mind checking these for me?
1. Referring to one qualitive characteristic, explain why the advertisiing owning shold be included in the Advertising expense for 2010.
(For reference, page 202 exercise 10.6 question b for the cambrdige textbook)
My answer:
Relevance.
All information useful for decision making should be included in our reports. As the expense was incurred in 2010, it needs to be recorded as such, despite the fact that it was not paid for, so that we can accurately calculate our profit for this reporting period.
book answer:
Balance day adjustments ensure that all information that is useful for decision-making is included in the reports. The advertising has been incurred/consumed in the period ending 31 December 2010,, and so should be included as an expense in this reporting period.
Do you think i'd still get full marks, even though I did not mention Balance day adjustments?
All of the following is subject to my opinion and could be wrong:
I think your answer would be given full marks. You have covered all the "key words" that are in the solution... so should be fine. However, you probably should incorporate the questions in your definition, during the I.D.L process....
Relevance:
Balance Day Adjustments ensure all information is useful for decision-making is useful in the reports.
- I think this is a very good sentence and could be used for any Balance Day Adjustment - Relevance question, which are quite common :P
Post by: BoredSatan on April 28, 2011, 06:09:44 pm
wouldnt it also ensure that all the information FROM THE CURRENT REPORTING PERIOD are included to calculate an accurate profit and hence be useful for the decision making. :PThanks, would someone mind checking these for me?
1. Referring to one qualitive characteristic, explain why the advertisiing owning shold be included in the Advertising expense for 2010.
(For reference, page 202 exercise 10.6 question b for the cambrdige textbook)
My answer:
Relevance.
All information useful for decision making should be included in our reports. As the expense was incurred in 2010, it needs to be recorded as such, despite the fact that it was not paid for, so that we can accurately calculate our profit for this reporting period.
book answer:
Balance day adjustments ensure that all information that is useful for decision-making is included in the reports. The advertising has been incurred/consumed in the period ending 31 December 2010,, and so should be included as an expense in this reporting period.
Do you think i'd still get full marks, even though I did not mention Balance day adjustments?
All of the following is subject to my opinion and could be wrong:
I think your answer would be given full marks. You have covered all the "key words" that are in the solution... so should be fine. However, you probably should incorporate the questions in your definition, during the I.D.L process....
Relevance:
Balance Day Adjustments ensure all information is useful for decision-making is useful in the reports.
- I think this is a very good sentence and could be used for any Balance Day Adjustment - Relevance question, which are quite common :P
Post by: nacho on April 28, 2011, 06:20:57 pm
wouldnt it also ensure that all the information FROM THE CURRENT REPORTING PERIOD are included to calculate an accurate profit and hence be useful for the decision making. :PYea, that's what i put didn't I?
Also, could someone have a look at this spark of curiosity:
Quote
ANOTHER QUESTION on formalities...
I know when recording in ledgers, it's acceptable to split the payments for something which includes GST, and you can also have them merged
eg. Jan. 31 Stock control/GST clearing $4400
Or you could put
Jan. 31 Stock control $4000
Jan. 31 GST Clearing $400
(According to my teacher anyway)
But in cases of recording a payment, for a prepaid expense and an accrued expense,
is it acceptable to do the same thing?
I've noticed in the examples in the book, they've split them,
yet in the answers provided, they've joined them.
And, in the case of the split ones, it just seemed as if they did it on two lines, because they ran out of room? (see reference)
But i thought another possible reason was that they split it too show the individual payments, rather than running out of room.
Also, for the Wages example they've provided, in the Ch. No column, are we expected to put "BS" (Bank statement?)
And is it also a possibility that they did not split the payments, because they can show the different payments in just one column?
(the idea of splitting to show different columns seems more appropriate now, but im going to ask just for the sake of it anyway. Would we ever get penalised if we split the payments into two different rows, bar the fact that they used different columns anyway? Eg. if we split the wage/accr wages payment)
Lastly,
i'm somewhat pissed with the VCAA.
I've read so many times to answer with dot points and that only include as many things as the question asks..
Reading the examiners report, I see comments like "Students are reminded that one sentence is often not enough detail to gain full marks"
and also for questions like:
"Explain the purpose of subsidiary records in the recording process." (2 marks)
the comments are "Students and teachers are reminded that a two-mark question usually requires two separate points as part of the explanation."
That is just dodgy and annoying... :@
The point of an 'explain' question is that you state/identify the answer (1 mark?) and then elaborate on it, no?
Post by: luffy on April 28, 2011, 08:47:11 pm
wouldnt it also ensure that all the information FROM THE CURRENT REPORTING PERIOD are included to calculate an accurate profit and hence be useful for the decision making. :PYea, that's what i put didn't I?
Also, could someone have a look at this spark of curiosity:QuoteANOTHER QUESTION on formalities...
I know when recording in ledgers, it's acceptable to split the payments for something which includes GST, and you can also have them merged
eg. Jan. 31 Stock control/GST clearing $4400
Or you could put
Jan. 31 Stock control $4000
Jan. 31 GST Clearing $400
(According to my teacher anyway)
But in cases of recording a payment, for a prepaid expense and an accrued expense,
is it acceptable to do the same thing?
I've noticed in the examples in the book, they've split them,
yet in the answers provided, they've joined them.
And, in the case of the split ones, it just seemed as if they did it on two lines, because they ran out of room? (see reference)
But i thought another possible reason was that they split it too show the individual payments, rather than running out of room.
Also, for the Wages example they've provided, in the Ch. No column, are we expected to put "BS" (Bank statement?)
And is it also a possibility that they did not split the payments, because they can show the different payments in just one column?
(the idea of splitting to show different columns seems more appropriate now, but im going to ask just for the sake of it anyway. Would we ever get penalised if we split the payments into two different rows, bar the fact that they used different columns anyway? Eg. if we split the wage/accr wages payment)
Lastly,
i'm somewhat pissed with the VCAA.
I've read so many times to answer with dot points and that only include as many things as the question asks..
Reading the examiners report, I see comments like "Students are reminded that one sentence is often not enough detail to gain full marks"
and also for questions like:
"Explain the purpose of subsidiary records in the recording process." (2 marks)
the comments are "Students and teachers are reminded that a two-mark question usually requires two separate points as part of the explanation."
That is just dodgy and annoying... :@
The point of an 'explain' question is that you state/identify the answer (1 mark?) and then elaborate on it, no?
I don't understand your prepaid/accrued expense question..... What are you talking about? xD. My teachers, who are also "exam-markers", ALWAYS merge the cross-references and amounts and encourage me to do so....
For the wages example, I would separate the columns in all examples. I don't know if they allow you to do it one row, but I know for a fact that the "separate" rows is the correct method of doing it. Besides, why risk it?
When they say "two points," it just means they are looking for two key sentences that must be stated in some way. The answer, itself, will not be explained in one sentence but in two to "fully" answer the question. I hope I answered your question...
Post by: nacho on May 01, 2011, 02:39:13 pm
1. Referring to one Accounting principle, explain why residual value is deducted from Historical cost when calculating the depreciation using the straight-line method.
"Entity Principle.
The business is seperate from the owner and other business and records should be kept on this basis. As the business will only consume the asset until it is at its' residual value,
upon which it will disposed of or consumed by another entity, the residual value must be deducted from the Historical cost to show the amount consumed by our business."
2. Referring to one accounting principle, explain why it si not always accurate to report depreciation expense per annum
Post by: 123456k on May 02, 2011, 03:49:10 pm
I dunno about accounting principles though. Where did you get these questions from?
Post by: 123456k on May 02, 2011, 03:58:07 pm
Post by: nacho on May 03, 2011, 05:13:12 pm
it's frmo teh cambridge book, and it's part of the "Review Questions" which dont have given answers, sadly
Post by: Dr.Lecter on May 03, 2011, 05:25:39 pm
Post by: Camo on May 03, 2011, 07:09:59 pm
Post by: sam.utute on May 03, 2011, 07:51:25 pm
Post by: cibicl on May 05, 2011, 07:20:41 pm
I understand the question but think its lacking quality.
Thanks :)
Post by: cibicl on May 05, 2011, 07:51:09 pm
The revision sheet I am currently doing asks to distinguish between inputs, processing and outputs. I can't find anything like this in my textbook :S can any one provide me with some examples?
Thank you!
Post by: nacho on May 05, 2011, 07:52:04 pm
to elaborate,
think of say, "Stock" (stuff we sell in order to gain profit)
If we have $x of stock on hand, it will represent a future economic benefit, as we bought it for $x, but plan to sell it for e.g $x+10
Therefore, the future economic benefit stock represents is cash.
Consumption of an economic benefit speaks for itself.
Once we sell this stock, it can sort of be said that we've "consumed" it, by using it up and selling it.
So, when we sell it, an expense called "Cost of Sales" arises.
This expense, will be equal to the amount that we bought the stock for, because that is the value of the stock, which we have used up.
By this I mean, if we bought the stock for $10 and we sold it for $20.
Our cost of sales expense will be $10, not $20, As this is the amount by which we have used our stock up.
Hope that's clear
also, in regards to your inputs, processing, outputs
it's just describing the way accounting works.
To VERY briefly summarise it.
we receive our data/information from source documents (which provide evidence and details of transactions)
Therefore, we input data from source documents.
INPUT = SOURCE DOCUMENTS
kinda forgot the rest, pretty bad considering im a 3/4 students aiming for 45+
But, processing is like "Recording" stuff and maybe reporting... not sure :/
ill have a look in a sec
Post by: cibicl on May 05, 2011, 09:10:08 pm
Post by: marr on May 06, 2011, 05:31:21 pm
1/1/2011: The business buys a van for $25,000 with a useful life of 5 years and $0 scrap value.
1/3/2011: The buisness installs shelving in the vans for $5000
What would the depreciation ledger account look like on 30/6/2011?
Post by: _avO on May 06, 2011, 05:45:39 pm
HC = 30000
RV = 0
UL = 5 years
Dep'n = (HC - RV)/UL
Dep'n exp = 30000 / 5
= $6000p.a.
= 500/mth
Post by: marr on May 06, 2011, 05:55:34 pm
Jan: $416.66
Feb: $416.66
Mar: $500
Apr: $500
May: $500
Jun: $500
= $2,833.32
Post by: _avO on May 06, 2011, 07:13:07 pm
Umm I think that would be right can't think of any other way
Post by: marr on May 06, 2011, 10:53:29 pm
Post by: Hodgeyhodgey on May 07, 2011, 06:49:44 pm
Just wondering because my teacher told us to prepare for a question like this for our next sac. I think I remember a while ago that someone answered with relevance, but another said that neville box argued the answer was understandability? Either way, I figure both could be acceptable with the appropriate explanation.
Thanks guys!
Post by: luffy on May 08, 2011, 03:04:58 pm
What qualitative characteristic applies and why when we talk about classifications in the cash flow statement (or the balance sheet for that matter)?
Just wondering because my teacher told us to prepare for a question like this for our next sac. I think I remember a while ago that someone answered with relevance, but another said that neville box argued the answer was understandability? Either way, I figure both could be acceptable with the appropriate explanation.
Thanks guys!
After a huge dispute between examiners, they actually concluded that in order to gain the entire marks of the question, you needed to state understandability because it was the most appropriate answer. (Refer to VCAA 2007 mid-year exam).
Therefore, for any questions about classification, it makes it easier to comprehend the meaning of the reports, and thus is associated with understandability.
Post by: Hodgeyhodgey on May 08, 2011, 06:36:32 pm
Reading through the assessor's report now, understandability makes a lot more sense than relevance.What qualitative characteristic applies and why when we talk about classifications in the cash flow statement (or the balance sheet for that matter)?
Just wondering because my teacher told us to prepare for a question like this for our next sac. I think I remember a while ago that someone answered with relevance, but another said that neville box argued the answer was understandability? Either way, I figure both could be acceptable with the appropriate explanation.
Thanks guys!
After a huge dispute between examiners, they actually concluded that in order to gain the entire marks of the question, you needed to state understandability because it was the most appropriate answer. (Refer to VCAA 2007 mid-year exam).
Therefore, for any questions about classification, it makes it easier to comprehend the meaning of the reports, and thus is associated with understandability.
Post by: nacho on May 09, 2011, 04:34:09 pm
Yes but from 1/1/2011 - 1/3/2011 is the depreciation calculated at $416.67 per month and then from 1/3/2011 onwards it becomes $500? Therefore would the answer be:A certain god of accounting says that because of 'relevance', you would not do this
Jan: $416.66
Feb: $416.66
Mar: $500
Apr: $500
May: $500
Jun: $500
= $2,833.32
Post by: sam.utute on May 09, 2011, 06:57:08 pm
FAIL...
Post by: luffy on May 09, 2011, 08:48:50 pm
Reading through the assessor's report now, understandability makes a lot more sense than relevance.What qualitative characteristic applies and why when we talk about classifications in the cash flow statement (or the balance sheet for that matter)?
Just wondering because my teacher told us to prepare for a question like this for our next sac. I think I remember a while ago that someone answered with relevance, but another said that neville box argued the answer was understandability? Either way, I figure both could be acceptable with the appropriate explanation.
Thanks guys!
After a huge dispute between examiners, they actually concluded that in order to gain the entire marks of the question, you needed to state understandability because it was the most appropriate answer. (Refer to VCAA 2007 mid-year exam).
Therefore, for any questions about classification, it makes it easier to comprehend the meaning of the reports, and thus is associated with understandability.
Just thought I would mention this:
- My teacher, who is an examiner, stated that when Neville Box, the chief examiner, was going through that question, due to huge disputes amongst the examiners, they had a vote for the most appropriate answer. Apparently, the difference in the vote came down to one examiner. Therefore, obviously "Understandability" was not the "clear" favourite.
Post by: nacho on May 09, 2011, 09:52:37 pm
For example, is:
"Memo 47 - Debt is written off as irrecoverable" adequate,
or does it need to be:
"80% of John O’Brien’s debt has
been deemed irrecoverable and is
to be written off (Memo 47)"
in particular, are key words like "Adjusting entry" required?
Eg.
Adjusting entry to lower stock
control to physical stocktake value
or
Memo 48 - physical stocktake revealed stock loss
Obviously the former is better, but just wondering if the latter is sufficient
thanks
Post by: sam.utute on May 09, 2011, 10:02:28 pm
Both methods are more than adequate.
Post by: Hodgeyhodgey on May 11, 2011, 05:34:59 pm
I'd go with something like "Adjusting entry for stock loss as revealed by physical stocktake (Memo 13)" as an example, just to be sure.
Post by: nacho on May 23, 2011, 08:57:31 pm
desperato question.
very confused in fact.
For a long time i've been thinking that there could be a deficiency in the question provided, however, seeing that this has appeared in both cambridge and TSFX, im a little bit unsure of myself.
when given a pre-adjustment trial balance
like if there is a drawings figure of, say, $15000.
How do we fill out the ledger account for drawings?
do we just assume it's stock, and not bank? Or vice versa? Or are we actually supposed to be told like in 'additional information' to come to a definitive conclusion.
(also, the fact that the business has a positive bank balance or a bank deficit, doesn't make a difference right?)
Okay and another question.
sometimes it'll say that "Pat paid $5000 in wages on february the 8th. Record this in teh Cash payments Journal" Or something along those lines, and it also gives that there are wages owing (accrued wages)
But i swear they will not tell you how much wages are owing, nor will they tell you the rate at which you pay wages.
is there way to figure out the wages accrued wages figures? Or am i misreading something..
thanks
(sorry i cant give examples, when i do questions and ifnd them, i shall)
Post by: soopertaco on May 25, 2011, 04:43:00 pm
IF in the additional info in a previous part of the q it says the owner withdrew 'x' amount of stock say $1500 during the period and also in the pre-adjustment trial balance there was drawings of say $2000... do we assume that 1500 is already part of the $2000 or should we add that amount of drawings to the $2000 when posted in the capital a/c in the general ledger??
awesome question i've never though about this until now.
and for the second question... the business will not always have accrued wages? maybe this is the problem, you're looking for something that is truly not there. But they should give you the accrued amount, if not they should at least get you to determine the amount in a previous part of the question, i doubt they'd leave you in the dark like that
Post by: ech_93 on May 25, 2011, 05:17:57 pm
I'm doing a profit and loss statement, but I'm not sure what to classify it as!?
thanks!
Post by: ech_93 on May 25, 2011, 07:09:18 pm
Sorry, but I need to finish it tonight.
Post by: marr on May 25, 2011, 07:53:23 pm
Post by: ech_93 on May 25, 2011, 08:05:16 pm
Post by: ech_93 on May 25, 2011, 09:12:39 pm
I'm thinking non-current assets, but not completely sure...
Post by: soopertaco on May 25, 2011, 09:32:37 pm
Post by: ech_93 on May 25, 2011, 09:36:42 pm
But, I did a balance sheet with those as assets and it worked :/
Unless that was just a fluke!
edit: yeah, thinking about it now, i don't think they are assets. How did the balance sheet even work then !?
edit2: finally worked it out! :D
Post by: soopertaco on May 26, 2011, 12:31:22 am
Post by: SDPHD on May 31, 2011, 07:29:25 pm
The Interest Expense and Accrued Interest Expense of the following question would be $1875 as the interest per annum is $4500 which is $375 per month and as five months have passed since 1 Feb to 30 Jun, that equals $1875, right?
Is my reasoning logical or have I just made up garbage which just happens to conform to the right answer?
PS - The question is 1.3 from the 2010 VCAA Exam 1.
(http://i.imgur.com/pDKX0.png)
Post by: 123456k on May 31, 2011, 08:19:17 pm
Post by: soopertaco on May 31, 2011, 10:06:51 pm
not meaning to sound like google but
did you mean according to one qualitative characteristic why are items in the balance sheet classified?
Post by: 123456k on May 31, 2011, 10:20:46 pm
Post by: soopertaco on May 31, 2011, 10:34:38 pm
Post by: ShortBlackChick on June 01, 2011, 04:14:44 pm
I'm doing a prac exam, and there's a question:Can i just ask, by element, do you mean like assets, liabilities, OE, revenue and expenses???
According to one Accounting Element, why are Balance Sheets classified?
Or element as if in, Principles???
I mean i got that it didnt make sense, but just to clarify what an element is
LOL
Post by: 123456k on June 01, 2011, 09:27:25 pm
Post by: soopertaco on June 01, 2011, 10:04:01 pm
Post by: sam.utute on June 01, 2011, 10:28:39 pm
Post by: soopertaco on June 01, 2011, 11:28:48 pm
and historical cost is the purchase price of the asset + any costs involved in getting the asset into a state and location to earn revenue? :) or is that different?
Post by: sam.utute on June 02, 2011, 12:44:39 pm
Just make sure you use the correct definition of cost of an asset.
Post by: SDPHD on June 02, 2011, 05:36:37 pm
Question data -
(http://i.imgur.com/tNjTw.jpg)
Solution -
(http://i.imgur.com/7IYsu.png)
How come the 'Interest on government bonds' is considered a 'Reciept from customers'?
Doesn't make sense to me.
Post by: 123456k on June 02, 2011, 06:44:27 pm
That's the best i can do :/. Hope this helps..
Post by: SDPHD on June 02, 2011, 07:04:34 pm
I knew that it was an inflow of cash but personally, I didn't think it would fall under the category of 'Reciepts from customers'. I don't know where I would have put it...
Post by: nacho on June 02, 2011, 08:33:47 pm
I seem to be struggling with the Link component.
Post by: soopertaco on June 02, 2011, 08:40:16 pm
and another question :)
what is advantage and disadvantage of prepaid rent?
Post by: soopertaco on June 02, 2011, 08:41:49 pm
but really i find that with the link you just really have go above and beyond when explaining the link
Post by: sam.utute on June 02, 2011, 08:56:23 pm
"All costs incurred in order to bring the asset into a location and condition ready for use, that will provide a benefit for the life of the asset."
Adv. of Prepaid Rent:
Guaranteed/Assurance that you will have use of the premises for a fixed period of time into the future.
Disadv. of Prepaid Rent:
Loss of cash that could have been used for other purposes, such as the purchase of stock or repayment of liabilities.
I'll be spending the first 30 or so minutes going through how to link theory questions :D
Post by: soopertaco on June 02, 2011, 09:09:52 pm
now that i think about it, my answer isn't as strong but could you give your criticisms :)
and btw sam is accounting on saturday booked out? i'm thinking of going but i'm kind of reluctant that like other lectures it'll spend a majority of the time addressing things that we already know and not the important and more challenging things. is this not the case with connect? :)
Post by: sam.utute on June 02, 2011, 09:43:38 pm
For that question I also had another advantage which is that the business can utilise its cash resources when they are readily accessible so management will not have to worry about providing an outflow of cash in the coming periods.
You should provide some brief examples. The main advantage that you should highlight is the fact that cash is available for alternate uses. The last bit about management not having to provide outflow is a little off topic (Unit 4, Chapter 17 of your text: Budgeting).
i'm thinking of going but i'm kind of reluctant that like other lectures it'll spend a majority of the time addressing things that we already know and not the important and more challenging thingThis is the reason we started. Simply put, I wasted too much time in lectures that were useless last year. We want to make sure that you guys get the most out of the limited amount of time. You've been learning the course for the last 6 months. You don't need me to explain it. However, I can hopefully provide you with tips on scoring well in the exam. :)
I am willing to refund anyone who feels that they didn't get their money's worth out of the lecture.
Post by: nacho on June 06, 2011, 07:23:09 pm
Question : Referring to one Accounting Principle, explain why the office furniture should be depreciated
Principle: Reporting Period.
Explanation: The asset has a finite life and in each reporting period it is partially consumed. As a result, the office furniture must be depreciated, so that this consumption is reflected in the reports and all expenses incurred in the reporting period are reported, and profit can be accurately calculated.
Post by: nacho on June 06, 2011, 08:04:58 pm
"If non-current assets are depreciated to reflect all expenses incurred in a reporting period, referring to a principle, explain why current assets are not depreciated."
and
Same question as above, but with a qualitative characteristic.
Post by: luffy on June 06, 2011, 08:48:47 pm
also,
"If non-current assets are depreciated to reflect all expenses incurred in a reporting period, referring to a principle, explain why current assets are not depreciated."
and
Same question as above, but with a qualitative characteristic.
I would say the accounting principle would be Reporting Period:
The ability of a current asset to assist the business in earning revenue will not decrease in the reporting period. Hence, current assets are not consumed over time, but rather by a transaction or consumption. By depreciating current assets, reports would show expenses, which have not been incurred in the current reporting period. Hence, this would be a direct breach of the Reporting Period principle.
Also, just to explain my point more effectively, I would use an example, such as "stock control."
I hope my answer is sufficient :(
Post by: nacho on June 07, 2011, 10:27:39 am
are they pedantic on the whole
"Plus, less, ( ... )" stuff?
I've noticed something which i think is incorrect in the assessment report.
They've put:
"less drawings" and then the figure for drawings is enclosed in brackets.
does this not indicate a 'double negative' and technically give the implication that the drawings figure is being added?
Thanks.
Edit:
- why do we have the profit and loss statement
- the balance sheet
- why do we put cost of sales in the special journals, despite the fact that it is a non-cash transaction
- how does the cash flow statement assist in decision making (i hate the book answer for this.. can someoen provide something different, yet acceptable by VCAA?)
thanks again
Post by: tazza on June 07, 2011, 02:36:52 pm
Post by: soopertaco on June 07, 2011, 06:00:42 pm
additional costs include: modifications, delivery of the vehicle to the business, extra features.
what i normally do is think to myself; is this a once off payment that will contribute to the benefit of the business over the asset's useful life.
common items not included in the cost of an asset: insurance, gst, warranty (basically things that will expire)
Post by: nacho on June 07, 2011, 06:41:31 pm
For the year ended 30 June 2010, calculate:
- The cash paid for rent
- the rent expense
here's how I did it, my answer was wrong.
If after 1 months worth of rent is consumed, we have $600 left, therefore we pay $900 per three months for rent.
we paid:
| June, July, August | Sept - Nov | Dec - Feb 2010 |March - May| June+
$900 $900 $900 $1200 $1200
total = $5100
Neap 09 answer = $4200
for some reason, they have excluded the payment for the first three months from june - august 2009 - anyone know what i've done wrong?
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
REnt expense:
Used june 09 - 10
= 5100 - 800 = 4300
book says: $4000
__________________________
I think i realised the answer to the first question as i was typing. its because the first payment of $1200 occurs on June 1, 2009, which is a different reporting period from the year ended June 30 2010.
still, answer both q's :D
Post by: ivanex on June 07, 2011, 06:57:29 pm
Post by: _avO on June 07, 2011, 07:52:08 pm
8 x $300 = $2400
After the price increase, rent costed $400 a month so from March 1 2010 to June 30 2010 there's 4 months.
4 x $400 = $1600
Add both gets you $4000
i have a question??? in the pre-adjustment trial balance at 30 june 2010 the loan was 50000 credit. the question is The interest on the loan is 9% per annum payable at 31 dec each yearWhats the reporting period? I'm assuming 6 months so
Your interest rate is 9% p.a. and from January 1 to June 30 you've incurred 6 months of interest
$50000 x 9% = 4500 p.a.
4500/12(months) x 6 months consumption
= $2250
Post by: sam.utute on June 07, 2011, 08:24:18 pm
i have a question??? in the pre-adjustment trial balance at 30 june 2010 the loan was 50000 credit. the question is The interest on the loan is 9% per annum payable at 31 dec each yearIf this is the question from the VCAA 2010 exam, then the reporting period was only 5 months (as trading only began February 1).
So do the same thing that _avO has explained, but multiply the by 5 instead of 6.
Post by: chelseaFC on June 08, 2011, 10:48:53 pm
Post by: sam.utute on June 09, 2011, 12:06:08 am
In VCAA exams, it generally doesn't happen. Don't be too worried if it does though. You'll only lose a maximum of 1 mark for incorrect calculation.
Post by: ruchika5 on June 09, 2011, 11:14:54 am
Post by: soopertaco on June 09, 2011, 02:16:51 pm
2010 vcaa if you haven't done it yet (well i've heard it's challenging)
Neap 2010 or 2011 i think
Just do all you can but these are reasonable exams, whether they're challenging or not depends on your skill level which i believe comes with doing a variety of questions from different exams :)
Post by: Dranoel523 on June 09, 2011, 06:11:48 pm
From08 VCAA
-Oct 11 2007. business paid 3600 to renew annual insurance policy due to expire on 31 Oct. 2007. On June 30 2008 remaining baance in prepaid insurance was 4720 prior to any adjusting entries.
How do i determine the amount of insurance used up?
Answer is 3520. But I have no idea how they derived that. Also is there some sort of steps/template you guys use when solving questions like this?
Post by: 123456k on June 09, 2011, 07:12:00 pm
Only 3% of the entire population of students got full marks for this question. Very tough question D:
Ask questions if you don't understand my explanation :)
Post by: Anon123 on June 10, 2011, 12:12:31 pm
one of them asks for you to complete what the liabilities section of the business in the BS would like like at (some) date.
-I didn't know how to interpret this, does it ask for ALL liabilities (which I thought seemed most correct), do you split up CL and NCL?
-the answer only showed CL....
and another one, there were GST Payments in the cash payments journal, but this was excluded in the cash flow statement in the answers. I put it as an outflow for operating activities, but there is no such entry in the solutions
-answers are wrong, or have I messed up?
Post by: sam.utute on June 10, 2011, 12:20:48 pm
Post by: soopertaco on June 10, 2011, 01:20:46 pm
Post by: soopertaco on June 10, 2011, 09:51:30 pm
OR should we calculate the dep exp on the new equipment and the calculate dep exp on the old equipment and then add them?
Post by: MaddehZ on June 11, 2011, 12:23:06 pm
got a question
if you get a source document - say a contribution of vehicle by owner that you missed out dated 24th of June
but its 30th of June atm...
do you record it as 30th of june in the general journal ?
Post by: andyzpipe on June 11, 2011, 08:46:52 pm
Post by: MaddehZ on June 12, 2011, 12:23:15 am
Post by: nacho on June 12, 2011, 11:28:14 am
and how is cash receipts calculated? in the first question, for bank ledger.
and i swear that their GST value is incorrect?
Shouldnt it be 3700?
3500 for stock, and then the 200 for the rent?
Thanks
also
for the stock card on 2.1.1
would we be penalised if we recorded memo29 on 30 june?
I didnt put an inflow or outflow, i just put the same balance.
i mean, if they didnt want us to put it there, why would they provide the date for us, and an extra line?
Post by: tazza on June 12, 2011, 02:21:47 pm
Q1 - Explain how the Going Concern principle will affect the reporting of Office Equipment in the Balance Sheet.
Answer - Going concern assumes the business will continue into future reporting periods. As the asset Office Equipment will earn revenue over those future reporting periods it must be depreciated each year that it remains with the business.
My answer - The business is expected to have an indefinite life span, and as office equipment is expected to provide a future economic benefit into future reporting periods longer than a year away, it is recorded as a non-current asset.
I've given a completely different answer, but is mine still right?
Q2 - Explain, with reference to an accounting principle, why it is necessary to charge depreciation on the motor vehicle.
My answer...
Reporting period – all revenues earned should be matched with expenses incurred for the one reporting period. Because the vehicle is used to help generate revenue throughout the reporting period, the expense ‘consumed’ by the asset must be matched so that an accurate profit figure can be determined.
I'm not sure if I've answered it right here, is there any way I could word it better?
Q3 - Explain why it is necessary to balance accounts at the end of the reporting period.
Answer - as the life of the business is assumed to be ongoing, the assets, liabilities and owner's equity accounts are balanced as they are expected to generate future economic benefits (assets) and comprimise future obligations for the business in future reporting periods.
My answer - Assets, liabilities and owner’s equity accounts need to be balanced so that the totals can be used to produce reports such as the Balance Sheet.
Completely different answer again,but is mine still kind of right?
Q4 - Explain, with reference to a qualitative characteristic, one benefit of using a control account and subsidiary ledgers for creditors.
Answer - relevance...removes bulky detail and is more useful for decision making blah blah blah
My answer - reliability...the creditors control accounts allow for a summary of all the transactions involving creditors, whereas the subsidiary ledgers allow all the transactions of the individual creditors to be posted individually. They satisfy reliability because they act as a cross checking mechanism, where the accuracy of accounting reports can be verified.
Once again, are there two answers to this question?
And finally, if there is a question that asks something and then says "in the recording process", is this different to if it asked a question and said "in the accounting reports", for example "explain how source documents improve the reliability of information in accounting report" compared to "explain the role of source documents in the recording process".
;)
Post by: ech_93 on June 12, 2011, 05:04:14 pm
annnd, @ anyone who has done neap 2011 practice exam, how did they calculate cash at bank for 1.1.1? It doesn't make sense :(
It says "During January 2011, Jessica opened a business bank account in the name of Rae’s Camping and deposited $45 000 cash. At this time she also transferred ownership of her personal Vehicle, purchased in 2009 for $47 000 (plus $4 700 GST), which has an agreed value of $32 000, to the business. Jessica borrowed $18 000 to purchase the Vehicle and currently owes $12 000 to ZNA Finance which the business will take over, paying $500 per month.
Jessica agreed to purchase the stock of an existing business, which had an agreed value of $42 000
plus $4 200 GST as of 29 January 2011. The stock was paid for on 1 February 2011 – Cheque No.001. On 31 January 2011 the business arranged a $10 000 overdraft with the bank. The business commenced trading on 1 February 2011." -- Then you have to do a balance sheet as at 1 Feb...
In the answers it says there is a bank overdraft of $1200. But i don't understand :(
D:
Post by: nacho on June 12, 2011, 05:17:12 pm
@ nacho, they are yet to pay rent for January, so the GST is not included (i think thats what it is?). And for 2.1.1 my teacher penalised me for putting in memo. 29can you upload neap 2011? I have no 2011 exams.
annnd, @ anyone who has done neap 2011 practice exam, how did they calculate cash at bank for 1.1.1? It doesn't make sense :(
It says "During January 2011, Jessica opened a business bank account in the name of Rae’s Camping and deposited $45 000 cash. At this time she also transferred ownership of her personal Vehicle, purchased in 2009 for $47 000 (plus $4 700 GST), which has an agreed value of $32 000, to the business. Jessica borrowed $18 000 to purchase the Vehicle and currently owes $12 000 to ZNA Finance which the business will take over, paying $500 per month.
Jessica agreed to purchase the stock of an existing business, which had an agreed value of $42 000
plus $4 200 GST as of 29 January 2011. The stock was paid for on 1 February 2011 – Cheque No.001. On 31 January 2011 the business arranged a $10 000 overdraft with the bank. The business commenced trading on 1 February 2011." -- Then you have to do a balance sheet as at 1 Feb...
In the answers it says there is a bank overdraft of $1200. But i don't understand :(
D:
ive only done 6 exams for accounting fml.
not that i need that much more practice..but i should have fkn done more.. i made the A+ cutoff once for one of vcaas previous, but only got an A for last years..
damn
Post by: ech_93 on June 12, 2011, 05:20:00 pm
Let me know if you find how to work out the bank in 1.1.1
or anyone else who works it out...
edit: for the 2011 neap 1.1.1 question if i ignore it saying "On 31 January 2011 the business arranged a $10 000 overdraft with the bank." then i can work out the 1200 overdraft. What does that even mean that it 'arranged' that overdraft?
Post by: urikolo on June 12, 2011, 05:26:06 pm
So you have: 45000-42000-4200= -1200
That's the bank balance as at feb 1
Post by: nacho on June 12, 2011, 05:26:30 pm
anyway,
back to my vcaa question
see it doesnt even matter if they havent paid for it yet, because it has been INCURRED.
get what im saying?
Post by: ech_93 on June 12, 2011, 05:28:11 pm
For the bank balance, the owner has contributed $45000 cash, then it says that the business has purchased stock valued at $42000 plus $4200 GST.
So you have: 45000-42000-4200= -1200
That's the bank balance as at feb 1
Yeah, thats what i'm thinking now too. thanks. But when it says " On 31 January 2011 the business arranged a $10 000 overdraft with the bank." that confuses me?
What does that mean?
edit: @ nacho. I get what you're saying, but i still don't think it effects GST. You only have cash payments of GST and cash reciepts of GST, and what you are owed on credit/what you owe on credit. And ATO stuff. So, where would the rent GST fit in? ... I'm not sure if what I'm saying is right (or if it makes sense), but thats what I was thinking when i was doing that question?
Post by: urikolo on June 12, 2011, 05:30:09 pm
Post by: _avO on June 12, 2011, 05:31:54 pm
Arranging an overdraft of 10,000 means that the business can be in overdraft up until $10,000 before they incur any interest expenses to the amount owing (could be 5% interest or 20% interest etc. depending on the contract)For the bank balance, the owner has contributed $45000 cash, then it says that the business has purchased stock valued at $42000 plus $4200 GST.
So you have: 45000-42000-4200= -1200
That's the bank balance as at feb 1
Yeah, thats what i'm thinking now too. thanks. But when it says " On 31 January 2011 the business arranged a $10 000 overdraft with the bank." that confuses me?
What does that mean?
Post by: ech_93 on June 12, 2011, 05:37:40 pm
Post by: MaddehZ on June 12, 2011, 05:52:47 pm
At the end of the reporting period (30th of June 2010), a memo was found that had not been recorded
The details of the memo are as follows:
On 23 June 2010, owner contributed vehicle to the business
Record this in the General Journal
What date would I use to record this? 23rd or 30th ?
Post by: BoredSatan on June 12, 2011, 11:12:43 pm
Post by: Angelz369 on June 12, 2011, 11:49:08 pm
Please help mee!!
Post by: nacho on June 13, 2011, 09:24:37 am
depreciation is actually a good question, in their trial balance, they've added $3000 to the vehicles value, by accident, because of vehicle repairs.
so if you deduct that $3000, the new value is $20000.
then,
20,000 - 8000
---------------
5
$2400 per year
= $200 per month
and its for 6 months (i actually sort of do not understand this part)
therefore $1200
HOW DO YOU CALCULATE THE INTEREST EXPENSE?
someone PLEASE tell me
Post by: tazza on June 13, 2011, 10:25:44 am
= 10000 (capital) -35000 (stock)-3500(GST paid) +50000 (loan)
=21500
Depreciation
=2400 p.a
=200 per month
And nacho, as the vehicle was contributed on the 1 january, and the report is being produces on the 30th june, this means that the vehicle has being earning revenue for the business for 6 months and the depreciation expense incurred must match this. If it had of been contributed on the 1st Feb then the expense would have been for 5 months, and so on. So it ends up being 200 x 6 =1200
Now for interest expense...
The loan is 50000 and it is paid at 9% p.a., which is 50000 x9% = 4500 per year.
Dividing by 12 = $375 per month. Now this concept is almost the same as the depreciation expense. The loan was taken out on the 31st of January, so that means that the business has had the loan for 5 months, so 375 x 5 = $1875.
But because interest is paid at the end of each year, this means that the interest expense has been INCURRED but not yet PAID, so $1875 is debited for interest expense and $1875 is credited for Accrued interest expense.
Hope that helps.
Post by: nacho on June 13, 2011, 11:26:18 am
i disagree with solutions on first question, can someone help me out?
i put my bank overdraft as 1700,
rather than 1200
because it says that the business will pay the ZNA finance loan, $500 per month.
the business commenced on january 1, so that means during january, they paid 500.
therefore the overdraft should be 1200 + 500 = 1700?
what have i done wrong?
also, for q1.4.2
i closed the wages account, because it said 'show how the wages expense account would appear at 30 june, 2011 after all entries had been posted'.
did i misinterpret it, because it only said 'after all entries had been posted'? at teh start of the question, it said 'reports are prepared anually'.
doesnt that mean that we need to close the ledger now?
woo, 84/90 on 2011 neap :D
POSSIBLE 86/90 if answers are wrong :D !!
Post by: BoredSatan on June 13, 2011, 12:18:40 pm
anyone done neap 2011?For the Bank Balance.
i disagree with solutions on first question, can someone help me out?
i put my bank overdraft as 1700,
rather than 1200
because it says that the business will pay the ZNA finance loan, $500 per month.
the business commenced on january 1, so that means during january, they paid 500.
therefore the overdraft should be 1200 + 500 = 1700?
what have i done wrong?
also, for q1.4.2
i closed the wages account, because it said 'show how the wages expense account would appear at 30 june, 2011 after all entries had been posted'.
did i misinterpret it, because it only said 'after all entries had been posted'? at teh start of the question, it said 'reports are prepared anually'.
doesnt that mean that we need to close the ledger now?
woo, 84/90 on 2011 neap :D
POSSIBLE 86/90 if answers are wrong :D !!
The Question says that DURING January 2011 the business took over the loan. So for all we know this could have been on the 31st on January so therefore we cannot assume that it was at the start of the month.
Answer is correct unfortunately :)
Hmm I did what you did for the second question and looking at the answer it is a bit obscure.. Maybe give yourself half a mark there ;)
Post by: benrattray on June 13, 2011, 02:03:46 pm
Apparently for conservatism, its stock control, but i cant work out why
Post by: Hodgeyhodgey on June 13, 2011, 02:08:04 pm
What items in a Balance Sheet would best show the Going Concern and conservatism principles?Going Concern would be a non-current asset, as it shows that the life of the business is assumed to continue indefinitely, because by reporting it as non-current it shows it will provide economic benefit to the entity as it is consumed in future reporting periods.
Apparently for conservatism, its stock control, but i cant work out why
But stock control for conservatism? Hm.....
Maybe because it is a control account and it provides a cross-check between it and the balances of the subsidiary accounts it makes sure losses are reported when possible and gains only when certain?
Haha I'm not real sure, mind my blabbing if this is all wrong.
Post by: benrattray on June 13, 2011, 02:23:47 pm
yeah im not sure about the conservatism thing
there doesnt seem to anything that shows conservatism
Post by: luffy on June 13, 2011, 02:43:07 pm
haha thanks man :)
yeah im not sure about the conservatism thing
there doesnt seem to anything that shows conservatism
Well, if a stock gain has occurred, then we use the smallest cost price in the balance. Hence, it shows conservatism in such cases. However, that probably isn't the entire reason for noting that it is conservatism. Anyone else got any ideas?
Post by: nacho on June 13, 2011, 02:45:00 pm
also
just a bunch of last minute questions:
- explain the role of stock cards in an accounting system
explain the affect of stock loss on the balance sheet
referring to one qualitative characteristic, explain the role of a physical stock take
Explain how a post adjustments trial balance can assist in the calculation of an accurate profit figure
explain two uses of the profit and loss statement
and what are the general advantages AND uses of the cash flow statement over the statement of receipts and payments.
:D
Thanks
Post by: benrattray on June 13, 2011, 02:49:44 pm
but thats kinda historical cost too
Post by: nacho on June 13, 2011, 02:57:47 pm
oh how about for conservatism, stock control shows stock at cost prices, and not selling prices, because gains from sales are not certainnope, you are correct.
but thats kinda historical cost too
also, because the vcaa study design does not specify a method of calculating stock gains, i personally would use the selling price thing.
(Stock gain = either most conservative price, or Last stock out)
also, vcaa 2009 exam, i just did it.
i dont quite understand one of the question i got wrong.
1.7
A credit sale that occurred in june has not been recorded.
State the effect of this omission on the profit and loss statement.
they say
Revenues:
Credit sales understated
stock gain understated
how is there a stock gain, if a credit sale goes unrecorded?
shouldnt there be a stock loss, because u have fewer stock on hand, and when u take a stock take, it will show up as 1 less stock than what our stock cards say?
Post by: ech_93 on June 13, 2011, 04:05:39 pm
I don't understand how they found the figure for either general journal entry :(
Post by: Angelz369 on June 13, 2011, 04:30:56 pm
I know this is a stupid question but is cost price cost of sales?
Post by: ech_93 on June 13, 2011, 04:33:08 pm
Post by: ech_93 on June 13, 2011, 04:50:40 pm
also, vcaa 2009 exam, i just did it.It's not necessarily saying that it created a stock gain, rather that the stock gain will be understated; not as high, without the recording of the credit sale.
i dont quite understand one of the question i got wrong.
1.7
A credit sale that occurred in june has not been recorded.
State the effect of this omission on the profit and loss statement.
they say
Revenues:
Credit sales understated
stock gain understated
how is there a stock gain, if a credit sale goes unrecorded?
shouldnt there be a stock loss, because u have fewer stock on hand, and when u take a stock take, it will show up as 1 less stock than what our stock cards say?
So, there are other factors that created the stock gain, then the ommission of the credit sale is pulling the stock gain down. If that makes sense. I think it just wanted to see if you could think of two revenues effected, thats the hard part.
I dunno if thats right though?
Post by: benrattray on June 13, 2011, 05:03:22 pm
Post by: laree_23 on June 13, 2011, 05:56:46 pm
Post by: ech_93 on June 13, 2011, 06:10:06 pm
Loan repayments is when the principal of the loan is being paid back. So it is the actual amount of money that has been taken out, that is being repaid.
Post by: ruchika5 on June 13, 2011, 06:11:22 pm
Post by: eeps on June 13, 2011, 06:39:54 pm
Do correcting entries ensure Reliability or Relevance?
Relevance.
Guys... when the business pays a loan repayment, what is the details for that in the cash payments journal?? is it just loan repayment ?? or something else ?
It's just "Loan repayment".
just a bunch of last minute questions:
- explain the role of stock cards in an accounting system
Stock cards detail the movement of stock coming in-and-out of the business. It shows which stocks sell the best, which ones don't. It can also show when levels of stock are low; re-ordering points.
Post by: Anon123 on June 13, 2011, 06:52:07 pm
would this be ok?
Post by: Hodgeyhodgey on June 13, 2011, 06:53:20 pm
^Stock cards can help a business to identify fast and slow moving lines of stock, which can then help the business to create a better stock mixThis would be an advantage of using stock cards, it's not necessarily the role that they play in the recording process. But definitely tag it onto the end of the role if required.
would this be ok?
Post by: 1337XaH on June 13, 2011, 07:05:44 pm
During times of rising prices, explain the effect that it has on net profit.
i was thinking that even though the stock will be more expensive, your net profit won't be affected as your old stock is still being sold.
seeing as it is your old stock that was being sold before rising prices, your net profit shouldn't actually change in relativity to your old
net profit as you are still selling the old stock and not the new, cheaper stock.
however, the answers still seem to point towards your net profit decreasing as the expensive stock is being sold and it doesn't seem very realistic to me.
Can someone explain? or would vcaa accept different responses as long as they are justified well?
Post by: luffy on June 13, 2011, 07:06:10 pm
Do correcting entries ensure Reliability or Relevance?
Relevance.Guys... when the business pays a loan repayment, what is the details for that in the cash payments journal?? is it just loan repayment ?? or something else ?
It's just "Loan repayment".just a bunch of last minute questions:
- explain the role of stock cards in an accounting system
Stock cards detail the movement of stock coming in-and-out of the business. It shows which stocks sell the best, which ones don't. It can also show when levels of stock are low; re-ordering points.
I think in the journals, you must strictly write ledger account names. Hence, you would have to write "Loan - <name> "
Post by: eeps on June 13, 2011, 07:25:37 pm
I think in the journals, you must strictly write ledger account names. Hence, you would have to write "Loan - <name> "
My bad. That's correct. @ruchika5, disregard what I said.
All the best for tomorrow guys! I hope for everyone's sake, there are no mistakes on the exam like they had last year. I'm sure everyone's hard-work and effort will be worth it. My advice for tomorrow; read the questions carefully. Underline key dates in the question. Do the questions which you think are easy, first. Remember "IDL" when answering theory questions. Other than that, good luck to everyone.
Post by: benrattray on June 13, 2011, 07:50:50 pm
i always thought it was Reliability
Post by: Angelz369 on June 13, 2011, 08:12:28 pm
Hi , wondering if you could explain this to me.
During times of rising prices, explain the effect that it has on net profit.
i was thinking that even though the stock will be more expensive, your net profit won't be affected as your old stock is still being sold.
seeing as it is your old stock that was being sold before rising prices, your net profit shouldn't actually change in relativity to your old
net profit as you are still selling the old stock and not the new, cheaper stock.
however, the answers still seem to point towards your net profit decreasing as the expensive stock is being sold and it doesn't seem very realistic to me.
Can someone explain? or would vcaa accept different responses as long as they are justified well?
In times of rising prices, Fifo assumes that cheaper stock is sold first, understating cost of sales, and thus overstating net profit. It assumes that the more expensive stock is still on hand therefore overstating stock control and assets.
It was in one of my summary notes, but I forgot where I got it from ^^"
Post by: eeps on June 13, 2011, 08:15:53 pm
sorry EPL, but why are correcting entries for Relevance?
i always thought it was Reliability
You could argue both to be honest. I think it's more-so relevance because by correcting entries, it's giving the owner of the business a more accurate determination of the business's financial position. For example, wages paid was incorrectly recorded; instead of it being $400 - it was recorded as $200. By correcting that entry and including it in the reports, it becomes useful for decision-making in the future for the business. Hopefully that makes some sense.
Post by: benrattray on June 13, 2011, 08:29:49 pm
ill go with your explanation though
another question : if the current dates the 30th of june (end of the reporting period), and you find a document that hasnt been recorded, and its from say the 15th of may, what date do you record it as in the journal?
Post by: Angelz369 on June 13, 2011, 08:31:33 pm
And for accrued wages do you put it in Cash Outflow of Operating activities or in the expenses account when you are closing it to the Profit and Loss Summary in the General Ledger?
Thanks!
Post by: benrattray on June 14, 2011, 12:11:24 pm
Post by: iderf on June 14, 2011, 06:45:27 pm
Q: Explain the relationship between the going concern principle and balance day adjustments
A: The business life is assumed to be continuous and the records are kept on this basis. Balance day adjustments adjusts for revenues earned and expenses incurred. After these adjustments are made, asset and liability accounts can be closed off in preparation for the next period as they represent a future inflow and outflow of economic benefit further on in the business' indefinite life.
Post by: MaddehZ on June 14, 2011, 09:18:48 pm
Someone check this for me:
Q: Explain the relationship between the going concern principle and balance day adjustments
A: The business life is assumed to be continuous and the records are kept on this basis. Balance day adjustments adjusts for revenues earned and expenses incurred. After these adjustments are made, asset and liability accounts can be closed off in preparation for the next period as they represent a future inflow and outflow of economic benefit further on in the business' indefinite life.
wat
Post by: iderf on June 14, 2011, 10:13:43 pm
Post by: Desline on June 15, 2011, 11:29:18 am
in a post adjusted trial balance, does capital already have net profit closed to it?
Nope, Adjust before Closing, ABC.
Post by: nacho on July 03, 2011, 10:47:45 am
the answers have put the sales figure as 52000, but i have 56000
could anyone verify this? I do not see how it is 52000
Another question,
for exercise 14.6 and the calculation of cost of stock, i added the insurance payment.
Solutions disagree with me, but my reasoning was that it is a cost incurred on bringing the stock to a condition ready for sale, and furthermore, it is a benefit that will last throughout the life of the asset.
I agree it is a weak argument, however, i'm thinking there's at least a 2% chance im right
another question,
reffering to a qualitative characteristic, explain why recording the prepaid revenue as revenue received is inccorect
also, i just came across 'term deposit'
is that something i should have learned previously?
Post by: Hodgeyhodgey on July 04, 2011, 03:17:51 pm
Post by: nacho on July 09, 2011, 03:11:11 pm
I would agree because of the definition of STO? Not much help, i know, sorry..
Anyways, another question, and also, can someone please help with my previous questions?
Explain why it is important to have an accurate budgeted sales figure?
Post by: MeLucky on July 09, 2011, 04:10:12 pm
'If stock turnover ratio has increased, it means the business has sold more goods.' Do you agree? Explain you answer fully.Just because there is a faster stock turnover rate does not mean the business has sold more goods.It only means stock has been turned into sales faster. For example, what if the average level of stock held was decreased due to a lower investment in inventory? This would lead to a higher stock turnover ratio but the amount of goods sold would be the same as it was before.
Hopefully that's a good explanation because I am still on Budgeting as well and had to read ahead onto that chapter lol
Post by: tony3272 on July 09, 2011, 08:27:26 pm
(sorry for the random order of answering your questions)
another question,
reffering to a qualitative characteristic, explain why recording the prepaid revenue as revenue received is inccorect
Relevance. Recording prepaid revenue as revenue recieved is incorrect as it has not yet been earned by the business and hence is not relevant to the current reporting period. It does not represent any inflow of economic benefits leading to an increase in owner's equity.
Another question,
for exercise 14.6 and the calculation of cost of stock, i added the insurance payment.
Solutions disagree with me, but my reasoning was that it is a cost incurred on bringing the stock to a condition ready for sale, and furthermore, it is a benefit that will last throughout the life of the asset.
I agree it is a weak argument, however, i'm thinking there's at least a 2% chance im right
I always treated insurance as a period cost. The definition of a product cost (as i recall) is a cost incurred in order to bring stock into a condition and location ready for sale which can be allocated to an individual unit of stock on a logical basis. The insurance on the stock in this case is not required to do this. It is simply an extra periodic expense being paid in regards to the stock; this payment will occur regardless of whether the stock is sold or not, so it cannot be allocated to individual units of stock on a logical basis.
question d from exercise 13.6
the answers have put the sales figure as 52000, but i have 56000
could anyone verify this? I do not see how it is 52000
It says that credit sales are $44,000 (Including $4000 GST)
so your actual credit sales are $40,000, which gives total sales of $52,000.
You don't need to worry about term deposits until you do balance day adjustments for revenues. It's basically just:
also, i just came across 'term deposit'
is that something i should have learned previously?
You put in a certain amount of money for 'x' amount of years as it earns a certain amount of interest each year. All you want to calculate is the amount that is accrued at the end of each reporting period, and also how much you've recieved.
Explain why it is important to have an accurate budgeted sales figure?
Your budget basically affects your planning an decision making for the budgeted period. An accurate budgeted sales figure is important as it also has an impact on your other budgets such as budgeted expenses (e.g from COGS) and also your budgeted cash flow statement (from inflows from debtors and cash sales), balance sheet, profit and loss statement etc. If your budgeted sales for a period in exceedingly high, then it may result in too much stock being purchased, and vise-versa.
Post by: Hodgeyhodgey on July 10, 2011, 06:26:46 pm
wow hodgy, you've practically finished the course? Im not upto that chapter yet (still on budgeting :(, damn umat) but, from my limited knowledge of what STO is,I'm using neville box, controlling stock/debtors/creditors is the 3rd(?) chapter of unit 4 in this book. But yes, I'm almost finished :P I'm up to the last chapter which is something about evaluating performance I think...
I would agree because of the definition of STO? Not much help, i know, sorry..
Anyways, another question, and also, can someone please help with my previous questions?
Explain why it is important to have an accurate budgeted sales figure?
Post by: MeLucky on July 10, 2011, 06:44:21 pm
Post by: MeLucky on July 12, 2011, 12:20:21 am
"Is there a problem with a low creditors turnover? Explain the possible implications of having a low creditors turnover rate."
and also
"State and describe two factors that should be taken into account when evaluating a creditors turnover rate."
Post by: _avO on July 12, 2011, 12:45:18 am
Yes, it suggests that the company is taking longer to repay its short term debts. i.e. suffering from poor liquidity or a drop in sales etc. It suggests that the company cannot control its debt and may risk itself of bankruptcy or heading for financial trouble. A low creditors turnover can also suggest that they are deliberately making an effort to control expenses (i.e. paying creditors as late as possible) however this can be analysed further by looking at other aspects of the entity's financial position such as a rising or falling QAR (quick asset ratio/acid-test ratio), DTO (debtors turnover) and STO (stock turnover)
"State and describe two factors that should be taken into account when evaluating a creditors turnover rate."
Benchmarking against:
-Industry average
-Competitors
-Previous period's CTO (if there is a substantial decrease in CTO it can suggest poor liquidity, bad stock management etc.)
-Credit terms (if credit terms is less than CTO this suggests that the entity cannot repay debt as they fall due)
Post by: MeLucky on July 22, 2011, 06:07:32 pm
"What is the purpose of calculating a return on owner's investment if the return on assets has already been determined?"
Post by: teodora on July 25, 2011, 10:52:01 pm
Post by: wqx1995 on July 27, 2011, 05:20:58 pm
Post by: laree_23 on August 14, 2011, 06:07:32 pm
VS Vehicles agreed on a $12000 trade-in value for the old vehicle, and a $2000 cash deposit was paid to VS Vehicles on the day of purchase (Cheque 425)
Post by: BoredSatan on August 14, 2011, 08:28:48 pm
Could someone please explain how to record this in the Cash Payments1. record all the disposals as per usual
VS Vehicles agreed on a $12000 trade-in value for the old vehicle, and a $2000 cash deposit was paid to VS Vehicles on the day of purchase (Cheque 425)
2. record the credit purchase as per usual
3. record the payment in the cash payment journal with the date as the date of purchase just like a normal sundry creditor repayment
How would you explain why the carrying value is used to calculate profit or loss on disposal of a nca, instead of the Historical Cost? (3marks)the carrying value represents the most accurate cost of the NCA at the time of its disposal based on the calculation of depreciation therefore it is more relevant to use it to calculate the profit of loss on the disposal so profit will be more accurate.
What are the ways of reducing sales return?buy better quality stock from suppliers
Post by: nacho on August 22, 2011, 06:06:50 pm
Post by: Moni.brew on August 24, 2011, 08:59:34 am
With recording of the expiration of the term deposit on the CRJ, why do we split the interest with the original term deposit?
And the classification of termdeposit? :)
thanks
Post by: BoredSatan on August 24, 2011, 09:52:25 pm
Post by: nacho on August 27, 2011, 05:13:30 pm
suggest two strategies the owner could adopt to improve net profit in 2010 without changing the Asset turnover
suggested answers are:
- cheaper supplier
- reduce stock loss / better control over advertising, wages
Actually, upon trying to justify my thoughts on why a cheaper supplier wouldnt work, i got even more confused
My initial line of thought was that, if we buy from a cheaper supplier, won't our assets decrease, as our stock is worth less that it was before? But then i thought, 'bank would also decrease, but it would decrease less than if we had bought the expensive stock'. then i thought these two factors would cancel each other out and the answer is valid for that reason.
HOWEVER, when you think about it, assets will still change, and therefore so will asset turnover, shouldnt the answer be something which has nothing to do with buying?
edit/; okay nvm, the key part i was missing was that assets will not change if we buy more stock. :) my bad
As for the stockloss, if we are reducing the amount of stock we lose, wouldn't that also effect asset turnover?
tl;dr justify why the suggested answers provided by the textbook work.
Thanks.
and also, someone please answer the quesiton i asked a few posts above, please
Post by: nacho on September 11, 2011, 03:36:11 pm
business can improve this ratio.
I put 'Buying stock from a cheaper supplier.'
as this would..in some way decrease the average stock on hand, would it not?
Post by: nacho on September 14, 2011, 10:15:20 pm
the hardest part of unit 4 for me is knowing when to and when not to include GST.. i swear some of the templates were screwed........................................................
Post by: nacho on September 28, 2011, 12:56:51 pm
Anyway:
would one consider 'disposal of equipment' as an expense account?
if not, then what would you consider it as?
Post by: abzzzz on September 28, 2011, 02:37:03 pm
Post by: nacho on September 28, 2011, 03:40:51 pm
Can someone guide me on Disposals and trade-ins? can you go through it step by step for the general journal entries please?Disposal of a NCA is three steps:
- transfer the carrying value of the nca
- record proceeds from the sale/trade-in
- transfer profit/loss from disposal
first step : carrying value - FOUR ENTRIES [ CR NCA ACCOUNT, DR DISPOSAL OF NCA + DR ACC DEP'N OF NCA , CR DISPOSAL OF NCA ]
You will CREDIT the non-current asset you are disposing of, so as to set its balance to zero
consequently, you will DEBIT "Disposal of noncurrent asset" by the amount you credited the non-current asset account.
However, you have to note that most of the time, you will have already consumed some of your non-current asset account, i.e it has been depreciated.
therefore, you have not disposed of the whole value, only some of it.
to show this: you have to DEBIT the "Accumulated Depreciation of non current asset'' account, TO SET the balance to ZERO.
and you have to CREDIT the 'disposal of non current asset' account, by the same amount you debited the 'accumulated depreciation account' (im sure your familiar with double entry rules ! :P)
STEP 2:
this step can vary, depending of whether u are dealing with trade-ins or sales.
Ill cover both:
For sales
you will be receiving money. Thus, this is not recorded in the general journal, but cash receipts journal
Date: Details: Rec. Bank Sundry
Month/# Disposal of Non-current asset x $500 $500 ($500 is just an example)
For trade in - FIVE ENTRIES (two for reduction in liability, and 3 for purchasing the non-current asset off of your sundry creditor)
this is a REDUCTION IN LIABILITY TO YOUR SUNDRY CREDITOR.
there is no cash payment involved, so it is recorded in the general journal.
Firstly, reduction in liability:
DEBIT 'SUNDRY CREDITOR - ..... ' by the amount that they are taking the asset for. it will generally say (traded in NCA for $500 reduced debt) or something along those lines.. it will always be specified how much your trade in is worth. CREDIT Disposal of noncurrent asset by the amount you debited sundry creditor by..
SECONDLY, the purchase of NCA.
if you are having a trade in, it obviously involves a sale. (I think that it may be possible that this isnt always the scenario, ill have to check up with someone else, HOWEVER, ive not come across a scenario as of yet)
Purchase of NCA has three entries:
DEBIT Non current asset
DEBIT GST Clearing
Credit Sundry Creditor .....
Step 3: Transferring profit or loss.
will complete later, must leave right now
Post by: abzzzz on September 28, 2011, 06:30:35 pm
Can you also explain product and period costs? i always have trouble with them two
Post by: Hodgeyhodgey on October 01, 2011, 07:09:07 pm
It says in the Cambridge book that a debit is made to the new asset's account (rather than the sundry account) but I don't get why this is done. Why would a debit entry be made to the asset's account?
Could someone please outline a typical example of this, I can't find one anywhere..
Post by: abzzzz on October 01, 2011, 09:37:44 pm
will complete later, must leave right now
[/quote]
Can you please teach me how to transfer the profit/loss
Post by: Anon123 on October 13, 2011, 11:47:35 pm
When trading in a non-current asset but purchasing the new asset with cash, how is the trade-in value recorded in the general journal?
It says in the Cambridge book that a debit is made to the new asset's account (rather than the sundry account) but I don't get why this is done. Why would a debit entry be made to the asset's account?
Could someone please outline a typical example of this, I can't find one anywhere..
? Go to page 295, its perfectly clear with their example.
Post by: nacho on October 15, 2011, 12:31:37 pm
Post by: kamb0z on October 15, 2011, 02:35:27 pm
for insight 2010, how did you guys figure out the cost of the billiard table? For 1.1.7 i got 225 per stock table, whereas insight got 700
Prepaid Sales Revenue was 2800. Mark up is 100%, so cost is half of sales price. 2800/2 = 1400. 1400/2 tables = 700.
Post by: Anon123 on October 19, 2011, 11:54:46 pm
A+ exam 1
really bad on SACs, like 75% [which ranks me pretty damn low for the MHS cohort]
What would another A+ on exam 2 get me? Guranteed 40+?
What about high A, 40 a possibility?
Thanks in advance :/
Post by: mugcake on October 30, 2011, 03:37:38 pm
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?
Post by: Hodgeyhodgey on October 30, 2011, 05:11:28 pm
Has anyone done CSE 2010 Q1.1.1?If you look carefully at the cheque butt, the account is 'Kathy Song' which indicates the owner is paying from her personal bank account, hence the reference to capital in the GJ.
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?
Also my own question (probably a silly one), are disposals of assets recorded on the date of the disposal or on balance day? Thanks!
Post by: RossiJ on October 30, 2011, 06:16:22 pm
Has anyone done CSE 2010 Q1.1.1?If you look carefully at the cheque butt, the account is 'Kathy Song' which indicates the owner is paying from her personal bank account, hence the reference to capital in the GJ.
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?
Also my own question (probably a silly one), are disposals of assets recorded on the date of the disposal or on balance day? Thanks!
not silly, interesting
I'm quite sure date of disposal
Post by: LuiAlefia28 on October 30, 2011, 09:26:24 pm
Also when referring to profitiability do we need to incorporate the Profit ability ratio in the answer? Giving the question is theory based.
Post by: Saur11 on October 30, 2011, 10:29:14 pm
Post by: RossiJ on October 30, 2011, 10:34:04 pm
Hi can someone give me like an A+ answer to the difference between profit and profitability please?
Also when referring to profitiability do we need to incorporate the Profit ability ratio in the answer? Giving the question is theory based.
Profit is revenue less expenses determined through accrual accounting for a reporting period whereas profitability is the ability of a firm to turn/generate a profit through the use of its resources by measuring profit with a base figure. Profitability indicators may include ROI, ROA, GPR, ATO, NPR ect
Post by: Anon123 on October 30, 2011, 10:38:16 pm
Hi can someone give me like an A+ answer to the difference between profit and profitability please?
Also when referring to profitiability do we need to incorporate the Profit ability ratio in the answer? Giving the question is theory based.
Profit is revenue earned less expenses incurred, and is expressed as a dollar figure. On the other hand, profitability is the ability of a firm to generate profit as compared to a base such as Assets or Sales.
Post by: Hodgeyhodgey on October 31, 2011, 11:26:08 am
The reason why I ask is that I did a practice exam and the solutions had it at balance day, I understand that it's recorded in the general ledger so it would make sense to be on balance day, but I'd still appreciate anyone else's feedback if possibleHas anyone done CSE 2010 Q1.1.1?If you look carefully at the cheque butt, the account is 'Kathy Song' which indicates the owner is paying from her personal bank account, hence the reference to capital in the GJ.
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?
Also my own question (probably a silly one), are disposals of assets recorded on the date of the disposal or on balance day? Thanks!
not silly, interesting
I'm quite sure date of disposal
Post by: hawks08 on October 31, 2011, 12:26:04 pm
How is depreciation recorded in financial statements?
How are the income statement, the balance sheet and the statement of changes in equity related
Thanks!!!!
Post by: RossiJ on October 31, 2011, 12:48:33 pm
The reason why I ask is that I did a practice exam and the solutions had it at balance day, I understand that it's recorded in the general ledger so it would make sense to be on balance day, but I'd still appreciate anyone else's feedback if possibleHas anyone done CSE 2010 Q1.1.1?If you look carefully at the cheque butt, the account is 'Kathy Song' which indicates the owner is paying from her personal bank account, hence the reference to capital in the GJ.
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?
Also my own question (probably a silly one), are disposals of assets recorded on the date of the disposal or on balance day? Thanks!
not silly, interesting
I'm quite sure date of disposal
Yeah I agree, I've seen it as both balance day and also the date of disposal
therefore I don't reckon you would lose marks for getting the date wrong haha?
Post by: Hodgeyhodgey on October 31, 2011, 12:59:02 pm
Haha I hope not.The reason why I ask is that I did a practice exam and the solutions had it at balance day, I understand that it's recorded in the general ledger so it would make sense to be on balance day, but I'd still appreciate anyone else's feedback if possibleHas anyone done CSE 2010 Q1.1.1?If you look carefully at the cheque butt, the account is 'Kathy Song' which indicates the owner is paying from her personal bank account, hence the reference to capital in the GJ.
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?
Also my own question (probably a silly one), are disposals of assets recorded on the date of the disposal or on balance day? Thanks!
not silly, interesting
I'm quite sure date of disposal
Yeah I agree, I've seen it as both balance day and also the date of disposal
therefore I don't reckon you would lose marks for getting the date wrong haha?
Just looking through past exams and in 2008 the disposal was on September 30 with the accountant preparing reports annually at Dec 31. The assessor report has the disposal recorded at Sep 30 so there's our answer!
But the trick with something like this is that you must remember to record the closing entries (dep'n, loss/profit) if applicable at balance day. That's where people would lose marks if they're focusing on getting the disposal at the right date.
Post by: Furbob on October 31, 2011, 01:41:02 pm
Q 2.2.1 - Explain why ROI is a more important indicator than ROA
is it because that ROI assess profitability from an investor's point of view rather than a managers point of view (ROA)? or is it because of what ROI measures? (how effectively a business had used its owners captial to earn profit)
Q 2.2.2 - (probably a simple question) Explain how ROA can increase while ATO has decreased
has to be that either NP>Sales (which doesnt make sense...?) or something about the proportional movement in the Avg Total Assets? :S
Post by: Hodgeyhodgey on October 31, 2011, 02:08:08 pm
from CSE 2011
Q 2.2.1 - Explain why ROI is a more important indicator than ROA
is it because that ROI assess profitability from an investor's point of view rather than a managers point of view (ROA)? or is it because of what ROI measures? (how effectively a business had used its owners captial to earn profit)
Q 2.2.2 - (probably a simple question) Explain how ROA can increase while ATO has decreased
has to be that either NP>Sales (which doesnt make sense...?) or something about the proportional movement in the Avg Total Assets? :S
2.2.1 - I'd say a mix of what you have suggested. Also mention that the owner is more interested in examining the return on his investment and that ROA may be inaccurate due to an over-investment in stock (or stock might be out of season, damaged and can't be sold, etc)
2.2.2 - think of the equation ROA = ATO x NPR, if ROA increases while ATO decreases, that means that NPR will have to increase by MORE than the decrease in ATO. To do this, either NP has to increase or sales has to decrease.
So take a decrease in sales for example. This would cause ATO to decrease and NPR to increase (if NPR stays the same or increases) and this can be done through improved expense control. An answer like this may be 2/3 so far but to get that extra mark you would have to explain how expense control has improved, whether it be through reduced wages, lower COS, better quality products resulting in lower sales returns, etc.
Post by: Furbob on October 31, 2011, 03:24:26 pm
2010 2011 2012
ROI 6% 7.5% 8%
ROA 4% 4.2% 4.8%
ATO 1.9 1.6 1.4
Post by: Hodgeyhodgey on October 31, 2011, 08:15:46 pm
hmm... for 2.2.2 all im given isYeah so to answer that a decrease in ATO will be 1 of 2 things, a decrease in sales or an increase in the level of assets. Since the level of assets isn't exactly relevant to the NPR (ignore ROI, focus on the formula ROA = ATO x NPR), you would say that there has been a decrease in sales (resulting in a decrease in ATO). But for ROA to increase, NPR must increase more than the decrease in ATO which means NPR will have to grow with a decrease in sales. That will be done by an improvement in expense control through decreased wages, rent, etc
2010 2011 2012
ROI 6% 7.5% 8%
ROA 4% 4.2% 4.8%
ATO 1.9 1.6 1.4
Post by: Random_Guy on November 03, 2011, 09:41:09 am
1) Explain how Return On Assets could increase but Asset Turnover decreases at the same time.
My thinking is that for this to occur, Sales must have decreased, causing the Asset Turnover to decrease. However, Return on Assets could still improve if the business had a stock gain, earned other revenue, or decreased expenses, causing Net Profit to still increase despite the decrease in Sales. As a result, Return on Assets could still increase, but Asset Turnover decreases.
However, my teacher only awarded me 1/2 for this question, and she said I had to say that the Net Profit Ratio had to increase more than the decrease in Asset Turnover, which I really don't understand. Can someone please explain this?
2) When asking for an effect on profitability, do I always have to refer to a profitability indicator? For example, the question was, "How does a Stock Write Down affect profitability?" I wrote that it is an expense (then I defined it), which decreases Adjusted Gross Profit, and therefore worsens profitability. However, I only got 1/2 marks for that, so I'm thinking that I had to say that a Stock Write Down decreases Adjusted Gross Profit RATIO? Thanks.
Post by: LuiAlefia28 on November 04, 2011, 07:46:42 pm
Hi can someone give me like an A+ answer to the difference between profit and profitability please?
Also when referring to profitiability do we need to incorporate the Profit ability ratio in the answer? Giving the question is theory based.
Profit is revenue less expenses determined through accrual accounting for a reporting period whereas profitability is the ability of a firm to turn/generate a profit through the use of its resources by measuring profit with a base figure. Profitability indicators may include ROI, ROA, GPR, ATO, NPR ect
Thank you so very much. (:
Post by: LuiAlefia28 on November 04, 2011, 07:47:16 pm
Hi can someone give me like an A+ answer to the difference between profit and profitability please?
Also when referring to profitiability do we need to incorporate the Profit ability ratio in the answer? Giving the question is theory based.
Profit is revenue earned less expenses incurred, and is expressed as a dollar figure. On the other hand, profitability is the ability of a firm to generate profit as compared to a base such as Assets or Sales.
Thank youuuuuuuuu (:
Post by: chelseaFC on November 05, 2011, 04:23:30 pm
Post by: Dranoel523 on November 05, 2011, 07:04:26 pm
TSSM 2008:
- Firm is selling stock @ 140ea.
- Firm receives a $500 deposit for goods. The order totals 10 units
- Initially they deliver 6 units.
As the delivery has been made I debited prepaid sales rev. And credited sales rev. As now they've earned that $500.
The answers said to debit debtors a total of 924, but since 500 has already been paid shouldn't it be 425?
My main query is that why not debit the prepaid sales revenue account? Upon delivery they should have earned that and thus recorded in the books.
Also, can insurance be recorded as a product cost? Say they're delivering a line of stock which is identical, "insurance on delivery" can be reported as a product cost? Finally insurance on delivery to the BUSINESS (from supplier) why that factored into the final cost of the equipment?
Post by: LuiAlefia28 on November 05, 2011, 07:28:33 pm
So
Question One
Those of you who have nevilles book, you will know what im referring to, so at the start of chapter 19 there are a list of ample methods of controlling stock. How many of these methods do you guys recommend for me to remember?
Question Two
Why is it that you don't cross reference the accrued revenue account of commission with the actual commission revenue account, instead you would just DR the commission revevnue account with cash at bank. Yet with interest revenue account you would Dr it with your accrued interest revenue account??
Question Three
So in relation to the cash cycle of how its calculated by combining stock turnover and debtors turnover, does anyone know if there is an actual fixed cash cycle value that determines whether the businesses cash cycle is favourable or unfavourable?(besides than just comparaing it to your previous records).
Question Four
So in relation to Product costing, if you can directly add the extra cost to an item of inventory when possible do you still do it even though it is under the demands of the materiality test?? ( I ask this because I went to a lecture conducted by Vicky Baron and she said you still do but I just don't see the reasoning behind it if it isnt that relevant to add the cost if it is minor and under that 10% materialty test rule).
Question Five
Can someone please explain what it actually means by a loss or profit could have happened on a disposal of a NCA. Like I don't understand what they really mean by You get a loss by overestimating the depriciation or something by underestimating the useful??? Like seriously what the hell does that even mean. That goes for the profit on the disposal of a NCA I dont get the revesed action for that either. So PLEASE EXPLAIN THIS IS ONE AREA I FIND REALLY HARD TO DECIPHER!!!!
Question SixSo in reference to the profitablitiy ratio (expense ratio) Can it relate to each individual expense??
Question Seven
Are there any factors besides increase in expenses and decrease in gross profit that can affect the Net Profit Ratio???
And finally my last question....... for now is....What does it mean by alternative investments in the money market? (That can be used used as a yardstick for return on owners investment).
Whoever can help it would be GROOVY!! thank you (;
Post by: nacho on November 06, 2011, 01:03:51 am
has anyone cone across a situation where insurance is treated as a product cost?
Post by: MaddehZ on November 06, 2011, 01:23:18 am
Hey guys;
has anyone cone across a situation where insurance is treated as a product cost?
yep i have a number of times
Post by: nacho on November 06, 2011, 01:25:10 am
Hey guys;examples? From which exams?
has anyone cone across a situation where insurance is treated as a product cost?
yep i have a number of times
Post by: Hodgeyhodgey on November 06, 2011, 10:31:19 am
Hey guys;On most exams it's treated as a period cost because the business might order say, 3 lines of stock, but if they only order 1 type of stock and get insurance on that I don't see why it can't be a product cost.
has anyone cone across a situation where insurance is treated as a product cost?
Post by: RossiJ on November 06, 2011, 11:44:16 am
Hey guys;On most exams it's treated as a period cost because the business might order say, 3 lines of stock, but if they only order 1 type of stock and get insurance on that I don't see why it can't be a product cost.
has anyone cone across a situation where insurance is treated as a product cost?
I agree
whilst it would be unusual to see it as a product cost, remember that if it relates to one line of stock, can be allocated logically and then isn't an annual cost, treat it as a product cost.
Post by: NedKelly on November 06, 2011, 01:41:44 pm
Post by: RossiJ on November 06, 2011, 01:58:08 pm
hey guys, i asked this in a different thread and then i saw this one...
i dont quite understand this question.
(http://img811.imageshack.us/img811/1661/93741547.png)
these are the answers.
(http://img341.imageshack.us/img341/7234/14739292.png)
i dont understand where all the values (3300, 5500, 2000, 1200) come from.
could anybody explain? thanks.
what exam was this again?
Work backwards.
Ok firstly, he received a deposit of 20%
so 20% of $10000 (500x20) is $2000
This is 'prepaid sales revenue'
Next you have to determine how much he actually purchased with this $2000
$2000/500 (selling price) is 4
therefore he purchased 4, so 4x300 (cost price) is $1200
NEXT
deduct these figures to determine ones in the sales journal
he purchased 15 bed (15x500) which has a total selling price of $7500
minus $2000 from this figure and you get your $5500
then do the same for cost price
15x300=4500
4500-1200=3300
Hope that helped... badly worded but meh, tricky question
Post by: Random_Guy on November 06, 2011, 08:48:25 pm
Post by: nacho on November 07, 2011, 10:41:41 am
that'd be an 'other expense' , correct?
Post by: mikesguns on November 07, 2011, 10:56:27 am
Post by: nacho on November 07, 2011, 11:46:08 am
Something about product costs, if you purchase stock from a supplier and get it delivered from another business. If this is returned to the supplier, only the amount purchased would be returned, however would the delivery( which is now stock) be written-down? Also ive got a question where the delivery was done by the same supplier and the whole amount was returned, so they must given credit for the delivery, which it unusual as this doesnt happen.mm that's odd
has anyone done 2006 VCTA?
I'm very interested in how to do 2.2.1
their computer equipment goes up only by 4500, whereas in the invoice it's shown to have a value of 6600 (including 600 gst)
it says uve traded in $500 worth of equipment and pay $1000 deposit, i still however, dont see why they've deducted this from the worth of the computer?
(Im guessing they went: 6000 - 1000 - 500 = 4500)
Post by: Naresh on November 07, 2011, 04:08:08 pm
this is the background.
(http://img841.imageshack.us/img841/4510/20111107154015.jpg)
the question says - complete the general journal as at the end of the year ended 30 june 2005.
i was wondering how you work out the accumulated depreciation as what i get is wrong.
Post by: RossiJ on November 07, 2011, 04:12:00 pm
If the additional equipment was purchased at the start of the reporting period?
Post by: Naresh on November 07, 2011, 04:13:53 pm
Post by: MaddehZ on November 07, 2011, 05:15:54 pm
the answer is $3075
First you have to calculate from the start of july 2004 to end of september 2004
23,000 - 10,000
= 13,000
x 0.15
/12
x 3
= 487.5
next, the period of 9 months that the equipment is worth 23,000
23,000 x 0.15 /12 x 9 = 2587.5
487.5 + 2587.5 = 3075
Post by: MaddehZ on November 07, 2011, 05:18:43 pm
hey guys, i asked this in a different thread and then i saw this one...
i dont quite understand this question.
(http://img811.imageshack.us/img811/1661/93741547.png)
these are the answers.
(http://img341.imageshack.us/img341/7234/14739292.png)
i dont understand where all the values (3300, 5500, 2000, 1200) come from.
could anybody explain? thanks.
what exam was this again?
Work backwards.
Ok firstly, he received a deposit of 20%
so 20% of $10000 (500x20) is $2000
This is 'prepaid sales revenue'
Next you have to determine how much he actually purchased with this $2000
$2000/500 (selling price) is 4
therefore he purchased 4, so 4x300 (cost price) is $1200
NEXT
deduct these figures to determine ones in the sales journal
he purchased 15 bed (15x500) which has a total selling price of $7500
minus $2000 from this figure and you get your $5500
then do the same for cost price
15x300=4500
4500-1200=3300
Hope that helped... badly worded but meh, tricky question
the sample answer from vcaa is wrong by the way, only recognises $550 instead of $750 which is tax fraud...srs
Post by: Naresh on November 07, 2011, 06:23:34 pm
the answer is $3075
First you have to calculate from the start of july 2004 to end of september 2004
23,000 - 10,000
= 13,000
x 0.15
/12
x 3
= 487.5
next, the period of 9 months that the equipment is worth 23,000
23,000 x 0.15 /12 x 9 = 2587.5
487.5 + 2587.5 = 3075
thank you.
Post by: miraj753 on November 07, 2011, 06:44:49 pm
Is it 'the ability of the business to manage its assets and liabilities'?
Post by: chelseaFC on November 07, 2011, 07:19:03 pm
hey guys, i asked this in a different thread and then i saw this one...
i dont quite understand this question.
(http://img811.imageshack.us/img811/1661/93741547.png)
these are the answers.
(http://img341.imageshack.us/img341/7234/14739292.png)
i dont understand where all the values (3300, 5500, 2000, 1200) come from.
could anybody explain? thanks.
what exam was this again?
Work backwards.
Ok firstly, he received a deposit of 20%
so 20% of $10000 (500x20) is $2000
This is 'prepaid sales revenue'
Next you have to determine how much he actually purchased with this $2000
$2000/500 (selling price) is 4
therefore he purchased 4, so 4x300 (cost price) is $1200
NEXT
deduct these figures to determine ones in the sales journal
he purchased 15 bed (15x500) which has a total selling price of $7500
minus $2000 from this figure and you get your $5500
then do the same for cost price
15x300=4500
4500-1200=3300
Hope that helped... badly worded but meh, tricky question
The whole deposit concept. So many practice exams do not allocate the deposit to an amount of stock, but rather just record it all as sales revenue within the general journal and have no stock control or cost of sales. For Example) If the question said he deposited $1000, i would think to direct all the cost of sales into the sales journal and have only the Prepaid Sales Revenue/Sales revenue entry within the General journal. Any clarification? I'm probably making no sense so let me know if i need to elaborate.
Post by: MaddehZ on November 07, 2011, 07:39:15 pm
miraj, efficiency refers to the ability of the business to manage its debtors, creditors and stock
sto, dto, cto are efficiency measures
(ato is too but....best not to confuse people...keep it to profitability)
Post by: Saur11 on November 07, 2011, 07:55:19 pm
Firstly, you record a purchase of a computer.
Following entries.
Computer 37000
Prepaid Service Contract 4800
GST-Clearing 4180
Sundry Creditor- ACME Computer 45980
This part is fine
The next part asks for the entry in the cash payments journal for the full payment (note there is 3000 trade in for old computers)
I got:
Sundry Creditor 42980 4180 38800
Apparently answer is
Sundry Creditor 42980 4180 34000
Prepaid service 4800
Post by: LuiAlefia28 on November 08, 2011, 11:22:13 am
Can people just give me random theory questions I can try and do myself?
Preferrably no questions directly from exams. But it can be similar. Thanx heaps.
Oh and pklease no the answer so when i reply back you guys can tell me if its right or not.
Post by: skiddy on November 08, 2011, 01:36:59 pm
Explain why the disposal of asset account is closed off at the end of the period
i said to transfer to profit or loss on disposal to the profit and loss summary account so an accurate profit figure can be determined and to reset the disposal of asset account to a zero balance in preparation for any disposals in the next period?
why is a profit on disposal revenue? How would you word it, referring to the definition of revenues. And visa versa for losses/expenses.
if you sold it for cash but at a loss (you sold it for less than its carrying value) is it still revenue?
and same thing for a trade-in: if you traded a non current asset in it is a reduction in outflow in the form of a decrease in liabilities, but is it still that if you traded it in for less than its carrying value?
Post by: miraj753 on November 09, 2011, 08:54:06 am
I've seen it done both ways, so which ones right?
Post by: Hodgeyhodgey on November 09, 2011, 10:48:31 am
Is the disposal of a non current asset recorded on the date of disposal, or balance day/end of the period?Looking at past assessment reports it's safe to say that the disposal is recorded on the date that it is disposed.
I've seen it done both ways, so which ones right?
Post by: luffy on November 09, 2011, 11:16:01 am
Is the disposal of a non current asset recorded on the date of disposal, or balance day/end of the period?Looking at past assessment reports it's safe to say that the disposal is recorded on the date that it is disposed.
I've seen it done both ways, so which ones right?
You record in the general journal on the date it was disposed. (or once the invoice is issued)
You record in the general ledger on balance day.
Post by: miraj753 on November 09, 2011, 11:32:40 am
In VCAA 2010, its recorded at the end of the period, but I've seen at least 2 other exams (cant remember which ones) where its on the date of disposal
Post by: luffy on November 09, 2011, 11:55:26 am
Yeah i meant in the general ledger
In VCAA 2010, its recorded at the end of the period, but I've seen at least 2 other exams (cant remember which ones) where its on the date of disposal
Yep - I remember asking my teacher about this. The companies are technically incorrect because they should be posted to the general ledger on balance day. However, I think if the question specifically asks to "post the dispoal to the general ledger on a specific date" it is somewhat indicating to you that it should be recorded on that date. I know what you mean though - it doesn't really make sense.
Don't worry - VCAA will not make ambiguous questions - they will tell us (or we assume its balance day) when to post it in the question
Post by: Hodgeyhodgey on November 09, 2011, 01:21:41 pm
VCAA 2008 1.4.2Is the disposal of a non current asset recorded on the date of disposal, or balance day/end of the period?Looking at past assessment reports it's safe to say that the disposal is recorded on the date that it is disposed.
I've seen it done both ways, so which ones right?
You record in the general journal on the date it was disposed. (or once the invoice is issued)
You record in the general ledger on balance day.
Balance day is Dec 31, disposal occurs on Sep 30. VCAA has recorded the disposal in the ledger at Sep 30, but accumulated depreciation at Dec 31. Now what do we do? haha
EDIT: Hopefully they just make the disposal on the last day of the period and save us all the trouble..
Post by: miraj753 on November 09, 2011, 02:31:05 pm
on that topic, say we dispose of an asset on the 30 April, and the reporting period ends 31 December
Would we have to record the extra 4 months depreciation in the GJ when disposing of the asset?
if depreciation has not yet been updated
Post by: Hodgeyhodgey on November 09, 2011, 04:08:24 pm
Yeah hopefully..Nope, just record the accumulated depreciation up until the asset is disposed of
on that topic, say we dispose of an asset on the 30 April, and the reporting period ends 31 December
Would we have to record the extra 4 months depreciation in the GJ when disposing of the asset?
if depreciation has not yet been updated
Post by: Lucid on January 03, 2012, 03:36:08 pm
Hey guys, I'm doing some holiday homework and am having trouble with analysing charts...I get that debit has to equal credit but I'm not completely sure how to do it.
On the link below, is my exercise, feel free to make comments/changes where I have gone wrong etc. Thanks!
Red = Not sure
Green = Pretty sure
Here are the transactions:
Kim Swood just opened her own spare parts shop called Monaro Motors. Transactions for
August 2010 showed the following:
Aug. 1 Capital contribution of $10 000 stock and $30 000 cash
2 Purchased premises worth $150 000 paying a $10 000 cash deposit with
the balance funded by a mortgage from QV Bank
3 Cash sale of parts for $400 (cost price $200)
4 Paid $2500 cash to Wilson Fittings for shelving
5 Purchased stock on credit from HolFord Parts for $2600
6 Sold parts on credit to Lemon Rentals for $900 (cost price $450)
7 Paid wages of apprentice $600
8 Kim Swood took home stock worth $1500
9 Received $500 cash from Lemon Rentals
https://docs.google.com/spreadsheet/ccc?key=0AqiRxK896d4gdENaOFZacXNKbVZvXzgzLVV1bkdXNXc
Post by: _avO on January 03, 2012, 04:01:28 pm
NEW QUESTION
Hey guys, I'm doing some holiday homework and am having trouble with analysing charts...I get that debit has to equal credit but I'm not completely sure how to do it.
On the link below, is my exercise, feel free to make comments/changes where I have gone wrong etc. Thanks!
Red = Not sure
Green = Pretty sure
Here are the transactions:
Kim Swood just opened her own spare parts shop called Monaro Motors. Transactions for
August 2010 showed the following:
Aug. 1 Capital contribution of $10 000 stock and $30 000 cash
2 Purchased premises worth $150 000 paying a $10 000 cash deposit with
the balance funded by a mortgage from QV Bank
3 Cash sale of parts for $400 (cost price $200)
4 Paid $2500 cash to Wilson Fittings for shelving
5 Purchased stock on credit from HolFord Parts for $2600
6 Sold parts on credit to Lemon Rentals for $900 (cost price $450)
7 Paid wages of apprentice $600
8 Kim Swood took home stock worth $1500
9 Received $500 cash from Lemon Rentals
https://docs.google.com/spreadsheet/ccc?key=0AqiRxK896d4gdENaOFZacXNKbVZvXzgzLVV1bkdXNXc
https://docs.google.com/spreadsheet/ccc?key=0AqiRxK896d4gdENaOFZacXNKbVZvXzgzLVV1bkdXNXc#gid=0
Let me know if you're confused with anything :)
Post by: Lucid on January 03, 2012, 04:44:42 pm
Instead of bank do we put cash? Our class exercises just put bank down for cash...and if it was credit etc it would be creditors or debtors.
Thanks again!
Post by: _avO on January 03, 2012, 09:56:08 pm
Wow, thanks Avo. Didn't expect you to do all of that :OYea you can use bank, cash at bank, cash or whatever is accepted for SACs. I think the only accepted one for the exams are Cash at Bank, as are Creditors Control and Debtors Control (you should be able to write just debtors/creditors for SACs, but make sure you check with your teacher, it's always good to write the proper way as practice)
Instead of bank do we put cash? Our class exercises just put bank down for cash...and if it was credit etc it would be creditors or debtors.
Thanks again!
Post by: Lucid on January 16, 2012, 04:08:15 pm
Exercise 2.5
State the effect of each of the following transactions has on the Accounting equation:
1. A loan for $5000 was received from ANZ bank.
2. Purchased office furniture on credit from HP Enterprises worth $19,000.
3. Paid a creditor $450
4. The owner contributed a vehicle to the business worth $25,000
5. Repaid part of the principal of the loan - $1000.
6. Cash purchase of stock $3000
7. Received $800 from a debtor.
This is what I've done so far: https://docs.google.com/spreadsheet/ccc?key=0AqiRxK896d4gdDBrZGItdGJwZVBaYUlLSENOX1ctalE
I hope I'm on the right track...Thanks in advance!
Post by: BoredSatan on January 18, 2012, 09:49:40 am
cause that is what i would use for no.2
no.3 bank should decrease as well since you are paying the creditor back with cash
no. 4 the capital should increase in OE not 'vehicle'
no. 5 'loan repayment' isnt an item in the balance sheet.. make sure you put 'loan' only
hope this helps
Post by: Lucid on January 20, 2012, 04:25:19 pm
I was wondering if anyone is able to help me understand general ledger accounts. I've filled out my analysing chart, but not sure how to add them into their ledgers...
For example, (Aug 1) Accounts affected are Stock, capital and bank. Do I add the stock amount in the bank credit ledger? I'm so confused. If chatting is easier, please PM and I'll let you add me on Facebook or msn or whatever.
Thanks!
Post by: jaketownley on April 22, 2012, 06:19:59 pm
We're dealing with stockcards and stuff at the moment in class and i was just wondering what description would suggest that stock is being used for advertising?
Our school's got the simmon's 3/4 textbook and it says that "stock is donated to local school fete" should be recorded as stock used for advertising! i cant see how this would clearly suggest that its used for advertising and i was hoping you could give me as many eg's as possible that would mean stock is being used for advertising!
Post by: sam.utute on April 22, 2012, 06:34:28 pm
It's similar to the Royal Melbourne Hospital Raffle (or lottery) that the hospital runs. You have the chance to win cars, houses, holidays etc. It's very unlikely that Audi charges the hospital to use it's vehicle as a potential prize. The benefit Audi receives is the fact that its product is being heavily promoted (think about it: "You could win a brand new Audi A3!").
Other examples: Apple donating iPhones as prizes to a charity.... basically any company that donates its product doesn't just do it out of feeling like they need to give back to the community (corporate social responsibility). Every donation represents advertising benefits.
Hope that made sense. :)
Post by: jaketownley on April 22, 2012, 06:41:45 pm
Post by: link125 on April 23, 2012, 08:43:27 pm
Cambridge Accounting 3 & 4 Third Edition
Page 231 Exercise 10.3
Maxwell's Shoes presented the following extract from its balance sheet at 31 march 2015:
Current Assets: Prepaid insurance $1800
The yearly insurance premium was paid in advance on 1st january 2015. the business prepares reports monthly, and the next balance day occurs on 30th april 2015
b) Calculate insurance expense for April 2015
I did this:
1800/12 = 150
Jan 1 - April 30 = 4 months
4 * 150 = 600 = Insurance expense for april 2015
Answer is actually $200
I must be missing out on something, or not fully understanding...
Post by: Somye on April 23, 2012, 09:57:37 pm
therefore, the 1800 remaining represents the insurance for the next 9 months (12-3). So, the expense for any given month, for example april, is 1800 / 9 = 200
Post by: link125 on April 23, 2012, 10:20:04 pm
Okay, so the business prepares reports monthly, meaning that it's already accounted for the indurance for 3 months (jan,feb,mar)Ahhhh thank you!
therefore, the 1800 remaining represents the insurance for the next 9 months (12-3). So, the expense for any given month, for example april, is 1800 / 9 = 200
Post by: splash.of.colour on April 25, 2012, 01:17:59 pm
my book says: "drawings are recorded by the owner in a seperate ledger account so that the owner's transactions for a particular Reporting period can be isolated. However, at the end of the reporting period, the balance of the drawings account must be transferred to the capital account so that the capital account reflects the net effect of all transactions with the owner"
if someone could explain this to me in another way, that would be really helpful! im just having a little trouble getting my head around it :-\
Post by: Somye on April 25, 2012, 05:59:55 pm
Hopefully that made sense:)
Post by: jaketownley on May 04, 2012, 09:35:39 pm
I understand that understandability is a relevant answer because "it helps readers with little knowledge to understand the basics of the report." (as stated in the examiners report http://www.vcaa.vic.edu.au/vce/studies/account/assessreports/2007/accounting1_assessrep_07.pdf question 1.1.3) The examiners report also stated that the question was poorly answered as a lot of student gave relevance with the explanation of how it helps classify the owner's equity.
My answer consisted of 'relevance' but for a different reason: "Classifying assets and liabilities as current and non-current allows the business to calculate its short term liquidity"
This links in with the fact that relevance states that all useful information that is useful for decision making should be included in reports.
Right or wrong?
Post by: splash.of.colour on May 05, 2012, 12:07:16 pm
Post by: BoredSatan on May 05, 2012, 04:14:40 pm
So i've done my first practice exam (2007) and came across a question we covered in class about, why assets and liabilities are classified in balance sheet with reference to one qualitative characteristic.not the best answer as liquidity isnt studied until unit 4..
I understand that understandability is a relevant answer because "it helps readers with little knowledge to understand the basics of the report." (as stated in the examiners report http://www.vcaa.vic.edu.au/vce/studies/account/assessreports/2007/accounting1_assessrep_07.pdf question 1.1.3) The examiners report also stated that the question was poorly answered as a lot of student gave relevance with the explanation of how it helps classify the owner's equity.
My answer consisted of 'relevance' but for a different reason: "Classifying assets and liabilities as current and non-current allows the business to calculate its short term liquidity"
This links in with the fact that relevance states that all useful information that is useful for decision making should be included in reports.
Right or wrong?
i would stick with understandability
Post by: jaketownley on May 06, 2012, 04:57:26 pm
not the best answer as liquidity isnt studied until unit 4..
i would stick with understandability
[/quote]
but we learnt it in unit 2 last year? or are we only allowed to comment on what's learnt in the current unit?
Post by: luffy on May 15, 2012, 10:37:47 am
So i've done my first practice exam (2007) and came across a question we covered in class about, why assets and liabilities are classified in balance sheet with reference to one qualitative characteristic.not the best answer as liquidity isnt studied until unit 4..
I understand that understandability is a relevant answer because "it helps readers with little knowledge to understand the basics of the report." (as stated in the examiners report http://www.vcaa.vic.edu.au/vce/studies/account/assessreports/2007/accounting1_assessrep_07.pdf question 1.1.3) The examiners report also stated that the question was poorly answered as a lot of student gave relevance with the explanation of how it helps classify the owner's equity.
My answer consisted of 'relevance' but for a different reason: "Classifying assets and liabilities as current and non-current allows the business to calculate its short term liquidity"
This links in with the fact that relevance states that all useful information that is useful for decision making should be included in reports.
Right or wrong?
i would stick with understandability
I don't think that is the reason its wrong.
I remember I had a VERY SIMILAR issue to you last year when I did accounting. I asked my teacher and she told me that if we are trying to calculate liquidity, accountants could always classify them outside of the balance sheet, and then present that data to owners. After all, the owner only needs to know the actual numbers, rather than how we calculated the number.
The questions asks why we classify assets and liabilities IN the balance sheet. Accountants don't really need the reports when calculating liquidity because they already have the ledger accounts, or any other records that they require. I think for this question, both Relevance and Understandability were "correct" - but Understandability was deemed more correct.
The purpose of actually separating current and non-current in the balance sheet is not so that we can calculate profitability/liquidity ratios. Its so that owners can better comprehend the information accountants present to them.
Having said all of this, I do agree with you. I argued almost the exact same case last year, but my teacher (who was an examiner) told me that although I wasn't completely incorrect, I would gain 1/3 marks.
Hope I helped.
Post by: Flying Emu on May 19, 2012, 01:46:46 pm
Financial information is simply a list of financial data, having being classified into time periods, etc.
Balance sheets record the overall revenues and expenses (from the financial information) which is calculated into the net income/loss.
And are balance sheets a form of financial information?
I'm a bit unclear on these definitions, and was wondering ig anyone could add any information I've missed or misunderstood.
Thanks in advance.
**Edit**
One more thing, what's the difference between a balance sheet and an income statement?
Post by: Tragesty on May 19, 2012, 05:08:19 pm
An income statement won't include assets or liabilities or information relating to owner's equity (except profit) - it will include all revenues and expenses of the business, which will allow the owner to determine whether they have a net profit or loss. This profit/loss will go into the balance sheet under 'Owners Equity'.
Balance Sheet = Assets, Liabilities, Owners Equity
Income Statement = Revenues, Expenses
Probably not the best explanation of all time, but figured I'd try.
Post by: Flying Emu on May 19, 2012, 05:37:36 pm
Now things actually start making sense >.<
Post by: jaketownley on May 29, 2012, 09:10:10 pm
Going concern or reporting period? and why please:)
Post by: BoredSatan on May 29, 2012, 09:51:32 pm
Reporting period because part of the office furniture was consumed thus resulting in an outflow of economic benefit .......etc
Going Concern because we assume that the office furniture will be used up in the future reporting periods thus it must be depreciated to reflect the amount consumed in the current reporting period
obviously im just being general here.. in the exam be more specific and remember to link back to office furniture (or whatever item it is)
Post by: link125 on May 30, 2012, 09:30:30 pm
Thomas' accountant tells him that he is still able to provide a relevant value of stock for the balance sheet even though it may not be the most reliable value. Discuss
4 marks
Sample answer:
First In First Out is an assumption to assign cost to outflows of stock. It is not an attempt to identify stock movements physically. It is not relevant to know which were the first items in.
For four marks what would you say? I don't think the sample answer really cuts it...
Post by: Flying Emu on May 31, 2012, 08:25:36 pm
Post by: splash.of.colour on June 03, 2012, 01:04:03 pm
1. on 21 September 2011, the business paid $3300 (including $300 GST) to renew the annual insurance policy due to expire on 30 September 2011 (chq. 538). The payment was correctly recorded in the Prepaid insurance account. On June 30 2012, before any adjusting entries, the balance of the Prepaid insurance was $3720. Prepare the necessary journal entries to record the balance day adjustment for the year ending 30 June 2012
- the answers have debited insurance expense by $2970, and credited the profit/loss summary
- i understand the credit and debits, just not how they got to that figure
2. Discuss how using the FIFO method of stock recoring will impactGross Profit suring a period when cost prices of stock are falling i got the first part of the answer right, but the next part confused me. They said:
- if a set $ amount or fixed % is added to cost price, then as cost price falls, selling price will also fall. This means the margins will remain unchanged and the $ figure of gross profit per unit will fall
- if the business maintains a set selling price regardless of cost price then as cost falls the margin on sales will increase, leading to higher gross profit
so if someone could explain that, that would be really helpfull haha :)
sorry for all the questions :/
Post by: ANILBALA on June 03, 2012, 03:12:58 pm
So at June 30 2012, the business has consumed 9 months worth of insurance. (1 Oct 2011 to June 30 2012)
So 3 * 250 = $750 should be the actual balance of the prepaid insurance at 30 June 2012.
Thus, insurance expense for the year ending 30 June 2012 is 3720 - 750 = $2970
2. I thought it was juts that gross profit was lower, as cost of sales would be relatively higher (more expensive stock will be sold first) and the stock on hand will be lower (assets go down) since stock on hand is relatively cheaper. Im not too sure about this one, if someone else can explain this plz. Thanks
Post by: Somye on June 03, 2012, 06:10:30 pm
Post by: luke_rulz94 on June 03, 2012, 06:13:43 pm
the question says...
1. Complete the general journal entry to close the revenues and expenses to the P/L summary.
additional information :
equipment of 12000 is depreciated at 10% per annum using the straight line method.
the business prepares reports monthly.
I worked out the depreciation of the equipment to be $100, however the solutions say $90.
I did:
12000 x 0.1 = 1200 per year.
1200/12 = $100
am i missing something?
Post by: link125 on June 04, 2012, 05:26:33 pm
Currently doing a practice exam..What exam is it in?
the question says...
1. Complete the general journal entry to close the revenues and expenses to the P/L summary.
additional information :
equipment of 12000 is depreciated at 10% per annum using the straight line method.
the business prepares reports monthly.
I worked out the depreciation of the equipment to be $100, however the solutions say $90.
I did:
12000 x 0.1 = 1200 per year.
1200/12 = $100
am i missing something?
I have most of them so I should be able to check it out
Post by: splash.of.colour on June 04, 2012, 05:45:25 pm
Post by: ANILBALA on June 04, 2012, 11:01:03 pm
VCAA 2009
1.7 A credit sale that occurred in June has not been recorded.
Required
State the effect of this omission on the Profit and Loss Statement.
Why is stock gain understated? Wouldn't it be logical for it to be overstated.
Everything else seems pretty obvious. Cost of sales and Credit sales understated.
Cheers guys
Post by: jaketownley on June 05, 2012, 12:11:37 pm
Say the sale had a cost of sales figure of $100, the omission of this transaction would mean that;
A stock loss of $100 would have been recorded which would decrease the amount of stock gain by $100, making it understated
Post by: splash.of.colour on June 06, 2012, 12:02:52 pm
The interest on the loan is 9% per annum, payable at 31st of December each year. Loan principle figure is $50 000. Prepare the necessary adjustments at 30 June 2010.
General journal entry:
interest expense: DR 1875
accrued interest: CR 1875
how did they get $1875? the answers say that it was 5 months accrued, but i keep working it out to be 6 months accrued (january - june)?
thanks in advance :)
Post by: Tragesty on June 06, 2012, 03:24:23 pm
Post by: splash.of.colour on June 06, 2012, 05:53:22 pm
Post by: splash.of.colour on June 08, 2012, 07:02:36 pm
1. Changes to GST: will they still identify if gst has been included/ not included? or they wont mention gst at all and we have to remember to include it?
2. posting to general ledgers in terms of months instead of reporting periods
thanks again
Post by: jaketownley on June 09, 2012, 05:28:50 pm
im a tad confused with the following in relation to the study design...
1. Changes to GST: will they still identify if gst has been included/ not included? or they wont mention gst at all and we have to remember to include it?
2. posting to general ledgers in terms of months instead of reporting periods
thanks again
had a similar discussion in class with my teacher! what they're saying about the gst is pretty much what you're saying. students will be expected to work out gst without being prompted.
transactions that DONT include gst are: wages, drawings, interest expense/revenue, gst settlement,capital contribution, loan repayment, loan received, payments to creditors (as its already included from the credit purchase) and receipts from debtors (same applies for payments to creditors)
as for the posting journals, they'll give you a journal thats has the totals from three separate months. i.e
Date Details Rec No. Bank Discount Rev Debtors Control
1-31 Jan Totals 43,000 18000
1-28 Feb Totals 37,000 500 12000
1-31 Mar Totals 50,000 24000
Then you have to post them to the one ledger using separate entries
Debtors Control
Date Cross Ref $ Date Cross Ref $
1/1 Balance 15,000 31/1 Bank 18000
28/2 Bank/ discount revenue 12000
31/3 Bank 24000
^(didnt include the credit sales but i hope you get the point)
i hope that clears a bit up splash.of.colour! :)
Post by: Nima2703 on June 09, 2012, 10:56:09 pm
Hi all, i was wondering if someones could help me with the following two questions:
1. on 21 September 2011, the business paid $3300 (including $300 GST) to renew the annual insurance policy due to expire on 30 September 2011 (chq. 538). The payment was correctly recorded in the Prepaid insurance account. On June 30 2012, before any adjusting entries, the balance of the Prepaid insurance was $3720. Prepare the necessary journal entries to record the balance day adjustment for the year ending 30 June 2012
- the answers have debited insurance expense by $2970, and credited the profit/loss summary
- i understand the credit and debits, just not how they got to that figure
2. Discuss how using the FIFO method of stock recoring will impactGross Profit suring a period when cost prices of stock are falling i got the first part of the answer right, but the next part confused me. They said:
- if a set $ amount or fixed % is added to cost price, then as cost price falls, selling price will also fall. This means the margins will remain unchanged and the $ figure of gross profit per unit will fall
- if the business maintains a set selling price regardless of cost price then as cost falls the margin on sales will increase, leading to higher gross profit
so if someone could explain that, that would be really helpfull haha :)
sorry for all the questions :/
Okay, the balance on 30 June of 2012 was $3720. On the 21st of September an annual insurance policy was renewed for 31st of September for $3000 plus $300 GST. Only the $3000 is relevant as it is the prepaid expense. Because it is renewed for 31st of September, is starts on 1st of October. Because the balance at June is 3720. We need to deduct is by 3000 to see how much prepaid rent expired BEFORE 31st of September which was still in the reporting period. Assuming that it is the same insurance, $250 is used per month, therefore the reporting period begins on 1st of July, so it was used for July, August, and September. $250x3 is $750. If you deduct the balance by how much was paid in 21st of September to renew it becomes $3720-3000= $720. This means that $720 has been used up before the insurance was renewed but has not been adjusted due to the reporting period being one year. So, the amount expensed is now $720. We know that $3000/12 is $250 so each month $250 is used. This was renewed on 31st of September therefore it is initiated on 1st of October. This means that it will be used for October, November, December, January, February, March, April, May, and finally June due to the reporting period ending on the last day of the month. So 9 months was used with the insurance renewed, thus 9x250=$2250. We also figured that the remainder of the balance has been used up previously, which was $720. Hence, the amount totally used up would be $720+$2250 which is $2970.
Hope that helped
Post by: VCEcupcakes on June 09, 2012, 11:09:48 pm
Post by: sam.utute on June 09, 2012, 11:11:31 pm
just wondering, how much theory will there approximately be, compared to previous years exams?Previous years' the split was about 70% practical, 30% theory. This year, I would be guessing at least 40% theory, if not more.
Post by: abcdqdxD on June 10, 2012, 09:27:41 am
just wondering, how much theory will there approximately be, compared to previous years exams?Previous years' the split was about 70% practical, 30% theory. This year, I would be guessing at least 40% theory, if not more.
Perhaps there will be less theory questions, however each question is allocated more marks?
Strong emphasis on theory will definitely lower the A+ cutoff imo. Most people place more emphasis on prac than on theory.
Sample exam was ~38% theory, however Simon Phelan is predicting about 30 marks will be on theory (33%).
Going to be very important to nail the prac quickly to maximise time spent on answering theory questions.
Post by: Nima2703 on June 10, 2012, 03:21:48 pm
im a tad confused with the following in relation to the study design...
1. Changes to GST: will they still identify if gst has been included/ not included? or they wont mention gst at all and we have to remember to include it?
2. posting to general ledgers in terms of months instead of reporting periods
thanks again
had a similar discussion in class with my teacher! what they're saying about the gst is pretty much what you're saying. students will be expected to work out gst without being prompted.
transactions that DONT include gst are: wages, drawings, interest expense/revenue, gst settlement,capital contribution, loan repayment, loan received, payments to creditors (as its already included from the credit purchase) and receipts from debtors (same applies for payments to creditors)
as for the posting journals, they'll give you a journal thats has the totals from three separate months. i.e
Date Details Rec No. Bank Discount Rev Debtors Control
1-31 Jan Totals 43,000 18000
1-28 Feb Totals 37,000 500 12000
1-31 Mar Totals 50,000 24000
Then you have to post them to the one ledger using separate entries
Debtors Control
Date Cross Ref $ Date Cross Ref $
1/1 Balance 15,000 31/1 Bank 18000
28/2 Bank/ discount revenue 12000
31/3 Bank 24000
^(didnt include the credit sales but i hope you get the point)
i hope that clears a bit up splash.of.colour! :)
Do we have to record each month's information in every ledger? will we be told to do so in the question?
Post by: jaketownley on June 10, 2012, 06:51:29 pm
Post by: VCEcupcakes on June 10, 2012, 08:44:56 pm
Post by: Tragesty on June 10, 2012, 09:07:37 pm
I'd start by explaining what the question asks (e.g discuss control accounts and subsidiary ledgers, explain what these are) followed by advantages/pros of what needs to be discussed, and then negatives/cons.
My approach, not sure if it's the best way, hope someone else can reply with their preferred way of tackling discussion questions.
Post by: Nima2703 on June 10, 2012, 10:01:50 pm
Everyone I've talked to doesn't seem to have a set format - hell Neville Box (chief assessor) said they aren't sure how they'll mark them yet. Another lecturer said to talk bout everything you know.
I'd start by explaining what the question asks (e.g discuss control accounts and subsidiary ledgers, explain what these are) followed by advantages/pros of what needs to be discussed, and then negatives/cons.
My approach, not sure if it's the best way, hope someone else can reply with their preferred way of tackling discussion questions.
Discuss requires you to explain advantages and disadvantages. For a six mark question: "Discuss why the use of Control accounts and subsidiary ledgers helps preparation of reports"
Using control accounts and subsidiary ledgers bring many benefits to a business. Subsidiary ledgers provide information regarding each individual debtor, creditor, or stock item. This can help chase bad debts or overdue payments, and recognize fast and slow moving lines of stock. Control accounts provide a summary of individual ledgers which removes unnecessary bulk from the balance sheet. Therefore, understandability is assisted, as the balance sheet is easier to comprehend. Relevance is also aided, as the total figure of accounts is relevant for decision making of the business. Control accounts may be used to reconcile with the subsidiary ledgers in order to identify recording errors, this improves the reliability of the records and reports of the business. However, acquiring additional ledger accounts requires additional bookkeeping and possibly extra staff hire, which consumes time and profit.
Post by: splash.of.colour on June 10, 2012, 10:58:28 pm
But then how will we know if they have or haven't included gst? Should we assume they haven't included it? ???
Post by: Tragesty on June 11, 2012, 10:59:20 am
Post by: idontknow017 on June 11, 2012, 12:37:46 pm
If you have:
4 units @ $10
6 units @ $15
Stock gain of 2 units.
Does it become:
6 units @ $10
6 units @ $15
or
4 units @ $10
6 units @ $15
2 units @ $10
Post by: abcdqdxD on June 11, 2012, 02:03:40 pm
6 units @ 15
Stock gains are recorded at the lowest cost price of stock currently on hand to satisfy Conservatism - prevent overstating assets.
Edit: There is no need to separate them - the balance must be shown for each cost price collectively.
Post by: idontknow017 on June 11, 2012, 02:49:08 pm
6 units @ 10
6 units @ 15
Stock gains are recorded at the lowest cost price of stock currently on hand to satisfy Conservatism - prevent overstating assets.
Edit: There is no need to separate them - the balance must be shown for each cost price collectively.
Are you 100% sure? When my teacher marked my practise exam (one of the Engage ones) it had 3 different cost prices
e.g.
5 units @ $22
4 units @ $28
7 units @ $25
Stock gain of 2 units
My response was (same method as yours):
7 units @ $22
4 units @ $28
7 units @ $25
However, I was told it was:
5 units @ $22
4 units @ $28
7 units @ $25
2 units @ $22
Post by: abcdqdxD on June 11, 2012, 02:52:37 pm
6 units @ 10
6 units @ 15
Stock gains are recorded at the lowest cost price of stock currently on hand to satisfy Conservatism - prevent overstating assets.
Edit: There is no need to separate them - the balance must be shown for each cost price collectively.
Are you 100% sure? When my teacher marked my practise exam (one of the Engage ones) it had 3 different cost prices
e.g.
5 units @ $22
4 units @ $28
7 units @ $25
Stock gain of 2 units
My response was (same method as yours):
7 units @ $22
4 units @ $28
7 units @ $25
However, I was told it was:
5 units @ $22
4 units @ $28
7 units @ $25
2 units @ $22
Out of all the practice exams I've done (~15), I have not seen the solutions separate them.
Post by: idontknow017 on June 11, 2012, 03:22:35 pm
How about "Referring to one QC, explain why assets and liabilties are classified in the balance sheet."
I've always gone with something along the lines of "Relevance - it is more useful for decision-making as the owner can access his liquidity and identify if he can meet his short term debts."
But the answers usually say "Understandability - Reports should be prepared in a manner that makes it easy for the user to comprehend their meaning. Classifying Assets and Liabilities in the Balance Sheet allows users with little accounting knowledge to understand the basics of the report."
Doesn't it improve relevance more than understandability?
Post by: Michelle94 on June 11, 2012, 03:23:57 pm
and out of the 90 marks tomorrow, what are u hoping to get?
Post by: splash.of.colour on July 01, 2012, 11:25:31 am
the question has given a purchase invoice:
Date Details QTY Unit price Total
3/8 Pure wool suits 16 175 2800
Tailoring costs 480
less sales discount 80
Sub total 3200
plus GST 320
Total $3520
should the sales discount reduce the cost of stock?
I didnt think so... so i recorded the unit cost price as $205 (suppliers price of $175 + product cost $30), but then how would i record the transaction in the purchases journal? is the sales discount recorded separately in the general journal or something? :-\ or was i supposed to subtract it from the cost price of stock?
thanks :)
Post by: Flying Emu on July 11, 2012, 05:18:32 pm
Where exactly are loans you receive recorded? Should they be recorded under cash receipts journal?
Post by: sam.utute on July 11, 2012, 06:55:33 pm
Quick question about special journalsYep, Cash Receipts Journal.
Where exactly are loans you receive recorded? Should they be recorded under cash receipts journal?
Post by: Flying Emu on July 11, 2012, 06:59:28 pm
Yep, Cash Receipts Journal.
Under sundries yeah?
Post by: sam.utute on July 15, 2012, 09:39:21 am
Yep. Unless there is a separate classification column for them (which there usually isn't).Yep, Cash Receipts Journal.
Under sundries yeah?
Sundries :)
Post by: jaketownley on August 06, 2012, 08:45:45 pm
in regards to distinguishing which depreciation method should be applied, my text book says that NCA that move (vehicle, equipment) should use reducing while non-moving (shelving) should use straight line.
i agree with this but if i was asked in a sac, i dont reckon an explanation like that would be too strong. How should i define which method should be applied in a theory question?
Post by: BoredSatan on August 07, 2012, 09:31:45 am
i hope this thread is still alive..The reducing balance method is based on the assumption that certain assets contribute more to the business at the start of it's useful life compared to later on in it's life. This is especially true of assets with moving parts (vehicles) as these are subject to wear and tear over time. However, other assets which are less active (shelving) may not deteriorate as much over time, therefore it is better to use the straight line method of depreciation.
in regards to distinguishing which depreciation method should be applied, my text book says that NCA that move (vehicle, equipment) should use reducing while non-moving (shelving) should use straight line.
i agree with this but if i was asked in a sac, i dont reckon an explanation like that would be too strong. How should i define which method should be applied in a theory question?
Post by: jaketownley on August 07, 2012, 12:36:36 pm
Post by: Michelle94 on October 02, 2012, 02:05:40 pm
i did the CPAP 2011 trial exam and question 2.3.5 is a budgeted cash flow statement for operating activities only
the answer says accrued wages and wages are both included as cash outflows? i know wages would be but why is accrued wages an outflow of cash? cos we haven't paid it yet ? can somebody please explain to me.
Post by: Somye on October 02, 2012, 04:07:25 pm
Post by: cullen6 on December 03, 2012, 09:11:50 pm
"The owner of a small business has stated that cents may be omitted from all balance sheets. State the qualitative chracteristic that may support this statement and explain why the business owner may be correct.
Post by: Kuchiki on December 03, 2012, 09:23:24 pm
Explanation: Cents are insignificant figures and the omittance of such information is unlikely to affect the decision-making of the business, thereby failing the materiality test and thus not deemed relevant to include in financial reports.
(I haven't done any Accounting since the exam, so I hope I haven't left anything out!)
Post by: cullen6 on December 03, 2012, 09:57:27 pm
Post by: sin0001 on December 21, 2012, 02:36:40 pm
Thanks
Post by: abcdqd on December 21, 2012, 03:09:26 pm
b- relevance. all reports must contain information useful to decision making. since the revenue is not earned in 2014, it is not useful for decision making and must not be included in accounting reports for that period. furthermore, it will not allow for the calculation of an accurate profit figure for the reporting period, which will undermine relevance in the balance sheet and income statement.
c- revenue- an inflow of economic benefits in the form of an increase in assets which increases owners equity except for capital contributions. even though cash is received (increase in Bank asset), the owner now has a present obligation to deliver the magazines, which increases liabilities. since there is no effect on owners equity, the cash received is thus not treated as revenue
just using what i can remember from this year, probably left out some stuff
Post by: sin0001 on December 21, 2012, 03:20:41 pm
Post by: sin0001 on December 24, 2012, 03:10:06 pm
Post by: abcdqdxD on December 24, 2012, 03:25:25 pm
Post by: sin0001 on December 24, 2012, 04:18:38 pm
Do you mean why you have to total both sides so that the amount is equal?Yes, why can't you leave both sides of a ledger account unbalanced at the end of a reporting period?
Post by: abcdqdxD on December 24, 2012, 04:31:57 pm
The double entry accounting system operates under the idea that debits = credits.
It also states that each transaction has a 'two-fold affect', that is, each transaction requires at least two entries.
Our assets/liabilities/owner's equity do not disappear at the end of the month, so we need to carry it forward to the next month. We do this by balancing the accounts.
So when we balance an account at the end of the reporting period, we need to apply a 'double entry' because we are using the Double Entry Accounting system.
E.g. for an asset account, we do CR Closing balance; DR Opening balance. And for a liability account, we do the reverse.
Therefore we must write the entry 'Balance' in both sides to satisfy the requirements of the double entry accounting system.
Post by: sin0001 on December 24, 2012, 04:34:36 pm
Post by: sin0001 on December 24, 2012, 04:45:30 pm
Post by: abcdqdxD on December 24, 2012, 05:08:47 pm
The vehicle is valued at its agreed value at the time of the vehicle's contribution at $20k. Although Historical Cost demands the vehicle to be valued at its original cost to ensure it is free from bias and error, the economic benefit represented by the vehicle has been partially consumed, and hence the future economic benefit provided by the vehicle is no longer indicated by its cost price. Therefore, the historical cost of the vehicle is no longer relevant to the firm. Instead, the vehicle should be valued at its 'agreed value' of 20k, as this amount is more useful for management decision-making by offering a more accurate reflection of the vehicle's future economic benefit to the firm.
Post by: BoredSatan on December 25, 2012, 12:36:33 am
Eh.. I'm a bit rusty but I'll try:Actually its cause the agreed value is more RELEVANT to the business and therefore its decision making
The vehicle is valued at its agreed value at the time of the vehicle's contribution at $20k. Although Historical Cost demands the vehicle to be valued at its original cost to ensure it is free from bias and error, the economic benefit represented by the vehicle has been partially consumed, and hence the future economic benefit provided by the vehicle is no longer indicated by its cost price. Therefore, the historical cost of the vehicle is no longer relevant to the firm. Instead, the vehicle should be valued at its 'agreed value' of 20k, as this amount is more useful for management decision-making by offering a more accurate reflection of the vehicle's future economic benefit to the firm.
Post by: abcdqdxD on December 25, 2012, 07:22:32 pm
Post by: dreambig on December 29, 2012, 07:08:39 pm
Post by: abcdqd on December 29, 2012, 07:13:30 pm
Hey, does anyone know the effect of drawings and capital contribution on the accounting equation?drawings decrease assets (cash or stock) and decrease OE
capital contribution increases assets (cash/nca/stock) and increase OE
no effect on liabilities for both
Post by: dreambig on December 29, 2012, 07:27:21 pm
Post by: sin0001 on January 04, 2013, 06:18:07 pm
The general ledger are very frequently used in this course, but what is its purpose? Aren't the other records/reports enough?
Post by: BoredSatan on January 05, 2013, 11:26:55 am
So one question that has been haunting me (not really...):Well it kinda groups all the accounts together really neatly rather than having to search through your records (ie journals) which may have 100 entries and then make reports out of them.
The general ledger are very frequently used in this course, but what is its purpose? Aren't the other records/reports enough?
Post by: abcdqdxD on January 05, 2013, 12:24:38 pm
Well it kinda groups all the accounts together really neatly rather than having to search through your records (ie journals) which may have 100 entries and then make reports out of them.
Hmm, but the purpose of journals is to summarise similar transactions as well, so totals can be posted to ledgers more easily..
Since ledgers are only used in double entry accounting (to my understanding anyway), perhaps ledgers are required so that you can see the individual 'two-fold effect' of each transaction? It also groups transactions by item, so it makes it easier for the stakeholders to trace back past transactions relating to a particular item?
Those are just some things that come to mind, but I'm not 100% sure..
In terms of the general ledger, it simply refers to the main group of ledger accounts.
Post by: sin0001 on January 05, 2013, 02:58:02 pm
Post by: abcdqdxD on January 05, 2013, 06:03:31 pm
Post by: sin0001 on January 06, 2013, 12:01:32 am
I guess it seems like you've already finished vce cos you're aiming for a specific atar, whereas most people just aim for study scores lol
Post by: unfamila on January 08, 2013, 03:20:14 pm
I thought it should be recorded at HC principal, or depreciation value.
Never heard of agreed value.
Post by: hjm2 on January 08, 2013, 03:39:00 pm
Post by: abcdqdxD on January 08, 2013, 03:45:09 pm
The agreed value is more RELEVANT to the business and therefore its decision making
Post by: sin0001 on January 09, 2013, 03:11:34 pm
Post by: abcdqdxD on January 09, 2013, 07:01:05 pm
So what's the difference between single entry & double entry accounting? Can someome give me an example of how each of these accounting methods operate? Plus, why are the existing assets & equities of the business recorded into the general journal, when the owner decidea to switch to double entry accounting?
Single entry accounting isn't in the scope of the study design for units 3/4. Double entry accounting just means every transaction will have at least two effects on the accounting equation.
Existing assets and equities are transferred over because if you didn't, the business would have no assets/equities in its records, which is clearly not the case.
You might want to take a look at my notes I posted up on AN as it will cover most of your questions :)
Post by: sin0001 on January 09, 2013, 07:29:31 pm
:)
Post by: dreambig on January 09, 2013, 09:08:09 pm
Post by: sin0001 on January 09, 2013, 09:34:43 pm
Post by: sin0001 on January 10, 2013, 07:55:37 pm
-State whether source docs take place at the input/processing/output stage of the accounting process.
Post by: Kuchiki on January 10, 2013, 08:11:52 pm
Having trouble with following question:
-State whether source docs take place at the input/processing/output stage of the accounting process.
Input.
(Source documents are the first stage of the accounting process, where we collect the raw financial data that will then be used in the processing and output stages.)
Post by: sin0001 on January 10, 2013, 08:18:28 pm
Post by: Kuchiki on January 10, 2013, 08:23:27 pm
Derp, had a brain freeze when doing that question :P
We all have those moments. :P
Post by: TimmyC on January 23, 2013, 11:32:13 am
Post by: unfamila on January 23, 2013, 08:59:37 pm
Hey everyone, this will be my first of many questions regarding 3&4 accounting! There is a question about a proprietor borrowing a computer from his sister for free, this should be recorded as an asset at the agreed value correct?
hey i asked this same question on here last week the answer i got told it was agreed value.
The agreed value is more RELEVANT to the business and therefore its decision making.
so yeah you're correct
Post by: TimmyC on January 23, 2013, 09:40:16 pm
hey i asked this same question on here last week the answer i got told it was agreed value.Yeah.. probably should of read up. Thanks! :D
The agreed value is more RELEVANT to the business and therefore its decision making.
so yeah you're correct
Post by: abcdqdxD on January 24, 2013, 11:48:19 am
Post by: TimmyC on January 24, 2013, 11:56:08 am
If the computer has been used then it should be valued at its agreed valueyea it is, thanks :)
Post by: sin0001 on February 04, 2013, 11:51:28 pm
I know that the answer might be something to do with 'The Entity Principle', but I cannot explain it :/
Post by: nacho on February 04, 2013, 11:55:19 pm
Identify, define, link back to q.
(I)Entity principle - (D)The business must be recognised as a separate entity to the owner, and transactions must be recorded on that basis. (L)As Jess takes clothing home for personal use, this is not a business expense and must be recognised as drawings (-OE) by Jess, the owner.
Post by: sin0001 on February 04, 2013, 11:59:15 pm
Post by: sin0001 on February 05, 2013, 12:05:39 am
"Narre Warren Pizza have just revalued their non-current assets upwards by 4% to reflect the rate of inflation. Referring to one accounting principle, explain why the non-current assets should not be revalued"
Is this something to do with the Consistency principle??
Post by: abcdqd on February 05, 2013, 12:08:58 am
One more:hizt0ric4l c057
"Narre Warren Pizza have just revalued their non-current assets upwards by 4% to reflect the rate of inflation. Referring to one accounting principle, explain why the non-current assets should not be revalued"
Is this something to do with the Consistency principle??
Post by: nacho on February 05, 2013, 12:14:59 am
(I)Consistency:
(D)Accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods.
(L)As the non-current assets were previously valued at their historical cost, only this value may be applied so as to maintain consistent records.
I've actually always sucked at linking, so anyone feel free to correct me.
Also a good exercise for these theory q's is to see if you can answer them with a Qualitative characteristic instead of principle (you'll find many of them link)
Try it in this case, see if you can tell me which qualitative char would apply to this question :)
Post by: abcdqd on February 05, 2013, 12:22:10 am
Post by: sin0001 on February 05, 2013, 12:29:11 am
Well, it could be :
Comparability- as records should be comparable overtime, through the use of consistent accounting methods. In this case, it is the price of the NCA that is lacking consistency
Reliability- The NCA must be recorded at their original price, as this value is verifiable through reference to source docs, and is therefore free of any guesswork
Post by: nacho on February 05, 2013, 12:44:09 am
consistency refers to accounting methods, recording things at historical cost isn't a method, it's a principle. if you interpreted consistency in this way, it could be used for literally every theory answer. so i doubt you would get any marks for stating consistencyI think that both should be accepted - consitency is still regarded as a principle. HC is a safer answer.
I would be interested in seeing what a teacher had to say on this, or a third party.
and yes, your QC's are both correct :)
Post by: sin0001 on February 05, 2013, 12:47:59 am
Post by: nacho on February 05, 2013, 12:52:55 am
In the accounting exam, will the more specific accounting principle (HC in this case) always be correct, regardless of how well you explain other accounting principlesthere are instances where more than one answer in correct, in which case you will receive marks for stating either.
go with the one which may be safer, or that you feel more confident with.
However always be wary of tricks, VCAA is notorious!
for example there was a question in the 2011 exam (not spoiling it) which seemed really straightforward, however 90% of the state got 0 marks out of 2.
Post by: abcdqdxD on February 05, 2013, 08:32:09 am
interesting, i think it could be either historical cost or consistency:
(I)Consistency:
(D)Accounting methods should be applied in a consistent manner to ensure that reports are comparable between periods.
(L)As the non-current assets were previously valued at their historical cost, only this value may be applied so as to maintain consistent records.
I've actually always sucked at linking, so anyone feel free to correct me.
Also a good exercise for these theory q's is to see if you can answer them with a Qualitative characteristic instead of principle (you'll find many of them link)
Try it in this case, see if you can tell me which qualitative char would apply to this question :)
In the scope of VCE, I would just stick with Historical Cost for this one because you can't go wrong. Whether consistency will be accepted is debatable.
One more:
"Narre Warren Pizza have just revalued their non-current assets upwards by 4% to reflect the rate of inflation. Referring to one accounting principle, explain why the non-current assets should not be revalued"
Is this something to do with the Consistency principle??
Others have touched on why its Historical cost. But I'll add this:
It's important to understand that the Balance Sheet is NOT a valuation tool. Assets should be recorded at their historical cost, not their market value.
Post by: dreambig on February 06, 2013, 07:05:44 pm
Post by: abcdqdxD on February 06, 2013, 07:20:35 pm
Why is stock used for advertising classified as an expense whereas drawings isnt? Is it because advertising is fo business purposes or?
Definition of an expense: an outflow of economic benefit decreasing assets (or increasing liabilities), decreasing Owner's equity, except for drawings.
Using stock for advertising fits under that definition because:
1) it is an outflow of economic decreasing assets (in this case stock control decreases)
2) decreases owner's equity (as a result of an increase in advertising expense, decreasing net profit)
3) it is is not drawings
So hence it is an expense
Post by: dreambig on February 08, 2013, 08:51:24 pm
Post by: abcdqdxD on February 08, 2013, 08:54:56 pm
Hey guys I'm a bit confused, can taking stock out for advertising be regarded as drawings?
Nope, if stock is taken out for advertising purposes then it must be recorded as advertising expense for reasons I've previously mentioned.
Post by: dreambig on February 08, 2013, 09:03:39 pm
Post by: abcdqdxD on February 08, 2013, 09:12:36 pm
Omg im so sorry, I didnt even realised i made the same mistake as another question a few days ago. Thanks for clarifying again!!
haha no problem! feel free to ask any questions!!
Post by: dreambig on February 08, 2013, 09:24:27 pm
Post by: abcdqdxD on February 08, 2013, 09:44:22 pm
Post by: dreambig on February 08, 2013, 09:54:30 pm
One more question: the Cash Receipts Journal record cash inflows but lets say I go to the shops and purchase something, I will usually receive a receipt for my purchase/payment, then how come the journal that records cash inflows is called Cash Receipts Journal as opposed to something else?
Post by: abcdqdxD on February 08, 2013, 09:59:28 pm
Thanks :)
One more question: the Cash Receipts Journal record cash inflows but lets say I go to the shops and purchase something, I will usually receive a receipt for my purchase/payment, then how come the journal that records cash inflows is called Cash Receipts Journal as opposed to something else?
When firms make a sale, they record the transaction in a cash receipt. The customer gets the original copy, and the firm keeps a duplicate for its records.
EDIT: I've just thought of another way of looking at it. Think of "receipt" as "receiving", so you have gained something, and in this case it's cash :P
Post by: dreambig on February 08, 2013, 10:16:40 pm
Post by: sin0001 on February 08, 2013, 11:39:10 pm
And how do we formally balance revenue/expense/OE accounts in the general ledger? (Do we use the same process of balancing Assets/Liability accounts?)
Post by: abcdqdxD on February 08, 2013, 11:50:00 pm
Do we have to record something in the general ledgers when a business submits a quote to supply their stock (sale)?
And how do we formally balance revenue/expense/OE accounts in the general ledger? (Do we use the same process of balancing Assets/Liability accounts?)
A quote is not a transaction, so we do not record anything.
To answer your second question, revenue and expense accounts are 'closed' to the profit and loss summary account. They are not balanced because revenue and expense accounts are not carried over to the next reporting period. Keep in mind that our revenues and expenses must be relevant to the CURRENT reporting period.
It is probably a bit difficult to explain this process here, but if you're using the Cambridge textbook, you'll find it in chapter 9. But for now, you shouldn't worry about it too much, you'll learn it near the end of unit 3 :P
Post by: sin0001 on February 08, 2013, 11:55:16 pm
Never knew replies would be this quick on an Accounting thread
Post by: abcdqd on February 08, 2013, 11:58:47 pm
Thanks abcd!oi that's me
Post by: sin0001 on February 09, 2013, 12:05:45 am
Post by: abcdqdxD on February 09, 2013, 12:20:41 am
why do you two have similiar usernames? lol
I'm his stalker
Post by: dreambig on February 11, 2013, 08:15:34 pm
Post by: sin0001 on February 11, 2013, 08:22:21 pm
Post by: abcdqdxD on February 11, 2013, 08:38:32 pm
Where is the contribution of an asset reported in the balance sheet?
The contribution of an asset will have TWO effects:
- an increase in total assets
- an increase in owner's equity (new capital)
Like sin mentioned, it is recorded under OE, however you must not forget to record the name of the asset on the asset side of the balance sheet. In the scope of VCE Accounting, all contributions of assets will be recorded under Non-current assets (with the exception being a contribution of cash, in which it would appear in current assets).
Post by: dreambig on February 12, 2013, 05:19:05 pm
Post by: abcdqd on February 12, 2013, 05:27:42 pm
So lets say im preparing a balance sheet, i must add the value of the asset to the Capital under Owners Equity as well as record the value and name of asset under assets?yes
Post by: sam.utute on February 12, 2013, 06:00:48 pm
yes
Nice and simple :)
Post by: sin0001 on February 13, 2013, 09:16:47 pm
Post by: Kuchiki on February 13, 2013, 09:40:19 pm
In a Cash Flow Statement, which transactions come under the categories of financing & investing activities? I know that the operating activities deals with the business' day to day transactions
Investing activities relate to the buying and selling of non-current assets (e.g. Cash Purchase of Vehicle, Cash Sale of Computer, Payment to Sundry Creditor).
Financing activities result in a change in the business' financial structure (e.g. Capital Contribution, Drawings, Loan, Loan Repayment).
Post by: sin0001 on February 14, 2013, 08:51:12 am
Also, which study guide do you think is better, The leading edge version or NEAP smartstudy guide?
Post by: abcdqdxD on February 14, 2013, 09:07:39 am
I did buy checkpoints, but I didn't end up using them at all. Needless to say, they were a total waste of money. Questions were ripped off from past VCAA exams, while some of their solutions were questionable.
Although I don't have first hand experience with Leading edge or NEAP, I hear NEAP is very very good. Having done NEAP practice exams, I find them to be aimed at the top-end students
Post by: Kuchiki on February 14, 2013, 11:55:35 am
I got extra questions and past SACs from my teacher, and I went to a revision lecture before the mid-year (I also emailed one of the lecturers afterward, who sent me a lot of practice exams). Basically, I just gathered as many free practice exams as I could (this might be difficult this year due to the new study design, but the past exams are still worth doing).
Post by: dreambig on February 19, 2013, 09:08:40 pm
Post by: abcdqdxD on February 19, 2013, 09:14:39 pm
It doesn't have anything to do with estimations to the best of my knowledge. But you could probably link 'no estimates' to Reliability - all transactions must be verifiable by source documents to ensure it is free from error and bias (and I guess free from estimations as a result).
Hope this helps
Post by: awesomejames on February 19, 2013, 09:21:42 pm
One question, does accounting scale up this year or is there no scale?
It's because when I put my hypothetical scores into the atar calc it says it scales up by 1 at 35.
Is this true?
Post by: abcdqd on February 19, 2013, 09:23:40 pm
Post by: awesomejames on February 19, 2013, 09:26:51 pm
2012 scaling report says no scaling at 35 but scaling +1 if 40 or above
Do you think that would be Same or very similar for this year?
Post by: abcdqd on February 19, 2013, 09:31:58 pm
Do you think that would be Same or very similar for this year?yeah its the same pretty much every year
Post by: dreambig on February 19, 2013, 10:16:51 pm
Conservatism states that losses must be recognised when probably and gains recorded only when certain. This is done to avoid overstating assets and owner's equity. This is linked to the Lower of cost/NRV rule.
It doesn't have anything to do with estimations to the best of my knowledge. But you could probably link 'no estimates' to Reliability - all transactions must be verifiable by source documents to ensure it is free from error and bias (and I guess free from estimations as a result).
Hope this helps
Post by: abcdqdxD on February 19, 2013, 10:38:02 pm
2012 scaling report says no scaling at 35 but scaling +1 if 40 or above
I thought scaling affects you the most at 30 and less as you move away from the mean? o.O
Post by: abcdqd on February 19, 2013, 10:49:14 pm
I thought scaling affects you the most at 30 and less as you move away from the mean? o.Oaccounting and biology are weird, probably has something to do with the large number of year 11s doing those subjects
Post by: sin0001 on February 19, 2013, 10:50:29 pm
Post by: abcdqd on February 19, 2013, 11:05:42 pm
Shouldn't scaling decrease as your SS increases, did you mean it scales up by 1 at 35 and there's no scaling at 40? 0.ono http://www.vtac.edu.au/pdf/scaling_report.pdf
Post by: BoredSatan on February 19, 2013, 11:22:19 pm
no http://www.vtac.edu.au/pdf/scaling_report.pdfThis could mean that it is harder to differentiate higher scores (40+) compared to lower scores (~30). This happens if a lot of people get around the same high mark.
Post by: sin0001 on February 20, 2013, 10:05:51 pm
Post by: availn on February 20, 2013, 10:14:38 pm
Can someone please explain why there needs to be a column for 'Stock Control' in Cash Payments Journals?
If you buy stock with cash, then it would increase your stock control balance, so you use that column, as well as the bank and GST columns.
Post by: morantz on February 21, 2013, 07:39:53 pm
If you buy stock with cash, then it would increase your stock control balance, so you use that column, as well as the bank and GST columns.Most importantly, the reason why one account has its own column in a particular journal is because there's regular activity involving that account in the reporting period. If one item only has a rare transaction here and there, then it would be unnecessary to have a separate column and would just be recorded under the Sundries column.
Post by: dreambig on February 22, 2013, 06:07:42 pm
Post by: abcdqdxD on February 22, 2013, 06:41:37 pm
So essentially the expense is accounted for by decreasing net profit or increasing net loss
Post by: sin0001 on February 24, 2013, 01:18:11 pm
Post by: abcdqdxD on February 25, 2013, 09:30:43 pm
In double entry accounting, financial data must be recorded in a journal before they are posted to ledger accounts
Post by: sin0001 on February 25, 2013, 10:24:40 pm
Post by: abcdqd on February 25, 2013, 10:28:12 pm
Yea, I meant General Ledger. Wait so since every transaction must be included in a journal, does that mean that Stock gains/losses are also recorded in the General Journal, or only in Stock cards?they are recorded in the general journal as well because they can't be recorded in any special journal
Post by: sin0001 on March 02, 2013, 06:06:19 pm
Might be a stupid question, but right now I can't figure it out.
Post by: sin0001 on March 09, 2013, 08:31:38 pm
Post by: abcdqdxD on March 10, 2013, 02:27:21 am
When a business establishes a double-recording system and it already owns a number of assets, do these assets need to be recorded as capital? (When recording the opening balance in the General Journal)
Yes
Post by: sin0001 on March 10, 2013, 10:29:33 am
Post by: abcdqd on March 10, 2013, 11:41:33 am
if the business didn't exist before, how can it have assets without the owner buying them.
i'm confused, can you provide the specific question for this?
also, addressing your concern of recording opening balances, they usually give you everything except the capital, which you have to work out by recording all the assets and liabilities first then balancing the debit and credit sides.
Post by: abcdqdxD on March 10, 2013, 01:58:01 pm
Even though you aren't contributing any new capital, the purpose of the commencement entry is to reflect your current business situation in your accounting records. To do this we record the balance of all existing A/L/OE accounts into our commencement entry. If we didn't record capital in the commencement entry, our business would have assets but no capital (which is clearly not the case!)
You don't even need to worry about the accounting equation, what I said above should make sense intuitively :P
Post by: sin0001 on March 10, 2013, 02:40:14 pm
Post by: abcdqdxD on March 10, 2013, 02:45:58 pm
Ahh alright thanks guys, that makes sense. So that means we have to record every source of finance (loan aswell) in the GJ?
Yep
Post by: TimmyC on March 13, 2013, 08:41:11 pm
Post by: sin0001 on March 13, 2013, 09:22:56 pm
Post by: TimmyC on March 14, 2013, 07:02:00 am
Main reason is to make sure that records are accurate, because with general ledgers you're recording twice, before financial info. is reported.yeah, thanks mate
Post by: abcdqdxD on March 14, 2013, 04:34:06 pm
Main reason is to make sure that records are accurate, because with general ledgers you're recording twice, before financial info. is reported.
be careful of using the word "accurate", because accounting records can never be accurate (quoting my uni lecturer) due to the element of judgement and use of estimates (e.g. depreciation/nrv/etc.)
some advantages of double entry:
Easier detection of errors and fraud
Preparation of financial statements directly from the ledger accounts
I think it's also important to understand its limitations/disadvantages:
Every transaction is recorded twice, hence is more time-consuming
Specialised staff may be required as it is a more complex system
Extra recording may result in higher administration costs
Post by: dinosaur93 on March 16, 2013, 04:02:39 pm
Post by: abcdqdxD on March 16, 2013, 04:27:09 pm
What does it mean when it says 'Stock Control' and 'Cost of Sales'?
Stock control (asset) is the account that summarises all movement of stock in and out of the business
Cost of sales is an expense account that records cash and credit sales of stock at cost price
Post by: sin0001 on March 16, 2013, 06:46:13 pm
Post by: abcdqdxD on March 16, 2013, 07:36:19 pm
Post by: sin0001 on March 18, 2013, 06:57:52 pm
Also, I would appreciate any general tips for AOS 1 of Unit 3 (pretty much recording + principles/characteristics), as I have a SAC on this tomorrow :S
Post by: abcdqd on March 18, 2013, 07:01:12 pm
Why is Loan recorded in the General Journal, not the Cash Receipts Journal? I mean, aren't you getting cash when the Loan is received?where do they record loans in the general journal? i'm pretty sure it goes in the cash receipts journal.
Also, I would appreciate any general tips for AOS 1 of Unit 3 (pretty much recording + principles/characteristics), as I have a SAC on this tomorrow :S
tips: revise theory 100x more than prac
Post by: TimmyC on March 18, 2013, 07:03:23 pm
Why is Loan recorded in the General Journal, not the Cash Receipts Journal? I mean, aren't you getting cash when the Loan is received?It is the cash receipts journal
Also, I would appreciate any general tips for AOS 1 of Unit 3 (pretty much recording + principles/characteristics), as I have a SAC on this tomorrow :S
Post by: sin0001 on March 18, 2013, 07:12:30 pm
Bikes 4 Everyone, , commenced business on 1 July 2012. Her accountant advised her to set up a double-entry system of accounting, and recommended using control accounts for stock, debtors and creditors.
Jacquie contributed the following items to the business:
1 office furniture that she had at home valued at $1 500
2 a motor vehicle that originally cost $60 000; the agreed value is $45 000
3 motor vehicle registration, which still has five months to run, with an annual cost of $840
4 a bank loan (ANZ) used to finance the motor vehicle with a balance owing of $32 000 (Memo 1)
5 $65 000 of her own money (Rec. 001).
Why is the loan (Transaction 4) recorded in the General Journal, also why is this loan debited from the 'Capital' account in the GL?
Post by: abcdqd on March 18, 2013, 07:28:32 pm
a liability ledger account would then be created for the loan, with a balance of 32000 CR, with the two-fold effect being a debit of 32000 for capital. this is due to the owner not paying the total agreed value of 45000 herself, but instead putting 32000 on a loan that will be paid by the business.
Post by: sin0001 on March 18, 2013, 07:31:17 pm
Post by: abcdqd on March 18, 2013, 07:33:49 pm
So this transaction works in a same way as Drawings, as it's also negative OE?sort of, the difference is that the owner isn't taking assets directly out of the business, but instead increasing its liabilities.
Post by: abcdqdxD on March 18, 2013, 07:35:48 pm
remember liabilities+oe=total equity
Post by: flyhighx on March 18, 2013, 10:46:29 pm
someone please explain how GST refund is recorded in Cash receipts and why is it treated that way
Thanks
Post by: abcdqdxD on March 18, 2013, 10:54:20 pm
Recorded under the heading "Sundries" as it is an infrequent cash receipt (remember not to confuse this with GST received from customers)
Post by: abcdqd on March 18, 2013, 10:55:58 pm
Post by: abcdqdxD on March 19, 2013, 03:59:18 pm
the details are "GST clearing" as that is the name of the ledger account that you cross-reference the transaction with
Ahh ok fair enough I'm a bit rusty :P
Post by: flyhighx on March 21, 2013, 12:42:30 am
Post by: sin0001 on March 21, 2013, 09:34:36 pm
Post by: abcdqdxD on March 21, 2013, 09:39:59 pm
think about it this way:
value of stock control - represents future economic benefit expected from selling the stock within 12 months etc.etc.
however, the GST figure does not represent a future economic benefit to the firm hence must not be included in the valuation of stock
Post by: unfamila on March 22, 2013, 05:44:06 pm
State effect on accounting equation if this error wasnt fixed
Post by: CH3ezEC4KE on March 22, 2013, 05:52:21 pm
Post by: Drunk on March 22, 2013, 06:02:31 pm
The incorrect recording would increase assets (cash) by $1396 and decrease assets (debtors control) by $1396 and the discount would decrease assets (debtors control) by $154 and increase expenses (discount expense) by $154. Overall, assets have decreased by $154 and OE decrease by $154.
So assets are overstated by $1242, liabilities are overstated by $1550 and OE understated by $308
I haven't done accounting in quite a while btw!!
Post by: unfamila on March 24, 2013, 10:19:31 pm
Post by: TimmyC on March 26, 2013, 04:19:21 pm
Post by: abcdqdxD on March 27, 2013, 01:08:16 am
Only got 80% for my first SAC.. am I doomed for a good SS haha? Rank 3 atm
Depends on strength and size of your cohort.. but i think you're on track for a 40+ :)
Post by: TimmyC on March 27, 2013, 04:47:53 pm
Post by: abcdqdxD on March 27, 2013, 09:26:57 pm
There's 11 people and the top 4-5 are quite strong I believe
Hmm I'm not familiar with small cohorts. I know for a fact that there were 50 people in my cohort and there were 7 40+'s.. so maybe aim to be in top 3 out of 11?
Post by: cullen6 on April 02, 2013, 04:43:28 pm
No accounting for a week and my minds got blank... help?
Post by: abcdqdxD on April 02, 2013, 04:56:20 pm
"A business owner has collected GST of $500 during the month. As the business has experienced an inflow of resources, the owner intends to report the $500 as revenue for the month. Is this correct accounting treatment? Explain your answer fully"
No accounting for a week and my minds got blank... help?
$500 GST received from customers is not a revenue as it does not increase owner's equity, but rather, it is a current liability since GST collected must be repaid to the ATO in the form of a GST Settlement
Post by: dreambig on April 02, 2013, 09:23:52 pm
Post by: BoredSatan on April 02, 2013, 09:38:53 pm
Why is rent paid in advance an asset?There is a future economic benefit in the form that the business can use the premises in the future without having to pay more rent.
Post by: dreambig on April 02, 2013, 11:34:56 pm
When the business pays for advertising using a personal cheque, why is it an increase in Owners Equity? Shouldnt it be a decrease...?
Post by: abcdqdxD on April 02, 2013, 11:45:24 pm
Has the advertising been consumed?
Prepaid advertising (not consumed) : Increase in OE because the owner made a capital contribution
Post by: Sach1_K on April 03, 2013, 10:44:43 am
Sort of made it up from the question above. And realised I don't know if I can answer it myself. XD
On jan 1 A business pays for advertising of 1500 dollars plus gst using a personal cheque. The business consumes advertising at the end of every month at 100 dollars. What is the effect on the acc eq.
The answer I got was 1500 in pre adv and decrease gst by 150 and increase oe by 1650.
Is that right ?
Post by: abcdqdxD on April 03, 2013, 05:03:27 pm
Quick question
Sort of made it up from the question above. And realised I don't know if I can answer it myself. XD
On jan 1 A business pays for advertising of 1500 dollars plus gst using a personal cheque. The business consumes advertising at the end of every month at 100 dollars. What is the effect on the acc eq.
The answer I got was 1500 in pre adv and decrease gst by 150 and increase oe by 1650.
Is that right ?
That question doesn't make sense? You can't state the effect of a BDA question without being given dates
Post by: Sach1_K on April 03, 2013, 10:27:40 pm
Post by: abcdqdxD on April 03, 2013, 11:53:20 pm
Assets increase (Prepaid Advertising) 1500
Lia. No effect
OE increase (Capital) 1500
GST liability is not included as the GST is incurred by the owner not the business (remember entity principle - owner is a separate entity from the firm) and neither does represent an economic benefit and so is not included in the value of pp.adv.
Post by: Sach1_K on April 04, 2013, 09:07:24 am
Thanks :)
Post by: sam.utute on April 05, 2013, 11:16:54 am
What do people find most difficult about Accounting (be specific - I'm writing a few new exercises and worksheets and wanted to make them as relevant as possible)?
I have "discuss" questions at the top of my list.
Post by: abcdqdxD on April 05, 2013, 03:16:06 pm
Just a quick question:
What do people find most difficult about Accounting (be specific - I'm writing a few new exercises and worksheets and wanted to make them as relevant as possible)?
I have "discuss" questions at the top of my list.
really complex BDA questions can be quite challenging (can't believe they weren't on the end of year exam!!)
other than that I think people have more trouble with higher level theory q's (such as analysis)
Post by: Sach1_K on April 06, 2013, 05:08:06 pm
Just a quick question:I find budgeting reports the hardest part of accounting for me. I just don't like them. Other then that bdas and the hardest report for me is the cash flow statement.
What do people find most difficult about Accounting (be specific - I'm writing a few new exercises and worksheets and wanted to make them as relevant as possible)?
I have "discuss" questions at the top of my list.
Try include questions that the answers aren't directly rote learned responses.
Like discuss if a business should offer credit to customers?
Or why would a business use FIFO?
At least for me when I got asked these questions I had to think not spit out rote Learned answers with a link.
Post by: sin0001 on April 07, 2013, 04:41:39 pm
Post by: Sach1_K on April 07, 2013, 04:52:12 pm
When depreciation expense is recorded to the general ledger, why is a credit entry made to the account-'accumulated depreciation', instead of just crediting the account of the asset (i.e.Van)I don't think I can answer ur question particularly well but ill try.
Accumulated depreciation is a negative asset. And in the balance sheet the asset for example van is shown at is agreed value then it says less acc dep then shows the carrying value.
Doing that shows the going concern principle and improves understandability and it shows the relevant negative asset of depreciation.
Post by: sin0001 on April 07, 2013, 05:09:22 pm
I don't think I can answer ur question particularly well but ill try.Same subjects!
Accumulated depreciation is a negative asset. And in the balance sheet the asset for example van is shown at is agreed value then it says less acc dep then shows the carrying value.
Doing that shows the going concern principle and improves understandability and it shows the relevant negative asset of depreciation.
Hmm, but even when you credit, let's say, the Van's account in the GL, the balance would still reflect the carrying value of this asset plus this way is kinda simpler too. But i think showing acc. Dep. Expense on the Balance sheet might be more relevant, maybe thats why
Post by: abcdqdxD on April 07, 2013, 05:14:44 pm
Note: acc depn is NOT an expense, its a negative asset account
Post by: Sach1_K on April 07, 2013, 05:18:18 pm
Same subjects!Had my answer all written out then abc steals it lol.
Hmm, but even when you credit, let's say, the Van's account in the GL, the balance would still reflect the carrying value of this asset plus this way is kinda simpler too. But i think showing acc. Dep.Expenseon the Balance sheet might be more relevant, maybe thats why
Post by: abcdqdxD on April 07, 2013, 06:04:20 pm
Had my answer all written out then abc steals it lol.
Sorry!
Post by: Sach1_K on April 07, 2013, 06:11:38 pm
Sorry!relax its all good !
Post by: itsdanny on April 12, 2013, 08:38:29 pm
Can I ask why you cannot say that a discount expense is an expense that is in the form of a decrease in Bank? Why is it a decrease in Debtors Control? i.e. when we receive less money from our debtors (due to the discount), aren't we receiving less cash and thus Bank should decrease? What's the concept behind understanding why this cannot be the case and that the correct answer is Debtors Control.
It’s just a little perplexing to understand because when a receipt from a debtor (who has been entitled to a discount for early payment) is recorded in the CRJ, the Debtors Control column amount stays the same (because you have to clear the total amount), but it is the Bank column amount that decreases (as less cash is received by the business). Any comments on this to further expand my insight onto this would be greatly appreciated, thanks.
Post by: abcdqdxD on April 12, 2013, 09:19:02 pm
Hi everyone,
Can I ask why you cannot say that a discount expense is an expense that is in the form of a decrease in Bank? Why is it a decrease in Debtors Control? i.e. when we receive less money from our debtors (due to the discount), aren't we receiving less cash and thus Bank should decrease? What's the concept behind understanding why this cannot be the case and that the correct answer is Debtors Control.
It’s just a little perplexing to understand because when a receipt from a debtor (who has been entitled to a discount for early payment) is recorded in the CRJ, the Debtors Control column amount stays the same (because you have to clear the total amount), but it is the Bank column amount that decreases (as less cash is received by the business). Any comments on this to further expand my insight onto this would be greatly appreciated, thanks.
Bank may be affected in the long term, but discount expense has no IMMEDIATE impact on bank, but it does have an immediate impact on debtors control (your debtors owe you less). But yes, I fully understand where you are coming from :P
Post by: itsdanny on April 12, 2013, 10:59:24 pm
Bank may be affected in the long term, but discount expense has no IMMEDIATE impact on bank, but it does have an immediate impact on debtors control (your debtors owe you less). But yes, I fully understand where you are coming from :P
Excellent. Thank you abcdqdxD :)
Also, may I ask what would be the best way to explain why GST does not affect the valuation of a stock (whether it may be a purchase or a sale)? I've seen a few explanations for this and they seem quite distinct, what would be the best approach on answering this?
Post by: abcdqdxD on April 13, 2013, 11:45:00 am
GST is not a future economic benefit to the entity
think about it this way:
value of stock control - represents future economic benefit expected from selling the stock within 12 months etc.etc.
however, the GST figure does not represent a future economic benefit to the firm hence must not be included in the valuation of stock
Post by: unfamila on April 20, 2013, 09:11:29 pm
They're so confusing :o
Post by: abcdqdxD on April 20, 2013, 09:46:56 pm
Any tips for balance day adjustments?
They're so confusing :o
use your fingers to count months :P
and I guess just do heaps of them (it's kind of like maths)
Which part are you struggling with the most?
Post by: jono88 on April 20, 2013, 10:18:05 pm
Post by: unfamila on April 20, 2013, 10:20:08 pm
Post by: abcdqdxD on April 21, 2013, 03:18:22 pm
Draw a timeline of what is occurring. Trust me it helps :)
Drawing a timeline was confusing for me :P
I guess I did do a mini timeline (not super detailed).. just need to find what works for you as everyone is different
Post by: flyhighx on April 25, 2013, 10:53:26 pm
Can someone please explain to me in full detail of "why do we produce a Adjusted Gross Profit as well as a Gross Profit Number?"
Thanks
Post by: abcdqdxD on April 25, 2013, 11:32:23 pm
Post by: flyhighx on May 02, 2013, 08:58:56 pm
During the year ended 30 June 2012 ,Black's electronics paid $32,300 in wages . At 30 June 2012, $600 were still owing (memo 19). The balance sheet at 30 June 2011 showed accrued wages of $450. The next date for payment of wages is 7 July 2012 when $2000 will be paid to employees (chq 721)
1. calculate wages expense for year ended 30 June 2012
Post by: Sach1_K on May 02, 2013, 09:15:10 pm
Can someone please complete this question?Assuming when it says 32,300 in wages it means wages in general including accrued. So shouldn't it be 32,300 - 450(previous periods accrued wages) and + 600(wages incurred not paid)? So altogether 32,450. This is just the way I interpreted the question I could be (probably) wrong.
During the year ended 30 June 2012 ,Black's electronics paid $32,300 in wages . At 30 June 2012, $600 were still owing (memo 19). The balance sheet at 30 June 2011 showed accrued wages of $450. The next date for payment of wages is 7 July 2012 when $2000 will be paid to employees (chq 721)
1. calculate wages expense for year ended 30 June 2012
And if wages meant just wages expense it would be just 32,300+600.
Post by: abcdqdxD on May 05, 2013, 02:50:34 pm
Post by: unfamila on May 31, 2013, 09:22:44 pm
The answer said to record the vehicle $28,000, is this correct?
Do I just look at it like an agreed value?
Post by: abcdqdxD on May 31, 2013, 10:32:45 pm
The business purchased their vehicle in 2013 for $30,000. However the owner went to the shop in 2014 and seen they were selling the same model for $28,000.
The answer said to record the vehicle $28,000, is this correct?
Do I just look at it like an agreed value?
No in VCE we always record NCA at either historical cost or agreed value. Fair value (which is the $28000) is not in the VCE course.
Post by: Sach1_K on May 31, 2013, 10:34:42 pm
The business purchased their vehicle in 2013 for $30,000. However the owner went to the shop in 2014 and seen they were selling the same model for $28,000.just to add to what abcdqdxd was saying. You record it at 30,000 in 2013 maybe in the next year thru depreciation or outdated model etc it went down to 28k. But since you bought it in 2013 for 30k you record it at 30k.
The answer said to record the vehicle $28,000, is this correct?
Do I just look at it like an agreed value?
Post by: sin0001 on May 31, 2013, 10:37:18 pm
Post by: abcdqdxD on May 31, 2013, 10:45:07 pm
Post by: unfamila on May 31, 2013, 10:52:40 pm
Post by: saidw on June 09, 2013, 07:34:37 pm
I'm having trouble with this question as the answer is apparently understandability and consistency, although i cant see why?
Post by: Sach1_K on June 09, 2013, 07:46:15 pm
Discuss the importance of classifications in accounting reports. With reference to one qualitative characteristic and one accounting principle. (6 marks)Understanability Becuase classifying assets and liabilities makes reports easier to understand for the users for decision making for example which assets provide economic benefit for 12 months and which ones provide economic benefit for more than 12 months.
I'm having trouble with this question as the answer is apparently understandability and consistency, although i cant see why?
Answer: Reports should be prepared in a manner that makes it easy for the user to comprehend their meaning.
Classifying Assets and Liabilities in the Balance Sheet allows users with little accounting knowledge to understand the basics of the report.
(VCAA 2007)
I'm not really sure about the consistency sorry.
Post by: saidw on June 09, 2013, 08:00:39 pm
Understanability Becuase classifying assets and liabilities makes reports easier to understand for the users for decision making for example which assets provide economic benefit for 12 months and which ones provide economic benefit for more than 12 months.
Answer: Reports should be prepared in a manner that makes it easy for the user to comprehend their meaning.
Classifying Assets and Liabilities in the Balance Sheet allows users with little accounting knowledge to understand the basics of the report.
(VCAA 2007)
I'm not really sure about the consistency sorry.
thanks anyway
Post by: sin0001 on June 09, 2013, 08:18:09 pm
Post by: abcdqdxD on June 09, 2013, 10:13:46 pm
Discuss the importance of classifications in accounting reports. With reference to one qualitative characteristic and one accounting principle. (6 marks)
I'm having trouble with this question as the answer is apparently understandability and consistency, although i cant see why?
Hi :)
First of all, we must realise there is more than one answer. VCE Accounting is known to be quite narrow, but really you could apply a whole set of QCs/APs to this question.
Some that come to mind are:
- Understandability (as previously mentioned)
- Going concern (more so for the classification of NCA and NCL on the balance sheet than other reports as they reflect future economic benefit/obligations in the long term)
- Reporting period (classification of accrued/prepaid revenues and expenses)
I'm not sure if Consistency should be one of the answers. The principle itself doesn't really specify why it's important to classify items, but rather requires the same accounting methods to be used from period to period (or maybe I'm being too pedantic).
Also not sure if that is really a 6 mark question. Perhaps they could've said, "referring to QCs and APs, explain why..." instead of placing a restriction on how many you can use.
What do you reckon abcdqd?
Post by: sin0001 on June 10, 2013, 08:57:17 pm
Post by: abcdqdxD on June 10, 2013, 09:47:21 pm
When you're allocating the value of stock, why don't we record the expense of cartage in separately to the cost of sales? Don't we need to report 'Cartage In' seperately on the Income Statement? o.0
Cartage in is reported separate of cost of sales under the heading "cost of goods sold" if treated as a period cost. If it is a product cost then it is included in cost of sales if I remember correctly.
But yeah, I'm real rusty on this so I may not be 100% correct.
Post by: Sach1_K on June 10, 2013, 11:33:55 pm
Cartage in is reported separate of cost of sales under the heading "cost of goods sold" if treated as a period cost. If it is a product cost then it is included in cost of sales if I remember correctly.it seems right. In unit 3 I think we assume everything is a period cost.
But yeah, I'm real rusty on this so I may not be 100% correct.
Post by: flyhighx on July 27, 2013, 08:00:06 pm
Are there any tips on balance day adjustments for revenues and disposal of non-current assets?
I have my sac this tuesday and I'm struggling with BDA
thanks
Post by: abcdqdxD on July 27, 2013, 08:47:14 pm
Post by: Damoz.G on July 27, 2013, 11:16:28 pm
Hi
Are there any tips on balance day adjustments for revenues and disposal of non-current assets?
I have my sac this tuesday and I'm struggling with BDA
thanks
Adding to abcdqdxD's two tips (Which are very useful), use your fingers when counting the months for Prepaid or Accrued. It may sound odd, but if it gets you those marks, then who cares what other people think. e.g. If your calculating from Feb to June, you would say 4 months. EXCEPT, you have to include Feb as well, so it would be 5 months consumed or left (Depending on Prepaid or Accrued).
Read the information a few times. It's time consuming, but if you get the answers, then that's the main point. Reading it once will DEFINITELY NOT be enough. Bare minimum two times, otherwise you are guaranteed to have missed or forgotten a key piece of vital information.
Post by: sin0001 on August 02, 2013, 07:09:54 pm
Might be a stupid question but I haven't done Accounting in a while, so I'm forgetting basics :/
Cheers
Post by: abcdqd on August 02, 2013, 07:25:18 pm
Post by: Kuroyuki on August 02, 2013, 07:27:10 pm
When we have to record the entries for the cash sale of a NCA in the General Journal, supposing it results in a profit, why do we have to debit 'Disposal of NCA' & credit 'Profit on Disposal of NCA' accounts, isn't the entry in the Cash Receipt Journal enough?The business might recieve a cash receipt of 20000 for the NCA. However not all of it is revenue. The entry in the GJ is to record the revenue not the cash received that has already been done. Sorry for the rushed response. Hope it helps
Might be a stupid question but I haven't done Accounting in a while, so I'm forgetting basics :/
Cheers
Beaten :( lol
Post by: sin0001 on August 02, 2013, 07:41:19 pm
Another question- What is the use of the 'Disposal of NCA' ledger account? I'm confused at why the proceedings from the sale of a NCA are credited from this ledger account in a trade-in of a NCA... any particular reason why you can't debit this?
Post by: abcdqdxD on August 02, 2013, 08:27:57 pm
Thanks guys!
Another question- What is the use of the 'Disposal of NCA' ledger account? I'm confused at why the proceedings from the sale of a NCA are credited from this ledger account in a trade-in of a NCA... any particular reason why you can't debit this?
Disposal of NCA account is pretty much used as a dumping ground in the double entry recording process. By using this account, it allows us to debit/credit the (other) appropriate accounts that are affected by the sale of NCA.
its similar to how the profit or loss summary account is used as a dumping ground as well (I say that because the ledger itself has little significance but simply exists to facilitate the calculation of the profit figure for the period)
Post by: sin0001 on August 07, 2013, 10:30:10 pm
Post by: TimmyC on August 07, 2013, 10:37:59 pm
Is the Disposal of NCA account an Asset, a Liability or an Owner's Equity legdger account? It's balance is not carried forward to the next reporting period, so I guess we can rule out A or L...I think its the same as a P+L summary account, just there to close off accounts.
Post by: TazzyGirl on September 05, 2013, 10:47:34 am
Post by: talib on October 12, 2013, 12:28:24 pm
Post by: Damoz.G on October 12, 2013, 04:18:50 pm
need help with vcaa exam 2 2012 the first question about stock control. and 1c as well can anyone help plz
So Question 1a and c?
I'll do it now. :)
Post by: Damoz.G on October 12, 2013, 04:42:53 pm
(http://i44.tinypic.com/2ntvbc8.jpg)
On November 15, the business made a sale of 3 Units at $500 each. This means that the total Invoice was $1500 + $150 = $1650
However, on November 18, the Debtor (Lyall’s Imports) returned 1 Leather Chair (due to damage). Therefore:
• Sales Returns – It is a negative Revenue, and since we have “lost” the sale of 1 Chair, we do a Debit entry.
• GST Clearing – Because the Leather Chair has been returned, we no longer owe that GST incurred from the Sale to the ATO. Therefore, we do a Debit entry to GST Clearing to reduce our Liability owed to the ATO.
• Debtors Control – When Debtors Control decreases, we do a Credit entry. This is because our Debtors Control balance has reduced. The Debtor doesn’t owe us the money anymore, since we now have the Stock back in our business again.
• Debtors - Lyall’s Imports (Subsidiary) – The Debtor doesn’t owe us the $550 from the Stock anymore, because they have returned it, and thus received a Credit Note for the return of Stock.
• Stock Control – When Stock Control increases, we do a Debit. Thus, we have now received the Stock again from the Sale, so our Stock Control balance increases.
• Cost of Sales – Do a Credit Entry because the Expense created at the time of the Sale, is now removed. Therefore to reduce an Expense, we do a Credit entry.
Given that the Mark-Up is 100%, we can convert this into simply 1.
Sales = Cost of Sales
1 + Mark-Up
1. c.
(http://i40.tinypic.com/2ekj7ms.jpg)
Now we switch businesses, and look from the perspective of Lyall’s Imports paying off their debt.
So how much does Lyall’s Imports owe Modern Seating as at November 26? Well, 2 Leather Chairs plus GST. Therefore, $1000 + $100 = $1,100 (Insert this figure straight away in the Creditors Control column, because this is how much we are reducing our Creditors Control by).
We are given the Credit Terms of 2/14, n/30. This means that if the business pays its debt within 14 days, that they will receive a 2% discount, otherwise they must repay the full amount back within 30 days.
Looking at the dates, Layall’s Imports paid back their debt owed by 11 days (which follows the credit terms of receving a discount). Therefore, calculate 2% of the total invoice owed ($1100), and you will get $22. Then obviously the left over amount ($1078), is the amount that Lyall’s Imports actually paid back to Modern Seating.
Post by: sin0001 on October 13, 2013, 02:49:41 pm
- When we are reporting Wages expense in the income statement/cash flow statement, should we break it up into Wages expense/Accrued Wages expense/Prepaid Wages expense or will a single figure for Wages suffice?
- Q3 of Practice Exam 1 from the ATARNotes study guide: I understand why the labelling cost is immaterial and thus, a period cost. But why isn't the Prepaid Insurance included as a product cost? The transaction is only for one line of stock, so I thought it can be assigned to each unit
- For Q4 of this exam, the answers have only reffered to profitability from the owner's perspective, but is it also valid to mention that the business might not be earning discount revenue from its creditors, so it's less profitable in this sense. Also the question asks for the 'movement of Debt Ratio', I've just mentioned the scenario where it increases, do I have to also talk about it decreasing?
- For Q8c, when explaining how Prepaid expenses are current assets, is it acceptable to say that economic benefits inflows are expected in the form of 'reduction in the expense payable'?
Post by: abcdqdxD on October 13, 2013, 02:56:37 pm
4) Hmm I wouldn't go down that path. If I was explaining why prepaid revenue is an asset, I'd argue that its a resource controlled by the entity transactions which results in an inflow of economic benefit as it provides the entity access to the premises for business operations for <length of time>. I think the only time you'd use reduction in an outflow of economic benefits (expenses payable) as far as I can remember is discount revenue and note that this is classified as a revenue not an asset
Can't really answer q2 and 3 as I haven't seen the questions
Post by: Damoz.G on October 13, 2013, 04:16:46 pm
Have a few exam questions:Thanks!
- When we are reporting Wages expense in the income statement/cash flow statement, should we break it up into Wages expense/Accrued Wages expense/Prepaid Wages expense or will a single figure for Wages suffice?
- Q3 of Practice Exam 1 from the ATARNotes study guide: I understand why the labelling cost is immaterial and thus, a period cost. But why isn't the Prepaid Insurance included as a product cost? The transaction is only for one line of stock, so I thought it can be assigned to each unit
- For Q4 of this exam, the answers have only reffered to profitability from the owner's perspective, but is it also valid to mention that the business might not be earning discount revenue from its creditors, so it's less profitable in this sense. Also the question asks for the 'movement of Debt Ratio', I've just mentioned the scenario where it increases, do I have to also talk about it decreasing?
- For Q8c, when explaining how Prepaid expenses are current assets, is it acceptable to say that economic benefits inflows are expected in the form of 'reduction in the expense payable'?
* You have to break it up in the CFS (Payment for two different Reporting Periods), but not in the Income Statement (Add together for the one Reporting Period).
I don't have the book, but:
* Insurance is an ongoing payment. Whilst it can be allocated on a logical basis, when the contract ends, another payment will be made. Only one-off payments for modifications are included as a Product Cost - No ongoing Prepaid Contracts, etc.
* I'd have to see the question.
* No, its a future inflow of economic benefits, but not a reduction in an expense (Doesn't relate to the definition of a Current Asset). Here's my answer that I would usually give: Prepaid _____ Expense is reported as a Current Asset in the Balance Sheet of the business because it is a resource that is controlled by the entity, as a result of past events, from which a future inflow of economic benefits is expected to occur within the next 12 months (when the _______ is consumed).
Post by: BoredSatan on October 18, 2013, 08:18:20 pm
Post by: Kayte on October 22, 2013, 08:28:42 pm
Can someone explain to me how to calculate the cost of: Depreciation of Equipment, Office expenses and Interest Expense(Where did it come from?)
Thank you! :)
Post by: Damoz.G on October 22, 2013, 10:10:45 pm
Post by: Kuchiki on October 22, 2013, 10:29:59 pm
I need help on question 3b of the 2012 Unit 4 exam.
Can someone explain to me how to calculate the cost of: Depreciation of Equipment, Office expenses and Interest Expense(Where did it come from?)
Depreciation of Equipment
Details given:
- 15% per annum straight line method
- $120,000 of equipment at 30 June 2012
- $20,000 new equipment purchased on 1 March 2013 (depreciate for 4 months only)
Office expenses
Details given:
- $30,800 paid including GST; $30,800 x 10/11 = $28,000 paid excluding GST
- $800 Prepaid Office Expenses at 30 June 2012
- $2,000 Prepaid Office Expenses at 30 June 2013
Basically:
Office expenses = 28,000 (paid) + 800 (prepaid in earlier period, incurred in this period) - 2,000 (paid this period but incurred in later period) = 26,800
Interest expense
Details given:
- $4,000 loan settled in February
- $4,200 paid in total
Oh, just saw your post, Damoz. I'll leave this here, but feel free to explain it better than I did. ^^"
Post by: Damoz.G on October 22, 2013, 10:42:23 pm
However, this is irrelevant to the original question, but I don't agree with the Wages Expense answer. I know how it was calculated, but I don't agree with it. Obviously I don't have the power to do anything about it, but do you disagree with the answer for Wages Expense as well?
Post by: Kuchiki on October 22, 2013, 10:58:03 pm
However, this is irrelevant to the original question, but I don't agree with the Wages Expense answer. I know how it was calculated, but I don't agree with it. Obviously I don't have the power to do anything about it, but do you disagree with the answer for Wages Expense as well?
Which part don't you agree with? I think it makes sense (though they do seem to have gone out of their way to confuse people in that question).
Post by: Damoz.G on October 22, 2013, 11:19:20 pm
Which part don't you agree with? I think it makes sense (though they do seem to have gone out of their way to confuse people in that question).
Well the Accrued Expense at the end the 2012 Year and the 2013 Budget are two different figures. I think the difference off the two should be accounted for in the calculation of the Wages Expense for the Budget.
Post by: Kuchiki on October 22, 2013, 11:40:24 pm
Well the Accrued Expense at the end the 2012 Year and the 2013 Budget are two different figures. I think the difference off the two should be accounted for in the calculation of the Wages Expense for the Budget.
How so? That was indeed a tricky thing for them to include (since they already gave you all the information to calculate the expense incurred in the Income Statement section), but it wouldn't affect the calculation; it just means that the business paid less in wages during the period than they incurred ($163,250 paid vs. $164,750 incurred, which is why the balance of Accrued Wages increased by the difference of $1,500). Hope that makes sense.
Post by: Damoz.G on October 22, 2013, 11:47:21 pm
How so? That was indeed a tricky thing for them to include (since they already gave you all the information to calculate the expense incurred in the Income Statement section), but it wouldn't affect the calculation; it just means that the business paid less in wages during the period than they incurred ($163,250 paid vs. $164,750 incurred, which is why the balance of Accrued Wages increased by the difference of $1,500). Hope that makes sense.
Yeah, I guess that's true. Thank you for explaining that - Actually understand it now. :)
I mean if I was doing that exam last year, I would've included that $1500 difference from the two figures in the Wages Expense. I guess getting 100% would be AWESOME, but I was still happy that I got the rest of it all correct except for that. I must say that Exam made me think a lot about what I was doing and paying attention to the very fine details (Such as the Interest Expense that a lot of people omitted).
Post by: Mafioso on October 23, 2013, 04:27:17 pm
I've seen a few that don't have GST and a few with different templates etc.
Post by: BoredSatan on October 23, 2013, 05:17:21 pm
I'm starting VCAA papers today. Which ones are relevant/similar to the current study design?Only the 2012 exam will have GST in budgeting and also reducing balance method of depreciation
I've seen a few that don't have GST and a few with different templates etc.
other than that you could probably go back until 2008 and unit 3 will be almost identical (except no discussion questions)
Post by: dreambig on November 01, 2013, 01:02:12 pm
What transactions do NOT attract GST?
Post by: Damoz.G on November 01, 2013, 01:09:14 pm
Hi guys!
What transactions do NOT attract GST?
Loan Repayments, Interest Expense, Drawings.
It will usually tell you though. :)
Post by: sin0001 on November 01, 2013, 04:51:16 pm
I agree that it usually does state in the question, but theoretically, VCAA expects us to know where GST is applicable in the current study design. I'm not entirely sure if this is true, can someone confirm?
Loan Repayments, Interest Expense, Drawings.
It will usually tell you though. :)
Post by: Damoz.G on November 01, 2013, 04:53:31 pm
I agree that it usually does state in the question, but theoretically, VCAA expects us to know where GST is applicable in the current study design. I'm not entirely sure if this is true, can someone confirm?
Well think about it as paying GST only on Goods and Services that are purchased. If you do this, you will be fine.
e.g. You are PURCHASING Stock, Prepaid Rent Expense (Service paid for).
Loan Repayments are not PURCHASED, they are repaid. Interest is incurred but its not a purchase. Drawings is not a Purchase.
Hope that helps a bit.
Post by: Kuroyuki on November 01, 2013, 04:58:22 pm
VCAA will assume that you know which transactions have gst and which don't.
Also to add to Damoz's list wages doesn't have gst and so doesn't the SALE of a non current asset.
Post by: Damoz.G on November 01, 2013, 05:01:02 pm
Also to add to Damoz's list wages doesn't have gst and so doesn't the SALE of a non current asset.
Yup. I was on my phone, so I tried to make it brief. :P
Also Accrued Expenses. :)
Post by: sin0001 on November 01, 2013, 05:07:53 pm
Post by: Kuroyuki on November 01, 2013, 05:08:50 pm
But the Purchase of a non-current asset does include GST, right?Yep!
Post by: Damoz.G on November 01, 2013, 05:10:20 pm
But the Purchase of a non-current asset does include GST, right?
Yup.
EDIT: Beaten.
Post by: abcdqdxD on November 01, 2013, 05:11:27 pm
But the Purchase of a non-current asset does include GST, right?
On the topic of GST, make sure you can calculate backwards if they give you the total price (GST inclusive). I'm sure many of you already know how to do that though :P
Always look out for whether GST is inclusive or exclusive to the figure given
Post by: sam.utute on November 01, 2013, 11:35:07 pm
On the topic of GST, make sure you can calculate backwards if they give you the total price (GST inclusive). I'm sure many of you already know how to do that though :P
Always look out for whether GST is inclusive or exclusive to the figure given
Good tip! I hope everyone has done a few timed exams to check their time management. Will be critical this year (Y)
Post by: Damoz.G on November 02, 2013, 10:08:02 am
I'm sure many of you already know how to do that though :P
Is there anyone who doesn't know how to calculate GST if its inclusive in a Price? Not gonna judge you or anything, but you'd rather ask now rather than kick yourself in the Exam. :P
Post by: dreambig on November 02, 2013, 11:56:40 am
Post by: Mafioso on November 02, 2013, 12:31:34 pm
I'm just a little paranoid about something like that happening in the middle of the exam...
Post by: Damoz.G on November 02, 2013, 12:39:01 pm
Am I allowed to take in two scientific calculators and put one under my desk just in case one of them stops working ?
I'm just a little paranoid about something like that happening in the middle of the exam...
No. Unfortunately you are only allowed to bring in one Calculator.
Post by: ashs_vb on November 02, 2013, 10:21:46 pm
You know those buy one get one free sales, how would they record the sale?
Would they write down stock by 50%? or treat all the stock lost as stock loss? or leave it and record the price of the stock leaving as cost of sales, i'm presuming the mark up is definitely more than 100% if the business owner is sane.
Post by: Kuroyuki on November 02, 2013, 10:24:08 pm
not in the constraints of the VCAA study design but was just wondering anyway.Record a normal sale. Then the free thing as advertising expense, that what I would do.
You know those buy one get one free sales, how would they record the sale?
Would they write down stock by 50%? or treat all the stock lost as stock loss? or leave it and record the price of the stock leaving as cost of sales, i'm presuming the mark up is definitely more than 100% if the business owner is sane.
Post by: ashs_vb on November 02, 2013, 10:26:23 pm
Post by: Kuroyuki on November 02, 2013, 10:32:35 pm
Also, if certain stock is returned, and it was incurred with delivery charge from a different entity to those whom the goods are being returned to, how do we record the stock flow in the stock card. I'm presuming the stock card is unreliable and inaccurate if we record the outflow as the whole figure. Maybe a memo for the adjusting entry? or is this a PARADOX in the study design?There's too many of them!!
Like what if we pay a sundry creditor in credit terms and received discount revenue in the disc rev column in payments journal. Then when we construct a cash flow statement for payments to creditors do we deduct the whole disc rev or just the amount actually discounted from trade creditors?
Post by: dreambig on November 03, 2013, 01:19:12 pm
There's too many of them!!
Like what if we pay a sundry creditor in credit terms and received discount revenue in the disc rev column in payments journal. Then when we construct a cash flow statement for payments to creditors do we deduct the whole disc rev or just the amount actually discounted from trade creditors?
I think you deduct the whole amount because its discount revenue so its not cash hence shouldnt be in the CFS? :)
Post by: sam.utute on November 04, 2013, 08:20:07 am
I think you deduct the whole amount because its discount revenue so its not cash hence shouldnt be in the CFS? :)
Correct. That's how I would approach it.
Post by: Damoz.G on November 04, 2013, 08:47:14 am
Post by: Kuroyuki on November 04, 2013, 10:30:49 am
But I was thinking like when we find payments to creditors for the CFS
We do the creditors total less discount revenue total.
But some of that discount revenue is not actually from trade creditors.
So if we deduct the whole amount payments to creditors will actually be less than it should be.
Get what I mean?
Post by: Damoz.G on November 04, 2013, 10:41:21 am
Thanks
But I was thinking like when we find payments to creditors for the CFS
We do the creditors total less discount revenue total.
But some of that discount revenue is not actually from trade creditors.
So if we deduct the whole amount payments to creditors will actually be less than it should be.
Get what I mean?
Correct me if I'm wrong, but I've attached an example to make sure I understand what you mean.
If my example is correct, then I would say when reducing Creditors Control, you would have to DEDUCT any Discount Revenue from Payments to Sundry Creditors. So instead of saying to reduce Creditors Control of $400+60=$460, you would have to take out any Discount Revenue from Payments to Sundry Creditors. Therefore, it would actually be $400+40 = $440
But if there is a question where you are required to prepare an Income Statement, BE CAREFUL not to state Discount Revenue as $40.
Hope this helps! :)
EDIT: Sorry, I made a typo with the Total for the Sundries column. Should be $400, not $900. Was in a rush when I made it. :P
Post by: Kuroyuki on November 04, 2013, 10:46:44 am
Correct me if I'm wrong, but I've attached an example to make sure I understand what you mean.thanks
If my example is correct, then I would say when reducing Creditors Control, you would have to DEDUCT any Discount Revenue from Payments to Sundry Creditors. So instead of saying to reduce Creditors Control of $400+60=$460, you would have to take out any Discount Revenue from Payments to Sundry Creditors. Therefore, it would actually be $400+40 = $440
But if there is a question where you are required to prepare an Income Statement, BE CAREFUL not to state Discount Revenue as $40.
Hope this helps! :)
So should payments to creditors in the CFS be 360 or 340?
Post by: Damoz.G on November 04, 2013, 10:49:14 am
thanks
So should payments to creditors in the CFS be 360 or 340?
No worries. :)
So, in the CFS:
Operating Cash Outflow: "Payments to Creditors" would be $360
and don't forget...:
Investing Cash Outflow: "Sundry Creditor - ATAR Notes" would be $480
Post by: Kuroyuki on November 04, 2013, 10:53:47 am
No worries. :)ok sweet
So, in the CFS:
Operating Cash Outflow: "Payments to Creditors" would be $360
and don't forget...:
Investing Cash Outflow: "Sundry Creditor - ATAR Notes" would be $480
And shouldn't it be "payment to sundry creditor...." ?
Or it doesn't matter
Post by: Damoz.G on November 04, 2013, 11:00:15 am
ok sweet
And shouldn't it be "payment to sundry creditor...." ?
Or it doesn't matter
Ummm....you wouldn't have it as that title. =/
The Cambridge Textbook says to just have "Sundry Creditor - Name" under Cash Flows from Investing Activities, and then either under "Cash Outflows" or in brackets have the amount paid, depending on what you've been told to use. :)
Post by: abcdqdxD on November 04, 2013, 11:13:41 am
Post by: Kuroyuki on November 04, 2013, 11:32:35 am
And why wouldn't it be payment to sundry creditor [name]
It's like payments to creditors instead of writing creditors control
I doubt it would make a difference tho.
Post by: sin0001 on November 04, 2013, 03:55:01 pm
For reference, I've attached the question I'm talking about; can someone check if my points were sufficient for 5 marks:
-Identify trend, explain significance (what I wrote above)
-Business has greater access to its personal cash, therefore improving their ability to meet short-term debts as they fall due, and improving liquidity
-Business is more likely to incur a greater amount of interest expense, as it's repaying more external sources, decreasing its ability to earn profit by controlling expenses, hence worsening its Profitability
Post by: Kuroyuki on November 04, 2013, 04:07:33 pm
For the Analysis theory questions that ask you to 'explain what's shown by the trend in an indicator', do you actually need to explicitly define what the indicator is? Or can you say something like: 'Debt ratio is shown to have increased, indicating that the proportion of the business' assets financed by external sources has increased' (So like a 'blended in' definition)You might want to say about deteriorating liquidity. As the increase in DR is most likely taking out loans. The business will have to repay the loan back and additional interest, which will decrease cash flow and liquidity.
For reference, I've attached the question I'm talking about; can someone check if my points were sufficient for 5 marks:
-Identify trend, explain significance (what I wrote above)
-Business has greater access to its personal cash, therefore improving their ability to meet short-term debts as they fall due, and improving liquidity
-Business is more likely to incur a greater amount of interest expense, as it's repaying more external sources, decreasing its ability to earn profit by controlling expenses, hence worsening its Profitability
Post by: Mafioso on November 04, 2013, 04:52:52 pm
Post by: Damoz.G on November 04, 2013, 04:59:08 pm
Can someone please explain to me the standard, step by step approach to recording the trade-in and purchase of a NCA? I just can't seem to understand it :-\
Have you memorised the General Journal Entries yet?
Could you may be post a question that you've had trouble with, and I'll explain it step-by-step with annotations. :) I don't mind if its an Exercise from your Textbook or a past Exam Question.
Post by: Mafioso on November 04, 2013, 05:31:41 pm
Have you memorised the General Journal Entries yet?
Here's a question from CPAP 2013:
On 30th Sep, owner decided to replace a business Vehicle. This Vehicle had an historical cost of $30,000 and a carrying value of $8000. The Vehicle was sold for $5000 cash (Rec X82).
A new vehicle was purchased on credit from Keilor Motos (Inv KM5). The details of this purchase were as follows:
[GST is applied where appropriate]
- Invoice price: $42000
- Delivery: $500
- Modification: $2,500
- Annual Rego and Insurace: $1000
- Credit terms 1/90, n/180
a) Record: Receipt X82 and Invoice KM5 in appropriate journals
b) Show how the following General Ledger accounts would appear after the transaction: Disposal of Motor Vehicle and GST Clearing
(I don't know the General Journal entries)
Thanks heaps!
Post by: Damoz.G on November 04, 2013, 07:45:38 pm
Here's a question from CPAP 2013:
On 30th Sep, owner decided to replace a business Vehicle. This Vehicle had an historical cost of $30,000 and a carrying value of $8000. The Vehicle was sold for $5000 cash (Rec X82).
A new vehicle was purchased on credit from Keilor Motos (Inv KM5). The details of this purchase were as follows:
[GST is applied where appropriate]
- Invoice price: $42000
- Delivery: $500
- Modification: $2,500
- Annual Rego and Insurace: $1000
- Credit terms 1/90, n/180
a) Record: Receipt X82 and Invoice KM5 in appropriate journals
b) Show how the following General Ledger accounts would appear after the transaction: Disposal of Motor Vehicle and GST Clearing
(I don't know the General Journal entries)
Thanks heaps!
I shall do it now. :) Sorry, I was predicting so many Further Maths Study Scores on that Exam 2 thread, and then had sooo many people PMing me questions about Study Scores and other stuff. Finally got through them all.
I think I did that Trial Exam, but now I can't find it, and its the one paper that I seem to have not put in my folder, which I need right now. =/
I think have it up soon. :)
Post by: Damoz.G on November 04, 2013, 08:29:48 pm
I stated it at the beginning, but I'll say it here as well, this question is not a trade in, because we received $5000 cash for the Sale of the NCA. If its a Trade-In, then this would not happen, instead we would simply reduce the balance owed to the Sundry Creditor.
I tried to explain as much as I could, but I'm happy to explain something in more detail. Just ask. :)
Enjoy!
Post by: Mafioso on November 04, 2013, 09:19:04 pm
Here it is. I've uploaded it as a Word Document.
I stated it at the beginning, but I'll say it here as well, this question is not a trade in, because we received $5000 cash for the Sale of the NCA. If its a Trade-In, then this would not happen, instead we would simply reduce the balance owed to the Sundry Creditor.
I tried to explain as much as I could, but I'm happy to explain something in more detail. Just ask. :)
Enjoy!
Pwoaah! Exactly what I needed, makes more sense now. Thanks dude.
Post by: Damoz.G on November 04, 2013, 09:33:20 pm
Pwoaah! Exactly what I needed, makes more sense now. Thanks dude.
No worries, mate! Please memorise those General Journal entries!
Post by: unfamila on November 05, 2013, 10:03:18 pm
This question created the confusion; where total sales are 277,200 and stock is marked up by 200%, the answer said cost of sales was 88,400.
This was a Compak unit 3+4 exam. ;)
Post by: Damoz.G on November 05, 2013, 10:07:04 pm
If mark-up is 200%, how do you calculate cost of sales? I divided it by 4 ???
This question created the confusion; where total sales are 277,200 and stock is marked up by 200%, the answer said cost of sales was 88,400.
This was a Compak unit 3+4 exam. ;)
It should be 92,400 not 88,400
Post by: sam.utute on November 05, 2013, 10:07:20 pm
If mark-up is 200%, how do you calculate cost of sales? I divided it by 4 ???
This question created the confusion; where total sales are 277,200 and stock is marked up by 200%, the answer said cost of sales was 88,400.
This was a Compak unit 3+4 exam. ;)
Wha.....?!
Post by: yoodles on November 05, 2013, 10:10:52 pm
If so please send to this email: [email protected]
thanks
Post by: unfamila on November 05, 2013, 10:13:39 pm
Sales were initially 252,000/3=84000. But first you had to add 10% to sales, so 277200/3=92,400
Thanks for the formula :D
Post by: Damoz.G on November 05, 2013, 10:17:20 pm
It seems they've made a mistake and haven't added the 10% extra to sales as this was a budgeting question...
Sales were initially 252,000/3=84000. But first you had to add 10% to sales, so 277200/3=92,400
Thanks for the formula :D
No worries. :)
Post by: unfamila on November 06, 2013, 04:01:08 pm
basis. A commission of 5% of sales will be paid for all sales orders taken by Roger. The commission will be
paid the month after the sales have occurred. Commission estimated to be received during the year is $5 000.
Actual sales December 2013 5000$ plus GST
Estimated Sales December 2014 $8000 plus GST
Show how the Commission Revenue account is expected to appear after closing the General
Ledger accounts at the year ended 31 December 2014.
How is the opening balance calculated to 4750? Why do you take 250(5000*5%) from 5000? I had 250 as the opening balance, and then added the 400.
Thank you in advance ;D
Post by: Damoz.G on November 06, 2013, 04:13:57 pm
Roger plans to accept an offer from an online business to display and sell their gym clothing on a commission
basis. A commission of 5% of sales will be paid for all sales orders taken by Roger. The commission will be
paid the month after the sales have occurred. Commission estimated to be received during the year is $5 000.
Actual sales December 2013 5000$ plus GST
Estimated Sales December 2014 $8000 plus GST
Show how the Commission Revenue account is expected to appear after closing the General
Ledger accounts at the year ended 31 December 2014.
How is the opening balance calculated to 4750? Why do you take 250(5000*5%) from 5000? I had 250 as the opening balance, and then added the 400.
Thank you in advance ;D
Are you sure those dates and years are correct? How can it only be estimated Sales for December 2014 - Is it meant to be year ending December? If its correct, then how can there be no Sales from January to November, inclusive? LOL!
Which company and year is it from? I might have it with me, so I can have a look. :)
Post by: ashs_vb on November 06, 2013, 04:18:31 pm
Roger plans to accept an offer from an online business to display and sell their gym clothing on a commissionCommission revenue account would just have the credit entry of 400 with the cross reference to accrued revenue. This is where the account will be settled when the commission is received. As this is a revenue account, under accrual accounting, we record the revenue earned, not the cash received so we just have to calculate the commission revenue earned in the period( which i am assuming is the whole year). It would be debited with a p and l summary cross reference and closed to calculate net profit, blah blah..
basis. A commission of 5% of sales will be paid for all sales orders taken by Roger. The commission will be
paid the month after the sales have occurred. Commission estimated to be received during the year is $5 000.
Actual sales December 2013 5000$ plus GST
Estimated Sales December 2014 $8000 plus GST
Show how the Commission Revenue account is expected to appear after closing the General
Ledger accounts at the year ended 31 December 2014.
How is the opening balance calculated to 4750? Why do you take 250(5000*5%) from 5000? I had 250 as the opening balance, and then added the 400.
Thank you in advance ;D
Apart from that, i think you are mixing up the accrued revenue and revenue accounts, and btw, how many marks was the question?
Post by: unfamila on November 06, 2013, 05:07:49 pm
Post by: Damoz.G on November 06, 2013, 05:13:51 pm
It's a Neap 2013 exam -Practice exam 3.
Hmmm...okay. I'm just trying to find my other Accounting folder with my Practice Exams with it, but I just gotta find it.
So all the information you posted is correct?
Post by: unfamila on November 06, 2013, 05:15:43 pm
It's all apart of a 16 mark budgeting question though, with a reporting period of 1 year.
Post by: Damoz.G on November 06, 2013, 05:19:34 pm
yeah i copied and pasted it...
It's all apart of a 16 mark budgeting question though, with a reporting period of 1 year.
Oh okay. I have the first 2013 NEAP Exam because it was our trial, but I don't have the third one. =/
That's a bit odd though, because the Reporting Periods are different. =/
Post by: FunkyAfrican on November 06, 2013, 07:52:53 pm
Why is it that when accrued liability is incurred or accrued revenue is earnt, sometimes in the General ledger for that revenue or expense item it will either be split up or added on top of the original amount.
For example, in an engage trial exam; they presented you with a pre-adjustment trial balance that said wages was 10,000 and the extra info down the bottom said that 2,000 was outstanding and not paid at the end of the period. When preparing the Wages ledger, the added the 10,000 and 2,000 and closed wages expense of to the p & l summary for 12,000.
In the same exam, another question said that John earnt 6,000 interest revenue and 2,000 was accrued. Now this time the interest revenue was closed to the p&l summary as 6,000 (with cross references bank and accrued interest rev.)
My question is why is it that we split up the amount in some cases and add to the original amount in others ? I'd really appreciate some clarification. :-\
Post by: Damoz.G on November 06, 2013, 08:02:04 pm
Can someone help clarify a confusing point for me?
Why is it that when accrued liability is incurred or accrued revenue is earnt, sometimes in the General ledger for that revenue or expense item it will either be split up or added on top of the original amount.
For example, in an engage trial exam; they presented you with a pre-adjustment trial balance that said wages was 10,000 and the extra info down the bottom said that 2,000 was outstanding and not paid at the end of the period. When preparing the Wages ledger, the added the 10,000 and 2,000 and closed wages expense of to the p & l summary for 12,000.
In the same exam, another question said that John earnt 6,000 interest revenue and 2,000 was accrued. Now this time the interest revenue was closed to the p&l summary as 6,000 (with cross references bank and accrued interest rev.)
My question is why is it that we split up the amount in some cases and add to the original amount in others ? I'd really appreciate some clarification. :-\
A Liability is someone that we have received but not yet paid. So Accrued Wages is a Liability because the employees have done work, but we haven't paid them yet. So they become a Current Liability to us until we pay them their wage.
Accrued Interest Revenue is a Current Asset because the business has earned it from sitting in the Bank Account, but we won't receive it until the Bank gives us the Interest. Therefore, we have earned it, but not yet received it so it will become a future inflow of economic benefits (when we actually receive the Interest from the Bank).
Should always refer to the definitions of Assets and Liabilities if a question like this came up. :)
Post by: Kuchiki on November 06, 2013, 08:05:16 pm
Can someone help clarify a confusing point for me?
Why is it that when accrued liability is incurred or accrued revenue is earnt, sometimes in the General ledger for that revenue or expense item it will either be split up or added on top of the original amount.
For example, in an engage trial exam; they presented you with a pre-adjustment trial balance that said wages was 10,000 and the extra info down the bottom said that 2,000 was outstanding and not paid at the end of the period. When preparing the Wages ledger, the added the 10,000 and 2,000 and closed wages expense of to the p & l summary for 12,000.
In the same exam, another question said that John earnt 6,000 interest revenue and 2,000 was accrued. Now this time the interest revenue was closed to the p&l summary as 6,000 (with cross references bank and accrued interest rev.)
My question is why is it that we split up the amount in some cases and add to the original amount in others ? I'd really appreciate some clarification. :-\
You have to read the question very carefully.
Remember that all figures in the pre-adjustment trial balance are based on what cash transactions occurred during the period and will not include any balance day adjustments, like accrued wages that have been incurred but not paid. Therefore, the total amount of wages expense for that period will be the amount of wages paid in cash plus the amount outstanding.
Regarding the interest revenue, if it said in the question that $6,000 was earned, then that's the amount of revenue earned for that period, where $4,000 was received in cash and $2,000 has not been received yet. (If the question had said that $6,000 had been received, then you would have to add the $2,000 accrued to get the total amount earned for that period. Just depends on the wording.)
Post by: Kuroyuki on November 06, 2013, 08:07:26 pm
Can someone help clarify a confusing point for me?Alright so you have to distinguish between pre adjustment and post adjustment. Pre adjusted is b4 any balance day adjustments to record any revenue earned but not received and any expenses incurred but not paid.
Why is it that when accrued liability is incurred or accrued revenue is earnt, sometimes in the General ledger for that revenue or expense item it will either be split up or added on top of the original amount.
For example, in an engage trial exam; they presented you with a pre-adjustment trial balance that said wages was 10,000 and the extra info down the bottom said that 2,000 was outstanding and not paid at the end of the period. When preparing the Wages ledger, the added the 10,000 and 2,000 and closed wages expense of to the p & l summary for 12,000.
In the same exam, another question said that John earnt 6,000 interest revenue and 2,000 was accrued. Now this time the interest revenue was closed to the p&l summary as 6,000 (with cross references bank and accrued interest rev.)
My question is why is it that we split up the amount in some cases and add to the original amount in others ? I'd really appreciate some clarification. :-\
In the first example it is stated that it is a pre adjustment trial balance. That means no adjustments have taken place. So when it says wages is 10000 in the trial balance, this is only the wages expense PAID. The 2000 outstanding is the wages incurred but not paid.
A bda must be done to recognise this
Wages 2000 dr
Accrued wages 2000 cr
Thus in the wages ledger, it will 10000 bank and another 2000 from accrued. Then you transfer this amount to the pl summary.
For the second example, it clearly states that John EARNT 6000 revenue not received, this indicates that this is post adjusted. This 6000 is the total amount after the adjusting entry. So if 2000 was accrued it means 4000 was paid, resulting in the bank and accrued interest cross references.
So basically read the question carefully looking for keywords such as pre adjusted, post, earned, received, incurred and paid.
Hope my poor explanation makes some sort of sense. :)
EDIT- beaten x 2
Post by: FunkyAfrican on November 06, 2013, 08:23:20 pm
Post by: Damoz.G on November 06, 2013, 08:25:55 pm
Thank you all, I've re-read it and now understand why one was split up and the other was not. Very slight wording changes, sneaky.
Yup, and watch out for those dates, particularly for BDA's!
Post by: FunkyAfrican on November 06, 2013, 08:31:58 pm
The FIFO method of cost allocation operates under the assumption that the first stock bought is the first stock sold. In times of rising stock prices, it assumes that the older and cheaper stock is sold first. This overstates assets (stock control) in the balance sheet as we are holding onto the more expensive stock purchased last. This then means that the cost of sales figure is understated, leading to the overstating of net profit in the income statement and Owner's equity.
Would that suffice?
Post by: Damoz.G on November 06, 2013, 08:38:45 pm
What effect does the FIFO method of cost allocation have on assets, cost of sales, net profit and owner's equity? (4 marks)
The FIFO method of cost allocation operates under the assumption that the first stock bought is the first stock sold. In times of rising stock prices, it assumes that the older and cheaper stock is sold first. This overstates assets (stock control) in the balance sheet as we are holding onto the more expensive stock purchased last. This then means that the cost of sales figure is understated, leading to the overstating of net profit in the income statement and Owner's equity.
Would that suffice?
The first sentence is good, but after that sentence, it went downhill for me. Plus, the first sentence is probably good to demonstrate understanding, but I don't think it is one of the four marks allocated.
No business can know which cost price of a Stock item is sold, so yes it is the assumption, but FIFO helps to improve the accuracy of Stock movements. So it doesn't actually overstate Assets, instead it helps to determine an accurate value of Stock on hand.
In fact, what's the Solutions say for this Question? Does it link to any information like Accounting Reports or something, or is it a stand alone question?
Post by: Kuroyuki on November 06, 2013, 08:47:44 pm
Or is it present in the questions b4 it like in a stock card or something?
Post by: FunkyAfrican on November 06, 2013, 08:55:40 pm
The first sentence is good, but after that sentence, it went downhill for me. Plus, the first sentence is probably good to demonstrate understanding, but I don't think it is one of the four marks allocated.Solutions:
No business can know which cost price of a Stock item is sold, so yes it is the assumption, but FIFO helps to improve the accuracy of Stock movements. So it doesn't actually overstate Assets, instead it helps to determine an accurate value of Stock on hand.
In fact, what's the Solutions say for this Question? Does it link to any information like Accounting Reports or something, or is it a stand alone question?
FIFO is a system of stock recording where the first stock purchased is assumed to be the first stock sold. This method of cost assignment is used when it is impractical to label the cost price of each individual item. FIFO however does not match the actual flow of goods when stock is sold. This may have implications for profit calculation if stock that was actually purchased at a higher price is the stock that is actually sold first. Profit calculation by FIFO will see a higher profit reported in this case. However the more practical ease of recording justifies the use of FIFO system of cost assignment on stock.
I can't break down this jargon.
Post by: Kuroyuki on November 06, 2013, 09:04:06 pm
The answer says basically why a business would use FIFO. Because its easier, more practical. It says that FIFO is an assumption and doesnt reflect the actual flow of stock.
The answer then goes on to say about when higher priced stock is sold first the implications on profit, basically in times of falling prices. What does not make sense is why is profit higher. IF the most expensive stock is assumed sold COGS would be higher and NP will be lower. Maybe they meant something like even though it might actualy be the most expensive stock leaving the business under FIFO is is assumed that a cheaper unit is leaving resulting in a higher NP. The answer doesnt really address COS or OE.
Post by: sin0001 on November 06, 2013, 09:08:19 pm
My teacher said that they must be included when closing revenues to P & L Summary, as they're certainly not an expense. Just making sure I didn't mishear
Post by: FunkyAfrican on November 06, 2013, 09:10:21 pm
Since there is no extra writing space, how do you recommend staying withing the confines of the allocated box for a theory question as I always find it is not enough space?
Post by: Damoz.G on November 06, 2013, 09:17:54 pm
Sales Returns included in the General Journal when closing either the expenses/revenues at end of the R.P.?
My teacher said that they must be included when closing revenues to P & L Summary, as they're certainly not an expense. Just making sure I didn't mishear
Thats actually a good question. It wouldn't be reported as a Revenue, because it is a negative Revenue, but not an Expense though either. Actually, I'm gonna email my teacher about that.
Yeah it is a bit vague.
Since there is no extra writing space, how do you recommend staying withing the confines of the allocated box for a theory question as I always find it is not enough space?
You are allowed to write under the lines - Your assessor will read it. :)
Post by: Kuroyuki on November 06, 2013, 09:21:54 pm
I personally close it off with expenses cuz it makes my general journal more clean.
In one exam i did it said like expenses were like 243733 and for some reason they included sales returns in that.. :/
Post by: Damoz.G on November 06, 2013, 09:23:34 pm
I dont know either.
I personally close it off with expenses cuz it makes my general journal more clean.
In one exam i did it said like expenses were like 243733 and for some reason they included sales returns in that.. :/
Well I guess if you do Total Revenues less Total Expenses in the General Journal, it should match the actual Net Profit figure. Therefore, I guess it should be reported under Expenses, even though its a negative Revenue.
Post by: sin0001 on November 06, 2013, 09:49:14 pm
Well I guess if you do Total Revenues less Total Expenses in the General Journal, it should match the actual Net Profit figure. Therefore, I guess it should be reported under Expenses, even though its a negative Revenue.Hmm I was thinking that since they're reported with in the Revenues section, they should also be closed with the revenues... just a thought
Post by: lmaoss on November 06, 2013, 09:55:37 pm
Post by: ashs_vb on November 06, 2013, 11:01:06 pm
Well I guess if you do Total Revenues less Total Expenses in the General Journal, it should match the actual Net Profit figure. Therefore, I guess it should be reported under Expenses, even though its a negative Revenue.But if you credit the entry with the revenues in the general journal then you should get the same net profit figure if you have done the income statement properly plus the right total revenue and expense figure is achieved so it does match the net profit figure. Its sort of like drawings and accumulated depreciation, acc dep is not a liability but you could say it is a negative asset. Also with drawings, they are negative capital( if that makes sense) so the negative classification is very important.
But if you think about it, technically the sales returns account should be closed to the sales account and only reported, not specifically recorded in its entirety as a negative revenue or expense. As sales returns are presented for the owner to see, who only views the reports in most cases, they shouldn't need a closing to the p and l as the accountant can decipher the transaction. Oh well, guess all these 'glitches' will be sorted out at uni.
Post by: FunkyAfrican on November 07, 2013, 11:14:59 pm
I dunno I guess I just thought an improvement in WKR was for it to increase. Sure we don't want it too high, doesn't a decreasing WKR also indicating a reduced ability to meet debts????????????
Post by: TimmyC on November 07, 2013, 11:19:21 pm
I came across a question asking for ways to improve Working capital ratio, the solutions just detailed ways to improve debtors turnover like leaving remainders, this would mean that debtors pay sooner and debtors control and assets decrease, leading to a decrease in WKR.A WCR is a measure of a firms efficiency in the way of covering it's short term debt.
I dunno I guess I just thought an improvement in WKR was for it to increase. Sure we don't want it too high, doesn't a decreasing WKR also indicating a reduced ability to meet debts????????????
Having a excessively high WCR (like >2) means that a firm is not investing it's excess cash, thus wasting opportunities to make greater profits or revenue. A good WCR is regarded as anywhere from 1-2
Post by: FunkyAfrican on November 08, 2013, 12:34:39 am
A WCR is a measure of a firms efficiency in the way of covering it's short term debt.I understand, But it was currently 1.5:1 and It was just tough to choose in which direction an improvement would occur.
Having a excessively high WCR (like >2) means that a firm is not investing it's excess cash, thus wasting opportunities to make greater profits or revenue. A good WCR is regarded as anywhere from 1-2
Post by: massachusetts8 on November 08, 2013, 10:11:55 am
So the answer is 6000 but I dont know how they got that because in my eyes,
9000 represents 12 months so thats 750 per month and 2250 per quarter and after one quarter (Jan to March) the Prepaid Rent Expense would be 6750 so then after another quarter (Apr-June) it should be 6750-2250 which is 4500. What am I doing wrong? :/
Its from a PES Exam btw.
Post by: Damoz.G on November 08, 2013, 10:26:08 am
I'm stuck on a question. Okay, the PRE-adjustment trial balance as at 30 June 2013 says the Prepaid Rent Expense is 9000. Reports are prepared on a quarterly basis. The Prepaid Rent Expense was paid 12months in advance on 1 January 2013, Calculate the Prepaid Rent Expense balance as at 30 June 2013.
So the answer is 6000 but I dont know how they got that because in my eyes,
9000 represents 12 months so thats 750 per month and 2250 per quarter and after one quarter (Jan to March) the Prepaid Rent Expense would be 6750 so then after another quarter (Apr-June) it should be 6750-2250 which is 4500. What am I doing wrong? :/
Its from a PES Exam btw.
Yes the balance is 6000.
You gotta work backwards with this question, and it helps to draw up a timeline.
Okay, so with this Question, the first thing to note, is that Reports are prepared quarterly, and since we have been told that we are now on Balance Day at June 30 2013, it means that this Reporting Period is April-June. Why? Quarterly is three months, so counting backwards from June three months is April 1. It might help if I said these are the Reporting Periods:
* Jan, Feb, March
* April, May, June
* July, August, September
* October, November, December
Sometimes they may trick you and it won't be as simple as that for quarterly Reporting Periods, which is why you gotta work backwards from the date given.
So from this timeline, where are we?
* Jan, Feb, March
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December
Now look back at the Balance of the Prepaid Rent Expense and it was $9000. This was as at April 1, 2013 because the Reporting Period is April to June. Then, look at when the Prepaid Rent Expense was paid, and for how long. So we can see that it was paid on January 1 2013 for 12 months (annual). So, January, February and March have already been accounted for, and the Expense was allocated in the previous Reporting Period as at March 31, so cross them out:
*
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December
After the last Reporting Period concluded, how many months were left on the Prepaid Rent Expense? 12 minus 3 (Jan, Feb, March) = 9. So as at April 1, 9 Months are left. So now, the balance was 9000, and divide this by 9 months remaining = $1000 per month is the Expense, so for a Reporting Period, its 3x$1000=$3000
So now, the question is asking, whats the balance as at June 30 2013. So now we need to take off another 3 months (April, May, June) because we have already consumed them.
*
*
* July, August, September
* October, November, December
How many months left on the Prepaid Rent Expense? 6 months. And just before, we calculated the amount for each month is $1000 per month. So 6 x $1000 = $6000 remaining for the Prepaid Rent Expense, as at June 30 2013.
Hope this helps! I tried to break it down as much as I could, but if you still don't get one of the steps, let me know. :)
The mistake you made was thinking that the whole Prepaid Rent Expense paid on January 1 2013, was $9,000, and missed the Balance Day date on March 31 2013, when the Expense for January to March was already accounted for and recognised as an Expense in the previous Reporting Period.
Post by: Damoz.G on November 08, 2013, 10:31:21 am
I came across a question asking for ways to improve Working capital ratio, the solutions just detailed ways to improve debtors turnover like leaving remainders, this would mean that debtors pay sooner and debtors control and assets decrease, leading to a decrease in WKR.
I dunno I guess I just thought an improvement in WKR was for it to increase. Sure we don't want it too high, doesn't a decreasing WKR also indicating a reduced ability to meet debts????????????
What happens when a Debtor pays you back? Your Bank increases, so therefore Assets increase as well
Whilst Debtors ↓, Bank ↑, so the effect on the Accounting Equation, is simply no increase or decrease (Unless there was a Discount Expense involved). So with this actually helps WCR, because that cash recieved can immediately be used to pay the firm's short-term debts. Otherwise, you would have to wait for the Debtors to pay you back, and then receive the money to pay short-term debts. You can't pay your short-term debts by transferring a Debtor over to another firm who is a Liability to you. :P
Post by: massachusetts8 on November 08, 2013, 10:32:38 am
Damoz.,
THANK YOU THANK YOU THANK YOU!
That makes so much sense! you're a legend! :D
Post by: Damoz.G on November 08, 2013, 10:35:15 am
I don't know how to quote but
Damoz.,
THANK YOU THANK YOU THANK YOU!
That makes so much sense! you're a legend! :D
No worries at all. :)
Just make sure you read those damn dates! They are always out to get you and make sure that you are fooled. :P
Oh, and if you wanted to know how to Quote a Post, you just click the "Quote" box on the Post in the top right hand corner, and then type your message underneath. :)
Post by: massachusetts8 on November 08, 2013, 10:43:46 am
No worries at all. :)
Just make sure you read those damn dates! They are always out to get you and make sure that you are fooled. :P
Oh, and if you wanted to know how to Quote a Post, you just click the "Quote" box on the Post in the top left hand corner, and then type your message underneath. :)
Oh yes, those dates can be frustrating,
I'm totally blind haha I didn't even see the "Quote" box, thanks dude! :D
Post by: Damoz.G on November 08, 2013, 10:46:04 am
Oh yes, those dates can be frustrating,
I'm totally blind haha I didn't even see the "Quote" box, thanks dude! :D
No worries. I'll probably be on all day today whilst doing Accounting and Business Exams, so just post on here if you don't understand something. ;)
Post by: janson34 on November 08, 2013, 10:49:08 am
Yes the balance is 6000.
You gotta work backwards with this question, and it helps to draw up a timeline.
Okay, so with this Question, the first thing to note, is that Reports are prepared quarterly, and since we have been told that we are now on Balance Day at June 30 2013, it means that this Reporting Period is April-June. Why? Quarterly is three months, so counting backwards from June three months is April 1. It might help if I said these are the Reporting Periods:
* Jan, Feb, March
* April, May, June
* July, August, September
* October, November, December
Sometimes they may trick you and it won't be as simple as that for quarterly Reporting Periods, which is why you gotta work backwards from the date given.
So from this timeline, where are we?
* Jan, Feb, March
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December
Now look back at the Balance of the Prepaid Rent Expense and it was $9000. This was as at April 1, 2013 because the Reporting Period is April to June. Then, look at when the Prepaid Rent Expense was paid, and for how long. So we can see that it was paid on January 1 2013 for 12 months (annual). So, January, February and March have already been accounted for, and the Expense was allocated in the previous Reporting Period as at March 31, so cross them out:
*Jan, Feb, March
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December
After the last Reporting Period concluded, how many months were left on the Prepaid Rent Expense? 12 minus 3 (Jan, Feb, March) = 9. So as at April 1, 9 Months are left. So now, the balance was 9000, and divide this by 9 months remaining = $1000 per month is the Expense, so for a Reporting Period, its 3x$1000=$3000
So now, the question is asking, whats the balance as at June 30 2013. So now we need to take off another 3 months (April, May, June) because we have already consumed them.
*Jan, Feb, March
*April, May, June<----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December
How many months left on the Prepaid Rent Expense? 6 months. And just before, we calculated the amount for each month is $1000 per month. So 6 x $1000 = $6000 remaining for the Prepaid Rent Expense, as at June 30 2013.
Hope this helps! I tried to break it down as much as I could, but if you still don't get one of the steps, let me know. :)
The mistake you made was thinking that the whole Prepaid Rent Expense paid on January 1 2013, was $9,000, and missed the Balance Day date on March 31 2013, when the Expense for January to March was already accounted for and recognised as an Expense in the previous Reporting Period.
Damoz,
i really liked how you set this out, it was very easy to go through the steps for the BDA that occured
i should probably do a timeline so i dont get confused !! thanks also ! 8) :D ;D :D ;D
Post by: Damoz.G on November 08, 2013, 11:00:37 am
Damoz,
i really liked how you set this out, it was very easy to go through the steps for the BDA that occured
i should probably do a timeline so i dont get confused !! thanks also ! 8) :D ;D :D ;D
Thank you. :)
Yup, even I make timelines to help make sense of BDAs as well. It only takes about 10-15 seconds to write it all up and then use it, so it definitely helps in understanding and avoiding mistakes.
Also another tip from me is to use your fingers to count months, it looks lame in the Exam room when the supervisors and other people are looking at you weirdly, but who cares? If you get the correct answer, I'm sure that you wouldn't care about getting those weird looks. :P
Post by: massachusetts8 on November 08, 2013, 11:02:46 am
Post by: mdotwillo on November 08, 2013, 11:21:26 am
I have another question. How does an increase in Debtors Turnover and a decrease in Creditors Turnover affect the profitability of the business? ???
An increase in DTO means, on average, debtors are taking longer to repay the business for their initial credit purchase. This will increase the chance of bad debts, therefore potentially increasing expenses, impacting negatively upon profitability. Although, at the same time an increasing DTO will reduce the liklihood of debtors taking advantage of credit terms offered by the business, as such, reducing the chance of discount expenses, impacting upon profitability in a favourable manner.
A decrease in CTO means, on average, the business is repaying their creditors more promptly. If the creditor is offering credit terms (depends on the question), it means an increase in discount revenue is likely, therefore positively impacting upon profitability. Although it should be mentioned that the owner should weigh this up in terms of the financial situation of the firm, for example, paying creditors more quickly reduces the available cash on hand to meet other short term obligations as the fall due (hurting liquidity). Also, a decreasing CTO will reduce the chance of the firm repaying their creditor outside of the credit terms (in which a late repayment fee is likely), therefore also impacting favourably upon profitability due to the reduced chance of increased expenses. (<--- that last point is a bit far-fetched, add it/exclude it depending on the marks)
Post by: massachusetts8 on November 08, 2013, 11:32:14 am
An increase in DTO means, on average, debtors are taking longer to repay the business for their initial credit purchase. This will increase the chance of bad debts, therefore potentially increasing expenses, impacting negatively upon profitability. Although, at the same time an increasing DTO will reduce the liklihood of debtors taking advantage of credit terms offered by the business, as such, reducing the chance of discount expenses, impacting upon profitability in a favourable manner.
A decrease in CTO means, on average, the business is repaying their creditors more promptly. If the creditor is offering credit terms (depends on the question), it means an increase in discount revenue is likely, therefore positively impacting upon profitability. Although it should be mentioned that the owner should weigh this up in terms of the financial situation of the firm, for example, paying creditors more quickly reduces the available cash on hand to meet other short term obligations as the fall due (hurting liquidity). Also, a decreasing CTO will reduce the chance of the firm repaying their creditor outside of the credit terms (in which a late repayment fee is likely), therefore also impacting favourably upon profitability due to the reduced chance of increased expenses. (<--- that last point is a bit far-fetched, add it/exclude it depending on the marks)
Thank you so much! That explains everything very well! :)
Post by: janson34 on November 08, 2013, 02:53:41 pm
"the prepaid insurance expense of $18,000 includes annual insurance of $15,000 (excluding GST) which was paid on 1st october 2012, for the next 12 months.
- show how the following ledger accounts would appear after this information has been posted:
prepaid insurance expense
insurance expense
** note for those who dont have the exam**- in the pre adjustment trial balance at 30th june 2013, prepaid insurance expensive is $18,000***
im not sure how to wor out the insurance expense amount where the answer is $14250
probably something easy that i completely overlooked, but thanks in advance :D
Post by: massachusetts8 on November 08, 2013, 03:01:00 pm
just a question if someone could answer if you have access to the "INSIGHT 2013 EXAM" , in relation to Q6C, where it says
"the prepaid insurance expense of $18,000 includes annual insurance of $15,000 (excluding GST) which was paid on 1st october 2012, for the next 12 months.
- show how the following ledger accounts would appear after this information has been posted:
prepaid insurance expense
insurance expense
** note for those who dont have the exam**- in the pre adjustment trial balance at 30th june 2013, prepaid insurance expensive is $18,000***
im not sure how to wor out the insurance expense amount where the answer is $14250
probably something easy that i completely overlooked, but thanks in advance :D
The timeline really does help :)
So From Oct 1 2012 to Sept 30 2013, the prepaid insurance expense is 15000, so that means it is 1250 per month so from Oct 1 2012 to 30 June 2013, the expense would be 1250*9 which gives you 11250.
Now the 18000 represents from July 1 2012 to June 30 2013, so the insurance expense from July 1 2012 to Sept 30 2012 is 18000-15000 which is $3000. So the total year (1July2012 to 30June2013) insurance expense would be 14250.
I'm not very good at explaining but i hope this helps :D
Post by: Damoz.G on November 08, 2013, 03:08:26 pm
The timeline really does help :)
So From Oct 1 2012 to Sept 30 2013, the prepaid insurance expense is 15000, so that means it is 1250 per month so from Oct 1 2012 to 30 June 2013, the expense would be 1250*9 which gives you 11250.
Now the 18000 represents from July 1 2012 to June 30 2013, so the insurance expense from July 1 2012 to Sept 30 2012 is 18000-15000 which is $3000. So the total year (1July2012 to 30June2013) insurance expense would be 14250.
I'm not very good at explaining but i hope this helps :D
Okay, yes, I've done that Trial Exam. Immediately what should go into your mind is that $3,000 is for another Insurance Expense, and $15,000 of annual insurance. What I always like to think is that even though its not specified, you would assume that the $3,000 was also consumed in this Reporting Period (even though it wasn't stated). There is a similar question in the 2013 NEAP Exam as well.
So (15,000/12) x 9 months consumed (Oct to June) = $11,250+$3,000=$14,250
I know that it should tell you that its consumed, but sometimes we're expected to pick up on the fact that $3,000 is also consumed in the Reporting Period.
EDIT: Beaten.
Post by: Lucho23 on November 08, 2013, 05:05:48 pm
Here's an example:
The business purchased 20 units of a stock item at $10 each . They are individually repackaged and this costs $2 per stock item.
Record this transaction and balance accounts.
So, if this was a Credit purchase, how would you record the repackaging in the General Ledger? Would it simply be included in the Stock Control a/c as the DR entry with cross-reference 'Creditors Control'?
If this was a Cash purchase, would it be recorded in the Stock Control a/c as the DR entry with cross reference 'Cash at Bank'?
Would this repackaging be considered separate in the General Ledger or as part of the purchase?
Also, if the stock was purchased initially without the repackaging and then a month later, say, the stock was repackaged...how would you record the repackaging now?
Thanks!
Post by: Damoz.G on November 08, 2013, 05:11:09 pm
I don't think they'll specifically make us do this but I'm still gonna ask.
Here's an example:
The business purchased 20 units of a stock item at $10 each . They are individually repackaged and this costs $2 per stock item.
Record this transaction and balance accounts.
So, if this was a Credit purchase, how would you record the repackaging in the General Ledger? Would it simply be included in the Stock Control a/c as the DR entry with cross-reference 'Creditors Control'?
If this was a Cash purchase, would it be recorded in the Stock Control a/c as the DR entry with cross reference 'Cash at Bank'?
Would this repackaging be considered separate in the General Ledger or as part of the purchase?
Also, if the stock was purchased initially without the repackaging and then a month later, say, the stock was repackaged...how would you record the repackaging now?
Thanks!
Well if the Repackaging is charged at $2 per stock item, you would use Product Costing, because it is a cost incurred in order to bring Stock into a condition and location ready for sale, and can be allocated to individual units of stock on a logical basis. Therefore, you would include as part of the value of the Stock, and would do the cross-references as usual.
Credit Purchase:
* DR Stock Control
* DR GST Clearing
* CR Creditors Control
Cash Purchase:
* DR Stock Control
* DR GST Clearing
* CR Bank
Post by: lmaoss on November 08, 2013, 05:46:36 pm
Say you have a prepaid sales revenue being fulfilled on the 30th may but the balance day of the business is on the 30th june. would you record this in the general journal on the 30th of may or the balance day of the business?
Also do you only balance accounts on balance day between periods or are you meant to balance each month?
Last question: If a debtor pays back half of its debt within discount terms would they receive a discount?
Post by: Damoz.G on November 08, 2013, 05:54:16 pm
Say you have a prepaid sales revenue being fulfilled on the 30th may but the balance day of the business is on the 30th june. would you record this in the general journal on the 30th of may or the balance day of the business?
Also do you only balance accounts on balance day between periods or are you meant to balance each month?
Last question: If a debtor pays back half of its debt within discount terms would they receive a discount?
No, you would recognise it when it occurs, so on May 30. Like when a Deposit is made, and is then converted into a Sale, the rest of the Sale is recorded in the Sales Journal, but the Deposit (Prepaid Sales Revenue) which is a Liability would be removed by recognising it as a Sale.
DR: Prepaid Sales Revenue
CR: Sales Revenue
Balancing Accounts are only done at the end of a Reporting Period. If Reports are prepared monthly, then you would Balance the Accounts each month, but if its not monthly, then you don't. :)
Full payment must be made for a Discount.
Post by: sin0001 on November 08, 2013, 06:11:53 pm
Say you have a prepaid sales revenue being fulfilled on the 30th may but the balance day of the business is on the 30th june. would you record this in the general journal on the 30th of may or the balance day of the business?Not entirely sure about your first question, so I'll wait for others to answer.
Also do you only balance accounts on balance day between periods or are you meant to balance each month?
Last question: If a debtor pays back half of its debt within discount terms would they receive a discount?
2nd question: No, you are only supposed to POST transactions to the ledger accounts monthly, but you only balance at the end of the reporting period/balance day
3rd:
Edit: See the post below. Thanks Damoz :)
Post by: Damoz.G on November 08, 2013, 06:22:24 pm
Not entirely sure about your first question, so I'll wait for others to answer.
2nd question: No, you are only supposed to POST transactions to the ledger accounts monthly, but you only balance at the end of the reporting period/balance day
3rd: Yes, the discount will be applicable on ANY payment made by the debtor within the discount terms offered
Sorry, but for the third Question as I mentioned before, full payment must be made for a Discount. :)
This is from the Cambridge Textbook, and I've highlighted it for you:
(http://i41.tinypic.com/281ric7.jpg)
Post by: noone29 on November 08, 2013, 06:27:03 pm
Any clarification will help!
Thanks! :)
Post by: Damoz.G on November 08, 2013, 06:37:16 pm
May seem a bit noobish, but when establishing a double-entry accounting system, in the General Journal, do we put down the 'Bank' figure? On some exams/exercises, I've seen them put it in the general journal, on some it is done in the Cash Receipts journal.
Any clarification will help!
Thanks! :)
I think you are getting confused by the establishing of Double-Entry Accounting and the opening of a business with Double-Entry Accounting.
If a business is just switching from Single-Entry to Double-Entry Accounting, the Cash at Bank must be reported in the General Journal. But this Entry and correcting entries are the only 2 times that Bank is even mentioned in the General Journal.
Post by: sin0001 on November 08, 2013, 06:39:18 pm
Only in the CRJ I believeI thought it's recorded in the General Journal when you change to a double-entry system, as this is not an inflow of cash, but just recording cash that's already there.
Isn't it recorded in the CRJ only when you commence your business?
Post by: TimmyC on November 08, 2013, 06:40:34 pm
I thought it's recorded in the General Journal when you change to a double-entry system, as this is not an inflow of cash, but just recording cash that's already there.yes, sorry haha :p
Isn't it recorded in the CRJ only when you commence your business?
Post by: noone29 on November 08, 2013, 06:44:54 pm
I think you are getting confused by the establishing of Double-Entry Accounting and the opening of a business with Double-Entry Accounting.
If a business is just switching from Single-Entry to Double-Entry Accounting, the Cash at Bank must be reported in the General Journal. But this Entry and correcting entries are the only 2 times that Bank is even mentioned in the General Journal.
So if they are about to commence the business, it should be recorded in the CRJ? And if it's an overdraft, it should be in the general journal, right?
EDIT: Instead of making a new post, I'll ask it on this one. Sorry to bombard you guys with questions, but Stock gains, what cost price if they are two items? The first item or the last one?
Post by: Damoz.G on November 08, 2013, 06:54:41 pm
So if they are about to commence the business, it should be recorded in the CRJ? And if it's an overdraft, it should be in the general journal, right?
EDIT: Instead of making a new post, I'll ask it on this one. Sorry to bombard you guys with questions, but Stock gains, what cost price if they are two items? The first item or the last one?
Well if your commencing a business, the Owner usually contributes some Cash, so yes the Capital Contribution of Cash is recorded in the Cash Receipts Journal. If the business is getting an overdraft, you don't record it in the General Journal unless its actually been used.
For Stock Gains, you use the lowest cost price of stock still on hand. Which cost price first and second is irrelevant. Just use the lower of the unit cost prices on hand. :)
Post by: noone29 on November 08, 2013, 07:01:33 pm
Well if your commencing a business, the Owner usually contributes some Cash, so yes the Capital Contribution of Cash is recorded in the Cash Receipts Journal. If the business is getting an overdraft, you don't record it in the General Journal unless its actually been used.
For Stock Gains, you use the lowest cost price of stock still on hand. Which cost price first and second is irrelevant. Just use the lower of the unit cost prices on hand. :)
Dude, you are saving me so many marks on the exam, thanks heaps mate!
So stock loss would be the highest cost, right?
Post by: Damoz.G on November 08, 2013, 07:05:14 pm
Dude, you are saving me so many marks on the exam, thanks heaps mate!
So stock loss would be the highest cost, right?
No worries. :D
Yup, highest cost price of stock still on hand. Its to support Conservatism. :)
Post by: Mafioso on November 08, 2013, 07:06:19 pm
If a business is just switching from Single-Entry to Double-Entry Accounting, the Cash at Bank must be reported in the General Journal. But this Entry and correcting entries are the only 2 times that Bank is even mentioned in the General Journal.
Could you please tell me how exactly this switch between the methods is reported in the general journal?
Also, how many types of 'Other revenue' (Income Statement) are there? I can only think of:
- discount revenue
- rent revenue
- interest revenue
- revenue on disposal of asset
Anything I'm missing?
Post by: massachusetts8 on November 08, 2013, 07:08:56 pm
Well if your commencing a business, the Owner usually contributes some Cash, so yes the Capital Contribution of Cash is recorded in the Cash Receipts Journal. If the business is getting an overdraft, you don't record it in the General Journal unless its actually been used.
For Stock Gains, you use the lowest cost price of stock still on hand. Which cost price first and second is irrelevant. Just use the lower of the unit cost prices on hand. :)
So if we were asked to explain using the Conservatism principle why the Stock Gain is recorded at the lowest cost price on hand would the explanation be...
Conservatism states that gains should only be recognised when certain so that assets are not understated (I.e. Stock Control) and revenues are not understated (Stock Gain) ?
Post by: noone29 on November 08, 2013, 07:09:13 pm
No worries. :D
Yup, highest cost price of stock still on hand. Its to support Conservatism. :)
Thanks heaps man! :)
Post by: noone29 on November 08, 2013, 07:11:17 pm
So if we were asked to explain using the Conservatism principle why the Stock Gain is recorded at the lowest cost price on hand would the explanation be...
Conservatism states that gains should only be recognised when certain so that assets are not understated (I.e. Stock Control) and revenues are not understated (Stock Gain) ?
I'm pretty sure it's so they are not overstated, but Damoz will clear it up!
Post by: Damoz.G on November 08, 2013, 07:12:50 pm
Could you please tell me how exactly this switch between the methods is reported in the general journal?
Also, how many types of 'Other revenue' (Income Statement) are there? I can only think of:
- discount revenue
- rent revenue
- interest revenue
- revenue on disposal of asset
Anything I'm missing?
Its reported depending on the classification of the item. So for all Assets, do you a Debit Entry with their name and the figure. Liabilities and Owner's Equity are Credit Entries. But be careful with Negative Assets, such as Accumulated Depreciation (Credit Entry), and Drawings (Debit Entry). Also need to remember to include individual Debtors and Creditors in the Subsidiary Ledger columns of the General Journal.
I think that your list of Other Revenue items are mainly the ones you need to know, but knowing VCAA, they may surprise you with other ones. :P
Post by: Damoz.G on November 08, 2013, 07:14:50 pm
So if we were asked to explain using the Conservatism principle why the Stock Gain is recorded at the lowest cost price on hand would the explanation be...
Conservatism states that gains should only be recognised when certain so that assets are notunderstatedoverstated (I.e. Stock Control) and revenues are notunderstatedoverstated (Stock Gain) ?
I'm pretty sure it's so they are not overstated, but Damoz will clear it up!
Yeah, everything in your explanation is correct, except as noone said its overstated for both Assets and Revenues, not understated. :)
Post by: massachusetts8 on November 08, 2013, 07:21:05 pm
Yeah, everything in your explanation is correct, except as noone said its overstated for both Assets and Revenues, not understated. :)Oh right yes that makes sense my bad. So you value stock gains at lowest cost price so assets and revenues are not overstated. Thanks guys! :D
Post by: Damoz.G on November 08, 2013, 07:22:53 pm
Oh right yes that makes sense my bad. So you value stock gains at lowest cost price so assets and revenues are not overstated. Thanks guys! :D
No worries. ;)
Post by: sin0001 on November 08, 2013, 07:23:12 pm
No worries. :DSorry to barge in, but Stock Losses are recorded using FIFO; attached the study design below:
Yup, highest cost price of stock still on hand. Its to support Conservatism. :)
(Although it also makes sense to use Conservatism)
Post by: Colokid on November 08, 2013, 07:34:12 pm
thanks
Post by: Damoz.G on November 08, 2013, 07:43:05 pm
Sorry to barge in, but Stock Losses are recorded using FIFO; attached the study design below:
(Although it also makes sense to use Conservatism)
Oh yeah! Sorry. =/ Its been a while since I've touched Accounting. I planned on getting through Exams today, but I had to help a friend and I was helping out on here a lot as well.
I won't be on as much tomorrow guys, so ask Questions today! :)
Post by: Damoz.G on November 08, 2013, 07:46:57 pm
if anyone has done the neap 2013 trial exam, can you please explain how to get the depreciation expense for question 2a?
thanks
Carrying Value = 42,000 - 10,500
= 31,500
25% x $31,500
= $7,875
Post by: abcdqdxD on November 08, 2013, 07:48:57 pm
Post by: Colokid on November 08, 2013, 08:01:32 pm
Carrying Value = 42,000 - 10,500
= 31,500
25% x $31,500
= $7,875
how do you get the $10, 500?
Post by: Damoz.G on November 08, 2013, 08:08:16 pm
how do you get the $10, 500?
Trial Balance. 1st line.
Accumulated Depreciation - Motor Vehicle: CR $10,500
Post by: Colokid on November 08, 2013, 08:20:17 pm
Trial Balance. 1st line.
Accumulated Depreciation - Motor Vehicle: CR $10,500
haha i feel so stupid now, thanks damoz
also in the attachment below, it shows CPJ and CRJ entries , with the entries does it matter if you write accrued wages first instead of wages?
Post by: Damoz.G on November 08, 2013, 08:24:28 pm
haha i feel so stupid now, thanks damoz
also in the attachment below, it shows CPJ and CRJ entries , with the entries does it matter if you write accrued wages first instead of wages?
LOL! No worries.
Nah, it doesn't matter, as long as both lines are there and correct. However, you should put in the Accrued one first because of 2 reasons:
1. You already know the Accrued figure, so its easily transferable
2. So that you don't make any silly mistakes.
Post by: Mafioso on November 08, 2013, 09:09:13 pm
In general, do we add the accrued revenue to revenue recieved to calculate revenue earnt when reporting in the income statement?
Post by: unfamila on November 08, 2013, 09:38:15 pm
Can someone please explain why in VCAA 2009 exam 2 question 2.2.2, the rent revenue in the budgeted income statement is $24000? I calculated it as $22000 since $2000 was accrued.Hey, just did this!!!
In general, do we add the accrued revenue to revenue recieved to calculate revenue earnt when reporting in the income statement?
Any way although the rent is accrued it's still a revenue in the current reporting period...That's how i interpreted it anyway ;)
EDIT:revenue not and expense
Post by: Lucho23 on November 08, 2013, 09:47:24 pm
Can someone please explain why in VCAA 2009 exam 2 question 2.2.2, the rent revenue in the budgeted income statement is $24000? I calculated it as $22000 since $2000 was accrued.
In general, do we add the accrued revenue to revenue recieved to calculate revenue earnt when reporting in the income statement?
Accrued Revenue is defined as: Revenue earned but not yet received.
As Revenue is defined under accrual accounting as inflows of economic benefits that have been earned in a reporting period (hence the need for balance day adjustments), this Accrued Rent Revenue is included as part of the Rent Revenue as it has been earned in December.
In the Cash Flow Statement, however, you would be correct as only 11 months worth ($22,000) of Rent has been received.
Hope this helps!
Post by: TimmyC on November 08, 2013, 09:58:49 pm
Can someone please explain why in VCAA 2009 exam 2 question 2.2.2, the rent revenue in the budgeted income statement is $24000? I calculated it as $22000 since $2000 was accrued.just finished that!!
In general, do we add the accrued revenue to revenue recieved to calculate revenue earnt when reporting in the income statement?
Rent revenue is $2000 per months so 12x2000=$24000
the accrued amount is just the amount earned but not yet received
woops did not see that comment lol^
Post by: Mafioso on November 08, 2013, 10:16:38 pm
Post by: Colokid on November 08, 2013, 11:08:57 pm
Post by: Lucho23 on November 08, 2013, 11:12:14 pm
when posting in ledgers, it is ok to post in the debtors ledger credit sales/gst in one or do we record it separetly?
When posting at the end of a reporting period it's fine to post with one total as Sales/GST Clearing.
When you're reconstructing an account, it's probably easier to split the Sales and GST Clearing though.
But yes, in formal recording Sales/GST Clearing is fine.
Post by: Damoz.G on November 08, 2013, 11:14:55 pm
When posting at the end of a reporting period it's fine to post with one total as Sales/GST Clearing.
When you're reconstructing an account, it's probably easier to split the Sales and GST Clearing though.
But yes, in formal recording Sales/GST Clearing is fine.
Yup, agree with what your saying.
Easier to split for Reconstructions in case you need a figure from previous account.
Post by: arthurjl on November 09, 2013, 12:18:32 pm
Post by: Damoz.G on November 09, 2013, 12:23:41 pm
Should we memorise all financial indicators? Or is it going to be given in the exam? :/
You won't need to calculate any of them, but you do however need to memorise the make up of all of them. They are not gonna be given to you.
Post by: Kuroyuki on November 09, 2013, 12:24:33 pm
Should we memorise all financial indicators? Or is it going to be given in the exam? :/They are not given in the exam.
They are not going to test you, how to calculate working capital ratio.
But memorise and UNDERSTAND Them. In order to answer most analysis questions, you will have to understand how each indicator works.
Post by: Mafioso on November 09, 2013, 12:59:22 pm
If the delivery expenses were $100 for the whole month (meaning that the business purchased more than the 10 units in the question stem), it would be classified as a period cost because we don't know the total amount of stock purchased so we cannot logically distribute the cost.
But what if I am told that the $100 delivery expense was for the 10 units alone? Do I classify it as a product cost since the $100 can be logically distributed to the 10 items? Or is delivery expenses always classified as a period cost regardless of whether it makes sense to distribute it to each stock item?
Post by: FunkyAfrican on November 09, 2013, 01:19:41 pm
I added $500 GST and my bank value was $5,500.
But this is wrong and the answers have no gst on the sale.
Why would there be no gst on sale of a NCA?
Post by: Kuroyuki on November 09, 2013, 01:22:21 pm
I was asked to record the cash proceeds from a disposal of a van for $5,000 in the CRJ.Yeah its weird. There is no gst charged on the sale of non current assets. Only purchase. I don't really know why.
I added $500 GST and my bank value was $5,500.
But this is wrong and the answers have no gst on the sale.
Why would there be no gst on sale of a NCA?
Say I purchased 10 units of stock for $1000 with $100 for delivery expenses.If it can be allocated logically then allocate it. There is no rule saying delivery expenses or anything must be a period or product cost.
If the delivery expenses were $100 for the whole month (meaning that the business purchased more than the 10 units in the question stem), it would be classified as a period cost because we don't know the total amount of stock purchased so we cannot logically distribute the cost.
But what if I am told that the $100 delivery expense was for the 10 units alone? Do I classify it as a product cost since the $100 can be logically distributed to the 10 items? Or is delivery expenses always classified as a period cost regardless of whether it makes sense to distribute it to each stock item?
Post by: Lucho23 on November 09, 2013, 01:42:15 pm
Thanks
Post by: TimmyC on November 09, 2013, 01:49:32 pm
How does the Asset Turnover increase while the Net Profit Margin decreased and Return on Assets increased?Maybe a reduction in average assets?
Thanks
Post by: Lucho23 on November 09, 2013, 01:51:32 pm
Maybe a reduction in average assets?
I don't think that's it because that means that Return on Assets would've increased.
Post by: TimmyC on November 09, 2013, 01:52:15 pm
I don't think that's it because that means that Return on Assets would've increased.That's what you said :p
Post by: Lucho23 on November 09, 2013, 01:54:09 pm
That's what you said :p
You're very wise...hahaha! Thanks! :)
Post by: sin0001 on November 09, 2013, 05:02:29 pm
Post by: nikil.v on November 09, 2013, 05:03:28 pm
cheers,
Post by: Damoz.G on November 09, 2013, 05:11:12 pm
hey guys, do we have to close off sales returns to the profit and loss summary? like, debit p/l summary and credit sales returns? cos otherwise the figure transferred to the capital account wont be the same as net profit in the income statement.
cheers,
Separate entry in the General Journal.
* DR: P/L Summary
* CR: Sales Returns
Post by: nikil.v on November 09, 2013, 05:15:43 pm
Post by: Damoz.G on November 09, 2013, 05:17:24 pm
ahah ok thanks, so if the question said "close all revenue and expense accounts to the profit and loss summary" do we close off sales returns too?
Yup, but as a separate entry because its not an Expense.
Post by: vididid on November 09, 2013, 05:33:07 pm
Could you give an example of how the sales return is closed off?
Thankyou x
Post by: Damoz.G on November 09, 2013, 05:36:49 pm
Damoz,
Could you give an example of how the sales return is closed off?
Thankyou x
I'm confused, what do you mean? ???
Post by: vididid on November 09, 2013, 05:41:21 pm
What entries would that be? As in the entries to close it off.
Sorry if this is worded wrong.
;D
Post by: TimmyC on November 09, 2013, 05:43:16 pm
You said that the sales return has to be closed off separately,as he previously said:
What entries would that be? As in the entries to close it off.
Sorry if this is worded wrong.
;D
In the GJ
DR: P/L Summary
CR: Sales Returns
haha :P
Post by: Damoz.G on November 09, 2013, 05:44:07 pm
You said that the sales return has to be closed off separately,
What entries would that be? As in the entries to close it off.
Sorry if this is worded wrong.
;D
Ohhh...I posted the Entries above. :)
I'll re-post it for you again:
Separate entry in the General Journal.
General Journal Entries:
* DR: P/L Summary
* CR: Sales Returns
Post by: Colokid on November 09, 2013, 05:52:12 pm
Post by: abcdqdxD on November 09, 2013, 06:00:20 pm
if anyone, is done the 2013 neap trial exam, can you please explain that in Q7, b, how to the value of the stock write down?
Post the question here and I'll try to answer it:P
Post by: Damoz.G on November 09, 2013, 06:04:32 pm
if anyone, is done the 2013 neap trial exam, can you please explain that in Q7, b, how to the value of the stock write down?
Question 7b only asks you to record the Sales Return in the General Journal, not the Stock Write-Down.
Post by: Colokid on November 09, 2013, 06:06:15 pm
Question 7b only asks you to record the Sales Return in the General Journal, not the Stock Write-Down.
yeah sorry i mean how to calculate the value of the stock write down, in Q7a
Post by: sin0001 on November 09, 2013, 06:06:25 pm
Compak 2013 worth doing?Bump! Since this thread has picked up speed :P
Post by: abcdqdxD on November 09, 2013, 06:08:05 pm
Bump! Since this thread has picked up speed :P
Yeah Compak exams are generally pretty good. Do it :P
Post by: sin0001 on November 09, 2013, 06:10:09 pm
Yeah Compak exams are generally pretty good. Do it :PHarder than VCAA would you say?
Post by: abcdqdxD on November 09, 2013, 06:11:30 pm
Harder than VCAA would you say?
Similar for the most part, might slightly harder
Post by: Damoz.G on November 09, 2013, 06:12:18 pm
yeah sorry i mean how to calculate the value of the stock write down, in Q7a
The first thing to note, is the NRV. The Selling Price has dropped from $150 to $40.
Cost Price of Watches: $50
NRV: $40-$4 = $36
NOTE: Its $4 because the cost for eBay is $8 in TOTAL, so you have to divide it by 2 watches = $4
Therefore, the LOWER of Cost and NRV is $36.
Then you adjust it by doing the Stock Write-Down in the OUT Column, 2 @ $14 = $28.
Bump! Since this thread has picked up speed :P
Yeah, you should get through any Exams you have, especially if they are 2013. Compak is similar difficulty to VCAA.
Post by: Colokid on November 09, 2013, 06:47:54 pm
The first thing to note, is the NRV. The Selling Price has dropped from $150 to $40.
Cost Price of Watches: $50
NRV: $40-$4 = $36
NOTE: Its $4 because the cost for eBay is $8 in TOTAL, so you have to divide it by 2 watches = $4
Therefore, the LOWER of Cost and NRV is $36.
Then you adjust it by doing the Stock Write-Down in the OUT Column, 2 @ $14 = $28.
Yeah, you should get through any Exams you have, especially if they are 2013. Compak is similar difficulty to VCAA.
thanks damoz, :)
Post by: Damoz.G on November 09, 2013, 06:50:39 pm
thanks damoz, :)
No worries. That NEAP Exam was the one our school used for the Trial Exam, and it took me a while to figure it out as well, but I was happy that I got it correct. :)
Post by: Kayte on November 09, 2013, 09:00:32 pm
Thanks :)
Post by: sam.utute on November 09, 2013, 09:03:10 pm
Could someone explain to me how net profit changes when period cost is used over product costs?
Thanks :)
Because period cost recognises the full expense, it means that Net Profit will potentially be lower, IF the business still has unsold stock. In other words, Profit is usually understated as a result of an overstated COGS when period cost is used over product cost.
Hope that made sense. Happy to give an example if you need it.
Post by: unfamila on November 09, 2013, 09:06:07 pm
I usually uses calculations to support my answer, I hope this made sense.
EDIT:Beaten
Post by: Kayte on November 09, 2013, 09:12:40 pm
Probably going to be beaten byDamozCaparva :P What a top bloke
Because period cost recognises the full expense, it means that Net Profit will potentially be lower, IF the business still has unsold stock. In other words, Profit is usually understated as a result of an overstated COGS when period cost is used over product cost.
Hope that made sense. Happy to give an example if you need it.
With product costs the expense is allocated to each individual item stock; thus when it's sold it's included in the cost of sales. Unless every unit of stock is sold expenses will be lower and henceforth a higher profit. With period costs it's not added to each unit of stock, and all of the expense is recorded in the reporting period was purchased. Thus resulting in higher expenses and a lower profit.
I usually uses calculations to support my answer, I hope this made sense.
EDIT:Beaten
Thank you both so much! I understand now :D
Post by: Damoz.G on November 09, 2013, 09:35:10 pm
Probably going to be beaten byDamozCaparva :P What a top bloke
HAHA! Thanks bud! :D
I was too busy making my last minute exam tips for the Accounting Exam, so I didn't see this until now. :P
Post by: Lucho23 on November 09, 2013, 09:36:47 pm
Total Sales: $75 000
Credit Sales to be 50% greater than Cash Sales.
From this, I assume that Cash Sales are $30 000 and Credit Sales are $45 000
However, the answers state that Cash Sales are $25 000 and Credit Sales are $50 000
I thought this was an increase of 100% rather than 50%
What do you guys think?
Thanks!
Also, when a Disposal of a non-current asset occurs, do we record this in the General Journal on Balance Day or on the date that the disposal actually occurred. And if this comes up on the exam, will be required to record on Balance day or on this day (assuming that we have to determine accumulated depreciation)?
Thanks!
Post by: abcdqdxD on November 09, 2013, 09:38:46 pm
OK, so I'm doing the 4th Neap Smartstudy Exam and there's this question that's subject to interpretation:
Total Sales: $75 000
Credit Sales to be 50% greater than Cash Sales.
From this, I assume that Cash Sales are $30 000 and Credit Sales are $45 000
However, the answers state that Cash Sales are $25 000 and Credit Sales are $50 000
I thought this was an increase of 100% rather than 50%
What do you guys think?
Thanks!
Also, when a Disposal of a non-current asset occurs, do we record this in the General Journal on Balance Day or on the date that the disposal actually occurred. And if this comes up on the exam, will be required to record on Balance day or on this day (assuming that we have to determine accumulated depreciation)?
Thanks!
Yes your interpretation is correct.
As for the Disposal, I think it's on the actual date (in Uni anyway). Because it's not a BDA, I would assume it's not on balance day. Someone might want to confirm this.
Post by: Damoz.G on November 09, 2013, 09:40:37 pm
Yes your interpretation is correct.
As for the Disposal, I think it's on the actual date (in Uni anyway). Because it's not a BDA, I would assume it's not on balance day. Someone might want to confirm this.
Yup, you record the Disposal on the Date that the NCA is sold on or traded-in on. :)
Post by: Lucho23 on November 09, 2013, 09:41:03 pm
Yes your interpretation is correct.
As for the Disposal, I think it's on the actual date (in Uni anyway). Because it's not a BDA, I would assume it's not on balance day. Someone might want to confirm this.
\That's what I thought, however, General Ledger entries are all completed on Balance Day as totals, at least that's what Neville Box said :P
Post by: Kuroyuki on November 09, 2013, 09:41:24 pm
EDIT - Damoz too fast
Post by: Kuroyuki on November 09, 2013, 09:43:19 pm
\That's what I thought, however, General Ledger entries are all completed on Balance Day as totals, at least that's what Neville Box said :PDid he really 0.o? Journals are posted at the end of each month, not at the end of the reporting period. And in the study design it shows that the adjustment for prepaid sales as done on the date the goods were delivered and not the end of the reporting period.
Post by: abcdqdxD on November 09, 2013, 09:45:09 pm
\That's what I thought, however, General Ledger entries are all completed on Balance Day as totals, at least that's what Neville Box said :P
If you're talking about the general ledger, then yes it will be at the end of the month.
Post by: Lucho23 on November 09, 2013, 09:47:00 pm
If you're talking about the general ledger, then yes it will be at the end of the month.
Yeah! General Ledger, will it be recorded on Balance Day or the day of disposal?
General Journal it would be recorded on day of disposal
Post by: abcdqdxD on November 09, 2013, 09:47:35 pm
Yeah! General Ledger, will it be recorded on Balance Day or the day of disposal?
General Journal it would be recorded on day of disposal
End of the month - journals are posted to the general ledger on a monthly basis
Post by: Damoz.G on November 09, 2013, 09:51:21 pm
Yeah! General Ledger, will it be recorded on Balance Day or the day of disposal?
General Journal it would be recorded on day of disposal
If its for the General Journal, then the Date is the date of the Trade-in or Sale of the NCA.
If its for the General Ledger, use the last day of the Reporting Period. The last day of each Reporting Period is to always be used for all items recorded in the General Ledger Accounts, except for when you state Opening Balances (where the first day of the Reporting Period is stated instead). :)
Post by: Lucho23 on November 09, 2013, 09:53:25 pm
It is recorded in the General Ledger at the end of the reporting period, as are the journals.
Usually they explain when the posting must take place (ie. Record this in the General Ledger on 30 June 2013)
Post by: Lucho23 on November 09, 2013, 09:54:15 pm
If its for the General Journal, then the Date is the date of the Trade-in or Sale of the NCA.
If its for the General Ledger, use the last day of the Reporting Period. The last day of each Reporting Period is to always be used for all items recorded in the General Ledger Accounts, except for when you state Opening Balances (where the first day of the Reporting Period is stated instead). :)
Yeah that's what I've thought this whole year ahahh!
Thanks!
Post by: abcdqdxD on November 09, 2013, 09:54:53 pm
Ok, I've consulted the past VCAA papers.
It is recorded in the General Ledger at the end of the reporting period, as are the journals.
Usually they explain when the posting must take place (ie. Record this in the General Ledger on 30 June 2013)
Which paper are you looking at? The study design changed in 2012
Post by: Lucho23 on November 09, 2013, 09:56:28 pm
Which paper are you looking at? The study design changed in 2012
The 2012 one XD
Although it is ambiguous as to if December 31 is the end of the reporting period.
I'm confused as to how you think its at the end of every month? Is it in the study design?
Post by: abcdqdxD on November 09, 2013, 09:57:36 pm
Post by: Lucho23 on November 09, 2013, 09:59:04 pm
Can you show me the question?
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/2012account2-w.pdf
Question 8:
On 19 December 2012, Landscapers provided the following details of transactions involving the purchase of
a tractor from Tractor World.
The old tractor had been purchased for $32 000 plus GST and depreciated to $9000. Landscapers bought the
new tractor for $61 000 plus GST and received a trade-in allowance of $8200 from Tractor World for the old
tractor.
Landscapers paid a deposit of $10 000 on the new tractor.
Complete the following General Ledger accounts on 31 December 2012.
• Disposal of Tractor
• Sundry Creditor – Tractor World
Post by: abcdqdxD on November 09, 2013, 10:00:29 pm
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/2012account2-w.pdf
Question 8:
On 19 December 2012, Landscapers provided the following details of transactions involving the purchase of
a tractor from Tractor World.
The old tractor had been purchased for $32 000 plus GST and depreciated to $9000. Landscapers bought the
new tractor for $61 000 plus GST and received a trade-in allowance of $8200 from Tractor World for the old
tractor.
Landscapers paid a deposit of $10 000 on the new tractor.
Complete the following General Ledger accounts on 31 December 2012.
• Disposal of Tractor
• Sundry Creditor – Tractor World
So of course you would complete it on Dec 31
Post by: Kuchiki on November 09, 2013, 10:01:18 pm
I'm confused as to how you think its at the end of every month? Is it in the study design?
http://www.vcaa.vic.edu.au/Documents/vce/account/AccountingSD-2013.pdf
Page 25:
Quote
• the process of posting to the general ledger from the general journal and special journals on a monthly basis
Post by: Damoz.G on November 09, 2013, 10:03:31 pm
http://www.vcaa.vic.edu.au/Documents/vce/account/AccountingSD-2013.pdf
Page 25:
That is so screwed up, because in the Cambridge Textbook when we studied the chapter earlier on in the year (Chapter 5 from memory), I used the last day of the Reporting Period, not the last day of each Month. =/
Post by: Lucho23 on November 09, 2013, 10:04:10 pm
So of course you would complete it on Dec 31
You're right!
The study design says:
the process of posting to the general ledger from the general journal and special journals on a
monthly basis
EDIT: Bit late ahah
Post by: Kuroyuki on November 09, 2013, 10:08:41 pm
The study design is god, its never wrong. At least hope not.
Post by: Damoz.G on November 09, 2013, 10:10:23 pm
Textbooks are only the authors opinion on the accounting course. If do learn from the textbook you can get it wrong, its pretty unfair but vcaa can still mark you incorrectly. I think fyrefly mentioned everyone using the box book got a question wrong one year.
The study design is god, its never wrong. At least hope not.
Yeah, I guess that's true.
I really wish VCAA would publish the Solutions to the Sample Exam. Would help us out soooo much! -.-
Post by: Gogogadget on November 09, 2013, 10:10:56 pm
Journals are reported at the end of the month
General Ledgers are balanced on the end of the reporting period with all the BDA's
The thing you have to remember is you are rarely asked to post journals over a month time span but if you want a good example look at CPAP 2013 exam 2.
You are asked to post two months worth of journals into the ledger as a result the general ledger as two months posted in it (28/2 and the 31/3).
As for the disposal of a NCA that is done in the general journal (cash receipts if you sell it) and is posted to the general ledger at the end of the month.
Post by: Damoz.G on November 09, 2013, 10:14:51 pm
Post by: abcdqdxD on November 09, 2013, 10:15:17 pm
I think that everyone is confusing themselves here...
Journals are reported at the end of the month
General Ledgers are balanced on the end of the reporting period with all the BDA's
This is correct. Just to make it even more explicit, journals are posted to the general ledger at the end of every month. The general ledger is balanced at the end of every reporting period. All BDA's are done on balance day (hence the name balance day adjustment).
Post by: abcdqdxD on November 09, 2013, 10:15:35 pm
Here's a possible solution to this situation: Does anyone have a copy of the old Study Design saved? Then we can compare that dot point about the journals being posted to the General Ledger.
Yes it was a new addition to the SD last year
Post by: ashs_vb on November 09, 2013, 10:18:04 pm
It is stated that the business reports monthly so houldn't an entry from june be omitted from the current month's receipts journal.
Got it right but had a good think about it. Question for reference
The transactions provided below for Best Timber Supplies relate to an order for timber placed by a customer,
James Hay, to the value of $3500 plus GST (cost $1500 plus GST).
• 28 June 2012: A deposit of $500 was received from James Hay (Receipt 235).
• 2 July 2012: The goods were delivered to James Hay (Invoice 121 indicating credit terms 2/14, n/30).
• 9 July 2012: James Hay settled the account (Receipt 261).
The business prepares reports monthly.
Prepare the journal entries for the above transactions, including the adjusting entry that is necessary in
July 2012.
Post by: Damoz.G on November 09, 2013, 10:18:04 pm
Yes it was a new addition to the SD last year
Yeah, just saw that:
Page 20 - http://www.vcaa.vic.edu.au/Documents/vce/account/TeachingAccountingSD2012-2016.pdf
Comment on the side says:
Quote
Journals will
be posted to the General Ledger at
the end of each month. This may
not necessarily be the reporting
period. (So it would be possible to
have 12 entries in a ledger by
balance day.)
Post by: Lucho23 on November 09, 2013, 10:39:28 pm
I thought this to be a bit weird
It is stated that the business reports monthly so houldn't an entry from june be omitted from the current month's receipts journal.
Got it right but had a good think about it. Question for reference
The transactions provided below for Best Timber Supplies relate to an order for timber placed by a customer,
James Hay, to the value of $3500 plus GST (cost $1500 plus GST).
• 28 June 2012: A deposit of $500 was received from James Hay (Receipt 235).
• 2 July 2012: The goods were delivered to James Hay (Invoice 121 indicating credit terms 2/14, n/30).
• 9 July 2012: James Hay settled the account (Receipt 261).
The business prepares reports monthly.
Prepare the journal entries for the above transactions, including the adjusting entry that is necessary in
July 2012.
So the deposit is recorded in June and is thus not included in July but is maintained in the balance of prepaid sales revenue account.
However, when the goods are delivered, the Prepaid sales revenue and sales accounts are adjusted in the General Journal and the Sale is recorded in the Sales Journal.
The receipt from the debtor would be recorded in the Cash Receipts journal.
Is that what you mean?
Post by: Damoz.G on November 09, 2013, 10:56:44 pm
* Usually, the Journals given are already for a period of a few months. e.g. It says Totals to date for like June-Sept or something. If this was the case, then you would just use Sept 30 for the Posting of the Journals to the General Ledger. I haven't come across a question, where it has CRJ's for different months. Correct me if I'm wrong.
* Also, if there happens to be a question with several Journals for different months, and there seems like there is a lot of space in the General Ledger (e.g. like 3 blank spots), then probably post each Journal INDIVIDUALLY. If there isn't enough space, then probably don't.
I think if we follow these two "guidelines", then we should be fine. :)
Post by: unfamila on November 09, 2013, 11:01:18 pm
Post by: abcdqdxD on November 09, 2013, 11:02:39 pm
Okay guys, I was still pondering on the thing about the posting of the Journals to the General Ledger on a monthly basis. I know - I get paranoid about those simple things in Accounting, because you can't afford to lose any marks. Anyways, I've come to two conclusions:
* Usually, the Journals given are already for a period of a few months. e.g. It says Totals to date for like June-Sept or something. If this was the case, then you would just use Sept 30 for the Posting of the Journals to the General Ledger. I haven't come across a question, where it has CRJ's for different months. Correct me if I'm wrong.
* Also, if there happens to be a question with several Journals for different months, and there seems like there is a lot of space in the General Ledger (e.g. like 3 blank spots), then probably post each Journal INDIVIDUALLY. If there isn't enough space, then probably don't.
I think if we follow these two "guidelines", then we should be fine. :)
I don't think this really addresses the issue of "posting on a monthly basis". Whether there is a single or multiple journals/ledgers, as long as you post to the ledger accounts at the end of the month you will be fine. I can't believe teachers haven't gone through this in class!
Post by: Kuroyuki on November 09, 2013, 11:06:16 pm
I don't think this really addresses the issue of "posting on a monthly basis". Whether there is a single or multiple journals/ledgers, as long as you post to the ledger accounts at the end of the month you will be fine. I can't believe teachers haven't gone through this in class!Teachers probably have. But its like one of those thing u just accept without thinking.
Post by: abcdqdxD on November 09, 2013, 11:08:08 pm
If in doubt, record on a monthly basis - you can't go wrong.
Post by: Damoz.G on November 09, 2013, 11:09:02 pm
I can't believe teachers haven't gone through this in class!
Yeah I know, but I guess the Study Design seems to change every year which is actually quite frustrating as well.
A couple of weeks ago, when I was doing an older VCAA Exam 2, I came across a question where a Deposit was made, then it obviously converted into a Sale. Now, with the GST Component, usually its 10% of the Deposit + the rest of the Sale amount. However, in the older exam, GST was only charged on the Sale amount (and not the GST :o).
It changes so many times! Can't wait for proper Accounting at Uni!
Post by: Damoz.G on November 09, 2013, 11:09:53 pm
Yeah fair enough. Most of the accounting cohort of last year were stressed over it too. But it's unlikely to cause any trouble in the exam so don't let it put you off your game.
If in doubt, record on a monthly basis - you can't go wrong.
Yeah exactly, and I might "communicate" with my assessor by putting a little comment next to it. :P
Post by: FunkyAfrican on November 09, 2013, 11:43:52 pm
Post by: Damoz.G on November 09, 2013, 11:46:35 pm
For an Interest only question where the business does not make loan repayments during the course of the loan and only pays interest expense, how would this be recorded in the Balance sheet?
How would the Interest be recorded or the Loan be recorded in the Balance Sheet? ???
The Loan would simply be recorded as a Non-Currently Liability with the full balance. Interest Expense would only be recorded as "Accrued Interest Expense" as a Current Liability if the expense was incurred in a particular Reporting Period, but was yet to be paid by the firm.
Post by: abcdqdxD on November 09, 2013, 11:47:19 pm
For an Interest only question where the business does not make loan repayments during the course of the loan and only pays interest expense, how would this be recorded in the Balance sheet?
Well it would only increase your expenses (interest expense) and decrease net profit. This will impact on the owner's equity section of the balance sheet in the form of a lower net profit/larger net loss.
The liability (represented by the loan) will not change as the principal amount has not been paid off.
EDIT: Beaten by Damoz. This guy is too keen.
Post by: ashs_vb on November 09, 2013, 11:50:33 pm
Post by: Damoz.G on November 09, 2013, 11:59:06 pm
EDIT: Beaten by Damoz. This guy is too keen.
LOL! May be I should stop answering questions. Probably annoying a few people who type up their responses as well. :P
What i meant was, transactions from the previous period should not be recorded in the special journal given that the new reporting period is started, or am i wrong. eerrgghh all this nitty gritty stuff is pretty annoying
I don't understand your question now. =/
Transactions from previous Reporting Periods are only recorded in Journals for this Reporting Period if its an Accrued Expense that has now been paid in the current Reporting Period.
EDIT: Do you want to may be post an Example of a Question? And then we can explain it to you. :)
Post by: ashs_vb on November 10, 2013, 12:06:54 am
James Hay, to the value of $3500 plus GST (cost $1500 plus GST).
• 28 June 2012: A deposit of $500 was received from James Hay (Receipt 235).
• 2 July 2012: The goods were delivered to James Hay (Invoice 121 indicating credit terms 2/14, n/30).
• 9 July 2012: James Hay settled the account (Receipt 261).
The business prepares reports monthly.
Prepare the journal entries for the above transactions, including the adjusting entry that is necessary in
July 2012.
right
so special journals get posted in every reporting period than are zeroed. The deposit should have been recorded in the june CRJ, not in the one accounted for july seeing that it the business operates on a monthly reporting period basisI recorded it anyway though. This is off last year's exam
Post by: Damoz.G on November 10, 2013, 12:17:01 am
The transactions provided below for Best Timber Supplies relate to an order for timber placed by a customer,
James Hay, to the value of $3500 plus GST (cost $1500 plus GST).
• 28 June 2012: A deposit of $500 was received from James Hay (Receipt 235).
• 2 July 2012: The goods were delivered to James Hay (Invoice 121 indicating credit terms 2/14, n/30).
• 9 July 2012: James Hay settled the account (Receipt 261).
The business prepares reports monthly.
Prepare the journal entries for the above transactions, including the adjusting entry that is necessary in
July 2012.
right
so special journals get posted in every reporting period than are zeroed. The deposit should have been recorded in the june CRJ, not in the one accounted for july seeing that it the business operates on a monthly reporting period basisI recorded it anyway though. This is off last year's exam
Yes, the Deposit would have been recorded in the Reporting Period of June's Special Journals, specifically the CRJ.
However, the Deposit (Prepaid Sales Revenue) must be removed in the General Journal for this Reporting Period. The Deposit is no longer a Current Liability in the Balance Sheet of Best Timber Supplies. Instead, its now Sales Revenue earned because the good have been delivered. So, we need to get rid of this Liability that was created close to the end of June.
Therefore, in the General Journal:
* DR: Prepaid Sales Revenue
* CR: Sales Revenue
and the record rest of the transactions into the Special Journals as usual.
Is this what you're asking for? ???
Post by: ashs_vb on November 10, 2013, 12:19:58 am
Yes, the Deposit would have been recorded in the Reporting Period of June's Special Journals, specifically the CRJ.http://www.vcaa.vic.edu.au/Documents/exams/account/2012/accounting_assessrep12.pdf
However, the Deposit (Prepaid Sales Revenue) must be removed in the General Journal for this Reporting Period. The Deposit is no longer a Current Liability in the Balance Sheet of Best Timber Supplies. Instead, its now Sales Revenue earned because the good have been delivered. So, we need to get rid of this Liability that was created close to the end of June.
Therefore, in the General Journal:
* DR: Prepaid Sales Revenue
* CR: Sales Revenue
and the record rest of the transactions into the Special Journals as usual.
Is this what you're asking for? ???
Q4 answer, that is why i was perplexed, even though i included it
261 3 283 67 3 350
Post by: Damoz.G on November 10, 2013, 12:24:01 am
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/accounting_assessrep12.pdf
Q4 answer, that is why i was perplexed, even though i included it
261 3 283 67 3 350
Ahhh.....Okay!
Ermmm...Yeah, I think that is a mistake in the Examiner's Reports. ??? abcdqdxD, would you agree?
Post by: abcdqdxD on November 10, 2013, 12:31:36 am
Ahhh.....Okay!
Ermmm...Yeah, I think that is a mistake in the Examiner's Reports. ??? abcdqdxD, would you agree?
Can I get back to you tomorrow? I need some sleep :P
Post by: Damoz.G on November 10, 2013, 12:34:40 am
Can I get back to you tomorrow? I need some sleep :P
Lol. Yeah, no worries! Same here. :P
Post by: sin0001 on November 10, 2013, 10:45:37 am
Post by: Kuroyuki on November 10, 2013, 10:57:04 am
Ahhh.....Okay!It seems like an error to me. It should have been amended tho...
Ermmm...Yeah, I think that is a mistake in the Examiner's Reports. ??? abcdqdxD, would you agree?
Can someone explain why the Capital contribution for the current R.P. will be already included in the 'Capital' balance, in a Post-adjusted trial balance. I thought it is included only when calculating profit + its balance for the upcoming R.P.? o.OI thinks it like, you record the ledgers after you have posted the journals. You then foot the accounts in order to prepare the preadjusted trial balance. After pl summary and bdas we then formally balance the accounts.
Post by: sin0001 on November 10, 2013, 11:04:49 am
I thinks it like, you record the ledgers after you have posted the journals. You then foot the accounts in order to prepare the preadjusted trial balance. After pl summary and bdas we then formally balance the accounts.Oh so even in a PRE-Adjusted T.B., the Capital balance will include any contributions?
Thanks Kuroyuki, seems like you were correct- my teacher said the same thing:
"When any capital contribution is made, whether it be cash or otherwise, it will be recorded in the journal and then posted to ledger at the end of the month. At the end of the reporting period, the amounts will be in the ledger account which then can be footed to prepare a pre-adjustment TB, and once profit or loss is calculated, balanced for the next RP for the Post-adjustment TB. It will already be included."
Post by: Kuroyuki on November 10, 2013, 11:24:54 am
Oh so even in a PRE-Adjusted T.B., the Capital balance will include any contributions?np
Thanks Kuroyuki, seems like you were correct- my teacher said the same thing:
"When any capital contribution is made, whether it be cash or otherwise, it will be recorded in the journal and then posted to ledger at the end of the month. At the end of the reporting period, the amounts will be in the ledger account which then can be footed to prepare a pre-adjustment TB, and once profit or loss is calculated, balanced for the next RP for the Post-adjustment TB. It will already be included."
yep they would be.
So if they ask you to prepare the capital account after adjustments and they say a capital contribution was made. Make sure you deduct the contribution from pre adjusted balance to find capital at the start.
Post by: Lucho23 on November 10, 2013, 11:42:09 am
And when establishing double entry do you record Cash at Bank in the General Journal with a DR balance?
Thanks!
Post by: abcdqdxD on November 10, 2013, 11:49:32 am
When a business is beginning and you're establishing the books of the business, Cash contributed by the owner/financed by a loan is recorded in CRJ?
And when establishing double entry do you record Cash at Bank in the General Journal with a DR balance?
Thanks!
yes
Post by: Damoz.G on November 10, 2013, 11:49:53 am
When a business is beginning and you're establishing the books of the business, Cash contributed by the owner/financed by a loan is recorded in CRJ?
And when establishing double entry do you record Cash at Bank in the General Journal with a DR balance?
Thanks!
Yup and yup. :D
The only 2 times Bank is even mentioned in the GJ is for the commencing of Double Entry and if there is a correcting Entry required. At no other point, should Bank even be mentioned in the GJ. :)
EDIT: Beaten by abcdqdxD by 21 seconds! :o
Post by: Lucho23 on November 10, 2013, 11:59:07 am
Post by: nikil.v on November 10, 2013, 03:04:24 pm
also, where are term deposits classified in the Balance Sheet, current assets or non current assets (if the question doesn't state when it is to be received) ?
Post by: Damoz.G on November 10, 2013, 03:07:53 pm
where does the receipt of a 6 month term deposit go in the CFS (principal part, not interest)?
also, where are term deposits classified in the Balance Sheet, current assets or non current assets (if the question doesn't state when it is to be received) ?
Recording the receiving of Term Deposits in the CFS has become quite controversial. In my opinion and the Cambridge Textbook's opinion, its a Investing Cash Inflow.
Term Deposits are usually recorded under Non-Current Assets if the business is going to receive the Term Deposit sometime beyond 12 months. However, your example says its for 6 months, so it would go under Current Assets because the firm will receive it within the next 12 months, and is thus recorded as a Current Asset. :)
Post by: Kuroyuki on November 10, 2013, 03:11:26 pm
I would go with operating myself, because it explicilty doesnt fit in the investing definition when it is received.
And anything that doesn't fit in financing and investing goes in operating.
Post by: abcdqdxD on November 10, 2013, 03:13:46 pm
We will never be asked to report the receipt of a term deposit in the cfs.
I would go with operating myself, because it explicilty doesnt fit in the investing definition when it is received.
And anything that doesn't fit in financing and investing goes in operating.
Yeah, can't see VCAA giving that question to be honest. Personally, I would put it in operating as well.
It can't be a non-current asset if you're receiving the Term Deposit.
Post by: Damoz.G on November 10, 2013, 03:15:53 pm
Yeah, can't see VCAA giving that question to be honest. Personally, I would put it in operating as well.
It can't be a non-current asset if you're receiving the Term Deposit.
I understand what you mean. But, if the Term Deposit is for 2 years, its recorded as a NCA. So when the two years is up, your now receiving the Term Deposit which was recorded as a NCA. Technically it should be an Operating Inflow, but the Cambridge Textbook says Investing Outflow because of these reasons. :)
Post by: abcdqdxD on November 10, 2013, 03:18:35 pm
It would only be treated as a non-current asset if you're expecting to receive the term deposit in >12 months. If that was the case, we wouldn't be asked to record the receipt of the term deposit.
So if VCAA does make you record it, it can only occur if the Term deposit has become a current asset.
Post by: Damoz.G on November 10, 2013, 03:20:33 pm
You only record the inflow when the cash is received (obviously). At the point of receiving the cash, the term deposit would be a current asset as the inflow of economic benefit is expected within 12 months.
It would only be treated as a non-current asset if you're expecting to receive the term deposit in >12 months. If that was the case, we wouldn't be asked to record the receipt of the term deposit.
So if VCAA does make you record it, it can only occur if the Term deposit has become a current asset.
Ahh...yep! I see what you mean now. :)
Post by: BoredSatan on November 10, 2013, 03:25:54 pm
Post by: abcdqdxD on November 10, 2013, 03:27:01 pm
Taking out the term deposit : Investing outflow
Receiving the principal amount upon maturity: Operating inflow
Do you agree
Post by: Damoz.G on November 10, 2013, 03:28:44 pm
In summary, this is what I think:
Taking out the term deposit : Investing outflow
Receiving the principal amount upon maturity: Operating inflow
Yup, that's what I would do as well. :)
Post by: BoredSatan on November 10, 2013, 03:32:14 pm
all the interest revenue received is operating inflows.
when you get the term deposit principle amount back, investing inflow
Post by: abcdqdxD on November 10, 2013, 03:34:45 pm
Yeah so if the term deposit was greater than a year...
all the interest revenue received is operating inflows.
when you get the term deposit principle amount back, investing inflow
Hmm.. I guess we have differing views about the last bit. Well I won't argue with Bored "the king of accounting" Satan :P
Post by: BoredSatan on November 10, 2013, 03:36:22 pm
Hmm.. I guess we have differing views about the last bit. Well I won't argue with Bored "the king of accounting" Satan :Ppleaseeee :P
Well as I see it, when you get the principle back technically you are 'selling' a non-current asset
Post by: Damoz.G on November 10, 2013, 03:36:54 pm
Hmm.. I guess we have differing views about the last bit. Well I won't argue with Bored "the king of accounting" Satan :P
LOL! Let's just hope that a Question on Term Deposits like that doesn't come up. If it does, you both can laugh at us all who are doing the Question in the Exam Room. :P
Post by: Damoz.G on November 10, 2013, 03:38:15 pm
pleaseeee :P
Well as I see it, when you get the principle back technically you are 'selling' a non-current asset
I originally that that opinion, and then abcdqdxD persuaded me otherwise, and now I've gone back to my original opinion. HAHA!....
Recording the receiving of Term Deposits in the CFS has become quite controversial. In my opinion and the Cambridge Textbook's opinion, its a Investing Cash Inflow.
Term Deposits are usually recorded under Non-Current Assets if the business is going to receive the Term Deposit sometime beyond 12 months. However, your example says its for 6 months, so it would go under Current Assets because the firm will receive it within the next 12 months, and is thus recorded as a Current Asset. :)
Post by: abcdqdxD on November 10, 2013, 03:38:53 pm
pleaseeee :P
Well as I see it, when you get the principle back technically you are 'selling' a non-current asset
Yeah I guess so. If it was last year, I probably would've recorded it under Investing inflow. The way I see accounting has changed a lot since doing UMEP :P
I would go with what BoredSatan has said.
Post by: Damoz.G on November 10, 2013, 03:41:16 pm
Yeah I guess so. If it was last year, I probably would've recorded it under Investing inflow. The way I see accounting has changed a lot since doing UMEP :P
I would go with what BoredSatan has said.
Yeah exactly. That's why I can't wait to do proper Accounting at Uni! :P
BTW: Congrats on 1,000 Posts!
Post by: Kuroyuki on November 10, 2013, 03:42:26 pm
But dont mess with AN accounting author.
Post by: abcdqdxD on November 10, 2013, 03:45:33 pm
i would think that vcaa would mark both answers correct, cuz each of them can be argued.
But dont mess with AN accounting author.
I don't think they will mark both answers correct. Again, go with what BoredSatan has said :P
Post by: BoredSatan on November 10, 2013, 03:45:40 pm
LOL! Let's just hope that a Question on Term Deposits like that doesn't come up. If it does, you both can laugh at us all who are doing the Question in the Exam Room. :PI sure as will! :P
Post by: Kuroyuki on November 10, 2013, 03:46:31 pm
I don't think they will mark both answers correct. Again, go with what BoredSatan has said :P:/
BoredSatan it is.
Post by: Lucho23 on November 10, 2013, 03:47:32 pm
Had 11 units at $860 each
Stock write down for 2 units (SWD value=$110)
What would the balance column look like now?
Post by: BoredSatan on November 10, 2013, 03:49:28 pm
If a stock write-down occurs and you have to show it in the stock card, would you have to put the written down stock at the top of the balance column? Does it matter?Hmm good question. I would put it at the top as one would assume you would want to get rid of that stock first hence the write down
Had 11 units at $860 each
Stock write down for 2 units (SWD value=$110)
What would the balance column look like now?
Post by: Kuroyuki on November 10, 2013, 03:50:03 pm
If a stock write-down occurs and you have to show it in the stock card, would you have to put the written down stock at the top of the balance column? Does it matter?Its never been actually covered. Some exams put it at the top some at the bottom. I don't think we can be penalised.
Had 11 units at $860 each
Stock write down for 2 units (SWD value=$110)
What would the balance column look like now?
FIFO doesnt match the actual flow of stock anyway.
But i would put it in the top cuz the business would want to sell it first.
EDIT - BoredSatan faster than damoz
Post by: BoredSatan on November 10, 2013, 03:50:41 pm
Its never been actually covered. Some exams put it at the top some at the bottom. I don't think we can be penalised.Due to constant refreshing of this page
FIFO doesnt match the actual flow of stock anyway.
But i would put it in the top cuz the business would want to sell it first.
EDIT - BoredSatan faster than damoz
Thought I might help out the accounting kiddies since ive done like nothing all year and so AN don't revoke my moderator powers :P
Post by: IT_Failure on November 10, 2013, 03:51:19 pm
If a stock write-down occurs and you have to show it in the stock card, would you have to put the written down stock at the top of the balance column? Does it matter?I had a question like that, and the solutions put it first (at the top)
Had 11 units at $860 each
Stock write down for 2 units (SWD value=$110)
What would the balance column look like now?
Post by: Damoz.G on November 10, 2013, 03:54:03 pm
EDIT - BoredSatan faster than damoz
I was busy answering the other Question on the new Thread. :P Beat everyone on that Thread. MUHAHAHAHAHAH! LOL!
Post by: BoredSatan on November 10, 2013, 03:57:01 pm
I was busy answering the other Question on the new Thread. :P Beat everyone on that Thread. MUHAHAHAHAHAH! LOL!:(
Post by: Lucho23 on November 10, 2013, 03:58:17 pm
Thanks!
Post by: Damoz.G on November 10, 2013, 04:02:06 pm
:(
:'(
Waits anxiously for IT_Failure to post his next Question to beat everyone. :P
Post by: IT_Failure on November 10, 2013, 04:05:50 pm
Is this answer enough?:
Accrual accounting is the matching or revenue earned to expenses incurred within a reporting period so that profit can be accurately calculated.
Or do I need to add more such as:
Under accrual accounting transactions are recorded as they occur, which is not always the same time as when the payment is made/received.
Post by: BoredSatan on November 10, 2013, 04:06:52 pm
:'(:( I have to head back to bendigo soon so cant beat you :(
Waits anxiously for IT_Failure to post his next Question to beat everyone. :P
Post by: Kuroyuki on November 10, 2013, 04:07:32 pm
With a "Define Accrual Accounting" question worth 2 marks, how do you get both marks?I use to say just the first part. But a lot of 2013 exams are adding in the second part so just add it in just to be safe.
Is this answer enough?:
Accrual accounting is the matching or revenue earned to expenses incurred within a reporting period so that profit can be accurately calculated.
Or do I need to add more such as:
Under accrual accounting transactions are recorded as they occur, which is not always the same time as when the payment is made/received.
Post by: Damoz.G on November 10, 2013, 04:07:46 pm
With a "Define Accrual Accounting" question worth 2 marks, how do you get both marks?
Is this answer enough?:
Accrual accounting is the matching or revenue earned to expenses incurred within a reporting period so that profit can be accurately calculated.
Or do I need to add more such as:
Under accrual accounting transactions are recorded as they occur, which is not always the same time as when the payment is made/received.
I like your first definition, but this is what I use: Accrual Accounting is determining Profit by matching Revenues earned against Expenses incurred in the Reporting Period in which they occur to accurately determine Net Profit.
Post by: BoredSatan on November 10, 2013, 04:08:51 pm
I use to say just the first part. But a lot of 2013 exams are adding in the second part so just add it in just to be safe.this is one of those questions in which just copying the practice exam answers are the best..
Man this question actually first came up on my exam.. and I had no idea how to answer..
Post by: abcdqdxD on November 10, 2013, 04:13:12 pm
I like your first definition, but this is what I use: Accrual Accounting is determining Profit by matching Revenues earned against Expenses incurred in the Reporting Period in which they occur to accurately determine Net Profit.
I probably wouldn't use the word accurate. Very pedantic I know, but nothing is accurate in accounting as per my uni lecturer :P
Accrual accounting is just a system of accounting, whether its more "accurate" compared to cash accounting is a matter for judgement. Obviously you wouldn't be penalised, but just my 2c.
Post by: IT_Failure on November 10, 2013, 04:13:51 pm
Another question: When does a Loan go into the General journal?
If the owner contributes a NCA which was bought with a loan, that goes into the general journal, but what happens if I used to start a business? (VCAA EXAM 1, 2012)
I included that loan in the general journal, which the solutions didn't. Does that mean it goes in the cash payments journal? There is no chq no. And no cash payments journal given. Unless the loan is still the responsibility of the owner, why is there no general journal entry?
Thanks!
Post by: Damoz.G on November 10, 2013, 04:14:06 pm
I probably wouldn't use the word accurate. Very pedantic I know, but nothing is accurate in accounting as per my uni lecturer :P
Accrual accounting is just a system of accounting, whether its more "accurate" compared to cash accounting is a matter for judgement. Obviously you wouldn't be penalised, but just my 2c.
LOL! Fair enough. I just memorise definitions from the Textbook. :P
Post by: abcdqdxD on November 10, 2013, 04:14:15 pm
Man this question actually first came up on my exam.. and I had no idea how to answer..
nek minit 50
Post by: Damoz.G on November 10, 2013, 04:15:27 pm
nek minit 50
I know right! How would be get a 50 without answering that Question! He probably wrote some crap, and the Examiner felt sorry. :P
Nahhh, it probably clicked into his mind by the end of Writing Time. HAHA! :D
Post by: IT_Failure on November 10, 2013, 04:16:00 pm
I probably wouldn't use the word accurate. Very pedantic I know, but nothing is accurate in accounting as per my uni lecturer :PSo I should probably say "more accurately" then.
Accrual accounting is just a system of accounting, whether its more "accurate" compared to cash accounting is a matter for judgement. Obviously you wouldn't be penalised, but just my 2c.
Post by: abcdqdxD on November 10, 2013, 04:17:17 pm
So I should probably say "more accurately" then.
LOL you won't lose any marks for this. As long as you clearly explain that accrual accounting is : a) a system of accounting b) matching revenues earned against expenses incurred to determine net profit for the reporting period, I can't see you being penalised.
Post by: Damoz.G on November 10, 2013, 04:17:18 pm
So I should probably say "more accurately" then.
If you reaalllllyyy want to. But if you were to just mention "accurately..." without the inclusion of "more", as abcdqdxD said you wouldn't be penalised. :)
EDIT: Beaten by 1 second. :(
Post by: Kuroyuki on November 10, 2013, 04:20:33 pm
Thanks for the replies,"Similarly, if a business takes out a loan and receives cash, this is not recorded in a General Journal. Such transactions appear in the Cash Receipts Journal" from the assesments report. The question only asked us to prepare the general journal entries. It will in the receipts journal most likely as a bank statement.
Another question: When does a Loan go into the General journal?
If the owner contributes a NCA which was bought with a loan, that goes into the general journal, but what happens if I used to start a business? (VCAA EXAM 1, 2012)
I included that loan in the general journal, which the solutions didn't. Does that mean it goes in the cash payments journal? There is no chq no. And no cash payments journal given. Unless the loan is still the responsibility of the owner, why is there no general journal entry?
Thanks!
Post by: IT_Failure on November 10, 2013, 04:24:32 pm
"Similarly, if a business takes out a loan and receives cash, this is not recorded in a General Journal. Such transactions appear in the Cash Receipts Journal" from the assesments report. The question only asked us to prepare the general journal entries. It will in the receipts journal most likely as a bank statement.my mistake, I meant cash receipts journal.
The question says the loan was taken out to START the business, so how could it be in the CRJ? It happened before the journals began
Post by: Damoz.G on November 10, 2013, 04:27:24 pm
my mistake, I meant cash receipts journal.
The question says the loan was taken out to START the business, so how could it be in the CRJ? It happened before the journals began
If a Loan was received to start a business, it would be recorded in the CRJ.
Loan is only mentioned in the GJ for a transfer by the Owner with a NCA, or the commencement of Double-Entry Accounting.
Post by: Kuroyuki on November 10, 2013, 04:28:12 pm
my mistake, I meant cash receipts journal.Yeah the wording is a bit off. I think it means like to get the business up and running, not like start the business meaning formally establishing the business name or something.
The question says the loan was taken out to START the business, so how could it be in the CRJ? It happened before the journals began
Post by: IT_Failure on November 10, 2013, 04:38:34 pm
Yeah the wording is a bit off. I think it means like to get the business up and running, not like start the business meaning formally establishing the business name or something.Thanks, it makes sense now!
Post by: BoredSatan on November 10, 2013, 04:38:53 pm
I know right! How would be get a 50 without answering that Question! He probably wrote some crap, and the Examiner felt sorry. :PLOL this was in unit 3 exam which I lost 6.5 marks for lol
Nahhh, it probably clicked into his mind by the end of Writing Time. HAHA! :D
Post by: Damoz.G on November 10, 2013, 04:39:56 pm
LOL this was in unit 3 exam which I lost 6.5 marks for lol
Ahhh, your already in Bendigo now? That was quick! :P
6.5? You can lose 0.5 marks in Accounting? :o
Post by: Mafioso on November 10, 2013, 04:44:24 pm
If a Loan was received to start a business, it would be recorded in the CRJ.
Loan is only mentioned in the GJ for a transfer by the Owner with a NCA, or the commencement of Double-Entry Accounting.
How do I record the transfer of a loan to the business by the Owner while giving a NCA in the GJ?
Post by: Damoz.G on November 10, 2013, 04:45:35 pm
How do I record the transfer of a loan to the business by the Owner while giving a NCA in the GJ?
* DR: NCA
* CR: Loan
* CR: Capital (If there is any figures remaining)
Post by: BoredSatan on November 10, 2013, 04:45:54 pm
Ahhh, your already in Bendigo now? That was quick! :PLol no I'm still in Melbourne on the train to the city to get onto another train to get to Bendigo :(
6.5? You can lose 0.5 marks in Accounting? :o
Anyways the exam is marked by 2 examiners so your marks are doubled. If one examiner gives you the mark but the other doesn't then you get .5 of a mark
Post by: Damoz.G on November 10, 2013, 04:48:36 pm
Lol no I'm still in Melbourne on the train to the city to get onto another train to get to Bendigo :(
Anyways the exam is marked by 2 examiners so your marks are doubled. If one examiner gives you the mark but the other doesn't then you get .5 of a mark
Awww, that sucks! =/ Are you going there for Exams?
Oh yeah. I forgot about that. :P
Post by: BoredSatan on November 10, 2013, 04:52:54 pm
Awww, that sucks! =/ Are you going there for Exams?Yep got an exam on Friday but I like to 'study' there beforehand ;)
Oh yeah. I forgot about that. :P
(The amount of Dota I will play this week lel) :P
Post by: Damoz.G on November 10, 2013, 04:54:31 pm
This thread got unstickied? :o (I'm guessing because its active again?)
Post by: BoredSatan on November 10, 2013, 04:55:57 pm
Study - What is Study? ??? HAHA! :PNo my thumbs accidentally clicked on the non-sticky thread button cause my phone is annoying like that :P
This thread got unstickied? :o (I'm guessing because its active again?)
Post by: Damoz.G on November 10, 2013, 04:57:00 pm
No my thumbs accidentally clicked on the non-sticky thread button cause my phone is annoying like that :P
And you also logged yourself off from the Forum at the same time. :P
Post by: BoredSatan on November 10, 2013, 04:57:23 pm
Post by: BoredSatan on November 10, 2013, 04:58:06 pm
And you also logged yourself off from the Forum at the same time. :POMG wtf how did you know???
Post by: Damoz.G on November 10, 2013, 04:58:08 pm
Would people be interested in me posting questions here for more practice? Or are we all too stressed :P
Well, I'm just chillaxing at the moment. Happy to do some though. :)
Post by: Damoz.G on November 10, 2013, 04:59:03 pm
OMG wtf how did you know???
LOL! I'm smart. I know these things. ;D
Walks away with a creepy laugh. MUHAHAHAHAHAHAHA! :P
Post by: BoredSatan on November 10, 2013, 05:00:33 pm
Explain how the going concern principle is related to balance day adjustments.
Ok it's not the exact same wording because I ceebs looking up the correct one
Post by: massachusetts8 on November 10, 2013, 05:05:33 pm
:/
Post by: Kuroyuki on November 10, 2013, 05:08:25 pm
Going Concern Principle assumes that the life of the business is ongoing and indefinite. Many balance day adjustments recognise an asset or liability that must be carried forward into the next reporting period such as Accrued expenses/revenues or Prepaid Expenses/Revenues hence balance day adjustments are necessary so that the information in future and current reporting periods are updated.You can give an example like accrued wages aswell.
:/
Post by: BoredSatan on November 10, 2013, 05:09:40 pm
On second thoughts, may be I should have said no to that request. =/Yeah this a pretty hard question :P
The business is continuous and its Reporting Periods will also remain constant, so Balance Day Adjustments are necessary to be accounted for because they must always be accounted for in the firm's reports for the life of the business, in order to keep these Reports relevant and useful for decision making?
Damn, that's a hard question. =/
Make sure you mention the definition of the going concern principle and link it to balance day adjustments. Something like:
Because the business life is assumed to be infinite, therefore balance day adjustments can be made to ensure revenues earned are compared with expenses incurred for the current reporting period. Also, items can be adjusted for the amount consumed/earned in the current reporting period since these will still exist in the future.
Hmm maybe not the best answer but I think it addresses the major points. Anyone have a better answer?
Post by: Damoz.G on November 10, 2013, 05:09:55 pm
Going Concern Principle assumes that the life of the business is ongoing and indefinite. Many balance day adjustments recognise an asset or liability that must be carried forward into the next reporting period such as Accrued expenses/revenues or Prepaid Expenses/Revenues hence balance day adjustments are necessary so that the information in future and current reporting periods are updated.
:/
Yup. Lets go with that answer. Its 100x better than mine. :P
Post by: BoredSatan on November 10, 2013, 05:11:05 pm
Going Concern Principle assumes that the life of the business is ongoing and indefinite. Many balance day adjustments recognise an asset or liability that must be carried forward into the next reporting period such as Accrued expenses/revenues or Prepaid Expenses/Revenues hence balance day adjustments are necessary so that the information in future and current reporting periods are updated.Brilliant answer!
:/
Post by: Kuroyuki on November 10, 2013, 05:11:37 pm
Post by: Damoz.G on November 10, 2013, 05:12:26 pm
The answer that massa gave is like 90% from a VCAA assessment report haha.
LOL! At least he has remembered it. :P
Wait, what? It's been a Question on a past VCAA Exam? :o
Post by: massachusetts8 on November 10, 2013, 05:12:45 pm
You can give an example like accrued wages aswell.
Should the example depend on the scenario of the question?
Yup. Lets go with that answer. Its 100x better than mine. :P
I feel like mine doesn't clearly link to the going concern principle very well.. :/
Post by: massachusetts8 on November 10, 2013, 05:14:00 pm
The answer that massa gave is like 90% from a VCAA assessment report haha.
Haha indeed it is, I took the liberty of copying and pasting VCAA theory answers to briefly remember :)
Post by: BoredSatan on November 10, 2013, 05:14:21 pm
LOL! At least he has remembered it. :PYep. But in the past it's asked as: 'referring to an accounting principle, explain why balance day adjustments are made'
Wait, what? It's been a Question on a past VCAA Exam? :o
And everyone in the state picks reporting period but going concern is also correct
Post by: Damoz.G on November 10, 2013, 05:15:40 pm
Yep. But in the past it's asked as: 'referring to an accounting principle, explain why balance day adjustments are made'
And everyone in the state picks reporting period but going concern is also correct
Ohhh yeah. I thought it was directly a question relating to BDAs and Going Concern.
I usually go with Reporting Period - Much safer. :P
Post by: Kuroyuki on November 10, 2013, 05:16:12 pm
Should the example depend on the scenario of the question?I just use ur one cuz vcaa does.
I feel like mine doesn't clearly link to the going concern principle very well.. :/
Going concern assuems the life of the business is indefnite and ongoing. Many balance day adjustments recognise an asset or liability that must be carried forward to a future period. For example, accrued wages.
If i memorised it right that's vcaa's model answer. Your answer is EVEN better!
And there wouldnt usually be a scenario given but if there was then might aswell link it back.
Post by: BoredSatan on November 10, 2013, 05:18:02 pm
Post by: massachusetts8 on November 10, 2013, 05:19:27 pm
I just use ur one cuz vcaa does.
Going concern assuems the life of the business is indefnite and ongoing. Many balance day adjustments recognise an asset or liability that must be carried forward to a future period. For example, accrued wages.
If i memorised it right that's vcaa's model answer. Your answer is EVEN better!
And there wouldnt usually be a scenario given but if there was then might aswell link it back.
Sweet! Thank You :)
Post by: Kuroyuki on November 10, 2013, 05:19:43 pm
Copying VCAA answers are the bestYeah
But like some of them are so short and concise, it feels risky to me.
Post by: Damoz.G on November 10, 2013, 05:23:04 pm
Yeah
But like some of them are so short and concise, it feels risky to me.
I agree. Sometimes I ask myself is that really 2/2? ???
Post by: abcdqdxD on November 10, 2013, 05:34:47 pm
Post by: Kuroyuki on November 10, 2013, 05:36:12 pm
Yeah I think VCAA don't give out perfect answers cus they know kids will memorise them :Pwas that a joke?
If not i need to add more detail to all my vcaa response answers lol
Post by: Damoz.G on November 10, 2013, 05:36:23 pm
Yeah I think VCAA don't give out perfect answers cus they know kids will memorise them :P
LOL! Yeah, true that. I guess the ones they give are still decent enough anyways. :)
Post by: Damoz.G on November 10, 2013, 05:46:21 pm
was that a joke?
If not i need to add more detail to all my vcaa response answers lol
Yeah, I don't think that was a joke. They give you the key important things, but they aren't enough - Especially when they give answers in dot points.
Post by: sin0001 on November 10, 2013, 06:06:07 pm
VCAA's Answer: http://puu.sh/5dYz9.png
Why have they included the transaction on the 28th of June?
Post by: Damoz.G on November 10, 2013, 06:08:02 pm
Question: http://puu.sh/5dYx6.png
VCAA's Answer: http://puu.sh/5dYz9.png
Why have they included the transaction on the 28th of June?
We were discussing that last night. Its a mistakes because Reports are prepared monthly. :)
Post by: Kuchiki on November 10, 2013, 06:11:42 pm
Question: http://puu.sh/5dYx6.png
VCAA's Answer: http://puu.sh/5dYz9.png
Why have they included the transaction on the 28th of June?
The question does say to "Prepare the journal entries for the above transactions," which would include the transaction on the 28th of June.
Post by: Damoz.G on November 10, 2013, 06:12:48 pm
The question does say to "Prepare the journal entries for the above transactions," which would include the transaction on the 28th of June.
But Reports are prepared monthly? ??? You can't record a transaction that occurred in June into July's CRJ. =/
Post by: abcdqdxD on November 10, 2013, 06:13:30 pm
Post by: Damoz.G on November 10, 2013, 06:17:14 pm
Just follow the instructions of the question and you cant go wrong
So would you include the transaction on the 28th as well? I would have thought it was a trick even though it said "above transactions".
Post by: Kuchiki on November 10, 2013, 06:17:38 pm
But Reports are prepared monthly? ??? You can't record a transaction that occurred in June into July's CRJ. =/
You mean journals are posted to the ledger monthly, right? Reports are prepared at the end of every reporting period.
Anyway, it doesn't say anywhere that it's strictly July's Cash Receipts Journal. Plus, you can clearly see that it's not a comprehensive Journal, anyway; you're just recording the transactions in the question. So, I guess, just imagine you're recording each entry as they've occurred, and you just happen to be putting them into one Journal template.
Post by: Damoz.G on November 10, 2013, 06:20:39 pm
You mean journals are posted to the ledger monthly, right? Reports are prepared at the end of every reporting period.
Anyway, it doesn't say anywhere that it's strictly July's Cash Receipts Journal. Plus, you can clearly see that it's not a comprehensive Journal, anyway; you're just recording the transactions in the question. So, I guess, just imagine you're recording each entry as they've occurred, and you just happen to be putting them into one Journal template.
Ooops...yeah. REPORTS are prepared monthly. Hmmm...that makes more sense. :)
Thank you. :D
Post by: itsdanny on November 10, 2013, 06:21:20 pm
Post by: abcdqdxD on November 10, 2013, 06:23:19 pm
Post by: Damoz.G on November 10, 2013, 06:29:29 pm
deposit is levied on total amount owing (therefore gst inclusive)
I thought the study design changed last year, and GST was only recognised at the time of the Sale, so it would be excluding the GST.
Post by: abcdqdxD on November 10, 2013, 06:32:32 pm
Post by: Damoz.G on November 10, 2013, 06:37:01 pm
When you record it, you don't recognise the GST in your CRJ. But the deposit is levied on the total amount payable which includes GST.
I know that bit. :P
Wasn't the question if GST was to be included when paying the Deposit?
Post by: abcdqdxD on November 10, 2013, 06:38:48 pm
I know that bit. :P
Wasn't the question if GST was to be included when paying the Deposit?
The question was whether the 20% is levied on the total amount owing or just the sales figure
Post by: Damoz.G on November 10, 2013, 06:40:30 pm
The question was whether the 20% is levied on the total amount owing or just the sales figure
Yeah, so you would do 20% x 500=$100 deposit, wouldn't you?
Post by: dreambig on November 10, 2013, 06:44:31 pm
I initially did include it but got it wrong :(
So i guess you dont include it then?
Post by: abcdqdxD on November 10, 2013, 06:45:12 pm
Yeah, so you would do 20% x 500=$100 deposit, wouldn't you?
iirc its 0.2 x 550
note with past exams pree 2012 rules regarding this changed from memory (better check the vcaa bulletin for changes to SD though)
Post by: Damoz.G on November 10, 2013, 06:48:37 pm
iirc its 0.2 x 550
note with past exams pree 2012 rules regarding this changed from memory (better check the vcaa bulletin for changes to SD though)
GST is charged on the total of $3,000+$500 = $3,500
10% x $3,500 = $350 (Recorded in GST Column of Sales Journal)
2012 Exam 2:
(http://i42.tinypic.com/mw8nkw.jpg)
Post by: Kuroyuki on November 10, 2013, 06:53:16 pm
The vcaa 2012 question was different as it specifically says 500 dollars.
But in the other question it says 20% of that value. And that value was 500 +GST which is 550.
So we should record the deposit of a 110.
but when we adjust in the general journal we might have to do something like
prepaid sales 110
sales 100
GSt clearing 10
we shouldnt include gst in deposit unless it specifically says so.
Post by: Damoz.G on November 10, 2013, 06:59:00 pm
As far as I know, GST is always charged at the time of the Sale when the goods are provided to the customer. So I would say its $100 Deposit. Then for when the goods are given I'd say its $400+$50 GST = $450 Balance owed on the Sale from the Debtor.
Post by: Kuroyuki on November 10, 2013, 07:03:38 pm
I'll be honest - That doesn't sound right.Yeah i know what you mean
As far as I know, GST is always charged at the time of the Sale when the goods are provided to the customer. So I would say its $100 Deposit. Then for when the goods are given I'd say its $400+$50 GST = $450 Balance owed on the Sale from the Debtor.
but in the specific question i think thats how we were meant to do it.
Post by: Damoz.G on November 10, 2013, 07:04:45 pm
Yeah i know what you mean
but in the specific question i think thats how we were meant to do it.
Hmmm......Even though its says "of that value", personally, I wouldn't include GST.
That's just my opinion.
Post by: abcdqd on November 10, 2013, 07:06:50 pm
Quote
– liability approach of recording prepaid revenue with no GST being recorded at the time of thehttp://www.vcaa.vic.edu.au/Documents/vce/account/AccountingSD-2013.pdf
deposit
Post by: Mafioso on November 10, 2013, 07:08:21 pm
In the last question, the statement of account for SW Sports says that on the 2nd of June, a credit sale was made to SWS with the invoice number of X34 and amount of 3740. But in the sales journal, X34 was for a sale to Club Hampton...
Minor issue, but I just wanted to point it out.
Post by: Damoz.G on November 10, 2013, 07:09:44 pm
Study Design page 29:http://www.vcaa.vic.edu.au/Documents/vce/account/AccountingSD-2013.pdf
Exactly, so as I said before, no GST on the Deposit. So its $100 deposit. Then $450 when the Sale occurs and the goods are given.
Has anyone else notices an error in the Neap 2013 paper?
In the last question, the statement of account for SW Sports says that on the 2nd of June, a credit sale was made to SWS with the invoice number of X34 and amount of 3740. But in the sales journal, X34 was for a sale to Club Hampton...
Minor issue, but I just wanted to point it out.
Yup. When doing Question 9c, use the Statement of Account instead of the Sales Journal. :)
Post by: Mafioso on November 10, 2013, 07:14:15 pm
Post by: Damoz.G on November 10, 2013, 07:17:38 pm
In NEAP 2013 question 1a, I keep getting $420 for the prepaid rego for the GJ but the answers say 490. How do I arrive at $490? My thinking was that between October to March, 6 months have passed so the original $840 paid is divided by 12 then multiplied by 6 to give 6 months incurred.
840/12=$70 per month
Consumed:
Remaining: March, April, May June, July, August, September
7 months x $70=$490
Use your fingers! It actually helps. :)
Post by: itsdanny on November 10, 2013, 07:18:53 pm
When you record it, you don't recognise the GST in your CRJ. But the deposit is levied on the total amount payable which includes GST.
This is what I have been told. But I have actually heard multiple different comments saying otherwise. So I am still not exactly sure (especially with the non-congruence going around here with the idea!!! Is there a correct answer?
Post by: Damoz.G on November 10, 2013, 07:21:01 pm
This is what I have been told. But I have actually heard multiple different comments saying otherwise. So I am still not exactly sure (especially with the non-congruence going around here with the idea!!! Is there a correct answer?
What do the answers say? Also, what company and year is the question from?
I'm confident that I am correct in my explanation.
Post by: Mafioso on November 10, 2013, 07:24:36 pm
Use your fingers! It actually helps. :)
Cheers mate :). Also, question 2e in the same exam has debited prepaid rent expense on the 1st of April in the question booklet but in the answer template it has 1st of March debited in the ledger. Screwed up the 2 marker because of this. I thought Neap was supposed to be perfect!
Post by: Damoz.G on November 10, 2013, 07:39:28 pm
Cheers mate :). Also, question 2e in the same exam has debited prepaid rent expense on the 1st of April in the question booklet but in the answer template it has 1st of March debited in the ledger. Screwed up the 2 marker because of this. I thought Neap was supposed to be perfect!
LOL! Don't let it get to you though. :)
Every company makes mistakes - Even VCAA!
Post by: mdotwillo on November 10, 2013, 07:51:53 pm
Stock Gain - always follow Conservatism, that is, if there are two balances with differing cost prices, always add the quantity to the cheaper of the cost prices so as not to overstate assets and owner's equity.
Stock Loss - always use FIFO as per normal
Purchase Returns - the credit note must identify the cost price of the stock that is being returned (i.e. FIFO doesn't apply)
Here's where my question is....
Sales Returns - it says in the VCAA Study Design that FIFO is reversed (i.e. Last out, first in - regardless of whether the last stock out was a sale or not). The textbook also suggests this.
However, in one practice exam, and I think maybe another one or two, there have been instances whereby in additional information they will say that a trade debtor has returned "stock line" purchased on "specific date" (which is normally a few weeks prior to the last entry in the stock card). So, my question is, should it appear tomorrow, do we uphold the rule stated in the Study Design and the textbook, or do we specifically record, in the 'IN' column, the particular cost price that the trade debtor paid on the specified date (because more often that not, the cost prices will differ depending on what way you go about it)?
Post by: Damoz.G on November 10, 2013, 07:55:12 pm
A question on Stock Cards:
Stock Gain - always follow Conservatism, that is, if there are two balances with differing cost prices, always add the quantity to the cheaper of the cost prices so as not to overstate assets and owner's equity.
Stock Loss - always use FIFO as per normal
Purchase Returns - the credit note must identify the cost price of the stock that is being returned (i.e. FIFO doesn't apply)
Here's where my question is....
Sales Returns - it says in the VCAA Study Design that FIFO is reversed (i.e. Last out, first in - regardless of whether the last stock out was a sale or not). The textbook also suggests this.
However, in one practice exam, and I think maybe another one or two, there have been instances whereby in additional information they will say that a trade debtor has returned "stock line" purchased on "specific date" (which is normally a few weeks prior to the last entry in the stock card). So, my question is, should it appear tomorrow, do we uphold the rule stated in the Study Design and the textbook, or do we specifically record, in the 'IN' column, the particular cost price that the trade debtor paid on the specified date (because more often that not, the cost prices will differ depending on what way you go about it)?
Always LIFO. :)
I've come across that as well, and it was in last year's VCAA Exam 2 as well - Have a look at Question 6 (2012 VCAA Exam 2):
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/2012account2-w.pdf
The second dot point in Additional Information says "A customer (T Wilson) returned two units purchased from Tech Talk on 25 November for a total of $1320 including GST (Credit Note 15)". Even though the Sale was in the previous month, you still had to use LIFO.
Hopefully that convinces you enough. :)
Post by: mdotwillo on November 10, 2013, 08:00:58 pm
Always LIFO. :)
I've come across that as well, and it was in last year's VCAA Exam 2 as well - Have a look at Question 6 (2012 VCAA Exam 2):
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/2012account2-w.pdf
The second dot point in Additional Information says "A customer (T Wilson) returned two units purchased from Tech Talk on 25 November for a total of $1320 including GST (Credit Note 15)". Even though the Sale was in the previous month, you still had to use LIFO.
Hopefully that convinces you enough. :)
Life saver! Thanks so much.
Post by: BoredSatan on November 10, 2013, 08:02:58 pm
Post by: Damoz.G on November 10, 2013, 08:05:28 pm
Life saver! Thanks so much.
No worries! :)
Guess who's back online ;)
You, but I'm going to sleep now. Sorry. =/
LOL! Jokes. :P
Post by: mdotwillo on November 10, 2013, 08:06:26 pm
No worries! :)
Although, unfortunately, it didn't provide absolute clarity on the issue because they would have purchased the stock for $350 cost price most likely anyway, as that was the only cost price in the balance on 1 December (considering they purchased stock on 25 November). In saying that, it has increased my confidence by a long way regarding using LIFO. And, let's be honest, if the official study design states that LIFO is the correct way, surely that outweighs any of these 'specific date' type questions!
Post by: Damoz.G on November 10, 2013, 08:08:40 pm
Although, unfortunately, it didn't provide absolute clarity on the issue because they would have purchased the stock for $350 cost price most likely anyway, as that was the only cost price in the balance on 1 December (considering they purchased stock on 25 November). In saying that, it has increased my confidence by a long way regarding using LIFO. And, let's be honest, if the official study design states that LIFO is the correct way, surely that outweighs any of these 'specific date' type questions!
Well if it tells you a price in the information, then use it. But if it doesn't tell you a Cost Price even though it was in a previous RP (e.g. the 2012 VCAA Exam), use LIFO.
Post by: Mafioso on November 10, 2013, 08:12:56 pm
Stock Loss - always use FIFO as per normal
Say my stock card balance currently indicates that I have 1 stock item at $50 (first in) and another stock item at $60 (last in). If a stocktake tells me that I have 1 stock on hand, does this mean that I assume that the stock worth $50 is 'lost'? Doesn't this breach conservatism since the loss is being understated by not recording the stock worth $60 as being lost?
Post by: Damoz.G on November 10, 2013, 08:14:59 pm
Say my stock card balance currently indicates that I have 1 stock item at $50 (first in) and another stock item at $60 (last in). If a stocktake tells me that I have 1 stock on hand, does this mean that I assume that the stock worth $50 is 'lost'? Doesn't this breach conservatism since the loss is being understated by not recording the stock worth $60 as being lost?
It does breach Conservatism, but the business will never know what Cost Price of the Stock was actually lost, so we follow the Rules of FIFO. If the 1@$50 is mentioned first in the Stock Card, then go with that.
Post by: mdotwillo on November 10, 2013, 08:18:52 pm
Well if it tells you a price in the information, then use it. But if it doesn't tell you a Cost Price even though it was in a previous RP (e.g. the 2012 VCAA Exam), use LIFO.
Yeah that seems like the way to go. Thanks again :)
Say my stock card balance currently indicates that I have 1 stock item at $50 (first in) and another stock item at $60 (last in). If a stocktake tells me that I have 1 stock on hand, does this mean that I assume that the stock worth $50 is 'lost'? Doesn't this breach conservatism since the loss is being understated by not recording the stock worth $60 as being lost?
I've also considered this before (it is strange how it can breach Conservatism), but yes, I agree with Caparva.
Post by: Damoz.G on November 10, 2013, 08:20:32 pm
Yeah that seems like the way to go. Thanks again :)
No worries. :)
Post by: Mafioso on November 10, 2013, 08:30:10 pm
Post by: TimmyC on November 10, 2013, 08:32:56 pm
What are some limitations of control accounts and subsidiary ledgers?If you mean negatives too there could be
- if there's only or two debtors it's rather pointless to set up control accounts and subsidiary ledgers
-can create more expenses due to more work required
Post by: Damoz.G on November 10, 2013, 08:36:50 pm
If you mean negatives too there could be
- if there's only or two debtors it's rather pointless to set up control accounts and subsidiary ledgers
-can create more expenses due to more work required
Yup, and its also time consuming which is another negative. :)
Post by: Lucho23 on November 10, 2013, 08:49:34 pm
Post by: massachusetts8 on November 10, 2013, 08:50:51 pm
Post by: Lucho23 on November 10, 2013, 08:53:31 pm
- They rely on historical data and cannot guarantee future transactions
- Some rely on averages which may conceal details about specific information
- Using different accounting methods between firms may undermine comparability of these reports and financial indicators
Thanks!
Post by: Damoz.G on November 10, 2013, 08:59:01 pm
Is it possible that the discuss question would be about disadvantages and advantages of computerised accounting pacakges (e.g. MYOB and Quickbooks)? :o
No, as far as I can remember, its not on the SD.
BUT, if it does come up...
Advantage - Automatically done so no errors are made. Saves time as well.
Disadvantage - Costly.
Are there any other limitations on using financial indicators to determine performance than:
- They rely on historical data and cannot guarantee future transactions
- Some rely on averages which may conceal details about specific information
- Using different accounting methods between firms may undermine comparability of these reports and financial indicators
Thanks!
Great list.
Could also discuss Non-Financial Information. e.g. Customer feedback, employee satisfaction, etc.
Post by: Mafioso on November 10, 2013, 09:08:26 pm
Wages increase 5% from 2012 so 2013 estimate is $997500.
Plus the additional employee means $997500 + $65000 = $164759.
Then the accrued wages of $2000 from 2012 that was settled,
This totals $166750. What am I doing wrong?
Post by: Damoz.G on November 10, 2013, 09:12:41 pm
Why is the wages figure in the VCAA 2012 exam 2 income statement $164750?
Wages increase 5% from 2012 so 2013 estimate is $997500.
Plus the additional employee means $997500 + $65000 = $164759.
Then the accrued wages of $2000 from 2012 that was settled,
This totals $166750. What am I doing wrong?
I got confused by it as well. :P
This is what Kuchiki posted for me when I asked a few of weeks ago:
That was indeed a tricky thing for them to include (since they already gave you all the information to calculate the expense incurred in the Income Statement section), but it wouldn't affect the calculation; it just means that the business paid less in wages during the period than they incurred ($163,250 paid vs. $164,750 incurred, which is why the balance of Accrued Wages increased by the difference of $1,500). Hope that makes sense.
Post by: Lucho23 on November 10, 2013, 09:14:58 pm
Why is the wages figure in the VCAA 2012 exam 2 income statement $164750?
Wages increase 5% from 2012 so 2013 estimate is $997500.
Plus the additional employee means $997500 + $65000 = $164759.
Then the accrued wages of $2000 from 2012 that was settled,
This totals $166750. What am I doing wrong?
So its only the Expense that you're calculating so we base it off the expense in the Income Statement only (as that is what has been paid and accrued)
$95000*1.050=$99750 + 65000= $164750
The accrued wages as at 30 June 2013 of $3500 is included in this
Post by: Mafioso on November 10, 2013, 09:19:04 pm
Post by: Lucho23 on November 10, 2013, 09:22:42 pm
Thanks! Yeah that clears it up a bit for me but I feel sorry for the guys last year who had to think through that in exam conditions. So generally, we record the payment of the previous reporting period's accrued wages in the income statement by including it in wages expense right?
So an Accrued Expense is an expense incurred but not yet paid for.
Thus, the $2000 accrued from last year was incurred last year but hasn't been paid.
As it won't be incurred this year (because it has already been incurred) it is not included in wages expense.
The only wages included in wages expense is wages incurred for a period (not a payment for accrued wages)
When you record a payment of accrued wages in the Cash Payments Journal, do you list it under 'Wages' or 'Sundries' (Accrued Wages)?
Sundries! So therefore, it is not a wages expense.
Post by: BoredSatan on November 10, 2013, 09:24:38 pm
Post by: Lucho23 on November 10, 2013, 09:24:44 pm
If you hold less stock on hand, you don't improve stock turnover....or do you?
Post by: Damoz.G on November 10, 2013, 09:25:05 pm
So an Accrued Expense is an expense incurred but not yet paid for.
Thus, the $2000 accrued from last year was incurred last year but hasn't been paid.
As it won't be incurred this year (because it has already been incurred) it is not included in wages expense.
The only wages included in wages expense is wages incurred for a period (not a payment for accrued wages)
When you record a payment of accrued wages in the Cash Payments Journal, do you list it under 'Wages' or 'Sundries' (Accrued Wages)?
Sundries! So therefore, it is not a wages expense.
Good explanation. :)
Mafioso, just gotta think that the business had incurred the Wages, but just didn't pay for it yet. So as Kuchiki explained, they just paid less during the Reporting Period. :)
Post by: Damoz.G on November 10, 2013, 09:26:44 pm
Why is the wages figure in the VCAA 2012 exam 2 income statement $164750?
Wages increase 5% from 2012 so 2013 estimate is $997500.
Plus the additional employee means $997500 + $65000 = $164759.
Then the accrued wages of $2000 from 2012 that was settled,
This totals $166750. What am I doing wrong?
What your doing wrong is adding the Accrued Wages. You don't need to do this. The business simply paid less Wages Expense during the Reporting Period, which is why the Accrued Wages Expense increased by $1500 by the end of the Budgeted period. :)
Post by: Mafioso on November 10, 2013, 09:29:08 pm
Post by: BoredSatan on November 10, 2013, 09:29:45 pm
Guys, I just had a mental blank. If you hold less stock on hand, you improve Return on Assets right?Not sure about the ROA part
If you hold less stock on hand, you don't improve stock turnover....or do you?
but if you have less stock on hand you definately improve stock turnover because it is likely that you won't be holding stock for a long time until it is sold (like you would if you bought in bulk)
an easy way to understand this is to think about it this way:
Say you sell 1 item per day.
Business 1 purchases 100 items and it takes them 100 days to sell them all which means the stock turnover is ~50 days
Business 2 purchases 10 items and it takes them 10 days to sell them all which means the stock turnover is ~5 days
I think this is the correct logic :/
Post by: abcdqdxD on November 10, 2013, 09:53:57 pm
Increasing stock turnover effectively means you are converting stock to sales in a quicker timeframe. If stock levels are not replenished quickly enough, then overall stock balance will be less. As a result, lower stock levels may indicate improvement in the STO.
Theoretically, if you hold less stock on hand that is not due to an improvement in your ability to convert stock to sales, then STO won't increase. (Although this is very rare). For example, a business may order less stock due to lower consumer demand, and this doesn't actually improve the STO.
As for ROA, assuming your STO increased because you're converting stock to sales on a more regular basis, then net profit will increase in the form of sales. Since ROA = Net profit/Assets, an improvement in the STO may have a favourable effect on ROA.
Post by: nikil.v on November 10, 2013, 09:55:14 pm
-budgeted balance sheet
-budgeted income statement
-budgeted cash flow statement ?
Post by: Damoz.G on November 10, 2013, 09:57:25 pm
what is the purpose of preparing:
-budgeted balance sheet
-budgeted income statement
-budgeted cash flow statement ?
Re-posting....
2 most important things:
* Planning - Indicates future requirements of the firm. Relates to issues such as Loan Repayments, and whether the business will be able to meet these cash requirements and short-term debts as they fall due.
* Decision-Making - Provides a standard against which trading performance can be measured. It allows problem areas to be identified, and then correct action to be taken by the owner.
Post by: noone29 on November 10, 2013, 10:10:39 pm
Post by: Damoz.G on November 10, 2013, 10:24:29 pm
Hey guys I know it's a bit late but, are we always suppose to assume that there is a GST settlement when reconstructing accounts? I did one of the TSSM ones and it recorded GST Settlement but gave no indication that there was one in the question.
No. You don't assume that there is a GST Settlement made. If the Budgeted Period is 12 months, then there probably is a GST Settlement so pay close attention to the information given in the question during Reading Time.
But if there was a GST Settlement, it would be stated or displayed somehow for you to notice.
TSSM Trial Exams have a lot of mistakes in the questions and solutions so probably don't do them. :)
Post by: noone29 on November 10, 2013, 10:27:11 pm
No. You don't assume that there is a GST Settlement made. If the Budgeted Period is 12 months, then there probably is a GST Settlement so pay close attention to the information given in the question during Reading Time.
But if there was a GST Settlement, it would be stated or displayed somehow for you to notice.
TSSM Trial Exams have a lot of mistakes in the questions and solutions so probably don't do them. :)
Alright, thanks so much! Good luck tomorrow (not that you need it, expecting a 50 from you mate :P ) and good luck to everyone else! :)
Post by: IT_Failure on November 10, 2013, 10:30:36 pm
Eg. Accrued Wages from last reporting period are paid ($3000) and wages paid this reporting period is $27000. Which method is preferred, $30000 wages operating outflow, or the figure split into 2 outflows, accrued wages: $3000 and Wages: $3000.
I'm unsure which method vcaa prefers, or are both correct?
Post by: Lucho23 on November 10, 2013, 10:31:59 pm
Hey i have a question. In a cash flow statement, when payment of an accrued expense or revenue occurs, can you add it to the inflow/outflow, or is it seperate?
Eg. Accrued Wages from last reporting period are paid ($3000) and wages paid this reporting period is $27000. Which method is preferred, $30000 wages operating outflow, or the figure split into 2 outflows, accrued wages: $3000 and Wages: $3000.
I'm unsure which method vcaa prefers, or are both correct?
Split 'em! Nah actually it's better to distinguish them as paying for an accrued wages expense is not the same as paying for a wages expense if you get what I mean :P
Post by: Damoz.G on November 10, 2013, 10:33:36 pm
Alright, thanks so much! Good luck tomorrow (not that you need it, expecting a 50 from you mate :P ) and good luck to everyone else! :)
HAHA! As I said, I'm just hoping for a 45, don't think I can get a 50. =/
Hey i have a question. In a cash flow statement, when payment of an accrued expense or revenue occurs, can you add it to the inflow/outflow, or is it seperate?
Eg. Accrued Wages from last reporting period are paid ($3000) and wages paid this reporting period is $27000. Which method is preferred, $30000 wages operating outflow, or the figure split into 2 outflows, accrued wages: $3000 and Wages: $3000.
I'm unsure which method vcaa prefers, or are both correct?
Split them - They are two expenses from different Reporting Period. Its more useful for decision-making, thus supporting Relevance. :P
Post by: IT_Failure on November 10, 2013, 10:41:05 pm
Good luck on that 50 Damoz! Or maybe 49 (Accounting is near impossible to ace!)
Does anyone know how to predict a study score? What would a 90% get?
Post by: BoredSatan on November 10, 2013, 11:10:55 pm
I'm expecting everyone to get 50's :P except Damoz, hopefully you can get that 30 ;)
Post by: Damoz.G on November 10, 2013, 11:15:19 pm
Good luck to you all!!!
I'm expecting everyone to get 50's :P except Damoz, hopefully you can get that 30 ;)
Now where's that Vote Down button. Hmmmm...:P
Post by: sin0001 on November 10, 2013, 11:15:50 pm
Split 'em! Nah actually it's better to distinguish them as paying for an accrued wages expense is not the same as paying for a wages expense if you get what I mean :P
Split them - They are two expenses from different Reporting Period. Its more useful for decision-making, thus supporting Relevance. :PSo would you do the same in an Income Statement (wait is it called Profit and Loss Statement now or what?), like report Accrued Wages incurred seperately Wages paid for and incurred?
Post by: abcdqd on November 10, 2013, 11:17:33 pm
P.S.: Good luck to y'all, but it looks like a lot of you don't even need it haha
Post by: sin0001 on November 10, 2013, 11:19:03 pm
No, wages expense is just wages expense (all wages that have been incurred over the period) :)Thanks!
Post by: Damoz.G on November 10, 2013, 11:19:37 pm
So would you do the same in an Income Statement (wait is it called Profit and Loss Statement now or what?), like report Accrued Wages incurred seperately Wages paid for and incurred?
No, its different for the Income Statement. Add the expense paid plus the expense incurred but not yet paid together which occur in the same Reporting Period as one expense in the Income Statement.
Post by: pumpkinbread on November 10, 2013, 11:23:32 pm
And is it okay to shortcut names in the exam for eg. disc. rev. , accum. depn - vehicle, etc?
Thanks :)
Post by: abcdqdxD on November 10, 2013, 11:25:03 pm
And is it okay to shortcut names in the exam for eg. disc. rev. , accum. depn - vehicle, etc?
Thanks :)
Don't abbreviate in the exam!
Post by: Damoz.G on November 10, 2013, 11:26:56 pm
What are the effects on the financial reports if a business fails to recognise NRV when valuing its stock?
And is it okay to shortcut names in the exam for eg. disc. rev. , accum. depn - vehicle, etc?
Thanks :)
If NRV is not recognised:
* Income Statement - Understated Stock Write-Down Expense means Overstated Net Profit.
* Balance Sheet - Assets (Stock Control) are overstated and Owner's Equity is overstated (Understated Stock Write-Down Expense means Overstated Net Profit).
* CFS - No Effect.
No, those abbreviations aren't allowed, you will lose the whole mark if you do. =/
Post by: abcdqdxD on November 10, 2013, 11:27:15 pm
P.S.: Good luck to y'all, but it looks like a lot of you don't even need it haha
Good luck on Wednesday! H1s for all :)
Oh and good luck to all accounting students of 2013! Remember to stay calm and write fast
Post by: pumpkinbread on November 10, 2013, 11:34:31 pm
What about the dates in the ledger accounts?
For eg. if all the items are related to Dec. 31 do we have to write in each line Dec. 31? Or can we write in the very first line Dec. 31 and then leave the lines underneath it blank?
Hopefully that makes sense LOL
Post by: Damoz.G on November 10, 2013, 11:37:21 pm
Thanks guys :)
What about the dates in the ledger accounts?
For eg. if all the items are related to Dec. 31 do we have to write in each line Dec. 31? Or can we write in the very first line Dec. 31 and then leave the lines underneath it blank?
Hopefully that makes sense LOL
Some Examiner's Reports have just the one Dec 31 for the rest of the entries, but you really should mention it for every entry.
Basically, avoid shortcuts and abbreviations at all times. I know your pushing for time, but don't take shortcuts, because it could be wrong or you may get a harsh assessor and you will lose the marks. So just don't use abbreviations or shortcuts - Write the full thing out and then there is no question on whether your assessor gives you marks or not (As long as the rest of the answer is correct as well). :)
Post by: pumpkinbread on November 10, 2013, 11:40:02 pm
Some Examiner's Reports have just the one Dec 31 for the rest of the entries, but you really should mention it for every entry.
Basically, avoid shortcuts and abbreviations at all times. I know your pushing for time, but don't take shortcuts, because it could be wrong or you may get a harsh assessor and you will lose the marks. So just don't use abbreviations or shortcuts - Write the full thing out and then there is no question on whether your assessor gives you marks or not (As long as the rest of the answer is correct as well). :)
Thanks so much :D
Post by: Damoz.G on November 10, 2013, 11:46:46 pm
Good Luck everyone! :)
Post by: TimmyC on November 11, 2013, 08:43:58 am
(sorry about no question lol)
Post by: mdotwillo on November 11, 2013, 10:00:34 am
Is it okay to shortcut names in the exam for eg. disc. rev. , accum. depn - vehicle, etc?
I'd say Acc. Dep'n of [NCA] is the only abbreviation VCAA would accept. They have used it numerous times in their Assessment Reports over the years. However, they write the full 'Accumulated Depreciation - NCA' in the Balance Sheet, this is because there is always enough space to do so.
If you're short on time, the only place I'd write the abbreviation would be in the 'Disposal of NCA' General Ledger account, due to the lack of space. In saying that, if you have the time up your sleeve, take the extra 5 seconds out to try and fit it into the cross reference column, you never know what assessor you'll get (as stated in a previous post).
Post by: Damoz.G on November 11, 2013, 10:06:17 am
Post by: Eugenet17 on December 27, 2013, 03:34:12 pm
Also, are there any other specific formattings such as this in a balance sheet that i should be aware of? Do you need a space before the next heading?
Post by: abcdqdxD on December 27, 2013, 03:43:30 pm
In a balance sheet, when should i draw a line/double lines? Eg. A double line under total assets.
Also, are there any other specific formats such as this in a balance sheet that i should be aware of? Do you need a space before the next heading?
It doesn't really matter. Assessors don't allocate marks to lines. As for spacing and stuff, once again it isn't important as you are not marked for formatting. If you use the Cambridge textbook, try to get a hold of the solutions to see how they set it out and use it as a guide. The exam will provide you with the necessary formatting so it isn't something you need to worry about :)
Post by: Eugenet17 on December 27, 2013, 03:46:53 pm
It doesn't really matter. Assessors don't allocate marks to lines. As for spacing and stuff, once again it isn't important as you are not marked for formatting. If you use the Cambridge textbook, try to get a hold of the solutions to see how they set it out and use it as a guide. The exam will provide you with the necessary formatting so it isn't something you need to worry about :)
Oh okay then, thanks! :)
Post by: Eugenet17 on December 28, 2013, 06:29:47 pm
Post by: angelicachee on December 28, 2013, 07:07:27 pm
Can anyone help with Exercise 2.7 of the Cambridge textbook? I keep getting $91,300 for my total assets but the answer says $91,700 :/
Current Assets
Debtors 3000
Stock 35000
Prepaid rent 1200
Non-Current Assets
Fixtures and Fitting 12500
Fridges 40000
Total Assets 91700
I hope it's correct :-[
Post by: Eugenet17 on December 28, 2013, 07:38:39 pm
Current Assets
Debtors 3000
Stock 35000
Prepaid rent 1200
Non-Current Assets
Fixtures and Fitting 12500
Fridges 40000
Total Assets 91700
I hope it's correct :-[
It is! Awesome, thanks alot :)
Post by: Eugenet17 on January 18, 2014, 06:58:00 pm
Post by: Kuroyuki on January 18, 2014, 07:21:47 pm
Can i get some help on Exercise 3.6 in the Cambridge Textbook? It's 'Opening balances in the General Ledger', the debit side of my Trial balance is correct but my credit side isnt? Am i supposed to add in the remainder as Capital or something?I haven't looked at the specific exercise but, the accounting equation is A = L + OE. So in the trial balance after you have included all the Assets and Liabilities, you do A -L to calculate the capital and record it as the last entry on the trial balance. This will also make the trial balance balance. Its quite a common error to not include capital.
Hope this helps somewhat. :)
Post by: Eugenet17 on January 18, 2014, 07:23:24 pm
I haven't looked at the specific exercise but, the accounting equation is A = L + OE. So in the trial balance after you have included all the Assets and Liabilities, you do A -L to calculate the capital and record it as the last entry on the trial balance. This will also make the trial balance balance. Its quite a common error to not include capital.
Hope this helps somewhat. :)
Oh okay, do i record it under the capital ledger under Balance?
Post by: Kuroyuki on January 18, 2014, 07:27:13 pm
Oh okay, do i record it under the capital ledger under Balance?
Yep, I just had a look at the question, because the business is just adopting the double entry system it is recorded as balance.
Post by: Eugenet17 on January 18, 2014, 07:28:59 pm
Yep, I just had a look at the question, because the business is just adopting the double entry system it is recorded as balance.
awesome, thanks alot! :)
Post by: TheWackyCheese on January 19, 2014, 04:14:45 pm
Post by: Kuroyuki on January 19, 2014, 04:56:30 pm
So I have some holiday homework, it's Exercise 4.10 out of a book called VCE Accounting Units 3 and 4 (I think) with the business being Harvey's Electricals. It has a list of the transactions that occurred in the month as well as the general ledger balances from the previous month. The first question says to "enter the opening balances into the general ledger accounts" and then to "enter the above transactions into the general ledger". I'm just a bit confused, how am I supposed to enter the transactions into the general ledger without doing an analysing chart first?I don't have exact question you are referring to. You would be expected to enter transactions into the general ledger by either posting journals or questions may just ask to post the transactions. In the latter case you kinda have to know which accounts each transaction affects or you could think it through.
For example, Harvey Electrical bought 4000 dollars worth of stock on credit. That would affect Stock control (as the business is buying stock) ,Gst clearing (the business has paid 400 dollars of GST) and creditors control (The business now owes 4400 to a creditor) . You would then record it with the appropriate cross references in the relevant ledger accounts.
I forgot what an analysing chart is. :/
If you give the specific question perhaps i could be more of assistance.
But hopefully i gave you something to work with.
Post by: TheWackyCheese on January 20, 2014, 12:08:49 pm
Post by: smile+energy on January 20, 2014, 03:20:50 pm
And where can I get the answers of Cambridge accounting workbook for free? Sometimes I want to check the answers.
Thanks a lot
Post by: TheWackyCheese on January 20, 2014, 04:08:59 pm
In regards to the solutions, my school has them posted on our college intranet. You could ask your teacher to upload them to yours but I don't think we are allowed to post textbook stuff on ATARNotes due to copyright or something.
Post by: Eugenet17 on January 20, 2014, 04:47:18 pm
Post by: Kuroyuki on January 20, 2014, 08:44:53 pm
Just need some clarification on something that I forgot about from a few weeks ago, what is discount revenue and how should it be classified?Discount revenue is the reduction in outflows of economic benefit in the form of decrease in creditors control, which increase owner's equity in the form of net profit.
And it should be classified as revenue is that what you mean?
Can anyone please explain the relationship between accrual accounting and reporting period for me?I cant really remember how I would word this. But Reporting Period states the business' life must be divided into intervals of time so reports can be prepared and profit can be calculated. Profit is calculated under the the accrual accounting method. Which states profit is determinedby matching revenues earned in the period with the expenses incurred. Reporting Period ensures that only relevant revenues and expenses are included for the calculation of accurate profit.
And where can I get the answers of Cambridge accounting workbook for free? Sometimes I want to check the answers.
Thanks a lot
^ say something like that, sorry I cant be of more help. But hopefully i gave you a starting point. :)
Post by: p.taaa on January 20, 2014, 09:24:27 pm
It is earned when the firm pays back their trade creditor within the discount credit terms and gets a discount from them.
But a textbook definition would be, " A discount revenue is a saving in an outflow of economic benefits (cash) in the form of a decrease in liabilities (creditors control) that increases owners equity"
Post by: smile+energy on January 21, 2014, 04:15:40 pm
I cant really remember how I would word this. But Reporting Period states the business' life must be divided into intervals of time so reports can be prepared and profit can be calculated. Profit is calculated under the the accrual accounting method. Which states profit is determinedby matching revenues earned in the period with the expenses incurred. Reporting Period ensures that only relevant revenues and expenses are included for the calculation of accurate profit.
^ say something like that, sorry I cant be of more help. But hopefully i gave you a starting point. :)
Your explanation is very clear, better than the textbook. Thanks :)
Post by: smile+energy on January 21, 2014, 04:37:46 pm
The accounting principle Consistency states that accounting methods should be applied..., what does the term "accounting methods" means?
I will appreciate your help, thanks
Post by: Kuroyuki on January 21, 2014, 05:47:00 pm
I don't really understand the accounting principle Conservatism, the definition is losses should be recorded when probable but gains should only be recorded when certain, so that liabilities and expenses are not understated and assets and expenses are not overstated. Can you explain further for me?So for conservatism, accountants are meant to be prudent, like always on the safe side. For example, when a debt is unlikely to be recovered, like the loss is probable we write it off as a bad debt, this ensures that we are not overstating our profit for the period and the amount debtors owe us as an asset. Likewise we record our stock at cost price and only recognise the selling price after the stock has actually being sold, when the gain is certain in other words.
The accounting principle Consistency states that accounting methods should be applied..., what does the term "accounting methods" means?
I will appreciate your help, thanks
Accounting methods refer to how the business does accounting like using FIFO. The business shouldn't change from FIFO to any other cost assignment method, if it did reports would be inaccurate. Another example of different accounting methods is depreciation methods such as reducing balance or straight line.
Post by: p.taaa on January 21, 2014, 09:32:27 pm
Post by: TheWackyCheese on January 22, 2014, 06:23:25 pm
Post by: IT_Failure on January 23, 2014, 03:34:14 pm
Just quick question, in regards to the general ledger. What accounts would be affected if the business "Received from cash clients $2860, including GST of $260 (Cost of sales $1400)?" I'm thinking there are 5 accounts but I'm not sure as the transaction was already completed but only being paid now so I don't know what to put in. :-\At the point of sale the accounts would appear as so: Debtors Control: (DR) $2680 (Individual Debtor account by same amount) Cost of Sales (DR) $1400, Sales: (CR): $2600, Gst Clearing: (CR) $260, Stock Control: (CR) $1400.
Therefore when a payment is received you are not recording the sale again but simply the receipt of debts owing to the business and the increase on bank. Therefore it will effect accounts in this way: Debtors Control: (CR) $2860 (Don't forget to record in individual debtor account too) Bank:(DR) $2680
Post by: smile+energy on January 24, 2014, 03:11:59 pm
So for conservatism, accountants are meant to be prudent, like always on the safe side. For example, when a debt is unlikely to be recovered, like the loss is probable we write it off as a bad debt, this ensures that we are not overstating our profit for the period and the amount debtors owe us as an asset. Likewise we record our stock at cost price and only recognise the selling price after the stock has actually being sold, when the gain is certain in other words.
Accounting methods refer to how the business does accounting like using FIFO. The business shouldn't change from FIFO to any other cost assignment method, if it did reports would be inaccurate. Another example of different accounting methods is depreciation methods such as reducing balance or straight line.
Wow, your explanations are excellent!
I really understand all of them now, thanks for your help :)
Post by: smile+energy on January 24, 2014, 03:13:23 pm
Conservatism is there to account for the 'worst case scenario' so the firm can employ strategies to solve or to handle the worst possible outcome.I've got it, thank you
Post by: smile+energy on January 24, 2014, 03:15:26 pm
Q: the owner of Frosty Fridegs believes its market value is shown in the Balance Sheet as the difference between total assets and total liabilities.
Referring to one accounting principle, explain why the market value of Frosty Fridges will not be shown as the difference between total assets and total liabilities
Thanks in advance.
Post by: TheWackyCheese on January 25, 2014, 10:37:11 am
At the point of sale the accounts would appear as so: Debtors Control: (DR) $2680 (Individual Debtor account by same amount) Cost of Sales (DR) $1400, Sales: (CR): $2600, Gst Clearing: (CR) $260, Stock Control: (CR) $1400.
Therefore when a payment is received you are not recording the sale again but simply the receipt of debts owing to the business and the increase on bank. Therefore it will effect accounts in this way: Debtors Control: (CR) $2860 (Don't forget to record in individual debtor account too) Bank:(DR) $2680
Sorry, I probably should've come back and said that I figured the answer out and there was no need for anyone to reply xD
But yeah, I got the exact same answer you worked out, thanks!
Post by: IT_Failure on January 25, 2014, 01:52:24 pm
Can anyone solve the problem for me? It is from the Cambridge workbook and I don’t understand what market value is.Market value is the current value of an item if sold now, eg a car bought for $30000 2 years ago may now have a market value of $24000.
Q: the owner of Frosty Fridegs believes its market value is shown in the Balance Sheet as the difference between total assets and total liabilities.
Referring to one accounting principle, explain why the market value of Frosty Fridges will not be shown as the difference between total assets and total liabilities
Thanks in advance.
As Assets are recorded at historical cost, the balance sheet will not show the current value of these (even a carrying value does not directly relate to market value).
However I think this question is confusing, the difference between total assets and liabilities is the Owner's Equity (as per the accounting equation), and I don't see how this relates at all to the market value of the business at a whole.
Post by: abcdqdxD on January 26, 2014, 04:30:28 pm
Post by: chasej on January 26, 2014, 11:16:29 pm
(I did a lot of practice with ledgers last year so if I don't need to know AC's I'll just skip the section.)
Post by: abcdqdxD on January 26, 2014, 11:33:54 pm
Do we need to know analysing charts? Like do we have to know the definition of an analysing chart etc? I know they aren't account reports but was wondering whether they would ever appear on the exam etc.
(I did a lot of practice with ledgers last year so if I don't need to know AC's I'll just skip the section.)
Definitely won't be assessed in the exam. For SACs, technically the school could assess anything they want but it is highly unlikely you will be asked for a definition. They may get you to fill in one though. Feel free to skip the section if you feel like you have a good grasp of double entry.
Post by: chasej on January 26, 2014, 11:52:27 pm
Definitely won't be assessed in the exam. For SACs, technically the school could assess anything they want but it is highly unlikely you will be asked for a definition. They may get you to fill in one though. Feel free to skip the session if you feel like you have a good grasp of double entry.
Thanks. I'm pretty sure my teacher won't assess them so I'll just ignore them. :)
Post by: smile+energy on January 27, 2014, 03:07:31 pm
Market value is the current value of an item if sold now, eg a car bought for $30000 2 years ago may now have a market value of $24000.
As Assets are recorded at historical cost, the balance sheet will not show the current value of these (even a carrying value does not directly relate to market value).
However I think this question is confusing, the difference between total assets and liabilities is the Owner's Equity (as per the accounting equation), and I don't see how this relates at all to the market value of the business at a whole.
Thanks for your help :)
Yeah, the question made me confused too
Post by: smile+energy on January 27, 2014, 03:08:48 pm
Accounting reports should not be used as a valuation tool. The difference between total assets and liabilities is a number - and only a number. In theory, it represents owner's equity (the value of the owner's stake in the firm) but in practice this figure is meaningless. Owner's equity differs to market value in that market value can only be discovered at the point of sale. Market value is based on supply and demand, brand loyalty among other things and is not necessarily indicated by the value of the firm's owner's equity.
Really good answer, thanks :)
Post by: p.taaa on January 28, 2014, 10:16:16 am
Do we need to know analysing charts? Like do we have to know the definition of an analysing chart etc? I know they aren't account reports but was wondering whether they would ever appear on the exam etc.
(I did a lot of practice with ledgers last year so if I don't need to know AC's I'll just skip the section.)
No not really, analysing charts are just there to aid learning. It helps students understand how debits and credits work because its their first time learning it. i also highly doubt that it will appear on the exam, yet it is pretty straight forward and easy to do. i've never seen an analysing chart in a practice paper/ exam
Hope this helps!
Post by: Jason12 on February 04, 2014, 09:42:44 pm
Post by: abcdqdxD on February 04, 2014, 10:52:07 pm
What is a situation in which a vehicle would be classified as a current asset?
If Vehicle falls under Stock Control, i.e. the firm sells cars as its main source of revenue generation.
Post by: chasej on February 05, 2014, 12:36:44 am
If Vehicle falls under Stock Control, i.e. the firm sells cars as its main source of revenue generation.
Couldn't it also be if the vehicle is expected to be sold/decommissioned within 12 months. As wouldn't a car seller list vehicles which it intends to sell as stock in the balance sheet?
Post by: abcdqdxD on February 05, 2014, 09:13:04 am
Couldn't it also be if the vehicle is expected to be sold/decommissioned within 12 months. As wouldn't a car seller list vehicles which it intends to sell as stock in the balance sheet?
Yep you're also right. As I previously said, Vehicle would fall under stock control if the firm is a car dealer but the vehicle in itself is still a current asset.
Post by: smile+energy on February 05, 2014, 04:03:35 pm
A vehicle purchased by the owner but then contributed to the business. The asset cannot be valued at the original price paid by the owner, as it is the cost to the business.
And can you please explain the Going concern principle by using an example for me?
Thanks in advance.
Post by: jono88 on February 05, 2014, 04:45:52 pm
Financial statements are prepared with the assumption that the entity will continue to exist in the future, unless otherwise stated.
The going concern assumption is the reason assets are generally presented in the balance sheet at cost rather that at fair market value. Long-term assets are included in the books until they are fully utilized and retired.
Post by: chasej on February 05, 2014, 05:09:54 pm
I am confused about this sentence, can someone explain it for me?Since the owner purchased the vehicle, the vehicle has probably gone down in value as the vehicle has been used by the owner. Therefore the value of the vehicle (capital contribution) must be recorded at the agreed value, which is an estimate of the vehicle's worth at the time of contribution. The figure is less reliable as there is no source document to verify the value, however the agreed value is far more relevant to the business as it represents the value of the vehicle, and hence the value of future economic benefit, the vehicle is to provide to the business. Essentially in this case relevance overrides reliability, no other time is that the case.
A vehicle purchased by the owner but then contributed to the business. The asset cannot be valued at the original price paid by the owner, as it is the cost to the business.
Post by: Kuroyuki on February 05, 2014, 05:32:28 pm
no other time is that the case.hmm
Isn't always the case? For example depreciation, it is an expense based on two estimates (unreliable) but we still do it because it is a relevant expense and will affect profit and decision making.
From what I remember relevance always overrides reliability.
Post by: smile+energy on February 06, 2014, 07:06:03 am
Since the owner purchased the vehicle, the vehicle has probably gone down in value as the vehicle has been used by the owner. Therefore the value of the vehicle (capital contribution) must be recorded at the agreed value, which is an estimate of the vehicle's worth at the time of contribution. The figure is less reliable as there is no source document to verify the value, however the agreed value is far more relevant to the business as it represents the value of the vehicle, and hence the value of future economic benefit, the vehicle is to provide to the business. Essentially in this case relevance overrides reliability, no other time is that the case.Thanks for your detailed explanation :)
I have another question: why the vehicle contributed by the owner is a cost of the business?
Post by: smile+energy on February 06, 2014, 07:09:22 am
The going concern principle means that a business entity will continue to operate indefinitely, or at least for another twelve months.That makes sense, thanks
Financial statements are prepared with the assumption that the entity will continue to exist in the future, unless otherwise stated.
The going concern assumption is the reason assets are generally presented in the balance sheet at cost rather that at fair market value. Long-term assets are included in the books until they are fully utilized and retired.
Post by: chasej on February 06, 2014, 07:14:38 am
hmm
Isn't always the case? For example depreciation, it is an expense based on two estimates (unreliable) but we still do it because it is a relevant expense and will affect profit and decision making.
From what I remember relevance always overrides reliability.
Very true. I forgot about that.
Post by: TazzyGirl on February 07, 2014, 04:40:16 pm
I understood it in the first place when I began with analysing charts...but as the exercises progressed I just began to struggle.
Should I make my own analysing charts before I put entries in the ledgers? Or is there another way to do it that isn't so time-wasting?
Post by: abcdqdxD on February 07, 2014, 04:57:32 pm
I am SO confused with ledger accounts.
I understood it in the first place when I began with analysing charts...but as the exercises progressed I just began to struggle.
Should I make my own analysing charts before I put entries in the ledgers? Or is there another way to do it that isn't so time-wasting?
Think of analysing charts as 'training wheels' in accounting. Some people may need them for longer than others. If you're struggling, it may be a good idea like you suggested to do an analysing chart before doing the ledgers.
Post by: chasej on February 08, 2014, 12:04:19 am
I am SO confused with ledger accounts.
I understood it in the first place when I began with analysing charts...but as the exercises progressed I just began to struggle.
Should I make my own analysing charts before I put entries in the ledgers? Or is there another way to do it that isn't so time-wasting?
What do you find confusing about the ledgers? Or are they just hard in general?
I take an approach differently to ledgers so it might help you, but basically instead of rote learning what side increases or decreases an item, I simply tried to understand the rules of the ledgers (always balance and one dr and cr entry). And from there after wrote learning one rule (dr up and cr down for assets), and then understanding the opposite happens for liabilities (as liabilities are essentially the opposite to assets), I was able to learn how to use ledgers by understanding the way in which they operate instead of rote learning whether to write things on the dr or cr side.
Sorry if that didn't help. I just find the way I did it was a different process to others so a different process may be helpful to you (I never used an analysing chart, just followed the above steps).
Post by: TheWackyCheese on February 08, 2014, 05:18:14 pm
A good way to remember it is the acronym ↓O↑A↓L↑E↓R↑. Owners Equity, Asset, Liability, Expense, Revenue.
For example, On January 1, if a business purchased $7000 stock plus GST, Stock Control (asset) would increase by 7000 as that amount of stock was purchased, GST clearing (Liability) would decrease 700 (As the business no longer owes that money to the ATO but the business they purchased from now do) and Bank (Asset) will decrease by 7700 as the business now just spent $7700 of their bank money on the stock.
I'll attach a word document to try and explain it a bit better from here.
I hope I sort of help :)
Post by: TazzyGirl on February 08, 2014, 08:29:03 pm
Now I just have to get the hang of GST!
Post by: Jason12 on February 09, 2014, 01:00:30 am
Post by: Kuroyuki on February 09, 2014, 08:14:26 am
I'm not up to this part in the course (if it even is in the course) but how do accountants classify assets that are affected by depreciation but their value goes up instead of down. For example, rare car dealers or antiques or something. Do they just list their assets at an agreed value or what?It's not in the accounting 3/4 course. Assets will never be appreciated or anything like that. Asset can only be depreciated down. :)
Post by: TheWackyCheese on February 09, 2014, 11:04:36 am
Thank you to all of you! This is actually really helpful. I'm kind of beginning to understand now by actually practicing over and over and trying to understand where each thing is entered. I like the acronym too, it's a good way to remember. :)
Now I just have to get the hang of GST!
Glad to hear that it helped! I've got some other fairly straight forward examples as well to help you get the hang of it so just send me a PM if you think you need them. :)
Post by: Jason12 on February 09, 2014, 01:01:22 pm
the business purchased stock from l.davenport costing $4000 (plus $400 GST). A deposit of $500 was paid and the balance is due in 30 days.
the business paid creditors $3200 after receiving a $300 discount.
btw these are from the neap book and the answers don't make sense to me. a lot of these questions ask you do stuff which i don't recall being in the cambridge textbook
Post by: Michael Scofield on February 09, 2014, 02:39:16 pm
Kim Swood took home stock worth $1500
I thought when drawing increases it's credited?
Post by: abcdqdxD on February 09, 2014, 08:35:20 pm
Hey guys, I'm a little confused as to why OE is debited in the following question.
Kim Swood took home stock worth $1500
I thought when drawing increases it's credited?
Owner's equity (capital) decreases due to drawings. Capital has a credit balance, so to decrease it a debit entry must be made.
Post by: Fyrefly on February 10, 2014, 12:11:58 am
I am SO confused with ledger accounts.
I understood it in the first place when I began with analysing charts...but as the exercises progressed I just began to struggle.
Should I make my own analysing charts before I put entries in the ledgers? Or is there another way to do it that isn't so time-wasting?
I had to google it, because I had no idea what an analysing chart was... but I think if they're helping you learn and consolidate your understanding, then you should keep using them for as long as you feel you need to.
Do you guys know PALER? Not sure if they teach it in schools still, but even now it pops into my head occasionally when I'm at work.
DR CR
Proprietor ↑
Asset ↑
Liability ↑
Expense ↑
Revenue ↑
"Proprietor" is another word for "Owner's Equity".
The up arrows indicate whether you need a debit or a credit entry to increase that account - e.g. an increase in an Expense requires a Debit entry.
You can put down arrows in the opposite, but I didn't to keep it clean and better illustrate it.
When I learned VCE Accounting, I found this easy to remember because it goes CR - DR - CR - DR - CR.
I pretty much scribbled that on the corner of every exam or SAC I did, so maybe it'll help some of you guys too.
Post by: Fyrefly on February 10, 2014, 04:29:00 pm
I'm not up to this part in the course (if it even is in the course) but how do accountants classify assets that are affected by depreciation but their value goes up instead of down. For example, rare car dealers or antiques or something. Do they just list their assets at an agreed value or what?
This isn't covered in the VCE course, but just to satisfy your curiosity...
In Australia, using Fair Value accounting you can increase the book value of the asset to above its original purchase price. The other side of the ledger entry goes to a special type of Owner's Equity account called an "Asset Revaluation Reserve".
e.g. Value of antique car increases from $10,000 to $15,000:
DR Antique Car $5,000
CR Asset Revaluation Reserve $5,000
I don't want to explain too much or it'll be confusing, but 'appreciating' the asset in this way isn't part of the depreciation system that you guys are learning... it's part of a system that works alongside depreciation.
Answering another point you questioned... they don't list their assets at an "agreed value" per se, but at "fair value". There are a lot of rules accountants have to follow in determining fair value, but you get the idea.
Really good questions :)
It's great to see you're already thinking about stuff that you don't learn until you get to university.
Post by: Jason12 on February 11, 2014, 10:28:01 pm
Post by: smile+energy on February 12, 2014, 03:45:44 pm
At the end of reporting period, the GST account has a debit balance, the business will get a refund. While if the GST account has a credit balance, the business will pay for the money owed. I don't really understand it. Thanks in advance
Post by: Fyrefly on February 12, 2014, 10:40:27 pm
Can someone please explain this for me?
At the end of reporting period, the GST account has a debit balance, the business will get a refund. While if the GST account has a credit balance, the business will pay for the money owed. I don't really understand it. Thanks in advance
The GST account can be an asset or a liability.
A debit balance makes it an asset.
A credit balance makes it a liability.
If the GST is an asset, that means the business has paid more GST throughout the year than they were obliged to, so they're entitled to a refund of the extra money paid. The refund represents "future economic benefit".
If the GST is a liability, that means the business has paid less GST throughout the year than they were supposed to, so they still owe the ATO some money and must pay this. The payment represents an "outflow of economic benefits".
Post by: smile+energy on February 13, 2014, 04:02:59 pm
The GST account can be an asset or a liability.
A debit balance makes it an asset.
A credit balance makes it a liability.
If the GST is an asset, that means the business has paid more GST throughout the year than they were obliged to, so they're entitled to a refund of the extra money paid. The refund represents "future economic benefit".
If the GST is a liability, that means the business has paid less GST throughout the year than they were supposed to, so they still owe the ATO some money and must pay this. The payment represents an "outflow of economic benefits".
Thanks, I fully understand the content now.
Post by: memento on February 13, 2014, 05:48:34 pm
Post by: abcdqdxD on February 13, 2014, 05:52:37 pm
Can someone please explain how to work out cost price from a sales invoice when there is no mark up stated. eg $720 plus gst what would be the cost price? Thanks
You can't work out the cost price if markup isn't stated
Post by: memento on February 13, 2014, 06:28:16 pm
You can't work out the cost price if markup isn't statedoh ok
Post by: Jason12 on February 13, 2014, 07:59:15 pm
Post by: abcdqdxD on February 13, 2014, 08:42:50 pm
Accounting reports should not be used as a valuation tool. The difference between total assets and liabilities is a number - and only a number. In theory, it represents owner's equity (the value of the owner's stake in the firm) but in practice this figure is meaningless. Owner's equity differs to market value in that market value can only be discovered at the point of sale. Market value is based on supply and demand, brand loyalty among other things and is not necessarily indicated by the value of the firm's owner's equity.
Post by: jtvg on February 13, 2014, 09:18:26 pm
a business owner determines the difference between assets and liabilities in his balance sheet is $10,000. He therefore believes that this is the amount that would remain if all assets were sold and all debts paid. Explain with reference to an accounting principle why the owner is incorrect.
Well, in the balance sheet, A - L = OE. However, there are different measurement bases used to value Assets, i.e. some could be recorded at cost and some revalued to fair value. Eventuallywhen the assets are sold they are sold at market price at point of sale, which may or may not equal the book value of the business' assets. So in that sense, the residual amount after netting off liabilities may not exactly equal the equity as stated on the balance sheet.
Post by: p.taaa on February 13, 2014, 10:31:46 pm
explain why assets and liabilities are classified in the balance sheet. In your explanation identify one qualitative characteristic that supports your explanation.
Assets and Liabilities are classified in the balance sheet to facilitate the calculation of financial indicators. By knowing the amount of current assets and current liabilities, then it is possibly to calculate the Working capital ratio. So a classified balance sheet will be more useful for decision making (Relevance) regarding the level of liquidity and possibility undertaking further finance, contributions or taking greater drawings.
Post by: smile+energy on February 17, 2014, 03:45:01 pm
Post by: Irving4Prez on February 17, 2014, 06:11:21 pm
Ty
Post by: Zealous on February 17, 2014, 09:00:38 pm
Is the monetary unit principle; all items must be recorded and reported in a common unit of measurement? Because the 3/4 textbook definition omitted "in the country where the reports were being made" which was included in the 1/2 textbook.I would say "common currency" rather than "common unit of measurement". The currency used should be that of the country where reports are made. Think of linking that to the understandability qualitative characteristic; is a report understandable if it's in a currency that's foreign to you? (someone correct me if i'm wrong..)
Ty
Can anyone explain why the term "term deposit" is a non-current asset? That will be great.We expect the benefits of a term deposit to last longer than a year, therefore we classify it as a non-current asset.
Post by: Kuroyuki on February 17, 2014, 09:26:39 pm
Post by: abcdqdxD on February 17, 2014, 09:48:52 pm
Post by: p.taaa on February 17, 2014, 10:50:09 pm
Is the monetary unit principle; all items must be recorded and reported in a common unit of measurement? Because the 3/4 textbook definition omitted "in the country where the reports were being made" which was included in the 1/2 textbook.
Ty
Remember to include the application of monetary values in the accounting records and reports!!
Post by: smile+energy on February 18, 2014, 10:55:43 am
Thanks, Zealous
We expect the benefits of a term deposit to last longer than a year, therefore we classify it as a non-current asset.
Post by: Jason12 on February 18, 2014, 10:24:07 pm
Post by: p.taaa on February 19, 2014, 05:34:11 pm
How do you record drawings in the analysing chart and general ledger?
Drawings is classified as negative drawings account. So recording will be opposite to a standard OE account.
So if you were to record a drawings, then it will be a debit entry, with either a bank cross-reference (if cash drawings), or stock control cross reference (if stock drawings).
Post by: anna.xo on February 22, 2014, 12:55:25 pm
Post by: abcdqdxD on February 22, 2014, 01:15:06 pm
Drawings is classified as negative drawings account. So recording will be opposite to a standard OE account.
So if you were to record a drawings, then it will be a debit entry, with either a bank cross-reference (if cash drawings), or stock control cross reference (if stock drawings).
I think u meant drawings is a -OE account
Post by: Jason12 on February 22, 2014, 05:45:06 pm
Post by: Eugenet17 on February 22, 2014, 10:03:38 pm
When wages are paid why does the wage expense go up instead of down
When wages are paid it is an expense, hence your expenses increase.
Question, will I ever be asked whether a business should value something at it's historical cost or it's agreed value? I know why one is used over the other (Relevance etc) but how do i judge if one is better in a situation?
Post by: Kuroyuki on February 22, 2014, 10:08:21 pm
When wages are paid it is an expense, hence your expenses increase.Well they do ask that question quite a lot. Relevance vs Reliability discussion questions are quite popular. Usually if they are asking it you usually are meant to argue Agreed value. But anyway just think did the business purchase the asset by itself, if so you value at the historical cost. If not its agreed value.
Question, will I ever be asked whether a business should value something at it's historical cost or it's agreed value? I know why one is used over the other (Relevance etc) but how do i judge if one is better in a situation?
Please correct me if I' m wrong, its been a while. :)
Post by: Eugenet17 on February 22, 2014, 10:22:26 pm
Well they do ask that question quite a lot. Relevance vs Reliability discussion questions are quite popular. Usually if they are asking it you usually are meant to argue Agreed value. But anyway just think did the business purchase the asset by itself, if so you value at the historical cost. If not its agreed value.
Please correct me if I' m wrong, its been a while. :)
Haha, right after I posted that I came across one of these questions.
The question asks to discuss the owner's argument to value a computer at the price she paid instead of the agreed value by referring to two accounting principles. So do i just talk about Entity to support the use of an agreed value, and then historical cost to support her argument?
Post by: p.taaa on February 23, 2014, 09:50:09 am
then go on and talk about the use of agreed value and what it represents
Post by: Eugenet17 on February 23, 2014, 07:57:24 pm
'A debt of $350 owed by B.Quick that had been written off was recorded in the ledger account of B.Quack', do I still record in the General Ledger column even though Debtors Control doesnt change?
Post by: IT_Failure on February 24, 2014, 03:35:44 pm
Thanks!
'A debt of $350 owed by B.Quick that had been written off was recorded in the ledger account of B.Quack', do I still record in the General Ledger column even though Debtors Control doesnt change?
I'm assuming you mean the subsidiary Debtor "B.Quick" has had $350 written off to Bad Debts expense. If this is the case then "Debtors Control"'s balance must be reduced by $350 also (cross reference Bad Debts). If an individual debtor's balance changes, debtors control will also change by the same amount.
Post by: smile+energy on March 01, 2014, 11:12:23 am
Yesterday I learned the debtors turnover, including the definition, formula and it's negative effects on a business. But the Cambridge doesnt give the details on what causes the DTO decreases or increase, can any one explain it for me? That will be great, thanks in advance. :)
Post by: Kuroyuki on March 01, 2014, 11:28:32 am
Hi, guysHmm is what you are looking for on page 467 in the textbook?
Yesterday I learned the debtors turnover, including the definition, formula and it's negative effects on a business. But the Cambridge doesnt give the details on what causes the DTO decreases or increase, can any one explain it for me? That will be great, thanks in advance. :)
That should give you a bunch of reasons for why DTO can speed up.
And you kinda do the opposite for why DTO can slow down
like the business has not been promptly invoicing so debtors are not immediately aware of their debt and the repayment date. Also the business may not have done sufficient credit checks, resulting in a lot more unreliable debtors that do not pay on time.
something like that
Post by: smile+energy on March 02, 2014, 02:01:40 pm
Hmm is what you are looking for on page 467 in the textbook?Sorry, I couldn't find the info from textbook :(
That should give you a bunch of reasons for why DTO can speed up.
And you kinda do the opposite for why DTO can slow down
like the business has not been promptly invoicing so debtors are not immediately aware of their debt and the repayment date. Also the business may not have done sufficient credit checks, resulting in a lot more unreliable debtors that do not pay on time.
something like that
Post by: Eugenet17 on March 03, 2014, 03:54:40 pm
Post by: IT_Failure on March 03, 2014, 11:17:35 pm
Could someone explain how i would go about recognising and recording a sundry creditor? Would i only record the creditor as a sundry creditor if i recognise that what im purchasing is a NCA and is infrequent? E.g purchase motor vehicle for firm, do i record it as a sundry creditor in the general journal, and do i record a sundry creditor seperately in their own ledger accounts and balance sheet?The short answer is YES.
All sundry creditors appear in their own individual accounts in the general ledger and the balance sheet.
Let's assume a $10000 vehicle was bought on credit from Honda. The NCA Vehicle would be debited $10000 and Sundry Creditor Honda credited $10000 in the general ledger.
Post by: BoredSatan on March 08, 2014, 10:02:32 pm
Post by: TheWackyCheese on March 10, 2014, 04:53:03 pm
Post by: BoredSatan on March 12, 2014, 11:51:52 am
Hey guys was just doing some practise sacs today and I was doing a question where the owner commenced business and contributed items. One of the items was: "Motor vehicle registration, which still has five months to run, with an annual cost of $840 (Memo 1)" Further down, it says "Identify and explain how the motor vehicle registration will be classified in the Balance Sheet of Bikes 4 Everyone." Would this be classified as a current asset and in the general journal as a debit of $350 (The price of the registration for the 5 months) and why? Thanks for any help.Yes it would be a current asset, because the motor vehicle registration will provide economic benefit to the business in the next 5 months since it provides the vehicle with registration and allow the vehicle to be used. Thus it is named "Prepaid Motor Vehicle Registration" and is a current asset.
It is debited in the General Journal because its contribution increases the amount of assets (hence debit) and increases the amount the owner has contributed to the business, increasing the owners equity (hence credit)
Post by: william.woon on March 16, 2014, 02:56:28 pm
Would the advertisement go into either statement of receipts and payments or income statement. Because I thought it wouldn't as its an liability as a creditor. Correct me please.
Post by: chasej on March 16, 2014, 08:19:57 pm
Question guys: For example the owner of a business organised an advertisement to be run during June at a cost of $480, plus GST, but the paper has not sent an account to him yet. The owner thinks they'll send it during July.
Would the advertisement go into either statement of receipts and payments or income statement. Because I thought it wouldn't as its an liability as a creditor. Correct me please.
When did the cash payment occur? Before during or after advertising appeared?
If the advertisement occurred before or same time as payment.
I imagine it would be an expense as it would result in an outflow of economic benefit (cash) which decreases assets (bank) and resultingly decreases owners equity. Adhering to conversation expenses must be recorded when probable hence an account need not be sent by the newspaper, only a cheque recording the outflow of cash from payment be needed.
I could be wrong because the information you have isn't really sufficient to give a proper answer tbh.
Post by: william.woon on March 16, 2014, 08:27:35 pm
When did the cash payment occur? Before during or after advertising appeared?
If the advertisement occurred before or same time as payment.
I imagine it would be an expense as it would result in an outflow of economic benefit (cash) which decreases assets (bank) and resultingly decreases owners equity. Adhering to conversation expenses must be recorded when probable hence an account need not be sent by the newspaper, only a cheque recording the outflow of cash from payment be needed.
I could be wrong because the information you have isn't really sufficient to give a proper answer tbh.
Sorry for the lack of information. So let's say in the month of July I was to have my business advertised, the company that advertises my business hasn't sent a bill to me by the end of 31st of July, I'm expecting it to be sent to me during August. Would I include it in the income statement for the month ended 31st of July?
Post by: jonoz0r on March 16, 2014, 08:45:02 pm
Sorry for the lack of information. So let's say in the month of July I was to have my business advertised, the company that advertises my business hasn't sent a bill to me by the end of 31st of July, I'm expecting it to be sent to me during August. Would I include it in the income statement for the month ended 31st of July?
This question is pretty ambiguous, but if the business was advertised in July, but won't be able to pay for the advertising until August, then I think that the expense would be recorded in the income statement ended 31st July as an Accrued Advertising Expense, as the expense has been incurred, but not yet paid for.
Hope this answers your question!
Post by: william.woon on March 16, 2014, 08:47:14 pm
This question is pretty ambiguous, but if the business was advertised in July, but won't be able to pay for the advertising until August, then I think that the expense would be recorded in the income statement ended 31st July as an Accrued Advertising Expense, as the expense has been incurred, but not yet paid for.
Hope this answers your question!
Thanks, I just thought you wouldn't put it in until the August income statement, but anyway thank you.
Post by: chasej on March 16, 2014, 10:06:44 pm
Thanks, I just thought you wouldn't put it in until the August income statement, but anyway thank you.
It couldn't be in the August income statement as to put an expense that was generated in July in the August income statement would understate net profit, thus decreasing relevance of accounting reports.
Post by: Eugenet17 on March 17, 2014, 06:02:50 pm
Assess the sales mark-up applied by Maranelli Sports for the six months ended 31 Dec 2015.
How do i answer this? :x
Also, 'Yearly repayments of 12000 are made on Mortgage-xx, interest 6% p.a., payable on 28 Feb and 31 Aug each year' : Is this still a current liability of 12000?
Post by: jonoz0r on March 17, 2014, 07:03:00 pm
From Cambridge Exercise 10.12:
Assess the sales mark-up applied by Maranelli Sports for the six months ended 31 Dec 2015.
How do i answer this? :x
Also, 'Yearly repayments of 12000 are made on Mortgage-xx, interest 6% p.a., payable on 28 Feb and 31 Aug each year' : Is this still a current liability of 12000?
For your first question, if there was a considerable profit in the reporting period, I would say something like "The sales mark-up applied by the business for the six months ended 31 December 2015 is adequate as Gross Profit is able to cover all other expenses, whilst also yielding a significant profit". You could also mention the timeframe in which the profit was earned, i.e. if there was considerable profit in only a 6 month period
For your second question, the yearly repayments are still considered to be a current liability of $12000, however be careful of the remaining portion that is non-current, because this is usually the part where people lose marks
Post by: Eugenet17 on March 17, 2014, 07:05:53 pm
For your first question, if there was a considerable profit in the reporting period, I would say something like "The sales mark-up applied by the business for the six months ended 31 December 2015 is adequate as Gross Profit is able to cover all other expenses, whilst also yielding a significant profit". You could also mention the timeframe in which the profit was earned, i.e. if there was considerable profit in only a 6 month period
For your second question, the yearly repayments are still considered to be a current liability of $12000, however be careful of the remaining portion that is non-current, because this is usually the part where people lose marks
Thanks!
@Second part: that's what i thought, solutions just recorded 24000 as a current liability so I guess it was just an error on their part
Post by: tiadrops on March 18, 2014, 08:36:46 pm
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.
Post by: Kuroyuki on March 18, 2014, 10:40:55 pm
Hi all, just a question about SACs.In the exam you will be given all the templates.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.
In SACS they should give you the templates, that said I'm not sure if they have to. But I agree that its time consuming and can get messy.
Post by: BoredSatan on March 19, 2014, 01:40:18 pm
Hi all, just a question about SACs.wow thats pretty unreasonable..
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.
Post by: smile+energy on March 19, 2014, 03:34:21 pm
Can I get some help? I don't know how to answer this question: why the vehicle contributed by the owner was valued at its agreed value?
And how can I structure my answer?
Thanks :)
Post by: TheWackyCheese on March 19, 2014, 06:37:42 pm
Hi all, just a question about SACs.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.
That's extremely unreasonable. Why would your teacher make you do that? Was it still 1 mark a minute? All templates should be given to you.
Hi, there
Can I get some help? I don't know how to answer this question: why the vehicle contributed by the owner was valued at its agreed value?
And how can I structure my answer?
Thanks :)
Basically the principles and characteristics you talk about here for this specific question are Conservatism and Relevance.
For example "The vehicle should be contributed at its agreed value as the conservatism principle states that losses be recorded when probably. The vehicle would have lost value overtime through use so the agreed value must be used so that the asset is not overstated. Furthermore, this provides a figure that upholds the relevance characteristic as the figure will be useful for calculating things such as depreciation which will aid in the businesses decision making" That would basically be how you structure it.
Someone feel free to correct me if I am wrong but I encountered that question in several practise SACs and that was pretty much how I answered it.
Post by: chasej on March 19, 2014, 06:43:04 pm
Hi all, just a question about SACs.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.
Maybe try talking to your teacher about it? Just say it's so time consuming and isn't even something you have to know for the exam.
If they don't know how to make the templates for some reason maybe even show them how to make them on excel or something.
Post by: smile+energy on March 20, 2014, 12:53:14 pm
Basically the principles and characteristics you talk about here for this specific question are Conservatism and Relevance.
For example "The vehicle should be contributed at its agreed value as the conservatism principle states that losses be recorded when probably. The vehicle would have lost value overtime through use so the agreed value must be used so that the asset is not overstated. Furthermore, this provides a figure that upholds the relevance characteristic as the figure will be useful for calculating things such as depreciation which will aid in the businesses decision making" That would basically be how you structure it.
Someone feel free to correct me if I am wrong but I encountered that question in several practise SACs and that was pretty much how I answered it.
My teacher taught me that the principle this question implied is historical cost. I just don't know to structure the answer properly. :(
Post by: chasej on March 20, 2014, 02:38:13 pm
Hi, there
Can I get some help? I don't know how to answer this question: why the vehicle contributed by the owner was valued at its agreed value?
And how can I structure my answer?
Thanks :)
The principle is the entity principle. It can't be historical coat as the historical cost is the irrelevant amount the owner purchased items for and used part of the value on a personal basis. I can write a solution later when I'm not on my phone if you wish.
Post by: smile+energy on March 20, 2014, 03:52:47 pm
The principle is the entity principle. It can't be historical coat as the historical cost is the irrelevant amount the owner purchased items for and used part of the value on a personal basis. I can write a solution later when I'm not on my phone if you wish.
Yes, please.
And I don't know how to answer this question too: if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why? Thanks
Post by: chasej on March 20, 2014, 05:55:34 pm
Yes, please.
And I don't know how to answer this question too: if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why? Thanks
why the vehicle contributed by the owner was valued at its agreed value? :
(this is more of a 5 mark discuss type answer)
Usually businesses value assets at their historical cost, the cost of the asset to the business as verified by source documents. However this is not the case when the owner contributes assets to the business, this is due to the fact that due to the entity principle, the owner and business are considered two separate entities, with accounting records and reports made on that basis, thus as the owner and business are separate any transfer of control of assets between the owner and the business must be reported as a transaction, as an exchange of goods and/or services occurred due to a capital contribution. However, although the entity principle forces a transaction to be recorded, in practice the owner and business are the one in the same, thus no receipt or other source document would exist to verify the cost of the asset to the business, thus an agreed value must be used, which is an estimate of the value of an asset at the time it is contributed to the business by the owner. The agreed value also improves relevance of accounting reports as by including an estimate of the value of the contributed asset to the business this is likely to be more representative of the potential future economic benefit to the business from the asset, then the price the owner purchased the asset at (as the owner would have likely already consumed some of the asset's value before the contribution).
if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why?
(made this a 2-3 mark-ish answer)
The vehicle should be valued at it's agreed value, an estimation of the value of the vehicle at time of contribution by the owner. This figure is preferable compared to the price the owner paid for the vehicle originally, the cost price, as the agreed value is more relevant to the business as the agreed value represents a figure likely to be closer to the value of future economic benefit the vehicle would provide to the business then the cost price, as it is likely the owner used a portion of the vehicles economic benefit for themselves before contribution, thus meaning the cost price would likely overstate the true value of the asset if it was used. Thus an agreed value increases relevance by including a figure which is more useful for decision making (the true value of economic benefit to the business) as opposed to a less useful figure, cost price (as the owner likely used some of the economic benefit).
Post by: TheWackyCheese on March 20, 2014, 09:53:17 pm
The historical cost principles states that assets should be valued at their original purchase price as this is verifiable by source document evidence. The owner should therefore value the non current asset at its original purchase price. This will also uphold the Reliability characteristic as the amount will be verifiable by a source document. However, the asset will most likely have lost value over time due to use. Therefore, the asset will not be worth as much when it was first purchased. If the owner did contribute the asset at its original purchase price, it may be breaching the Conservatism principle by overstating its assets. Since the loss of value on the asset is probable, it should be recorded at the agreed value (the value that it is believed the asset is worth now). This will also provide a figure that upholds the characteristic of relevance as the business can now use the agreed value for decision-making such as for calculation of depreciation.
I suppose you can use entity if you wanted to but I just think its easier and makes much more sense to correlate HC and Relaibilty to Conservatism and Relevance, especially for the 4 or 5 mark questions.
Edit: I accidentally posted this just after I finished talking about reliability for the first time.
Post by: chasej on March 20, 2014, 09:56:39 pm
Actually it sort of can be historical cost instead of entity and I think it makes more sense. Its usually a case of Historical cost and Reliability vs Conservatism and Relevance. The historical cost principles states that assets should be valued at their original purchase price as this is verifiable by source document evidence. The owner should therefore value the non current asset at its original purchase price. This will also uphold the Reliability characteristic as the amount will be verifiable by a source document.
Nah. capital contributions of non-cash asset almost always need an agreed value. Capital contributions is one of the only times we deviate from historical cost in the aim of increasing relevance to the business (I believe depreciation expense is the only other exception for VCE purposes but I stand to be corrected on this).
Relevance trumps reliability in this case. The purchase price has nothing to do with the business and will likely overstate the value of future economic benefit to the business resulting from the asset, thus is very irrelevant and will breach conservatism as assets would be overstated.
I refer to the cambridge 3/4 accounting text extract from pages 8 and 9 at this link http://imgur.com/uJzoBuO
Post by: tiadrops on March 20, 2014, 11:11:28 pm
That's extremely unreasonable. Why would your teacher make you do that? Was it still 1 mark a minute? All templates should be given to you.What's even more unreasonable is that he told us ON THE DAY of the sac that we had to draw everything by ourselves. The whole class was shocked and totally unprepared. We had a double period to do it, I was just lucky that I managed to finish in time.
Maybe try talking to your teacher about it? Just say it's so time consuming and isn't even something you have to know for the exam.Will do. :) He definitely knows how to make templates. He was being stingy about paper.
If they don't know how to make the templates for some reason maybe even show them how to make them on excel or something.
Post by: Jason12 on March 21, 2014, 09:04:39 pm
Post by: smile+energy on March 22, 2014, 07:51:11 am
why the vehicle contributed by the owner was valued at its agreed value? :
(this is more of a 5 mark discuss type answer)
Usually businesses value assets at their historical cost, the cost of the asset to the business as verified by source documents. However this is not the case when the owner contributes assets to the business, this is due to the fact that due to the entity principle, the owner and business are considered two separate entities, with accounting records and reports made on that basis, thus as the owner and business are separate any transfer of control of assets between the owner and the business must be reported as a transaction, as an exchange of goods and/or services occurred due to a capital contribution. However, although the entity principle forces a transaction to be recorded, in practice the owner and business are the one in the same, thus no receipt or other source document would exist to verify the cost of the asset to the business, thus an agreed value must be used, which is an estimate of the value of an asset at the time it is contributed to the business by the owner. The agreed value also improves relevance of accounting reports as by including an estimate of the value of the contributed asset to the business this is likely to be more representative of the potential future economic benefit to the business from the asset, then the price the owner purchased the asset at (as the owner would have likely already consumed some of the asset's value before the contribution).
if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why?
(made this a 2-3 mark-ish answer)
The vehicle should be valued at it's agreed value, an estimation of the value of the vehicle at time of contribution by the owner. This figure is preferable compared to the price the owner paid for the vehicle originally, the cost price, as the agreed value is more relevant to the business as the agreed value represents a figure likely to be closer to the value of future economic benefit the vehicle would provide to the business then the cost price, as it is likely the owner used a portion of the vehicles economic benefit for themselves before contribution, thus meaning the cost price would likely overstate the true value of the asset if it was used. Thus an agreed value increases relevance by including a figure which is more useful for decision making (the true value of economic benefit to the business) as opposed to a less useful figure, cost price (as the owner likely used some of the economic benefit).
Thanks very much. Very clear answers.
Post by: Jason12 on March 24, 2014, 10:04:34 pm
Post by: chasej on March 24, 2014, 10:41:04 pm
how to record correcting entries where a receipt from a debtor was incorrectly recorded as a payment to a creditor?
The first step for all correcting entries is to figure out what accounts where incorrectly debited or credited.
A payment to a creditor causes a decrease (credit) entry to bank, and a decrease (debit entry) to creditor's control in the general ledger.
Thus to negate the effect of the incorrect entry we must do the opposite to bring the accounts to their correct figures before the incorrect entry was made. Thus we make a debit entry to bank and a credit entry to creditor's control, to the value of the incorrect entry. To bring the balance of the account to their correct amount.
Then we must enter in the real transaction that occured, the receipt from debtors, which is a debit entry to bank, and a credit entry to debtors control, the former we increase the asset, and the latter we decrease.
Remember all the corrections must be entered into the general journal before being put into the ledger as ledger entries always need a journal entry.
--
That's the simple steps however to be really correct for VCAA purposes we need to only enter the correction as one entry in each ledger. Thus the bank entry must be refrenced to both creditor'ss control and debtor's control, and reflect the amount needed to bring the bank balance to what it should be (which is the amount to remove the effect of the incorrect entry+the amount to record the receipt from debtors). And the creditor's control should be cross-refrenced to bank, and debtor's control cross refrenced to bank.
Hope that last paragraph wasn't to confusing.
Post by: TheWackyCheese on March 25, 2014, 02:20:04 pm
1. Get the incorrect ledger balance back to $0
2. Enter what should have happened in the first place.
3. Transfer what you hand-wrote into the General Journal
Post by: anna.xo on April 02, 2014, 08:25:57 pm
I lose a lot of marks on the theory questions of exercises and past exams. Does anyone have any tips on how I can improve my theory answers ? (Just from a general point of view - common slip ups to avoid, etc.)
Any help is very appreciated ! Thanks :)
Post by: Jayceeleah on April 03, 2014, 10:28:32 pm
Post by: chasej on April 04, 2014, 12:44:11 am
Does anyone know what the petty cash system is? :o :o
It's not really relevant to the VCE accounting course (at least up until chapter 11 in cambridge text it isn't). But as I understand it, this system is a way to ensure cash payments, which are of a small nature, and thus do not justify their own cheques, are accounted for. This is done by creating a "petty cash" account in the general ledger, and crediting bank whenever petty cash needs to increase, (thus debiting petty cash). To do this one cheque is written out to cover all the small expenses of a business over a period, thus saving time by not having to write a new cheque for every small expense (by small I mean a few dollars, probably even less-anything more probably justifies its own cheque). (According to wikipedia the petty cash account should contain no more than $100 for a small business-that probably gives you an idea of how small these payments are).
I don't know exactly how the expenses are recorded after the petty cash is spent though.
Hope that made some sense.
P.S. It's late, I probably made some glaring spelling/grammatical mistakes.
Post by: Jason12 on April 06, 2014, 04:18:51 pm
also if the business receives a GST refund from the ATO how does it affect the GST clearing account in the general ledger?
Post by: TheWackyCheese on April 06, 2014, 05:45:08 pm
when calculating cost of sales from the stock cards, why isn't any memo transactions included?
Because Cost of Sales is an expense incurred when the stock is sold, not when the stock is withdrawn or taken for personal use/advertising etc.
also if the business receives a GST refund from the ATO how does it affect the GST clearing account in the general ledger?
When the GST on sales is less than GST on purchases, the account will have a debit balance. So I'm guessing that when the money is refunded by the ATO, it will go on the credit side of GST Clearing under "Bank"? Someone maybe clarify this.
Post by: chasej on April 07, 2014, 12:52:57 am
When the GST on sales is less than GST on purchases, the account will have a debit balance. So I'm guessing that when the money is refunded by the ATO, it will go on the credit side of GST Clearing under "Bank"? Someone maybe clarify this.
Correct. GST refund is a cash receipt thus has a debit entry on bank (as part of the aggregate posted from the cash receipts journal), and following double entry has a credit entry in the GST clearing account which is cross-referenced to bank. Essentially, a GST refund is turning the GST asset into cash for the business.
ALWAYS ensure GST refund is recorded in the cash receipts journal under sundries and is posted to the GST clearing account separately to the main GST column, as the GST column in the CRJ itself is only for GST collected/charged from customers, thus cannot include GST refunded from the ATO
This is what a GST refund looks like in the CRJ: http://imgur.com/3UYoZSY (credit cambridge published vce accounting 3/4 text page p.120 by A.Simmons and R.Hardy)
Post by: Eugenet17 on April 10, 2014, 08:23:03 pm
Shouldn't the Accumulated Depreciation of Cabinet be $720? The answer says that it's $1080.
Post by: chasej on April 10, 2014, 08:43:53 pm
On 1 July 2013, Knight's Prawns purchased new cabinets for $1800 plus 180 GST, depreciated using straight-line method at 20% p.a. Show how the cabinets would be reported in Balance sheet as at 30 June 2016.
Shouldn't the Accumulated Depreciation of Cabinet be $720? The answer says that it's $1080.
No the answer is $1080. We have a 20% p.a. depreciation and the item would have been consumed for 3 years at 30jun16, hence the depreciation rate is 60%*1800 (the purchase price), that is the accumulated depreciation is $1080.
Post by: Eugenet17 on April 10, 2014, 08:51:30 pm
Post by: chasej on April 10, 2014, 08:54:03 pm
Wait sorry typo on my part, the item was purchased on the 1 July 2014 haha
Ah right. In that case you're correct and the solutions are wrong.
Post by: Irving4Prez on April 11, 2014, 03:16:06 pm
Hoping someone could address the following questions I had,
1. I follow the 'IDL' layout when answering questions that involve an accounting principle and I came across a question in the Cambridge textbook that had an answer that didn't explicitly link the principle with the explanation.
Question: "Referring to one accounting principle, explain why only some of the wages paid on 9 July 2015 should be reported as an expense for July 2015".
Answer: "Of the $1260 paid in July, $810 was incurred in the current reporting period (July 2015) and $450 incurred (and accrued) in previous reporting period (June 2015).
They didn't explicitly mention how the reporting period period governs that the "life of the business should be separated...". So when is it necessary to omit regurgitating the definition? Secondly, if I were to link the definition to the explanation, how would I do so without bringing in other qualitative characteristics?
2. Is it more correct to say, 'accrued electricity', 'accrued electricity expense' or does it depend on the context of the question?
Thanks :)
Post by: Zealous on April 11, 2014, 03:57:51 pm
1. I follow the 'IDL' layout when answering questions that involve an accounting principle and I came across a question in the Cambridge textbook that had an answer that didn't explicitly link the principle with the explanation.1.
Question: "Referring to one accounting principle, explain why only some of the wages paid on 9 July 2015 should be reported as an expense for July 2015".
Answer: "Of the $1260 paid in July, $810 was incurred in the current reporting period (July 2015) and $450 incurred (and accrued) in previous reporting period (June 2015).
They didn't explicitly mention how the reporting period period governs that the "life of the business should be separated...". So when is it necessary to omit regurgitating the definition? Secondly, if I were to link the definition to the explanation, how would I do so without bringing in other qualitative characteristics?
2. Is it more correct to say, 'accrued electricity', 'accrued electricity expense' or does it depend on the context of the question?
I guess it depends on the amount of marks given for the question. If it were only 2 marks, I'd assume 1 mark would be for identifying the principle, and 1 mark would be for explaining how it relates to the question. I'm not too sure specifically about how accounting is marked in exams (spent too much time on maths =p) but I would slip in a quick definition of reporting period (or any principles) anyway though just to be safe so I've covered everything examiners could be looking for in my response.
I'm not too sure what you mean by "without bringing in other qualitative characteristics". Are you trying to avoid mentioning "relevance" when making a link? I personally feel that mentioning how the use of reporting period can link and serve an accounting characteristic can strengthen your response.
2.
I'm quite sure you use "electricity expense" as an expense and "accrued electricity" as a liability. So if we need to do a balance day adjustment to recognise electricity we have used in a reporting period but not yet paid for, we will debit "electricity expense" (E) and credit "accrued electricity" (L, as we are required to pay for the electricity at a later point).
Post by: Irving4Prez on April 11, 2014, 05:37:59 pm
1.
I guess it depends on the amount of marks given for the question. If it were only 2 marks, I'd assume 1 mark would be for identifying the principle, and 1 mark would be for explaining how it relates to the question. I'm not too sure specifically about how accounting is marked in exams (spent too much time on maths =p) but I would slip in a quick definition of reporting period (or any principles) anyway though just to be safe so I've covered everything examiners could be looking for in my response.
I'm not too sure what you mean by "without bringing in other qualitative characteristics". Are you trying to avoid mentioning "relevance" when making a link? I personally feel that mentioning how the use of reporting period can link and serve an accounting characteristic can strengthen your response.
2.
I'm quite sure you use "electricity expense" as an expense and "accrued electricity" as a liability. So if we need to do a balance day adjustment to recognise electricity we have used in a reporting period but not yet paid for, we will debit "electricity expense" (E) and credit "accrued electricity" (L, as we are required to pay for the electricity at a later point).
I slipped in the definition for safe measures followed with an explanation but the explanation and definition weren't linked, they were isolated in a sense because I didn't know how to link them effectively. Usually when I add in 'relevance' my response ranges between 4-5 sentences which is excessive for the amount of space they give us. How do you normally link a principle and characteristic without taking too much time/space?
Yeah that's how I see it but sometimes the solutions use 'accrued electricity expense' instead of 'accrued electricity', I was curious to whether there was a relation to context.
Post by: Kuroyuki on April 11, 2014, 05:52:14 pm
I slipped in the definition for safe measures followed with an explanation but the explanation and definition weren't linked, they were isolated in a sense because I didn't know how to link them effectively. Usually when I add in 'relevance' my response ranges between 4-5 sentences which is excessive for the amount of space they give us. How do you normally link a principle and characteristic without taking too much time/space?I think you should say accrued something expense. Cuz if i remember correctly you have accrued revenues aswell. So when you say accrued interest its ambiguous.
Yeah that's how I see it but sometimes the solutions use 'accrued electricity expense' instead of 'accrued electricity', I was curious to whether there was a relation to context.
And for slipping in relevance, just say whatever is the most relevant value and most useful for decision making. If the question is like a explicit using one qualitative characteristic explain blah blah i would define that characteristic. But if its like a discussion question and you are meant to do use multiple Qcs and aps just add a bit of the definition in your explanation.
Hope this make sense and helps somewhat. :)
Post by: Irving4Prez on April 12, 2014, 12:46:47 pm
Can someone explain to me the difference between Principal and Interest Only Loans? Preferably with figures.
Cheers
Post by: p.taaa on April 13, 2014, 12:29:09 pm
interest only loans is where you only pay interest, then when the loan matures, you pay back the principal amount, if maturity is over a year, then the loan will be entirely a NCL
so if you have a 5% interest only loan for 100k, payable every year, then each year you will pay 5k interest, principal is not affected
if you have a principal/interest loan then the question will specify how much you pay per month/year and interest will also usually be given
hope this helps
Post by: Irving4Prez on April 13, 2014, 01:30:11 pm
principal/ interest loans are where for you pay both principal and interest on the loan over the life of the loan, if maturity is over a year then it will be both a CL and NCL
interest only loans is where you only pay interest, then when the loan matures, you pay back the principal amount, if maturity is over a year, then the loan will be entirely a NCL
so if you have a 5% interest only loan for 100k, payable every year, then each year you will pay 5k interest, principal is not affected
if you have a principal/interest loan then the question will specify how much you pay per month/year and interest will also usually be given
So for the principal/interest loan, you'll be paying both interest and principal/month or year? Just say a business borrowed 100k from NAB with 10% interest, payable over 2 years, will the total interest over the 2 years be 10k? Or would it be:
100k x .1 = 10k [1st year]
50k x .1 = 5k [2nd year]
Total interest payable over the 2 years = 15k
For the example you have provided for the interest only loan, will the debt be covered in 20 years when 100k interest has been paid?
Post by: chasej on April 13, 2014, 10:06:26 pm
So for the principal/interest loan, you'll be paying both interest and principal/month or year? Just say a business borrowed 100k from NAB with 10% interest, payable over 2 years, will the total interest over the 2 years be 10k? Or would it be:
100k x .1 = 10k [1st year]
50k x .1 = 5k [2nd year]
Total interest payable over the 2 years = 15k
For the example you have provided for the interest only loan, will the debt be covered in 20 years when 100k interest has been paid?
For the first question. Interest will always be per annum that is per year, unless otherwise specified. (e.g. sometimes it may say 5% payable each month, most of the time interest will be given per year).
For interest only loans, interest does not reduce the principle, the principle needs to be paid at the end of the loan's life (very often though borrowers just take out a new loan to cover the principle, so they don't pay anything themselves, it's also possible borrowers could choose to pay part of the principle of the loan's life voluntarily to reduce their interest payments and also the principal due at the end, all of that you don't really need to know though as the question specifies it for you if it occurs).
Post by: Jason12 on April 21, 2014, 01:36:40 am
Post by: chasej on April 21, 2014, 03:07:09 am
What is the difference between accrued expense and sundry creditor? the book has something on it but I don't quite get it
Accrued expenses is the liability, present obligation, a business incurs when a business incurs an expense before it pays for the expense, and hence is required to pay for the expense at a later date. No invoice exists for this type of item, and it's source document is a memo as a result of the balance day adjustment.
A sundry creditor, is the liability, present obligation, a business owes to the sellers of assets which are non-stock which the business has purchased on credit. These transactions are verified by an invoice which verifies the credit sale of the non-stock item to the business.
The bit in the textbook on it, is just to ensure you don't get confused later down the track. tbh I found that section of the textbook more confusing than helpful, but its relevance will become apparent eventually.
Post by: Irving4Prez on April 21, 2014, 12:12:00 pm
1. In the cash flow statement, why is it we say 'receipts from debtors' instead of 'debtors control'? We do the same thing in SORP so I'm assuming it somehow links with understandability.
2. A business pays for rent in advance on the 16th May covering months July - November [BDA at 30 June]. If this firm prepares its reports every 6 months, why is it that in the general ledger for prepaid rent expense, the date is 30 June instead of 16 May [where the report on 30 June covers the past 6 months]?
3. Can the terms, firm and business be used interchangeably for 3/4 accounting?
And a general question, how do you personally avoid silly mistakes such as forgetting to include accrued wages in the CL section of the balance sheet or accidently omitting prepaid rent/rent expense from the general journal?
Thanks :)
Post by: chasej on April 21, 2014, 01:07:45 pm
Hey guys, hopefully someone can address these questions I had,
1. In the cash flow statement, why is it we say 'receipts from debtors' instead of 'debtors control'? We do the same thing in SORP so I'm assuming it somehow links with understandability.
2. A business pays for rent in advance on the 16th May covering months July - November [BDA at 30 June]. If this firm prepares its reports every 6 months, why is it that in the general ledger for prepaid rent expense, the date is 30 June instead of 16 May [where the report on 30 June covers the past 6 months]?
3. Can the terms, firm and business be used interchangeably for 3/4 accounting?
And a general question, how do you personally avoid silly mistakes such as forgetting to include accrued wages in the CL section of the balance sheet or accidently omitting prepaid rent/rent expense from the general journal?
Thanks :)
1. Debtors control decreases are made up of both receipts from debtors and discount expense, we can't put debtor's control as that figure is usually not what was actually received from debtors. Receipts from debtors represents only the part of the decrease in debtor's control which resulted in an inflow of cash. I suppose understandability also comes into it as it's easier for the layman to understand what "receipts from debtors" is describing than trying to decipher "debtor's control".
2. I don't understand the question. It doesn't seem to make sense?
3. Yes, but it's good to be consistent to avoid confusion.
Post by: abcdqdxD on April 21, 2014, 02:04:22 pm
Post by: Irving4Prez on April 21, 2014, 02:49:09 pm
1. Debtors control decreases are made up of both receipts from debtors and discount expense, we can't put debtor's control as that figure is usually not what was actually received from debtors. Receipts from debtors represents only the part of the decrease in debtor's control which resulted in an inflow of cash. I suppose understandability also comes into it as it's easier for the layman to understand what "receipts from debtors" is describing than trying to decipher "debtor's control".
3. Yes, but it's good to be consistent to avoid confusion.
If that were the case, wouldn't 'purchases of stock' simply be, 'stock control'? So would you advise sticking with 'firm' throughout all responses?
If i understand q2 correctly, it's because journals are posted to the general ledger at the end of every month, hence 30th
Ohh, so even though reports are prepared over a period of time, the accounting records are posted monthly?
Thanks for your replies :)
Post by: TheWackyCheese on April 24, 2014, 05:13:27 pm
$500 of stock was donated to a raffle by the business. This was not recorded.
Explain the impact of the decision on the assets of the business.
Post by: Irving4Prez on April 24, 2014, 05:21:55 pm
Hey guys, just a quick question I came across today that I eventually got the answer to:
$500 of stock was donated to a raffle by the business. This was not recorded.
Explain the impact of the decision on the assets of the business.
As it was not recorded, the business would be oblivious to the outflow of $500 worth of stock. As a result, stock control (assets) would be overstated by $500. Consequently, net profit would be overstated (understating advertising expense) by $500 but this isn't required for the question.
Hope this helps
Post by: Jason12 on May 09, 2014, 08:26:33 pm
State the impact on the accounting equation of memo 43 not being recorded in the business's records
I remember my teacher saying something about how there is no overall effect but not too sure.
Post by: TheWackyCheese on May 09, 2014, 11:20:15 pm
MEMO 43 - 3 Tiles taken by Chanel for personal use
State the impact on the accounting equation of memo 43 not being recorded in the business's records
I remember my teacher saying something about how there is no overall effect but not too sure.
Sorry, I've been a bit busy and completely forgot about my question. According to my teacher, the answer that Irving4Prez gave is incorrect.
The effect on the accounting equation would be as follows: Assets would not be effected because, even though the donation would not have been recorded resulting in assets being overstated at that time, the stock loss would still be accounted for in the stocktake at the end of the reporting period resulting in no effect overall. Liabilities are not effected by this transaction. Owners equity would not be effected as even though the stock has been donated, the loss will be detected in the stocktake so the net profit will not be overstated or understated by the end of the reporting period.
Post by: Jason12 on May 11, 2014, 10:10:33 pm
E.g. If you have 5 units of stock valued at $30 each and 5 units of stock valued at $35 each but the $30 stock was purchased first would you record the stock gain as $30 stock?
Post by: TheWackyCheese on May 11, 2014, 10:30:55 pm
what is the correct way to record a stock gain.
E.g. If you have 5 units of stock valued at $30 each and 5 units of stock valued at $35 each but the $30 stock was purchased first would you record the stock gain as $30 stock?
You would record the stock gain using the lowest cost price in the balance column before the stocktake was conducted I'm pretty sure. In your case it would be the $30 of stock.
Post by: abcdqdxD on May 12, 2014, 10:24:10 pm
You would record the stock gain using the lowest cost price in the balance column before the stocktake was conducted I'm pretty sure. In your case it would be the $30 of stock.
Yep that's correct, remember Conservatism.
Post by: Sanguinne on May 13, 2014, 06:27:48 pm
Post by: jonoz0r on May 13, 2014, 06:38:47 pm
Explain how depreciation ties in with the demands of the qualitative characteristics of relevance.
Depreciation ties in with relevance as it ensures that the Income statement includes all information that is useful for decision-making about profit, by showing the consumption of non-current assets, allowing revenues earned to be matched against expenses incurred in the current reporting period. Depreciation also satisfies relevance because by reporting accumulated depreciation in the Balance sheet, this allows assets to be shown at their carrying value, which is vital to decision-making regarding the eventual replacement of the asset.
Post by: smile+energy on May 21, 2014, 04:00:18 pm
Explain why an accrued expense is calssified as a current liability?
Explain why the payment of an accrued expense in a subsequent period requires the payment to be split in the CPJ?
Post by: chasej on May 21, 2014, 10:28:54 pm
1. Explain why an accrued expense is calssified as a current liability?
2. Explain why the payment of an accrued expense in a subsequent period requires the payment to be split in the CPJ?
1. An accrued expense is an expense which is recognised following accrual accounting as having been incurred in a period, but not yet paid in that period. Hence the business has a present obligation to pay the expense, as a result of the past expense (event), the settlement of which will result in an outflow of cash (a resource embodying economic benefit) within the next 12 months (in the next reporting period), hence following the definition of a current liability.
2. As an accrued expense is the liability related to an expense incurred in a past period, it is necessary to split any payments of an expense into discharging of the liability and an incurrence of the same expense in the current period, to ensure expenses in the current period are not overstated (ensuring more accurate net profit), while ensuring liabilities are not overstated by discharging the liability. As a rule, the accrued expense is always paid before any new expense is paid and consumed in the current period. It is thus necessary to split any payments related to accrued expense into discharging of the liability and incurrence of expense in the CPJ to ensure accounting records and reports are accurate, and reflect the business's actual performance and transactions.
Post by: smile+energy on May 23, 2014, 06:50:16 am
Post by: partition on May 23, 2014, 07:47:34 pm
Like basically how to calculate what is the expense and what is the prepaid, and then use them in ledgers?
All help would be greatly appreciated!
Post by: william.woon on May 27, 2014, 08:44:39 pm
Post by: chasej on May 27, 2014, 11:37:16 pm
Hey guys got a question, do cash purchases have GST included in them and do we have to find the GST from the cash purchase as we do for the Cash Budget
For VCE purposes the transactions always specify if GST is applicable. And it varies, sometimes it says "purchased x for $880 including GST", in which case you divide it by 11 (or simply use intuition) to work out the GST paid is $80. Sometimes it can also say "purchased x for $800 plus GST), in which case you must work out 10% of 800 for the GST of $80.
Not sure if this answered your question as I don't understand what you mean by cash budget?
Post by: william.woon on May 27, 2014, 11:43:19 pm
Post by: chasej on May 28, 2014, 10:38:03 pm
Does anyone have any tips for how to avoid this? Because over practice exams/SACs I've realised this is really what makes the difference between mid and high A+ for me.
Post by: Jason12 on May 28, 2014, 11:16:52 pm
Post by: Oathkeeper on May 29, 2014, 07:00:36 pm
how do balance day adjustments ensure relevance?
BDA ensures reports only contain expenses incurred and revenue earned in a given reporting period. Thus, net profit can be calculated accurately and material decision-making can be made based on these reports. Moreover, relevance trumps reliability during the calculation of depreciation as the depreciated value is paramount for decision making (relevance).
Post by: lmnop on May 30, 2014, 10:43:29 am
The accountant of Hannah’s Hats provided the following Pre-adjustment Trial Balance (extract) as at 30 June 2014.
Account: Debit:
Prepaid Insurance Expense 1620
The accountant also noted the following.
-Reports are prepared on a quarterly basis.
-The annual insurance policy ends on 30 April. The payment made for the policy ending 30 April 2015 was $1500 plus GST.
a) Prepare the General Journal entries required to record the balance day adjustment on 30 June 2014.
I was sure that $370 would be the amount debited from the Insurance expense account. But apparently, some students have found the answer to be $1650 +$250 or something similar to that.
So yeah, I hope that makes sense.
Post by: chasej on May 30, 2014, 02:37:06 pm
Hi, just dropping in with a question from our prac SAC that I’ve been meaning to get off my chest:
The accountant of Hannah’s Hats provided the following Pre-adjustment Trial Balance (extract) as at 30 June 2014.
Account: Debit:
Prepaid Insurance Expense 1620
The accountant also noted the following.
-Reports are prepared on a quarterly basis.
-The annual insurance policy ends on 30 April. The payment made for the policy ending 30 April 2015 was $1500 plus GST.
a) Prepare the General Journal entries required to record the balance day adjustment on 30 June 2014.
I was sure that $370 would be the amount debited from the Insurance expense account. But apparently, some students have found the answer to be $1650 +$250 or something similar to that.
So yeah, I hope that makes sense.
I got $370.
Post by: Jason12 on June 01, 2014, 12:58:52 am
Post by: chasej on June 01, 2014, 11:41:25 am
how to record insurance expense when there are multiple payments due?
A little ambigious but insurance is no different to any other expense account. If there's a prepaid expense you determine how much is consumed in the period, if there is accrued you do the same and simply follow the BDA method for recording them.
Do you have a specific question from a paper/book you didn't understand because it's a little hard to answer the question you asked itself?
Post by: Jason12 on June 01, 2014, 05:44:11 pm
A little ambigious but insurance is no different to any other expense account. If there's a prepaid expense you determine how much is consumed in the period, if there is accrued you do the same and simply follow the BDA method for recording them.
Do you have a specific question from a paper/book you didn't understand because it's a little hard to answer the question you asked itself?
question 5
(http://i.imgur.com/9qFIWJl.jpg)
Post by: Jason12 on June 06, 2014, 03:00:45 pm
Post by: abcdqdxD on June 06, 2014, 03:45:09 pm
With the Cash flow statement is GST received/paid part of operating cash flows? What about GST charged on credit sales?
To your first question, yes.
GST charged on credit sales is not recorded as it is not a cash item.
Post by: lmnop on June 06, 2014, 03:55:09 pm
When recording GST paid for a non-current asset, do we lump it in with the amount of GST paid for Operating activities or do we record it separately under Investing activities?
Post by: Duyyy11 on June 06, 2014, 04:02:38 pm
Just a quick question regarding the Cash Flow Statement.
When recording GST paid for a non-current asset, do we lump it in with the amount of GST paid for Operating activities or do we record it separately under Investing activities?
GST Paid and GST received will always be classified as operating inflows/outflows.
Investing activities concerns only the buying and selling of NCA for cash, and GST is not included in the cost of a NCA.
Hope this helps!
Post by: lmnop on June 06, 2014, 05:18:18 pm
GST Paid and GST received will always be classified as operating inflows/outflows.
Investing activities concerns only the buying and selling of NCA for cash, and GST is not included in the cost of a NCA.
Hope this helps!
Thanks!
Post by: Jason12 on June 06, 2014, 06:44:17 pm
Post by: TheWackyCheese on June 09, 2014, 11:03:46 pm
How do I explain cash vs profit questions? E.g. when the business has an increase in profit but a decrease in cash.
You should always start a Cash vs Profit question with something along the lines of "Under Accrual Accounting, cash and profit are different resources. There is a difference between revenues earned less expenses incurred and cash inflows less cash outflows. Some cash items do not affect profit and vice versa" This is probably the most important part as it is required to gain full marks.
Then you would go on to discuss what happened specifically for the business. As an example, GST Paid could have been more than GST received. This results in an increase in cash outflows however, seeing as GST is not a revenue or expense, it is not used to calculate profit so profit is left unchanged. A final example, Credit sales may have been greater than receipts from debtors. Credit Sales is a revenue resulting in an increase in revenues (and therefore profit). Receipts from debtors is a cash inflow however, it does not increase cash inflows as much as credit sales revenue increases profit leaving profit higher than cash flows from operating activities.
The Cambridge Textbook has a helpful table in Chapter 12 so you can memorise it and reverse it if you need to if the question is the other way around.
I have a question as well by the way. Is it called the Profit and Loss Summary or Profit/Loss Summary? In the textbook and VCAA assessment report is says Profit and Loss Summary but I thought the main purpose of having the account is to report a Profit OR a Loss, it can't report a Profit AND a Loss at the same time? Would I get marked down for saying Profit/Loss?
Post by: Jason12 on June 10, 2014, 12:02:53 am
I have a question as well by the way. Is it called the Profit and Loss Summary or Profit/Loss Summary? In the textbook and VCAA assessment report is says Profit and Loss Summary but I thought the main purpose of having the account is to report a Profit OR a Loss, it can't report a Profit AND a Loss at the same time? Would I get marked down for saying Profit/Loss?
I always refer to it as P&L summary or profit and loss summary. You have a point with profit or loss but i think either way should be fine but check with a teacher in case.
Post by: TheWackyCheese on June 10, 2014, 09:50:59 am
I always refer to it as P&L summary or profit and loss summary. You have a point with profit or loss but i think either way should be fine but check with a teacher in case.
My teacher said it should be the Profit/Loss Summary and it makes more sense to me to call it that but everywhere else lists it as the Profit and Loss Summary.
Post by: Valyria on June 11, 2014, 04:25:44 pm
Post by: Jason12 on June 11, 2014, 05:47:26 pm
Post by: Jason12 on June 11, 2014, 07:08:26 pm
Post by: chasej on June 12, 2014, 12:23:28 am
with cash vs profit questions if you get a question like "Explain how a business can have a cash surplus even with a net loss", are you only allowed to use examples that decrease profit and don't affect/increase cash or can you use examples that don't affect profit but make cash higher?
You can use both.
A good thing to do is to work out essentially what has happened. So if cash was in surplus but there a net loss, this means Change in cash has exceeded net profit/loss, this means you can use examples which caused either receipts>revenue or payments<expenses, as these would cause the difference. Always be aware of limiting phrases in the questions however, for example, sometimes it may say why operational activities was in surplus but net loss occured, meaning you can only discuss items relevant to operational activities.
Post by: Eugenet17 on June 14, 2014, 07:26:59 pm
Caruso's Store paid 9000 for 6 months of advertising contract on 1 March 2015. Contract covers the months from March to the end of August. The reporting period ends on 30 June each year. Complete the general ledger of the relevant entries.
In the Prepaid advertising ledger, they debited Bank 9000 and recorded the date as 1 March. Shouldnt this date be the 30th of june as we record in our general ledgers during the end of the reporting period, or am I forgetting something?
Post by: Valyria on June 14, 2014, 07:37:19 pm
Caruso's Store paid 9000 for 6 months of advertising contract on 1 March 2015. Contract covers the months from March to the end of August. The reporting period ends on 30 June each year. Complete the general ledger of the relevant entries.
In the Prepaid advertising ledger, they debited Bank 9000 and recorded the date as 1 March. Shouldnt this date be the 30th of june as we record in our general ledgers during the end of the reporting period, or am I forgetting something?
If you were making a BDA on the 30th of June, then the entry could have been for the 31st of March with the cross reference being the bank or the 1st of June with the cross reference being balance. It depends when the the ledger accounts are posted since they can be posted monthly or once a reporting period. Usually the question won't specify when they're posted so you can choose accordingly. However you can't for example have the entry on the 1st of June with the cross reference being the bank.
Hope this sheds some light on your issue :)
Post by: Eugenet17 on June 14, 2014, 07:48:57 pm
Post by: Valyria on June 14, 2014, 07:57:07 pm
Yeah i know that but this question states that the RP is between March and June, and it's just a debit entry to record the purchase of the advertising contract, so would i be right in recording the debit as June 30th with the cross-ref being bank?
Yes you would be right.
Post by: Eugenet17 on June 14, 2014, 07:57:35 pm
Post by: chasej on June 15, 2014, 01:34:20 am
was doing some unit 3 practice exams and want to clarify something:
Caruso's Store paid 9000 for 6 months of advertising contract on 1 March 2015. Contract covers the months from March to the end of August. The reporting period ends on 30 June each year. Complete the general ledger of the relevant entries.
In the Prepaid advertising ledger, they debited Bank 9000 and recorded the date as 1 March. Shouldnt this date be the 30th of june as we record in our general ledgers during the end of the reporting period, or am I forgetting something?
It is my understanding that the journals (and hence transactions) can only be posted into the general ledger each month, regardless of reporting period length (unless the reporting period goes for less than a month obviously). So the dates would be 31 mar. They probably made a mistake.
Ledgers are balanced/closed at the end of the reporting period.
So the "prepaid advertising expense" ledger account would look like:
----------------------------------------------------------------------------------
31 mar bank 9000 | 30 june advertising 6000
| 30 june balance 3000
-------- --------
9000 9000
1 july balance 3000
Post by: chasej on June 15, 2014, 01:40:11 am
If you were making a BDA on the 30th of June, then the entry could have been for the 31st of March with the cross reference being the bank or the 1st of June with the cross reference being balance. It depends when the the ledger accounts are posted since they can be posted monthly or once a reporting period. Usually the question won't specify when they're posted so you can choose accordingly. However you can't for example have the entry on the 1st of June with the cross reference being the bank.You cannot balance a ledger during a reporting period. Balancing separates reporting periods from another, not unlike closing, but in balancing the actual balance of the ledger is carried forward. If you ever want to know the balance of an account during a reporting period it is footed, which essentially does the same thing as balancing in a less formal way.
Hope this sheds some light on your issue :)
The journals can only be posted monthly (check my post above).
Post by: lmnop on June 15, 2014, 07:45:54 am
1) Interest expense paid, as shown per question, is recorded as $2300. Instead, the answers seem to suggest that $1200 was transferred from GST Payments to Interest expense, raising the total of the transaction to $3500. Is it a mistake on NEAP's part? Or am I just overlooking some minor detail?
2) I've calculated the Depreciation of the Motor Vehicle for the year to be $2450, but the answer is $2200 somehow.
Apologies for the wonky scanning and the light font. Thanks :)
Post by: Valyria on June 15, 2014, 10:19:52 am
1) Interest expense paid, as shown per question, is recorded as $2300. Instead, the answers seem to suggest that $1200 was transferred from GST Payments to Interest expense, raising the total of the transaction to $3500. Is it a mistake on NEAP's part? Or am I just overlooking some minor detail?
2) I've calculated the Depreciation of the Motor Vehicle for the year to be $2450, but the answer is $2200 somehow.
1) I'm not understanding your qn, are you saying they regarded $1200 of the GST payment as an interest expense? Does this tie up with a question?
2) I calculated the depn expense to be $2450 as well. Was there any information provided above the 'additional information' about the length of the reporting period? Or have they provided a post trial balance?
Post by: lmnop on June 15, 2014, 12:27:18 pm
Post by: anna.xo on July 02, 2014, 12:50:47 pm
Thanks :)
Post by: Jason12 on July 06, 2014, 12:58:47 am
How does using a period cost affect the accounting equation? As the period cost is assigned in its entirety, regardless of how many stock items were sold, does this mean it overstates the cost of goods sold or cost of sales? Again textbook says it understates cost of goods sold which I don't understand
Post by: chasej on July 06, 2014, 03:46:14 am
how do you record a period cost? Essentials Book says it's recorded it it's own ledger account but in the exercises they put a period cost in the general journal
How does using a period cost affect the accounting equation? As the period cost is assigned in its entirety, regardless of how many stock items were sold, does this mean it overstates the cost of goods sold or cost of sales? Again textbook says it understates cost of goods sold which I don't understand
A period cost is recorded in the relevant journal, not necessarily a journal journal. If it is a cash payment of the cost, it goes into cash payments journal. If it is on credit it goes in the general journal as it is a sundry creditor. Period cost is simply the way buying expenses have been recorded in unit 3, in their own ledger account classified under "Cost of Goods Sold" in the income statement. The only actual change in recording of buying expenses is with product costing, which includes buying expenses within the value of stock if it is logical to do so, eliminating the need for the extra ledger account to record the buying expense.
Period cost results in Cost Of Goods Sold being overstated, as it records the entire buying expense as being incurred in the period it is paid/charged, when in reality the entire expense is not incurred as the stock it is associated with has not been sold. It understates cost of sales, as the figure representing the buyers expense for each stock only includes the supplier's price of stock itself as the buying expenses weren't calculated in the value of stock. The essentials textbook has a mistake which says COGS is understander, COGS is overstated, I actually encountered that issue earlier today when I was writing notes on period cost.
Post by: Jason12 on July 16, 2014, 10:40:20 pm
Post by: chasej on July 16, 2014, 11:47:55 pm
explain why sales returns is classified as a negative revenue account?
Because it is important that sales return be clearly shown in the balance sheet so the owner can ascertain the level of returns in order to make important decisions to rectify the issues causing the returns, whether the issue is faulty/damaged stock or bad customer service etc.
If sales return was not recorded separately, sales revenue would just be debited and the owner may not find out about the returns affecting net (and gross) profit.
Effectively, it is just the debit side of the sales revenue ledger which is put into another separate ledger so a person reading the final report can easily ascertain the level of returns when looking at the income statement.
Post by: sam.utute on July 19, 2014, 06:39:55 pm
The course really starts heating up about halfway through Unit 4.
I am back from my trip overseas so will try and be more active on this thread.
Sam
Post by: Jason12 on July 25, 2014, 10:27:03 pm
Post by: demand&supply on July 25, 2014, 10:56:03 pm
why is disposal an OE account?
This is because during a cash sale of a NCA or trade-in, money (or economic inflow) received differs to its carrying value. If selling NCA for a price higher than carrying value (historical cost less any depreciation), it leads to a profit on disposal which is considered to be a revenue as it is an inflow of economic benefit because your selling something for a higher price than expected, thus it influence profit and owner's equity. Vice versa, if the price sold or traded is lower than calculated carrying value (most of the case) it is an expense due to reduction in economic outflow, as a result it is the account is classified as OE as it can be both a revenue or expense.
Hope this helps :)
Post by: Rachelle on July 25, 2014, 11:50:25 pm
For instance; purchased on credit 10 watches @$25 each, plus $2.50 GST (inv 933)
Any response greatly appreciated!
Post by: sam.utute on July 26, 2014, 12:15:08 am
If stock was puchased on credit, does it still get recorded in the stock card?Because there is a physical or real increase in stock on hand. Remember, your stock card is your measure of how much stock you actually have on hand at any point in time.
For instance; purchased on credit 10 watches @$25 each, plus $2.50 GST (inv 933)
Any response greatly appreciated!
It doesn't matter how you purchase stock; cash or credit. A purchase of stock increases your inventory, and therefore needs to be recorded as such in the stock card.
In case you're unclear about what a purchase on credit represents:
We receive an invoice from the supplier accompanied by stock. We store the stock and begin selling it, promising to repay the supplier at some later date.
Post by: Rachelle on July 26, 2014, 11:41:35 am
Because there is a physical or real increase in stock on hand. Remember, your stock card is your measure of how much stock you actually have on hand at any point in time.
It doesn't matter how you purchase stock; cash or credit. A purchase of stock increases your inventory, and therefore needs to be recorded as such in the stock card.
In case you're unclear about what a purchase on credit represents:
We receive an invoice from the supplier accompanied by stock. We store the stock and begin selling it, promising to repay the supplier at some later date.
thanks !
Post by: Rachelle on July 26, 2014, 11:46:15 am
Post by: Zealous on July 26, 2014, 12:12:05 pm
Also, when it is deduced that a stock loss has occurred, what effect will it have on OE? Is it that theres no effect? Because stock loss is an expense, this will decrease Net Profit, which will in turn decrease OE. Thus, having exactly the same effect. I dont get how this is so?Stock Loss results in a decrease in Assets and decrease in Owners Equity. You've explained it yourself, because Stock Loss is an expense it will reduce Net Profit leading to a decrease in Owners Equity.
Post by: Jason12 on July 27, 2014, 01:47:39 pm
Post by: chasej on July 27, 2014, 10:36:06 pm
why do we debit accumulated depreciation when we removing the non-current asset. Acc dep is usually a negative asset so it is credited but why debited now?
Because as we are disposing of the asset the acc dep ledger is no longer relevant and must be closed to the disposal account so profit or loss on the disposal can be determined. We Debit it simply to transfer the balance, it's an accounting procedure, nothing to do with the physical asset itself, aside from preparing its disposal.
Post by: marsbareater12 on August 02, 2014, 11:28:47 am
At the moment I have As only part of the revenue was actually earned in the current Reporting Period, the receipt is split in the CRJ to reflect this, but I feel like that's not going to get full marks in an exam situation; anything else I'm missing here?
Post by: Eugenet17 on August 03, 2014, 02:36:50 pm
This was the answer:
April. 1 | Balance | 200 | April.30 | Bank | 200
Jun.30 | Interest Revenue| 200 |
This doesn't look right to me, could someone go through this question and make sense of it?
Post by: Equilibriaas on August 03, 2014, 08:10:08 pm
Post by: Equilibriaas on August 03, 2014, 08:16:27 pm
Mad Magazines has a term deposit for $10000 and earns 12% per annum interest. Interest is paid quarterly from the commencement of the term deposit on the 1 November 2013. THe first payment of interest was on the 1 February 2014. Complete the Accrued Interest Revenue account for the quarter ended 30 June 2014.
This was the answer:
April. 1 | Balance | 200 | April.30 | Bank | 200
Jun.30 | Interest Revenue| 200 |
This doesn't look right to me, could someone go through this question and make sense of it?
I can have a go !
10000 x0.12 = 1200 per annum which is 100 per month (how long is the reporting period?)
on Feb 1 you received payments for Nov, dec and Jan. Feb and march are still accrued...Assuming a new reporting period starts in April, balance would be 200 (for the two months before). You would also receive a payment in April as it is 3 months from 1 Feb. Hence this would be $300.
However, this should be split into $200 for accrued interest and $ 100 for Interest Revenue in the cash receipt journal.
Hence at the end of the reporting period on June 30, June and may are still accrued ...it is $200.
I think the answers are right.
Post by: TheWackyCheese on August 06, 2014, 06:21:59 pm
Post by: Valyria on August 06, 2014, 07:12:10 pm
Just a quick question, "Why is it correct to record a deposit as Prepaid Sales"? So far all I have is because it increases bank and also creates a liability but I don't think I'm really answering the question.
A deposit is where a customer pays in advance to secure a sale. A deposit is a form of prepaid revenue (prepaid sales) because the revenue received (cash) is yet to be earned (after fulfilling the obligation by presenting the customer with the stock). It really depends on the marks allocated for this question, if it's 3 then you should explain why prepaid sale is a current liability.
You've got the basis, just need a little more breadth :)
EDIT: Prepaid sale is a CL*
Post by: Equilibriaas on August 06, 2014, 07:13:29 pm
Prepaid sales is a current liability since it is a present obligation of the firm as a result of past events from which an outflow of economic benefit is expected within 12 months, when the goods are supplied to the customer.
Post by: Equilibriaas on August 06, 2014, 07:15:08 pm
A deposit is where a customer pays in advance to secure a sale. A deposit is a form of prepaid revenue (prepaid sales) because the revenue received (cash) is yet to be earned (after fulfilling the obligation by presenting the customer with the stock). It really depends on the marks allocated for this question, if it's 3 then you should explain why prepaid sale is a revenue.Im sorry but prepaid sales is not a revenue
You've got the basis, just need a little more breadth :)
Post by: p.taaa on August 11, 2014, 12:20:55 am
Hopefully that helps
Post by: Rachelle on August 15, 2014, 08:34:02 pm
At 1 Jan 2009:
Creditors were 31,010
Cash Payments Journal for Jan showed he had paid creditors 25,000, while the creditors schedule showed that Harry owed creditors 38,900 at 31 Jan.
Calculate the GST charged on Credit Purchases.
Anyone know how to figure this one out? Any attempt greatly appreciated!!
Post by: chasej on August 16, 2014, 12:00:00 pm
Harry has been shown many times how to calculate GST by using relevant info from the journals, and balances at the beginning of the reporting period. He found some pieces of paper in his office. [<-- unneccesary info, just to set the context]
At 1 Jan 2009:
Creditors were 31,010
Cash Payments Journal for Jan showed he had paid creditors 25,000, while the creditors schedule showed that Harry owed creditors 38,900 at 31 Jan.
Calculate the GST charged on Credit Purchases.
Anyone know how to figure this one out? Any attempt greatly appreciated!!
You need to use account reconstruction to work out how much the credit purchase were so:
31 jan bank 25000 | 1 jan balance 31010
31 jan balance 38900 |
| 1 feb balance 38900
So all I've done is filled in the information which was given to me about the creditors ledger. There is one missing entry on the right hand side - that is credit purchases. Thus we simply work out the value of entries on the right hand side (31010+38900=69910) and the left hand side (25000+38900=63900). The difference between the right hand and left hands side is out missing figure so the Stock control/GST clearing entry would be 6010, that would be the amount of GST was charged and stock purchased from creditors. To find the GST amount we simply divide by 11 and we get 546 (with some irrelevant decimal places).
Post by: Jason12 on August 17, 2014, 09:12:45 pm
Post by: Rachelle on August 17, 2014, 09:50:29 pm
You need to use account reconstruction to work out how much the credit purchase were so:
31 jan bank 25000 | 1 jan balance 31010
31 jan balance 38900 |
| 1 feb balance 38900
So all I've done is filled in the information which was given to me about the creditors ledger. There is one missing entry on the right hand side - that is credit purchases. Thus we simply work out the value of entries on the right hand side (31010+38900=69910) and the left hand side (25000+38900=63900). The difference between the right hand and left hands side is out missing figure so the Stock control/GST clearing entry would be 6010, that would be the amount of GST was charged and stock purchased from creditors. To find the GST amount we simply divide by 11 and we get 546 (with some irrelevant decimal places).
Thank-you. I was wondering if this could be done through the format of: (it was just what the teacher had put on the board)
Opening GST Bal:
+GST on cash sales
+ GST on credit sales
-GST paid cash payments
-GST charged on credit purchases
Closing GST Bal:
If it can, how?
Post by: chasej on August 17, 2014, 11:54:18 pm
how does GST paid work in the budgeted cash flow statement? or what are some tips for recording it as i always get it wrong
GST paid is ten percent of the price of cash payments which incur GST. So if there was 10000 of cash purchases of stock and one vehicle worth 20000 purchased with cash, GST paid would be 10% of that $30 000, so $3000. You have to work out 10% of the cash payments which resulted in GST being paid.
Always watch out for whether GST is included or not included in the price of stuff purchased with cash.
Post by: chasej on August 17, 2014, 11:56:21 pm
Thank-you. I was wondering if this could be done through the format of: (it was just what the teacher had put on the board)
Opening GST Bal:
+GST on cash sales
+ GST on credit sales
-GST paid cash payments
-GST charged on credit purchases
Closing GST Bal:
If it can, how?
It could be done that way, but I don't have the information to work that out as to do so we would need to now all the amounts to put in the GST ledger except for amount charged on credit sales. In the information you gave I don't have the amount of cash sales to work out GST received on them for example.
Post by: TheWackyCheese on August 20, 2014, 03:46:21 pm
Post by: redcracker on August 20, 2014, 06:56:45 pm
sales returns have their own ledger because they are an indication of customer disatisfaction, and they are reported seperately under their own heading in the income statement to bring the issue to the attention of the owner to that corrective action may be taken. (relevance is normally the QC linked to this area)
the owner already knows about purchase returns and so it does not need to be brought to the attention of the owner.
hope this explanation helped a bit?
Post by: Jason12 on August 20, 2014, 09:48:20 pm
I did 10% x 550,000 and then subtracted that from 550,000 but its wrong.
Post by: demand&supply on August 20, 2014, 11:25:15 pm
if sales were 10% higher than budgeted and my sales figure from the income statement is 550,000 then how do I work out what the budgeted is?
I did 10% x 550,000 and then subtracted that from 550,000 but its wrong.
550,000/11 which is 50,000, then multiply by ten gives you 500,000
Post by: sam.utute on August 20, 2014, 11:35:10 pm
if sales were 10% higher than budgeted and my sales figure from the income statement is 550,000 then how do I work out what the budgeted is?
I did 10% x 550,000 and then subtracted that from 550,000 but its wrong.
Easier way to think about it:
Let budgeted figure = X
Actual figure = 1.1 x X (10% higher than budgeted)
Therefore:
550,000 = 1.1 x X,
X = 550,000/1.1
X = 500,000
Post by: sam0015 on August 28, 2014, 09:11:45 pm
Post by: Equilibriaas on August 29, 2014, 02:48:23 pm
Post by: abcdqdxD on September 01, 2014, 10:50:15 am
Is it worth getting an Accounting tutor next year (2015) for units 3 and 4?
Depends. If you are naturally a good student it's probably not necessary. Generally I have two types of students: the ones that just want to pass and ones that want to do really well.
Post by: Rachelle on September 01, 2014, 05:05:50 pm
also,is the creditors/debtors schedule source documents, or records, or what?
any answers greatly appreciated.
Post by: Valyria on September 01, 2014, 06:59:28 pm
are debtors and stock classified as revenue? because when i'm doing income statements for trading firms, i only ever have to put cash and credit sales.
also,is the creditors/debtors schedule source documents, or records, or what?
Debtors and stock are classified as assets. Credit sales to debtors is considered to be revenue as the inflow of economic benefits in the form of an increase in assets (debtors control) results in an increase in owner's equity. Sales also incur an expense (cost of sales) as the outflow of economic benefits (stock that can be used for future sales) in the form of a decrease in assets (stock control) results in a decrease in owner's equity. So, although you won't explicitly see the items 'stock control' and 'debtors control' in the income statement, you'll see other accounts that are affected by them.
I wouldn't say that creditors/debtors schedule are source documents as they don't verify a transaction from occurring. Conversely, they are schedules that facilitate the calculation of projected receipts from debtors and payments to creditors.
Hope these answer your questions.
Post by: Rachelle on September 01, 2014, 08:12:02 pm
Post by: marsbareater12 on September 03, 2014, 08:36:39 am
"Referring to one accounting principle, explain why it may be necessary to prepare a Schedule of Receipts from Debtors when preparing a Budgeted Cash Flow Statement"
I have zero idea. D:
Post by: Valyria on September 03, 2014, 02:20:46 pm
"Referring to one accounting principle, explain why it may be necessary to prepare a Schedule of Receipts from Debtors when preparing a Budgeted Cash Flow Statement"The reporting period principle states that the life of the firm should be separated into equal periods of time to prepare reports that reflect the period in which they occur. A budgeted cash flow statement will contain information regarding projected receipts from debtors. However, credit sales to debtors and receipts from these debtors may take place over different reporting periods. By creating a schedule of receipts from debtors, we can accurately calculate the amount received from debtors during a particular budgeted reporting period.
Post by: Jason12 on September 03, 2014, 09:24:31 pm
how are some of the profitability indicators linked/explain how a change in one affects the other?
Post by: Valyria on September 07, 2014, 12:15:22 pm
what is the limitations of gross profit margin in assessing profitability?
GPM measures the average mark up by calculating the % of sales revenue that is retained as gross profit. Indeed, a greater gap between selling price and cost price could be interpreted as having a higher average mark up. Yet through the formula of GPM (gross profit/sales revenue x 100) how can we deduce whether an increase in GPM is attributed to a decrease in cost price where selling price remains constant or to a decrease in both selling price and cost price where cost price has decreased by more? Well, this could be considered as a limitation of the GPM formula. As profitability is seen as the ability of the firm to earn profit measured by comparison against a base (in this case gross profit and sales revenue) we are limited in assessing profitability solely based on the GPM formula.
how are some of the profitability indicators linked/explain how a change in one affects the other?
The most common link I have come across is asset turnover, net profit margin and return on assets (you can derive the ROA formula based on the other 2 aforementioned). ATO measures how productively a firm has used its assets to earn revenue whilst NPM measures expense control and ability to retain sales revenue as net profit. The ROA depends on the ability of the firm to use its assets to generate revenue and control its expense, a link to both the NPM and ATO formula. Have a shot at making arbitrary numbers for net profit, sales etc. and change them around to see the affect on ROA.
Hope this helps.
EDIT: ROA to ATO* (Thanks Mars)
Post by: marsbareater12 on September 10, 2014, 06:16:12 am
The most common link I have come across is return on assets, net profit margin and return on assets
Hope this helps.
Asset turnover, perhaps? :P (stupid similar ratios)
Post by: Rachelle on September 13, 2014, 12:03:00 pm
Depreciation = Existing display cases New display cases
= $32 000 x 10% + $3 600 x 10% x 7/12
= $3 200 + $210
Depreciation of display cases $ 3 410
b WANGARATTA WATCHES
Balance Sheet (extract) as at 30 June 2016
Non-Current Assets $ $
Computer 35 600
Less Accumulated Depreciation 11 410 (?) 24 190
Does anyone know why the less accumulated depreciation is 11410, and not 3410?
Because the depreciation of display cases is $3410 per annum.
Post by: Valyria on September 13, 2014, 01:06:32 pm
Calculation of depreciation of display cases for the year ending 30 June 2016
Depreciation = Existing display cases New display cases
= $32 000 x 10% + $3 600 x 10% x 7/12
= $3 200 + $210
Depreciation of display cases $ 3 410
b WANGARATTA WATCHES
Balance Sheet (extract) as at 30 June 2016
Non-Current Assets $ $
Computer 35 600
Less Accumulated Depreciation 11 410 (?) 24 190
Does anyone know why the less accumulated depreciation is 11410, and not 3410?
Because the depreciation of display cases is $3410 per annum.
Your calculations were for the depreciation of display cases, not the firm's computer :P
Post by: knightrider on September 13, 2014, 03:35:29 pm
Do you guys think i should get the book and do the accounting 1/2 course anyways
Because my school does offer accounting 3/4 and i want to do it
how important is 1/2 accounting in terms of 3/4 accounting
Will i be missing out on alot if i dont do accounting 1/2 but do 3/4
All help appreciated :)
Post by: sabxiao on September 14, 2014, 09:53:12 pm
Hi guys i wanted to do accounting 1/2 next year but my school doesn't let us do itHi, my school doesn't offer 1/2 accounting, and I'm doing 3/4 at the moment.
Do you guys think i should get the book and do the accounting 1/2 course anyways
Because my school does offer accounting 3/4 and i want to do it
how important is 1/2 accounting in terms of 3/4 accounting
Will i be missing out on alot if i dont do accounting 1/2 but do 3/4
All help appreciated :)
However, we did have a 1 semester 'foundation' course, which went over the basics
1/2 is quite different from 3/4 and in my opinion, you definitely don't need it to do well in 3/4.
However, that being said, over the summer holidays, I recommend you learning over the basics of Unit 3.
All the elements, ie. assets, owner's equity etc and their formal definitions, double entry accounting (debits and credits), journals and ledgers.
As well as the basic structure of these reports: balance sheet, cash flow statement and income statement
If you're comfortable with these by the next school year, you'll be all set for 3/4
Post by: Jason12 on September 24, 2014, 10:33:28 am
I also have a term deposit that was invested on 1 august 2009 for a period of 5 years. Interest is receivable half yearly on 31 January and 31 July each year at the rate of 5% per annum. The term deposit is valued at 12000CR. Not sure what to do
Post by: mega_H on September 24, 2014, 01:02:40 pm
I have a pre adjusted trial balance and information that says insurance is paid annual in advance on 1 march. The trail balance is as at 30 june 2013 and the only figure I have is prepaid insurance expense for 2200 DR
I also have a term deposit that was invested on 1 august 2009 for a period of 5 years. Interest is receivable half yearly on 31 January and 31 July each year at the rate of 5% per annum. The term deposit is valued at 12000CR. Not sure what to do
This is just my method and i'm not sure if it's right but i think 2200 would include 12 months + 8 months from the previous period. Therefore you would divide 2200/20 and times it by 12 to get an expense of 1320. For the term deposit you would receive $600 interest a year and at balance day you would have 5 months you have earned but not yet received. 600/12 x5 = 250
Post by: kk.08 on October 04, 2014, 11:03:44 am
Post by: p.taaa on October 04, 2014, 08:18:01 pm
if the firm expects a cash surplus of $10000 or any number, they can plan to purchase an NCA or take drawings. If there is a cash deficit, the firm can plan to take out a loan in the budgeted period. So budgets can be used for planning.
Control:
They can essentially use it as a benchmark to track actual expenditures. So if they budget for $1000 in advertising and see their actual advertising is already $1000, then the business will know not to spend anymore on advertising, so keeping within their restrictions. So it can control their expenditure
Post by: lmnop on October 08, 2014, 06:29:42 pm
The stockcard for this item is shown below.
Date Details IN OUT BALANCE
Jul 31 Memo 201 4@$10 ea 10@$10 ea
50@$12 ea
Bert decided to reduce the selling price of the item to $12 each (plus $1.20 GST). He also is
going to make 3 signs to advertise this sale costing $20 each. (Memo 202).
So how do you calculate the stock write-down?
Apparently you are meant to write-down the latest line of stock by $1 per unit but I'm not sure how.
Post by: Zealous on October 08, 2014, 07:26:17 pm
Bert decided to reduce the selling price of the item to $12 each (plus $1.20 GST). He also isSo there are 60 units of the Coloured Paynes on hand. The Net Realisable Value of each item will be $12 less the advertising costs. The advertising costs a total of $60 and there are 60 units of stock so the advertising will cost $1 per unit. Therefore the NRV will be $11 for each item.
going to make 3 signs to advertise this sale costing $20 each. (Memo 202).
Apparently you are meant to write-down the latest line of stock by $1 per unit but I'm not sure how.
Using the lower of cost price and NRV rule we do not need to write down the first stock as the cost price is less than the NRV. But the 50 units valued at $12 each will need to be written down as the NRV is lower at $11. They will need to be written down by $1 as you mentioned.
So the final stock writedown will be:
Post by: lmnop on October 08, 2014, 07:56:57 pm
Thanks heaps. ;D
Post by: Rachelle on October 12, 2014, 03:47:45 pm
i know its 1800/x
x=? & why
thanks!
Post by: Kuroyuki on October 12, 2014, 04:48:33 pm
can someone please explain the answer to b), which is 200. (in terms of the months)My memory of accounting is pretty dodgy but ill try to explain it
i know its 1800/x
x=? & why
thanks!
first the business prepares reports monthly.
the 1800 is at dec 31st but the prepaid rent started on the 1st October. So actually 3 months of rent have already been expensed by the end of december. So the remaining 1800 dollars is divided on the remaining 9 (12-3) months. That gives you 200 per month.
Post by: Rachelle on October 12, 2014, 07:27:38 pm
Dodgy?! I don't think so mr 48 in accounting...
Post by: Rachelle on October 12, 2014, 08:55:30 pm
Your calculations were for the depreciation of display cases, not the firm's computer :P
They are supposed to be for the display cases?
Post by: Valyria on October 12, 2014, 11:23:43 pm
They are supposed to be for the display cases?
Calculation of depreciation of display cases for the year ending 30 June 2016
Depreciation = Existing display cases New display cases
= $32 000 x 10% + $3 600 x 10% x 7/12
= $3 200 + $210
Depreciation of display cases $ 3 410
b WANGARATTA WATCHES
Balance Sheet (extract) as at 30 June 2016
Non-Current Assets $ $
Computer 35 600
Less Accumulated Depreciation 11 410 (?) 24 190
Does anyone know why the less accumulated depreciation is 11410, and not 3410?
Because the depreciation of display cases is $3410 per annum.
You asked why the accm dpn was 11,410 rather than 3,410 which was the accm dpn for the firm's computer. Your preceding calculations were for the dpn of display cases not the computer, leading to a variance in accm dpn.
Post by: demand&supply on October 18, 2014, 05:10:45 pm
http://www.vcaa.vic.edu.au/Documents/vce/account/accnt-specs-samp-w.pdf
Post by: ValiantIntellectual on October 19, 2014, 11:54:42 am
Post by: abcdqdxD on October 19, 2014, 06:33:22 pm
Does the term selling price include GST? Likewise cost price?
Normally they will make it clear whether its GST inclusive or exclusive
Post by: lmnop on October 20, 2014, 04:47:52 pm
A payment of wages of $505 was incorrectly recorded in the cash payments journal as a payment to creditor- N. Smythe for $550.
The solutions debit $505 to Wages expense and likewise credit $505 to Creditors control.
Now what happens to the extra $45 from payments to Creditors? Should there be an extra entry that debits $45 to Bank?
Post by: redcracker on October 20, 2014, 08:21:57 pm
I might as well ask another question since you guys were quick enough to respond to my last query.
A payment of wages of $505 was incorrectly recorded in the cash payments journal as a payment to creditor- N. Smythe for $550.
The solutions debit $505 to Wages expense and likewise credit $505 to Creditors control.
Now what happens to the extra $45 from payments to Creditors? Should there be an extra entry that debits $45 to Bank?
wages debit $505 (to correct the fact that no wages recorded)
creditors control&creditor n smythe credit $550 (to undo the changes to cc/cns)
bank debit $45 (to restore bank to what it should be)
i formatted it weirdly, but thats how i would do it - im fairly sure im right but i cant be certain
Post by: lmnop on October 20, 2014, 08:53:01 pm
wages debit $505 (to correct the fact that no wages recorded)
creditors control&creditor n smythe credit $550 (to undo the changes to cc/cns)
bank debit $45 (to restore bank to what it should be)
i formatted it weirdly, but thats how i would do it - im fairly sure im right but i cant be certain
The solutions for the Cambridge textbook seems to have mistakes here and there, but I can't really say for sure. ¯\_(ツ)_/¯
Post by: Fyrefly on October 22, 2014, 07:35:24 pm
wages debit $505 (to correct the fact that no wages recorded)
creditors control&creditor n smythe credit $550 (to undo the changes to cc/cns)
bank debit $45 (to restore bank to what it should be)
i formatted it weirdly, but thats how i would do it - im fairly sure im right but i cant be certain
This is correct.
Post by: BoredSatan on October 31, 2014, 10:59:35 pm
Post by: Valyria on November 01, 2014, 12:22:22 am
Alright, I'll try to be online as much as possible to help with Accounting Questions! :D
This place has been a ghost town for the past 11 months :P I'll try revive it;
Summarised information;
Question concerns the budgeted cash flow statement for operating activities.
GST collected from cash sales is $18,700
GST paid is $19,445
They have told us that balance at the END is $11,105 and NO information has been provided for the START.
So if those are the only transactions that involve GST and we reconstruct the ledger, we should have a debit entry cross referenced 'bank' for $11,850. This figure representing a refund from ATO.
However, as the answers didn't include this entry, I'm not too sure whether I overlooked a key step.
Post by: demand&supply on November 01, 2014, 07:16:34 pm
Sorry to ask these questions but i really want to know...
I'm rank 1 in my school with 94% in Unit 3 and 92% in Unit 4. I did well on the trial exam (TSSM) with 93%, Im dying to know, do i have to get 100/100 on the exam for a 50?
Post by: jonoz0r on November 01, 2014, 07:31:54 pm
Hey guys,
Sorry to ask these questions but i really want to know...
I'm rank 1 in my school with 94% in Unit 3 and 92% in Unit 4. I did well on the trial exam (TSSM) with 93%, Im dying to know, do i have to get 100/100 on the exam for a 50?
Nah you don't. Last year 194/200 (97/100) was enough for a 50, so don't fret! :D
It might be different this year though :P
Post by: Fyrefly on November 01, 2014, 08:22:15 pm
This place has been a ghost town for the past 11 months :P I'll try revive it;
Summarised information;
Question concerns the budgeted cash flow statement for operating activities.
GST collected from cash sales is $18,700
GST paid is $19,445
They have told us that balance at the END is $11,105 and NO information has been provided for the START.
So if those are the only transactions that involve GST and we reconstruct the ledger, we should have a debit entry cross referenced 'bank' for $11,850. This figure representing a refund from ATO.
However, as the answers didn't include this entry, I'm not too sure whether I overlooked a key step.
Can't answer the question based on the information you've provided.
1. Ending balance debit or credit?
2. Full financial year?
3. Cash-only basis, or does the ending balance potentially include credit transactions?
4. GST paid is cash only?
Post by: demand&supply on November 01, 2014, 08:25:12 pm
Nah you don't. Last year 194/200 (97/100) was enough for a 50, so don't fret! :D
It might be different this year though :P
Oh WOW! Thats pretty good! And congrats on the amazing score man :D
Post by: kk.08 on November 02, 2014, 05:08:01 pm
This place has been a ghost town for the past 11 months :P I'll try revive it;
Total agree with you!
Anyhow, what is the purpose of the going concern principle?
Post by: Coralista on November 02, 2014, 05:48:26 pm
Total agree with you!
Anyhow, what is the purpose of the going concern principle?
Going concern states that
-the business is assumed to be continuous and its records should be kept on that basis.
-this allows the recording of transactions that have an effect on the future (such as depreciation, prepaid revenue/expenses etc)
-also assets and revenue can be distinguished
Post by: kk.08 on November 02, 2014, 11:03:15 pm
Going concern states that
-the business is assumed to be continuous and its records should be kept on that basis.
-this allows the recording of transactions that have an effect on the future (such as depreciation, prepaid revenue/expenses etc)
-also assets and revenue can be distinguished
Thanks! If you don't mind, could you explain how going concern helps distinguish between assets and expenses? I saw it in the Acc study design and could not connect the two ideas together!
Post by: BoredSatan on November 03, 2014, 08:15:14 pm
Thanks! If you don't mind, could you explain how going concern helps distinguish between assets and expenses? I saw it in the Acc study design and could not connect the two ideas together!Because the business' life is assumed to be infinite therefore we are able to classify a prepaid expense as an asset as we know that the business will exist in the future/next reporting period in order to consume that part of the asset. Therefore we can separate the prepaid expense into segments depending on how much we have consumed in the reporting period.
Post by: Eugenet17 on November 04, 2014, 10:56:27 am
Prepaid Sales Revenue relates to an amount paid as a deposit on an antique dining table and chairs. The stock had a selling price of $23,000 with a cost price of $14,375. This stock was delivered on 30 June 2013 and Invoice AA132 was raised.
Are we supposed to assume that that $23,000 is the value PLUS GST even though it isn't specified? The answers assumed that it was 23000 + 2300(GST) but I thought that we didn't have to if the question doesn't specify.
Post by: abcdqdxD on November 04, 2014, 12:38:45 pm
For questions like these:
Prepaid Sales Revenue relates to an amount paid as a deposit on an antique dining table and chairs. The stock had a selling price of $23,000 with a cost price of $14,375. This stock was delivered on 30 June 2013 and Invoice AA132 was raised.
Are we supposed to assume that that $23,000 is the value PLUS GST even though it isn't specified? The answers assumed that it was 23000 + 2300(GST) but I thought that we didn't have to if the question doesn't specify.
Yeah it would be 23000+GST, VCAA will make it explicit though.
It's clear that 23000 can't be a GST inclusive figure. You can check this by dividing by 11 and see if you get a whole number.
Post by: ermelinde on November 04, 2014, 07:41:36 pm
Could anybody please explain this question from 2008 Unit 3 VCAA Exam 1? I've attached a pic of it below. I don't understand where the $5000 accrued wages from October went.
Post by: Zealous on November 04, 2014, 07:52:31 pm
Hope everyone's going well with revision!
Could anybody please explain this question from 2008 Unit 3 VCAA Exam 1? I've attached a pic of it below. I don't understand where the $5000 accrued wages from October went.
Looks like they've got a 3 month reporting period (quarter), so only the first payment on the 15th of October would go towards accrued wages - the other payments would go directly to wages expense. If the reporting period is 3 months, you don't need to adjust for accrued wages at the end of October and November.
Then at the end of the 3 month reporting period on balance day, there would be an adjustment for the $5000 accrued from December which would be paid off in January (next year).
Post by: ermelinde on November 04, 2014, 08:06:48 pm
I will assume that they're using quarterly periods here though, so that clarifies it plenty.
Post by: Zues on November 06, 2014, 06:36:36 pm
thanks
Post by: more_vanilla on November 07, 2014, 06:50:04 pm
Its kind of late but...any tips?
Post by: Zealous on November 07, 2014, 07:02:09 pm
if there is a decreasing trend in the net profit margin (graphically). can someone outline some factors that may be to contribute to this trend?There's heaps of things which could cause that. Think about the income statement and the sort of items which fit there, what will increase net profit and what will decrease net profit? So a decrease in net profit margin could be due to increased cost price of stock, poor expense control, decreased markup (constant cost price), maybe the business decreased their advertising (reducing expenses) but that impacted their sales proportionally more? even the business purchasing a new non-current assets which caused a large amount of depreciation (compared to previous periods) can decrease the amount of each sales dollar retained as net profit compared to previous periods. These sort of responses may accompany data of a business so base your answers off the question and data given and since it says "may" you can be a little creative (and less generic).
thanks
I'm averaging low 80s in my practice exams and would like to increase this to at least a high 80s. I correct all my exams and type up all my mistakes so I don't know why I'm still making so many errors - they're usually little marks here and there that all add up :(Well, you type up all of your mistakes - have you been reviewing them frequently? Reading through them and applying what you've learnt to new practice exams? I recommend compiling all of your most common mistakes into a word document, printing it out and briefly reading it before you do a practice exam. If you know all your stuff but it's just silly mistakes holding you back then I think that could help.
Its kind of late but...any tips?
Post by: kk.08 on November 08, 2014, 12:58:04 am
Because the business' life is assumed to be infinite therefore we are able to classify a prepaid expense as an asset as we know that the business will exist in the future/next reporting period in order to consume that part of the asset. Therefore we can separate the prepaid expense into segments depending on how much we have consumed in the reporting period.
Thanks! That actually came up in a practice paper I did today :P
Also, does anyone know if we need to know how to calculate the depreciation percentage rate?
Post by: more_vanilla on November 08, 2014, 06:56:23 am
Well, you type up all of your mistakes - have you been reviewing them frequently? Reading through them and applying what you've learnt to new practice exams? I recommend compiling all of your most common mistakes into a word document, printing it out and briefly reading it before you do a practice exam. If you know all your stuff but it's just silly mistakes holding you back then I think that could help.
Yeah thanks. I probably wasn't reviewing my notes enough (because there's just so much to go through T_T)
I'll try that today and hope for the best on Monday haha
Post by: BoredSatan on November 08, 2014, 11:16:20 am
Thanks! That actually came up in a practice paper I did today :Pdepends if you're talking about the straight line or reducing balanced method
Also, does anyone know if we need to know how to calculate the depreciation percentage rate?
Straight line method: depreciation expense (per annum) / historical cost x 100
Reducing Balance Method: Don't need to know how to calculate
Post by: BigWhale112 on November 08, 2014, 11:58:54 am
could you guys help me with a couple of questions i have?
1) if i were to get a question such as "Discuss the changes in profitability of the business between 2012 and 2011" or "Explain the trend in the Working Capital Ratio", do i have to explicitly define the terms profitability and working capital ratio before answering the question
2) for a budgeted report do we have to include GST Settlement/GST Refund in the budgeted cash flow statement?
for example if at 31 Dec 2012 there was a GST liability of 1480, do we have to include this amount in the budgeted cash flow statement for the year ended 21 Dec 2013?
thankyou in advance :)
Post by: lisax3 on November 08, 2014, 12:20:38 pm
Post by: Jason12 on November 08, 2014, 01:34:51 pm
Post by: lisax3 on November 08, 2014, 01:40:13 pm
does 5/7 credit terms mean 5% discount if payed within 7 days or other way round?
Yes, it means if it is paid within 7 days a 5% discount will be given
Post by: Valyria on November 08, 2014, 03:01:57 pm
On reporting day (30th of june) if it is found that a transaction such as a cash payment that occurred earlier for example on the 16th on june has not been recorded. Do we record it in the cash payment on the day it occurred (16th of june) or the day the transaction was found 30th of june?
30/06.
If you think about it, if you write 16/06 in the general journal, you'll most likely disrupt the chronology of entries already in the general journal because there's bound to be entries on the 30/06 for balance day adjustments. Secondly, even if you say 16/06, the general journal will be posted at the end of the month (or however frequently) so the general ledgers won't reflect when you actually found the transaction.
Post by: Valyria on November 08, 2014, 06:04:38 pm
Which unit cost price would you need to adjust for the following transactions and why?
Post by: student1122 on November 08, 2014, 06:04:56 pm
heyy1. No you do not have to to define profitability if it asks you to discuss regarding to a business however with any ratio given you need to describe what the numbers actually mean. So for example, if the business had 0.8:1 (2011) and 1:1 (2012) as their WCR figures then you need to state that the working capital ratio increased from 0.8 (2011) to 1(2012) which is a favourable trend as the business now has more current assets available for its current liabilities. So you need to embed the definition in your answer which is a very common thing that is required in accounting.
could you guys help me with a couple of questions i have?
1) if i were to get a question such as "Discuss the changes in profitability of the business between 2012 and 2011" or "Explain the trend in the Working Capital Ratio", do i have to explicitly define the terms profitability and working capital ratio before answering the question
2) for a budgeted report do we have to include GST Settlement/GST Refund in the budgeted cash flow statement?
for example if at 31 Dec 2012 there was a GST liability of 1480, do we have to include this amount in the budgeted cash flow statement for the year ended 21 Dec 2013?
thankyou in advance :)
2. Yes the budgeted reports do need to include GST, previous years they did not have this however the new study design requires the addition of GST, so do not forget about it!
Hope this helped :)
Post by: student1122 on November 08, 2014, 06:11:19 pm
Hey,
Which unit cost price would you need to adjust for the following transactions and why?
• Memo 24: stock loss of 3 units @ $55 (because of FIFO)
• Memo 25: stock write down of 5 units @ $55 (because of FIFO)
• Memo 26: stock write down of the remaining 4 units @ 55 and 30 units @ 50 to $40 each
tell me if any of it does not make sense
Post by: lisax3 on November 08, 2014, 06:19:08 pm
Because in the study design pg 40-41 it records prepaid sales revenue when it was earned even though it is not the end of the month
http://www.vcaa.vic.edu.au/documents/vce/account/accountingsd-2013.pdf and also in the 2010 vcaa exam 2
However in the 2012 exam question 4
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/accounting_assessrep12.pdf
It was recorded at the end of the month where the revenue has not been earned yet.
Post by: Valyria on November 08, 2014, 06:21:47 pm
• Memo 24: stock loss of 3 units @ $55 (because of FIFO)
• Memo 25: stock write down of 5 units @ $55 (because of FIFO)
• Memo 26: stock write down of the remaining 4 units @ 55 and 30 units @ 50 to $40 each
tell me if any of it does not make sense
Sigh I didn't realise the 12 units at $55 preceded the 30 units at $50. Thanks for that :)
Post by: student1122 on November 08, 2014, 07:30:27 pm
Which date should you use to record prepaid sales revenue in the general journal once it has reached the end of the reporting period? The end of the reporting period where the revenue has not been earned yet or the date of when it was earned?I am pretty sure it is recorded at the date it is earnt in the general journal :) and that is probably a mistake? I am not too sure :/
Because in the study design pg 40-41 it records prepaid sales revenue when it was earned even though it is not the end of the month
http://www.vcaa.vic.edu.au/documents/vce/account/accountingsd-2013.pdf and also in the 2010 vcaa exam 2
However in the 2012 exam question 4
http://www.vcaa.vic.edu.au/Documents/exams/account/2012/accounting_assessrep12.pdf
It was recorded at the end of the month where the revenue has not been earned yet.
Post by: Jason12 on November 08, 2014, 09:20:00 pm
Post by: kk.08 on November 08, 2014, 09:36:00 pm
is the DR side of GST clearing account for assets and the credit side for a liability? So If A GST refund or a GST settlement from ATO happens which side does it go on?
So the DR side represents a decrease in GST liability which is achieved when stock is bought from creditors on cash or credit. The CR side represents an increase in GST liabilty which is achieved when debtors buy your stock and you collect GST.
A GST settlement is recorded on the DR side because you're reducing GST liabilty and the GST refund from the ATO goes on the CR.
Also, does anyone know how to do question 4a) and b) of the image attached below? It's actually driving me crazy!! I've also attached the answers from the examiner's report.
Thanks in advance :)
Post by: Zealous on November 08, 2014, 09:46:41 pm
Also, does anyone know how to do question 4a) and b) of the image attached below? It's actually driving me crazy!! I've also attached the answers from the examiner's report.
Thanks in advance :)
One way of doing it is to look at each individual month, remembering that they pay in advance:
Jul (2011): Original contract payment for Aug, 1200
Aug: Original contract payment for Sep, 1200
Sep: Very first payment on new contract for Oct costing 1200x1.2=1440
Oct: Payment for Nov, 1440
Nov: Payment for Dec, 1440
Dec: Payment for Jan, 1440
Jan (2012): Payment for Feb, 1440
Feb: Payment for Mar, 1440
Mar: Payment for Apr, 1440
Apr: Payment for May, 1440
May, Payment for Jun, 1440
Jun, Payment for Jul, 1440
So we end up with 10 payments of 1440 and 2 payments of 1200 which equates to 16800.
For part b, you can do the exact same method, or you can alternatively think about it like this: The original advertising cost at $1200/month applies to Jul, Aug and Sep 2011, and the new advertising cost of $1440/month applies to October onwards, so we have 3 months of the old 1200, and 9 months of the new 1440 which is 16560. Even though there was a payment for 1440 in September (above), this was a prepayment in advance so the actual expense for the month was still 1200.
Post by: TheWackyCheese on November 08, 2014, 09:52:56 pm
Post by: kk.08 on November 08, 2014, 10:02:43 pm
Do accrued wages go in the income statement?
Accrued wages are wages that the are still owing to the employees and is therefore a liability. The income statement only consists of revenues and expenses, while the balance sheet consists of liabilities, assets and owners equity. Therefore, accrued wages would be recorded in the balance sheet not the income statement :)
Post by: anna.xo on November 08, 2014, 10:12:11 pm
So I've done like 5 practice exams, and I'm only getting like 70. I'm losing marks on prac and theory and I don't know how to get better. Does anyone have any actually helpful tips ? TIA.
Post by: kk.08 on November 08, 2014, 10:19:48 pm
I know that this is probably irrelevant here, and I do apologise but I really need some help.
So I've done like 5 practice exams, and I'm only getting like 70. I'm losing marks on prac and theory and I don't know how to get better. Does anyone have any actually helpful tips ? TIA.
I second this, need some last minute tips as well!
Post by: student1122 on November 08, 2014, 10:59:14 pm
I second this, need some last minute tips as well!Hey,
Well, the best way to minimise your mistakes is to take your time first of all to do all the questions and think them through specially with prac. Theory questions, always try to relate it to what principles/qualitative characteristic the questions can relate to. There are many questions that are often asked again and again such as the difference between product and period cost, definition of net realisable value and why it is done (because of conservatism), etc. Revise through unit 4 more than unit 3 as most of the exam will be on unit 4. Read through the chapters and if you have the cambridge vce accounting book, memorize the definitions that are on the side margins of the book. REALLY KNOW YOUR BASICS AS WELL, such as reasons for stock loss/gain, reasons for profit/loss on disposal, definitions of assets, expenses, revenues and liabilities. Also, memorise the format for the reports and ledger accounts (do all of these: stock control, creditors control, debtors control, GST clearing, expenses, revenues) this will help you heaps if there is any budgeting questions because then you know what information to look for rather than hope for the information to stand out to you.
I really hope this helped and tell me if you need any other help :)
Post by: TheWackyCheese on November 08, 2014, 11:01:14 pm
Accrued wages are wages that the are still owing to the employees and is therefore a liability. The income statement only consists of revenues and expenses, while the balance sheet consists of liabilities, assets and owners equity. Therefore, accrued wages would be recorded in the balance sheet not the income statement :)Yeah I know Accrued Wages are a liability. But I remember I had to put accrued wages into the income statement. If the business paid off accrued wages, would it be listed as accrued wages or just wages in the income statement?
Post by: student1122 on November 08, 2014, 11:04:15 pm
Yeah I know Accrued Wages are a liability. But I remember I had to put accrued wages into the income statement. If the business paid off accrued wages, would it be listed as accrued wages or just wages in the income statement?you NEVER write accrued wages in the income statement. If they are wages that are accrued for the current reporting period (so you incurred this expense but you have not paid it yet) then you include it in your wages expense. But if it is from the previous reporting period then it is not included.
Post by: Valyria on November 08, 2014, 11:27:25 pm
Yeah I know Accrued Wages are a liability. But I remember I had to put accrued wages into the income statement. If the business paid off accrued wages, would it be listed as accrued wages or just wages in the income statement?
If a firm has incurred wages expense for a reporting period and haven't paid, an accrued wages (current liability) account is created. However, through the underlying principles of accrual accounting, revenue earned must be matched with expenses incurred in a given reporting period and so the wages the firm hasn't paid increases wages expense for the reporting period. When the firm pays after the reporting period, only their bank balance and accrued wages decrease since expenses was recognised in the previous reporting period. Thus you'll never see 'accrued wages' in an income statement but the 'wages expense' may include a portion of wages that hasn't been paid.
Post by: Valyria on November 09, 2014, 10:26:04 am
When we write-down stock in the stock card, what position do we record them in the last column (balance column)?
When we are required to close off rev/exp accounts to P/L summary in the general journal, how do we treat sales return? Since it's a (-R) account, do we close it off with the expenses? Or do we first transfer it to the sales ledger and then close off the sales account?
Thanks in advance
Post by: lisax3 on November 09, 2014, 11:32:18 am
Hey guys,I'm wondering about the same thing for the first question. And to close off sales return, you close it by it self as a negative revenue so the entry would look like this
We we write-down stock in the stock card, what position do we record them in the last column (balance column)?
When we are required to close off rev/exp accounts to P/L summary in the general journal, how do we treat sales return? Since it's a (-R) account, do we close it off with the expenses? Or do we first transfer it to the sales ledger and then close off the sales account?
Thanks in advance
DR profit and loss summary
CR Sales return
You can also close it with sales because my teacher (who is an assessor) told me there are 2 ways to do it. But she also told me that its not in the course.
Post by: simenzz on November 09, 2014, 12:28:21 pm
Post by: Zealous on November 09, 2014, 12:43:12 pm
I'm wondering about the same thing for the first question. And to close off sales return, you close it by it self as a negative revenue so the entry would look like thisYep, I've been told that since Sales Return is neither a true revenue or expense, we just close it off separately to Profit and Loss Summary.
DR profit and loss summary
CR Sales return
You can also close it with sales because my teacher (who is an assessor) told me there are 2 ways to do it. But she also told me that its not in the course.
For the Stock Write-Down, I think you should treat it as if it is expected to be the first stock to go out (so at the top), unless otherwise specified. So the exception would be VCAA 2013 where they had two stock write-downs in a row, so the earlier write-down would get the place at the top. That's personally how I'm going to go about it.
Post by: exceed on November 09, 2014, 03:42:47 pm
And also, what is the effect on the income statement if the NRV rule hadn't been recognised if the NRV had fallen below cost price?
Post by: student1122 on November 09, 2014, 04:25:14 pm
Hi I'm not sure if this has been answered yet, but what are the limitations of using control accounts and subsidiary ledgers?I don't know about the limitations, disadvantages are that they can increase expenses as a staff member is required to record in the subsidiary ledger
And also, what is the effect on the income statement if the NRV rule hadn't been recognised if the NRV had fallen below cost price?
If NRV has not been recognized then stock write down expense is not recognized, calculating a lower adjusted gross profit, leading to a lower net profit
Post by: student1122 on November 09, 2014, 04:26:15 pm
I get around 90 in practice exams :/
Post by: Selcouth on November 09, 2014, 04:30:22 pm
What do I need in the exam to get 45+
I get around 90 in practice exams :/
If you can get 93+ in the actual exam I think you'd have a pretty good shot at getting a 45.
But hey, what would I know?
Post by: kk.08 on November 09, 2014, 04:49:09 pm
This what the answers say
Bank - $1078
Discount revenue - $22
Creditors control - $1100
Thanks!
Post by: brisbane99 on November 09, 2014, 05:16:50 pm
Does anyone know how to figure out question 1c?
This what the answers say
Bank - $1078
Discount revenue - $22
Creditors control - $1100
Thanks!
Lyalls Imports bought 3 chairs for $500 each plus GST. Since they returned one, the balance now owing is 2 chairs (2x550)
The questions states the CPJ from Lyalls imports POV: 1100 Creditors control 22 Discount Revenue (0.02 x 1100 as stated) and therefore 1078 bank (1100-22)
Post by: Jason12 on November 09, 2014, 05:27:19 pm
When doing a disposal of assets do the accumulated depreciation and non-current assets have to have an opening balance?
Post by: anna.xo on November 09, 2014, 05:33:49 pm
What do I need in the exam to get 45+How are you even getting 90 ? Like I'm struggling to even get 70 ffs >:(
I get around 90 in practice exams :/
Post by: Jason12 on November 09, 2014, 05:38:27 pm
How are you even getting 90 ? Like I'm struggling to even get 70 ffs >:(
In my experience, it's usually silly mistakes like forgetting to include an entry or getting the cross-reference wrong that can cause a 70%. In one practice exam, I got a 70% but I realized that around 15 marks were lost just on easy things
Post by: anna.xo on November 09, 2014, 05:42:54 pm
In my experience, it's usually silly mistakes like forgetting to include an entry or getting the cross-reference wrong that can cause a 70%. In one practice exam, I got a 70% but I realized that around 15 marks were lost just on easy things
Thanks man..
Way to trivialise my marks >:(
Post by: kk.08 on November 09, 2014, 05:50:08 pm
Lyalls Imports bought 3 chairs for $500 each plus GST. Since they returned one, the balance now owing is 2 chairs (2x550)
The questions states the CPJ from Lyalls imports POV: 1100 Creditors control 22 Discount Revenue (0.02 x 1100 as stated) and therefore 1078 bank (1100-22)
Oh, just realised that I forgot to take the sales return into consideration so I didn't deduct the amount for one chair. Thanks!! :)
Post by: TheWackyCheese on November 09, 2014, 06:21:32 pm
you NEVER write accrued wages in the income statement. If they are wages that are accrued for the current reporting period (so you incurred this expense but you have not paid it yet) then you include it in your wages expense. But if it is from the previous reporting period then it is not included.
If a firm has incurred wages expense for a reporting period and haven't paid, an accrued wages (current liability) account is created. However, through the underlying principles of accrual accounting, revenue earned must be matched with expenses incurred in a given reporting period and so the wages the firm hasn't paid increases wages expense for the reporting period. When the firm pays after the reporting period, only their bank balance and accrued wages decrease since expenses was recognised in the previous reporting period. Thus you'll never see 'accrued wages' in an income statement but the 'wages expense' may include a portion of wages that hasn't been paid.Thanks for the responses guys it cleared it up for me. My teacher mentioned accrued wages and income statement at one stage and I found the question.
The business had paid Wages of $51720.
Furthermore, Wages of $2300 were owing at the end of the period.
Therefore the income statement should say "Wages: $54020"
Post by: ermelinde on November 09, 2014, 06:28:56 pm
Say for example, a business has a yearly reporting period. If the question specifies that the business pays for example, rent, in advance for the next month, and this is within the same reporting period, is this reported as "Prepaid Rent" or "Rent" in the Cash Flow Statement?
Post by: kk.08 on November 09, 2014, 07:56:08 pm
Hi, could anyone please clear up the concept of prepaid expense for me?
Say for example, a business has a yearly reporting period. If the question specifies that the business pays for example, rent, in advance for the next month, and this is within the same reporting period, is this reported as "Prepaid Rent" or "Rent" in the Cash Flow Statement?
I'm not entirely sure myself so someone correct me if I'm wrong...
I'd assume that it'd only be considered prepaid if the current reporting period's rent expense was paid for in the previous reporting period. Because although the rent has been paid one month in advance in the same period, at the end of the year it will all add up to the same expense.
But let's say the rent expense was prepaid in early December 2014 for the next month (January 2015) and the reporting period ended December 31st 2014. Then that amount would be considered prepaid in 2015 and as a result the rent expense will be reduced.
Post by: Jason12 on November 09, 2014, 08:24:28 pm
Thanks man..
Way to trivialise my marks >:(
sorry I meant it more along the lines of that you already know the main concepts its probably just small things that are stopping you from getting 90%
Post by: Jason12 on November 09, 2014, 08:25:46 pm
Post by: Valyria on November 09, 2014, 08:28:29 pm
Is GST refund recorded on the credit side and GST settlement on the right? If so then what does the debit and credit side mean for GST clearing?
GST refund is on the credit side and GST settlement is on the debit site. There's several transactions that occur in the GST clearing account, I'd recommend looking at the account reconstruction for a complete set of the transactions.
Post by: kk.08 on November 09, 2014, 09:50:16 pm
A trading firm increased its cost of goods sold from $80 000 in 2014 to $88 000 in 2015. The owner of the business claims that this indicates an increase in stock turnover of 10%. Is this necessarily correct? Explain your answer.
Thanks :)
Post by: Coralista on November 09, 2014, 10:12:07 pm
Could someone help me out with this question, I don't have the answers :(
A trading firm increased its cost of goods sold from $80 000 in 2014 to $88 000 in 2015. The owner of the business claims that this indicates an increase in stock turnover of 10%. Is this necessarily correct? Explain your answer.
Thanks :)
Not necessarily, think about what other reasons could cause an increase in cost of goods sold (such as an increase in the cost price of individual items of stock (supplier's price))
Also, an increase in stock turnover could be due to reducing stock levels, getting rid of slow moving lines of stock etc
Post by: kk.08 on November 09, 2014, 10:24:48 pm
Not necessarily, think about what other reasons could cause an increase in cost of goods sold (such as an increase in the cost price of individual items of stock (supplier's price))
Also, an increase in stock turnover could be due to reducing stock levels, getting rid of slow moving lines of stock etc
Yeah I thought it was something along those lines just wasn't too sure haha, thanks heaps!
Post by: kk.08 on November 09, 2014, 11:11:22 pm
Thanks
Post by: anna.xo on November 09, 2014, 11:25:20 pm
sorry I meant it more along the lines of that you already know the main concepts its probably just small things that are stopping you from getting 90%That's okay, I'm sorry for jumping down your throat when you were only trying to be helpful. I'm just stressed [like most of us no doubt] and sensitive, so ignore the theatrics :P
Anyway good luck to you for tomorrow :)
Post by: Jason12 on November 09, 2014, 11:30:00 pm
Post by: abcdqdxD on November 09, 2014, 11:39:59 pm
P.S. go to sleep guyz
Post by: kk.08 on November 09, 2014, 11:42:33 pm
could a bank statement be given to us and if so, how to record one?
Yeah so I just checked and according to the study design we need to know how to interpret a bank statement, I'm guessing you could use it to see whether there have been overdrafts and to be able to record it in the balance sheet and what not.
Post by: Rachelle on November 20, 2014, 01:44:48 pm
Thanks!
Post by: mc1234 on March 04, 2015, 05:45:21 pm
E.g. The motor vehicle is 3 years old, and the owner has estimated its value at $15200, rather than $22000 its listed at in the Balance Sheet. Discuss how the motor vehicle should be valued, citing at least two qulitative characteristics in your answer.
Would I just talk about how the $15200 is the agreed value and therefore the most relevant, despite not being as reliable as the $22000? Or would I have to discuss positives/negatives?
Cheers!
Post by: aaziz17 on March 04, 2015, 06:01:00 pm
Hey Guys, when looking at discussion questions, is it more of a discussion of positives/negatives, or is it just a more general discussion of the topic.
E.g. The motor vehicle is 3 years old, and the owner has estimated its value at $15200, rather than $22000 its listed at in the Balance Sheet. Discuss how the motor vehicle should be valued, citing at least two qulitative characteristics in your answer.
Would I just talk about how the $15200 is the agreed value and therefore the most relevant, despite not being as reliable as the $22000? Or would I have to discuss positives/negatives?
Cheers!
I cant answer your question i have trouble with those questions as well. But i do know when talking about agreed value QC you should be referring to is relevance and not reliability
Post by: Zealous on March 08, 2015, 06:35:34 pm
Hey Guys, when looking at discussion questions, is it more of a discussion of positives/negatives, or is it just a more general discussion of the topic.
E.g. The motor vehicle is 3 years old, and the owner has estimated its value at $15200, rather than $22000 its listed at in the Balance Sheet. Discuss how the motor vehicle should be valued, citing at least two qulitative characteristics in your answer.
Would I just talk about how the $15200 is the agreed value and therefore the most relevant, despite not being as reliable as the $22000? Or would I have to discuss positives/negatives?
Cheers!
There's no harm talking a little bit about both sides. So discuss both ways that it could be recorded and describe why one method is better than the other. Discussions are often quite open which can also make them difficult.
This is your classic reliability vs relevance question. Using the reliability characteristic, the $22000 should be used as it is verifiable by source documents and is free from bias - it is not based on estimations. This will provide the most accurate figure in reports and also supports the historical cost principle. However, the $15200 is more relevant and will provide a better picture of the business position at the point where reports are made. Ultimately, using the $15200 will allow the owner to make better decisions as the information is more relevant and up to date, so the vehicle should be valued at $15200.
Post by: mc1234 on March 08, 2015, 09:31:10 pm
There's no harm talking a little bit about both sides. So discuss both ways that it could be recorded and describe why one method is better than the other. Discussions are often quite open which can also make them difficult.
This is your classic reliability vs relevance question. Using the reliability characteristic, the $22000 should be used as it is verifiable by source documents and is free from bias - it is not based on estimations. This will provide the most accurate figure in reports and also supports the historical cost principle. However, the $15200 is more relevant and will provide a better picture of the business position at the point where reports are made. Ultimately, using the $15200 will allow the owner to make better decisions as the information is more relevant and up to date, so the vehicle should be valued at $15200.
Great answer, cheers!
Post by: Escobar on March 15, 2015, 09:31:56 am
last year the class average was 40% and no one finished
so time might be an issue
Post by: abcdqdxD on March 16, 2015, 05:46:22 pm
any tips on an excel sac for general journal?
last year the class average was 40% and no one finished
so time might be an issue
read the questions carefully, type fast and check your answers if you have time
Post by: abcdqdxD on April 08, 2015, 07:28:46 pm
If you have any questions, please make use of this thread :)
Post by: nick_9_8 on May 11, 2015, 08:01:36 pm
Do I include it in the income statement ? Is it an expense or an asset?
Post by: Kel9901 on May 15, 2015, 09:51:35 am
I have a trial balance with "Insurance" listed.expense.
Do I include it in the income statement ? Is it an expense or an asset?
prepaid insurance is an asset, insurance is an expense
Post by: MayMacQueen on May 17, 2015, 12:13:26 am
Discuss, ref to AP (OTHER THAN reporting period), why this is inappropriate.
I could only think of going concern that could fit, but can't come to the conclusion as to why. Any one got any suggestions?
Post by: izzywantsa97 on June 15, 2015, 06:52:37 pm
Post by: mc1234 on June 24, 2015, 04:10:23 pm
Post by: mike.jones on June 24, 2015, 08:21:46 pm
I was wondering if someone could provide me with some Unit 4 QAT Exams even if it is the 2013 Exam, for accounting obviously.
Email: [email protected]
Thank-you, would be greatly appreciated.
Post by: Escobar on June 29, 2015, 12:50:56 pm
can you combine the entries for disposal of van?
Post by: Davos on June 29, 2015, 02:17:59 pm
(http://i.imgur.com/xLUjjWS.png)
can you combine the entries for disposal of van?
No
Post by: Zealous on July 02, 2015, 07:34:53 pm
Do discounts on credit purchases reduce the cost of stock? And if so, would that be a period or product thing?Nope. The cost of the stock won't change, all a discount is doing is reducing our liability to creditors, it doesn't actually change how much the stock is worth.
Luke has stated that he would reduce his profit as much as possible as he doesn't want to pay too much tax this year. In order to do so he has stated that he will record the whole amount of Prepaid Rent Expense as an expense in the reporting period.Conservatism: If you treat all the rent expense as an expense in the current period, there's going to be zero rent expense allocated to the next 'x' periods. This means you're acutally overstating your profit in future periods. It's better to spread out the expense.
Discuss, ref to AP (OTHER THAN reporting period), why this is inappropriate.
I could only think of going concern that could fit, but can't come to the conclusion as to why. Any one got any suggestions?
I've been seeing in a couple of practice papers/Checkpoints questions relating to internal control mechanisms. I know it was somewhat covered briefly in Unit 1/2, but I can't see anything about it in the Study Design or in the Textbook. Will it ever/Has it ever come up on any actual VCAA exams or am I wasting my time doing questions on it?I think it came up once a while ago - but I don't think it has come up since. I wouldn't worry too much about it.
(http://i.imgur.com/xLUjjWS.png)It's fine to do boths. If you combine them you'll still get the same overall effect on the general ledger. So combining them will make the ledger look neater while separating them could make it slightly easier to understand.
can you combine the entries for disposal of van?
Post by: Berimbolo King on July 05, 2015, 07:22:52 pm
In the cambridge textbook it says because its a balance day adjustment and blah blah blah
Thanks ;D ;D
Post by: shivaji on September 03, 2015, 04:54:18 pm
Why do business' depreciate?
In the cambridge textbook it says because its a balance day adjustment and blah blah blah
Thanks ;D ;D
lol might be late but whatever
they depreciate to ensure that an accurate profit is determined at the end of the period (as the asset has been expensed.) also to abide by conservatism
Post by: shivaji on September 03, 2015, 04:55:27 pm
Post by: Escobar on September 18, 2015, 10:09:29 pm
Post by: teresa_turtle1234 on September 30, 2015, 10:12:49 pm
Post by: Escobar on September 30, 2015, 10:17:17 pm
How would you figure out Cost of Sales if selling price was $600,000 and mark-up was 50%?600000/1.5
Post by: mc1234 on October 04, 2015, 11:59:09 am
Thanks!
Post by: Berimbolo King on October 04, 2015, 12:05:12 pm
Hey guys, quick question, are we expected to recognize which expenses incur GST on their payment and which don't? For example, Advertising and Office Expenses will always incur GST, whilst Wages will not. Should we always treat these expenses as having GST incurred on their payment, even if the question does not explicitly state that they have?They would usually tell you. But yes you should .
Thanks!
Post by: mc1234 on October 04, 2015, 12:59:15 pm
They would usually tell you. But yes you should .
Yeah I have noticed they are including a lot more in the practice exams I've been doing as a way to trick students. Thanks for the quick response!
Post by: Berimbolo King on October 04, 2015, 01:06:38 pm
Yeah I have noticed they are including a lot more in the practice exams I've been doing as a way to trick students. Thanks for the quick response!No worries, hows your revision going?
Post by: friedjelly on October 10, 2015, 03:42:29 pm
Post by: Berimbolo King on October 10, 2015, 03:49:27 pm
If anyone has done the NEAP 2014 Exam please let me know, I think there may be a few errors in it but I'm not 100% sure...Yep , Questiom 3e if im not wrong.
Capital meant to be 600 instead of 2000.
Post by: schooliskool on October 11, 2015, 10:58:11 am
They would usually tell you. But yes you should .In last years exam (VCE ofc) they didn't for the balance sheet question, and you needed them to get a proper gst figure. They do use it to trick you.
Post by: teresa_turtle1234 on October 26, 2015, 10:12:30 am
Post by: schooliskool on October 26, 2015, 10:18:58 am
when calculating cost of sales for budget reconstruction, should it be recorded separately or together in the ledger account if its from cash sales or credit sales?
In the stock control ledger right? Separate for cash and credit sales, both called cost of sales credit side
Post by: cameotodd on October 26, 2015, 10:36:37 am
In the stock control ledger right? Separate for cash and credit sales, both called cost of sales credit side
When reconstructing you don't have to follow the proper ledger rules, so you can have them as one single entry as long as you get the answer you're looking for. This only applies to reconstructions tho.
Post by: schooliskool on October 31, 2015, 11:52:49 am
1) $200 interest expense was incorrectly recorded as interest revenue. Record the necessary correcting entry.
My guess was;
Int Rev 200 debit
Int Exp 200 debit
P+L Sum 400 credit
Is that right? If not, how do you do it when they are both on the same side?
2) Just in general, how do you do prepayments and accrued expenses in the cash flow statement (operating activities)
Say Insurance paid 12 months in advance $1800 1 October, cash flow statement for end of December
So how do you record this fully in the operating activities? I know that the insurance expense for that period is 450, but what do I do with the rest of the prepayment since it is technically an outflow
And also same thing, what about accrued expenses?
Post by: EvoFusion on November 02, 2015, 11:17:37 am
Post by: chasej on November 02, 2015, 04:57:16 pm
Two questions if anyone could help would be appreciated =]
1) $200 interest expense was incorrectly recorded as interest revenue. Record the necessary correcting entry.
My guess was;
Int Rev 200 debit
Int Exp 200 debit
P+L Sum 400 credit
Is that right? If not, how do you do it when they are both on the same side?
2) Just in general, how do you do prepayments and accrued expenses in the cash flow statement (operating activities)
Say Insurance paid 12 months in advance $1800 1 October, cash flow statement for end of December
So how do you record this fully in the operating activities? I know that the insurance expense for that period is 450, but what do I do with the rest of the prepayment since it is technically an outflow
And also same thing, what about accrued expenses?
1) You also have to adjust bank. interest expense is an outflow so you have to debit bank to ensure the erroneous credit is eliminated. and then when you add interest revenue you debit to bank to record the inflow of interest which is cash. P/L summary is a tool you use at the end of the reporting period to calculated net profit/loss. [this is unless you were advised by the question to make the adjustment at the end of the reporting period after the P/L summary was completed - if that was the case you are correct]
2) In the cash flow statement you record it 'prepaid [asset] expense paid' as an outflow for the full amount you paid. for the income statement you record only the amount of the expense consumed in the reporting period.
The cash flow statement records all flows of cash, whereas income statement only includes expenses incurred (not necessarily paid), and revenues earned (not necessarily received).
Accrued expenses in the cash flow statement isn't included as by definition it is an expense you have incurred, but no outflow of cash has occurred.
The distinction between cash flows and profit earned/expenses incurred is very important [has its own dot point in the key knowledge] so make sure you learn it well for the exam.
Post by: cameotodd on November 02, 2015, 06:10:13 pm
Post by: mc1234 on November 03, 2015, 02:48:21 pm
Post by: cameotodd on November 03, 2015, 07:07:19 pm
(http://i68.tinypic.com/104rtxy.png)
(http://i65.tinypic.com/29bydcj.png)
Post by: omcgil15 on November 03, 2015, 07:49:41 pm
How do they get rent paid in cash outflows as 26800?
(http://i68.tinypic.com/104rtxy.png)
(http://i65.tinypic.com/29bydcj.png)
2000 per month from July to November and then 2400 per month from December to June
so (5 times 2000) plus (7 times 2400)
Post by: omcgil15 on November 03, 2015, 07:50:38 pm
If a question asks us to "Close the revenue accounts", do we have to close the Sales Returns account in this entry despite it being a negative account? The Compak 2014 for question 7b does not include the Sales Returns in the closing of the revenue accounts but surely, as it is still a revenue account, Sales Returns must be closed too in order to allow for the calculation of an accurate profit?
Close Sales Returns as an expense :)
Post by: cameotodd on November 03, 2015, 08:00:29 pm
2000 per month from July to November and then 2400 per month from December to June
so (5 times 2000) plus (7 times 2400)
Ah thank you and also how did the get the interest on loan to be 9100 and not 8400?
Post by: schooliskool on November 03, 2015, 08:03:05 pm
Ah thank you and also how did the get the interest on loan to be 9100 and not 8400?The accrued interest amount paid so 8400 plus 700 that was owing then paid
I think lmfao I'm probs wrong somehow
Post by: cameotodd on November 03, 2015, 08:34:13 pm
The accrued interest amount paid so 8400 plus 700 that was owing then paid
I think lmfao I'm probs wrong somehow
Ah yes you're correct! Didn't notice the accrued interest in the balance sheet.
Thank you!
Post by: kvnroy9 on November 03, 2015, 11:12:49 pm
Post by: teresa_turtle1234 on November 05, 2015, 08:41:40 pm
Post by: omcgil15 on November 05, 2015, 09:51:08 pm
in the 2014 exam question 4 what do you do with the overdraft and the stock being ordered?
Leave them as there is no actual transaction that has occurred.
Post by: Maz on January 06, 2016, 02:15:11 am
what is the difference between a debt agreement and a personal insolvency agreement?
thankyou in advance :)
Post by: yermum on January 14, 2016, 04:12:51 pm
Post by: Maz on January 14, 2016, 05:04:00 pm
Hi.. just a quick one. Why isn't collecting money from debtors considered revenue? Thank you
it is i think- it goes in the accounts receivable section of the income statement, under 'add other income'
Post by: nt2387 on January 14, 2016, 05:35:51 pm
Hi.. just a quick one. Why isn't collecting money from debtors considered revenue? Thank youReceipts from debtors isn't revenue even though it is an inflow of economic benefits (cash) in the form of an increase in assets (bank), as it also reduces assets (debtors control) and has no effect on owner's equity.
Even though we receive cash, it is not revenue. The revenue associated with receipts from debtors is credit sales and hence it will be credit sales which will be reported in the income statement.
Post by: lin-d on January 14, 2016, 06:22:02 pm
Hi.. just a quick one. Why isn't collecting money from debtors considered revenue? Thank you
Hey! It is not considered revenue because revenue was already recognised when the credit sale was made. Collecting money is just reducing the amount debtors owed you from the sale previously made. This is based on the concept of accrual accounting.
Hope that helps :)
Post by: chasej on January 14, 2016, 08:17:17 pm
it is i think- it goes in the accounts receivable section of the income statement, under 'add other income'
Because you're in Western Australia what you are taught is a little different to Victoria, so please be mindful of that.
In VCE 'credit sales' is revenue, and the associated inflow of cash is 'receipts from debtors'. same as how credit purchases and cost of sales is linked to 'payments to creditors' [outflow].
Post by: friedchromosome on January 30, 2016, 11:30:11 am
Post by: The Usual Student on January 30, 2016, 12:28:34 pm
Seeing as I just dropped methods and picked up accounting 3&4 without 1&2, could i get as many tips/advice as possible because I'm currently so scared!!!!!? feel free to private message :'( :'( :'(
A lot of people are in your position, I recommend going through the course as thoroughly as possible to catch up to all the rest of your peers who did unit 1.2.
Do the textbook questions under time since I ifnd that helps with my sac preparation.,
Post by: chasej on January 31, 2016, 03:43:10 am
Seeing as I just dropped methods and picked up accounting 3&4 without 1&2, could i get as many tips/advice as possible because I'm currently so scared!!!!!? feel free to private message :'( :'( :'(
I picked up in unit 2 and know several that picked up in Yr 12 who did very well.
Maybe put some pre-reading in but everything you need to know is taught in 3/4 so don't be scared.
Post by: Maz on January 31, 2016, 05:17:48 pm
thankyou sooo much in advance :)
Post by: The Usual Student on January 31, 2016, 09:25:54 pm
Hey- I've always had trouble with balance day adjustments...i was wandering if any of you guys had any notes or a good website i could use? my book either isn't explaining it well or i'm just not getting it...
thankyou sooo much in advance :)
Shoot us some questions specifically about BDA and we should be able to explain them. I generally don't use external resources for Accoutning because i find a lot of the stuff online is VASTLY different to the VCE/WACE course. Sorry :(
If you need someone to explain the whole BDA topic, i can do that.
Post by: Maz on January 31, 2016, 09:29:12 pm
Shoot us some questions specifically about BDA and we should be able to explain them. I generally don't use external resources for Accoutning because i find a lot of the stuff online is VASTLY different to the VCE/WACE course. Sorry :(
If you need someone to explain the whole BDA topic, i can do that.
yeah i will definitely- when i have questions...it's just that i did 1&2 accounting last year and BDA was my only downfall- unfortunately it was a pretty big drop (oh no)
If you want/have time to explain the whole BDA topic i would absolutely love that? please
Thankyou so much though
Post by: The Usual Student on January 31, 2016, 10:00:17 pm
yeah i will definitely- when i have questions...it's just that i did 1&2 accounting last year and BDA was my only downfall- unfortunately it was a pretty big drop (oh no)
If you want/have time to explain the whole BDA topic i would absolutely love that? please
Thankyou so much though
Haha ok I will write up a short summary in my free period tomorrow
Post by: Maz on January 31, 2016, 10:02:00 pm
Haha ok I will write up a short summary in my free period tomorrowthankyou so much human :)
Post by: The Usual Student on February 02, 2016, 10:19:01 pm
yeah i will definitely- when i have questions...it's just that i did 1&2 accounting last year and BDA was my only downfall- unfortunately it was a pretty big drop (oh no)
If you want/have time to explain the whole BDA topic i would absolutely love that? please
Thankyou so much though
Ok so here it is - KEEP IN MIND I HAVEN'T REVISED THIS IN OVER 3 MONTHS. So please don't use my exact wording but hopefully this will clarify the idea.
BALANCE DAY ADJUSTMENTS - BDA
Balance day is the day we create our reports for a reporting period, so balance day adjustments are adjustments we make in order to ensure our information is 1) relevant and to also satisfy the 2) reporting period principle
In essence, there are a few special instances in which accountants may not pick up on certain things.
FOR EXAMPLE
We may pay for advertising in advanced ( prepaid advertising asset ) for the next 3 months, however 2 weeks of advertising means we used or consumed 2 weeks worth of it. So we must "adjust" our records accordingly so that we report the correct figure next Report period.
Another example is, depreciation. Our NCA will slowly be used up and hence we must allocate a price to it that represent its actual worth. So we must adjust our records on balance day so we have an accurate figure that represents the actual value of that NCA.
Hopefully you are catching on to this recurring theme of "adjusting" for things that are not picked up the first time round when we do our reporting.
The concept of accrual accounting also helps us understand how we can miss certain transactions or events, since it broadens the definition of "revenue" and "expense" so that we recognize it once the economic benefit is consumed or the inflow of economic benefit occurs.
So a lot of expenses and revenue are missed because it is commonly thought that we don't actually receive the revenue until the cash is in our hands, when in actuality it is when the inflow of economic benefit occurs!
TLDR ( sorry for the tangents :P ) BDA'S are simply adjustements we make on balance day, these adjustements are commonly employed to recognize revenue or expenses following the accrual accounting version of expense and revenue. So making sure things like : Prepaid expenses, depreiciation of NCA and ect are recorded and reported.
Hahaha hope that helps a bit :P
Post by: Maz on February 03, 2016, 12:17:06 am
Ok so here it is - KEEP IN MIND I HAVEN'T REVISED THIS IN OVER 3 MONTHS. So please don't use my exact wording but hopefully this will clarify the idea.yeah- thank you...i just never get them right...hopefully practice will alleviate that problem :) thanks for the context info though :)
BALANCE DAY ADJUSTMENTS - BDA
Balance day is the day we create our reports for a reporting period, so balance day adjustments are adjustments we make in order to ensure our information is 1) relevant and to also satisfy the 2) reporting period principle
In essence, there are a few special instances in which accountants may not pick up on certain things.
FOR EXAMPLE
We may pay for advertising in advanced ( prepaid advertising asset ) for the next 3 months, however 2 weeks of advertising means we used or consumed 2 weeks worth of it. So we must "adjust" our records accordingly so that we report the correct figure next Report period.
Another example is, depreciation. Our NCA will slowly be used up and hence we must allocate a price to it that represent its actual worth. So we must adjust our records on balance day so we have an accurate figure that represents the actual value of that NCA.
Hopefully you are catching on to this recurring theme of "adjusting" for things that are not picked up the first time round when we do our reporting.
The concept of accrual accounting also helps us understand how we can miss certain transactions or events, since it broadens the definition of "revenue" and "expense" so that we recognize it once the economic benefit is consumed or the inflow of economic benefit occurs.
So a lot of expenses and revenue are missed because it is commonly thought that we don't actually receive the revenue until the cash is in our hands, when in actuality it is when the inflow of economic benefit occurs!
TLDR ( sorry for the tangents :P ) BDA'S are simply adjustements we make on balance day, these adjustements are commonly employed to recognize revenue or expenses following the accrual accounting version of expense and revenue. So making sure things like : Prepaid expenses, depreiciation of NCA and ect are recorded and reported.
Hahaha hope that helps a bit :P
Post by: Maz on February 05, 2016, 12:55:39 am
i have an answer for both but don't really understand it and was wandering if someone could please help?
1. Wages paid in july should be $8200. On 31 july 2019 accrued wages are predicted to be 150.
2. Electricity expense for july should be $3000. On 31 July 2019 accrued electricity should be $1000
on a cash budget- why does the electricity go as (3000-1000=2000) and wages as $8200? whats the difference between how you work out them?
Thankyou in advance :)
Post by: The Usual Student on February 05, 2016, 04:47:34 pm
hey- I've got that BDA question :)
i have an answer for both but don't really understand it and was wandering if someone could please help?
1. Wages paid in july should be $8200. On 31 july 2019 accrued wages are predicted to be 150.
2. Electricity expense for july should be $3000. On 31 July 2019 accrued electricity should be $1000
on a cash budget- why does the electricity go as (3000-1000=2000) and wages as $8200? whats the difference between how you work out them?
Thankyou in advance :)
So look at the key wording,
We know WAGES PAID ( WAGES PAID IN CASH) is 8200, this is pretty obvious since we get told it. Also add that to ACCRUED WAGES of 1000 and the TOTAL WAGE EXPENSE IS 9200
However the cash budget only includes the amount paid in cash of 8200
Now the ELECTRICITY EXPESNES ( In other words : Electricy paid + electricty accrued) = 3000
but in the cash budget only ELECTRICITY paid in cash is included so we minus the electricity accrued from the overall electricity and we get 3000 - 1000 = 2000
and that value is put into our cahs budget
Make sure to look out for terms such as ; Expenses vs Accrued
Post by: Maz on February 06, 2016, 11:26:02 am
So look at the key wording,Thankyou :)
We know WAGES PAID ( WAGES PAID IN CASH) is 8200, this is pretty obvious since we get told it. Also add that to ACCRUED WAGES of 1000 and the TOTAL WAGE EXPENSE IS 9200
However the cash budget only includes the amount paid in cash of 8200
Now the ELECTRICITY EXPESNES ( In other words : Electricy paid + electricty accrued) = 3000
but in the cash budget only ELECTRICITY paid in cash is included so we minus the electricity accrued from the overall electricity and we get 3000 - 1000 = 2000
and that value is put into our cahs budget
Make sure to look out for terms such as ; Expenses vs Accrued
Post by: Maz on February 12, 2016, 09:04:18 pm
Can someone please clarify this for me?
Why are debtors included in the cash budget when the accrued stuff isnt? Isnt kinda the same thing...like money owed but not received? and it's not cash
Thankyou :)
Post by: The Usual Student on February 12, 2016, 09:29:42 pm
hey
Can someone please clarify this for me?
Why are debtors included in the cash budget when the accrued stuff isnt? Isnt kinda the same thing...like money owed but not received? and it's not cash
Thankyou :)
The criteria to be included in the cash budget you need to be cash based, as long as it is a cash inflow or outflow it will be in the cash budget. By debtors I assume you mean receipts from debtors? They are cash based transactions so they will be included ( the debtor control however will not be included since it is not cash based ). The accrued stuff by defintion is pretty much sutff you havent paid for so obviously if you have not paid for it, you cannot have it in your cash budget as it is not a cash based transaction.
But I have a feeling you know this already but are confused with the term "debtor" with the term " receipts from debtors" which is the actual money we get form our debtors to settle what they owe to us.
Post by: Maz on February 12, 2016, 09:48:02 pm
The criteria to be included in the cash budget you need to be cash based, as long as it is a cash inflow or outflow it will be in the cash budget. By debtors I assume you mean receipts from debtors? They are cash based transactions so they will be included ( the debtor control however will not be included since it is not cash based ). The accrued stuff by defintion is pretty much sutff you havent paid for so obviously if you have not paid for it, you cannot have it in your cash budget as it is not a cash based transaction.right- that makes sense , thank you :)
But I have a feeling you know this already but are confused with the term "debtor" with the term " receipts from debtors" which is the actual money we get form our debtors to settle what they owe to us.
Post by: friedchromosome on February 13, 2016, 02:34:03 pm
Post by: The Usual Student on February 13, 2016, 03:09:40 pm
Does anyone know any good websites/youtubers for the theory aspect of the content. Also anyone i can buy notes off?https://www.youtube.com/watch?v=kJdKF0bNLhk&list=PL_w5nl2l8qjtzj4UbFWLs4DVILnjBn4Ni - pretty good theory
https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg - WAY BETTER IMO * HE teaches at trinity
Also for notes - search up sara doan ( 49 raw in 2015 ) she sells her notes for 20 bucks
Post by: friedchromosome on February 13, 2016, 05:58:44 pm
https://www.youtube.com/watch?v=kJdKF0bNLhk&list=PL_w5nl2l8qjtzj4UbFWLs4DVILnjBn4Ni - pretty good theoryThanks heaps!!!!!!!
https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg - WAY BETTER IMO * HE teaches at trinity
Also for notes - search up sara doan ( 49 raw in 2015 ) she sells her notes for 20 bucks
Post by: friedchromosome on February 13, 2016, 06:07:17 pm
https://www.youtube.com/watch?v=kJdKF0bNLhk&list=PL_w5nl2l8qjtzj4UbFWLs4DVILnjBn4Ni - pretty good theoryI can't seem to find her, could you provide a link sorryyy
https://www.youtube.com/channel/UCf5jyuJoYwie8tWfvjEc0zg - WAY BETTER IMO * HE teaches at trinity
Also for notes - search up sara doan ( 49 raw in 2015 ) she sells her notes for 20 bucks
Post by: Nequam on February 23, 2016, 07:03:31 pm
''Renae has decided to borrow $24000 to purchase a new vehicle. After investigating the loan options she has settled on the following alternatives:
a. Builders Credit Union - 12% simple interest
b. IOOF Friendly Society - 16% reducing half yearly.
Renae anticipates repaying the loan in equal monthly instalments over two years.
Caluclate the total interest charged on the loan from Builders credit union.
Calculate the total interest charge on the loan from IOOF Friendly society.''
If someone could please walk me through the steps to be able to complete these calculations ASAP as my SAC is this week. Thanks :)
Post by: Maz on February 26, 2016, 10:13:14 pm
quick question and id appreciate any help..
does anyone know any managerial accounting reports...besides the budget sheet?
Post by: upandgo on February 26, 2016, 10:26:11 pm
hey
quick question and id appreciate any help..
does anyone know any managerial accounting reports...besides the budget sheet?
by reports, do you mean reports like the income and cash flow statement? :)
Post by: Maz on February 26, 2016, 10:36:57 pm
by reports, do you mean reports like the income and cash flow statement? :)yeah soz... i meant statement- like I've got income statement, balance sheet and performance report...
managerial accounting is concerned with internal users of accounting information- so those used to make changes to policies and
how the business is run..that sort of thing...it's a 12 mark question so theres a lot to write :)
thank you guys soooo much in advance
Post by: Maz on February 27, 2016, 01:59:23 am
yeah soz... i meant statement- like I've got income statement, balance sheet and performance report...Actually guys don't worry about the question...can u guys please help with this one instead?
managerial accounting is concerned with internal users of accounting information- so those used to make changes to policies and
how the business is run..that sort of thing...it's a 12 mark question so theres a lot to write :)
thank you guys soooo much in advance
what sort of regulations are there covering the preparation of financial reports?
Post by: The Usual Student on February 27, 2016, 02:09:19 am
Actually guys don't worry about the question...can u guys please help with this one instead?
what sort of regulations are there covering the preparation of financial reports?
when you use the term regulation..... i am assuming you are referring to something more legal rather then something like accounting Q.C and principles.
So I would mention ATO requires reports be prepared at least annually for taxation purposes
Post by: Maz on February 27, 2016, 02:12:01 am
when you use the term regulation..... i am assuming you are referring to something more legal rather then something like accounting Q.C and principles.yeah that is along the lines i was thinking...do you know of any others by any chance?
So I would mention ATO requires reports be prepared at least annually for taxation purposes
thankyou btw
Post by: Maz on February 27, 2016, 10:38:29 am
yeah that is along the lines i was thinking...do you know of any others by any chance?
thankyou btw
kind of like..what legislation is there over the preparation of financial statements in the private sector?
Post by: Biology24123 on February 27, 2016, 04:56:18 pm
Post by: The Usual Student on February 27, 2016, 05:08:06 pm
Explain, by referring to one accounting principle, why the the market value is not shown as the difference between total assets and total liabilities in the balance sheet
a weird question tbh
Perhaps are your referring to the market value of the firm? as in if you were to sell it?
Either way I would state that TA - TL represent what the firm owes to the firm ( Entity principle ) and has no relationship to the value an asset would take in the market which is dependent on numerous other factors such as demand and supply.
I would usually deifne entity principle at the start as well
Post by: Maz on February 27, 2016, 05:14:59 pm
a weird question tbh
Perhaps are your referring to the market value of the firm? as in if you were to sell it?
Either way I would state that TA - TL represent what the firm owes to the firm ( Entity principle ) and has no relationship to the value an asset would take in the market which is dependent on numerous other factors such as demand and supply.
I would usually deifne entity principle at the start as well
it is a weird question
TA-TL is owners equity
but the entity principle is 'the dealings of the business is independent to the dealing of the the owner(s)...so how does that relate to equity and assets minus liabilities?
Post by: Maz on February 27, 2016, 06:24:36 pm
if any of you guys are free for a bit, do you reckon u could maybe skim/read over it and see if you think it fits the question?
Question: Explain what id meant by management accounting, state the reports used in management accounting, the user of the reports and any legislation regarding preparation
My answer:
Management accounting involves preparing and providing timely financial and statistical information to business managers so that they can make day-to-day and short-term managerial decisions.’1 This sector of accounting is concerned with the information needed to plan, coordinate and control the business on a day to day basis. The managers utilize accounting information in order to inform themselves before deciding matters with the business, to improve financial position; maximize cost-effectiveness, and ensure security and integrity of it’s assets. Key topics in managerial accounting include; understanding cost behavior and CVP analysis, operational budgeting and capital budgeting, standard costing and variance analysis, activity based costing, pricing of individual products and services, and, analyzing the profitability of product lines etc. The Institute of Management Accountants describes management accounting: "Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy"2. Management accounting differs from it’s counterpart, Financial accounting in the sense that it is not subject to external audit, hence, being customized to suit manager(s). Managerial accounting provides instructions on computing costs of products. Costs, that will then be used in the external financial statements. Where financial accounting has its focus on financial statements distributed outside the company, management accounting focuses on the internal users and management of the business.
Depending on the type of business and project, managerial reports can be produced annually, quarterly, monthly, weekly, or even daily; allowing managers to strategically monitor company policies and methods to maximize profitability.
Financial reports which top management of a company uses for managerial decision-making but those are not required for financial disclosure. For financial disclosure companies are bound under law to publish those related statements.
Common Managerial accounting related reports include:
Master Budget
The master budget is the name given to the full set of budgets prepared by a business for a period of time. These budgets are divided in two categories; operating budgets and Financial budgets.
Operating Budgets:
- Sales budget - Other expenses budget
- Production budget - Budgeted Income Statement
- Raw materials budget
- Cost of sales budget
Financial Budgets
- Cash Budget
- Budgeted balance sheet
- Capital expenditure budget
A budget is a blueprint for future financial transactions. Master budgets aid in this area, serveing as a planning tool. All budgets and statements in the master budget are interconnected; in the sense that the numbers from one component budget flow into other statements. For this reason the master budget needs to be prepared in a specific order. When all are prepared they will give management a comprehensive analysis on company financial position, allowing managers to adjust the business’ direction accordingly. Explanatory texts can be compiled along-side the master budget, explaining the entity’s strategic direction, how the master budget will aid the process and the management actions needed to achieve the budget.
The Budget Income statement Performance Report
A budget report is an internal report used to compare actual sales with those projected at the start of that period, whether it is a day, week…etc. This allows businesses to determine if their position is better or worse than anticipated, indicated by the variance. Budgets, being financial goals, are often in-accurate and can differ greatly from a business’ actual budget. If a business was substantially over the projected budget, it allows managerial accountants and managers to assess and decide the best course of action to prevent the discrepancy. The budget report is used to compare the two sets of data. Following the set-up of an income statement, there are two columns listed side by side; one for the budget and one for actual sales. A third column lists any variances; categorizing them favorable (F) and unfavorable (U). Budget Reports are considered managerial accounting reports, as they are perhaps one of the most vital reports in business growth analysis.
Budgeted Income Statement
A budgeted income statement is very similar to the classified income statement, the difference being the absence in classification of expenses in the budgeted statement, which is present in classified income statement. This managerial statement sets out expected income, expenses and profit/loss over an accounting period.
The Cash Budget
Cash budgets allow managers to analyze cash-related dealings. This statement displays current cash balance, the future cash inflows and outflows of a business and the expected cash balance at the end of a budget period. Cash budgets classify cash based dealings in two categories; receipts and payments.
Cost of good sold statement
This statement gathers cost of goods sold in a greater detail found in an income statement. It is used in the periodic inventory system and follows the formula:
Beginning inventory + Purchases - Ending inventory = Cost of goods sold
Cost accounting is a name given to managerial accounting. Managers on different levels of the business use the reports constructed in cost accounting. These managers are given the name internal users. The reports given to these internal users are prepared in accordance with company policies as there is no set concept, merely guidelines to follow. Cost accounting reports are prepared in the form chosen by the entity.
Financial reports prepared in accordance with the Corporations Act generally must comply with accounting standards.
Reports for government authority are prepared in the prescribed format. According to the ASIC (Australian Securities and Investment Comission), unless business is listed with ASX or if a foreign company, a Form 388 Copy of financial statements and reports should be lodged. If entity holds an Australian Financial Services license the business must also present a profit and loss statement and a balance sheet, with an auditor’s report with a Form FS70 Australian financial services licensee profit and loss statement and balance sheet and Form FS71 Australian financial services licensee audit report. Details about when these managerial accounting statements need to be lodged are found in Section 319 of the Corporations Act, stating that these must be presented within 3 months of the ending of the financial year.
Khong Pty Ltd, being a large proprietary company and a reporting entity, must prepare annual financial reports, with accordance to chapter 2M, audited, lodged with AISC within a specific date and sent to members within 4 months of the financial year end.
Business financial security encompasses the protection of people from those more knowledgeable in that sector than them. Business Finance achieves this in the following ways;
- Development of accounting conceptual framework, with associated standards, setting out principles and rules with which all producers of financial reports are encouraged to comply
- The Corporations Act 2001 (governs operations of entity)
- Requirement that certain entities must have an audit (external)
The AASB 101 Presentation of Financial Statements prescribes basis for presentation of general purpose financial reports. The set of financial reports include
- Statement of financial position
- Statement of comprehensive income
- Statement in changes of equity
- Statement of cash flows for the period.
- Notes comprising of significant accounting policies and information
All financial statements, in managerial accounting, except for the cash flows must be prepared using the accrual accounting method
Each financial statement and notes must be clearly identified and contain the name of the entity, if the report covers the whole group, reporting period and date, currency used and level of rounding. The format and legislation regarding the income statement and the statement of changes in equity is explained in the AASB 101 part 80-111.
According to the AASB, in regards to income statement (P+L): Part (80)4
‘The statement of profit or loss and other comprehensive income (statement of comprehensive income) shall present, in addition to the profit or loss and other comprehensive income sections: - profit or loss;
- total other comprehensive income;
- comprehensive income for the period, being the total of profit or loss and other comprehensive income.
If an entity presents a separate statement of profit or loss it does not present the profit or loss section in the statement presenting comprehensive income.’
This futher informs regarding income statement (82)4
‘In addition to items required by other Australian Accounting Standards, the profit or loss section or the statement of profit or loss shall include line items that present the following amounts for the period:
(a) revenue, presenting separately interest revenue calculated using the effective interest method;
(b) finance costs;
(ba) impairment losses (including reversals of impairment losses or impairment gains) determined in accordance with Section 5.5 of AASB 9;
(c) share of the profit or loss of associates and joint ventures accounted for using the equity method;
(ca) if a financial asset is reclassified out of the amortised cost measurement category so that it is measured at fair value through profit or loss, any gain or loss arising from a difference between the previous amortised cost of the financial asset and its fair value at the reclassification date (as defined in AASB 9);
(cb) if a financial asset is reclassified out of the fair value through other comprehensive income measurement category so that it is measured at fair value through profit or loss, any cumulative gain or loss previously recognised in other comprehensive income that is reclassified to profit or loss;
(d) tax expense;
Thankyou sooo much in advance :)
Post by: upandgo on February 27, 2016, 07:07:34 pm
Explain, by referring to one accounting principle, why the the market value is not shown as the difference between total assets and total liabilities in the balance sheet
accounting principle: historical cost
explanation: assets and liabilities will be reported in the balance sheet at their original purchase price, as these values are verifiable by a source document. the market value, on the other hand, represents what a potential buyer is prepared to pay for the
assets.
hope that helps :P
Post by: upandgo on February 27, 2016, 07:20:21 pm
Actually guys don't worry about the question...can u guys please help with this one instead?
what sort of regulations are there covering the preparation of financial reports?
- prepared frequently (no later than a year)
- using figures pertaining to the current reporting period and not from previous periods
- all amounts in the financial reports must be verifiable by a source document (except depreciation)
- including transactions relevant to the business and not the owner's transactions
- compiling reports in a manner that is unambiguous and easily understandable
a few i could think of (not 100% sure if these are regulations but they are requirements) :).
in your answer, you can also add that failing to comply with these regulations will violate certain accounting principles and qualitative characteristics, ie. including transactions irrelevant to the business' activities in financial reports will prevent the owner + business from being treated as separate and distinct entities, and will thus breach the entity principle.
Post by: The Usual Student on February 27, 2016, 07:36:36 pm
it is a weird question
TA-TL is owners equity
but the entity principle is 'the dealings of the business is independent to the dealing of the the owner(s)...so how does that relate to equity and assets minus liabilities?
then entity principle establishes the business as a separate entity to the firm, it is a bit more broad then your definition but still works with your one. The business can only owe a certain amount to the owner (OE) ... if we distinguish the firm from the business in the first place. So I guess that is my justification.
Post by: Maz on February 27, 2016, 10:55:30 pm
then entity principle establishes the business as a separate entity to the firm, it is a bit more broad then your definition but still works with your one. The business can only owe a certain amount to the owner (OE) ... if we distinguish the firm from the business in the first place. So I guess that is my justification.right yeah i get you know haha...yeah i reckon thats right
- prepared frequently (no later than a year)Thankyou so so much :)
- using figures pertaining to the current reporting period and not from previous periods
- all amounts in the financial reports must be verifiable by a source document (except depreciation)
- including transactions relevant to the business and not the owner's transactions
- compiling reports in a manner that is unambiguous and easily understandable
a few i could think of (not 100% sure if these are regulations but they are requirements) :).
in your answer, you can also add that failing to comply with these regulations will violate certain accounting principles and qualitative characteristics, ie. including transactions irrelevant to the business' activities in financial reports will prevent the owner + business from being treated as separate and distinct entities, and will thus breach the entity principle.
Post by: The Usual Student on February 28, 2016, 12:03:32 am
accounting principle: historical cost
explanation: assets and liabilities will be reported in the balance sheet at their original purchase price, as these values are verifiable by a source document. the market value, on the other hand, represents what a potential buyer is prepared to pay for the
assets.
hope that helps :P
hey since you have done accounting already, I am going to assume that answer is correct and mine isnt. Can you explain how you dealt with the TA-TL aspect of the question cause that is what confuses me. Essentially I interpreted it as " why shouldn't market value be used as a value for Owner's equity" and I don't fully understand how your answer answered that.
Thanks!!!
Post by: 7ayed on March 01, 2016, 05:47:37 pm
Why are the ledger entries sometimes flipped when putting it into the general ledger?
Like the names and the debits and credits being flipped in a general ledger.
Can someone explain all this to me from basics?
Appreciate it
Post by: Cornrow Kenny on March 01, 2016, 07:01:23 pm
I do not understand general ledgers in chapter 3 in the Cambridge VCE Accounting Textbook Third Edition Units 3,4.One reason the names are flipped (this is called Cross-Referencing) is it makes it really easy to see what caused each entry in a transaction. Eg if I just wrote Bank in a Debit Entry in the Bank Ledger, I won't know what caused the increase in bank without looking through all my other ledgers - was it Sales, or a Capital Contribution etc? Using the cross reference accounting method, we can quickly see what transaction occurred.
Why are the ledger entries sometimes flipped when putting it into the general ledger?
Like the names and the debits and credits being flipped in a general ledger.
Can someone explain all this to me from basics?
Appreciate it
Does that make sense? (That's not a model answer, but it is just my simple way of putting it)
Post by: 7ayed on March 01, 2016, 07:53:37 pm
One reason the names are flipped (this is called Cross-Referencing) is it makes it really easy to see what caused each entry in a transaction. Eg if I just wrote Bank in a Debit Entry in the Bank Ledger, I won't know what caused the increase in bank without looking through all my other ledgers - was it Sales, or a Capital Contribution etc? Using the cross reference accounting method, we can quickly see what transaction occurred.
Does that make sense? (That's not a model answer, but it is just my simple way of putting it)
Thanks :) I hadn't done the chapter 3 exercises, once I checked through the answers it made sense.
Post by: upandgo on March 01, 2016, 10:25:30 pm
hey since you have done accounting already, I am going to assume that answer is correct and mine isnt. Can you explain how you dealt with the TA-TL aspect of the question cause that is what confuses me. Essentially I interpreted it as " why shouldn't market value be used as a value for Owner's equity" and I don't fully understand how your answer answered that.
Thanks!!!
because TA-TL gives us capital (which belongs to the owner), it's not a representative figure of how much the business is actually worth (market value). the balance sheet doesnt provide market valuations of assets - in the interests of Reliability, assets and liabilities are shown at their historical costs, an amount that is readily verifiable and free from bias. but because there is no source document that specifically verifies market value, we cannot use it as a value for owners equity. doing so would contravene the historical cost principle (we wouldn't be using figures verifiable by a source document) and the reliability characteristic (as we cannot verify the amount, the balance sheet would be subject to bias and inaccuracy).
hopefully that helps :) i remember finding this question in the accounting textbook and the worked solutions also mentioned historical cost
Post by: 7ayed on March 03, 2016, 08:00:32 pm
Worked example please, thanks.
Post by: Maz on March 03, 2016, 08:05:20 pm
Can someone please explain mark-up? If selling price is $900 and cost price is $600..Mark-up is the difference between the cost and selling price
Worked example please, thanks.
so the selling price was 900...minus the cost price of 600= $300 mark-up
Post by: upandgo on March 03, 2016, 08:38:31 pm
Can someone please explain mark-up? If selling price is $900 and cost price is $600..
Worked example please, thanks.
mark-up is calculated by using the mark up formula :) mark up = (sales price / cost price) -1
like mq123 said, mark-up is basically the difference between the business' cost price and selling price. however, we cannot simply calculate it by deducting sales price from cost price.
EXAMPLE: if i sold a car at $47500 per unit, and purchased it from my supplier (the cost price) at $19000, what would my mark up be?
by using the mark up formula:
(sales price / cost price) -1
(47500/19000) -1
= 2.5-1
= 1.5 x 100 (the 'x 100' isnt part of the formula, but we cant leave our answer at 1.5)
= 150%
so if we followed the same procedure for your question,
(sales price / cost price) -1
= (900/600) -1
= 1.5 -1
= 0.5 x 100
= 50% mark up :P hope that helps!
Post by: Maz on March 03, 2016, 08:40:18 pm
mark-up is calculated by using the mark up formula :) mark up = (sales price / cost price) -1yeah so thats how to get it in a percentage...if you want it as a monetery value...you just deduct it
like mq123 said, mark-up is basically the difference between the business' cost price and selling price. however, we cannot simply calculate it by deducting sales price from cost price.
EXAMPLE: if i sold a car at $47500 per unit, and purchased it from my supplier (the cost price) at $19000, what would my mark up be?
by using the mark up formula:
(sales price / cost price) -1
(47500/19000) -1
= 2.5-1
= 1.5 x 100 (the 'x 100' isnt part of the formula, but we cant leave our answer at 1.5)
= 150%
so if we followed the same procedure for your question,
(sales price / cost price) -1
= (900/600) -1
= 1.5 -1
= 0.5 x 100
= 50% mark up :P hope that helps!
Post by: upandgo on March 03, 2016, 08:46:41 pm
yeah so thats how to get it in a percentage...if you want it as a monetery value...you just deduct it
yep true (im pretty sure), wasnt sure if they were asking for mark up in % or $ ::) sorry about that
Post by: Maz on April 18, 2016, 10:46:33 am
i am doing an assignment on CSD and CSR...could someone please help me out with this one?
List and discuss three costs that public companies may incur when they report on CSR targets and achievements.
thankyou :)
Post by: val265 on July 01, 2016, 04:27:42 pm
Can someone please give me tips to know all the different cross references for the different ledger accounts?
Post by: The Usual Student on July 01, 2016, 05:42:01 pm
Hi
Can someone please give me tips to know all the different cross references for the different ledger accounts?
You kinda need to understand the transaction, break it up into accounts and then break those accounts into values.
What i do is kinda verbalise the transactions and the postings, so like if i post 55 bucks into creditor's control i ask myself? why? and i realize it is because of the 50 from stock ctrl and 5 from GST
ALWAYS ASK WHERE THE VALUES COME FROM
Eg Purchase of stock on credit for 60$ ex GST
1) Break it up into accounts --> creditor ctrl, stock ctrl, gst cl
Now you know all the accounts you need to corss reference tooo
2) pick and account to post in EG creditor's ctrl and ask how much does it increase by and why?
well it increase by 66 as 60 is incurred form purchase of stock and 6 from gst incurred.
Hence it becomes obvious you need ot reference to GST CL and STOCK CTRL
hope that helped :P
Post by: val265 on July 06, 2016, 09:35:57 pm
Post by: One Step at a Time on July 26, 2016, 10:58:56 pm
Bit confused about this concept: is the total revenue always the amount received + the amount owed?
Thanks everyone!
Post by: The Usual Student on August 01, 2016, 11:14:55 pm
Hi everyone! :)
Bit confused about this concept: is the total revenue always the amount received + the amount owed?
Thanks everyone!
Hey one step, I haven't covered BDA for revenues yet but I presume what you are saying is correct :) it would be the accrued revenue + the revenue you received
Just make sure to distinguish between revenue received and simply cash received like a payment to denotes but other then that all good.
Post by: Maz on August 02, 2016, 06:39:16 pm
Hi everyone! :)Hey yeah it is :)
Bit confused about this concept: is the total revenue always the amount received + the amount owed?
Thanks everyone!
Post by: One Step at a Time on August 07, 2016, 10:30:24 pm
Post by: Maz on August 09, 2016, 07:14:48 pm
do you guys do Cash flow statements in year 12?
If so do any of you humans have any prac tests that you are will/able to share?
Post by: The Usual Student on August 09, 2016, 08:45:35 pm
Hey,
do you guys do Cash flow statements in year 12?
If so do any of you humans have any prac tests that you are will/able to share?
1) yes
2) nah not really :(
I mainly use the textbook . I can send you some half baked notes lol, they are very rushed by its something i guess :P sorry i couldn't be anymore help.
You have any questions on CFS?
Post by: Maz on August 09, 2016, 08:55:08 pm
1) yesYeah we do, but we don't have a lot of tests to practice on...and that's generally the way to go as far as studying for a test :)
2) nah not really :(
I mainly use the textbook . I can send you some half baked notes lol, they are very rushed by its something i guess :P sorry i couldn't be anymore help.
You have any questions on CFS?
Post by: The Usual Student on August 09, 2016, 08:58:27 pm
Yeah we do, but we don't have a lot of tests to practice on...and that's generally the way to go as far as studying for a test :)'
I have some theory questions I came up with myself if ya want?
Post by: KDB on August 09, 2016, 09:28:18 pm
Post by: The Usual Student on August 09, 2016, 09:30:22 pm
What chapter are you all up to? We're on chapter 16 on the cambridge textbook
Chapter 17 at my school, just had a sac on 15/16
Post by: Maz on August 09, 2016, 09:41:36 pm
'yes please :)
I have some theory questions I came up with myself if ya want?
Post by: The Usual Student on August 09, 2016, 09:53:57 pm
yes please :)
I will look through my notes tomorrow night and try and get em out :)
when is your test?
Maybe PM me so we don't clog up the thread lol
Post by: Cornrow Kenny on August 10, 2016, 06:46:29 pm
What chapter are you all up to? We're on chapter 16 on the cambridge textbook17 here - SAC on 15/16 next week though
Post by: One Step at a Time on August 10, 2016, 10:44:58 pm
SAC on Friday and I'm very very confused...
For the BALANCE column of the stock card, what order do we write the stock in? From lowest to highest?
I'm stuck on the transaction of the 7th July in the question below. In the IN column, there is 1 unit of stock at $2200 each and 1 unit of stock at $2100 each.
I got 1 unit of stock at $2200 and 15 units of stock at $2325 each in the BALANCE column on 5/7 (when the last stock related transaction occurred).
So would there be 2 units of stock at $2200 each (combine the two) or do I record each unit of stock at $2200 each separately (separate)?
QUESTION:
Ramesh Traders buy and sell Ultra HD TVs, use product costing and prepare reports monthly. The
following transactions occurred during July 2015:
3rd July, purchase of 15 ultra HD TVs from HiTech Enterprises, $37 950 including GST. Invoice 87.
4th July, delivery of 15 units from HiTech Enterprises, total $375 plus GST, Invoice 17. Jet Couriers.
5th July, sold 6 ultra HD TVs to Just TVs, at a unit selling price of $5 000 plus GST, Invoice 211.
7th July, return of 2 units from Just TVs, Credit Note 4. Full credit given.
30th July, took 1 ultra HD TV from stock for use in the boardroom (Boardroom TV). Memo 9.
30th July, Invoice 567 from Handy Harry to install ultra HD TV in the boardroom, $300 plus GST.
31st July, stocktake: 18 units, Memo 10.
Appreciate everyone's help!! Thanks :D
Post by: One Step at a Time on August 11, 2016, 09:37:15 pm
I have another question I was hoping I could get some help with since my SAC is tomorrow! It's about product costing :D
What does the "logically allocated" bit of the definition mean? Does this exclude numbers with decimals? e.g If the expense calculated for each unit cost of stock is $9.09, (the total cost of goods expense is $300), do we still allocate it to each unit cost of stock or do we count it simply as a cost of goods sold expense (not part of cost of sales)?
Post by: The Usual Student on August 11, 2016, 10:05:40 pm
Hi everyone :D
I have another question I was hoping I could get some help with since my SAC is tomorrow! It's about product costing :D
What does the "logically allocated" bit of the definition mean? Does this exclude numbers with decimals? e.g If the expense calculated for each unit cost of stock is $9.09, (the total cost of goods expense is $300), do we still allocate it to each unit cost of stock or do we count it simply as a cost of goods sold expense (not part of cost of sales)?
so logically allocated semantically means,
You can take the overall value Eg 900 bucks, and trace it to each individual unit. So if we paid 900 bucks for transport, but we transported 100 rubber ducks and 100 rubber snakes. You can't trace the overall 900 to just ONE item of stock since; for instance, the rubber snakes might take up more space and hence it is more expensive to transport oooorrrrr the rubber ducks are heavy and hence incur more cost when transported.Due to this we can't really be sure how much it cost us to transport 100 rubber ducks or 100 rubber snakes by themselves as we don't know how much of the 900 was incurred just because of the rubber ducks ( eg it could be 450 or 500 or 700 out of 900 ) or just because of the rubber snakes ( eg 400 or 550 or 800 out of the 900). Hence it isn't logically tracable
However, if you had just rubber ducks, then you know the 100 rubber ducks cost 900 dollars to transport and you can trace it to each individual unit of stock (1 rubber duck = 9 bucks to transport)
I asked my teacher about decimals and also asked an examiner, i got two replies lol
My teacher: DO NOT ROUND THE NUMBERS AT ALL, the cents are no relevant and should be discluded from product costs as they are not material, include them as other expenses or whatever. However, the full amount eg ( 9.90 per stock to be tranposrted but 990 for 100 stock transported ) should be kept as 990 so the product cost is 990. SO make sure you mutliply it by the overall amount to make sure it doesn't have decimals in its final answer.
Sorry i can't really answer the second questions cause there are a few opinions i am hearing. I can't recall what the examiner said but he disagreed with above :P
ASK YOUR TEACHER ASAP
Post by: One Step at a Time on August 15, 2016, 05:26:06 pm
My teacher has disappeared these few days and isn't answering his emails either, so I'll go with what you said! Just have to decide between the examiner's or your teacher's words :P
For stock cards, I'm a bit confused about the recording process.
e.g. There is are 5 units of stock at $1000 each (total $5000) on 1/2/16 in the BALANCE column.
The next day, then there is a transaction e.g. sales returns which leads to 1 unit of stock coming in at $1200 each (total $1200) and 2 units of stock coming at $1000 each (total $2000 each). It's recorded in the IN column in that order (stock at $1200 first, then stock at $1000).
What do we write in the BALANCE column now? Do we write 5 at $1000 (total $5000), then 1 at $1200 (total $1200) and lastly followed by 2 at $1000 (total $2000)? Or do we combine the stock at $1000? Or something completely differently?
Thanks again, hope that made some sense :)
Post by: The Usual Student on August 16, 2016, 04:41:58 pm
Thanks so much the Usual Student, you always save the day 8)
My teacher has disappeared these few days and isn't answering his emails either, so I'll go with what you said! Just have to decide between the examiner's or your teacher's words :P
For stock cards, I'm a bit confused about the recording process.
e.g. There is are 5 units of stock at $1000 each (total $5000) on 1/2/16 in the BALANCE column.
The next day, then there is a transaction e.g. sales returns which leads to 1 unit of stock coming in at $1200 each (total $1200) and 2 units of stock coming at $1000 each (total $2000 each). It's recorded in the IN column in that order (stock at $1200 first, then stock at $1000).
What do we write in the BALANCE column now? Do we write 5 at $1000 (total $5000), then 1 at $1200 (total $1200) and lastly followed by 2 at $1000 (total $2000)? Or do we combine the stock at $1000? Or something completely differently?
Thanks again, hope that made some sense :)
i assume those values are cost prices? If so,
I would not combine the two 1000 packages, assuming the sales return occurred after the 1500 one. But that is a gut feeling, don't know exactly. I would go with the first option.
Post by: One Step at a Time on August 18, 2016, 09:33:30 pm
Luckily this didn't appear on the SAC ! :P
Post by: val265 on August 19, 2016, 02:59:43 pm
Can someone pls help me with these questions
Post by: One Step at a Time on August 20, 2016, 02:49:39 pm
Not too sure if these answers are correct, so take them with a grain of salt! :P
1. Stock cards do not only show the movement of stock into the business (recorded in the Purchases Journal for credit purchases of stock, Cash Payments Journal for cash purchases of stock and the General Journal for stock gain and purchase returns). They also show the outflow of stock from the business e.g sales, sales returns and stock loss. Stock cards are also used to record stock write-downs.
2. a) Look at the Cost of Sales column in the Cash Receipts Journal and the Sales Journal, and the entries that affect Cost of Sales in the General Journal.
b) Look at the OUT column of the stock card. Add all OUTS not inc. the memos or the credit notes less credit notes in the IN column.
Post by: One Step at a Time on August 20, 2016, 02:52:50 pm
Having some trouble with these two questions (no idea how to approach them/ get started)!
The business has a 6 month reporting period. The following data is provided.
Balances at 31/12/19: Accrued wages $700 & Prepaid sales $4500
Income Statement Data for 6 months ending 30/6/20: Wages $26300 & Sales $107000
Cash Flow Statement for 6 months ending 30/6/20: Accrued wages $700 & Wages $25 000 & Prepaid Sales $18700 & Sales $90000
What are the balances of accrued wages and prepaid sales at 30/6/20?
Post by: qweasdzxc on August 20, 2016, 03:18:59 pm
Hi everyone :)
Having some trouble with these two questions (no idea how to approach them/ get started)!
The business has a 6 month reporting period. The following data is provided.
Balances at 31/12/19: Accrued wages $700 & Prepaid sales $4500
Income Statement Data for 6 months ending 30/6/20: Wages $26300 & Sales $107000
Cash Flow Statement for 6 months ending 30/6/20: Accrued wages $700 & Wages $25 000 & Prepaid Sales $18700 & Sales $90000
What are the balances of accrued wages and prepaid sales at 30/6/20?
Accrued wages: 26300-25000=1300 (because figure in IS includes accrued wages for this period)
Prepaid sales: 107000-90000= 17000 (all sales that aren't cash. I'm gonna assume that there are no credit sales)
17000-4500= 12500 ( this is how much of the 18700 prepaid sales that has even converted to sales)
18700-12500= 6200 (remaining balance at 30/6)
Hope this makes sense!
Post by: xjiaa on August 23, 2016, 09:25:19 am
I'm struggling to grasp the concept of general ledgers and I've been coping so far by memorising the templates and not actually understanding the reason for it. I'm often confused with what entries must be made and ensuring that everything is included. I have a sac this week so hoping someone could help me understand ledgers better.
Thank you!
Post by: val265 on August 25, 2016, 05:59:56 pm
Just wondering what increases stock control that is cross referenced Bank?
Post by: The Usual Student on August 25, 2016, 06:12:26 pm
Accrued wages: 26300-25000=1300 (because figure in IS includes accrued wages for this period)
Prepaid sales: 107000-90000= 17000 (all sales that aren't cash. I'm gonna assume that there are no credit sales)
17000-4500= 12500 ( this is how much of the 18700 prepaid sales that has even converted to sales)
18700-12500= 6200 (remaining balance at 30/6)
Hope this makes sense!
The accrued wages BALANCE will be (total incurred) - (total paid)
so wages incurred = 26300 - ( 700 + 25000) = 600
the end balance being 600 CR for accrued wages.
Alternatively, you can use your method and take the 1300 and minus 700 balance from it to get 600.
As long as you account for the 700 accrued wages paid.. all g.
Post by: qweasdzxc on August 25, 2016, 08:35:46 pm
The accrued wages BALANCE will be (total incurred) - (total paid)
so wages incurred = 26300 - ( 700 + 25000) = 600
the end balance being 600 CR for accrued wages.
Alternatively, you can use your method and take the 1300 and minus 700 balance from it to get 600.
As long as you account for the 700 accrued wages paid.. all g.
Ohh but I thought the $700 accrued wages from CFS was to pay off the $700 accrued wages at the start of the period, then it kinda cancels out and the accrued wages for this period is just $26300-$25000?
Post by: qweasdzxc on August 25, 2016, 08:37:32 pm
Hey Guys,
Just wondering what increases stock control that is cross referenced Bank?
Cash purchase of stock.
Post by: The Usual Student on August 25, 2016, 09:38:20 pm
Ohh but I thought the $700 accrued wages from CFS was to pay off the $700 accrued wages at the start of the period, then it kinda cancels out and the accrued wages for this period is just $26300-$25000?
yeah soz read the question wrong, your answer is fine :)
Post by: The Usual Student on August 25, 2016, 09:44:40 pm
Hello,
I'm struggling to grasp the concept of general ledgers and I've been coping so far by memorising the templates and not actually understanding the reason for it. I'm often confused with what entries must be made and ensuring that everything is included. I have a sac this week so hoping someone could help me understand ledgers better.
Thank you!
a ledger is just like a little report for each account or item
Eg Vehicle
It has its own ledger which tells us everything that happened to the vehicle.
Best way to understand it is to realize EVERY single line in the ledger is telling us something happened.
So BANK - 600 on the DR side is telling us a vehicle was probably bought for 600!
Like try and keep track of the story if that makes sense :)
ALSO, look at DR and CR as an increase/decrease rather then credit and debit
So like that will give you and indication of what is going on or where something must go.
Obviously is you spend money to buy stock, your stock control will need to increase and since it is about swapping money for stock its cross reference is bank! Hence DR BANK!
Try and split the transactions up into their individual accounts as well so it beocmes much more clear!
Post by: val265 on August 25, 2016, 10:21:23 pm
Just wondering what are the different expenses that could be in the budgeted income statement?
Post by: qweasdzxc on August 26, 2016, 10:52:27 am
yeah soz read the question wrong, your answer is fine :)
No worries, all good!
Post by: qweasdzxc on August 26, 2016, 11:02:56 am
Thank You so much. You saved my life.
Just wondering what are the different expenses that could be in the budgeted income statement?
Stock write down
Stock loss
Other expenses:
Loss on disposal of NCA
rent expense
Interest expense
Discount expense
Advertising
Wages
Insurance expense
Depreciation of NCA
Office expenses
I'm sure there's more but there are the common ones, hope it helps ~
Post by: val265 on August 27, 2016, 10:33:47 pm
Post by: One Step at a Time on September 02, 2016, 08:21:08 pm
I'm pretty sure there aren't control accounts called "trade-in" or "deposit"...
Post by: Cornrow Kenny on September 03, 2016, 12:27:00 pm
When you trade-in a NCA and on the invoice, it says "less trade-in $1500" and "less deposit $12000", what would be the debits and credits in the general journal?The trade in reduces what you owe to the Sundry Creditor, so it would Debit Sundry Creditor and Credit disposal of vehicle I think (it's been a while and I just woke up :P).
I'm pretty sure there aren't control accounts called "trade-in" or "deposit"...
For the deposit you Credit Bank, and Debit Vehicle I believe.
Hopefully someone can confirm this is correct ;D
Post by: One Step at a Time on September 03, 2016, 02:18:29 pm
Haha I just woke up too :P
Post by: One Step at a Time on September 03, 2016, 02:33:39 pm
I'm thinking of going to the Engage Lecture and buying the recording from the VCTA lecture, but I'm not sure if it's worth it!
Love to hear all your opinions ;D
Post by: The Usual Student on September 03, 2016, 02:46:54 pm
What lectures is everyone going to?
I'm thinking of going to the Engage Lecture and buying the recording from the VCTA lecture, but I'm not sure if it's worth it!
Love to hear all your opinions ;D
VCTA one should be good
Post by: One Step at a Time on September 03, 2016, 03:15:51 pm
Did you go today to the VCTA lecture?
Post by: The Usual Student on September 03, 2016, 03:47:09 pm
Thanks The Usual Student :D
Did you go today to the VCTA lecture?
Nah planning in buying it. City is waayyyyy to far
Post by: Cornrow Kenny on September 03, 2016, 03:57:27 pm
What lectures is everyone going to?Don't think I'll be going to any... Out of interest, what do you take away from these lectures?
I'm thinking of going to the Engage Lecture and buying the recording from the VCTA lecture, but I'm not sure if it's worth it!
Love to hear all your opinions ;D
Post by: One Step at a Time on September 03, 2016, 04:49:17 pm
Nah planning in buying it. City is waayyyyy to far
Haha totally agree, would be a total drainer with the travel time!
I noticed on the website that we can buy the Unit 3 one (with slides) and the Unit 3&4 one (recording only). If I buy the Unit 3&4 one, I'm a bit worried about how I'll follow the it without the slides?! Or maybe it's just as suitable for us who didn't go to the lecture...
Don't think I'll be going to any... Out of interest, what do you take away from these lectures?
Actually, I haven't been to any Accounting lectures! I didn't go to the VCTA one today, so I'm planning on buying the recording of the lecture.
Apart from VCTA, I only know that Engage holds Accounting lectures too. Since Accounting is definitely not my forte, I was hoping that the lectures would help clarify what I need to work on... or is that just wishful thinking :P
Post by: One Step at a Time on September 10, 2016, 10:21:41 pm
Also, where's everyone getting the practice exams from? VCAA is the only "company" I know of hahah :)
Post by: readothien on September 10, 2016, 11:25:52 pm
For the practice exams, my school provides us with A LOT of them that are titled 'Nano exams'. I'm not sure if these are company or school made but they are really good revision. I believe that TSSM sells accounting practice exams, so maybe check there?
Hope this helped! :)
Post by: Cornrow Kenny on September 11, 2016, 11:29:22 am
Have all of you finished the course already? I feel like my school is behind... we're starting Unit 4 Outcome 2 this week :-[Finished content, last SAC this week.
Also, where's everyone getting the practice exams from? VCAA is the only "company" I know of hahah :)
My teacher has a lot of previous papers from various companies. Have you asked your teacher if they have any - or can get any?
Post by: reganconnor16 on September 12, 2016, 10:31:19 am
I have been doing practice exams and marking my mistakes in red... Lots of red...
If anyone has any tips on remembering how to record specific items, I'd gladly take it on board.
Thanks.
Post by: One Step at a Time on September 12, 2016, 04:47:55 pm
Hi :) I'm only in the 1/2 class at the moment but I have a couple of friends doing the 3/4. I think (not certain here) that they may have already finished the course. Not sure at all where they are with assessments but I do know they had a SAC about 3 weeks ago.
For the practice exams, my school provides us with A LOT of them that are titled 'Nano exams'. I'm not sure if these are company or school made but they are really good revision. I believe that TSSM sells accounting practice exams, so maybe check there?
Hope this helped! :)
Hey! :D Thanks you for your reply, I'll check out the TSSM papers. I've heard that the lectures/ classes aren't the best, but maybe the papers are worth having a go it.
Finished content, last SAC this week.
My teacher has a lot of previous papers from various companies. Have you asked your teacher if they have any - or can get any?
Wow, your school is blazing through the course. Well, my teacher always says that we're quite ahead, but seeing that we're starting Key Performance Indicators now, I have a feeling that we're not... :P
Funnily enough, my school has heaps of company papers for Bio, Chem, and those subjects but none for accounting...
I guess I'll have to buy the papers, but from what I've seen, most of them are around $30 each! Yikes!!
I've finished all coursework, now doing trial exams this week in 3/4.
I have been doing practice exams and marking my mistakes in red... Lots of red...
If anyone has any tips on remembering how to record specific items, I'd gladly take it on board.
Thanks.
Wow, I'm definitely behind then!
Are you doing VCAA/ company papers? Were they provided by your teacher?
Haha I get that feeling of "lots of red" before everyone SAC! :)
Do you mean recording in the journals? Or do you mean recording your mistakes?
Post by: One Step at a Time on September 12, 2016, 05:42:52 pm
1. Just checking, is there such thing as "customers duty"? I saw it in one of my school's practice SACs, so I'm not sure if it's a typo or another way of "customs duty". Has anyone here been taught that it's "customers duty"?
2. In the Cash Flow Statement, do you need to have the heading "Operating Activity Inflows" AND "Operating Activity Outflows" or can we simply write "Operating Activities" at the top?
3. If stock purchases was $30 000 and customs duty was $1000 in a period, what would be reported in the Cash Flow Statement? Don't we assume that the business uses product costing if not stated otherwise for VCE? So wouldn't we combine the 2 items as "Stock purchases" (cash outflow) of $31 000? Or would we keep them separately?
4. In the Cash Flow Statement, is GST collections always 10% of Cash Sales?
One last question:
Post by: Maz on September 12, 2016, 05:45:55 pm
I've finished all coursework, now doing trial exams this week in 3/4.To be honest I don't think there are any 'tips', you just need to work through it logically and think about where the money will go. Alot of this will come from following examples but you can always just rote memorise as well
I have been doing practice exams and marking my mistakes in red... Lots of red...
If anyone has any tips on remembering how to record specific items, I'd gladly take it on board.
Thanks.
Post by: The Usual Student on September 12, 2016, 06:41:50 pm
sorry i posted too soon, in regards to the last post,
I presume so since no other cash inflows charge GST, maybe if you had a weird form of interest revenue that did you would.
Post by: One Step at a Time on September 12, 2016, 07:12:16 pm
Thanks so much, understand it know :)
What did you mean by "The period and product assumption is always assumed, as in you apply the assumption." though?
Also, what are the restraints of budgeted reports? I guess I can use common sense to write an answer, but I can't seem to find anything on it in my teacher's notes!
Another question haha If the estimate for bad debts is 1% of credit sales plus GST, why do we have to include the GST in the debtors control accounting.
e.g. If credit sales was $710 000, then bad debts would be $710 000*0.01= $7100. But on the credit side of the debtors control account, the answer says $7810 (which is 1.1 * $7100). The cross reference is only to "bad debts" (not "GST Clearing"). I don't understand why we need to include the GST as the total bad debts though?
Last question, when we reconstruct accounts, do we need to balance/ close? :P
Post by: The Usual Student on September 12, 2016, 08:22:56 pm
Hi The Usual Student :D
Thanks so much, understand it know :)
What did you mean by "The period and product assumption is always assumed, as in you apply the assumption." though?
Also, what are the restraints of budgeted reports? I guess I can use common sense to write an answer, but I can't seem to find anything on it in my teacher's notes!
Another question haha If the estimate for bad debts is 1% of credit sales plus GST, why do we have to include the GST in the debtors control accounting.
e.g. If credit sales was $710 000, then bad debts would be $710 000*0.01= $7100. But on the credit side of the debtors control account, the answer says $7810 (which is 1.1 * $7100). The cross reference is only to "bad debts" (not "GST Clearing"). I don't understand why we need to include the GST as the total bad debts though?
Last question, when we reconstruct accounts, do we need to balance/ close? :P
a better way to think about the gst and bad debt bit, the gst + sale = total owed by debtor
and when we think about what the debtor represents to the firm, the debtor owes both GST AND SALES to the firm and we don't really distinguish between the two. Bad debts are the amount we aren't going to get paid back, so 1% of credit sales is 1% of what the debtor owes to the firm. Unless you intepret 1 % of credit sales as literally 1% of exclusively the credit sales which some people in my class did :P so that might be the correct answer. I still remain in the GST included camp but yeah idk
Post by: One Step at a Time on September 13, 2016, 02:16:16 am
a better way to think about the gst and bad debt bit, the gst + sale = total owed by debtor
and when we think about what the debtor represents to the firm, the debtor owes both GST AND SALES to the firm and we don't really distinguish between the two. Bad debts are the amount we aren't going to get paid back, so 1% of credit sales is 1% of what the debtor owes to the firm. Unless you intepret 1 % of credit sales as literally 1% of exclusively the credit sales which some people in my class did :P so that might be the correct answer. I still remain in the GST included camp but yeah idk
Yeah it's a bit weird. I guess you could take 1% of the credit sales + GST or take 1% of the credit sales, THEN multiply it by the GST. Comes out with the same ans, but I wonder which method is correct... especially when most questions don't say bad debts + GST...
Or is it assumed that the bad debts already inc. GST e.g. debtor receipts, so technically the 1st method is correct? ???
Post by: The Usual Student on September 13, 2016, 11:51:48 am
Ah I got it, thank you so much!! (Btw I see a premier's coming your way)
Yeah it's a bit weird. I guess you could take 1% of the credit sales + GST or take 1% of the credit sales, THEN multiply it by the GST. Comes out with the same ans, but I wonder which method is correct... especially when most questions don't say bad debts + GST...
Or is it assumed that the bad debts already inc. GST e.g. debtor receipts, so technically the 1st method is correct? ???
The GST is assumed as apart of the bad debt. Only issue is the wording of the transaction.
Since it says 1% of credit sales you can interpret it as your bad debts being ONLY 1% of your credit sales and you won't need to apply the GST afterwards.
But I assume 1% of credit sales ( you include the GST in the figure ) when you multiply it by 0.01 since the debates owe the firm the credit sale and the GST. It's kinda a hidden implication.
So you get two VERY different answers depending on the method you take , the second method wouldn't really make any sense since you shouldn't be applying GST to a bad debt figure AKA there is no such thing as bad debt + GST.
Post by: One Step at a Time on September 13, 2016, 06:52:53 pm
The GST is assumed as apart of the bad debt. Only issue is the wording of the transaction.
Since it says 1% of credit sales you can interpret it as your bad debts being ONLY 1% of your credit sales and you won't need to apply the GST afterwards.
But I assume 1% of credit sales ( you include the GST in the figure ) when you multiply it by 0.01 since the debates owe the firm the credit sale and the GST. It's kinda a hidden implication.
So you get two VERY different answers depending on the method you take , the second method wouldn't really make any sense since you shouldn't be applying GST to a bad debt figure AKA there is no such thing as bad debt + GST.
Ahh yes so true, thanks so much! Never even realised until I did that question :P
I'll just remember to take whatever % from the credit sales + GST! Unless, of course, the question asks for a % of only credit sales.
Is that right? :D
Post by: joejoh on September 14, 2016, 03:41:33 pm
Also the study design states that "Bad Debts with GST not applicable"... just thought i'd point that out.
Post by: Rumena on September 16, 2016, 05:29:07 pm
Post by: The Usual Student on September 16, 2016, 05:45:54 pm
Hey guys, does anyone know how many marks you can drop to get a 50 in accounting? Assume you've been ranked 1st throughout the whole year?
from memory,
1.5 marks? I believe was the threshold. I asked this question before and I remember that being somewhere near the answer.
So yeah best to 100% it :)
Post by: nt2387 on September 16, 2016, 06:09:32 pm
Hey guys, does anyone know how many marks you can drop to get a 50 in accounting? Assume you've been ranked 1st throughout the whole year?195/200 for most years.
So 97.5 + usually.
Post by: The Usual Student on September 16, 2016, 06:27:14 pm
195/200 for most years.
So 97.5 + usually.
yeah that looks moe correct tbh
Post by: ffs1234 on September 16, 2016, 07:59:39 pm
i calculated stock-write down; historical cost (14000) - NRV(8000)
= 6,000 for 4 mazda cars
not sure if this is right tho.
Post by: joejoh on September 17, 2016, 08:12:32 pm
hey, im a bit confused with this question attatched below.
i calculated stock-write down; historical cost (14000) - NRV(8000)
= 6,000 for 4 mazda cars
not sure if this is right tho.
Hey ffs1234,
I'll try and explain this as best as I can, so here goes:
Firstly you need to recognise that there are two things you are required to complete:
1. Accounting for the stock write down using the Lower of Cost and NRV rule (as you mentioned).
2. Adjusting for the stock gain.
First I would adjust for the stock gain, but remember using conservatism we use the lowest cost available in the stock card. So our lowest cost will have to be the 13600.
So we will have in the IN column
1 @ 13600 = 13600. (nice and easy)
And the BALANCE will be
4@ 14000
4 @13600
NEXT we account for the stock write down as some(not all) have been damaged. So the key with the NRV rule is that is by definition "estimated price less all costs incurred in the selling marketing and distribution of the stock items". So firstly as always in a stock card get rid of GST for anything. Then work out what your NRV is for each item of stock. In this case it is:
NRV= 10000 (HC) - $2000/5 (Advertising as this is a cost incurred in selling cars being written down)
= 10000 - 400
= 9600
This is our NRV which is lower than cost price so a stock write down is necessary. This is the amount that the 5 cars which were damaged now have to be revalued at.
Now to calculate the stock write down (keep in mind 5 cars are being written down... that is 4 of the $14000 and 1 of the $13600 Mazda 2).:
Therefore we have:
14000-9600 = the value we have to write down per each of the 14000 dollar Mazdas (i.e. in the OUT column of the stock card) = 4400.
But we have 4 of these Mazdas (see the balance of the stock card), so 4*4400 = 17600, will give us our total stock write down for the Mazdas that were initially $14000.
But this is only 4 of the cars so using FIFO we write down the 5th car which is the $13600:
13600 - 9600= 4000= the value we have to write down per each of the 13600 dollar Mazdas (i.e. in the OUT column of the stock card) = 4000.
So therefore in the OUT column of the stock card we have:
4 @ 4400 = 17600
1 @ 4000 = 4000
Therefore in the BALANCE column of the stock card we have:
5 @ 9600 = 48000 (notice our new balance which accounts for the 5 written down cars)
and leaving us with 8- 5 = 3 cars that have not been damaged @ 13600 = 40800
So finally our stock card will look like:
5 @ 9600
3 @ 13600
Btw, notice the question says that all of this happened on one day... 30th November. In VCAA I don't it matters which transaction you record first unless it actually says so. But I did the stock gain adjustment first b/c the marks allocated were 1 followed by 2 marks (usually a stock write down is worth more marks than a stock loss/gain adjusting entry especially in a stock card)... but don't quote me on that. I'd be interested to see what the solutions have to say. Also was that off a practice exam, i'd be interested to know which one.
Hope that makes sense,
p.s. i did this in a rush so anyone please double check and approve or disapprove.
Jo
Post by: ffs1234 on September 19, 2016, 01:21:16 pm
Hey ffs1234,thanks Jo! according to the answers you're correct :) and yes this was off a practice exam made in 2014, by the company '2 for 1'. The solutions have adjusted for stock write-down before memo 21.
I'll try and explain this as best as I can, so here goes:
Firstly you need to recognise that there are two things you are required to complete:
1. Accounting for the stock write down using the Lower of Cost and NRV rule (as you mentioned).
2. Adjusting for the stock gain.
First I would adjust for the stock gain, but remember using conservatism we use the lowest cost available in the stock card. So our lowest cost will have to be the 13600.
So we will have in the IN column
1 @ 13600 = 13600. (nice and easy)
And the BALANCE will be
4@ 14000
4 @13600
NEXT we account for the stock write down as some(not all) have been damaged. So the key with the NRV rule is that is by definition "estimated price less all costs incurred in the selling marketing and distribution of the stock items". So firstly as always in a stock card get rid of GST for anything. Then work out what your NRV is for each item of stock. In this case it is:
NRV= 10000 (HC) - $2000/5 (Advertising as this is a cost incurred in selling cars being written down)
= 10000 - 400
= 9600
This is our NRV which is lower than cost price so a stock write down is necessary. This is the amount that the 5 cars which were damaged now have to be revalued at.
Now to calculate the stock write down (keep in mind 5 cars are being written down... that is 4 of the $14000 and 1 of the $13600 Mazda 2).:
Therefore we have:
14000-9600 = the value we have to write down per each of the 14000 dollar Mazdas (i.e. in the OUT column of the stock card) = 4400.
But we have 4 of these Mazdas (see the balance of the stock card), so 4*4400 = 17600, will give us our total stock write down for the Mazdas that were initially $14000.
But this is only 4 of the cars so using FIFO we write down the 5th car which is the $13600:
13600 - 9600= 4000= the value we have to write down per each of the 13600 dollar Mazdas (i.e. in the OUT column of the stock card) = 4000.
So therefore in the OUT column of the stock card we have:
4 @ 4400 = 17600
1 @ 4000 = 4000
Therefore in the BALANCE column of the stock card we have:
5 @ 9600 = 48000 (notice our new balance which accounts for the 5 written down cars)
and leaving us with 8- 5 = 3 cars that have not been damaged @ 13600 = 40800
So finally our stock card will look like:
5 @ 9600
3 @ 13600
Btw, notice the question says that all of this happened on one day... 30th November. In VCAA I don't it matters which transaction you record first unless it actually says so. But I did the stock gain adjustment first b/c the marks allocated were 1 followed by 2 marks (usually a stock write down is worth more marks than a stock loss/gain adjusting entry especially in a stock card)... but don't quote me on that. I'd be interested to see what the solutions have to say. Also was that off a practice exam, i'd be interested to know which one.
Hope that makes sense,
p.s. i did this in a rush so anyone please double check and approve or disapprove.
Jo
Post by: joejoh on September 19, 2016, 04:11:48 pm
Post by: ffs1234 on September 23, 2016, 07:34:28 pm
i have stumbled upon something that i'm unsure of in the answers of engage's accounting practice exam 'C'.
http://engageeducation.org.au/engagedownloads/Practice%20Exams/2013/Accounting/Exam%20Solutions.pdf
Question 6b, i was asked to prepare an income statement. I had previsouly worked out bad debts to 7100 (was 1 percent of credit sales which was 710,000)
in the answers, they have included bad debts PLUS gst as 'other expenses'.
this has got to be incorrect right?
oh yeah and same thing with discount expense
appreciate it
Post by: nt2387 on September 23, 2016, 09:02:58 pm
hey guys,
i have stumbled upon something that i'm unsure of in the answers of engage's accounting practice exam 'C'.
http://engageeducation.org.au/engagedownloads/Practice%20Exams/2013/Accounting/Exam%20Solutions.pdf
Question 6b, i was asked to prepare an income statement. I had previsouly worked out bad debts to 7100 (was 1 percent of credit sales which was 710,000)
in the answers, they have included bad debts PLUS gst as 'other expenses'.
this has got to be incorrect right?
oh yeah and same thing with discount expense
appreciate it
There definitely shouldn't be GST included in the bad debts figure. GST isn't included in an income statement at all.
There are a lot of wrong answers in accounting exams and worksheets, so don't be too concerned about it.
Post by: ffs1234 on September 23, 2016, 09:57:07 pm
There definitely shouldn't be GST included in the bad debts figure. GST isn't included in an income statement at all.
There are a lot of wrong answers in accounting exams and worksheets, so don't be too concerned about it.
thanks nt2387
Post by: ffs1234 on September 23, 2016, 10:00:57 pm
in this question attached below how would i work out cash paid to creditors?
in this case, im not given any credit purchases as i was normally given in my textbook questions. is it something to do with the gst balance they give you at the end of december 2013?
Post by: friedchromosome on September 24, 2016, 04:05:28 pm
Post by: friedchromosome on September 24, 2016, 04:21:10 pm
please provide an example
Post by: Cornrow Kenny on September 24, 2016, 04:52:18 pm
Can someone please explain why gst collected from cash sales not classified as a revenue? thanksWhile it is an inflow of economic benefit (cash) that increases Assets (Bank), it doesn't increase Owner's Equity. The GST is incurred on behalf of the ATO and is owed to the Government.
Also how can a get clearing account have a closing debit ratio?Do you mean having a closing debit balance? This occurs when the GST paid on purchases/expenses is greater than the GST received on Sales, eg. We paid $50 GST on Electricity and $50 on buying Stock, but we only received $75 GST on Sales, therefore we are owed $25 (which also means it is a Current Asset).
please provide an example
Post by: val265 on October 02, 2016, 05:34:19 pm
Just wondering why sales return is reported separately in the income statement?
Post by: RuiAce on October 02, 2016, 05:43:32 pm
Hey GuysOn a realistic income statement, any income of any form (revenue or gains) is reported first. The expenses follow from all income.
Just wondering why sales return is reported separately in the income statement?
In reality, a company is subject to a much greater "category" of expenses than with income. (GAAP puts on more restrictions on what can be classified as income, whereas the definition of expenses is a bit more relaxed.)
If the sales revenue is the only form of income, there is nothing to be reported with it. Thus, apart from a COGS expense to be deducted (where applicable), it cannot be tied down with anything else.
This might not answer the question sufficiently enough. Feel free to ask another question on top of it if so.
Post by: ffs1234 on October 02, 2016, 05:55:15 pm
Post by: The Usual Student on October 02, 2016, 06:56:00 pm
could you say that the role of a physical stocktake supports the accounting principle conservatism as well as reporting period by ensuring that the number of stock on the stock card matches with the amount on hand so that assets (stock control) is not overstated?
Hmm, potentially but a stocktake itself isn't centered around making sure we pick up on stock losses, It is to make sure we pick up on inaccuracies between our stock records and the actual stock number. The distinction is that not all stocktakes will lead to a stock loss hence linking it to conservatism due to the recognition of stock losses is circumstantial. Also, conservatism generally has to do with estimations and not actual records, it is in order to ensure we value estimates conservatively but making sure our records are not overstating assets is not a ocnservatims issue but a reliability issue since its to do with accuracy.
Post by: KidClutch on October 05, 2016, 09:07:31 pm
Post by: The Usual Student on October 05, 2016, 09:31:07 pm
hey guys, there was a question in one of the practice exams that asked to calculate bad debts from a % of total credit sales. the answers included gst as part of the total credit sales. I didn't include gst in my calculation but i'm not sure which one is right. Anyone know?
haha we just had this discussion,
so in short, the study design says " gst excluded" so exclude the GST.
Post by: One Step at a Time on October 12, 2016, 04:39:23 pm
I know there can be invoices and receipts too (Balance Day Adjustment for prepaid sales revenue), but apart from this example, I can't think of any other exceptions.
Can anyone help me out? :P
Post by: readothien on October 13, 2016, 11:24:02 pm
Post by: One Step at a Time on October 15, 2016, 01:45:37 pm
I've seen one recorded as 'GJ note' followed by the number so I think it's possible? Sorry, I'm not really sure :/Oh I've never seen GJ note before! I'll keep an eye out, thanks :D
Post by: john_honrade on October 15, 2016, 08:57:25 pm
Thanks in advance :)
Post by: One Step at a Time on October 26, 2016, 09:55:55 pm
Cheers for helping a very confused student :P
Post by: Hannibal on October 26, 2016, 10:13:37 pm
What's the relationship between Return on Assets and Return on Average Owner's Investment? How do they affect each other? Is it true that an increase in one will also lead to an increase in another and vice versa? ???ROA is a profitability indicator that measure how effectively the firm can generate net profit using its assets. If there is a favourable trend in ROA, and that is due to an increase in net profit and not a decrease in assets, then it should also lead to an increase and favourable trend in ROI, if the increase in net profit is proportionately more than the increase in capital (If there is any). Thus, the owner is earning a greater return for the capital investment that has been made.
Cheers for helping a very confused student :P
Sorry if my wording isn't great.
Came up with another answer (Not sure if you can say higher ROI = more external finance):
An increase in ROI means the owner is earning more net profit for every $1 of capital that has been invested. If this is because the firm has taken out drawings and is using more loans and external finance to purchase non-current assets, then the firm will be able to purchase assets it otherwise would not have been able to, and thus replace idle assets with more productive and efficient ones. Hence, the assets should be able to more effectively earn sales revenue, increasing ATO, which should have a flow on effect to increase ROA. This means that the firm is using its assets more effectively to generate net profit.
Post by: One Step at a Time on October 30, 2016, 11:05:55 pm
Also, I've got a pretty simple question!
I've actually never been taught the "full definition" of an expense (the "Expenses are outflows of economic benefits or reductions in inflows" bit). Same goes for revenue. I didn't realise that "inflows of economic benefits or savings in outflows" was part of the definition until just then!
So now I'm not too sure how to answer questions which need to justify the treatment of an item. e.g. Why is depreciation an expense?
How do I know which part to choose?
- For expense items, "outflows of economic benefits" OR "reductions in inflows"?
For revenue items, "inflows of economic benefits" OR "savings in outflows"?
Not sure if I'm explaining myself clearly, but if anyone could help out, that'd be great :D
Post by: The Usual Student on October 30, 2016, 11:41:59 pm
Ah I got it, thanks Hannibal! :) Definitely well explained, no doubt about that!
Also, I've got a pretty simple question!
I've actually never been taught the "full definition" of an expense (the "Expenses are outflows of economic benefits or reductions in inflows" bit). Same goes for revenue. I didn't realise that "inflows of economic benefits or savings in outflows" was part of the definition until just then!
So now I'm not too sure how to answer questions which need to justify the treatment of an item. e.g. Why is depreciation an expense?
How do I know which part to choose?
- For expense items, "outflows of economic benefits" OR "reductions in inflows"?
For revenue items, "inflows of economic benefits" OR "savings in outflows"?
Not sure if I'm explaining myself clearly, but if anyone could help out, that'd be great :D
I know this seems like such an obvious answer but really dissect what the expense is doing to the accounting equation. Something like depreciation is ( in simple terms ) reducing the value of our assets ( technically its not but just go with this for now ) so we are losing economic benefit. However, with something like discount expense, you are not receiving the amount you expected back hence it is a reduction in revenue.
lol abcxyz beat me to it but yeah pretty much think about the accounting elements and you will be fine.
Post by: val265 on November 02, 2016, 09:30:04 am
Is Bad debt recorded in the income statement?
Post by: Cornrow Kenny on November 02, 2016, 11:27:04 am
Hey Guys,Yes, under "Other Expenses".
Is Bad debt recorded in the income statement?
Post by: One Step at a Time on November 02, 2016, 12:10:35 pm
For depreciation you would choose 'outflow/consumption of economic benefits' because the non-current assets ability to generate revenue decreases as it is consumed. You can also refer to the next part of the definition to be certain, that is, it leads to a decrease in assets (Accumulated Depreciation, which is a negative asset), thus reducing owner's equity (as it is an expense and reduces net profit).
You would use 'reduction in inflows' for something like discount expense, as there is less cash received cash received from debtors.
For revenues you'd use 'saving in outflows' for items such as discount revenue, as less cash is being paid to the creditor as a result of early repayment. Interest revenue is an item you would describe with 'inflow of economic benefits' as it leads to an increase in assets (bank) and owner's equity.
Sorry it's a little rushed, but I hope that helped haha :D
I know this seems like such an obvious answer but really dissect what the expense is doing to the accounting equation. Something like depreciation is ( in simple terms ) reducing the value of our assets ( technically its not but just go with this for now ) so we are losing economic benefit. However, with something like discount expense, you are not receiving the amount you expected back hence it is a reduction in revenue.
lol abcxyz beat me to it but yeah pretty much think about the accounting elements and you will be fine.
Thanks so much! I get it now, your explanations definitely helped ;D
Is outflow of economic benefits and consumption of economic benefits the same? Can they be used interchangeably?
Also, depreciation doesn't actually decrease the value of the asset, right? It just increases the negative asset, accumulated depreciation, which decreases assets overall?
And is discount expense the only expense that is a "reduction in inflows..."? Likewise, is discount revenue the only revenue item that is "savings in outflows...?"
Thanks again ;D
Post by: Hannibal on November 02, 2016, 01:46:24 pm
Thanks so much! I get it now, your explanations definitely helped ;DI reckon the key difference is that consumption of economic benefit is when you're consuming something that's pre-existing, so say rent expense because you're consuming prepaid rent or depreciation because you're consuming an asset. But really they can be used interchangeably, don't think it actually matters.
Is outflow of economic benefits and consumption of economic benefits the same? Can they be used interchangeably?
Also, depreciation doesn't actually decrease the value of the asset, right? It just increases the negative asset, accumulated depreciation, which decreases assets overall?
And is discount expense the only expense that is a "reduction in inflows..."? Likewise, is discount revenue the only revenue item that is "savings in outflows...?"
Thanks again ;D
Post by: One Step at a Time on November 02, 2016, 02:08:34 pm
So rent could also be an outflow of economic benefits if cash from bank is used to pay it?
Also, if given a stock card, how do I determine the stock gain value? The lowest value from the whole stock card or from the last entry?
Post by: heartsflame on November 02, 2016, 08:39:58 pm
Thanks Hannibal! :D
So rent could also be an outflow of economic benefits if cash from bank is used to pay it?
Also, if given a stock card, how do I determine the stock gain value? The lowest value from the whole stock card or from the last entry?
Stock gain is valued at the lowest price in the stock card, this is due to conservatism and preventing assets from being overstated when the stock gain is realised.
Post by: KDB on November 02, 2016, 08:56:50 pm
Rent would be considered an outflow of economic benefit when cash is used. It is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic benefit from the entity.
Post by: qweasdzxc on November 02, 2016, 09:38:40 pm
Rent would be considered an outflow of economic benefit when cash is used. It is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic benefit from the entity.
Correct me if I'm wrong, but isn't rent an expense? 'Present obligation, arising from past events...' sounds like the definition of a liability ? Unless you were talking about accrued rent expense ?
Post by: KDB on November 02, 2016, 09:49:25 pm
Yes, sorry accrued rent expense is the liability, rent itself is an expense, and prepaid rent is the asset. too many types .. aha
Post by: Cornrow Kenny on November 02, 2016, 09:49:45 pm
Rent would be considered an outflow of economic benefit when cash is used. It is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic benefit from the entity.That sounds like the Liability definition. I don't think I've ever come across Rent as a Liability (edit unless Accrued), it is either prepaid or paid month to month etc.
Post by: SexGodDosia on November 02, 2016, 11:46:10 pm
what is Discount revenue?
*Not looking for definition looking for how to refer to it in this context
Post by: Cornrow Kenny on November 03, 2016, 12:17:41 am
So if Discount expense is an outflow in economic benefitDiscount expense is not an outflow, it is the reduction in the inflow of economic benefits. You are getting less money from debtors.
what is Discount revenue?
*Not looking for definition looking for how to refer to it in this context
Discount revenue is a reduction in the outflow of economic benefits. You are paying less money to creditors.
Post by: One Step at a Time on November 03, 2016, 12:52:09 am
Stock gain is valued at the lowest price in the stock card, this is due to conservatism and preventing assets from being overstated when the stock gain is realised.
Thanks heartsflame. I was actually more specifically wondering which price to take. The lowest price form the whole stock card or the last entry or something else?
Post by: SexGodDosia on November 03, 2016, 08:53:27 am
Discount expense is not an outflow, it is the reduction in the inflow of economic benefits. You are getting less money from debtors.
Discount revenue is a reduction in the outflow of economic benefits. You are paying less money to creditors.
Thanks :))
Post by: One Step at a Time on November 03, 2016, 11:14:43 am
Stock gain should be valued at lowest cost price of stock still on hand. So whatever is the lowest amount in the balance column of your stock card :)
Thanks so much abcxyz (like your username btw haha) :P
Post by: One Step at a Time on November 03, 2016, 06:22:13 pm
How's everyone feeling? :P
A last-minute question: are bad debts written off when probable (according to Conservatism) or only when deemed irrecoverable?
Also, can rent revenue be described as "a reduction in the outflow of economic benefits as it decreases a liability (prepaid rent revenue) that increases owner's equity..."? If not, how would it be defined in this case?
Post by: The Usual Student on November 03, 2016, 07:45:20 pm
Hi everyone!!
How's everyone feeling? :P
A last-minute question: are bad debts written off when probable (according to Conservatism) or only when deemed irrecoverable?
Also, can rent revenue be described as "a reduction in the outflow of economic benefits as it decreases a liability (prepaid rent revenue) that increases owner's equity..."? If not, how would it be defined in this case?
Yep when probable!
And no to your second question, because rent revenue is revenue you generated for charging others for rent so the asset ( premise or land or NCA you are renting out) is being used by someone else to generate inflows of economic benefit. You are not reducing any outflows of economic benefit since there is no outflow of economic benefit in the scenario :) AKA you are not reducing a liability ( prepaid rent has nothing to do with rent revenue )
Hope that helps!
Post by: One Step at a Time on November 03, 2016, 08:10:43 pm
Also, are there any differences between the benefits of variance reports and budgeted reports? Is it the same: identify possible problems, take corrective action, etc.?
Post by: One Step at a Time on November 03, 2016, 08:47:17 pm
Post by: Cornrow Kenny on November 03, 2016, 09:29:06 pm
Also, on a totally different topic (still accounting related haha), does changes in quantity traded change Net Profit Margin? ???What do you mean "quantity"? NPM is Net Profit/Sales, so if you sell less stock at a time, but overall Sales are the same, then it wouldn't affect NPM.
Sorry I don't have an answer for your other question, I need to look over some of that stuff. Best of luck for tomorrow!
Post by: One Step at a Time on November 03, 2016, 09:41:59 pm
What do you mean "quantity"? NPM is Net Profit/Sales, so if you sell less stock at a time, but overall Sales are the same, then it wouldn't affect NPM.
Sorry I don't have an answer for your other question, I need to look over some of that stuff. Best of luck for tomorrow!
Sorry I wasn't clear! I meant how many units are sold. Does that affect NPM?
Same goes, no doubt you'll smash it! ;D Thanks for all your help!
Post by: Cornrow Kenny on November 03, 2016, 09:50:42 pm
Sorry I wasn't clear! I meant how many units are sold. Does that affect NPM?Just think about these things logically and in terms of the formula.
Same goes, no doubt you'll smash it! ;D Thanks for all your help!
If less units sold means less revenue from Sales, then yes it would effect NPM. However a business could just order the same amount just in smaller quantities, thus having no effect. Or it could order more increasing NPM etc it depends on the question.
Post by: One Step at a Time on November 03, 2016, 10:19:08 pm
Post by: Guideme on January 11, 2017, 07:38:05 pm
Post by: epichedgehog on February 07, 2017, 06:26:03 pm
I'm having a little trouble with GST refunds - the textbook says for example, if a business purchases an expensive non-current asset, then GST paid during purchases could be greater than GST received from sales, and therefore the business will be owed GST by the ATO (GST refund). But why is it a non-current asset? Why not an expensive current asset (e.g. equipment that is expected to be used up within the next 12 months)?
Thanks!
Post by: omcgil15 on February 07, 2017, 07:35:31 pm
Hi everyone,Purchasing a non current asset is simply an example used. More generally, it can be said that GST on purchases exceeding GST on sales will mean the business is owed money from the ATO. Also, equipment is assumed to be used beyond 12 months, businesses purchase equipment to last for a lot longer than 12 months
I'm having a little trouble with GST refunds - the textbook says for example, if a business purchases an expensive non-current asset, then GST paid during purchases could be greater than GST received from sales, and therefore the business will be owed GST by the ATO (GST refund). But why is it a non-current asset? Why not an expensive current asset (e.g. equipment that is expected to be used up within the next 12 months)?
Thanks!
Post by: epichedgehog on February 07, 2017, 08:08:39 pm
Purchasing a non current asset is simply an example used. More generally, it can be said that GST on purchases exceeding GST on sales will mean the business is owed money from the ATO. Also, equipment is assumed to be used beyond 12 months, businesses purchase equipment to last for a lot longer than 12 months
Ah, that makes sense. Thank you :).
Post by: m12345 on February 23, 2017, 08:54:08 pm
Post by: dan0038 on March 02, 2017, 02:07:35 pm
Post by: ish708 on March 08, 2017, 08:09:37 am
HEY GUYS, this question is for the accounting gods. my first sac just past and i have a query bout a point that i got wrong. does discount apply to the whole gst total when receiving money back from a debtor or does it apply to the gst exclusive total. coz the rule is that gst is not included when paying creditors or receiving money from debtors. So apparently im wrong that discount applies to the total not including gst. What do you guys think?
The discount does not apply to the GST, however you do not acknowledge this when recording. You have acknowledged GST when the credit sale occurred and as you know you cannot acknowledge it again or you would be double counting. So yes, the discount only comes of the GST exclusive total. That is because the business is not in a position to offer a discount on the GST - exceptions will come later in the course. So when recording you must not separate the GST when applying the discount but just be aware that the GST is not affected. If the discount is say 10%, they get 10% of the total they owe, including GST, however the GST is not decreased. Say the debtor owes $110 and they get 10% off, it comes to $99 owing including $11 GST. So the discount would essentially mean the debtor is paying $11 GST and $88 for the item they bought.
Post by: NAT0003 on March 10, 2017, 12:10:08 pm
Post by: ish708 on March 10, 2017, 02:55:11 pm
How do you improve theory in accounting 1/2
Practise, practise, practise. Do a lot of theory questions and they will improve. Practise makes perfect. Try to nail your definitions as you get taught them, as intertwining a definition into your answer boosts it. Feel free to message me if you want and I can help you out with anything. I can even give you some questions if you like and mark them for you?
Post by: NAT0003 on March 10, 2017, 04:08:13 pm
Post by: ish708 on March 10, 2017, 07:06:08 pm
Is it possible to get answers for cambridge review questions
You can get them but your teacher will be the one who has them.
Post by: Cranium002 on March 11, 2017, 12:29:38 pm
Post by: omcgil15 on March 13, 2017, 10:45:17 pm
Hello, can someone please help me with these theory questions
Kylie provides you with the following information on March 1: Bank Overdraft ($5000), Equipment ($37800), Motor Vehicle ($43500), Loan - Listening Loans ($42000) - repayable $3000 per month, Stock ($41500), Debtor - DJ Danny ($2900), Debtor - BJ Lo Fi ($3250), Creditor - Ytunes ($3690), Creditor - Upload ($3380), GST owed to the ATO ($2570).
b) Identify and explain one current asset on March 1 2016 which best illustrates the accounting principle of conservatism (3 marks)
c) Identify and explain one current liability on March 1 2016 which best illustrates the qualitative characteristic of relevance (3 marks)
Thank you :)
Conservatism is stock control - stock is recorded at cost price and not selling price, as the gains derived from selling stock should only be recorded once certain (i.e. once the stock is sold). This ensures that assets (stock control) and owners equity are not overstated.
Creditors Control - Only the total of all individual creditors from the subsidiary ledger is recorded in the balance sheet', as this is all that is relevant for decision making purposes when analyzing the balance sheet.
Post by: plsbegentle on April 03, 2017, 10:29:39 pm
Post by: exit on April 04, 2017, 12:26:47 am
Any tips on how to answer theory questions in general, i find myself either knowing what to say in my head but cant quite word it properly or just not know the answer. I've done basically all the exercises and still find myself struggling with theory. Any help would be appreciated! :D
IDL=identify,definition,link
IDL
IDL
Use words like however, on the other hand, to discuss various aspects.
Post by: plsbegentle on April 05, 2017, 02:33:56 pm
Post by: omcgil15 on April 05, 2017, 08:43:14 pm
Just some help with balancing, i'm kinda confused with what needs balancing in general ledgers, i know that only assets, liabilities and owner's equity accounts are balanced. However, when doing practice sacs, i'm noticing that some assets and liabilities don't get balanced, for example, stock control, gst clearing Any reasoning behind this? Thanks
Will just be that the practice SAC is only making you balance one or two accounts rather than them all. Assets, Liabilities and Capital are always balanced, drawings is transferred to capital and revenues and expenses are closed to the P/L summary
Post by: epichedgehog on April 30, 2017, 01:07:44 pm
I'm having some trouble with Question 2.2 from VCAA 2008 Exam 1:
On 11 October 2007 the business paid $3 960 (including $360 GST) to renew the annual insurance policy due to expire on 31 October 2007 (Chq. 1245). The payment was correctly recorded in the Prepaid Insurance account. On 30 June 2008, before any adjusting entries, the balance in the Prepaid Insurance account was $4 720. Prepare the necessary General Journal entries to record the BDA and closing entry relating to insurance for the year ending 30 June 2008. Narrations are not required.
(Solutions are here: http://www.vcaa.vic.edu.au/Documents/exams/account/accounting_assessrep_june08.pdf). How is the value of $3520 in the General Journal obtained? I've tried drawing a timeline and everything but I can't seem to understand it.
Many thanks.
Post by: gamma032 on April 30, 2017, 05:57:43 pm
Hi all,
I'm having some trouble with Question 2.2 from VCAA 2008 Exam 1:
On 11 October 2007 the business paid $3 960 (including $360 GST) to renew the annual insurance policy due to expire on 31 October 2007 (Chq. 1245). The payment was correctly recorded in the Prepaid Insurance account. On 30 June 2008, before any adjusting entries, the balance in the Prepaid Insurance account was $4 720. Prepare the necessary General Journal entries to record the BDA and closing entry relating to insurance for the year ending 30 June 2008. Narrations are not required.
(Solutions are here: http://www.vcaa.vic.edu.au/Documents/exams/account/accounting_assessrep_june08.pdf). How is the value of $3520 in the General Journal obtained? I've tried drawing a timeline and everything but I can't seem to understand it.
Many thanks.
The two tricks here are to realise that the reporting period is yearly and that the cost of the insurance per month changes (the word 'renew' is slightly misleading).
The first step is to figure out how much insurance cost from November 2007 to June 2008:
Payment: $3960 - $360 = $3600/year.
$3600 / 12 = $300/month.
From November to June there's 8 months, so:
300 * 8 = $2400.
But what about the other 4 months (July - October) that we need to record? To do that, we'll start with the balance of the prepaid account in 2008:
Pre-adjustment balance June 2008: $4720
- Payment in October $3600
= Post-adjustment balance June 2007: $1120.
This means that at the end of last period we had $1120 of prepaid insurance left, and it was consumed by the end of October.
So just combine these two figures and you'll get what you're looking for:
$2400 + $1120 = $3520
Post by: bdgonz on May 02, 2017, 08:12:27 pm
Quote
Hey guys,
I have a couple of questions:
With reference to one qualitative characteristic or accounting principle, discuss the importance of a physical stocktake (4 marks)
Explain the effect on the accounting reports of the business using the FIFO cost assignment method when suppliers prices are falling. (5 marks)
I have the basic idea of the questions but I'm not too sure how to answer them when they are worth this many marks.
Thanks :)
With reference to one qualitative characteristic or accounting principle, discuss the importance of a physical stocktake (4 marks)
This is how I would go around it!
1. Identify what is the physical stocktake and its purpose? (1 Mark) - Counting each individual item of stock and comparing it with the stock cards to detect any stock losses or gains.
2. Identify the principle or characteristic (I would go with Reliability, but you could also justify Conservatism) (1 Mark)
3. Explain how the characteristic links with the physical stock take (2 or 1 Marks)
Eg 1 - By a firm conducting a physical stocktake, it is ensured that the stockcards are free from bias and/or material error, and will have a source document (a memo) as verifiable evidence of the loss/gain.
Eg 2 - By conducting a physical stocktake, if the firm detects a stock loss it must be reported immediately, as according to the Conservatism principle, all losses must be reported when they are likely to occur. Hence, the firm's assets (specifically Stock Control) will not be overstated, and thus the reports (speicifically the Balance Sheet, current asset section) will be accurate.
To be honest I am surprised that this question is 4 marks, I would've thought 3 marks is more suitable.
Explain the effect on the accounting reports of the business using the FIFO cost assignment method when suppliers prices are falling. (5 marks)
1. What is the FIFO cost assignment method? (1 mark) - The assumption that the stock that enters the business first, is the first to leave the business.
2. Which accounting reports are affected? (1 mark) - The accounting report affected is primarily the Balance Sheet (stock control) and the Income Statement (stock losses or gains)
3. What is the effect? (3 marks)
Eg - If a firm uses the FIFO method whilst supplier prices are falling, then it is likely that a firm may overstate their assets (stock control) and overstate their expenses (Cost of Sales), and thereby understate Owner's Equity (Net Profit). As FIFO is an assumption, the stock cards would state the highest possible stock control and the highest possible Cost of Sales. This breaches the Conservatism principle, as the firm could possibly be overstating their assets, and understating their Profit, hence a physical stocktake must be conducted to ensure the stockcards and accounting reports are free from bias and material error (thus upholding Reliability). Therefore, the overall effect of using the FIFO assumption on reports of the business when supplier prices are falling is that the Current Asset section in the Balance Sheet may be overstated, and the Adjusted Gross Profit of the firm may be understated.
I hopefully think this would get you the 5 marks :) hope I could help!
Post by: suzannecory on May 10, 2017, 10:29:48 am
Aladdin's accountant has informed him that classification of reports is important. Discuss this statement, referring to both an accounting principle and qualitative characteristic in your answer. (6 marks)
Bunny has been informed that the business should adopt the Historical Cost principle. Discuss how Historical Cost impacts the Balance Sheet. (5 marks)
Thanks!!
Post by: Yueni on May 13, 2017, 02:50:22 pm
Hello I was wondering if I could get help with two questions I am having trouble with.
Aladdin's accountant has informed him that classification of reports is important. Discuss this statement, referring to both an accounting principle and qualitative characteristic in your answer. (6 marks)
Bunny has been informed that the business should adopt the Historical Cost principle. Discuss how Historical Cost impacts the Balance Sheet. (5 marks)
Thanks!!
Classification of reports splits assets and liabilities into current and non current. What this does is it allows organisations to better make decisions based on their long and short term debt, working with the long and short term assets (liquidity vs earning revenue in the long run).
Historical costs, instead of present or fair value, values assets at their original cost (usually higher.) This may end up overstating your assets.
Post by: faraj on May 15, 2017, 09:40:01 am
holy shit this is so insightful
Post by: faraj on May 15, 2017, 09:40:56 am
Classification of reports splits assets and liabilities into current and non current. What this does is it allows organisations to better make decisions based on their long and short term debt, working with the long and short term assets (liquidity vs earning revenue in the long run).bro ur so smart u could give a better answer than that
Historical costs, instead of present or fair value, values assets at their original cost (usually higher.) This may end up overstating your assets.
Post by: zuleika on June 03, 2017, 03:17:06 pm
Post by: viralcricstar on June 03, 2017, 08:44:30 pm
Why is GST refund not counted in revenue?It is not counted as revenue because:
Imagine you pay 100 gst in a year but receive only 90. This might be due to less revenue through sales or service. The 10 gst becomes gst receivable. When you receive those 10 bucks, your gst balance is 0 which is why any type of gst is not revenue for a business
Post by: Yueni on June 04, 2017, 02:26:50 pm
Why is GST refund not counted in revenue?
GST does not meet the definition of revenue as defined in your course outline.
1. Is an inflow of economic benefit that increases assets or decreases liabilities (Yes)
2. Increases OE (No, we Dr Cash and Cr GST receivable when we receive the refund, no affect on OE)
3. Is not a contribution from an owner (Yes)
It does not meet criteria 2, and thus is not a revenue.
Post by: johnhalo on June 22, 2017, 06:13:19 pm
Is the insurance in this question a period cost or an other expense?
In my opinion, it should be an other expense because it relates to insurance whilst the stock is on the business floor. However, the answers say period cost (maybe because this question is from 2009?)
Any help is appreciated.
Post by: Cornrow Kenny on June 22, 2017, 06:31:54 pm
Hello,What is the question? Doesn't it usually ask you if something is a product v period cost? In which case Insurance would be period.
Is the insurance in this question a period cost or an other expense?
In my opinion, it should be an other expense because it relates to insurance whilst the stock is on the business floor. However, the answers say period cost (maybe because this question is from 2009?)
Any help is appreciated.
Post by: johnhalo on June 22, 2017, 06:35:01 pm
What is the question? Doesn't it usually ask you if something is a product v period cost? In which case Insurance would be period.
The question is 'How would you classify insurance of stock?'
I think it should be an Other Expense because it is not involved in getting the stock into a condition and location ready for sale (the stock is already on the shop floor)
Post by: Cornrow Kenny on June 22, 2017, 06:51:05 pm
The question is 'How would you classify insurance of stock?'Yes that is correct - it is an Other Expense, not Cost of Goods Sold.
I think it should be an Other Expense because it is not involved in getting the stock into a condition and location ready for sale (the stock is already on the shop floor)
However I think you were getting confused earlier - the opposite of a Period Cost is a Product Cost. And insurance would be Period in this case, however on the income statement it would be classified under Other Expenses. Depends what the question is specifically asking for.
Post by: johnhalo on June 22, 2017, 07:00:35 pm
Yes that is correct - it is an Other Expense, not Cost of Goods Sold.
However I think you were getting confused earlier - the opposite of a Period Cost is a Product Cost. And insurance would be Period in this case, however on the income statement it would be classified under Other Expenses. Depends what the question is specifically asking for.
But don't they describe two different things? Period/Product Costing have to do with getting stock ready for sale (they both have that in their definition) whereas Other Expenses are expenses involved in selling?
I'm slightly confused now :/
Post by: Cornrow Kenny on June 22, 2017, 07:07:31 pm
But don't they describe two different things? Period/Product Costing have to do with getting stock ready for sale (they both have that in their definition) whereas Other Expenses are expenses involved in selling?Yeah that's what I'm saying, they are separate.
I'm slightly confused now :/
Insurance can be classified as a period cost or other expense.
In this case they list a number of costs associated with stock, so they are assuming you to state whether insurance is product or period, not COGS or Other Expense. Hope that makes sense!
Post by: johnhalo on June 22, 2017, 07:12:05 pm
Yeah that's what I'm saying, they are separate.
Insurance can be classified as a period cost or other expense.
In this case they list a number of costs associated with stock, so they are assuming you to state whether insurance is product or period, not COGS or Other Expense. Hope that makes sense!
That clears it up - thanks
Post by: Guideme on July 06, 2017, 06:27:39 pm
Also referring to thew elements of reports explain why Prepaid sales must not be reported as revenues ?
Post by: Yueni on July 09, 2017, 01:12:03 pm
Why is no GST recognised when a deposit is provided to our business? In other words when we record prepaid sales in the CRJ why dont we record the GST?
Also referring to thew elements of reports explain why Prepaid sales must not be reported as revenues ?
1. A transaction has not occurred.
2. Elements you need to consider are assets and revenue. It meets the definition of an asset, but does not meet the definition of a revenue (does not increase OE).
Post by: jrogers on August 21, 2017, 08:31:38 pm
Post by: jrogers on August 22, 2017, 02:39:46 pm
Post by: plsbegentle on September 05, 2017, 09:25:14 pm
Thanks in advance
Post by: Oxmacro on October 15, 2017, 07:24:14 pm
For budgeting, do we have to include dates when reconstructing ledger accounts such as debtors control, because from past sac papers, none of them include dates?
Thanks in advance
Hey!
For reconstructing ledgers, the strict Accounting rules do not apply; i.e you will not lose any marks for dates/cross references. You always can add them in if you want, but that may be just wasting your time!
Post by: Guideme on November 05, 2017, 06:12:54 pm
However just to confirm in case i am wrong. If Disposals of EEquipment or any other non-current assets occur on the start of the month. Lets say May1. Do we record it as May 1 or May 31.
I am pretty sure it is 31 but the solutions say 1 HMMM :/
Thank you in advance
Post by: peter.g15 on November 05, 2017, 06:44:35 pm
IDK why i am still doing practise exams from Neap after all the errors that i have found with the solutions.
However just to confirm in case i am wrong. If Disposals of EEquipment or any other non-current assets occur on the start of the month. Lets say May1. Do we record it as May 1 or May 31.
I am pretty sure it is 31 but the solutions say 1 HMMM :/
Thank you in advance
I believe that the general journal entries are made on the date of the disposal, but the posting to the general ledgers are made at the end of the month as usual.
Post by: Snow_ on November 06, 2017, 09:02:30 pm
When using the Lower of Cost and Net Realisable Value rule, and Net realisable value has fallen below cost price, the new cost will be net realisable value less Direct selling expenses. Does Delivery to customers (paid by the business) and installation costs count as direct selling expenses? What are other typical examples of direct selling expenses?
Thanks!
Post by: kayalsingh on November 06, 2017, 11:12:05 pm
Post by: Oxmacro on November 07, 2017, 07:16:31 am
Can I use pencil for the accounting exam???Hey!
Yeah, of course. I'm pretty sure they'd want all your practical work in pencil, and it's easier to correct mistakes anyway. However, you do have to use pen for theory answers because pencil's usually harder to read and you don't want your examiner to have a hard time reading your paper.
Good luck on Friday!
Post by: Guideme on November 07, 2017, 11:39:47 pm
Post by: peter.g15 on November 09, 2017, 10:57:03 am
Just wondering,
When using the Lower of Cost and Net Realisable Value rule, and Net realisable value has fallen below cost price, the new cost will be net realisable value less Direct selling expenses. Does Delivery to customers (paid by the business) and installation costs count as direct selling expenses? What are other typical examples of direct selling expenses?
Thanks!
Delivery to customers is included, but I'm not sure about installation (it probably is, but show us the question first). Other typical selling expenses are those that involve giving the customer a free item when purchasing the stock. e.g. buy this chair for $50 and we'll give you a free cushion (worth $10)
Post by: kayalsingh on November 09, 2017, 07:22:20 pm
Post by: snowisawesome on November 28, 2017, 03:57:51 pm
Post by: tchaikno6 on November 29, 2017, 09:54:35 pm
Post by: snowisawesome on December 04, 2017, 10:35:26 am
Post by: exit on December 04, 2017, 10:10:50 pm
Does anyone know where i can get worked solutions for the unit 3/4 accounting workbook?
which textbook?
Post by: snowisawesome on December 04, 2017, 10:14:42 pm
Post by: snowisawesome on December 06, 2017, 05:15:25 pm
Post by: snowisawesome on December 08, 2017, 10:46:00 am
Does anyone know where i can get worked solutions for the unit 3/4 accounting workbook?Bump, does anyone know where I can get worked solutions for the cambridge accounting unit 3/4 workbook (exercises)?
Thanks
Post by: Ajakara on December 16, 2017, 03:50:57 pm
For donations of stock, how is advertising involved? I was doing a NEAP Question and it was something along the lines of 'Stock units are donated....but its not recorded...state the effects on the accounting equation.' And the answers had something like Advertising is understated, but I'm not sure where Advertising came from.
Post by: Jigsaw on December 16, 2017, 04:20:00 pm
Hey guys just a quick Q,
For donations of stock, how is advertising involved? I was doing a NEAP Question and it was something along the lines of 'Stock units are donated....but its not recorded...state the effects on the accounting equation.' And the answers had something like Advertising is understated, but I'm not sure where Advertising came from.
Wouldn't it be Stock understated by x, Capital understated by x? Don't see how advertising is involved either :/
Post by: tchaikno6 on December 16, 2017, 11:30:43 pm
Post by: Oxmacro on December 17, 2017, 08:48:09 am
Yeah it's pretty weird, however, we recognise the donation of stock to be of advertising purposes. This is usually because a business won't just donate it's stock for no specific motives, but in giving stock, the business' name, and its products are advertised, not only in a good light for giving away free items, but also for the quality of the goods provided. This in effect may result in future economic benefits flowing to the entity as a person who received the donation may come to the business at a latter date, and purchase its stock. Hence, it works in the same way as an advertising campaign, as it entices customers to purchase goods at the firm.
Hope this helps!
Post by: snowisawesome on December 17, 2017, 11:10:42 am
Post by: snowisawesome on December 24, 2017, 10:04:22 am
Post by: omcgil15 on December 24, 2017, 04:41:31 pm
What chapters from the Cambridge accounting textbook does sac 1 for unit 3 cover?Generally Chapters 1-6 or in some schools 1-8
Post by: snowisawesome on December 24, 2017, 04:54:12 pm
Generally Chapters 1-6 or in some schools 1-8thank you :)
Post by: snowisawesome on December 27, 2017, 10:06:33 am
Van (asset) will increase by $28,000
loan(liability) will increase by $28,000
are these correct?
Question 2
As at 30 september, assets + liabilities of sam's shop
assets
debtors = 3000
fixtures + fittings = 15000
stock = 25000
fridges = 40000
equities
bank overdraft = 2500
creditors = 7000
loan ( repayable $6000 p.a) = $36000
capital = $37500
In the first week of October 2015, the following occured
october 1. Paid $2000 to creditor
2. sam contributed $5000 of his own money to the business
3. paid $3000 off the loan principal
4. purchased stock on credit for $10000
5. sam took $2500 of the fixtures and fittings home for personal use
6. paid $1200 in advance for the next 6 months
Can someone please explain how to do a balance sheet with all this information? (question 2)
Thanks
Post by: Oxmacro on December 27, 2017, 05:41:57 pm
Borrowed $28,000 cash from the NAB, which was used to purchase another van. The Loan is to be repaid in monthly instalments of $1,000, commencing in May 2015.
Van (asset) will increase by $28,000
loan(liability) will increase by $28,000
are these correct?
Question 2
As at 30 september, assets + liabilities of sam's shop
assets
debtors = 3000
fixtures + fittings = 15000
stock = 25000
fridges = 40000
equities
bank overdraft = 2500
creditors = 7000
loan ( repayable $6000 p.a) = $36000
capital = $37500
In the first week of October 2015, the following occured
october 1. Paid $2000 to creditor
2. sam contributed $5000 of his own money to the business
3. paid $3000 off the loan principal
4. purchased stock on credit for $10000
5. sam took $2500 of the fixtures and fittings home for personal use
6. paid $1200 in advance for the next 6 months
Can someone please explain how to do a balance sheet with all this information? (question 2)
Thanks
Hey!
Usually for these type of questions, you can either draw up a T ledger, or do each individual transaction, recording the effect on either side of the balance sheet; as I will.
1) Paid a creditor: Bank; down $2000, Creditors Control; down $2000
2) Capital Contribution: Bank; increase $5000, Capital; increase $5000
3) Paid off loan principle: Bank; down $3000, Loan; down $3000
4) Paid stock on credit: Stock Control; increase $10000, GST Clearing (asset); increase $1000, Creditors Control; increase $11000. -I'm assuming you didn't include GST, and assuming the GST balance will become a current asset.
5) Withdrawal of fixtures and fittings: Fixtures and Fittings; down $2500, Drawings (Negative Owner's Equity); increase $2500 (overall decrease by $2500 in Capital).
6) Paid $1200 in advance (for the purposes of this, I will assume it's rent): Prepaid Rent Expense; increase $1200, GST Clearing (asset); increase $120, Bank; decrease $1320.
Overall Effect on the Balance Sheet
Current Assets: Current Liabilities:
Stock Control; $35000 Bank Overdraft; $3820
Debtors Control; $3000 Creditors Control; $16000
GST Clearing; $1120 Loan; $6000 $25820
Prepaid (Rent) Expense; $1200 $40320
Non-Current Liabilities
Non-Current Assets Loan; $27000 $27000
Fixtures and Fittings; $12500
Fridges; $40000 $52500 Owner's Equity
Capital; $42500
less Drawings; $2500 $40000
Total Assets: $92820 Total Equities: $92820
Hope this helped! Let me know if you have any questions.
Post by: snowisawesome on December 27, 2017, 05:57:33 pm
Hey!You're awesome ;D thankyou 8)
Usually for these type of questions, you can either draw up a T ledger, or do each individual transaction, recording the effect on either side of the balance sheet; as I will.
1) Paid a creditor: Bank; down $2000, Creditors Control; down $2000
2) Capital Contribution: Bank; increase $5000, Capital; increase $5000
3) Paid off loan principle: Bank; down $3000, Loan; down $3000
4) Paid stock on credit: Stock Control; increase $10000, GST Clearing (asset); increase $1000, Creditors Control; increase $11000. -I'm assuming you didn't include GST, and assuming the GST balance will become a current asset.
5) Withdrawal of fixtures and fittings: Fixtures and Fittings; down $2500, Drawings (Negative Owner's Equity); increase $2500 (overall decrease by $2500 in Capital).
6) Paid $1200 in advance (for the purposes of this, I will assume it's rent): Prepaid Rent Expense; increase $1200, GST Clearing (asset); increase $120, Bank; decrease $1320.
Overall Effect on the Balance Sheet
Current Assets: Current Liabilities:
Stock Control; $35000 Bank Overdraft; $3820
Debtors Control; $3000 Creditors Control; $16000
GST Clearing; $1120 Loan; $6000 $25820
Prepaid (Rent) Expense; $1200 $40320
Non-Current Liabilities
Non-Current Assets Loan; $27000 $27000
Fixtures and Fittings; $12500
Fridges; $40000 $52500 Owner's Equity
Capital; $42500
less Drawings; $2500 $40000
Total Assets: $92820 Total Equities: $92820
Hope this helped! Let me know if you have any questions.
Post by: samyaks123 on December 29, 2017, 03:54:41 pm
Post by: Secc119 on December 30, 2017, 10:06:30 pm
Post by: snowisawesome on January 04, 2018, 06:33:43 pm
Post by: Secc119 on January 04, 2018, 07:55:49 pm
Post by: zuleika on January 28, 2018, 05:37:16 pm
Post by: Big Dadda on January 29, 2018, 09:28:52 pm
Hey guys, what qualitative characteristic would relate closest to conservatism. I'm not sure if it would be relevance or reliability.
Relevance. It depends on the context of the question though.
Post by: Big Dadda on January 29, 2018, 09:32:12 pm
E) Roger Van is the proprietor of Van’s Steam Cleaning. The business has been struggling of late and Roger is not certain that he will continue in business next year. With this in mind he has prepared a balance sheet on the basis of what he expects to receive if he decides to sell the firm’s assets.
I would say the going concern, historical cost and reliability but I think that there is more to it and this is not quite the right answer. I would like to know what you guys think.
Thanks.
Post by: Secc119 on February 01, 2018, 12:00:24 am
Hope this helps!
Post by: snowisawesome on February 02, 2018, 07:13:05 pm
1.Is Wages expense the same as wages in the general ledger?
2. What is a negative owner's equity?
Thanks :)
Post by: tinkerbell101 on February 03, 2018, 04:27:34 pm
2 Questions
1.Is Wages expense the same as wages in the general ledger?
2. What is a negative owner's equity?
Thanks :)
1. Yes, that's right. They may or may not always write expense at the end of each expense (or revenue at the end of each revenue item) but will definitely write it for things like interest, commission and rent (these can be a revenue or an expense). If it was accrued wages, it would also be stated.
2. I'm not positive about this one, but I think negative owner's equity refers to things that are reported under Owner's equity but decrease it. For example, drawings would be a negaive owner's equity. Negative assets include accumulated depreciation.
Hope this helps! :)
Post by: snowisawesome on February 09, 2018, 03:34:03 pm
Post by: tinkerbell101 on February 15, 2018, 10:23:50 pm
Would a sac average of ~85% and about the same on the exam be enough to get a 40 raw study score in accounting?
It all really depends on the strength of your cohort and your ranking, rather than your SAC scores although, SAC scores are definitely important in terms of determining how good you are in comparison to your friends . Last year I got 2 unit 4 sac's in the 70's and still managed to get an a+ for GA2. I think if you get an 85 in the exam, it won't be enough to get a 40 but most likely a high 30. Perhaps aim for at least a 90 for a 40+. Do not stress now, by the time you come around to exams, you will be much better at the subject and will have done enough practice exams to get an over 90. All the best for accounting! Absolutely loved the subject and hope you will too!
Post by: skrt skrt on February 15, 2018, 11:07:23 pm
Thanks
Post by: Scanzy the pussy on February 22, 2018, 08:20:08 pm
If the top of the credit source document has the name of the company you are doing the bookkeeping, then that source document will be your credit sales.
Skrrt Skrrt, PS, a Cambridge Accounting textbook is a better textbook to invest in, in my opnion of course.
Post by: snowisawesome on February 22, 2018, 09:00:10 pm
It all really depends on the strength of your cohort and your ranking, rather than your SAC scores although, SAC scores are definitely important in terms of determining how good you are in comparison to your friends . Last year I got 2 unit 4 sac's in the 70's and still managed to get an a+ for GA2. I think if you get an 85 in the exam, it won't be enough to get a 40 but most likely a high 30. Perhaps aim for at least a 90 for a 40+. Do not stress now, by the time you come around to exams, you will be much better at the subject and will have done enough practice exams to get an over 90. All the best for accounting! Absolutely loved the subject and hope you will too!So do you reckon a sac average of 85% and 90% on the exam would get 40 raw?
Also, do you have any tips for improving in accounting, as i'm sort of struggling with debit and credit entries and recording in ledgers, and also theory
Thanks :)
Post by: zuleika on February 22, 2018, 09:57:18 pm
It all really depends on the strength of your cohort and your ranking, rather than your SAC scores although, SAC scores are definitely important in terms of determining how good you are in comparison to your friends . Last year I got 2 unit 4 sac's in the 70's and still managed to get an a+ for GA2. I think if you get an 85 in the exam, it won't be enough to get a 40 but most likely a high 30. Perhaps aim for at least a 90 for a 40+. Do not stress now, by the time you come around to exams, you will be much better at the subject and will have done enough practice exams to get an over 90. All the best for accounting! Absolutely loved the subject and hope you will too!
My teacher is a VCAA accesor and has been for 10+ years (forgot how many exactly). He told my class that in that time he hass never marked an exam that got 100%. The highest was a 98%. So doubt you could only get a 40 with a 90%+ exam. I think a high 80 would get a 40+, given you have a high SAC result.
Post by: snowisawesome on February 23, 2018, 01:43:46 pm
My teacher is a VCAA accesor and has been for 10+ years (forgot how many exactly). He told my class that in that time he hass never marked an exam that got 100%. The highest was a 98%. So doubt you could only get a 40 with a 90%+ exam. I think a high 80 would get a 40+, given you have a high SAC result.High sac results as in would 85% be enough for 40 raw?
Post by: dan0038 on February 23, 2018, 09:25:19 pm
High sac results as in would 85% be enough for 40 raw?
Well for me, i averaged 93% in first semester and then 97% in second semester on fairly reasonable sacs but then choked the exam and got around 80-85% and got 38 raw. My mate averaged the same but he got around high 80% for the exam and got 40 raw. he was rank 4 and i was rank 3. just goes to show the exam matters most and that choking the exam can really hit hard. probs focus on not dropping alot of marks like i did in the first semester and ur gud for a 40. my dm's are open if u need any help with accounting coz i did around 40 prac exams and choked the final exam 0.0
Post by: snowisawesome on February 24, 2018, 08:47:02 am
Thanks
Well for me, i averaged 93% in first semester and then 97% in second semester on fairly reasonable sacs but then choked the exam and got around 80-85% and got 38 raw. My mate averaged the same but he got around high 80% for the exam and got 40 raw. he was rank 4 and i was rank 3. just goes to show the exam matters most and that choking the exam can really hit hard. probs focus on not dropping alot of marks like i did in the first semester and ur gud for a 40. my dm's are open if u need any help with accounting coz i did around 40 prac exams and choked the final exam 0.0
Do you know why in the general ledger the stock control account (asset)
1.Has the stock control on the debit side
2. Calls it creditors control
3. Has cost of sales on the credit side even though it's an expense?
Thanks :)
Post by: dan0038 on February 24, 2018, 05:40:05 pm
Thanks
Do you know why in the general ledger the stock control account (asset)
1.Has the stock control on the debit side
2. Calls it creditors control
3. Has cost of sales on the credit side even though it's an expense?
Thanks :)
these questions are pretty bland and i seem to be missing context 0.0.
1. The stock control debit side i understand u are probably referring to the opening balance which is always on the debit side at the opening balance/final balance will have to always be positive (or else wat will the business sell...)
2. No clue wat ur trying to ask here....
3. The increase in the expense statement is true but when cross referencing in the stock control account, you are losing stock in the sale and so the stock control account is credited with cross reference to the cost of sales account (the cost of sales account will have a debit entry with a cross reference to stock control). Later u will see that cost of sales will also be on the debit side of a stock control account when u do sales returns in unit 4 :P
Post by: snowisawesome on February 26, 2018, 07:32:27 pm
Post by: dan0038 on February 26, 2018, 08:59:13 pm
Post by: snowisawesome on March 09, 2018, 07:55:52 pm
Thanks :)
Post by: Jigsaw on March 09, 2018, 09:31:29 pm
Understated - too little is being reported
No effect - self explanatory.
These are usually used in questions where you are asked to describe the effects of a transaction, particularly when it has been omitted.
Eg- "Explain the effects of not recording a credit purchase of stock for $440 including GST."
From this example, Assets will be understated 400 and liabilities will be also be understated 400 (understated 440 creditors control and overstated 40 GST clearing).
Hope this helps :)
Post by: snowisawesome on March 09, 2018, 10:09:54 pm
Overstated - too much is being reportedBut wouldn't the liabilities be overstated if you didn't record a credit purchase of stock?
Understated - too little is being reported
No effect - self explanatory.
These are usually used in questions where you are asked to describe the effects of a transaction, particularly when it has been omitted.
Eg- "Explain the effects of not recording a credit purchase of stock for $440 including GST."
From this example, Assets will be understated 400 and liabilities will be also be understated 400 (understated 440 creditors control and overstated 40 GST clearing).
Hope this helps :)
Post by: Jigsaw on March 10, 2018, 01:38:37 pm
But wouldn't the liabilities be overstated if you didn't record a credit purchase of stock?
No, they would be understated because you haven't accounted for:
- an increase in amount owing to creditors (440)
- a decrease in GST liability (40)
Which overall means that liabilities is understated 400.
Post by: snowisawesome on March 10, 2018, 02:10:56 pm
No, they would be understated because you haven't accounted for:Thanks
- an increase in amount owing to creditors (440)
- a decrease in GST liability (40)
Which overall means that liabilities is understated 400.
Just wondering is it possible to think of it as understated because liability means you owe something and when you purchase stock you owe something, so if you didn't record owing something, it's understated?
Post by: recess on March 10, 2018, 10:44:16 pm
Thanks
Post by: snowisawesome on March 11, 2018, 11:32:42 am
(Ian solvent) was declaring bankruptcy and would only be able to pay 20c of every dollar owed (memo 52). Thee letter was accompanied by a cheque from Ian Solvent for which Travis issued Rec. 31. on 1 March 2015, total debtors owed $19,500 with $2000 of that amount owed by Ian Solvent.
Can someone please explain why the effect on the accounting equation if a bad debt was not recorded is
Assets: Overstated (Debtors Control) 1600
Liabilities: No effect
Owner's equity: Overstated (No Bad Debts expense would overstate Net Profit) 1600
Thanks ;D
Also, would telephone charges be an expense?
Post by: skrt skrt on March 11, 2018, 07:43:18 pm
Thank you
Post by: omcgil15 on March 12, 2018, 10:13:28 pm
Hi I'm having trouble on getting the dates right for the general ledger balance accounts I know you put the last date of the month for posting, but then sometimes you put the 1st date of the month for "Balance" and sometimes you put the last date for "balance". Why is that?The first date of the month is used when it is an opening balance (i.e. a balance carried forward from the previous month, e.g. debtors control)
Thanks
The last date of the month is used the account is being balanced at the end of the month (the difference between the debit and credit sides of the account)
Travis milton owns terrific tellies. On 25 march 2015, he received a letter from a solicitor stating that one of the firm's debtorsThe best way to do these questions is to consider the effect if the transaction was recorded.
(Ian solvent) was declaring bankruptcy and would only be able to pay 20c of every dollar owed (memo 52). Thee letter was accompanied by a cheque from Ian Solvent for which Travis issued Rec. 31. on 1 March 2015, total debtors owed $19,500 with $2000 of that amount owed by Ian Solvent.
Can someone please explain why the effect on the accounting equation if a bad debt was not recorded is
Assets: Overstated (Debtors Control) 1600
Liabilities: No effect
Owner's equity: Overstated (No Bad Debts expense would overstate Net Profit) 1600
Thanks ;D
Also, would telephone charges be an expense?
For the bad debt component:
Assets: Decrease by $1600 in the form of debtors control (80 cents in every dollar is written off)
Liabilities: No effect
Owners Equity: Decrease by $1600 via a lower net profit.
Using the fact that overstated = increase and understated = decrease;
Reverse the asset and owners equity effects to get assets and OE overstated by $1600 each.
Telephone charges would be an expense yes :)
Post by: emmykatexo on March 26, 2018, 01:55:31 pm
Post by: m2121 on March 28, 2018, 09:31:55 pm
Post by: peter.g15 on March 28, 2018, 10:30:23 pm
Don't quite understand this question. Is someone able to explain this fully in response to this question?? Explain the effect on net profit of using the FIFO cost assignment method at a time when suppliers’ prices are falling.
Okay, so when supplier's price is falling, the old stock is more expensive than the new stock, correct?
So, with FIFO, you always use the oldest stock price according to your stock card, however, you must remember that FIFO does NOT guarantee that your oldest stock is the one being purchased, for all we know, it could be the stock that came in 5 minutes ago.
So therefore, the oldest (and therefore most expensive) stock is considered to be sold as part of FIFO. Therefore, this will have the greatest cost of sales. However, this could overstate cost of sales (and therefore understate net profit) if the stock that is being purchased is actually a lot newer (and therefore cheaper).
I hope that was clear :) If not, I think the best way to understand it is to draw up a stock card with falling stock prices and see what happens
Post by: brickm on April 02, 2018, 03:15:49 pm
- do balance day adjustments also ensure that revenues and expenses are not overstated? Is so, what are some examples?
In the Cambridge textbook:
Ex 10.5 Qa)
what is the difference between what a is asking and what question b is asking?
Where in the question does it refer to determining the total rent of 2014 and 2015 together, isn't it asking for total rent for year that ends at 30th June 2015?
Mod edit: merged double post
Post by: livio on April 14, 2018, 08:44:35 pm
Hi I'm having trouble on getting the dates right for the general ledger balance accounts I know you put the last date of the month for posting, but then sometimes you put the 1st date of the month for "Balance" and sometimes you put the last date for "balance". Why is that?
Thanks
If the ledger is an ongoing asset, liability or capital account, it would already have a 'Balance' with the first day of the reporting period. At the end of the reporting period, after all the recording of the transactions using the last date of the month, you would balance the ledgers and still use the date of the month.
Say the Bank ledger. it would have a balance on the debit side. at the start of the month. Then after all the recording, the credit side would hopefully be less than the debit side, thus the need of the balance on the same date, to make the ledger balance. then in order to have your ledgers ready for the next reporting period, you will need to transfer that balance to the debit side, with the date of the next day, which is the first day of the next month/ reporting period.
Post by: DoctorTwo on April 15, 2018, 01:51:08 pm
Post by: recess on April 15, 2018, 08:38:12 pm
We use agreed value (as opposed to historical cost) because it is more RELEVANT. This is because assuming that it's an asset purchased by the owner prior to opening the business, it won't be relevant if its historical cost is reported since it wasn't purchased by the business ENTITY, but instead, by the owner him/herself. Therefore, to answer your question, it is related to the entity accounting principle and the relevance qualitative characteristic.
Post by: DoctorTwo on April 16, 2018, 05:40:33 pm
Post by: georgina qiu on April 22, 2018, 10:03:40 pm
Post by: Cranium002 on May 02, 2018, 06:38:56 pm
It’s definitely worth talking with your teacher first before you spend money on a tutor. They should be able to better your understanding of accounting. If not, a tutor might be worth looking into to improve the SAC marks. The tutor would probably go through the theory component of accounting because in turn that will improve the practical component.
Good luck with it
Hope that helps 😊
That's just the job of the teacher. Talk to your teacher, stay back after school, do whatever you need to do with them. At the end of vce, your teacher should be like thank god, cranum is gone. Watch edrolo, andy is pretty good there.
Post by: m2121 on May 11, 2018, 12:23:02 am
Post by: S200 on May 31, 2018, 04:31:14 am
Would it be to just know what the financial health of the business is at? I don't actually think this is a legal thing, but yeah
Post by: gamma032 on June 05, 2018, 01:01:13 pm
Random question. What is the legal obligation that is fulfilled by completing an Income statement and a profit and loss statement?Public companies need to submit financial reports for shareholders
Would it be to just know what the financial health of the business is at? I don't actually think this is a legal thing, but yeah
For all reports:
- Helps in paying GST/tax.You need to lodge a business activity statement, and all the info for that can be found on the reports. So you kinda need to do them.
- Reports are imperative for financial auditing. Without them it can be hard to track employee fraud/theft ect.
Post by: Springyboy on July 04, 2018, 01:55:34 pm
How to work out question 10.8 a and b??
So for this, as payment is only made on 30 April and balance day is 30 June, then there would be some accrued interest between 1 May and 30 June i.e. 2 months accrued interest.
Therefore,
1. Calculate interest expense per annum = 24000*0.08 = 1920
2. See how many months have passed between the 1 November 2014 and 30 June 2015 = 8 months
3. Then times annual interest expense by 8/12 to get the amount incurred = 1920*8/12 = $1280
for part a
For part b you just need the general journal entry. Remember that accrued interest expense is a liability which increases on the credit side of the ledger. Also, since part of the annual interest expense has been paid off in cash then only the remaining 2 months left over is accrued.
So to calculate the accrued figure, work out how much is half a years payment and subtract that from the interest incurred for the entire year
This equals 1280 - 1920*0.5 = $320
Therefore, the journal entry is:
DR Interest Expense 1280
CR Accrued Interest Expense 320
CR Bank 960
Or you can do the bank entry separately and then instead just write out
DR Interest Expense 320
CR Accrued Interest Expense 320
Hope that makes sense,
James
Post by: skrt skrt on August 15, 2018, 10:51:03 am
Thanks
Post by: DoctorTwo on October 31, 2018, 03:48:28 pm
Post by: Maddyv11 on November 01, 2018, 02:18:02 pm
Hi, I was just wondering when we were supposed to split credit sales and cash sales in the income statement with net sales below them. I've seen them split with net sales below in budgeted income statements, but does that only apply if there are both credit and cash sales? What if there are only credit or only cash sales? Also what about if the question is asking you to report 'sales' (not split) and there are sales returns? Do you just write sales, then less sales returns below it with the total beside it? Or do you do sales, less sales returns, and under it net sales? This question probably looks a bit confusing but I hope I explained it well enough. Any help or opinions are appreciated! Thanks :)
Hi!
For the splitting of credit and cash sales, I would split the two in the income statement, and have the total of sales on the right column on the income statement.
Then I would deduct sales returns and have net sales in the right column next to the value for the sales returns.
if there is only cash or only credit sales, just put sales in there.
I hope this helps and makes sense :)
Post by: DoctorTwo on November 02, 2018, 11:27:46 pm
I was wondering about question 4 from the 2016 exam. In the question, the Cost of Sales figure is $105,500, yet in the answer it's $105,580. Where did the extra $580 come from? The only place I could think of was prepaid sales revenue but I don't see how you could have gotten $580 out of that.
Any help is appreciated. Thanks :)
Post by: zenith101 on November 04, 2018, 02:06:12 pm
Post by: DoctorTwo on November 04, 2018, 02:23:08 pm
Post by: Beatifique on November 05, 2018, 03:08:49 pm
Thanks for your answer Maddy. :)
I was wondering about question 4 from the 2016 exam. In the question, the Cost of Sales figure is $105,500, yet in the answer it's $105,580. Where did the extra $580 come from? The only place I could think of was prepaid sales revenue but I don't see how you could have gotten $580 out of that.
It's 105 000 - 670 (Sales Return) + 1250 (Prepaid Sales) = 105 580
Post by: DoctorTwo on November 05, 2018, 05:41:57 pm
It's 105 000 - 670 (Sales Return) + 1250 (Prepaid Sales) = 105 580
I just asked my teacher about this today, thanks for your answer though. :)
The question still confuses me though to be honest. Wouldn’t half of the the sales return already have been taken away from cost of sales? The debit to sales returns and credit to cost of sales are recorded at the same time in the general journal, so how would the sales return exist without the cost of sales? It doesn’t make sense to me, wouldn’t you just assume that it’s already been taken away from cost of sales?
Thanks.
Post by: zenith101 on November 05, 2018, 09:19:40 pm
I just asked my teacher about this today, thanks for your answer though. :)
The question still confuses me though to be honest. Wouldn’t half of the the sales return already have been taken away from cost of sales? The debit to sales returns and credit to cost of sales are recorded at the same time in the general journal, so how would the sales return exist without the cost of sales? It doesn’t make sense to me, wouldn’t you just assume that it’s already been taken away from cost of sales?
Thanks.
Ahaha I actually remember having the exact same argument with my teacher. I reckon it was a bit unfair seeing as the Sales Returns had already been adjusted for. My teacher justified that cost of sales was exactly half of sales despite a sales return and that was the danger sign to look out for adjusting cost of sales, but I reckon it was harshly done by VCAA.
Post by: DoctorTwo on November 05, 2018, 10:54:26 pm
Ahaha I actually remember having the exact same argument with my teacher. I reckon it was a bit unfair seeing as the Sales Returns had already been adjusted for. My teacher justified that cost of sales was exactly half of sales despite a sales return and that was the danger sign to look out for adjusting cost of sales, but I reckon it was harshly done by VCAA.Thanks for this, it makes more sense now! :)
Post by: English101 on November 06, 2018, 10:20:59 am
Thanks for this, it makes more sense now! :)
Cost of sales from pre-adjustment trial balance you need to work out the revenue and then take the cost of sales figure as it has not yet been adjusted for. Whereas, in the income statement you simply take the cost of sales figure in the report.
2014 Exam! That was a killer.
Post by: zenith101 on November 06, 2018, 12:27:19 pm
-straight line vs reducing balance method of dep? which method to use.
-Depreciation breaching QC and AP but satisfying others.
-Product vs Period costs and effects on Income Statement.
-Agreed value vs historical cost.
-Discuss use of control accounts and subsidiary ledgers
Anyone know of any others we should prepare for?
Cheers
Post by: DoctorTwo on November 06, 2018, 03:25:29 pm
Does anyone have a list of all the topics that commonly appear on the 6 marker in the accounting exams? Off the top of my head i can think of:
-straight line vs reducing balance method of dep? which method to use.
-Depreciation breaching QC and AP but satisfying others.
-Product vs Period costs and effects on Income Statement.
-Agreed value vs historical cost.
-Discuss use of control accounts and subsidiary ledgers
Anyone know of any others we should prepare for?
Cheers
Beside the ones you mentioned, the other 6 mark questions were:
In the 2014, 2016, and 2018 NHT exams, there were 6 mark questions about discussing profitability.
In the 2017 and 2018 Northern Hemisphere exams, there were 6 mark discuss liquidity questions.
The 2015 exam and 2017 NHT exam had 6 markers about discussing strategies to improve stock/creditors/debtors turnover.
In 2013 and 2017, there were 6 mark questions about discussing budgeted cash flow/why positive operating cash is important.
Also, just out of curiosity, were there any agreed value vs. historical cost questions on any exams? I couldn't find any ???
Post by: Uncle Cassowary on November 06, 2018, 05:46:43 pm
Post by: recess on November 08, 2018, 04:26:47 pm
Post by: Jim_Bob on November 08, 2018, 04:39:02 pm
Is the answer for vcaa 2018 nth q2b wrong, because it was a stock gain and you’re supposed to value it at the lowest cost? Also for sales returns, do you use reverse FIFO?
No, its right. You must have done it wrong
Post by: tomatosauce on November 08, 2018, 04:46:18 pm
Post by: DoctorTwo on November 08, 2018, 06:44:54 pm
Is the answer for vcaa 2018 nth q2b wrong, because it was a stock gain and you’re supposed to value it at the lowest cost? Also for sales returns, do you use reverse FIFO?
Stock gains are valued at the lowest cost price on hand when the adjustment is made, and since there was only one cost price on hand, the answer can't be wrong. But yes, if there were multiple cost prices on hand, stock gains would be valued at the lowest. And yes, for sales returns you do reverse FIFO. (ie. last cost price in the out column.)
Post by: m2121 on November 09, 2018, 12:37:53 pm
Post by: Maddyv11 on November 09, 2018, 01:18:16 pm
Post by: ooft123 on March 03, 2019, 09:45:07 am
Post by: dunno2012 on June 26, 2019, 08:38:00 am
Thanks,
Anonymous
Post by: dunno2012 on June 26, 2019, 02:20:05 pm
I’m bringing in both; pen for theory and then pencil for prac and also highlighter for budgeting!
Hello!
I realised that you received 41 for Accounting, may I ask what SAC averages you got for unit 3 and unit 4 and the exam. Sorry if this is a bit weird, I just need some examples of SAC scores that lead to 40+.
Thanks so much,
Anonymous
Post by: mathsfailure on July 09, 2019, 08:56:32 pm
Post by: Seamus Wong on July 10, 2019, 02:18:25 pm
just wondering if it is worthwhile to create notes for a subject like accounting or would it just be more useful to do the exercises and practice?
Both
Post by: Cici201811 on November 02, 2019, 11:58:54 pm
Post by: Seamus Wong on November 03, 2019, 12:32:55 am
Can anyone help me with vcaa 2018 exam question number 5 d please? Should the final debit for the van be $45000 not $55000 because it should minus the trade in of $10000?
Yeah u is right. it should be 45k. It's different in the 2018 exam answers cos they had Sundry creditors.
Post by: Cici201811 on November 03, 2019, 10:54:37 am
Yeah u is right. it should be 45k. It's different in the 2018 exam answers cos they had Sundry creditors.Thank you so much
Post by: RB04 on November 07, 2019, 09:08:14 pm
Post by: miyashiro on November 07, 2019, 10:40:26 pm
Post by: pahm on November 28, 2019, 08:21:38 pm
Post by: pahm on December 11, 2019, 10:18:09 am
Does anyone have experience with completing accounting 1&2 or 3&4 through virtual school victoria? Was the program well run? What is the general structure of doing a subject through distance? Sorry for all the questions!!
Bump! :)
Post by: WackyWill on January 04, 2020, 08:20:04 pm
Just wondering if anyone has a macmillan account login that I could use.
Just need to download the templates for the exercises as code in the second hand textbook I bought was used already.
Cheers.
Post by: morlin01 on January 20, 2020, 07:52:30 am
Can someone distinguish between Accrued Wages and Wages Owing, providing which report that they will be required to be reported in!
Thankyou
Post by: Seamus Wong on January 20, 2020, 07:07:31 pm
Hi,
Can someone distinguish between Accrued Wages and Wages Owing, providing which report that they will be required to be reported in!
Thankyou
Pretty sure they are the same. Both represent an obligation of a firm to transfer an economic resource (cash) to an outside entity (employees) at some future date. It is therefore classified as a current Liability on the Balance sheet.
Post by: morlin01 on January 20, 2020, 08:11:47 pm
A business uses FIFO to manage its inventory of clocks, and their current balance is:
2 Clocks with a cost price of 45 each-------was purchased first by the business
12 Clocks with a cost price of 50 each
On the 7th of Jan, a customer purchases 4 clocks, and in order to fulfil the rules of FIFO, the customer receives the 2 Clocks worth the $45 each and 2 clocks worth $50 each
Two days later, the customer makes a sales return of one of the clocks (but the info doesn't specify which clock was returned)
SO my question is, is there a specific rule that determines which clock is recorded as the sales return in the inventory card?
Thankyou!
Post by: idrk on January 21, 2020, 06:15:54 pm
Hi !
A business uses FIFO to manage its inventory of clocks, and their current balance is:
2 Clocks with a cost price of 45 each-------was purchased first by the business
12 Clocks with a cost price of 50 each
On the 7th of Jan, a customer purchases 4 clocks, and in order to fulfil the rules of FIFO, the customer receives the 2 Clocks worth the $45 each and 2 clocks worth $50 each
Two days later, the customer makes a sales return of one of the clocks (but the info doesn't specify which clock was returned)
SO my question is, is there a specific rule that determines which clock is recorded as the sales return in the inventory card?
Thankyou!
The Rule is Last out, first in or LOFI, where the last inventory to go out according to FIFO is the first inventory to be returned
Post by: morlin01 on February 09, 2020, 04:34:09 pm
Could anyone please explain to me the difference between how both the period and accrual basis assumption are concerned with recognising revenue and expenses for a particular period of time? Hope this isn't a dumb question :(
THANKYOU
Post by: pahm on February 15, 2020, 09:47:38 pm
I know it's not a prereq but would someone who had done accounting 3/4 (or even 1/2) be in a much better position than someone who hadn't?
Post by: pahm on February 18, 2020, 02:27:57 pm
Hi, I'm curious to know what level of accounting knowledge would people expect in first year BCom at Monash or Melbourne Uni? I'm asking because I have just recently dropped VCE accounting 3/4 but I know it's a compulsory subject for commerce at uni.Bump!
I know it's not a prereq but would someone who had done accounting 3/4 (or even 1/2) be in a much better position than someone who hadn't?
Post by: pahm on February 22, 2020, 08:23:51 pm
Hi, I'm curious to know what level of accounting knowledge would people expect in first year BCom at Monash or Melbourne Uni? I'm asking because I have just recently dropped VCE accounting 3/4 but I know it's a compulsory subject for commerce at uni.Bump!
I know it's not a prereq but would someone who had done accounting 3/4 (or even 1/2) be in a much better position than someone who hadn't?
Also, are there overlaps in content between vce and uni accounting, or anything that doesn't apply? Thank you!
Post by: harley1 on February 28, 2020, 05:33:37 pm
Post by: rubybynature on March 04, 2020, 07:35:53 pm
Does anyone have experience with completing accounting 1&2 or 3&4 through virtual school victoria? Was the program well run? What is the general structure of doing a subject through distance? Sorry for all the questions!!
I did units 1 and 2 through vsv and it's well run and well structured! The only thing is that you have to be motivated, and you have to stay motivated throughout the entire year. If you fall behind by one or two weeks, that can really set you back if you're not quick to catch up! Otherwise, if you're motivated and determined, it can be really good!
Post by: pahm on March 08, 2020, 06:24:29 pm
I did units 1 and 2 through vsv and it's well run and well structured! The only thing is that you have to be motivated, and you have to stay motivated throughout the entire year. If you fall behind by one or two weeks, that can really set you back if you're not quick to catch up! Otherwise, if you're motivated and determined, it can be really good!
ahhh rip I already dropped it :'(
Nothing against vsv tho or how they run the subject but I just didn't enjoy the content overall, and I thought the workload was a bit too much.
Post by: zazzlemay on March 25, 2020, 10:24:03 am
I've been given this question where I have to create a statement of R & P (that's all that's required). I've already recorded the payment for the supplies the owner bought during the period (worth $4000).
However the question also states as additional information that the owner has used up some supplies (worth $2000) during the period and believes that it should be recorded as an expense. I understand that this would be true in an income statement (please correct me if I'm wrong) but would that make any changes to my supplies listed as $4000 in the statement of R & P?
Thank you in advance for the help!
Post by: Manny.R on April 25, 2020, 03:22:25 pm
Hi, I'm curious to know what level of accounting knowledge would people expect in first year BCom at Monash or Melbourne Uni? I'm asking because I have just recently dropped VCE accounting 3/4 but I know it's a compulsory subject for commerce at uni.
I know it's not a prereq but would someone who had done accounting 3/4 (or even 1/2) be in a much better position than someone who hadn't?
Good question, I completed Accounting 3+4 in High School and then went on to complete a BCom at Monash. The first accounting unit you study is essentially the same as high school accounting. The university assumes you know nothing about accounting, and teaches it to you in that way. That being said, it is university, so the expectations on you speed of learning is greatly accelerated. You will be expected to learn 2 years worth of high school content in 1 semester, roughly 16 weeks or so. So to answer your question, someone who has completely VCE accounting, even just 1/2, and actually understands the concepts and fundamentals will find the first accounting subject in university a breeze. All subsequent accounting units in university are beyond the scope of VCE accounting, but build on its fundamentals.
Post by: Manny.R on April 25, 2020, 03:36:55 pm
Hello, I have a query regarding Unit 1/2 statement of receipts and payments.
I've been given this question where I have to create a statement of R & P (that's all that's required). I've already recorded the payment for the supplies the owner bought during the period (worth $4000).
However the question also states as additional information that the owner has used up some supplies (worth $2000) during the period and believes that it should be recorded as an expense. I understand that this would be true in an income statement (please correct me if I'm wrong) but would that make any changes to my supplies listed as $4000 in the statement of R & P?
Thank you in advance for the help!
Good Question.
The short answer is it would not make any changes to the supplies listed at $4000.
The longer answer is, Statement of receipts and payments simply shows the CASH that is flowing to the business (Received) and the CASH that is flowing away from the business (Paid). You are correct to say that the cash paid to a supplier is payment recorded in the Statement of R&P.
The using up of those supplies does not result in CASH flowing to or from the business, rather it results in SUPPLIES moving from the business because they are being used up. And you are again correct in saying it should be recorded as an expense in the income statement.
Whenever you have a Statement of Receipts and Payments question, just ask yourself this simple question. Did the transaction cause CASH to be received by the business OR to be paid by the business? If the answer is Yes, then it goes in the Statement of R&P, if the answer is No, then it doesn't.
Ultimately it just shows the bank balance of the business, ie. how much is in the bank account.
Post by: pahm on April 27, 2020, 04:57:58 pm
Good question, I completed Accounting 3+4 in High School and then went on to complete a BCom at Monash. The first accounting unit you study is essentially the same as high school accounting. The university assumes you know nothing about accounting, and teaches it to you in that way. That being said, it is university, so the expectations on you speed of learning is greatly accelerated. You will be expected to learn 2 years worth of high school content in 1 semester, roughly 16 weeks or so. So to answer your question, someone who has completely VCE accounting, even just 1/2, and actually understands the concepts and fundamentals will find the first accounting subject in university a breeze. All subsequent accounting units in university are beyond the scope of VCE accounting, but build on its fundamentals.
ah ok, thank you so much for your reply! So people who have done accounting will have an advantage, but the course is designed for those with zero background knowledge?
Sorry for all my questions but do you know roughly what proportion of people in BCom at uni have done vce accounting? Is it a significant number? thank you! :)
Post by: hq317 on April 28, 2020, 12:16:54 pm
If there is a decrease in cost of goods sold, there would obviously be an increase in the GPM, but would this affect the NPM in any way (as I've read that only expenses can affect the NPM).
Any help would be appreciated thanks.
Post by: Manny.R on April 29, 2020, 01:58:20 pm
ah ok, thank you so much for your reply! So people who have done accounting will have an advantage, but the course is designed for those with zero background knowledge?
Sorry for all my questions but do you know roughly what proportion of people in BCom at uni have done vce accounting? Is it a significant number? thank you! :)
Yes, that would be correct. They teach that unit as though you have no knowledge of accounting.
With respect to your second question, I do not know the answer to that. There are so many people that study BCom at Monash it is impossible to tell.
Post by: Manny.R on April 29, 2020, 02:16:33 pm
Hi,
If there is a decrease in cost of goods sold, there would obviously be an increase in the GPM, but would this affect the NPM in any way (as I've read that only expenses can affect the NPM).
Any help would be appreciated thanks.
It would indeed affect NPM. What's interesting is that you are partly correct in saying 'only expenses can affect the NPM', although obviously revenues affect it too. But your statement "only expenses can affect the NPM" is correct as it includes COGS, because COGS is an expenses. And therefore a variation in COGS will affect NP and NPM.
If you are talking about Net Profit Margin, then start with the formula for calculating it:
NPM = Net Profit/Revenue
This formula can be further broken down into:
NPM = (Revenue - COGS - Expenses)/Revenue
The first thing you should notice is the COGS is a part of the formula, and therefore any increase or decrease in COGS will affect NPM.
What you need to remember is that anything that increases or decreases Gross Profit will increase or decrease Net Profit. Because GP is contained within the calculation of Net profit. There are multiple ways to look at NP below and all are correct.
NP = Revenue - Expenses (which include COGS)
NP = Revenue - COGS - Expenses
NP = GP (which is Rev - COGS) - expenses
Post by: pahm on May 03, 2020, 04:38:20 pm
Yes, that would be correct. They teach that unit as though you have no knowledge of accounting.
With respect to your second question, I do not know the answer to that. There are so many people that study BCom at Monash it is impossible to tell.
thank you so much for your help! :)
Post by: Manny.R on May 04, 2020, 12:56:18 am
thank you so much for your help! :)
You're welcome.
Post by: yikesagain on May 13, 2020, 09:52:13 am
I was looking at a question from the 2019 exam for cashflow.
I don't understand how they get to the accounts payable figure of (222 015).
My thinking is the cost of sales at 210,000 + inventory on hand of 25,000. Less the 5% discount?
Thanks,
Post by: morlin01 on October 01, 2020, 11:42:46 am
Post by: C.J.Tielen on November 16, 2020, 09:09:14 pm
HOW IS A DEPOSIT MADE BY A CUSTOMER REPORTED IN CASH FLOW STATEMENT -- LIKE WHAT HEADING DO I USE -- DO I USE UNEARNED SALES REVENUE OR DEPOSIT?
Hey man,
Under Operating activities, as Unearned Sales revenue. Trust.
You'll be fine, chill brother
Post by: valjaybj on November 17, 2020, 12:18:50 pm
Post by: PizzaMaster on December 17, 2021, 06:37:05 pm
In a balance sheet, there is a section called "Bank: ". I was wondering if you have to add the loan in it too?
For example in one of the questions it says:
Someone has Cash $70000, office assets $11000, vehicle $35000. They also borrowed $30000 cash from
ANZ Bank and $5000 cash from AMP Finance.
Is the cash value $70 000
OR
is it $70 000 +$30 000 + $5000
= $105 000
?
Post by: PizzaMaster on January 09, 2022, 02:34:08 pm
I was just wondering whether wages was part of owner's equity or not?
Post by: Commercekid2050 on January 11, 2022, 09:14:49 pm
Hi
I was just wondering whether wages was part of owner's equity or not?
Hi Pizzamaster,
You can consider wage as a part of owner equity as wage are an expense which impact business Net Profit. Net Profit would improve owner equity or lower (Net Loss). Thus wage can be consider a part of owner equity.
Hope it helps
Post by: Commercekid2050 on January 11, 2022, 09:22:08 pm
Hi!
In a balance sheet, there is a section called "Bank: ". I was wondering if you have to add the loan in it too?
For example in one of the questions it says:
Someone has Cash $70000, office assets $11000, vehicle $35000. They also borrowed $30000 cash from
ANZ Bank and $5000 cash from AMP Finance.
Is the cash value $70 000
OR
is it $70 000 +$30 000 + $5000
= $105 000
?
Hi Pizzamaster (Again)
While preparing balance sheet you would have to add money you get loan in bank. This is as you need to equal Asset=Liability+Owner Equity. Both the loan would be part of liability section in balance sheet. so to equal the equation you would need to increase bank value.
Hope this helps
Post by: PizzaMaster on January 27, 2022, 12:18:37 am
In other questions it doesn't specify how much loan is taken but we just have to assume that the loan is included in the 'bank' section?
Post by: destinyschild on February 05, 2022, 05:33:59 pm
I am also not sure how to begin answering this. A sample response/ key points would be greatly appreciated. Thanks!
Post by: Commercekid2050 on February 06, 2022, 07:33:19 pm
Oh I understand nowHi, For starters sorry to respond to you late. I think it generally link to what the question asks. In many question related to balance sheet you might have to change bank section. Cash in hand is really rare and do not think it is really common in year 12.
In other questions it doesn't specify how much loan is taken but we just have to assume that the loan is included in the 'bank' section?
So you should generally think it is by cash.
Post by: Commercekid2050 on February 06, 2022, 08:00:28 pm
Could someone give me a hand with this question? How would the mark allocation work? (It's not a VCAA question tho)
I am also not sure how to begin answering this. A sample response/ key points would be greatly appreciated. Thanks!
Hi destinychild,
For starter this is a really good question.
Points-
- I would recommend you to start every theory question in Accounting with definition. In this case define Loan. While defining you should try to talk about why loan is a liability. So talk about how it is an obligation which is to be paid. This should give you a mark or two.
- You should also talk about how in this case loan is an liability but talk about how it is current and non current. This is as loan would not be able to be paid in 12 months so some of it would have to be paid in more than 12 months (non current liability). This again would be worth a mark.
I hope this helps you
Post by: PizzaMaster on March 12, 2022, 02:47:14 pm
Plz help:
what payments and receipts include GST?
Post by: Commercekid2050 on March 13, 2022, 12:03:09 pm
Hi guys
Plz help:
what payments and receipts include GST?
Every recent and payment would have got excepted payment of account payable or money received through receivables as they already have got included
Post by: PizzaMaster on June 18, 2022, 03:54:00 pm
what impact does:
"business takes on owner's personal loan"
have on the accounting equation and why?
thank you for all help
Post by: Commercekid2050 on June 19, 2022, 09:08:26 pm
Hi guys,
what impact does:
"business takes on owner's personal loan"
have on the accounting equation and why?
thank you for all help
Hi PizzaMaster,
There would be increase in liability (bank loan) and there would be increase in drawing.
There would be Increase in liability as business would owe money and need to pay bank.
There is drawing.
In equation sense-
Debit - Drawing
Credit Loan
A (No effect) = Liability (Bank loan credit) + Owner Equity (Drawing)