VCE Accounting Question Thread!

[Equilibriaas]

The owner says depreciation expense will provide cash kept in business for the replacement of asset. How may he be correct?

[Equilibriaas]

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. 

[TheWackyCheese]

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.

[Valyria]

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*

[Equilibriaas]

It is correct,maybe answer using the definition of a current liability.
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.

[Equilibriaas]

 

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.

You've got the basis, just need a little more breadth

Im sorry but prepaid sales is not a revenue

[p.taaa]

it is correct to record prepaid sales because you receive money from a customer, creating an obligation to provide it in the future. Since that deposit is for stock, it will eventually become a sale, so it is a prepaid sale because it is paid for (partly) in advance. So the key here is 'what the deposit is for' and in this case, it is a sale, since the stock has not been provided yet, it is a prepaid sale
Hopefully that helps

[Rachelle]

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!!

[chasej]

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).

[Jason12]

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

[Rachelle]

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?

[chasej]

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.

[chasej]

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.

[TheWackyCheese]

Why don't we have a Purchase Returns account? I have a rough idea but I'm struggling to put it into words as if it were an exam question response.

[redcracker]

a purchase return simply adjusts ledger accounts it doesn't add anything (im having trouble articulating the idea aswell)

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?