VCE Accounting Question Thread!

[sam.utute]

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?'
and the if possible incorporate what the question is asking??

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.".
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.

[hello_kitty]

Thanks!

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!

[hello_kitty]

Also, How do I avoid from 'rote-learning'

[iNerd]

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.

[sam.utute]

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.

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.
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.

[sam.utute]

Thanks!
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!

This is the kind of response I think they are after:

Cash Sale:
Bank                        xxxx
        Sales                      xxxx
        GST Clearing            xxxx
Cost of Sales            xxxx
         Stock Control          xxxx

Let me know if that made any sense.

[nacho]

Thanks!

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!

Hey, okay for question one.
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.

[hello_kitty]

Could anyone help me with this:

- Explain why the entries required to balance a ledger account are shown with different dates.


Thanks! Hello_kitty

[hello_kitty]

What is the difference between Cash and Profit???

[mba]

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

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.

[Ematuro]

Hey guys. Does anyone know what to do when they are given a mortgage and asked to put it in a balance sheet? Is there an assumed amount for current/non-current mortgage if no extra details are given?

[_avO]

Those extra details such as the principal loan, date loan was taken out, or monthly repayments which give a clear indication of the current and noncurrent liabilities need to be given otherwise there is no way you can assume an amount

[Ematuro]

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?

[Hodgeyhodgey]

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

[sam.utute]

I try to think of GST in a very simplified manner. If ever you receive or charge GST (on cash and credit sales), you are acting as a collector on behalf of the ATO, and thereby increasing your liability to the tax office. That's the simple part.
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.