VCE Accounting Question Thread!

[jaketownley]

i hope this thread is still alive..
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?

[BoredSatan]

i hope this thread is still alive..
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?

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.

[jaketownley]

wow, thats a very good answer! thank you very much

[Michelle94]

Hope somebody can answer this!

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.

[Somye]

Haven't seen the question, but it may be the accrual from a previous reporting period?

[cullen6]

Just a quick question, would be good for a quick response

"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.

[Kuchiki]

Qualitative characteristic: Relevance
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!)

[cullen6]

thanks buddy!

[sin0001]

Can someone help me with 1.6-a,b,c (below)
Thanks

[abcdqd]

a- reporting period. under accrual accounting, revenue is recorded when earned (not necessarily when received) to be matched with expenses incurred to calculate an accurate profit figure for the reporting period. since the owner has not delivered the magazines, he/she has not earned the revenue and thus it cannot be recorded for 2014, but only for 2015 when the magazines have been delivered.
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

[sin0001]

Okay, that makes sense, thanks

[sin0001]

When balancing a ledger account, why do you have to write the balance in both sides, debt & credit, instead of just carrying forward the balance into the next reporting period?

[abcdqdxD]

Do you mean why you have to total both sides so that the amount is equal?

[sin0001]

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?

[abcdqdxD]

In Year 12 Accounting we use a system of accounting called "Double Entry Accounting".

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.