VCE Accounting Question Thread!

[RuiAce]

Hey Guys
Just wondering why sales return is reported separately in the income statement?

On a realistic income statement, any income of any form (revenue or gains) is reported first. The expenses follow from all income.

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.

[ffs1234]

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?

[The Usual Student]

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.

[KidClutch]

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?

[The Usual Student]

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.

[One Step at a Time]

Is the source document for transactions recorded in the General Journal always a memo?

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? 

[readothien]

I've seen one recorded as 'GJ note' followed by the number so I think it's possible? Sorry, I'm not really sure :/

[One Step at a Time]

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 

[john_honrade]

Does anyone know the password of CPAP Accounting 2013?

Thanks in advance 

[One Step at a Time]

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? 

Cheers for helping a very confused student   

[Hannibal]

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? 

Cheers for helping a very confused student   

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.

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.

[One Step at a Time]

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 

[The Usual Student]

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 

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.

[val265]

Hey Guys,
Is Bad debt recorded in the income statement?

[Cornrow Kenny]

Hey Guys,
Is Bad debt recorded in the income statement?

Yes, under "Other Expenses".