VCE Accounting Question Thread!

[RossiJ]

Has anyone done CSE 2010 Q1.1.1?
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?

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.


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

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 possible

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?

[Hodgeyhodgey]

Has anyone done CSE 2010 Q1.1.1?
Why is Capital included in the General Journal?
Since it was paid by cheque, why is it in the GJ?

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.


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

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 possible

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?

Haha I hope not.

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.

[Furbob]

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

[Hodgeyhodgey]

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.

[Furbob]

hmm... for 2.2.2 all im given is

              2010          2011        2012
ROI           6%          7.5%        8%
ROA          4%           4.2%      4.8%
ATO           1.9           1.6         1.4

[Hodgeyhodgey]

hmm... for 2.2.2 all im given is

              2010          2011        2012
ROI           6%          7.5%        8%
ROA          4%           4.2%      4.8%
ATO           1.9           1.6         1.4

Yeah 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

[Random_Guy]

I have a few questions.

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.

[LuiAlefia28]

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. (:

[LuiAlefia28]

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 (:

[chelseaFC]

When recording a deposit for a prepaid sales revenue, do you not take a percentage of the total amount (inclusive of GST)? I am confused by VCAA 2008 question 2.3.2 where the deposit was only taken out of the sales figure? Also they have assumed it can cover "20%" of the stock ordered as a cost of sales adjusting entry in the general journal. How can you allocate it like this?

[Dranoel523]

Can I get some tips for recording prepaid revenues? I'm really struggling to grasp the concepts here.

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?

[LuiAlefia28]

Ok so today I was doing major hardcore boot camp revision and I came across a list of queries to fire at you accountant samrties as I clearly find it too hard to work it out. I think most if not all are theory based questions. So whoever can help will be greatly appreciated.

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 (;

[nacho]

Hey guys;
has anyone cone across a situation where insurance is treated as a product cost?

[MaddehZ]

Hey guys;
has anyone cone across a situation where insurance is treated as a product cost?

yep i have a number of times

[nacho]

Hey guys;
has anyone cone across a situation where insurance is treated as a product cost?

examples? From which exams?


yep i have a number of times