ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Accounting => Topic started by: mumakai on June 05, 2010, 08:59:25 pm
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The forum is starting to be cluttered with to many topics relating to everyones personal questions im finding it hard to get to navigate. so i've started this subsidiary topic account for the question forum account (yes accounting pun intended)
So shoot away on this topic please and i know i will endeavour to answer your questions.
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Benefits of a preparing a cashflow statement
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to aid decision making by showing the change in bank balance.
to determine if the business is meeting its cash requirements without the funding of additional funds
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two uses of a memo and order form?
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two uses of a memo and order form?
1. To evidence results of a stock take
2. To evidence a drawing of a non-cash item from a business
i'm not sure for order forms though
Questions:
1. Outline a cash flow problem that GST could cause Jan's Pottery.
2. Explain how GST may affect the profitability of Jan's Pottery.
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How would you record this in the general journal?
200 dollars interest expense was incorrectly recorded as interest revenue.
i did
DR interest revenue
DR interest expense
this is obviously wrong?
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order forms can be used to ensure that the amount ordered is the amount supplied to ensure no stock losses
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RE: LFTM
Interest Expense Dr 200
Interest Revenue Dr 200
Cash at Bank Cr 400
would be my guess
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ok. can someone confirm
how about this:
explain why Di(business owner) claims dereciation for the vehicle in the business reports?
this is from tssm 2009 btw.
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two uses of a memo and order form?
1. To evidence results of a stock take
2. To evidence a drawing of a non-cash item from a business
i'm not sure for order forms though
Questions:
1. Outline a cash flow problem that GST could cause Jan's Pottery.
2. Explain how GST may affect the profitability of Jan's Pottery.
If more more gst was collected/charged than paid/incurred the business will have a current liability. If the firm however has charged more gst than it has collected they will still have to pay to settlement to the ATO even thought they may not have received all the money from the debtor. Thus the firm may have to use their own funds which may create liquidity problems.
The profitability will not be directly affect by gst as it is neither a revenue or expense. However it may indirectly be affected due to their liquidity problem which may result in the firm being unable to buy stock to sell or to pay off their expenses.
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What is the purpose of a subsidiary ledger? and what are the benefits?
Define negative non current asset.
Why is it necessary to charge depreciation?
Purpose of control accounts?
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Define negative non current asset.
A negative non current asset is a reduction in a resource controlled by the entity which future economic benefit is expected to flow to the entity beyond 12 months. It represents a reduction of future economic benefit.
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What is the purpose of a subsidiary ledger? and what are the benefits?
It is where all the individual debtors and creditors accounts are listed. Every transaction is recorded separately in the subsidiary account and dates are all individual.
Benefits:
- Double checking mechanism: the balances of the control accounts should match the totals of the subsidiary ledger (via a schedule)
- Bulky detail is removed from the general ledger.
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Why is it necessary to charge depreciation?
the relevance QC states that all information that may influence the users of a report must be disclosed so that decision makers are properly informed. to not charge depreciation would mean that decision makers would not be properly informed which would contravene the relevance qc.
Purpose of control accounts?
its purpose is to keep the general ledger free of details as it is a summary account in the general ledger. the details that support the balance in the summary account are contained in the subsidiary ledger.
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Is this an appropriate answer for : why is bad debts an expense?
Bad debts is a reduction in an economic inflow which decreases assets(debtors control) leading to a decrease in owners equity.
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Bad debts represent a reduction in the inflow of future economic benefits that decrease assets (debtors) and owner's equity.
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How does going concern, reporting period, and relevance relate to Depreciation?
Also, how does Debtors control relate to going concern?
And lastly, do prepaid expense and accrued expense relate to accounting principle or qualitative characteristics?
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How does going concern, reporting period, and relevance relate to Depreciation?
Going concern: The life of the entity is assumed to be continuous and its records are therefore kept on this basis. Purchasing a non-current asset is predicated on the notion that they will receive economic benefits in the future; this means it is necessary to distinguish between that which is due beyond twelve months by allocating the historical cost of the non-current asset as an expense over its useful life.
Reporting period/relevance: Given that we assume that the life of the entity is continuous as per the going concern principle, it is necessary to divide it into arbitrary reporting periods for the purposes of reporting its progress (reporting period)/Financial information that is relevant to making decisions as to the allocation of scarce resources should be included in financial reports (relevance). By allocating the historical cost of a non-current asset as an expense over its useful life, we can match revenues earned within a period to expenses incurred. In doing so, we are able to determine profit for the period with a greater degree of accuracy, enhancing the relevance of the financial information thus provided in the financial statements.
How does Debtors control relate to going concern?
-Life of the entity is assumed to be continuous, and the records are kept on this basis.
-Credit sales are made on the assumption that the entity will receive economic benefits in the future (i.e. the receipt of cash), within twelve months.
-As such, debtors control represents a current asset.
Do prepaid expense and accrued expense relate to accounting principles or qualitative characteristics?
Of course.
BDAs stem from the QC of relevance; that is, the need to report all financial information that is relevant to making decisions as to the allocation of scarce resources, either in a confirmatory or predictive capacity. By matching revenues earned in a period with expenses incurred (i.e. the accrual basis), profit can be more accurately determined, enhancing the usefulness of the reports.
Furthermore, given that the life of the entity is divided into arbitrary reporting periods, it is necessary to match the revenues earned in each of these periods with the expenses incurred (as above, too lazy to retype; reporting period and relevance are heavily related in this context, as you might have guessed).
They are the main ones, although principles like conservatism and consistency can also apply in given scenarios.
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Explain the role of the general ledger in the recording process.
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Explain the role of the general ledger in the recording process.
The general ledger is used primarily as a mechanism to ensure the fundamental rule of accounting, the accounting equation, is always in equilibrium. In doing so, it reduces the likelihood of error by ensuring that the accounts are always balanced. This in turn facilitates the preparation of the financial reports.
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state the benefit of reporting the financing and investing activities seperately in the classified cash flow statement.
btw thanks for answering all my questions akirus
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No problem, I'm just sitting here procrastinating anyway.
State the benefit of reporting the financing and investing activities seperately in the classified cash flow statement.
-Classification of the cash flow statement into financing and investing activities enhances the understandability of the report; it allows the contents to be more readily accessible to the intended users by sorting the information into relevant categories. This allows assessments to be made as to the weak areas in the cash flow and confirming any past evaluations (i.e. comparison with past budgets), as well as assisting in formulating plans for the future activities of the business (i.e. budgeting).
You could also mention how separation from operating activities allows assessment as to the efficiency of the entity's normal trading activities in regards to the management of funds.
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i think this is an important question about a business wanting to make a profit but are experiencing sever cash shortages. could some one supply a good answer to this because i can seem to get one that will get me fully marks.
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i think this is an important question about a business wanting to make a profit but are experiencing sever cash shortages. could some one supply a good answer to this because i can seem to get one that will get me fully marks.
What's the question?
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How come in some ledger questions, you have a balance and then you have to assume that the balance has been paid during the reporting period. This prob doesn't make sense, it's like question 2.2.4 in NEAP 2010 (accrued wages) and question 1.1.3 in VCAA 2009 (GST Clearing)?
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dont know about the neap, but the vcaa 2009 question 1.1.3 the business paid the ATO, its in the sundries column(CPJ)
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dont know about the neap, but the vcaa 2009 question 1.1.3 the business paid the ATO, its in the sundries column(CPJ)
omg what an idiot i am thanks :D
now to figure out why the neap question is like that lol
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Why is prepaid expenses not an expense but instead recorded in the current assest
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Why is prepaid expenses not an expense but instead recorded in the current assest
If it says PREPAID it should be an asset.
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um the question about the NEAP 2.2.4 the answer is because it says in the additional information that the balance of the accrued wages account at the start of the reporting period at 1 jan is 700 and then at the end it was 600. We assume he had paid of the 700 simply because wages do not tend to take a very long time to be paid of (the employees want their money) and that it is a small amount means he is able to pay it off. Therefore only 600 remains owing at the end as the 700 has been (assumed) paid off.
i hope that this is the kind of logic one would involve. someone please tell me if i am wrong thanks
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Can someone tell me what i need to know about the statement of account, teacher hardly went through it at all.
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um the question about the NEAP 2.2.4 the answer is because it says in the additional information that the balance of the accrued wages account at the start of the reporting period at 1 jan is 700 and then at the end it was 600. We assume he had paid of the 700 simply because wages do not tend to take a very long time to be paid of (the employees want their money) and that it is a small amount means he is able to pay it off. Therefore only 600 remains owing at the end as the 700 has been (assumed) paid off.
i hope that this is the kind of logic one would involve. someone please tell me if i am wrong thanks
okay thanks that makes sense, do you think the VCAA will expect us to make a similar assumption?
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Can someone tell me what i need to know about the statement of account, teacher hardly went through it at all.
know the reasons for using it.
and try to learn how to make one from given information like subsidiary ledgers. you never know but 2010 could be the year to make one on Tuesday this week.
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um the question about the NEAP 2.2.4 the answer is because it says in the additional information that the balance of the accrued wages account at the start of the reporting period at 1 jan is 700 and then at the end it was 600. We assume he had paid of the 700 simply because wages do not tend to take a very long time to be paid of (the employees want their money) and that it is a small amount means he is able to pay it off. Therefore only 600 remains owing at the end as the 700 has been (assumed) paid off.
i hope that this is the kind of logic one would involve. someone please tell me if i am wrong thanks
okay thanks that makes sense, do you think the VCAA will expect us to make a similar assumption?
umm i would probably assume so in the worst case scenario.
but they should provide information about what to do in some way or another. dont quote me on it but i think we might just have to.
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Term deposit - Current Asset or Non Current Asset?
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quote author=Chavi link=topic=26386.msg267603#msg267603 date=1275811664]
Term deposit - Current Asset or Non Current Asset?
[/quote]
depends one how long it has been locked in for and how long before it matures
i would generally put it as a NCA.
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i think this is an important question about a business wanting to make a profit but are experiencing sever cash shortages. could some one supply a good answer to this because i can seem to get one that will get me fully marks.
What's the question?
a business made a profit but is experiencing cash shortages.
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I've seen a lot of different narration, some are really short and some are quite long.
What kind of narrations would be the most appropriate to use for Stock Gain/ Loss, Correcting Entries, Depreciation, Prepaid, Accrued, Drawings of Asset, Closing Entries etc.
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i think this is an important question about a business wanting to make a profit but are experiencing sever cash shortages. could some one supply a good answer to this because i can seem to get one that will get me fully marks.
What's the question?
a business made a profit but is experiencing cash shortages.
Under accrual accounting there is a difference between revenue earned and received and expenses paid and incurred. Cash and profit are therefore different resources.
examples can include
drawings
purchase of NCA
credit sales greater than receipts from debtors
prepaid expenses paid but not incurred yet.
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I've seen a lot of different narration, some are really short and some are quite long.
What kind of narrations would be the most appropriate to use for Stock Gain/ Loss, Correcting Entries, Depreciation, Prepaid, Accrued, Drawings of Asset, Closing Entries etc.
Out of the one's you have mentioned, remember for stock loss or gain ALWAYS include the specific line of stock loss or gained, amount of stock in units loss or gained and then the memo. this is what our teacher has told us.
For Depreciation include the following to be on the safe side: period of depreciation, depreciation rate (p.a.), straight line method, item you are depreciation and the memo.
For the rest you can vary ur responses but for depreciation and stock loss or gain my teacher has told me to be quite detailed but short in the narration.
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Term deposit - Current Asset or Non Current Asset?
depends one how long it has been locked in for and how long before it matures
i would generally put it as a NCA.
If the term deposit expires within 12 months or after 12 months?
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i think this is an important question about a business wanting to make a profit but are experiencing sever cash shortages. could some one supply a good answer to this because i can seem to get one that will get me fully marks.
remember to include (if you want to) how cash and profit are calculated. this depends on the constraints in the question that might be specifically to do with gross profit, or net cash flow from operations, etc. this will enhance your response to hopefully be awarded full marks.
What's the question?
a business made a profit but is experiencing cash shortages.
Under accrual accounting there is a difference between revenue earned and received and expenses paid and incurred. Cash and profit are therefore different resources.
examples can include
drawings
purchase of NCA
credit sales greater than receipts from debtors
prepaid expenses paid but not incurred yet.
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Term deposit - Current Asset or Non Current Asset?
depends one how long it has been locked in for and how long before it matures
i would generally put it as a NCA.
If the term deposit expires within 12 months or after 12 months?
if expires within 12 months then it will be turned into cash within 12 months and thus CA.
if expires beyond 12 months then NCA
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I've seen a lot of different narration, some are really short and some are quite long.
What kind of narrations would be the most appropriate to use for Stock Gain/ Loss, Correcting Entries, Depreciation, Prepaid, Accrued, Drawings of Asset, Closing Entries etc.
i doubt we would have to do narrations.
Out of the one's you have mentioned, remember for stock loss or gain ALWAYS include the specific line of stock loss or gained, amount of stock in units loss or gained and then the memo. this is what our teacher has told us.
For Depreciation include the following to be on the safe side: period of depreciation, depreciation rate (p.a.), straight line method, item you are depreciation and the memo.
For the rest you can vary ur responses but for depreciation and stock loss or gain my teacher has told me to be quite detailed but short in the narration.
doubt they'll ask for narrations
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Can someone explain 1.7 in last years exam. Why is stock gain understated
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I've seen a lot of different narration, some are really short and some are quite long.
What kind of narrations would be the most appropriate to use for Stock Gain/ Loss, Correcting Entries, Depreciation, Prepaid, Accrued, Drawings of Asset, Closing Entries etc.
i doubt we would have to do narrations.
Out of the one's you have mentioned, remember for stock loss or gain ALWAYS include the specific line of stock loss or gained, amount of stock in units loss or gained and then the memo. this is what our teacher has told us.
For Depreciation include the following to be on the safe side: period of depreciation, depreciation rate (p.a.), straight line method, item you are depreciation and the memo.
For the rest you can vary ur responses but for depreciation and stock loss or gain my teacher has told me to be quite detailed but short in the narration.
doubt they'll ask for narrations
i dont think they asked for narations since 07 in vcaa ones. may be wrong though
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Can someone explain 1.7 in last years exam. Why is stock gain understated
can someone else please re explain 1.7 in 09 VCAA
VCAA 2009 1.7:
This is a tricky question.
Take a look at the ledgers of the transaction was recorded:
DR Debtors control
CR GST clearing
CR Sales
and
DR Cost of Sales
CR Stock control
The only Revenue/expense items are Sales and Cost of sales. Not recording these would understate Sales (a sale has not been recorded) and understate Cost of Sales (Stock has been removed and sold)
Because the credit sale is unrecorded (and stock has been removed as cost of sales), the owner later in the period discovers a stock loss and records it. So Stock loss is now overstated.
However, there is no stock loss account (from previously in the question), only a stock gain. So stock gain would be understated (opposite of stock loss).
[also, they only provide room for only one expense account and 2 rev accounts in the answer booklet, so a 2nd revenue item i.e. stock gain was the only obvious answer]
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In the Cash flow statement, when we record GST settlement to the ATO, do we write just GST Clearing? what about capital contribution?
And in the Balance for a bank overdraft, do we write bank or bank overdraft in the current liability section?
I've seen so many different versions :(
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can someone else please re explain 1.7 in 09 VCAA
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In the Cash flow statement, when we record GST settlement to the ATO, do we write just GST Clearing? what about capital contribution?
And in the Balance for a bank overdraft, do we write bank or bank overdraft in the current liability section?
I've seen so many different versions :(
My accounting teacher says just to write the name of the ledger, and under liabilities, just Bank (there is no bank overdraft ledger)
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In the Cash flow statement, when we record GST settlement to the ATO, do we write just GST Clearing? what about capital contribution?
And in the Balance for a bank overdraft, do we write bank or bank overdraft in the current liability section?
I've seen so many different versions :(
In the cash flow statement, for GST refunds, you write GST refund. Same for settlement. However, in the cash journals, it is "GST Clearing", recorded in the sundries column. Straight from Vicki Baron herself, apparently.
And what Chavi said: it's always bank, as that is the name of the account.
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In the Cash flow statement, when we record GST settlement to the ATO, do we write just GST Clearing? what about capital contribution?
And in the Balance for a bank overdraft, do we write bank or bank overdraft in the current liability section?
I've seen so many different versions :(
In the cash flow statement, for GST refunds, you write GST refund. Same for settlement. However, in the cash journals, it is "GST Clearing", recorded in the sundries column.
My teacher said that you never write GST settlement or refund. You always write GST clearing, even in CFS.
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Titles in Reports
"GST Refund (Sundries column CRJ)"
"GST Settlement (Sundries column CPJ)"
Straight from Vicki Baron's powerpoint presentation for correct headings. Take it as you will.
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Titles in Reports
"GST Refund (Sundries column CRJ)"
"GST Settlement (Sundries column CPJ)"
Straight from Vicki Baron's powerpoint presentation for correct headings. Take it as you will.
There seems to be some confusion of titles in different journals and ledgers.
For GST:
In the journals and Balance sheet, always use GST clearing.
For the cash flow statement, use GST received/collected and refund (for inflows) or GST paid/incurred and GST settlement for outflows.
Also, for the CFS, use Receipts from debtors, Payments to creditors, Purchase of Stock and Loan repayment, rather than ledger titles.
For everything other than the CFS you should be using the ledger names (from my Acc teacher who is also a VCAA marker)
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is it ok to use:
GST paid to ATO and GST received from ATO in the CFS?
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do we need to know about sundry creditors?
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is it ok to use:
GST paid to ATO and GST received from ATO in the CFS?
I'd stick to the correct titles as specified in the examiners reports. Why add ATO to the title? Isn't obvious that GST is paid/received from the ATO?
do we need to know about sundry creditors?
It's unit 4, but if it does pop up in the mid year:
All transactions involving Sundry creditors are recorded in the GJ (for now).
The entry is:
DR NCA/CA
CR Sundry creditor - Imsellingtou
(don't record in the subsidiary)
-and they get their own ledger in the GL; reported as an individual CL in the balance sheet.
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How about the title for Wages in the Cash Flow Statement, Would it just be Wages? Wages Paid? or Wages Expense?
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is it ok to use:
GST paid to ATO and GST received from ATO in the CFS?
I'd stick to the correct titles as specified in the examiners reports. Why add ATO to the title? Isn't obvious that GST is paid/received from the ATO?
do we need to know about sundry creditors?
It's unit 4, but if it does pop up in the mid year:
All transactions involving Sundry creditors are recorded in the GJ (for now).
The entry is:
DR NCA/CA
CR Sundry creditor - Imsellingtou
(don't record in the subsidiary)
-and they get their own ledger in the GL; reported as an individual CL in the balance sheet.
so what should i use in regard to a gst settlement or refund in the CFS?
edit: so its GST settlement and GST refund in CFS?
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from Tssm 2008 question 2.1
Annual Insurance of 1500(plus 150 gst) was paid in advanced 1 July 2009
The pre-adjusted trail balance shows prepaid insurance as DR: 1375
and its calculating the expense for the quarter ending 30 september 2009
i dont get it ><
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what is a stock mix? This is the first time i've seen that word, my teacher didn't mention anything about it :/
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what is a stock mix? This is the first time i've seen that word, my teacher didn't mention anything about it :/
stock mix is just multiple stock lines
eg you have 10 different brands of clothing
stock cards help identify a good stock mix as they can be used to see fast and slow moving stock lines and thus take corrective action in adjusting etc etc etc etc
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Anyone know how to work out the answer for question 2.21 for NEAP 2010?
"One 1 November 2009 the insurance was paid in advance for the year ending 31 October 2010."
*and the general journal shows Prepaid Insurance Expense of 2000 + the balance day is on 30 June 2010
Don't i just divide the 2000 into 12 months and then multiple it by 8 months (Nov1-June31)?
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Anyone know how to work out the answer for question 2.21 for NEAP 2010?
"One 1 November 2009 the insurance was paid in advance for the year ending 31 October 2010."
*and the general journal shows Prepaid Insurance Expense of 2000 + the balance day is on 30 June 2010
Don't i just divide the 2000 into 12 months and then multiple it by 8 months (Nov1-June31)?
This question has been asked multiple times in the past few days, have a look around.
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from Tssm 2008 question 2.1
Annual Insurance of 1500(plus 150 gst) was paid in advanced 1 July 2009
The pre-adjusted trail balance shows prepaid insurance as DR: 1375
and its calculating the expense for the quarter ending 30 september 2009
i dont get it ><
because of the 1500 you paid on 1 july, 125 of it was for july, so that 125 wasn't prepaid insurance, it was just insurance expense. so only 1375 went into prepaid insurance. Hence, the BDA for 30 september would only be for august and september, as july is already accounted for.
That's my interpretation of it anyway.
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from Tssm 2008 question 2.1
Annual Insurance of 1500(plus 150 gst) was paid in advanced 1 July 2009
The pre-adjusted trail balance shows prepaid insurance as DR: 1375
and its calculating the expense for the quarter ending 30 september 2009
i dont get it ><
because of the 1500 you paid on 1 july, 125 of it was for july, so that 125 wasn't prepaid insurance, it was just insurance expense. so only 1375 went into prepaid insurance. Hence, the BDA for 30 september would only be for august and september, as july is already accounted for.
That's my interpretation of it anyway.
Hmmm yeah i put insurance expense as 250 too but the answer says 375
This is what i did i thought that they will have 1125 remaining (1500/12 X 9)
therefore 1375 - 1125 = 250
but then for some reason the trial balance states 1375 as prepaid insurance so calculating it that way doesnt work?
i would need to do it as 1500/12 = 125
and i have used 3 months which is 375 as insurance expense?
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In the Cash flow statement, when we record GST settlement to the ATO, do we write just GST Clearing? what about capital contribution?
And in the Balance for a bank overdraft, do we write bank or bank overdraft in the current liability section?
I've seen so many different versions :(
In the cash flow statement, for GST refunds, you write GST refund. Same for settlement. However, in the cash journals, it is "GST Clearing", recorded in the sundries column. Straight from Vicki Baron herself, apparently.
And what Chavi said: it's always bank, as that is the name of the account.
From What I know, I agree with that.
I confirmed through checking textbook, lecture notes/my brain....
In CFS youre allowed to specifiy paid/settlement, received/refund etc.
ANYWHERE ELSE, its going to be GST CLEARING!
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I did the 2008 vcaa exam and question 1.2.2 stumbled me,
there debit entire in the creditors control is different to my answer and not sure how they got 96900?
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I did the 2008 vcaa exam and question 1.2.2 stumbled me,
there debit entire in the creditors control is different to my answer and not sure how they got 96900?
They took the entire creditors column from the cash payments journal.What did you get?
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GST Clearing account has debit balance of 600
So this means its a current asset right?
So in justification of this would you say, GST paid or incurred is greater the GST received or earnt?
2marks, so I and D
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in the 2009 examiners report it says "relevance is not the answer to every question"
So im thinking what sought of questions can they ask for understandability and comparability?
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in the 2009 examiners report it says "relevance is not the answer to every question"
So im thinking what sought of questions can they ask for understandability and comparability?
GUESS?
Its blatantly obvious.... In REPORTS?
The comparibility, classification etc
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GST Clearing account has debit balance of 600
So this means its a current asset right?
So in justification of this would you say, GST paid or incurred is greater the GST received or earnt?
2marks, so I and D
i did this in a sac and lost marks. Teacher said to be more specific.
The business has paid and been charged more GST by suppliers than it has received or charged to customers.
is it ok that i said OR?
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in the 2009 examiners report it says "relevance is not the answer to every question"
So im thinking what sought of questions can they ask for understandability and comparability?
For the understandability characteristic, the key word to look for is classify.
For example why classify the balance sheet? makes it easier for people with little accounting knowledge to understand the position of the business.
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the effect of bad debt on profit and cash?
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Profit, reduces..as expense increases :)
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Profit, reduces..as expense increases :)
for bad debt do you say it decreases profit as it an expense
but it also affects cash at bank cuz less cash is received from debtors?
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Insight 2008 - 1.1.4
Explain with reference to a qualitative characeristic why there is only one amount for Debtors Control in the Balance sheet.
The solution says relevance, but I said Understandability as this ensures that reports are neat and easy to comprehend by non-accountants, thus allowing the decision making process easier for the user
Could that be right?
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Insight 2008 - 1.1.4
Explain with reference to a qualitative characeristic why there is only one amount for Debtors Control in the Balance sheet.
The solution says relevance, but I said Understandability as this ensures that reports are neat and easy to comprehend by non-accountants, thus allowing the decision making process easier for the user
Could that be right?
thats right :)
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^ I did that exam yesterday, and I also had understandability. Would VCAA accept either?
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State and justify WHAT prepaid rent is classified in balance sheet
2 marks
Current Asset
It is an economic resource controlled by the entity as a result from past transaction,
from which future economic benifets are expected to flow to the entity within the
next 12 months.
Correct?
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Profit, reduces..as expense increases :)
Causes reduction in assets and owners equity
you must put this in
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Insight 2008 - 1.1.4
Explain with reference to a qualitative characeristic why there is only one amount for Debtors Control in the Balance sheet.
The solution says relevance, but I said Understandability as this ensures that reports are neat and easy to comprehend by non-accountants, thus allowing the decision making process easier for the user
Could that be right?
went through a similar question in class, teacher said it was relevance because the question is asking why is there one amount, listing all debtors would be irrelevant or something..
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State and justify WHAT prepaid rent is classified in balance sheet
2 marks
Current Asset
It is an economic resource controlled by the entity as a result from past transaction,
from which future economic benifets are expected to flow to the entity within the
next 12 months.
Correct?
similar question in last years exam. State how the Prepaid office expense account would be classified in the balance sheet.
From assessment report:
Current Asset
Represents a future economic benefit that is expected to be used in the next 12 months.
I would've wrote an answer similar to yours.
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say you do a profit loss statement
and then theres no other revenue
so would you still right, add other revenue
or instead not right that
and write less Other expenses
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why does fifo breach reliability?
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one more thingy... Im just not getting this one straight!!!!
okay
4000 rent is still prepaid
prepaid rent expense in trial balance is 28000 Dr
Whats the balance day adjustment
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one more thingy... Im just not getting this one straight!!!!
okay
4000 rent is still prepaid
prepaid rent expense in trial balance is 28000 Dr
Whats the balance day adjustment
Is it 24 000 consumed?
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one more thingy... Im just not getting this one straight!!!!
okay
4000 rent is still prepaid
prepaid rent expense in trial balance is 28000 Dr
Whats the balance day adjustment
Cr 24000
Got it
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why does fifo breach reliability?
Because it is a ASSUMPTION of the movement of stock, it is not necessary what happens in reality.
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purpose of commencing entries?
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Why are some accounts balanced rather than closed?
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Why are some accounts balanced rather than closed?
in preparation for the next reporting period? :S
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Why are some accounts balanced rather than closed?
Because assets, liability and the capital account carry forward to the next reporting period?
Someone confirm.
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Why are some accounts balanced rather than closed?
Because assets, liability and the capital account carry forward to the next reporting period?
Someone confirm.
yea where revenue and expenses need to be closed- reporting period principal.
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Is there any benefits of having a net negative operating or financing?
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benefit of preparing a cash flow statement instead of the statement of receipts and payments
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Why isn't GST included in the calculation of depreciation?
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benefits of classifying the balance sheet, p/l statement and cash flow statement?
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benefits of classifying the balance sheet, p/l statement and cash flow statement?
understandability-
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explain why the bookkeeper cannot simply erase an incorrect entry and write the correct entry
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possibility of fraud. not sure how to link it to a QC, probs reliability though
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possibility of fraud. not sure how to link it to a QC, probs reliability though
reliability i would think you need a record of all transactions
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explain how depreciation ensures relevance in the p/l statement and the balance sheet?
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disadvantages of using perpetual inventory system
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Why isn't GST included in the calculation of depreciation?
gst isnt expense - colllected on behalf ato
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disadvantage of accrual accounting for a small business?
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disadvantage of accrual accounting for a small business?
Costly, often impractical, etc etc.
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Does depreciation lead to an indirect retention of funds? I dont even know what the questions is asking
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Does depreciation lead to an indirect retention of funds? I dont even know what the questions is asking
LOLLLLLLLLLLLLL !!!!!!!!!
But they are good questions, ive been revising all this over the last month :)
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last minute preparation :)
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guys, why do we actually depreciate?
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guys, why do we actually depreciate?
to determine an accurate profit by matching revenue earnt against expenses incurred for current reporting period
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guys, why do we actually depreciate?
Because the asset is assisting the firm in earning revenue, an appropriate amount needs to be expensed to match the revenue it's earning.
I think that's why, i'm not sure. Someone should confirm this!
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guys, why do we actually depreciate?
To ensure the cost incurred in relation to a non current asset is reported as an expense in each reporting period in which it earns revenue. This allows the owner to accurately calculate profit.
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Is there any benefits of having a net negative operating or financing?
There may, depending on whether the business purchased a large quantity of non-current assets when they are just starting up their business. This is because these non-current assets are expected to generate revenue for the business in the near future which will in turn, hopefully, increase operating cash flows
explain how depreciation ensures relevance in the p/l statement and the balance sheet?
Same answer as this question; 'Explain with reference to one qualitative characteristic why it is necessary to depreciate non-current assets'... I'm assuming you've done a million of them by now
disadvantages of using perpetual inventory system
- Can be costly for staff to update records and invest in stock management software
- Can be time consuming for staff to conduct physical stock takes and compare them to manual reports
Benefits of classifying the balance sheet, p/l statement and cash flow statement?
Upholds understandability be presenting the reports in such a manner that allows non-accountants to understand and comprehend the information presented in order to make accurate decisions on balance day.
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thanks all for answering my questions :)
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Give us more Tyred :P
I love your questions :P Heheh
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lol alright :)
explain why the balance sheet is titled 'as at'
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What is meant by the term equities
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what's a good definition for going-concern?
i always say like "the assumption that the life of the business is continuous and indefinite" - but is there an "in order to.." ?
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Uses of profit and loss statement.
Uses of cashflow statement.
Thanks!
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What is the importance of a cross reference when recording transactions in ledger accounts?
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Why are order forms not part of the accounting process?
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What is the importance of a cross reference when recording transactions in ledger accounts?
To name the other account that is affected. And to identify both of the accounts that are affected by a particular transaction.
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Explain why it is more likely that a business will end up with a credit balance in its GST clearing account?
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Explain why it is more likely that a business will end up with a credit balance in its GST clearing account?
Due to the markup of stock.
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What is the role of the narration in the general journal entry?
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What is the role of the narration in the general journal entry?
To briefly describe the transaction? Not entirely sure.
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Explain the impact of GST on the recording of transactons in the stock cards
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Explain the importance of stock cards when sales are recorded in the special journals
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Explain the impact of GST on the recording of transactons in the stock cards
None :P
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Explain why the P/L statement identifies Gross Profit and Adjusted gross porfit seperately?
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Explain why GST recieved and GST refund must be reported seperately?
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What is the role of the narration in the general journal entry?
To briefly describe the transaction? Not entirely sure.
to provide a brief story of the nature of the transaction and to identify the source document. This is important cuz the general journal has so many different entries
provides an audit trail
blah blha blha
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I'll just give you all the questions and answers that I have compiled from the cambridge textbook.
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I know that its a bit too late but hopefully you guys can use the remaining 5-7 hours or so just going through them as a revision type exercise. You probably wont even need it haha
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explain why the balance sheet is titled 'as at'
This is because the balance sheet is prepared at a particular date if the business were to prepare the balance sheet a day later the figures in the report may change.
What is meant by the term equities
Put simply. The amount the business owes, hence owners equity. If you didn't get it, Owner's Equity is the amount the business owes the owner.
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I'll just give you all the questions and answers that I have compiled from the cambridge textbook.
WOW!
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i regret not posting it earlier
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Uses of profit and loss statement.
- Can aid in decision making by measuring performance, allowing corrective action to be taken, and planning for the future
- Can assess gross profit, mark-up and calculate ratios
- Can measure the performance of management and staff
Uses of cashflow statement.
- Can aid in decision making by identifying types of cash flows and uses of cash
- Can determine whether the business is meeting its overall cash targets, in particular Operating Cash Flows
- Can determine the final bank balance at the end of the period
- Can help the business plan its cash targets for the future
Explain why the P/L statement identifies Gross Profit and Adjusted gross profit seperately?
Gross profit takes into account the average mark-up placed on the purchase price of stock, whilst the Adjusted Gross profit takes into account and stock losses/gains that have occurred throughout the period aswell, therefore they must be reported separately as they are different measures of performance.
Explain why GST recieved and GST refund must be reported seperately?
GST Received is the GST collected/received from Sales made during the current reporting period, Whilst GST Refund is the GST received from the Australian Tax Office from the previous reporting period (this was because during that period the GST paid or invoiced by suppliers exceeded the GST received or invoiced to customers)
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When preparing a cash flow statement, we only look at the CRJ and CPJ?
Or at all 4 special journals?
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When preparing a cash flow statement, we only look at the CRJ and CPJ?
Or at all 4 special journals?
only crj and cpj cos the others dont effect then bank
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When preparing a cash flow statement, we only look at the CRJ and CPJ?
Or at all 4 special journals?
only crj and cpj cos the others dont effect then bank
thought soo
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When preparing a cash flow statement, we only look at the CRJ and CPJ?
Or at all 4 special journals?
only crj and cpj cos the others dont effect then bank
what about for profit /loss
and balacne sheet
balance sheet and p@l look at all cos of the selling and purchase of stock.
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in profit and loss statement
can we have all sales together..as in cash/credit sales - just as sales.
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My teacher and Neville Box says to split if it has Credit Sales and Cash Sales.
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My teacher and Neville Box says to split if it has Credit Sales and Cash Sales.
I asked Neville Box and he said either..
(and so did my teacher!)
But there is probably less risk of error by posting them separately
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I was just wondering how does "Payment to Creditors being less Cost of Sales" effect Net Profit and Cash?
I think you mean 'Payments to Creditors are either less than/greater than Cost of Sales', but think about it, If payments to creditors are higher than Cost of Sales, the Cash outflows in the Cash flow statement is going to be higher than the Cost of Goods Sold expenses in the Profit and Loss statement. This is why it can be used as an example for why a business incurred a cash surplus yet suffered a net loss.
Keep in mind you must state why Payments to creditors or Cost of Sales isn't classified in both the Cash flow statement or the Profit and loss, otherwise this can't be used as an example.
If that made absolutely no sense, I'll give you an example of what I would write for a question where this answer can be used.
Question;
Tim told his accountant on balance day that he can't work out why he incurred a Net Loss despite earning a Cash suplus for the period. Explain how this can occur.
Answer;
Under accrual accounting there is a difference between revenues earned and received and expenses incurred and paid for the period, thus they are two different sources of finance. e.g. Tim may have found that his Cost of Goods sold exceeded his Payments to creditors for the period thus displaying a greater loss in the P/L statement compared to the Cash Flow Statement. This is because Payments to Creditors is not classified as an expense as it doesn't decrease owners equity and therefore isn't included in the P/L statement and has No effect on profit.
That's just one example, generally you would have to give two examples.
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What are the disadvantages of control accounts?
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What are the disadvantages of control accounts?
I'm not sure that there is any to be honest. The only disadvantage I can come up with is that they are summary accounts and therefore are not as useful for decision making as a subsidiary account/stock card would be. But then again there primary reason is that they are summary accounts, so I'm not sure on this one.
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what would be a proper narration for depreciation?
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what would be a proper narration for depreciation?
Depreciation of <insert non-current asset here> ?
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What are the disadvantages of control accounts?
I'm not sure that there is any to be honest. The only disadvantage I can come up with is that they are summary accounts and therefore are not as useful for decision making as a subsidiary account/stock card would be. But then again there primary reason is that they are summary accounts, so I'm not sure on this one.
Using control accounts and subsidiary ledgers require more bookkeeping, which may increase administration costs. If these outweigh the benefits thus derived from the usage of said control accounts, it is not worth using in that given entity (cost vs benefit).
Another case would be, obviously, if the entity does not have creditors or debtors, or very few, which make the use of control accounts redundant.
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I know the benefits to a perpetual stock system
however, what are the disadvantages?
Is it just that its time consuming? what other ones can there be?
Thanks guys
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Excuse my barging but could someone please provide a clear, succinct explanation of why balance day adjustments and specifically depreciation are made?
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I know the benefits to a perpetual stock system
however, what are the disadvantages?
Is it just that its time consuming? what other ones can there be?
Thanks guys
In real small businesses, a lot don't use the perpetual stock system.
-often it is impractical. Not all stock can easily be tracked.
-additional administration expenses/time/etc involved in maintaining the records (if ever in doubt, just say 'costly', it's most likely right for these types of questions)
-not necessarily useful, depending on the stock being sold
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I know the benefits to a perpetual stock system
however, what are the disadvantages?
Is it just that its time consuming? what other ones can there be?
Thanks guys
Since the perpetual stock system involves constantly recording all inflows and outflows of stock, extra costs may be incurred in order to employ staff to maintain subsidiary records. Also, a computer system may be needed and this also is a cost for the firm.
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Excuse my barging but could someone please provide a clear, succinct explanation of why balance day adjustments and specifically depreciation are made?
Balance day adjustments are made in order to match revenues earned with expenses incurred, as per the accrual basis; this is done in order to accurately determine net profit for a given reporting period. In order to achieve this with non-current assets, they are depreciated by allocating the historical cost of the asset as an expense over its useful life.
In doing so, the profit figure reported in the financial statements will be more relevant when making decisions as to the allocation of scarce resources, which will enhance the usefulness of the reports in allowing the users to confirm past evaluations and make judgments for the future activities of the entity (purpose of accounting reports).
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I know the benefits to a perpetual stock system
however, what are the disadvantages?
Is it just that its time consuming? what other ones can there be?
Thanks guys
- Time consuming to have staff conduct regular physical stock takes and update records
- Costly to invest in stock management software or pay staff to conduct physical stocktakes
Thats all you really need I guess
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sneaker shoes is making out a loan application for the purchase of a nca explain whether the bank manager should rely on the individual asset valuations in the balance sheeet
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Are Deposit and Term Deposit seperated?
One is expense and one is liability?
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^^^
I thought they were both Current Assets :S
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Also, do we write Accrued Wages paid in the Cash Flow Statement or do we combine the accrued wages paid along with the wages paid and write "Wages"/ "Wages Paid" ?
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If you pay for Accrued Wages obviously through the CPJ,
You write Accrued Wages Expense.
and Wages separatly!
The words Accrued and Prepaid are not too be seen in P/L statement however for the CFS, Yes you put Accrued Wages Expense
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This was from 09 TSSM (1.2.3)
Identify 3 reasons for the credit sales exceeding the receipts from debtors for the reporting period
-one reason would be slow payments from debtors
What else?
-Thanks :)
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hmmm bad debt? and discount expense?
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hmmm bad debt? and discount expense?
Oh yeah true true true (Y) thanks for that
goodluck for tomorrow :)
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hmmm bad debt? and discount expense?
Oh yeah true true true (Y) thanks for that
goodluck for tomorrow :)
thanks.
You too, good luck for tomorrow :)
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Anyone know what the A+ mark was last year?
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Anyone know what the A+ mark was last year?
79/90
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Anyone know what the A+ mark was last year?
79/90
Thanks =]