Help with Accounting Assignment.

[MelbourneUNI]

Hello,

I am a commerce student at UoM and I am new to accounting and finding it quite difficult.

Ive got this assignment to do, which im struggling with. Im not looking for anyone to do it for me, but rather some direction for an accounting noob. Here is the first question for example and the task required.



All I have figured out so far is that -

12th December
- Accounts Payable (Current Liability) for $40,000
- GST Payable (Current Liability) for $4,000


31 December
- Decrease in Cash at bank (Current Asset) of $44,000

Is there an ASSET gained anywhere? How do you even supposed write this all out?

Help would be very much appreciated.

[Fyrefly]

I gather that the machines were installed on the 12th.

So:

Dec 12th

- Accounts Payable (Current Liability)                                 $44,000
- GST Paid (Current Asset)                                   $4,000
- Equipment/Bottling Machines (Non-current Asset) $40,000

Dec 31st

- Cash at Bank (Current Asset)                                          $44,000
- Accounts Payable (Current Liability)                    $44,000

Please consider that I haven't opened an accounting textbook in over a year, but I will try to explain:

*Every economic event that affects the accounting equation will effect all the elements simultaneously - you can't have Owner's Equity or Liabilities being affected immediately, but a delayed reaction from Assets where they only increase a couple of days later (as you have done).
*So, knowing this... we need to consider each economic event to be in its own little 'nutshell' - the events on Dec 12th and on Dec 31st are entirely separate.

*Accounts payable increases by the actual charge PLUS the GST, because even though YVM do not ultimately get to keep this money, it is compulsory for them to collect it off you and pass it onto the ATO once tax time ticks around. So in actuality, you will have to hand over $44,000 to them, regardless of how much *they* get to keep.
*GST Paid is a current asset - remember the definition for an asset and have a think about it... GST Paid will provide an economic benefit by reducing the amount you will have to pay the ATO come tax time. It may help to think of it as akin to a prepaid expenses account such as Prepaid Electricity or Prepaid Internet Service (I'm not sure if you've cover that yet though).

*Note that the $40,000 increase in the NCA of the Bottling Machines is not the cost of the Bottling Machines themselves. It says that TW has already previously purchased them. HOWEVER, as the $40,000 must be paid to get the Bottling Machines into a use-able state (they're not in a condition ready to be used until then), you may add the cost of installation to the value of the NCA. So say the machines themselves cost $60,000. The Dec 12th transaction *increases* the value of the NCA (Bottling Machines). In a Balance Sheet, the total value of the Bottling Machines would now be recorded as $100,000. Do you understand what I mean? There should be something in your txtbook about this, so I'd strongly suggest you have a flick through it.

*Compared to the Dec 12th transaction, the Dec 31st one is quite simple: TW reduces it's liabilities using up some of its assets.
*Cash at bank decreases, as does the liability called Accounts Payable - the amount TW owes (or is 'liable for') has now decreased by the $44,000 they've paid by cheque.


I'm not going to directly answer your question for you - it's your job to examine the effects on the accounting elements, justify your views, etc...

I hope that my explanations have helped things make sense though, because it really isn't enough for you to be able to copy the answers I've given you and expect to pass the exam. You really need to understand what's going on so your knowledge is pliable enough that you can mould it to other situations. Also, consult the textbook where I've suggested. A good textbook will provide easy-to-understand explanations about these things. Also... the terminology you use in your txtbook (and therefore, your unit) may be different to what I've been using, so make sure to eliminate any discrepancies there.

Any more Qs please feel free to ask ^_^

To all the accounting geniuses on here: if I've made some sort of fundamental error, please say so... like I said, it's been more than a year since I opened an accounting txtbook and I'd hate to steer a person in the wrong direction when they're after some help >.<

Also, I solemnly swear that I *will* open my accfin txtbook 2day, and I *will* start on some hw XD