vcaa sample questions 2012

[abcdqdxD]

Memo 44 states Advertising $1000+100GST was incorrectly debited to Debtors Control.

This would understate expenses by $1000, hence overstate Net Profit and owner's equity.

Assets(Debtors Control) and Owner's Equity would be overstated by $1000.

*This assumes that GST was recorded correctly in the original entry.*

[Tragesty]

Yes that's simple enough, and what I'd assume to be the answer given similar questions have appeared in practice exams I've done, however the question mentions impact on accounting reports, am I not required to mention what would happen in each of the 3 reports?

And why do we assume GST was recorded correctly?

[huss48]

HERE ARE THE SOLUTIONS TO THE VCAA SAMPLE QUESTIONS.

THANK YOU TO SAM FOR EDITING SOME QUESTIONS.

RE-MODIFIED  SOLUTIONS ON PAGE 3 .

[Tragesty]

Cheers for the answers - can someone please explain why everyone's excluding GST of $1000 for the general journal opening entries?

[abcdqdxD]

Because Advertising should have been debited by $1000, however it was debited to Debtors Control by $1000 instead. The question only states that Advertising has been incorrectly debited to Debtors Control- there was no mention that the GST component  was incorrectly recorded.

[Tragesty]

I mean for question 2 - the opening entries, I had:

Stock Control
Prepaid Rent
Computer
GST Clearing (Payed $600 for shop fittings, payed 2 months in advance for rent at $200 GST per month)
Display Fittings
   Loan
   Capital (9400 because i included 1000 GST debit)

[abcdqdxD]

The firm hasn't begun trading yet, hence GST paid/received by the firm isn't recognised by the ATO.

Just a guess, don't count me on this one.

Can someone confirm why GST Clearing was excluded?

Thanks

[Tragesty]

That's probably it, yeah.

Also, it mentions she payed for the items which involved the GST using her PERSONAL cheque account.

Makes sense, thanks guys.

Part of me wonders why it's worth 7 marks when there are 6 entries (excluding GST) :|

[TMlight]

GST Clearing not included in commencement as GST was incurred by the owner prior to contribution, not the business.

The stock used for advertising, id say something about an outflow of economic benefit (specifically) due to the stock not being intended for resale at a profit (stock control and assets decrease), owner's equity decreases through net profit.

[huss48]

big discussion on the GST which is good.

totally agree with TMlight, GST is not included. 
His response is spot on.

Also liverpoolxD, ur response saying:
The firm hasn't begun trading yet, hence GST paid/received by the firm isn't recognised by the ATO.

[abcdqdxD]

Does that mean there will never be 'GST Clearing' in the General Journal for a commencement entry of a new business where there is GST incurred by the owner prior to when the firm starts trading operations?

However there would be 'GST Clearing' in the General Journal for the opening balances of an already established business.

Would the above statements be correct?

[BoredSatan]

Does that mean there will never be 'GST Clearing' in the General Journal for a commencement entry of a new business where there is GST incurred by the owner prior to when the firm starts trading operations?

However there would be 'GST Clearing' in the General Journal for the opening balances of an already established business.

Would the above statements be correct?

Yes the owner is separate from the business

[Sleepwalker]

Hey thanks for the solutions. For question 9e should the contribution of the vehicle at an agreed value of $20,000 (memo 45) be added to capital? or is it already included in the $360,000? Thank you

[luke_rulz94]

how did you get 17250 for net profit ?

[Nima2703]

I don't understand why you are saying that a decrease in stock control will reduce net profit. Owner's equity is decreased because capital is assets minus liabilities, as the asset of stock control decreases, as does capital, under owner's equity