Accounting Question Thread

[eeps]

Question:

I was wondering could people help me with Qs. 1.4.2 and 1.4.3 of the 2005 VCAA Unit 4 PAPER.

A .jpg of the QUESTIONS has been attached.

Cheers.

[eeps]

I don't get the whole "Year Ended" and "Quarter Ended" thing... it confused me. =='

[darcy42]

1.4.2 - The business may have found a cheaper supplier of stock
or     - generated more sales.

1.4.3
Sales have increased in comparison to the last period
Net profit ratio and Gross profit ratio have improved.

Take your pick really.
The Year/Quarter thing is there to trick you. Pretty much just means that the first figures are based on an entire year wheeas the second set of information is based on 3 months only. Therefore, sales have increased from an average of $55000 a quarter the previous year (220000/4) to $66000 in the quarter.

[eeps]

According to the 2005 Assessment Report:

• increase in sales
• increase in profit margin
• cheaper stock purchases; that is, lower cost of sales

(FOR Q. 1.4.2)

Students generally handled this question well, with most able to identify one correct reason. The students who did not perform well did not fully understand that the second set of figures related to a quarter rather than a full reporting period and attempted to argue that profitability was worse as Net Profit was lower than last period.

1.4.2 - The business may have found a cheaper supplier of stock
or     - generated more sales.

1.4.3
Sales have increased in comparison to the last period
Net profit ratio and Gross profit ratio have improved.

Take your pick really.
The Year/Quarter thing is there to trick you. Pretty much just means that the first figures are based on an entire year wheeas the second set of information is based on 3 months only. Therefore, sales have increased from an average of $55000 a quarter the previous year (220000/4) to $66000 in the quarter.

Oh... right... Thanks!

[eeps]

Which exams would people say are the hardest to do - in order of difficulty; going off Unit 3 exams as well?..

e.g. NEAP, TSSM, CSE, VCAA etc.

[darcy42]

Personally I haven't really noticed a difference. Although I do recall one particular Insight one being a bit ridiculous, but aside from that they have seemed pretty general to me.
Others will probably have different opinions.
Oh yeah and from what i've experienced, the VCAA ones are always the most reasonable and often the simplest, which is a comforting thought =)

[eeps]

I found with many exams that there was a clear difference in the level of difficulty. I found the Insight ones quite lengthy and challenging in comparsion to CSE ones, which I found easy. I reckon it depends on personal opinion... I was just asking to get the general feel of what everyone thinks.

LOL, yeah the VCAA ones were always somewhere in between. There were easy but yet some questions were harder than in other papers that I'd done. I guess it's good just to do as many different exams as possible to expose yourself to many questions, which may be worded differently or the lay-out may be different etc.

[_avO]

Are all these past exams hard copy? If so does your school provide them for you?

[eeps]

I don't know about darcy42, but in the case of my school... it buys past papers from TSSM and in relation to other EXAM papers like Insight, CSE, VCAA... I think my school buys that as well/or re-uses old ones from previous years. About 4 or 5 weeks before the Unit 3 exam... my teacher gave me 15+ exams from various companies - ranging back 3-4 years ago. my school gave me a bucket load of exams before the mid-year exam... I finished about 90% of them.

and yes... they are HARD COPY.

We were told getting hard-copies of the papers/exams is the best method of revision, since you can see the lay-out and feel what's it's like when it comes to the real thing, that is... an exam booklet and answer booklet.

[_avO]

TT_TT our school is not financed enough, although my teacher basically uses about 50% of the schools paper for us, they're not on past exams () which is sad. Prior to the Unit 3 exam, we only got the '07-'09 VCAA past exams and nothing else.

Fortunately my teacher prints out like a booklet on the majority of the questions per chapter (eg. an exam book for budgeting consisting of mainly VCAA and COMPAK q's) however its format doesn't really help for exam preparation.

[darcy42]

Pretty sure our teacher downloads one off the internet and photocopies it like 30 times...
Definitely shady, there is no way they would pay for exams.
But we still get heaps so I'm not complaining.

[eeps]

If I didn't have hard-copies of exam papers, I would tend to get an online copy of them through the various websites... VCAA website etc. and I would write answers to them in a separate exercise book or something. I found this techinque quite useful... I couldn't be bothered actually printing the question and answer booklets myself.

You can get all the past VCAA exams dating back to 2003 or something on their website. In relation to other Accounting exams... try cleo_xo. (still online copies though.)

[eeps]

Question:

Explain the impact of a low interest cover on the financial structure of the business. 2 marks.

My response would have been that the firm is less able to meet the cost associated with borrowed funds, and therefore less liquid. Has anyone else got a better, more detailed response?

Thanks.

[sam.utute]

A firm with a low interest cover ratio may have a poor liquidity position as it is less able to meet short-term obligations as they fall due, as a large proportion of Net Cash Flows from Operating Activities are used simply to meet interest expenses. This may mean that the firm has less cash to meet other pressing obligations such as payments to creditors. It is also indicative of the firm relying heavily on liabilities (high gearing) - maybe discuss this a bit more; it has to do with the financial structure of the business.
Also, you could talk about how the low interest cover may force the owner to inject more funds into the business to help meet short-term obligations , either through a loan or capital contribution, as interest expense is taking up a large proportion of Operating Cash Flows.

Hope that helped.

[eeps]

A firm with a low interest cover ratio may have a poor liquidity position as it is less able to meet short-term obligations as they fall due, as a large proportion of Net Cash Flows from Operating Activities are used simply to meet interest expenses. This may mean that the firm has less cash to meet other pressing obligations such as payments to creditors. It is also indicative of the firm relying heavily on liabilities (high gearing) - maybe discuss this a bit more; it has to do with the financial structure of the business.
Also, you could talk about how the low interest cover may force the owner to inject more funds into the business to help meet short-term obligations , either through a loan or capital contribution, as interest expense is taking up a large proportion of Operating Cash Flows.

Hope that helped.

Cheers mate.