Accounting Question Thread

[darcy42]

I got a closing balance of 33700. Which is essentially what the assessment report has even though they somehow got 14300+650000= 663300, (clearly 664300)

To answer your question EPL, 14300+ cash recepits of 650000 (consisting of 264000 sales, 385000 receipts from debtors and 1000 acc comm rev)= 664300 MINUS cash payments of 630600 (34000 stock, 189000 expenses, 84000 drawings, 307600 creditors, 16000 loan) = closing balance of 33700.

[eeps]

Oh right. I was missing the Accrued Commission Revenue from Cash Receipts.

Also, doesn't it say Payment to Creditors is Opening Balance + 90% of Credit Purchases. Since, Stock Purchases was $340,000... 90% of that is $306,000. Add on the Opening Balance of $32,200 (Creditors Control) and you get $338,200 do you not? Am I missing something in the calculation there?

I'm rather bemused on the Payment to Creditors. :\

EDIT: LOL I got it! It is 90% of $306,000 which is $275,400. You add $32,200 which gives you $307,600. such a noob question. =P

Cheers darcy42 for the explanation! =)

[LFTM]

With prepaid sales revenue, will it ever include GST?
Some of the exercises in the cambridge book include it but the vcaa exams never have GST in the CRJ.

[eeps]

Yeah, I've noticed that as well. I don't think there will be any GST with Prepaid Sales Revenue in the VCAA exams going off previous years - I think it's just how the VCAA do it.

[mmmmm]

For the practice exam - Insight 2007,
Question 1.2.1
Source document - Inv 19.
It has included freight - I thought it would be counted separately because it's not assignable to individual units of stock (because they bought hybrid bikes AND bike pants) - when i was doing it, i was trying to figure a way to make it work - to put it in the Sales journal.  But i ended up just putting the whole amount in (which is right). Anyways, that's not the point.  But I was just wondering, shouldn't it be separated because it's not included in the cost price of the stock?

Thanks!

[eeps]

Yes, the Freight shouldn't be included in the cost of the stock as you pointed out - it's a period cost. It should be recorded in the General Journal or something. I recall that in this exam, you weren't given any space besides the Purchases Journal - so that's the only place to put it I guess.

[mmmmm]

Yes, the Freight shouldn't be included in the cost of the stock as you pointed out - it's a period cost. It should be recorded in the General Journal or something. I recall that in this exam, you weren't given any space besides the Purchases Journal - so that's the only place to put it I guess.

Yeah.  How would you record it in the general journal?
Debit - ?
Credit - Creditors control and Creditor - Office Co.

Oh also! for question 1.3.1 - how did they get 84 months for the acc depn.  I got 83 :S Would you count the two days (2 Dec 2007) as a whole month?

Thanks for that EPL.11.4ever.

[eeps]

Yeah.  How would you record it in the general journal?
Debit - ?
Credit - Creditors control and Creditor - Office Co.

Oh also! for question 1.3.1 - how did they get 84 months for the acc depn.  I got 83 :S Would you count the two days (2 Dec 2007) as a whole month?

Thanks for that EPL.11.4ever.

I think you would just debit "Freight In", credit "Creditors Control". I'm not too sure - since it's a credit purchase of stock (which generally isn't included in the General Journal).

I'm a bit confused about what you're asking in Q. 1.3.1 - The Accumulated Depreciation is $4,200. Since $6,000 (Historical Cost)*10% = 6000. Then you multiply by 7 (from Dec 1 2000 to Dec 2 2007 - which is exactly 7 years) giving you the figure of $4,200.

[mmmmm]

Yeah.  How would you record it in the general journal?
Debit - ?
Credit - Creditors control and Creditor - Office Co.

Oh also! for question 1.3.1 - how did they get 84 months for the acc depn.  I got 83 :S Would you count the two days (2 Dec 2007) as a whole month?

Thanks for that EPL.11.4ever.

I think you would just debit "Freight In", credit "Creditors Control". I'm not too sure - since it's a credit purchase of stock (which generally isn't included in the General Journal).

I'm a bit confused about what you're asking in Q. 1.3.1 - The Accumulated Depreciation is $4,200. Since $6,000 (Historical Cost)*10% = 6000. Then you multiply by 7 (from Dec 1 2000 to Dec 2 2007 - which is exactly 7 years) giving you the figure of $4,200.

O right. Let's just hope that question doesn't come up on the exam.
Oh do you count it as 7 years, i went and counted it all up in months! I'm such an idiot.

[sam.utute]

I'm a little unsure about the justification questions that seem to pop up every now and then.
Questions like:
How is Debtors Turnover used as a measure of efficiency? (VCAA 2008)
Explain why Return on Assets is used as an indicator of business profitability. (VCAA 2007)
Explain how the Cash Flow Ratio is used as a measure of liquidity. (VCTA 2009)

What do you need to mention for each of these? Relate to the definitions?

Thanks,
Sammy

EDIT: Typo

[eeps]

I'd give a definition of each (DTO, ROA etc) and then link it to the measure/indicator of _____

i.e. Debtors Turnover measures (on average) how long it takes debtors to pay the business. If DTO is fast, the business is receiving money quickly from debtors, then this would indicate that the efficiency of the business is good/better - as the business to able to manage its assets to meet its short-term debts. [or something along those lines!]

Yes, I'd relate it to the definitions as you said.

[sam.utute]

link it to the measure/indicator of _____
If DTO is fast, the business is receiving money quickly from debtors, then this would indicate that the efficiency of the business is good/better - as the business to able to manage its assets to meet its short-term debts. [or something along those lines!]

Thanks EPL! Legend!

For profitability, of the question I stated in my previous post, would this be ok?

Return on Assets measures how effectively or efficiently the business is using its assets to earn profit. If the business is using its assets more effectively, this will allow it to generate higher levels of profit.

[eeps]

Yes, that works. As long as you point out two clear/distinct points (which you have) then you'll get the full marks.

[eeps]

I was wondering how would people answer:

Although the Return on Owner's Investment is improving (35 to 40%), explain a negative consequence this may have on the firm's liquidity. (2 marks)

My answer would be:

ROI may have only improved because the business withdrew higher cash drawings and injected less capital into the business. This is negative as the business may be relying on the owner too heavily (cash shortages) and this will reduce the liquidity of the business, as it may not be able to meet its short-term debts as they fall due.

HAS ANYONE GOT ANY BETTER RESPONSES TO THIS QUESTION?

Cheers. =)

EDIT: LOL no problem. I got it. =P

[eeps]

Question:

Excluding static measure, explain one limitation of ratio analysis.

Easy question, I know.

Cheers.