Accounting Question Thread

[Yitzi_K]

Stock write down wouldn't affect cash directly.

[davyp3]

umm...

ONE disadvantage of preparing budgeted reports more than once a year is that preparing the budgeted reports is time-consuming to the business and is costly. (not the best reasons I know...)

THE business may have suffered a cash deficit because of unforeseen expenses (i.e. damage to stock, stock write down) and this may have contributed to the cash deficit. Another cause may have been that there was less demand for the stock of which the business was selling.

Budgeting is the process of predicting/estimating the financial consquences of future events.

LOL. the last question, I've got no idea... I'll have a shot. After preparing the variance report, the actual figures are compared to the budgeted figures for the period, to see if the item is favourable or unfavourable to the business.

LOL. any of them right?

Both examples are non-cash expenses for the business that do NOT affect CASH but decrease NET PROFIT.

My Suggestions:

the owner paid trade creditors and received large discounts for early payment. This will have led to greater Cash Outflow from Operating Activities and Increase Discount revenue for the firm, leading to decrease in cash and increase in net profit.
They also may have paid sundry creditors cash that is higher than depreciation amount for the reporting period

Another possible answer could be owner withdrew large sum of drawings, leading to cash deficit. This does not affect Profit calculations.

Also, Firm made payments for prepaid expenses which will affect cash but not profit.
Firm paid accrued expenses in this reporting period.

Feel Free to Critique

[eeps]

Both examples are non-cash expenses for the business that do NOT affect CASH but decrease NET PROFIT.

My Suggestions:

the owner paid trade creditors and received large discounts for early payment. This will have led to greater Cash Outflow from Operating Activities and Increase Discount revenue for the firm, leading to decrease in cash and increase in net profit.
They also may have paid sundry creditors cash that is higher than depreciation amount for the reporting period

Another possible answer could be owner withdrew large sum of drawings, leading to cash deficit. This does not affect Profit calculations.

Also, Firm made payments for prepaid expenses which will affect cash but not profit.
Firm paid accrued expenses in this reporting period.

Feel Free to Critique

LOL... woops, didn't read the question properly.

YEP, your answers that the owner withdrew Cash Drawings and the payment for Prepaid Expenses (i.e. Prepaid Rent) and the payment of Accrued Expenses like Accrued Wages are good examples to use.

[eeps]

IS my answer that "After preparing the variance report, the actual figures are compared to the budgeted figures for the period, to see if the item is favourable or unfavourable to the business." right? for the question where it says Explain the process of Budgeting after Variance Reports have been prepared or whatever...

I'm yet to come across a question like that before.

[davyp3]

I thought variance reporting was determining differences and seeing if they were favourable or not

In this question, i would suggest without any confidence at all is that the process after budgeting is to evaluate the performance of the firm in the reporting period and to identify why variances occured. once this is figured out, management can take action to rectify unfavourable changes.

Something on these lines

Im interested to here the actual answers

[eeps]

Yeah... your response seems much better and clearer than mine... would you have an answer to this, _avO?

Cheers.

[_avO]

It would be to identify unfavourable variances (the issues) and take corrective action, then to plan and prepare the budget for the next period in accordance to these actions. Seeing as budgeting is an ongoing 'cycle' this question would probably be inappropriate for the exam but it will help you in the practicality of preparing budgets and variances as well as assist in understandability

[eeps]

Question:

I'm not sure I follow QUESTION 1.1.3 of the VCE Unit 4 Outcome 2: Assessment task A...

Calculate the budgeted cash proceeds from the sale of the old shop fittings.

During the year, old shop fittings with a carrying value of $2500 are to be sold for cash at loss of $1700...

IN the answers, they have done:

$2500 - $1700 = $800

LOL. what?! I don't know why they've done that... could someone give a logical explanation... (probs a noob question, I know.) :S

[_avO]

Yeah, they received 'a loss of $1700'. This means that whatever amount they got it was 1700 less then the carrying value

therefore 2500 - 1700 = 800 (received 800, but loss of 1700)

[eeps]

Question:

I don't really get when it says the "Debtors Turnover is less than the credit terms offered to customers..." (i.e. DTO was 25 days, whereas the credit terms offered to customers was 30 days.) Apparently, this is an example that "supports the claim that stock management has been worse than debtor management."

COULD someone explain the reasoning behind this... I don't really get it...

Cheers.

[davyp3]

average debtors may have decreased whilst credit sales could of also decreased.
in this case, you have an improved DTO but your sales and lower, meaning less stock is being sold. therefore your management of your stock is inferior to that of debtors

depends on your figures

Feel free to critique

[_avO]

They are buying stock and paying at a later date then they are receiving cash from debtors (good thing), however due to the 5 day difference in DTO and CTO it is more unlikely that the firm can purchase more stock on credit before paying off the debt.

Stock management relates to how much stock on hand a business has at any given period. Thus when it says it's an example that "supports the claim that stock management has been worse than debtor management" it refers to how more stock is coming out of the business than it is in, and although cash is received earlier then credit repayments, there is insufficient stock to provide for future customers rendering a shortage of stock and hence bad stock management.

I am not 100% sure as I haven't even started liquidity yet but this is just a guess

[davyp3]

They are buying stock and paying at a later date then they are receiving cash from debtors (good thing), however due to the 5 day difference in DTO and CTO it is more unlikely that the firm can purchase more stock on credit before paying off the debt.

Stock management relates to how much stock on hand a business has at any given period. Thus when it says it's an example that "supports the claim that stock management has been worse than debtor management" it refers to how more stock is coming out of the business than it is in, and although cash is received earlier then credit repayments, there is insufficient stock to provide for future customers rendering a shortage of stock and hence bad stock management.

I am not 100% sure as I haven't even started liquidity yet but this is just a guess

Unless they only have a sole supplier, the firm should be able to obtain stock from other suppliers

Possibly due to the firms favorable assets?

what you think?

[eeps]

I'm still confused... DTO measures the average number of days it takes for a business to collect cash from its debtors, and as in the example, it took 25 days... which happened to be less than the credit terms offered to customers. In theory, wouldn't that mean that the business is receiving the money (from its' debtors) in less time than they (the business) are offering its' customers. LOL. I've got no idea what I'm saying... I'm tots LOST. :S

[sam.utute]

Where is this quesiton from? Do you have the whole question? I'm not sure what it asking.