Accounting Question Thread

[kakar0t]

The business will have to give less discounts for further payment, thus maxmising their net profit?

[eeps]

The business will have to give less discounts for further payment, thus maxmising their net profit?

Yeah, that was what I was thinking.

The business may not be offering any credit terms to debtors... thus, in that sense they are maxmising their net profit. This was a tricky question I just made up... LOL. :S I doubt it would be tested in the exam since I suppose as the business, we want to collect the money quickly from our debtors.

[eeps]

What are 3 examples of Ratio Analysis limitations?

Thanks.

[_avO]

Doesn't show qualitative measures including level of customer satisfaction, percentage of market share and other vital information such as credit ratings of customers and the quality of stock. Not 100% sure you'd best ask someone else for their opinion.

[eeps]

I said that RATIOS rely on historical data which may not be accurate as items like Stock, Debtors Control are not static b/c they change in value. My second example was that it only shows averages, thus ratios do not detail individual items (e.g. stock etc.)

[eeps]

Question:

This was in the QAT Unit 4 exam.

"Identify and explain one reason why a business might have received more than the expected residual when a non-current asset is sold." (2 marks)

I've got no idea... is it like higher demand for the NCA or the NCA was under-depreciated... could someone help? :S

Thanks.

[sam.utute]

I've got no idea... is it like higher demand for the NCA or the NCA was under-depreciated... could someone help? :S

I'd be writing something along those lines. Depsite having done this exam, I can't remember the answer .

I would probably write some fluff pertaining to:
The NCA was underdepreciated due to poor original estimates when calculating depreciation, resulting in the asset's residual value being understated. Also, the asset could be in higher demand and in a superior condition thatn originally anticipated. As a result, the business stands to receive more than the residual value of the asset.

That's basically what you had.
Hope it helped,
Sam

[eeps]

I'd be writing something along those lines. Depsite having done this exam, I can't remember the answer .

I would probably write some fluff pertaining to:
The NCA was underdepreciated due to poor original estimates when calculating depreciation, resulting in the asset's residual value being understated. Also, the asset could be in higher demand and in a superior condition thatn originally anticipated. As a result, the business stands to receive more than the residual value of the asset.

That's basically what you had.
Hope it helped,
Sam

Cheers mate. Thanks for the help!

[mba]

Remember in VCE accounting that a profit or loss on disposal of an asset is simply a result of either over or under depreciation. As depreciation is simply an estimate, it does not meet the characteristic of reliability, and therefore there may be some errors in the calculation of residual and useful life. This may result in either a profit or loss on disposal of the asset.

[eeps]

Remember in VCE accounting that a profit or loss on disposal of an asset is simply a result of either over or under depreciation. As depreciation is simply an estimate, it does not meet the characteristic of reliability, and therefore there may be some errors in the calculation of residual and useful life. This may result in either a profit or loss on disposal of the asset.

True! Thanks for that reminder.

[eeps]

Question:

This comes from the Insight 2009 Exam 2.

Q. 1.1.8

"State two reasons why scrap value may be overstated." (2 marks)

This question threw me off somewhat as it wasn't in relation to any other question. If someone could answer it, much appreciated.

[_avO]

This relates to page 300 of the Cambridge textbook (2nd and 3rd dotpoint)

The original estimates did not anticipate damage to the NCA. This would decrease the scrap value. (thus is overstated)

The original estimates did not anticipate that the NCA would be outdated or superseded by a new or superior model, which would decrease scrap value (thus is overstated)

[eeps]

This relates to page 300 of the Cambridge textbook (2nd and 3rd dotpoint)

The original estimates did not anticipate damage to the NCA. This would decrease the scrap value. (thus is overstated)

The original estimates did not anticipate that the NCA would be outdated or superseded by a new or superior model, which would decrease scrap value (thus is overstated)

Oh... right... so that's what it's asking. I was flicking through the textbook for that bit. Thanks!

[eeps]

Question:

VCAA 2007 Exam 2.

State two possible reasons, apart from budget error, why actual Cost of Sales could be less than budgeted despite actual Sales exceeding budget expectation. (2 marks)

I'm not sure what another reason would be, besides the business found a cheaper supplier of stock...

Thanks.

[_avO]

using product costs rather than period costs.

increase selling price

I think you asked this before