Random Accounting Revision Questions

[Noblesse]

Cambridge book says when doing commencing entries put bank in the General Journal while all other sources including questions with worked sollutions say when doing commencing entries, any cash capital contributed by the owner to the business should be put in the cash receipts journal

WTF... now im looking at a 2005 question which puts commencing entries in the cash receipts journal (for contributions of cash) while the 2007 first question has bank in the general journal for commencing entries (first question) OMG
What the go with that!

I can help with this. Ok the difference between the questions is, in 2005 the business was starting up, "Mark Munro commences a business called Mark’s Motorbike City on 1 January 2005." however in the 2007 question the business was already operating, and just starting a double-entry system, "John Barker has been operating a small business, Barker Electrics, selling a range of electrical goods. He is about to commence using a double-entry accounting system"

Since the business was just changing its accounting system, no cash had actually be contributed and therefore the account just needed to be opened. However, in 2005 when the business was just starting up then the cash was a capital contribution and should go in the cash receipts journal.

Hope this helps! Tell me if its to confusing.

[costargh]

Oh thanks!!! Yeh that makes perfect sense. Thats what I thought it had something to do with but I couldnt find any information which said that like you did! Thanks again =)

[elaine]

Compak 2008 Question 2.5.3

Explain how the profit and loss statement prepared in question 2.5.2 (this was a standard profit and loss statement) could be changed to enable the qualitative characteristic of comparability to be applied.


Answer: It would require the addition of last reporting periods (six months) figures to provide a comparison. This requires a consistent application of principles.

WTF

there is no last reporting periods profit and loss statement given in the question, so you can't compare the two and see if the headings are different etc..

The question and answer seem to be on completely different planets, the question is asking HOW it could be changed, the answer is saying you need the other profit loss statement (No shit).

does this seem stupid to anyone else?

lol yeah i did that one as well. lol i had no idea how to answer that one haha.

Cambridge book says when doing commencing entries put bank in the General Journal while all other sources including questions with worked sollutions say when doing commencing entries, any cash capital contributed by the owner to the business should be put in the cash receipts journal

WTF... now im looking at a 2005 question which puts commencing entries in the cash receipts journal (for contributions of cash) while the 2007 first question has bank in the general journal for commencing entries (first question) OMG
What the go with that!

I can help with this. Ok the difference between the questions is, in 2005 the business was starting up, "Mark Munro commences a business called Mark’s Motorbike City on 1 January 2005." however in the 2007 question the business was already operating, and just starting a double-entry system, "John Barker has been operating a small business, Barker Electrics, selling a range of electrical goods. He is about to commence using a double-entry accounting system"

Since the business was just changing its accounting system, no cash had actually be contributed and therefore the account just needed to be opened. However, in 2005 when the business was just starting up then the cash was a capital contribution and should go in the cash receipts journal.

Hope this helps! Tell me if its to confusing.

i was wondering about that too! it makes a lot more sense now, thanks jamison

[elaine]

Has anyone done the 2004 rewritten mid year exam?

If so, how did you work up 2.4.1? It is such a weird table, i've never seen it before.

2.4.1
Thomas decides to offer credit terms to customers from 1 May 2006. The following documents relate to the sale of a motorised scooter to customer John Smith.
TOMO’S TOYS
ABN 46 997 218 347
 Receipt No. 425
 Date 27/5/2006
Received from:    John Smith
For:                      Deposit on GT Motorised Scooter 
                            (on order)
 Amount                                                  $ 90

TOMO’S TOYS
ABN 46 997 218 347
 Invoice No. 65
 Date 26/6/2006
Debit Account:      John Smith
For:                        GT Motorised Scooter
  Amount  $900 + $90 GST               $ 990
  Less deposit paid                            $   90
                  Balance due                     $ 900



TOMO’s TOYS
ABN 46 997 218 347
 Receipt No. 528
 Date 12/7/2006
Received from:      John Smith
For:                        Balance owing – Invoice 65
                        Amount                            $ 990


• The scooter was delivered to the customer on 26 June 2006.
• The cost price of the scooter was $400.

2.4.1  Show the effect of this transaction on Assets and Owner’s Equity, at 30 June 2006


Here is the answer:

Assets   Liabilities   Owner’s Equity
Account   Inc/Dec   $   Account   Inc/Dec   $   Account   Inc/Dec   $
Bank   Inc   90   GST   Inc   90   Capital   Inc   500
Debtor   Inc   900                  
Stock   Dec   400                  
Overall   Inc   590                  

How strange is the table? Hopefully, they won't pull this out again for our exam :S

[costargh]

If a business purchased a building for 12000 in 1981 and then in 1996 made 40000 worth of renovations, how would it be reported in the balance sheet?

[elaine]

If a business purchased a building for 12000 in 1981 and then in 1996 made 40000 worth of renovations, how would it be reported in the balance sheet?

12000+40000= 52000
is that the answer?
because the cost of the asset include any costs associated with bringing the asset into a revenue earning state, which include modifications added.

[costargh]

I dont know the answer HAHA
Im actually wondering =S

I think that would be the answer though.... Id hope so.

And your answer makes sense. Yeh I guess it would have to be because its just like 'repairs' on equipment or something. Without them, the ability of that asset to contribute to revenue would hindered, so repairing the asset ( in this case a building) would allow more revenue to flow to the entity.

[costargh]

Why can assets that were worth 10000 when purchased by the OWNER and then contributed to the business (with an agreed value with the accountant of 5000) be reported in the balance sheet as 5000 but still be in line with Historical cost? Is it because it is the most Relevant value?

[elaine]

Why can assets that were worth 10000 when purchased by the OWNER and then contributed to the business (with an agreed value with the accountant of 5000) be reported in the balance sheet as 5000 but still be in line with Historical cost? Is it because it is the most Relevant value?

is that in a question somewhere? i would've thought it would be valued at $10000, i think i got a question like this wrong.

[costargh]

Theres been heaps of questions iv done where that is the situation.

Its reported at the value it was agreed to by the accountant and the owner. Ill try find thee question

[AppleXY]

when he contributed the asset to the business it was worth $5000. Before that, he bought the asset for his/her's personal use which we do not account for, as it will breach the entity principle.

Thus, the value that the owner contributed is the value that should be displayed on the Balance sheet.

[elaine]

when he contributed the asset to the business it was worth $5000. Before that, he bought the asset for his/her's personal use which we do not account for, as it will breach the entity principle.

Thus, the value that the owner contributed is the value that should be displayed on the Balance sheet.

ohhh cool, thanks apple
but there's no source document evidence to verify the value (unless you can count the memo), so would it  be a breach of Reliability?

[costargh]

Oh yeh it makes sense. Some of the usefulness of the asset has been consumed by the owner for personal use so it would have to be recorded at the price it was contribtuted by the owner

Elaine look at rewritten questions 1.1.1 from 2005 exam. Its the first questioon

[AppleXY]

Nah, actually you were correct. You use the memo to record the transaction of an asset contribution to the business

[costargh]

when he contributed the asset to the business it was worth $5000. Before that, he bought the asset for his/her's personal use which we do not account for, as it will breach the entity principle.

Thus, the value that the owner contributed is the value that should be displayed on the Balance sheet.

ohhh cool, thanks apple
but there's no source document evidence to verify the value (unless you can count the memo), so would it  be a breach of Reliability?

I think in this case there is a conflict between Reliability and Relevance but Relevance prevails becaused by recording the asset at 10000 we would be overstating assets (only 5000 of the asset well aactually help contribute to earning revenue) and this would affect decision making.