VCE Accounting Question Thread!

[redcracker]

a purchase return simply adjusts ledger accounts it doesn't add anything (im having trouble articulating the idea aswell)

sales returns have their own ledger because they are an indication of customer disatisfaction, and they are reported seperately under their own heading in the income statement to bring the issue to the attention of the owner to that corrective action may be  taken. (relevance is normally the QC linked to this area)

the owner already knows about purchase returns and so it does not need to be brought to the attention of the owner.

hope this explanation helped a bit?

[Jason12]

if sales were 10% higher than budgeted and my sales figure from the income statement is 550,000 then how do I work out what the budgeted is?

I did 10% x 550,000 and then subtracted that from 550,000 but its wrong.

[demand&supply]

if sales were 10% higher than budgeted and my sales figure from the income statement is 550,000 then how do I work out what the budgeted is?

I did 10% x 550,000 and then subtracted that from 550,000 but its wrong.

550,000/11 which is 50,000, then multiply by ten gives you 500,000

[sam.utute]

if sales were 10% higher than budgeted and my sales figure from the income statement is 550,000 then how do I work out what the budgeted is?

I did 10% x 550,000 and then subtracted that from 550,000 but its wrong.

Easier way to think about it:

Let budgeted figure = X
Actual figure = 1.1 x X (10% higher than budgeted)

Therefore:
550,000 = 1.1 x X,
X = 550,000/1.1
X = 500,000

[sam0015]

Is it worth getting an Accounting tutor next year (2015) for units 3 and 4? 

[Equilibriaas]

I reccomend it because it was with my tutor's help I finished the course throughly and early. If I were I study myself, I don't think I could have done it efficiently. But don't take my word, there are people on AN that don't need tutors to get ahead.

[abcdqdxD]

Is it worth getting an Accounting tutor next year (2015) for units 3 and 4?

Depends. If you are naturally a good student it's probably not necessary. Generally I have two types of students: the ones that just want to pass and ones that want to do really well.

[Rachelle]

are debtors and stock classified as revenue? because when i'm doing income statements for trading firms, i only ever have to put cash and credit sales.

also,is the creditors/debtors schedule source documents, or records, or what?

any answers greatly appreciated.

[Valyria]

are debtors and stock classified as revenue? because when i'm doing income statements for trading firms, i only ever have to put cash and credit sales.

also,is the creditors/debtors schedule source documents, or records, or what?

Debtors and stock are classified as assets. Credit sales to debtors is considered to be revenue as the inflow of economic benefits in the form of an increase in assets (debtors control) results in an increase in owner's equity. Sales also incur an expense (cost of sales) as the outflow of economic benefits (stock that can be used for future sales) in the form of a decrease in assets (stock control) results in a decrease in owner's equity. So, although you won't explicitly see the items 'stock control' and 'debtors control' in the income statement, you'll see other accounts that are affected by them.

I wouldn't say that creditors/debtors schedule are source documents as they don't verify a transaction from occurring. Conversely, they are schedules that facilitate the calculation of projected receipts from debtors and payments to creditors.

Hope these answer your questions.

[Rachelle]

Thank you for your great response 

[marsbareater12]

Straight out of the textbook 17.4, q1:

"Referring to one accounting principle, explain why it may be necessary to prepare a Schedule of Receipts from Debtors when preparing a Budgeted Cash Flow Statement"

I have zero idea. D:

[Valyria]

"Referring to one accounting principle, explain why it may be necessary to prepare a Schedule of Receipts from Debtors when preparing a Budgeted Cash Flow Statement"

The reporting period principle states that the life of the firm should be separated into equal periods of time to prepare reports that reflect the period in which they occur. A budgeted cash flow statement will contain information regarding projected receipts from debtors. However, credit sales to debtors and receipts from these debtors may take place over different reporting periods. By creating a schedule of receipts from debtors, we can accurately calculate the amount received from debtors during a particular budgeted reporting period.

[Jason12]

what is the limitations of gross profit margin in assessing profitability?

how are some of the profitability indicators linked/explain how a change in one affects the other?

[Valyria]

what is the limitations of gross profit margin in assessing profitability?

GPM measures the average mark up by calculating the % of sales revenue that is retained as gross profit. Indeed, a greater gap between selling price and cost price could be interpreted as having a higher average mark up. Yet through the formula of GPM (gross profit/sales revenue x 100) how can we deduce whether an increase in GPM is attributed to a decrease in cost price where selling price remains constant or to a decrease in both selling price and cost price where cost price has decreased by more? Well, this could be considered as a limitation of the GPM formula. As profitability is seen as the ability of the firm to earn profit measured by comparison against a base (in this case gross profit and sales revenue) we are limited in assessing profitability solely based on the GPM formula.

how are some of the profitability indicators linked/explain how a change in one affects the other?

The most common link I have come across is asset turnover, net profit margin and return on assets (you can derive the ROA formula based on the other 2 aforementioned). ATO measures how productively a firm has used its assets to earn revenue whilst NPM measures expense control and ability to retain sales revenue as net profit. The ROA depends on the ability of the firm to use its assets to generate revenue and control its expense, a link to both the NPM and ATO formula. Have a shot at making arbitrary numbers for net profit, sales etc. and change them around to see the affect on ROA.

Hope this helps.

EDIT: ROA to ATO* (Thanks Mars)

[marsbareater12]

The most common link I have come across is return on assets, net profit margin and return on assets
Hope this helps.

Asset turnover, perhaps? (stupid similar ratios)