VCE Accounting Question Thread!

[_avO]

Thanks for your help _avO!!

Sorry I wrote the wrong thing for question 1, it's actually supposed to be:

"In a small local business, the 4 business owners have decided to donate a day's work to help a local charity. They usually earn $100 a day which will be deducted from their week's pay".

Is it still the same principle/solution even though they are not giving money and the business is actually saving $400? (If that makes sense?)

I'm unsure of the answer as the only thing the business is losing is 'time' which can't really be valued. What I would do is just recognise the event as irrelevant to the business' entity. The business loses productivity but you don't record that in your statements.

The second question I understand although I'm unsure as to what amount to enter as the cost was $0. If I use cost price then the transaction would have no effect on accounts at all would they? Or do I use the selling price but wouldn't this go against the historical cost principle? I'm really not sure what to do with this one.

Yeah since there is no monetary effect then I wouldn't record it

- If there is damage to a non current asset that makes it unusable, what is the name of this account? Ie. for stock it is called stock loss but what do you call the account if it does not involve stock?

Under the AASB 136 - Impairment of Assets, when an asset is damaged it is recognised as depreciation, it is then deducted from the initial value of the asset. In this case if an asset is damaged to the extent that it is unusable, then the Recoverable amount is $0, and the useful life is 0 years.
EG.
Depreciation Expense = (Historical cost - Recoverable amount)/Useful life
                             =       ($10,000 - 0)/0
                             = $10,000
Carrying value = HC - Dep'n Exp
                    = $10000 - $10000
                    = $0
So you basically write off the asset as it no longer holds any future economic benefit and theres no probable outcome of liquidating the asset

- Do you happen to know how to account for a 'lease' of a non current asset?

No idea ><

IF i were to guess, then I would record it as this
DR - NCA                          $20000
    CR - Lease liability                   $25000
DR - Lease charges/interest $5000

And when you make a repayment at any point it would be
DR - Lease liability   $$$$
    CR Cash at bank         $$$$

When you repay interest
DR - Lease charges/interest $$$
    CR - Cash at bank               $$$

As well as during the Balance Day adjustment period
DR - Depreciation expense: NCA $$$$$
    CR - Accumulated Dep'n: NCA        $$$$$

[marr]

Wow you really are amazing at this! Haha thanks so much!

I hope you don't mind me asking but how did you know all of that? In your signature it says you did accouting last year so did you learn it through VCE? Kudos to you anyway and all the best in the future!

[marr]

Sorry for the impairment of assets question, do you create an 'impairment of asset' account so that it would be:

Debit: 'Impairment of -insert asset name here-' (E)
 Credit: Non current asset

or is it:

Debit: Depreciation of -insert asset name here-(E)
 Credit: Non current asset

[nacho]

Question
A motor vehicle is bought on credit for $30,000.
Explain with reference to the motor vehilce the following parts of the asset definition:
(A) Controlled by the entity as a result of past transactions:

(B) Future economic benefits are expected to flow:

Explain with reference to this transaction the following parts of the liability definition:
(C) A present obligation arising from past events

(D) Outflow of resources embodying economic benefits.

thanks!

[marr]

I'll give it a shot.

(A) The business legall owns the motor vehicle as a result of its purchase (past transaction) and thus are the only ones who are able to utilise (control) the economic benefit.

(B) The motor vehicle can be used by the business to deliver goods thus assisting the business in earnign more revenue

(C) The business has a present obligation to pay the creditor as a result of the purchase (past event)

(D) This is expected to result in an outflow of an economic benefit in the form of cash when the creditor is repaid

[_avO]

Sorry for the impairment of assets question, do you create an 'impairment of asset' account so that it would be:

Debit: 'Impairment of -insert asset name here-' (E)
 Credit: Non current asset

or is it:

Debit: Depreciation of -insert asset name here-(E)
 Credit: Non current asset

It's the bolded one, 'Impairment of Assets' is just the category in which damaged assets are classified under the Australian Accounting Standards Board (the standards and guidelines to which financial reports are to be prepared). Other impairments include obsolete goods and worse than expected economic performance.

Question
A motor vehicle is bought on credit for $30,000.
Explain with reference to the motor vehilce the following parts of the asset definition:
(A) Controlled by the entity as a result of past transactions:
Motor Vehicle
(B) Future economic benefits are expected to flow:
Transporting persons/goods
Explain with reference to this transaction the following parts of the liability definition:
(C) A present obligation arising from past events
Sundry Creditors $30000 payable
(D) Outflow of resources embodying economic benefits.
Decrease in cash ($30000)
thanks!

[nacho]

Question:
I noticed in this thread:

http://vce.atarnotes.com/forum/index.php/topic,38980.0.html

that hello_kitty used 'we' a fair bit. I generally find myself doing this, but i try to avoid it, do the examiners dislike this style in answering questions?

[_avO]

I'd just replace it with 'the business' or the name of the business if it's given

[ech_93]

I have two questions...
1. If the GST clearing account balance thing at the end of the reporting period is a debit... what does that mean? Is it that we owe the government more/less money, or something?

2. In the general journal we just put the extra things that don't fit into the other journals , yeah? And then in the general journal, what is the difference between the general ledger and subsidiary ledger? What do we put in them :S
(i hope that makes sense)

Thanks!

[sam.utute]

I have two questions...
1. If the GST clearing account balance thing at the end of the reporting period is a debit... what does that mean? Is it that we owe the government more/less money, or something?

2. In the general journal we just put the extra things that don't fit into the other journals , yeah? And then in the general journal, what is the difference between the general ledger and subsidiary ledger? What do we put in them :S
(i hope that makes sense)

Thanks!

1. We owe the ATO so much less money, now in fact, they end up owing us. Remember that an asset is a resource that will bring about an inflow of economic benefits in the future. In this case, we are entitled to received a GST REFUND from the ATO as we have paid or incurred more GST than we have received or charged.

2. The general ledger columns are used to record the effects of transactions that affect accounts in the General Ledger (such as Bank, Stock Control, Drawings etc.). The subsidiary ledger column is used to record the changes in the Creditors and Debtors Ledger. So, for example, when debtor B. Hill declares bankruptcy on his debt of $500, the General Ledger accounts affected are Debtors Control and Bad Debts. So the general ledger column is used to change these accounts.
In the subsidiary ledger, the account, Debtor- B. Hill has decreased, so the subsidiary column is used to reduce this account.

DR.  Bad Debts                   500
     CR.  Debtors Control             500
     CR. Debtor - B. Hill                                500

[minimum]

i have a question that's really confusing me:

A business usually earns $50 a day from providing it's services,
however it decides to donate a day worth of services to a charity.

First i thought it should be an expense then i realised it doesn't meet the definition.
As, there is no decrease in assets nor is there an increase in Liabilities.
If so, i think it shouldn't effect any element.

Is my thinking correct? Please help!

[soopertaco]

couldn't an expense also be defined as a decrease in inflow or increase in outflow of assets??

for example a debt written of as irrecoverable will result in a reduction of inflow of cash from debtors.
i may be wrong so please correct me before i commit this to long term memory haha

but using this logic, since they aren't working for payment this could be a 'reduction in inflow' thus this expense could be entered into the general journal as a debit to advertising/donations and credit to ______ im actually blank here on the other side of the double entry.

i have a feeling that i'm totally wrong but now i'm curious, someone help

[minimum]

couldn't an expense also be defined as a decrease in inflow or increase in outflow of assets??

for example a debt written of as irrecoverable will result in a reduction of inflow of cash from debtors.
i may be wrong so please correct me before i commit this to long term memory haha

but using this logic, since they aren't working for payment this could be a 'reduction in inflow' thus this expense could be entered into the general journal as a debit to advertising/donations and credit to ______ im actually blank here on the other side of the double entry.

i have a feeling that i'm totally wrong but now i'm curious, someone help

Well, i completed my assignment and said "there was no effect on the accounting elements"
and i was correct.

So, in the circumstances there was no transation held. The revenue were not earned (so cannot cancel them out by categorising them as "donations" etc.

And as there was no inflow there cannot be a reduction.

[soopertaco]

hahaha i think my friend who was doing uni accounting did this as well he said it was really confusing! well i guess you learn something new everyday

[nacho]

Question regarding the benefit of "allocation of responsibility":
Is this a particularly good one to mention? I've always thought of it as kind of dodgy/weak, still not seeing how the allocation of responsibility serves as a benefit, and i don't see why you can't have the allocation of responsibility prior to whatever change in method we've used (e.g without subsidiary ledgers)
Plus, you'd have to have an extra employee, or pay the existing one more as well.

Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports

And just a question regarding in recording in ledgers.
Is it sufficient to just write "GST" instead of "GST clearing" when cross-referencing? Or will the VCAA Examiners not like me taking any shortcuts?
Furthermore, do they make the exam so that if I lost a mark for not cross-referencing in the conventional way (used shorthand) and I did this 4 times in the whole exam, will i only lose one mark?