VCE Accounting Question Thread!

[eeps]

I'll try to answer your questions in one go. Yeh, I tend to agree the "allocation of responsibility" is weak as an answer; it's correct but only refer to it if you have to. I wouldn't mention it at all personally. As for your other question, I was crucified by my teacher last year when I wrote "GST" in a ledger in a SAC; VCAA expect students to write "GST Clearing" no matter what, so if you just wrote "GST" you would lose marks. Write everything in full, don't take shortcuts. The Assessor's Reports detail what VCAA expect from students, and you'll probably hear this again if you go to any mid-year lectures for Accounting.

[nacho]

Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports

[eeps]

Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports

Control accounts and subsidiary ledgers assist in the preparation of reports in that only one figure has to be transferred to the reports. It simplifies and makes it easier. For example, once you balance the Stock Control account, you're left with one figure; which is generally on the debit side. That figure can then be transferred to the Balance Sheet under "Current Assets", assisting in the preparation of reports.

[Fyrefly]

Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports

Control accounts and subsidiary ledgers assist in the preparation of reports in that only one figure has to be transferred to the reports. It simplifies and makes it easier. For example, once you balance the Stock Control account, you're left with one figure; which is generally on the debit side. That figure can then be transferred to the Balance Sheet under "Current Assets", assisting in the preparation of reports.

Also: cross-check mechanism.

[nacho]

This question is doing my head in...
- $120 of equipment was incorrectly debited to cleaning supplies   (please note that it is cleaning supplies)
A payment of $100 interest was incorrectly debited to Loan - HBM
Question. Explain the effect on the Net Profit of Blue Lines for June 2010 if the error regarding equipment had not been corrected.
My answer - There is no effect, as there is still an overall increase in assets by $120.

The book's answer - " Cleaning expenses would be overstated by $120, meaning Net profit would be understated by $120.
(Equipment is an asset, not an expense.)"
____
How did it even become an expense..

Q2. State the effect on owner's equity of the entries to correct the error regarding stock.

[Hodgeyhodgey]

This question is doing my head in...
- $120 of equipment was incorrectly debited to cleaning supplies    (please note that it is cleaning supplies)
A payment of $100 interest was incorrectly debited to Loan - HBM
Question. Explain the effect on the Net Profit of Blue Lines for June 2010 if the error regarding equipment had not been corrected.
My answer - There is no effect, as there is still an overall increase in assets by $120.

The book's answer - " Cleaning expenses would be overstated by $120, meaning Net profit would be understated by $120.
(Equipment is an asset, not an expense.)"
____
How did it even become an expense..

Q2. State the effect on owner's equity of the entries to correct the error regarding stock.

In that case, I'd assume the book has made a typo and put 'supplies' instead of 'expenses'.

[luffy]

I have a question, which is probably irrelevant to the accounting course. In the textbook, it constantly mentions the term "accrual accounting" which is the calculation of profit by subtracting expenses from revenues.

Is there another method of calculating profit, which is not accrual accounting?

Also:

Oh okay, fair enough.
One question oustanding though: Explain how using a system of control accounts and subsidiary ledgers assists in the preparation of reports

Control accounts and subsidiary ledgers assist in the preparation of reports in that only one figure has to be transferred to the reports. It simplifies and makes it easier. For example, once you balance the Stock Control account, you're left with one figure; which is generally on the debit side. That figure can then be transferred to the Balance Sheet under "Current Assets", assisting in the preparation of reports.

How do subsidiary ledgers assist in the preparation of reports though?

[sam.utute]

Another method used by mainly by small sole trader businesses is "cash accounting." This is basically when you record revenues when you receive that cash, and expenses when you pay them. In contrast, accrual accounting involves recording revenues when earned, and expenses when incurred.

[luffy]

Another method used by mainly by small sole trader businesses is "cash accounting." This is basically when you record revenues when you receive that cash, and expenses when you pay them. In contrast, accrual accounting involves recording revenues when earned, and expenses when incurred.

Ah... right - I can't believe I didn't self-realize that. Thanks Sam.Utute.

[nacho]

1. Explain why in some situations errors may be corrected in the appropriate special journal, but in others a General Journal entry is required.

I thought that errors were always corrected in the general journal?
Also, what are three types of errors which are corrected in the general journal

[luffy]

1. Explain why in some situations errors may be corrected in the appropriate special journal, but in others a General Journal entry is required.

I thought that errors were always corrected in the general journal?
Also, what are three types of errors which are corrected in the general journal

Logically speaking, you only make a correcting entry once the special journals have been posted to the ledger accounts. Therefore, if they haven't yet been posted (i.e. before the last day of the reporting period) you can simply fix the part in the special journal by "erasing" the incorrect part and fixing it to what should have been there.

Types of errors (in my opinion) would include:
- Omission of a transaction
- Reversing Debit/Credit entries
- Debiting/Crediting the wrong amount (the only one which would be picked up by the Trial Balance)
- Debiting/Crediting the wrong ledger account.

[nacho]

1. Explain why expense and revenue accounts are not included in the general journal when we recorded a commencing entry.

[luffy]

1. Explain why expense and revenue accounts are not included in the general journal when we recorded a commencing entry.

I know the answer - but its hard to explain (as are most theory questions in accounting lol). Can someone confirm if this is correct?

A commencing entry takes place only during the start of a reporting period. Revenue and expense accounts exist only during the Reporting Period when they are respectively earned/incurred. Therefore, as they do not have a balance at the start of the reporting period, they should not be recorded as a commencing entry.

[nacho]

1. Explain why expense and revenue accounts are not included in the general journal when we recorded a commencing entry.

I know the answer - but its hard to explain (as are most theory questions in accounting lol). Can someone confirm if this is correct?

A commencing entry takes place only during the start of a reporting period. Revenue and expense accounts exist only during the Reporting Period when they are respectively earned/incurred. Therefore, as they do not have a balance at the start of the reporting period, they should not be recorded as a commencing entry.

sounds good.

1. Identify three details that are provided when transactions are recorded in teh stock card but not provided in the Stock Control Account.

[luffy]

Details would include:
- Source Documents

- Location in the store

- Details of particular lines of stock

- Common Suppliers

- Individual transaction dates (i.e. I like to look at stock cards, as if they are subsidiary ledger accounts, while stock control is the respective general ledger account)

There are probably more details - my brain just isn't functioning.