VCE Accounting Question Thread!

[cibicl]

Hey! Could anyone help me with this question?

"Explain with reference to a QC the reason for preparing Memo 8 (it is a memo of a physical stockstake where a stock loss occured"
Thanks

[luffy]

Hey! Could anyone help me with this question?

"Explain with reference to a QC the reason for preparing Memo 8 (it is a memo of a physical stockstake where a stock loss occured"
Thanks

This would be my answer to the question:

Relevance - All information relevant to decision-making should be included in accounting reports. The preparation of memo 8, including the stock take, is conducted to detect any stock losses in the reporting period, so that an accurate profit figure can be calculated, which would be more useful for decision-making.

The reason I didn't say Reliability was because it wasn't asking for why we need to have a memo, but why it is prepared. I'm not 100% sure of my answer, and there is a chance my answer could be wrong.

Tell me if I was right. Hope I helped.

[cibicl]

Hey! Could anyone help me with this question?

"Explain with reference to a QC the reason for preparing Memo 8 (it is a memo of a physical stockstake where a stock loss occured"
Thanks

This would be my answer to the question:

Relevance - All information relevant to decision-making should be included in accounting reports. The preparation of memo 8, including the stock take, is conducted to detect any stock losses in the reporting period, so that an accurate profit figure can be calculated, which would be more useful for decision-making.

The reason I didn't say Reliability was because it wasn't asking for why we need to have a memo, but why it is prepared. I'm not 100% sure of my answer, and there is a chance my answer could be wrong.

Tell me if I was right. Hope I helped.

Yeah I did think it was relevance. Just wasn't a 100% sure. Thanks heaps

[luffy]

I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):
- I know my answer is wrong, I just don't understand why its wrong.

So the question is:

"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."

Anyone got any thoughts on this question?

[eeps]

I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):
- I know my answer is wrong, I just don't understand why its wrong.

So the question is:

"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."

Anyone got any thoughts on this question?

I came across this question last year, it's understandability from what I remember.

[luffy]

I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):
- I know my answer is wrong, I just don't understand why its wrong.

So the question is:

"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."

Anyone got any thoughts on this question?

I came across this question last year, it's understandability from what I remember.

Yes, it is understandability. But why? How does classifying information make it more understandable? The asset is still an asset; you have just informed the owner that it is current/non-current, making it more useful for decision-making, which would be Relevance.

[eeps]

Both answers are correct, I agree with you. It's an ambiguous question. My teacher told me last year that at a meeting of VCAA markers, this particular question was debated at length. The "more" correct answer according to Neville Box was understandability. I don't know why it's understandability, just is. If anything, it should be relevance. Understandability is the characteristic VCAA will only accept. I realise what I've said doesn't answer your question; it's more-so a grey area in VCE Accounting.

[luffy]

Both answers are correct, I agree with you. It's an ambiguous question. My teacher told me last year that at a meeting of VCAA markers, this particular question was debated at length. The "more" correct answer according to Neville Box was understandability. I don't know why it's understandability, just is. If anything, it should be relevance. Understandability is the characteristic VCAA will only accept. I realise what I've said doesn't answer your question; it's more-so a grey area in VCE Accounting.

From my current perception of the question, not only should understandability not be the "more correct answer," but it shouldn't really even be an option. Neville Box must have a reason behind why he wanted that answer.

I guess there must be more to classifying an asset/liability than we are realizing. I guess I need to do more research.

[nacho]

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.

im kind of unsure if this is the answer the book requires.
the previous question was "What is in the top section of the stock cards which isnt in the stock control account" or something along htose lines..
for which i putwhat you just said
All i could get was the Individual transactions..

[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.

im kind of unsure if this is the answer the book requires.
the previous question was "What is in the top section of the stock cards which isnt in the stock control account" or something along htose lines..
for which i putwhat you just said
All i could get was the Individual transactions..

Well, source documents aren't stated in the "top section" of stock cards either.

Also, stock cards also state the individual cost prices of stock, whereas the stock control account merely states a total stock value.
That, along with the individual transaction dates, should cover all the details in the stock card, which are not in the control account.

[nacho]

^ gw
Another question:
"Explain how the profit and losss summary account would be classified in the balance sheet."

Okay, well the profit and loss summary account isn't actually classified in the balance sheet, however, the end profit/loss is added/subtracted to/from the capital account.
So how would one go about wording this?

I did a VCAA accounting exam and I came across a certain question (to which I disagree with the VCAA solutions):
- I know my answer is wrong, I just don't understand why its wrong.

So the question is:

"With reference to a qualitative characteristic, explain why Assets and Liabilities are classified in the Balance Sheet."

Anyone got any thoughts on this question?

I probably would have said relevance, but looking at the definitions I can see where VCAA was going with this  question.
Understandability: Reports should be presented in a manner in which it is easy to understand. They may perhaps reject "relevance" because the question does not ask why we include assets and liabilities in the balance sheet (which is a represenation of the accounting equation for the business).
rather it's asking why we group assets and liabilites together as current/non-current (classify). And i guess it's cause it's clearer to read with all our assets grouped together on one side and our liabilities on the other side, furthermore in their respective current and non-current ways, we can see how it balances, thus making it easier to comprehend the information presented to us.

Fairly debateable question though, they should accept both answers, but i dont think understandability is wrong, it is technically right, and more correct

Edit: (lol my 4th edit..) i actually think relevance is wrong, because the accounting equation isn't split into current assets + non-current assets = NCL + CL + OE
it's technically not relevant at all to include classified stuff

Yes, it is understandability. But why? How does classifying information make it more understandable? The asset is still an asset; you have just informed the owner that it is current/non-current, making it more useful for decision-making, which would be Relevance.

yea, you've made it easier for the user to comprehend the meaning. i dont think the real reason is to aid in decision making, for the exact same reason as to why we exclude the individual debtors and creditors (its' irrelevant to decision making). int heory we shouldnt classify, because it doesnt effect decision making, so therefore, we classify to increase understandability

[eeps]

Although the P/L Summary account isn't classified in the Balance Sheet; after it has been closed off, the end figure is then transferred to "Owner's Equity" in the Balance Sheet of the business. At which point, the figure will be subtracted from or added to the amount of the "Capital", depending on whether a net profit or loss was determined.

[luffy]

- Tell me if I'm wrong, but by classifying the Balance Sheet, we are allowing for the calculation of statistics, such as Working Capital Ratio, and Quick Asset Ratio, making it more useful for decision-making.
 
- I don't understand you. How does the Accounting Equation relate to this?

- In their respective current/non-current groupings, how does it make us see how it balances? All the individual assets/liabilities are still there, if we don't classify them, the only addition is they are categorized.

- However, I am starting to see where VCAA is coming from.... so Thank you for your post!

[nacho]

- Tell me if I'm wrong, but by classifying the Balance Sheet, we are allowing for the calculation of statistics, such as Working Capital Ratio, and Quick Asset Ratio, making it more useful for decision-making.
 
- I don't understand you. How does the Accounting Equation relate to this?

- In their respective current/non-current groupings, how does it make us see how it balances? All the individual assets/liabilities are still there, if we don't classify them, the only addition is they are categorized.

- However, I am starting to see where VCAA is coming from.... so Thank you for your post!

In regards to the Working Capital Ratio and Quick Asset ratio - this is a fair point actually and I didn't know the meanings of these terms, are they in the vce accounting course?
Even then, however, this only aids the point of understandability. Because, even if the information isn't classified, we can still work out the working capital ratio and quick asset ratio.
 Consider the following scenario:
"An experienced accountant (as opposed to the average business manager, with little accounting knowledge) will be able to identify that "Equipment" and "Vehicle" are non-current assets and that "Stock control" and "bank" are current assets. So, even if the balance sheet did not classify the stuff, he is still able to work out the Working Capital Ratio and quick asset ratio, it'll just take him longer. Now, in contrast, the average business manager would have difficulty in identifying the current assets and non-current assets (same goes for liabilities) and in turn would have difficulty in working out the working capital ratio and quick asset ratio. Therefore, the balance sheet classifies information, so as to allow the inexperienced manager to identify current and non-current assets and liabilities."

In regards to why i was talking about the accounting equation, it relates because the Balance Sheet is the accounting equation. And, because the accounting equation does not specifically state that "Current Assets + Non-current assets = Current Liabilities + non-current liabiliteis + owner's equity" It isn't in fact "relevant" to classify in the balance sheet. We only classify to have a more understandable blaance sheet.

As to your third inquiry, i think i was a bit confused. When i thought of classifying, i thought of grouping in general, in addition to grouping in terms of non-current and current (assets on side, divided into non-current and current assets, liabilites on the other side, divided into current and non-current, plus owner's equity)
from which you can add the totals on each side and see if your accounting equation balances.
Idk, im just rambling on lol

Also, i had a question.
In the balance sheet, do we write "Stock control" or simply "stock" ?
Sames goes for debtors and creditors.
Also, if the business has undertaken two seperate loans, both with <12months repayments (eg quarterly, every semester etc), do would you just write two seperate entires in the non-current and current liabilities?

Eg:
Current Liabilties:
Loan - Goku         $9001
Loan - SS Vegeta  $9000
Non-current Liabilities:
Loan - Goku      $ 100,000
Loan - SS Vegeta   $ 99,999

?
Is this correct?


Also, in the general journal, is it acceptable to abbreviate "profit and loss summary account" to "P&L Summary account" ?
The textbook does this, but my teacher warned me not to abbreviate - ever.

[eeps]

Also, i had a question.
In the balance sheet, do we write "Stock control" or simply "stock" ?
Sames goes for debtors and creditors.
Also, if the business has undertaken two seperate loans, both with <12months repayments (eg quarterly, every semester etc), do would you just write two seperate entires in the non-current and current liabilities?

Eg:
Current Liabilties:
Loan - Goku         $9001
Loan - SS Vegeta  $9000
Non-current Liabilities:
Loan - Goku      $ 100,000
Loan - Vegeta   $ 99,999

In the Balance Sheet, you must write "Stock Control" not just "Stock". Same goes for Debtors and Creditors; must be "Debtors Control" and "Creditors Control". To answer your second question, yes, you would do that. Though you'll find in most exams, they'll only give you one loan which is spilt into "Current" and "Non-current". Rarely two. Sidenote; your Dragon Ball Z references are quite amusing.  :p