I'm a bit shaky on this since it's been like a year but...
(sorry for the random order of answering your questions)
another question,
reffering to a qualitative characteristic, explain why recording the prepaid revenue as revenue received is inccorect
Relevance. Recording prepaid revenue as revenue recieved is incorrect as it has not yet been earned by the business and hence is not relevant to the current reporting period. It does not represent any inflow of economic benefits leading to an increase in owner's equity.
Another question,
for exercise 14.6 and the calculation of cost of stock, i added the insurance payment.
Solutions disagree with me, but my reasoning was that it is a cost incurred on bringing the stock to a condition ready for sale, and furthermore, it is a benefit that will last throughout the life of the asset.
I agree it is a weak argument, however, i'm thinking there's at least a 2% chance im right
I always treated insurance as a period cost. The definition of a product cost (as i recall) is a cost incurred in order to bring stock into a condition and location ready for sale which can be allocated to an individual unit of stock on a logical basis. The insurance on the stock in this case is not required to do this. It is simply an extra periodic expense being paid in regards to the stock; this payment will occur regardless of whether the stock is sold or not, so it cannot be allocated to individual units of stock on a logical basis.
question d from exercise 13.6
the answers have put the sales figure as 52000, but i have 56000
could anyone verify this? I do not see how it is 52000
It says that credit sales are $44,000
(Including $4000 GST)so your actual credit sales are $40,000, which gives total sales of $52,000.
also, i just came across 'term deposit'
is that something i should have learned previously?
You don't need to worry about term deposits until you do balance day adjustments for revenues. It's basically just:
You put in a certain amount of money for 'x' amount of years as it earns a certain amount of interest each year. All you want to calculate is the amount that is accrued at the end of each reporting period, and also how much you've recieved.
Explain why it is important to have an accurate budgeted sales figure?
Your budget basically affects your planning an decision making for the budgeted period. An accurate budgeted sales figure is important as it also has an impact on your other budgets such as budgeted expenses (e.g from COGS) and also your budgeted cash flow statement (from inflows from debtors and cash sales), balance sheet, profit and loss statement etc. If your budgeted sales for a period in exceedingly high, then it may result in too much stock being purchased, and vise-versa.
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