VCE Accounting Question Thread!

[massachusetts8]

I don't know how to quote but
Damoz.,
THANK YOU THANK YOU THANK YOU!
That makes so much sense! you're a legend! 

[Damoz.G]

I don't know how to quote but
Damoz.,
THANK YOU THANK YOU THANK YOU!
That makes so much sense! you're a legend! 

No worries at all.

Just make sure you read those damn dates! They are always out to get you and make sure that you are fooled.

Oh, and if you wanted to know how to Quote a Post, you just click the "Quote" box on the Post in the top right hand corner, and then type your message underneath.

[massachusetts8]

No worries at all.

Just make sure you read those damn dates! They are always out to get you and make sure that you are fooled.

Oh, and if you wanted to know how to Quote a Post, you just click the "Quote" box on the Post in the top left hand corner, and then type your message underneath.

Oh yes, those dates can be frustrating,

I'm totally blind haha I didn't even see the "Quote" box,  thanks dude! 

[Damoz.G]

Oh yes, those dates can be frustrating,

I'm totally blind haha I didn't even see the "Quote" box,  thanks dude! 

No worries. I'll probably be on all day today whilst doing Accounting and Business Exams, so just post on here if you don't understand something. 

[janson34]

Yes the balance is 6000.

You gotta work backwards with this question, and it helps to draw up a timeline.

Okay, so with this Question, the first thing to note, is that Reports are prepared quarterly, and since we have been told that we are now on Balance Day at June 30 2013, it means that this Reporting Period is April-June. Why? Quarterly is three months, so counting backwards from June three months is April 1. It might help if I said these are the Reporting Periods:
* Jan, Feb, March
* April, May, June
* July, August, September
* October, November, December

Sometimes they may trick you and it won't be as simple as that for quarterly Reporting Periods, which is why you gotta work backwards from the date given.

So from this timeline, where are we?
* Jan, Feb, March
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December

Now look back at the Balance of the Prepaid Rent Expense and it was $9000. This was as at April 1, 2013 because the Reporting Period is April to June. Then, look at when the Prepaid Rent Expense was paid, and for how long. So we can see that it was paid on January 1 2013 for 12 months (annual). So, January, February and March have already been accounted for, and the Expense was allocated in the previous Reporting Period as at March 31, so cross them out:
* Jan, Feb, March
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December

After the last Reporting Period concluded, how many months were left on the Prepaid Rent Expense? 12 minus 3 (Jan, Feb, March) = 9. So as at April 1, 9 Months are left. So now, the balance was 9000, and divide this by 9 months remaining = $1000 per month is the Expense, so for a Reporting Period, its 3x$1000=$3000

So now, the question is asking, whats the balance as at June 30 2013. So now we need to take off another 3 months (April, May, June) because we have already consumed them.
* Jan, Feb, March
* April, May, June <----- HERE! We're on Balance Day for the end of the Reporting Period, so June 30.
* July, August, September
* October, November, December

How many months left on the Prepaid Rent Expense? 6 months. And just before, we calculated the amount for each month is $1000 per month. So 6 x $1000 = $6000 remaining for the Prepaid Rent Expense, as at June 30 2013.

Hope this helps! I tried to break it down as much as I could, but if you still don't get one of the steps, let me know.

The mistake you made was thinking that the whole Prepaid Rent Expense paid on January 1 2013, was $9,000, and missed the Balance Day date on March 31 2013, when the Expense for January to March was already accounted for and recognised as an Expense in the previous Reporting Period.

Damoz,
i really liked how you set this out, it was very easy to go through the steps for the BDA that occured
i should probably do a timeline so i dont get confused !! thanks also ! 

[Damoz.G]

Damoz,
i really liked how you set this out, it was very easy to go through the steps for the BDA that occured
i should probably do a timeline so i dont get confused !! thanks also ! 

Thank you.

Yup, even I make timelines to help make sense of BDAs as well. It only takes about 10-15 seconds to write it all up and then use it, so it definitely helps in understanding and avoiding mistakes.

Also another tip from me is to use your fingers to count months, it looks lame in the Exam room when the supervisors and other people are looking at you weirdly, but who cares? If you get the correct answer, I'm sure that you wouldn't care about getting those weird looks.

[massachusetts8]

I have another question. How does an increase in Debtors Turnover and a decrease in Creditors Turnover affect the profitability of the business? 

[mdotwillo]

I have another question. How does an increase in Debtors Turnover and a decrease in Creditors Turnover affect the profitability of the business? 

An increase in DTO means, on average, debtors are taking longer to repay the business for their initial credit purchase. This will increase the chance of bad debts, therefore potentially increasing expenses, impacting negatively upon profitability. Although, at the same time an increasing DTO will reduce the liklihood of debtors taking advantage of credit terms offered by the business, as such, reducing the chance of discount expenses, impacting upon profitability in a favourable manner.

A decrease in CTO means, on average, the business is repaying their creditors more promptly. If the creditor is offering credit terms (depends on the question), it means an increase in discount revenue is likely, therefore positively impacting upon profitability. Although it should be mentioned that the owner should weigh this up in terms of the financial situation of the firm, for example, paying creditors more quickly reduces the available cash on hand to meet other short term obligations as the fall due (hurting liquidity). Also, a decreasing CTO will reduce the chance of the firm repaying their creditor outside of the credit terms (in which a late repayment fee is likely), therefore also impacting favourably upon profitability due to the reduced chance of increased expenses. (<--- that last point is a bit far-fetched, add it/exclude it depending on the marks)

[massachusetts8]

An increase in DTO means, on average, debtors are taking longer to repay the business for their initial credit purchase. This will increase the chance of bad debts, therefore potentially increasing expenses, impacting negatively upon profitability. Although, at the same time an increasing DTO will reduce the liklihood of debtors taking advantage of credit terms offered by the business, as such, reducing the chance of discount expenses, impacting upon profitability in a favourable manner.

A decrease in CTO means, on average, the business is repaying their creditors more promptly. If the creditor is offering credit terms (depends on the question), it means an increase in discount revenue is likely, therefore positively impacting upon profitability. Although it should be mentioned that the owner should weigh this up in terms of the financial situation of the firm, for example, paying creditors more quickly reduces the available cash on hand to meet other short term obligations as the fall due (hurting liquidity). Also, a decreasing CTO will reduce the chance of the firm repaying their creditor outside of the credit terms (in which a late repayment fee is likely), therefore also impacting favourably upon profitability due to the reduced chance of increased expenses. (<--- that last point is a bit far-fetched, add it/exclude it depending on the marks)

Thank you so much! That explains everything very well!

[janson34]

just a question if someone could answer if you have access to the "INSIGHT 2013 EXAM" , in relation to Q6C, where it says

"the prepaid insurance expense of $18,000 includes annual insurance of $15,000 (excluding GST) which was paid on 1st october 2012, for the next 12 months.
 
- show how the following ledger accounts would appear after this information has been posted:
    prepaid insurance expense
    insurance expense

** note for those who dont have the exam**- in the pre adjustment trial balance at 30th june 2013, prepaid insurance expensive is $18,000***
im not sure how to wor out the insurance expense amount where the answer is $14250

probably something easy that i completely overlooked, but thanks in advance   

[massachusetts8]

just a question if someone could answer if you have access to the "INSIGHT 2013 EXAM" , in relation to Q6C, where it says

"the prepaid insurance expense of $18,000 includes annual insurance of $15,000 (excluding GST) which was paid on 1st october 2012, for the next 12 months.
 
- show how the following ledger accounts would appear after this information has been posted:
    prepaid insurance expense
    insurance expense

** note for those who dont have the exam**- in the pre adjustment trial balance at 30th june 2013, prepaid insurance expensive is $18,000***
im not sure how to wor out the insurance expense amount where the answer is $14250

probably something easy that i completely overlooked, but thanks in advance   

The timeline really does help
So From Oct 1 2012 to Sept 30 2013, the prepaid insurance expense is 15000, so that means it is 1250 per month so from Oct 1 2012 to 30 June 2013, the expense would be 1250*9 which gives you 11250.
Now the 18000 represents from July 1 2012 to June 30 2013, so the insurance expense from July 1 2012 to Sept 30 2012 is 18000-15000 which is $3000. So the total year (1July2012 to 30June2013) insurance expense would be 14250.
I'm not very good at explaining but i hope this helps

[Damoz.G]

The timeline really does help
So From Oct 1 2012 to Sept 30 2013, the prepaid insurance expense is 15000, so that means it is 1250 per month so from Oct 1 2012 to 30 June 2013, the expense would be 1250*9 which gives you 11250.
Now the 18000 represents from July 1 2012 to June 30 2013, so the insurance expense from July 1 2012 to Sept 30 2012 is 18000-15000 which is $3000. So the total year (1July2012 to 30June2013) insurance expense would be 14250.
I'm not very good at explaining but i hope this helps

Okay, yes, I've done that Trial Exam. Immediately what should go into your mind is that $3,000 is for another Insurance Expense, and $15,000 of annual insurance. What I always like to think is that even though its not specified, you would assume that the $3,000 was also consumed in this Reporting Period (even though it wasn't stated). There is a similar question in the 2013 NEAP Exam as well.

So (15,000/12) x 9 months consumed (Oct to June) = $11,250+$3,000=$14,250

I know that it should tell you that its consumed, but sometimes we're expected to pick up on the fact that $3,000 is also consumed in the Reporting Period.

EDIT: Beaten.

[Lucho23]

I don't think they'll specifically make us do this but I'm still gonna ask.

Here's an example:

The business purchased 20 units of a stock item at $10 each . They are individually repackaged and this costs $2 per stock item.
Record this transaction and balance accounts.

So, if this was a Credit purchase, how would you record the repackaging in the General Ledger? Would it simply be included in the Stock Control a/c as the DR entry with cross-reference 'Creditors Control'?

If this was a Cash purchase, would it be recorded in the Stock Control a/c as the DR entry with cross reference 'Cash at Bank'?

Would this repackaging be considered separate in the General Ledger or as part of the purchase?

Also, if the stock was purchased initially without the repackaging and then a month later, say, the stock was repackaged...how would you record the repackaging now?

Thanks!

[Damoz.G]

I don't think they'll specifically make us do this but I'm still gonna ask.

Here's an example:

The business purchased 20 units of a stock item at $10 each . They are individually repackaged and this costs $2 per stock item.
Record this transaction and balance accounts.

So, if this was a Credit purchase, how would you record the repackaging in the General Ledger? Would it simply be included in the Stock Control a/c as the DR entry with cross-reference 'Creditors Control'?

If this was a Cash purchase, would it be recorded in the Stock Control a/c as the DR entry with cross reference 'Cash at Bank'?

Would this repackaging be considered separate in the General Ledger or as part of the purchase?

Also, if the stock was purchased initially without the repackaging and then a month later, say, the stock was repackaged...how would you record the repackaging now?

Thanks!

Well if the Repackaging is charged at $2 per stock item, you would use Product Costing, because it is a cost incurred in order to bring Stock into a condition and location ready for sale, and can be allocated to individual units of stock on a logical basis. Therefore, you would include as part of the value of the Stock, and would do the cross-references as usual.

Credit Purchase:
* DR Stock Control
* DR GST Clearing
* CR    Creditors Control

Cash Purchase:
* DR Stock Control
* DR GST Clearing
* CR    Bank

[lmaoss]

Say you have a prepaid sales revenue being fulfilled on the 30th may but the balance day of the business is on the 30th june. would you record this in the general journal on the 30th of may or the balance day of the business?
Also do you only balance accounts on balance day between periods or are you meant to balance each month?
Last question: If a debtor pays back half of its debt within discount terms would they receive a discount?