VCE Accounting Question Thread!

[TheWackyCheese]

Thank you to all of you! This is actually really helpful. I'm kind of beginning to understand now by actually practicing over and over and trying to understand where each thing is entered. I like the acronym too, it's a good way to remember. 
Now I just have to get the hang of GST!

Glad to hear that it helped! I've got some other fairly straight forward examples as well to help you get the hang of it so just send me a PM if you think you need them. 

[Jason12]

state the effect of the accounting equation on the following transactions:

the business purchased stock from l.davenport costing $4000 (plus $400 GST). A deposit of $500 was paid and the balance is due in 30 days.

the business paid creditors $3200 after receiving a $300 discount.

btw these are from the neap book and the answers don't make sense to me. a lot of these questions ask you do stuff which i don't recall being in the cambridge textbook

[Michael Scofield]

Hey guys, I'm a little confused as to why OE is debited in the following question.

Kim Swood took home stock worth $1500

I thought when drawing increases it's credited?

[abcdqdxD]

Hey guys, I'm a little confused as to why OE is debited in the following question.

Kim Swood took home stock worth $1500

I thought when drawing increases it's credited?

Owner's equity (capital) decreases due to drawings. Capital has a credit balance, so to decrease it a debit entry must be made.

[Fyrefly]

I am SO confused with ledger accounts.
I understood it in the first place when I began with analysing charts...but as the exercises progressed I just began to struggle.
Should I make my own analysing charts before I put entries in the ledgers? Or is there another way to do it that isn't so time-wasting?

I had to google it, because I had no idea what an analysing chart was... but I think if they're helping you learn and consolidate your understanding, then you should keep using them for as long as you feel you need to.

Do you guys know PALER? Not sure if they teach it in schools still, but even now it pops into my head occasionally when I'm at work.

                        DR            CR
Proprietor                          ↑
Asset                ↑
Liability                              ↑
Expense           ↑
Revenue                            ↑

"Proprietor" is another word for "Owner's Equity".
The up arrows indicate whether you need a debit or a credit entry to increase that account - e.g. an increase in an Expense requires a Debit entry.
You can put down arrows in the opposite, but I didn't to keep it clean and better illustrate it.

When I learned VCE Accounting, I found this easy to remember because it goes CR - DR - CR - DR - CR.
I pretty much scribbled that on the corner of every exam or SAC I did, so maybe it'll help some of you guys too.

[Fyrefly]

I'm not up to this part in the course (if it even is in the course) but how do accountants classify assets that are affected by depreciation but their value goes up instead of down. For example, rare car dealers or antiques or something. Do they just list their assets at an agreed value or what?

This isn't covered in the VCE course, but just to satisfy your curiosity...

In Australia, using Fair Value accounting you can increase the book value of the asset to above its original purchase price. The other side of the ledger entry goes to a special type of Owner's Equity account called an "Asset Revaluation Reserve".

e.g. Value of antique car increases from $10,000 to $15,000:

DR  Antique Car                                     $5,000
       CR   Asset Revaluation Reserve                       $5,000

I don't want to explain too much or it'll be confusing, but 'appreciating' the asset in this way isn't part of the depreciation system that you guys are learning... it's part of a system that works alongside depreciation.

Answering another point you questioned... they don't list their assets at an "agreed value" per se, but at "fair value". There are a lot of rules accountants have to follow in determining fair value, but you get the idea.


Really good questions
It's great to see you're already thinking about stuff that you don't learn until you get to university.

[Jason12]

explain why assets and liabilities are classified in the balance sheet. In your explanation identify one qualitative characteristic that supports your explanation.

[smile+energy]

Can someone please explain this for me?
At the end of reporting period, the GST account has a debit balance, the business will get a refund. While if the GST account has a credit balance, the business will pay for the money owed. I don't really understand it. Thanks in advance

[Fyrefly]

Can someone please explain this for me?
At the end of reporting period, the GST account has a debit balance, the business will get a refund. While if the GST account has a credit balance, the business will pay for the money owed. I don't really understand it. Thanks in advance

The GST account can be an asset or a liability.
A debit balance makes it an asset.
A credit balance makes it a liability.

If the GST is an asset, that means the business has paid more GST throughout the year than they were obliged to, so they're entitled to a refund of the extra money paid. The refund represents "future economic benefit".

If the GST is a liability, that means the business has paid less GST throughout the year than they were supposed to, so they still owe the ATO some money and must pay this. The payment represents an "outflow of economic benefits".

[smile+energy]

The GST account can be an asset or a liability.
A debit balance makes it an asset.
A credit balance makes it a liability.

If the GST is an asset, that means the business has paid more GST throughout the year than they were obliged to, so they're entitled to a refund of the extra money paid. The refund represents "future economic benefit".

If the GST is a liability, that means the business has paid less GST throughout the year than they were supposed to, so they still owe the ATO some money and must pay this. The payment represents an "outflow of economic benefits".

Thanks, I fully understand the content now.

[memento]

Can someone please explain how to work out cost price from a sales invoice when there is no mark up stated. eg $720 plus gst what would be the cost price? Thanks

[abcdqdxD]

Can someone please explain how to work out cost price from a sales invoice when there is no mark up stated. eg $720 plus gst what would be the cost price? Thanks

You can't work out the cost price if markup isn't stated

[memento]

You can't work out the cost price if markup isn't stated

oh ok

[Jason12]

a business owner determines the difference between assets and liabilities in his balance sheet is $10,000. He therefore believes that this is the amount that would remain if all assets were sold and all debts paid. Explain with reference to an accounting principle why the owner is incorrect.

[abcdqdxD]

Accounting reports should not be used as a valuation tool. The difference between total assets and liabilities is a number - and only a number. In theory, it represents owner's equity (the value of the owner's stake in the firm) but in practice this figure is meaningless. Owner's equity differs to market value in that market value can only be discovered at the point of sale. Market value is based on supply and demand, brand loyalty among other things and is not necessarily indicated by the value of the firm's owner's equity.