VCE Accounting Question Thread!

[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.

[jtvg]

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.

Well, in the balance sheet, A - L = OE. However, there are different measurement bases used to value Assets, i.e. some could be recorded at cost and some revalued to fair value. Eventuallywhen the assets are sold they are sold at market price at point of sale, which may or may not equal the book value of the business' assets. So in that sense, the residual amount after netting off liabilities may not exactly equal the equity as stated on the balance sheet.

[p.taaa]

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

Assets and Liabilities are classified in the balance sheet to facilitate the calculation of financial indicators. By knowing the amount of current assets and current liabilities, then it is possibly to calculate the Working capital ratio. So a classified balance sheet will be more useful for decision making (Relevance) regarding the level of liquidity and possibility undertaking further finance, contributions or taking greater drawings.

[smile+energy]

Can anyone explain why the term "term deposit" is a non-current asset? That will be great.

[Irving4Prez]

Is the monetary unit principle; all items must be recorded and reported in a common unit of measurement? Because the 3/4 textbook definition omitted "in the country where the reports were being made" which was included in the 1/2 textbook.

Ty

[Zealous]

Is the monetary unit principle; all items must be recorded and reported in a common unit of measurement? Because the 3/4 textbook definition omitted "in the country where the reports were being made" which was included in the 1/2 textbook.

Ty

I would say "common currency" rather than "common unit of measurement". The currency used should be that of the country where reports are made. Think of linking that to the understandability qualitative characteristic; is a report understandable if it's in a currency that's foreign to you? (someone correct me if i'm wrong..)

Can anyone explain why the term "term deposit" is a non-current asset? That will be great.

We expect the benefits of a term deposit to last longer than a year, therefore we classify it as a non-current asset.

[Kuroyuki]

If i remember correctly 'common unit of measurement' is what is used by the study design.

[abcdqdxD]

Assessors won't discriminate between 'common unit of measurement' and 'common currency', I think you guys are getting a bit semantic

[p.taaa]

Is the monetary unit principle; all items must be recorded and reported in a common unit of measurement? Because the 3/4 textbook definition omitted "in the country where the reports were being made" which was included in the 1/2 textbook.

Ty

Remember to include the application of monetary values in the accounting records and reports!!