VCE Accounting Question Thread!

[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!!

[smile+energy]

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

Thanks, Zealous

[Jason12]

How do you record drawings in the analysing chart and general ledger?

[p.taaa]

How do you record drawings in the analysing chart and general ledger?

Drawings is classified as negative drawings account. So recording will be opposite to a standard OE account.
So if you were to record a drawings, then it will be a debit entry, with either a bank cross-reference (if cash drawings), or stock control cross reference (if stock drawings).

[anna.xo]

How do I record a cash payment to creditors in the General ledger and creditors ledger ?

[abcdqdxD]

Drawings is classified as negative drawings account. So recording will be opposite to a standard OE account.
So if you were to record a drawings, then it will be a debit entry, with either a bank cross-reference (if cash drawings), or stock control cross reference (if stock drawings).

I think u meant drawings is a -OE account

[Jason12]

When wages are paid why does the wage expense go up instead of down

[Eugenet17]

When wages are paid why does the wage expense go up instead of down

When wages are paid it is an expense, hence your expenses increase.

Question, will I ever be asked whether a business should value something at it's historical cost or it's agreed value? I know why one is used over the other (Relevance etc) but how do i judge if one is better in a situation?