VCE Accounting Question Thread!

[Kuroyuki]

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?

Well they do ask that question quite a lot. Relevance vs Reliability discussion questions are quite popular. Usually if they are asking it you usually are meant to argue Agreed value. But anyway just think did the business purchase the asset by itself, if so you value at the historical cost. If not its agreed value.
Please correct me if I' m wrong, its been a while.

[Eugenet17]

Well they do ask that question quite a lot. Relevance vs Reliability discussion questions are quite popular. Usually if they are asking it you usually are meant to argue Agreed value. But anyway just think did the business purchase the asset by itself, if so you value at the historical cost. If not its agreed value.
Please correct me if I' m wrong, its been a while.

Haha, right after I posted that I came across one of these questions.

The question asks to discuss the owner's argument to value a computer at the price she paid instead of the agreed value by referring to two accounting principles. So do i just talk about Entity to support the use of an agreed value, and then historical cost to support her argument?

[p.taaa]

Yep so all you need to write is, 'the historical cost usually dictates that items should be valued at original purchase price, but as the Entity principle assumes that there is no source documents that verify the purchase of the NCA by the owner, as owner and business are seen as separate entitiy, then the price paid by the owner cannot be used"
then go on and talk about the use of agreed value and what it represents

[Eugenet17]

Thanks!

'A debt of $350 owed by B.Quick that had been written off was recorded in the ledger account of B.Quack', do I still record in the General Ledger column even though Debtors Control doesnt change?

[IT_Failure]

Thanks!

'A debt of $350 owed by B.Quick that had been written off was recorded in the ledger account of B.Quack', do I still record in the General Ledger column even though Debtors Control doesnt change?

I'm assuming you mean the subsidiary Debtor "B.Quick" has had $350 written off to Bad Debts expense. If this is the case then "Debtors Control"'s balance must be reduced by $350 also (cross reference Bad Debts). If an individual debtor's balance changes, debtors control will also change by the same amount.

[smile+energy]

Hi, guys
Yesterday I learned the debtors turnover, including the definition, formula and it's negative effects on a business. But the Cambridge doesnt give the details on what causes the DTO decreases or increase, can any one explain it for me? That will be great, thanks in advance. 

[Kuroyuki]

Hi, guys
Yesterday I learned the debtors turnover, including the definition, formula and it's negative effects on a business. But the Cambridge doesnt give the details on what causes the DTO decreases or increase, can any one explain it for me? That will be great, thanks in advance. 

Hmm is what you are looking for on page  467 in the textbook?
That should give you a bunch of reasons for why DTO can speed up.
And you kinda do the opposite for why DTO can slow down
like the business has not been promptly invoicing so debtors are not immediately aware of their debt and the repayment date. Also the business may not have done sufficient credit checks, resulting in a lot more unreliable debtors that do not pay on time.
something like that

[smile+energy]

Hmm is what you are looking for on page  467 in the textbook?
That should give you a bunch of reasons for why DTO can speed up.
And you kinda do the opposite for why DTO can slow down
like the business has not been promptly invoicing so debtors are not immediately aware of their debt and the repayment date. Also the business may not have done sufficient credit checks, resulting in a lot more unreliable debtors that do not pay on time.
something like that

Sorry, I couldn't find the info from textbook

[Eugenet17]

Could someone explain how i would go about recognising and recording a sundry creditor? Would i only record the creditor as a sundry creditor if i recognise that what im purchasing is a NCA and is infrequent? E.g purchase motor vehicle for firm, do i record it as a sundry creditor in the general journal, and do i record a sundry creditor seperately in their own ledger accounts and balance sheet?

[IT_Failure]

Could someone explain how i would go about recognising and recording a sundry creditor? Would i only record the creditor as a sundry creditor if i recognise that what im purchasing is a NCA and is infrequent? E.g purchase motor vehicle for firm, do i record it as a sundry creditor in the general journal, and do i record a sundry creditor seperately in their own ledger accounts and balance sheet?

The short answer is YES.
All sundry creditors appear in their own individual accounts in the general ledger and the balance sheet.
Let's assume a $10000 vehicle was bought on credit from Honda. The NCA Vehicle would be debited $10000 and Sundry Creditor Honda credited $10000 in the general ledger.

[BoredSatan]

SORRY IVE BEEN AWAY GUYS. I WILL ANSWER QUESTIONS FROM NOW ON I PROMISE

[BoredSatan]

Hey guys was just doing some practise sacs today and I was doing a question where the owner commenced business and contributed items. One of the items was: "Motor vehicle registration, which still has five months to run, with an annual cost of $840 (Memo 1)" Further down, it says "Identify and explain how the motor vehicle registration will be classified in the Balance Sheet of Bikes 4 Everyone." Would this be classified as a current asset and in the general journal as a debit of $350 (The price of the registration for the 5 months) and why? Thanks for any help.

Yes it would be a current asset, because the motor vehicle registration will provide economic benefit to the business in the next 5 months since it provides the vehicle with registration and allow the vehicle to be used. Thus it is named "Prepaid Motor Vehicle Registration" and is a current asset.

It is debited in the General Journal because its contribution increases the amount of assets (hence debit) and increases the amount the owner has contributed to the business, increasing the owners equity (hence credit)

[william.woon]

Question guys: For example the owner of a business organised an advertisement to be run during June at a cost of $480, plus GST, but the paper has not sent an account to him yet. The owner thinks they'll send it during July.

Would the advertisement go into either statement of receipts and payments or income statement. Because I thought it wouldn't as its an liability as a creditor. Correct me please.

[chasej]

Question guys: For example the owner of a business organised an advertisement to be run during June at a cost of $480, plus GST, but the paper has not sent an account to him yet. The owner thinks they'll send it during July.

Would the advertisement go into either statement of receipts and payments or income statement. Because I thought it wouldn't as its an liability as a creditor. Correct me please.

When did the cash payment occur? Before during or after  advertising appeared?
If the advertisement occurred before or same time as payment.
I imagine it would be an expense as it would result in an outflow of economic benefit (cash) which decreases assets (bank) and resultingly decreases owners equity. Adhering to conversation expenses must be recorded when probable hence an account need not be sent by the newspaper, only a cheque recording the outflow of cash from payment be needed.

I could be wrong because the information you have isn't really sufficient to give a proper answer tbh.

[william.woon]

When did the cash payment occur? Before during or after  advertising appeared?
If the advertisement occurred before or same time as payment.
I imagine it would be an expense as it would result in an outflow of economic benefit (cash) which decreases assets (bank) and resultingly decreases owners equity. Adhering to conversation expenses must be recorded when probable hence an account need not be sent by the newspaper, only a cheque recording the outflow of cash from payment be needed.

I could be wrong because the information you have isn't really sufficient to give a proper answer tbh.

Sorry for the lack of information. So let's say in the month of July I was to have my business advertised, the company that advertises my business hasn't sent a bill to me by the end of 31st of July, I'm expecting it to be sent to me during August. Would I include it in the income statement for the month ended 31st of July?