VCE Accounting Question Thread!

[jonoz0r]

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?

This question is pretty ambiguous, but if the business was advertised in July, but won't be able to pay for the advertising until August, then I think that the expense would be recorded in the income statement ended 31st July as an Accrued Advertising Expense, as the expense has been incurred, but not yet paid for.

Hope this answers your question!

[william.woon]

This question is pretty ambiguous, but if the business was advertised in July, but won't be able to pay for the advertising until August, then I think that the expense would be recorded in the income statement ended 31st July as an Accrued Advertising Expense, as the expense has been incurred, but not yet paid for.

Hope this answers your question!

Thanks, I just thought you wouldn't put it in until the August income statement, but anyway thank you.

[chasej]

Thanks, I just thought you wouldn't put it in until the August income statement, but anyway thank you.

It couldn't be in the August income statement as to put an expense that was generated in July in the August income statement would understate net profit, thus decreasing relevance of accounting reports.

[Eugenet17]

From Cambridge Exercise 10.12:

Assess the sales mark-up applied by Maranelli Sports for the six months ended 31 Dec 2015.

How do i answer this? :x

Also, 'Yearly repayments of 12000 are made on Mortgage-xx, interest 6% p.a., payable on 28 Feb and 31 Aug each year' : Is this still a current liability of 12000?

[jonoz0r]

From Cambridge Exercise 10.12:

Assess the sales mark-up applied by Maranelli Sports for the six months ended 31 Dec 2015.

How do i answer this? :x

Also, 'Yearly repayments of 12000 are made on Mortgage-xx, interest 6% p.a., payable on 28 Feb and 31 Aug each year' : Is this still a current liability of 12000?

For your first question, if there was a considerable profit in the reporting period, I would say something like "The sales mark-up applied by the business for the six months ended 31 December 2015 is adequate as Gross Profit is able to cover all other expenses, whilst also yielding a significant profit". You could also mention the timeframe in which the profit was earned, i.e. if there was considerable profit in only a 6 month period

For your second question, the yearly repayments are still considered to be a current liability of $12000, however be careful of the remaining portion that is non-current, because this is usually the part where people lose marks

[Eugenet17]

For your first question, if there was a considerable profit in the reporting period, I would say something like "The sales mark-up applied by the business for the six months ended 31 December 2015 is adequate as Gross Profit is able to cover all other expenses, whilst also yielding a significant profit". You could also mention the timeframe in which the profit was earned, i.e. if there was considerable profit in only a 6 month period

For your second question, the yearly repayments are still considered to be a current liability of $12000, however be careful of the remaining portion that is non-current, because this is usually the part where people lose marks

Thanks!

@Second part: that's what i thought, solutions just recorded 24000 as a current liability so I guess it was just an error on their part

[tiadrops]

Hi all, just a question about SACs.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.

[Kuroyuki]

Hi all, just a question about SACs.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.

In the exam you will be given all the templates.
In SACS they should give you the templates, that said I'm not sure if they have to. But I agree that its time consuming and can get messy.

[BoredSatan]

Hi all, just a question about SACs.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.

wow thats pretty unreasonable..

[smile+energy]

Hi, there

Can I get some help? I don't know how to answer this question: why the vehicle contributed by the owner was valued at its agreed value?
And how can I structure my answer?
Thanks

[chasej]

Hi all, just a question about SACs.
Are teachers required to give us all the templates? In our first SAC our teacher made us draw up all the ledgers, trial balance etc. which was quite time consuming. I mean in reality, we're going to be given all the templates in an exam.

Maybe try talking to your teacher about it? Just say it's so time consuming and isn't even something you have to know for the exam.

If they don't know how to make the templates for some reason maybe even show them how to make them on excel or something.

[chasej]

Hi, there

Can I get some help? I don't know how to answer this question: why the vehicle contributed by the owner was valued at its agreed value?
And how can I structure my answer?
Thanks

The principle is the entity principle. It can't be historical coat as the historical cost is the irrelevant amount the owner purchased items for and used part of the value on a personal basis. I can write a solution later when I'm not on my phone if you wish.

[smile+energy]

The principle is the entity principle. It can't be historical coat as the historical cost is the irrelevant amount the owner purchased items for and used part of the value on a personal basis. I can write a solution later when I'm not on my phone if you wish.

Yes, please.

And I don't know how to answer this question too: if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why? Thanks

[chasej]

Yes, please.

And I don't know how to answer this question too: if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why? Thanks

why the vehicle contributed by the owner was valued at its agreed value? :
(this is more of a 5 mark discuss type answer)
Usually businesses value assets at their historical cost, the cost of the asset to the business as verified by source documents. However this is not the case when the owner contributes assets to the business, this is due to the fact that due to the entity principle, the owner and business are considered two separate entities, with accounting records and reports made on that basis, thus as the owner and business are separate any transfer of control of assets between the owner and the business must be reported as a transaction, as an exchange of goods and/or services occurred due to a capital contribution. However, although the entity principle forces a transaction to be recorded, in practice the owner and business are the one in the same, thus no receipt or other source document would exist to verify the cost of the asset to the business, thus an agreed value must be used, which is an estimate of the value of an asset at the time it is contributed to the business by the owner. The agreed value also improves relevance of accounting reports as by including an estimate of the value of the contributed asset to the business this is likely to be more representative of the potential future economic benefit to the business from the asset, then the price the owner purchased the asset at (as the owner would have likely already consumed some of the asset's value before the contribution).

if an owner contribute his vehicle to his business, should we record the vehicle at its cost price or agreed value? and why?
(made this a 2-3 mark-ish answer)
The vehicle should be valued at it's agreed value, an estimation of the value of the vehicle at time of contribution by the owner. This figure is preferable compared to the price the owner paid for the vehicle originally, the cost price, as the agreed value is more relevant to the business as the agreed value represents a figure likely to be closer to the value of future economic benefit the vehicle would provide to the business then the cost price, as it is likely the owner used a portion of the vehicles economic benefit for themselves before contribution, thus meaning the cost price would likely overstate the true value of the asset if it was used. Thus an agreed value increases relevance by including a figure which is more useful for decision making (the true value of economic benefit to the business) as opposed to a less useful figure, cost price (as the owner likely used some of the economic benefit).

[chasej]

Actually it sort of can be historical cost instead of entity and I think it makes more sense. Its usually a case of Historical cost and Reliability vs Conservatism and Relevance. The historical cost principles states that assets should be valued at their original purchase price as this is verifiable by source document evidence. The owner should therefore value the non current asset at its original purchase price. This will also uphold the Reliability characteristic as the amount will be verifiable by a source document.

Nah. capital contributions of non-cash asset almost always need an agreed value. Capital contributions is one of the only times we deviate from historical cost in the aim of increasing relevance to the business (I believe depreciation expense is the only other exception for VCE purposes but I stand to be corrected on this).

Relevance trumps reliability in this case. The purchase price has nothing to do with the business and will likely overstate the value of future economic benefit to the business resulting from the asset, thus is very irrelevant and will breach conservatism as assets would be overstated.

I refer to the cambridge 3/4 accounting text extract from pages 8 and 9 at this link http://imgur.com/uJzoBuO