VCE Accounting Question Thread!

[chasej]

how to record correcting entries where a receipt from a debtor was incorrectly recorded as a payment to a creditor?

The first step for all correcting entries is to figure out what accounts where incorrectly debited or credited.

A payment to a creditor causes a decrease (credit) entry to bank, and a decrease (debit entry) to creditor's control in the general ledger.

Thus to negate the effect of the incorrect entry we must do the opposite to bring the accounts to their correct figures before the incorrect entry was made. Thus we make a debit entry to bank and a credit entry to creditor's control, to the value of the incorrect entry. To bring the balance of the account to their correct amount.

Then we must enter in the real transaction that occured, the receipt from debtors, which is a debit entry to bank, and a credit entry to debtors control, the former we increase the asset, and the latter we decrease.

Remember all the corrections must be entered into the general journal before being put into the ledger as ledger entries always need a journal entry.

--

That's the simple steps however to be really correct for VCAA purposes we need to only enter the correction as one entry in each ledger. Thus the bank entry must be refrenced to both creditor'ss control and debtor's control, and reflect the amount needed to bring the bank balance to what it should be (which is the amount to remove the effect of the incorrect entry+the amount to record the receipt from debtors). And the creditor's control should be cross-refrenced to bank, and debtor's control cross refrenced to bank.

Hope that last paragraph wasn't to confusing.

[TheWackyCheese]

I find it helps to hand-draw the affected ledger accounts on the side and enter what happened with the transaction. Then:
1. Get the incorrect ledger balance back to $0
2. Enter what should have happened in the first place.
3. Transfer what you hand-wrote into the General Journal

[anna.xo]

I apologise if this is in the wrong place - feel free to move it

I lose a lot of marks on the theory questions of exercises and past exams. Does anyone have any tips on how I can improve my theory answers ? (Just from a general point of view - common slip ups to avoid, etc.)

Any help is very appreciated ! Thanks

[Jayceeleah]

Does anyone know what the petty cash system is? 

[chasej]

Does anyone know what the petty cash system is? 

It's not really relevant to the VCE accounting course (at least up until chapter 11 in cambridge text it isn't). But as I understand it, this system is a way to ensure cash payments, which are of a small nature, and thus do not justify their own cheques, are accounted for. This is done by creating a "petty cash" account in the general ledger, and crediting bank whenever petty cash needs to increase, (thus debiting petty cash). To do this one cheque is written out to cover all the small expenses of a business over a period, thus saving time by not having to write a new cheque for every small expense (by small I mean a few dollars, probably even less-anything more probably justifies its own cheque). (According to wikipedia the petty cash account should contain no more than $100 for a small business-that probably gives you an idea of how small these payments are).

I don't know exactly how the expenses are recorded after the petty cash is spent though.

Hope that made some sense.

P.S. It's late, I probably made some glaring spelling/grammatical mistakes.

[Jason12]

when calculating cost of sales from the stock cards, why isn't any memo transactions included?

also if the business receives a GST refund from the ATO how does it affect the GST clearing account in the general ledger?

[TheWackyCheese]

when calculating cost of sales from the stock cards, why isn't any memo transactions included?

Because Cost of Sales is an expense incurred when the stock is sold, not when the stock is withdrawn or taken for personal use/advertising etc.

also if the business receives a GST refund from the ATO how does it affect the GST clearing account in the general ledger?

When the GST on sales is less than GST on purchases, the account will have a debit balance. So I'm guessing that when the money is refunded by the ATO, it will go on the credit side of GST Clearing under "Bank"? Someone maybe clarify this.

[chasej]

When the GST on sales is less than GST on purchases, the account will have a debit balance. So I'm guessing that when the money is refunded by the ATO, it will go on the credit side of GST Clearing under "Bank"? Someone maybe clarify this.

Correct. GST refund is a cash receipt thus has a debit entry on bank (as part of the aggregate posted from the cash receipts journal), and following double entry has a credit entry in the GST clearing account which is cross-referenced to bank. Essentially, a GST refund is turning the GST asset into cash for the business.

ALWAYS ensure GST refund is recorded in the cash receipts journal under sundries and is posted to the GST clearing account separately to the main GST column, as the GST column in the CRJ itself is only for GST collected/charged from customers, thus cannot include GST refunded from the ATO

This is what a GST refund looks like in the CRJ: http://imgur.com/3UYoZSY (credit cambridge published vce accounting 3/4 text page p.120 by A.Simmons and R.Hardy)

[Eugenet17]

On 1 July 2014**, Knight's Prawns purchased new cabinets for $1800 plus 180 GST, depreciated using straight-line method at 20% p.a. Show how the cabinets would be reported in Balance sheet as at 30 June 2016.

Shouldn't the Accumulated Depreciation of Cabinet be $720? The answer says that it's $1080.

[chasej]

On 1 July 2013, Knight's Prawns purchased new cabinets for $1800 plus 180 GST, depreciated using straight-line method at 20% p.a. Show how the cabinets would be reported in Balance sheet as at 30 June 2016.

Shouldn't the Accumulated Depreciation of Cabinet be $720? The answer says that it's $1080.

No the answer is $1080. We have a 20% p.a. depreciation and the item would have been consumed for 3 years at 30jun16, hence the depreciation rate is 60%*1800 (the purchase price), that is the accumulated depreciation is $1080.

[Eugenet17]

Wait sorry typo on my part, the item was purchased on the 1 July 2014 haha

[chasej]

Wait sorry typo on my part, the item was purchased on the 1 July 2014 haha

Ah right. In that case you're correct and the solutions are wrong.

[Irving4Prez]

Hey AN,

Hoping someone could address the following questions I had,

1. I follow the 'IDL' layout when answering questions that involve an accounting principle and I came across a question in the Cambridge textbook that had an answer that didn't explicitly link the principle with the explanation.
Question: "Referring to one accounting principle, explain why only some of the wages paid on 9 July 2015 should be reported as an expense for July 2015".
Answer: "Of the $1260 paid in July, $810 was incurred in the current reporting period (July 2015) and $450 incurred (and accrued) in previous reporting period (June 2015).
They didn't explicitly mention how the reporting period period governs that the "life of the business should be separated...". So when is it necessary to omit regurgitating the definition? Secondly, if I were to link the definition to the explanation, how would I do so without bringing in other qualitative characteristics?

2. Is it more correct to say, 'accrued electricity', 'accrued electricity expense' or does it depend on the context of the question?

Thanks

[Zealous]

1. I follow the 'IDL' layout when answering questions that involve an accounting principle and I came across a question in the Cambridge textbook that had an answer that didn't explicitly link the principle with the explanation.
Question: "Referring to one accounting principle, explain why only some of the wages paid on 9 July 2015 should be reported as an expense for July 2015".
Answer: "Of the $1260 paid in July, $810 was incurred in the current reporting period (July 2015) and $450 incurred (and accrued) in previous reporting period (June 2015).
They didn't explicitly mention how the reporting period period governs that the "life of the business should be separated...". So when is it necessary to omit regurgitating the definition? Secondly, if I were to link the definition to the explanation, how would I do so without bringing in other qualitative characteristics?

2. Is it more correct to say, 'accrued electricity', 'accrued electricity expense' or does it depend on the context of the question?

1.
I guess it depends on the amount of marks given for the question. If it were only 2 marks, I'd assume 1 mark would be for identifying the principle, and 1 mark would be for explaining how it relates to the question. I'm not too sure specifically about how accounting is marked in exams (spent too much time on maths =p) but I would slip in a quick definition of reporting period (or any principles) anyway though just to be safe so I've covered everything examiners could be looking for in my response.

I'm not too sure what you mean by "without bringing in other qualitative characteristics". Are you trying to avoid mentioning "relevance" when making a link? I personally feel that mentioning how the use of reporting period can link and serve an accounting characteristic can strengthen your response.

2.
I'm quite sure you use "electricity expense" as an expense and "accrued electricity" as a liability. So if we need to do a balance day adjustment to recognise electricity we have used in a reporting period but not yet paid for, we will debit "electricity expense" (E) and credit "accrued electricity" (L, as we are required to pay for the electricity at a later point).

[Irving4Prez]

1.
I guess it depends on the amount of marks given for the question. If it were only 2 marks, I'd assume 1 mark would be for identifying the principle, and 1 mark would be for explaining how it relates to the question. I'm not too sure specifically about how accounting is marked in exams (spent too much time on maths =p) but I would slip in a quick definition of reporting period (or any principles) anyway though just to be safe so I've covered everything examiners could be looking for in my response.

I'm not too sure what you mean by "without bringing in other qualitative characteristics". Are you trying to avoid mentioning "relevance" when making a link? I personally feel that mentioning how the use of reporting period can link and serve an accounting characteristic can strengthen your response.

2.
I'm quite sure you use "electricity expense" as an expense and "accrued electricity" as a liability. So if we need to do a balance day adjustment to recognise electricity we have used in a reporting period but not yet paid for, we will debit "electricity expense" (E) and credit "accrued electricity" (L, as we are required to pay for the electricity at a later point).

I slipped in the definition for safe measures followed with an explanation but the explanation and definition weren't linked, they were isolated in a sense because I didn't know how to link them effectively. Usually when I add in 'relevance' my response ranges between 4-5 sentences which is excessive for the amount of space they give us. How do you normally link a principle and characteristic without taking too much time/space?

Yeah that's how I see it but sometimes the solutions use 'accrued electricity expense' instead of 'accrued electricity', I was curious to whether there was a relation to context.