VCE Accounting Question Thread!

[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.

[Kuroyuki]

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.

I think you should say accrued something expense. Cuz if i remember correctly you have accrued revenues aswell. So when you say accrued interest its ambiguous.
And for slipping in relevance, just say whatever is the most relevant value and most useful for decision making. If the question is like a explicit using one qualitative characteristic explain blah blah i would define that characteristic. But if its like a discussion question and you are meant to do use multiple Qcs and aps just add a bit of the definition in your explanation.
Hope this make sense and helps somewhat.

[Irving4Prez]

Cheers for that Kuroyuki

Can someone explain to me the difference between Principal and Interest Only Loans? Preferably with figures.

Cheers

[p.taaa]

principal/ interest loans are where for you pay both principal and interest on the loan over the life of the loan, if maturity is over a year then it will be both a CL and NCL

interest only loans is where you only pay interest, then when the loan matures, you pay back the principal amount, if maturity is over a year, then the loan will be entirely a NCL

so if you have a 5% interest only loan for 100k, payable every year, then each year you will pay 5k interest, principal is not affected
if you have a principal/interest loan then the question will specify how much you pay per month/year and interest will also usually be given

hope this helps

[Irving4Prez]

principal/ interest loans are where for you pay both principal and interest on the loan over the life of the loan, if maturity is over a year then it will be both a CL and NCL

interest only loans is where you only pay interest, then when the loan matures, you pay back the principal amount, if maturity is over a year, then the loan will be entirely a NCL

so if you have a 5% interest only loan for 100k, payable every year, then each year you will pay 5k interest, principal is not affected
if you have a principal/interest loan then the question will specify how much you pay per month/year and interest will also usually be given

So for the principal/interest loan, you'll be paying both interest and principal/month or year? Just say a business borrowed 100k from NAB with 10% interest, payable over 2 years, will the total interest over the 2 years be 10k? Or would it be:
100k x .1 = 10k [1st year]
50k x .1 = 5k [2nd year]
Total interest payable over the 2 years = 15k

For the example you have provided for the interest only loan, will the debt be covered in 20 years when 100k interest has been paid?

[chasej]

So for the principal/interest loan, you'll be paying both interest and principal/month or year? Just say a business borrowed 100k from NAB with 10% interest, payable over 2 years, will the total interest over the 2 years be 10k? Or would it be:
100k x .1 = 10k [1st year]
50k x .1 = 5k [2nd year]
Total interest payable over the 2 years = 15k

For the example you have provided for the interest only loan, will the debt be covered in 20 years when 100k interest has been paid?

For the first question. Interest will always be per annum that is per year, unless otherwise specified. (e.g. sometimes it may say 5% payable each month, most of the time interest will be given per year).

For interest only loans, interest does not reduce the principle, the principle needs to be paid at the end of the loan's life (very often though borrowers just take out a new loan to cover the principle, so they don't pay anything themselves, it's also possible borrowers could choose to pay part of the principle of the loan's life voluntarily to reduce their interest payments and also the principal due at the end, all of that you don't really need to know though as the question specifies it for you if it occurs).

[Jason12]

What is the difference between accrued expense and sundry creditor? the book has something on it but I don't quite get it

[chasej]

What is the difference between accrued expense and sundry creditor? the book has something on it but I don't quite get it

Accrued expenses is the liability, present obligation, a business incurs when a business incurs an expense before it pays for the expense, and hence is required to pay for the expense at a later date. No invoice exists for this type of item, and it's source document is a memo as a result of the balance day adjustment.

A sundry creditor, is the liability, present obligation, a business owes to the sellers of assets which are non-stock which the business has purchased on credit. These transactions are verified by an invoice which verifies the credit sale of the non-stock item to the business.

The bit in the textbook on it, is just to ensure you don't get confused later down the track. tbh I found that section of the textbook more confusing than helpful, but its relevance will become apparent eventually.

[Irving4Prez]

Hey guys, hopefully someone can address these questions I had,

1. In the cash flow statement, why is it we say 'receipts from debtors' instead of 'debtors control'? We do the same thing in SORP so I'm assuming it somehow links with understandability.

2. A business pays for rent in advance on the 16th May covering months July - November [BDA at 30 June]. If this firm prepares its reports every 6 months, why is it that in the general ledger for prepaid rent expense, the date is 30 June instead of 16 May [where the report on 30 June covers the past 6 months]?

3. Can the terms, firm and business be used interchangeably for 3/4 accounting?

And a general question, how do you personally avoid silly mistakes such as forgetting to include accrued wages in the CL section of the balance sheet or accidently omitting prepaid rent/rent expense from the general journal?

Thanks

[chasej]

Hey guys, hopefully someone can address these questions I had,

1. In the cash flow statement, why is it we say 'receipts from debtors' instead of 'debtors control'? We do the same thing in SORP so I'm assuming it somehow links with understandability.

2. A business pays for rent in advance on the 16th May covering months July - November [BDA at 30 June]. If this firm prepares its reports every 6 months, why is it that in the general ledger for prepaid rent expense, the date is 30 June instead of 16 May [where the report on 30 June covers the past 6 months]?

3. Can the terms, firm and business be used interchangeably for 3/4 accounting?

And a general question, how do you personally avoid silly mistakes such as forgetting to include accrued wages in the CL section of the balance sheet or accidently omitting prepaid rent/rent expense from the general journal?

Thanks

1. Debtors control decreases are made up of both receipts from debtors and discount expense, we can't put debtor's control as that figure is usually not what was actually received from debtors. Receipts from debtors represents only the part of the decrease in debtor's control which resulted in an inflow of cash. I suppose understandability also comes into it as it's easier for the layman to understand what "receipts from debtors" is describing than trying to decipher "debtor's control".

2. I don't understand the question. It doesn't seem to make sense?

3. Yes, but it's good to be consistent to avoid confusion.

[abcdqdxD]

If i understand q2 correctly, it's because journals are posted to the general ledger at the end of every month, hence 30th

[Irving4Prez]

1. Debtors control decreases are made up of both receipts from debtors and discount expense, we can't put debtor's control as that figure is usually not what was actually received from debtors. Receipts from debtors represents only the part of the decrease in debtor's control which resulted in an inflow of cash. I suppose understandability also comes into it as it's easier for the layman to understand what "receipts from debtors" is describing than trying to decipher "debtor's control".

3. Yes, but it's good to be consistent to avoid confusion.

If that were the case, wouldn't 'purchases of stock' simply be, 'stock control'? So would you advise sticking with 'firm' throughout all responses?

If i understand q2 correctly, it's because journals are posted to the general ledger at the end of every month, hence 30th

Ohh, so even though reports are prepared over a period of time, the accounting records are posted monthly?

Thanks for your replies

[TheWackyCheese]

Hey guys, just a quick question I came across today that I eventually got the answer to:
$500 of stock was donated to a raffle by the business. This was not recorded.
Explain the impact of the decision on the assets of the business.

[Irving4Prez]

Hey guys, just a quick question I came across today that I eventually got the answer to:
$500 of stock was donated to a raffle by the business. This was not recorded.
Explain the impact of the decision on the assets of the business.

As it was not recorded, the business would be oblivious to the outflow of $500 worth of stock. As a result, stock control (assets) would be overstated by $500. Consequently, net profit would be overstated (understating advertising expense) by $500 but this isn't required for the question.

Hope this helps

[Jason12]

MEMO 43 - 3 Tiles taken by Chanel for personal use

State the impact on the accounting equation of memo 43 not being recorded in the  business's records

I remember my teacher saying something about how there is no overall effect but not too sure.