VCE Accounting Question Thread!

[TheWackyCheese]

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.

Sorry, I've been a bit busy and completely forgot about my question. According to my teacher, the answer that Irving4Prez gave is incorrect.

The effect on the accounting equation would be as follows: Assets would not be effected because, even though the donation would not have been recorded resulting in assets being overstated at that time, the stock loss would still be accounted for in the stocktake at the end of the reporting period resulting in no effect overall. Liabilities are not effected by this transaction. Owners equity would not be effected as even though the stock has been donated, the loss will be detected in the stocktake so the net profit will not be overstated or understated by the end of the reporting period.                                                                                                      

[Jason12]

what is the correct way to record a stock gain.

E.g. If you have 5 units of stock valued at $30 each and 5 units of stock valued at $35 each but the $30 stock was purchased first would you record the stock gain as $30 stock?

[TheWackyCheese]

what is the correct way to record a stock gain.

E.g. If you have 5 units of stock valued at $30 each and 5 units of stock valued at $35 each but the $30 stock was purchased first would you record the stock gain as $30 stock?

You would record the stock gain using the lowest cost price in the balance column before the stocktake was conducted I'm pretty sure. In your case it would be the $30 of stock.

[abcdqdxD]

You would record the stock gain using the lowest cost price in the balance column before the stocktake was conducted I'm pretty sure. In your case it would be the $30 of stock.

Yep that's correct, remember Conservatism.

[Sanguinne]

Explain how depreciation ties in with the demands of the qualitative characteristics of relevance.

[jonoz0r]

Explain how depreciation ties in with the demands of the qualitative characteristics of relevance.

Depreciation ties in with relevance as it ensures that the Income statement includes all information that is useful for decision-making about profit, by showing the consumption of non-current assets, allowing revenues earned to be matched against expenses incurred in the current reporting period. Depreciation also satisfies relevance because by reporting accumulated depreciation in the Balance sheet, this allows assets to be shown at their carrying value, which is vital to decision-making regarding the eventual replacement of the asset.

[smile+energy]

Could anyone help me with these questions?
Explain why an accrued expense is calssified as a current liability?
Explain why the payment of an accrued expense in a subsequent period requires the payment to be split in the CPJ?

[chasej]

1. Explain why an accrued expense is calssified as a current liability?
2. Explain why the payment of an accrued expense in a subsequent period requires the payment to be split in the CPJ?

1. An accrued expense is an expense which is recognised following accrual accounting as having been incurred in a period, but not yet paid in that period. Hence the business has a present obligation to pay the expense, as a result of the past expense (event), the settlement of which will result in an outflow of cash (a resource embodying economic benefit) within the next 12 months (in the next reporting period), hence following the definition of a current liability.

2. As an accrued expense is the liability related to an expense incurred in a past period, it is necessary to split any payments of an expense into discharging of the liability and an incurrence of the same expense in the current period, to ensure expenses in the current period are not overstated (ensuring more accurate net profit), while ensuring liabilities are not overstated by discharging the liability. As a rule, the accrued expense is always paid before any new expense is paid and consumed in the current period. It is thus necessary to split any payments related to accrued expense into discharging of the liability and incurrence of expense in the CPJ to ensure accounting records and reports are accurate, and reflect the business's actual performance and transactions.

[smile+energy]

Thanks, chasej

[partition]

Could someone briefly go over how prepaid expenses work?
Like basically how to calculate what is the expense and what is the prepaid, and then use them in ledgers?
All help would be greatly appreciated!

[william.woon]

Hey guys got a question, do cash purchases have GST included in them and do we have to find the GST from the cash purchase as we do for the Cash Budget

[chasej]

Hey guys got a question, do cash purchases have GST included in them and do we have to find the GST from the cash purchase as we do for the Cash Budget

For VCE purposes the transactions always specify if GST is applicable. And it varies, sometimes it says "purchased x for $880 including GST", in which case you divide it by 11 (or simply use intuition) to work out the GST paid is $80. Sometimes it can also say "purchased x for $800 plus GST), in which case you must work out 10% of 800 for the GST of $80.

Not sure if this answered your question as I don't understand what you mean by cash budget?

[william.woon]

You answered my question, thanks really helps a lot!

[chasej]

Sometimes I make what I refer to "fallacies" like for example when a question states a pre-adjustment trial balance shows drawings to be 1100, but a correcting entry to record 200 of stock drawings is required, I do the correction in part a of the question. But then if the question was to then say in part B to close drawings to the p/l summary acc, I have a tendency to simply record drawings as a 1100 in part B just because I failed to link the parts a and b of the question.

Does anyone have any tips for how to avoid this? Because over practice exams/SACs I've realised this is really what makes the difference between mid and high A+ for me.

[Jason12]

how do balance day adjustments ensure relevance?