VCE Accounting Question Thread!

[lmnop]

Hi, just dropping in with a question from our prac SAC that I’ve been meaning to get off my chest:

The accountant of Hannah’s Hats provided the following Pre-adjustment Trial Balance (extract) as at 30 June 2014.     

Account:                                                  Debit:
Prepaid Insurance Expense                    1620             

The accountant also noted the following.
-Reports are prepared on a quarterly basis.
-The annual insurance policy ends on 30 April. The payment made for the policy ending 30 April 2015 was $1500 plus GST.

a) Prepare the General Journal entries required to record the balance day adjustment on 30 June 2014.   

I was sure that $370 would be the amount debited from the Insurance expense account. But apparently, some students have found the answer to be $1650 +$250 or something similar to that. 

So yeah, I hope that makes sense. 

[chasej]

Hi, just dropping in with a question from our prac SAC that I’ve been meaning to get off my chest:

The accountant of Hannah’s Hats provided the following Pre-adjustment Trial Balance (extract) as at 30 June 2014.     

Account:                                                  Debit:
Prepaid Insurance Expense                    1620             

The accountant also noted the following.
-Reports are prepared on a quarterly basis.
-The annual insurance policy ends on 30 April. The payment made for the policy ending 30 April 2015 was $1500 plus GST.

a) Prepare the General Journal entries required to record the balance day adjustment on 30 June 2014.   

I was sure that $370 would be the amount debited from the Insurance expense account. But apparently, some students have found the answer to be $1650 +$250 or something similar to that. 

So yeah, I hope that makes sense.

I got $370.

[Jason12]

how to record insurance expense when there are multiple payments due?

[chasej]

how to record insurance expense when there are multiple payments due?

A little ambigious but insurance is no different to any other expense account. If there's a prepaid expense you determine how much is consumed in the period, if there is accrued you do the same and simply follow the BDA method for recording them.

Do you have a specific question from a paper/book you didn't understand because it's a little hard to answer the question you asked itself?

[Jason12]

A little ambigious but insurance is no different to any other expense account. If there's a prepaid expense you determine how much is consumed in the period, if there is accrued you do the same and simply follow the BDA method for recording them.

Do you have a specific question from a paper/book you didn't understand because it's a little hard to answer the question you asked itself?

question 5

[Jason12]

With the Cash flow statement is GST received/paid part of operating cash flows? What about GST charged on credit sales?

[abcdqdxD]

With the Cash flow statement is GST received/paid part of operating cash flows? What about GST charged on credit sales?

To your first question, yes.
GST charged on credit sales is not recorded as it is not a cash item.

[lmnop]

Just a quick question regarding the Cash Flow Statement.

When recording GST paid for a non-current asset, do we lump it in with the amount of GST paid for Operating activities or do we record it separately under Investing activities?   

[Duyyy11]

Just a quick question regarding the Cash Flow Statement.

When recording GST paid for a non-current asset, do we lump it in with the amount of GST paid for Operating activities or do we record it separately under Investing activities?   

GST Paid and GST received will always be classified as operating inflows/outflows.
Investing activities concerns only the buying and selling of NCA for cash, and GST is not included in the cost of a NCA.

Hope this helps!

[lmnop]

GST Paid and GST received will always be classified as operating inflows/outflows.
Investing activities concerns only the buying and selling of NCA for cash, and GST is not included in the cost of a NCA.

Hope this helps!

Thanks!

[Jason12]

How do I explain cash vs profit questions? E.g. when the business has an increase in profit but a decrease in cash.

[TheWackyCheese]

How do I explain cash vs profit questions? E.g. when the business has an increase in profit but a decrease in cash.

You should always start a Cash vs Profit question with something along the lines of "Under Accrual Accounting, cash and profit are different resources. There is a difference between revenues earned less expenses incurred and cash inflows less cash outflows. Some cash items do not affect profit and vice versa" This is probably the most important part as it is required to gain full marks.
Then you would go on to discuss what happened specifically for the business. As an example, GST Paid could have been more than GST received. This results in an increase in cash outflows however, seeing as GST is not a revenue or expense, it is not used to calculate profit so profit is left unchanged. A final example, Credit sales may have been greater than receipts from debtors. Credit Sales is a revenue resulting in an increase in revenues (and therefore profit). Receipts from debtors is a cash inflow however, it does not increase cash inflows as much as credit sales revenue increases profit leaving profit higher than cash flows from operating activities.
The Cambridge Textbook has a helpful table in Chapter 12 so you can memorise it and reverse it if you need to if the question is the other way around.

I have a question as well by the way. Is it called the Profit and Loss Summary or Profit/Loss Summary? In the textbook and VCAA assessment report is says Profit and Loss Summary but I thought the main purpose of having the account is to report a Profit OR a Loss, it can't report a Profit AND a Loss at the same time? Would I get marked down for saying Profit/Loss?

[Jason12]

I have a question as well by the way. Is it called the Profit and Loss Summary or Profit/Loss Summary? In the textbook and VCAA assessment report is says Profit and Loss Summary but I thought the main purpose of having the account is to report a Profit OR a Loss, it can't report a Profit AND a Loss at the same time? Would I get marked down for saying Profit/Loss?

I always refer to it as P&L summary or profit and loss summary. You have a point with profit or loss but i think either way should be fine but check with a teacher in case.

[TheWackyCheese]

I always refer to it as P&L summary or profit and loss summary. You have a point with profit or loss but i think either way should be fine but check with a teacher in case.

My teacher said it should be the Profit/Loss Summary and it makes more sense to me to call it that but everywhere else lists it as the Profit and Loss Summary.

[Valyria]

If we are to establish commencing entries for a business that has a CR bank balance, do we omit the bank balance or include it in the CR section of the general journal and why? Moreover, if we have taken out a loan, why is this entry excluded from the commencing entries?