VCE Accounting Question Thread!

[One Step at a Time]

For depreciation you would choose 'outflow/consumption of economic benefits' because the non-current assets ability to generate revenue decreases as it is consumed. You can also refer to the next part of the definition to be certain, that is, it leads to a decrease in assets (Accumulated Depreciation, which is a negative asset), thus reducing owner's equity (as it is an expense and reduces net profit).

You would use 'reduction in inflows' for something like discount expense, as there is less cash received cash received from debtors.

For revenues you'd use 'saving in outflows' for items such as discount revenue, as less cash is being paid to the creditor as a result of early repayment. Interest revenue is an item you would describe with 'inflow of economic benefits' as it leads to an increase in assets (bank) and owner's equity.

Sorry it's a little rushed, but I hope that helped haha

I know this seems like such an obvious answer but really dissect what the expense is doing to the accounting equation. Something like depreciation is ( in simple terms ) reducing the value of our assets ( technically its not but just go with this for now ) so we are losing economic benefit. However, with something like discount expense, you are not receiving the amount you expected back hence it is a reduction in revenue.

lol abcxyz beat me to it but yeah pretty much think about the accounting elements and you will be fine.

Thanks so much! I get it now, your explanations definitely helped 

Is outflow of economic benefits and consumption of economic benefits the same? Can they be used interchangeably?

Also, depreciation doesn't actually decrease the value of the asset, right? It just increases the negative asset, accumulated depreciation, which decreases assets overall?

And is discount expense the only expense that is a "reduction in inflows..."? Likewise, is discount revenue the only revenue item that is "savings in outflows...?"

Thanks again 

[Hannibal]

Thanks so much! I get it now, your explanations definitely helped 

Is outflow of economic benefits and consumption of economic benefits the same? Can they be used interchangeably?

Also, depreciation doesn't actually decrease the value of the asset, right? It just increases the negative asset, accumulated depreciation, which decreases assets overall?

And is discount expense the only expense that is a "reduction in inflows..."? Likewise, is discount revenue the only revenue item that is "savings in outflows...?"

Thanks again 

I reckon the key difference is that consumption of economic benefit is when you're consuming something that's pre-existing, so say rent expense because you're consuming prepaid rent or depreciation because you're consuming an asset. But really they can be used interchangeably, don't think it actually matters.

[One Step at a Time]

Thanks Hannibal! 

So rent could also be an outflow of economic benefits if cash from bank is used to pay it?

Also, if given a stock card, how do I determine the stock gain value? The lowest value from the whole stock card or from the last entry?

[heartsflame]

Thanks Hannibal! 

So rent could also be an outflow of economic benefits if cash from bank is used to pay it?

Also, if given a stock card, how do I determine the stock gain value? The lowest value from the whole stock card or from the last entry?

Stock gain is valued at the lowest price in the stock card, this is due to conservatism and preventing assets from being overstated when the stock gain is realised.

[KDB]

Rent would be considered an outflow of economic benefit when cash is used. It is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic benefit from the entity.

[qweasdzxc]

Rent would be considered an outflow of economic benefit when cash is used. It is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic benefit from the entity.

Correct me if I'm wrong, but isn't rent an expense? 'Present obligation, arising from past events...' sounds like the definition of a liability ? Unless you were talking about accrued rent expense ?

[KDB]

Yes, sorry accrued rent expense is the liability, rent itself is an expense, and prepaid rent is the asset. too many types .. aha

[Cornrow Kenny]

Rent would be considered an outflow of economic benefit when cash is used. It is a present obligation, arising from past events, the settlement of which is expected to result in an outflow of economic benefit from the entity.

That sounds like the Liability definition. I don't think I've ever come across Rent as a Liability (edit unless Accrued), it is either prepaid or paid month to month etc.

[SexGodDosia]

So if Discount expense is an outflow in economic benefit
what is Discount revenue?

*Not looking for definition looking for how to refer to it in this context

[Cornrow Kenny]

So if Discount expense is an outflow in economic benefit
what is Discount revenue?

*Not looking for definition looking for how to refer to it in this context

Discount expense is not an outflow, it is the reduction in the inflow of economic benefits. You are getting less money from debtors.

Discount revenue is a reduction in the outflow of economic benefits. You are paying less money to creditors.

[One Step at a Time]

Stock gain is valued at the lowest price in the stock card, this is due to conservatism and preventing assets from being overstated when the stock gain is realised.

Thanks heartsflame. I was actually more specifically wondering which price to take. The lowest price form the whole stock card or the last entry or something else?

[SexGodDosia]

Discount expense is not an outflow, it is the reduction in the inflow of economic benefits. You are getting less money from debtors.

Discount revenue is a reduction in the outflow of economic benefits. You are paying less money to creditors.

Thanks

[One Step at a Time]

Stock gain should be valued at lowest cost price of stock still on hand. So whatever is the lowest amount in the balance column of your stock card

Thanks so much abcxyz (like your username btw haha) 

[One Step at a Time]

Hi everyone!!

How's everyone feeling? 

A last-minute question: are bad debts written off when probable (according to Conservatism) or only when deemed irrecoverable?

Also, can rent revenue be described as "a reduction in the outflow of economic benefits as it decreases a liability (prepaid rent revenue) that increases owner's equity..."? If not, how would it be defined in this case?

[The Usual Student]

Hi everyone!!

How's everyone feeling? 

A last-minute question: are bad debts written off when probable (according to Conservatism) or only when deemed irrecoverable?

Also, can rent revenue be described as "a reduction in the outflow of economic benefits as it decreases a liability (prepaid rent revenue) that increases owner's equity..."? If not, how would it be defined in this case?

Yep when probable!
And no to your second question, because rent revenue is revenue you generated for charging others for rent so the asset ( premise or land or NCA you are renting out) is being used by someone else to generate inflows of economic benefit. You are not reducing any outflows of economic benefit since there is no outflow of economic benefit in the scenario AKA you are not reducing a liability ( prepaid rent has nothing to do with rent revenue )
Hope that helps!