VCE accounting u3u4
With reference to one qualitative characteristic, explain the role of source documents -
answer Documents in an accounting system satisfy the qualitative characteristic of
verifiability (1 mark). Business documents enable independent observers to come to the
same conclusion regarding the event on the document (1 mark). OR This also ensures
that the events on the source document are faithfully represented (1 mark).
effect of paying an invoice on the accounting equation - answer decrease in assets due
to cash outflow. decrease in liability due to reduced accounts payble. no overall change
in OE
explain the FIFO cost assignment method - answerThe First In First Out cost
assignment method is an assumption that the newest stock is sold first (1 mark). The
FIFO method is used to allocate the cost of inventory sold when there is stock valued at
different amounts (1 mark).
identify the difference between cost of sales and cost of goods sold - answerCost of
Sales is the cost of inventory sold by the business (1 mark). This is different from the
Cost of Goods Sold, which includes Cost of Sales in addition to costs that are incurred
in getting the inventory into a condition and to a location ready to sell (1 mark), such as
Cartage Inwards or Customs Duty (1 mark).
explain the purpose of depreciating non-current assets - answerDepreciation attempts
to calculate how much of the asset's value has been consumed in the reporting period
(1 mark). It therefore allocates the cost of the non-current asset over the years (1 mark).
This satisfies the accrual basis accounting assumption as the part of the non-current
asset that is consumed in a particular reporting period is recognised as an expense in
the same reporting period, enabling the profit to be accurately calculated (1 mark).
explain the effects on the accounting reports if the depreciation of NCA is not recorded -
answerIf the depreciation of the vehicle was not recorded, the non-current assets in the
Balance Sheet would be overstated (1 mark). Owner's Equity would also be overstated,
as the Net Profit calculated in the Income Statement would be overstated (1 mark). This
is because expenses are understated (Depreciation expense) in the Income Statement
(1 mark). Depreciation has no effect on the Cash Flow Statement as it is not a cash
transaction (1 mark).
examine the effect of a slow inventory turnover on profitability and liquidity of a business
- answerThe profitability of Peta's Photo Frames will be affected, as a slow Inventory
Turnover means that sales are not being made quickly (1 mark). This means that sales
revenue and consequently profit will be reduced for the business (1 mark).
, The liquidity of Peta's Photo Frames would also be affected as aslowInventory Turnover
means that sales revenue is not being received quickly (1 mark). This means that there
is less cash available to meet Peta's Photo Frames short-term debts as they fall due (1
mark).
identify one disadvantage if a business has an inventory turnover that is too high -
answerIf Inventory Turnover is too high Peta's Photo Frames could miss possible sales
if it does not have inventory items that customers want to buy
explain the role of a tax invoice - answerA tax invoice is a source document used to
verify any transaction that involves the GST. They provide specific information about
transactions that is required by the ATO to substantiate GST amounts.
Explain why a business is allowed to deduct the GST on its purchases from the GST on
its sales when calculating the GST that it owes to the ATO. - answerUltimately it is the
final consumer who is penalised by the GST system, not small businesses. If a business
incurs any GST on purchases within the ordinary course of business operations, it is
entitled to receive back this GST in the form of a decrease to an existing GST liability
owed to the ATO.
Referring to one Qualitative characteristic, explain the importance of recording
transactions as they occur - answerTimeliness. Accounting information is only useful if it
available at the time that decisions need to be made. By recording transactions in a
timely manner when they occur, all information that is required to influence and inform
decisions at any specific point in time will be available.
elements of narration in the general journal - answerdescription of the transcation
including the source document number
explain what it means by double-entry accounting - answera system of recording
financial information which involves the use of ledger accounts; for each debit entry,
there is a corresponding credit entry to the same value; the value of all credit entries is
equal to the value of all debit entries.
what is a ledger account - answera record of all changes to a particular item in a
chnological order, and is comprised of debit and credit entries
what is the purpose of a trial balance? - answerto check that the double entry recording
process has been completed accurately if the sum of credit is equal to the sum of debit
Explain what circumstances may have caused the GST Clearing account of Mind
Games to have a debit balance as at 1 March 2025. - answerGiven that selling prices
exceed cost prices, it is normal for the GST Clearing ledger to be in credit at the end of
the period. If, however, the ledger has a debit balance, this indicates that more GST
was paid than received during the period. This is most likely due to the purchase of an
With reference to one qualitative characteristic, explain the role of source documents -
answer Documents in an accounting system satisfy the qualitative characteristic of
verifiability (1 mark). Business documents enable independent observers to come to the
same conclusion regarding the event on the document (1 mark). OR This also ensures
that the events on the source document are faithfully represented (1 mark).
effect of paying an invoice on the accounting equation - answer decrease in assets due
to cash outflow. decrease in liability due to reduced accounts payble. no overall change
in OE
explain the FIFO cost assignment method - answerThe First In First Out cost
assignment method is an assumption that the newest stock is sold first (1 mark). The
FIFO method is used to allocate the cost of inventory sold when there is stock valued at
different amounts (1 mark).
identify the difference between cost of sales and cost of goods sold - answerCost of
Sales is the cost of inventory sold by the business (1 mark). This is different from the
Cost of Goods Sold, which includes Cost of Sales in addition to costs that are incurred
in getting the inventory into a condition and to a location ready to sell (1 mark), such as
Cartage Inwards or Customs Duty (1 mark).
explain the purpose of depreciating non-current assets - answerDepreciation attempts
to calculate how much of the asset's value has been consumed in the reporting period
(1 mark). It therefore allocates the cost of the non-current asset over the years (1 mark).
This satisfies the accrual basis accounting assumption as the part of the non-current
asset that is consumed in a particular reporting period is recognised as an expense in
the same reporting period, enabling the profit to be accurately calculated (1 mark).
explain the effects on the accounting reports if the depreciation of NCA is not recorded -
answerIf the depreciation of the vehicle was not recorded, the non-current assets in the
Balance Sheet would be overstated (1 mark). Owner's Equity would also be overstated,
as the Net Profit calculated in the Income Statement would be overstated (1 mark). This
is because expenses are understated (Depreciation expense) in the Income Statement
(1 mark). Depreciation has no effect on the Cash Flow Statement as it is not a cash
transaction (1 mark).
examine the effect of a slow inventory turnover on profitability and liquidity of a business
- answerThe profitability of Peta's Photo Frames will be affected, as a slow Inventory
Turnover means that sales are not being made quickly (1 mark). This means that sales
revenue and consequently profit will be reduced for the business (1 mark).
, The liquidity of Peta's Photo Frames would also be affected as aslowInventory Turnover
means that sales revenue is not being received quickly (1 mark). This means that there
is less cash available to meet Peta's Photo Frames short-term debts as they fall due (1
mark).
identify one disadvantage if a business has an inventory turnover that is too high -
answerIf Inventory Turnover is too high Peta's Photo Frames could miss possible sales
if it does not have inventory items that customers want to buy
explain the role of a tax invoice - answerA tax invoice is a source document used to
verify any transaction that involves the GST. They provide specific information about
transactions that is required by the ATO to substantiate GST amounts.
Explain why a business is allowed to deduct the GST on its purchases from the GST on
its sales when calculating the GST that it owes to the ATO. - answerUltimately it is the
final consumer who is penalised by the GST system, not small businesses. If a business
incurs any GST on purchases within the ordinary course of business operations, it is
entitled to receive back this GST in the form of a decrease to an existing GST liability
owed to the ATO.
Referring to one Qualitative characteristic, explain the importance of recording
transactions as they occur - answerTimeliness. Accounting information is only useful if it
available at the time that decisions need to be made. By recording transactions in a
timely manner when they occur, all information that is required to influence and inform
decisions at any specific point in time will be available.
elements of narration in the general journal - answerdescription of the transcation
including the source document number
explain what it means by double-entry accounting - answera system of recording
financial information which involves the use of ledger accounts; for each debit entry,
there is a corresponding credit entry to the same value; the value of all credit entries is
equal to the value of all debit entries.
what is a ledger account - answera record of all changes to a particular item in a
chnological order, and is comprised of debit and credit entries
what is the purpose of a trial balance? - answerto check that the double entry recording
process has been completed accurately if the sum of credit is equal to the sum of debit
Explain what circumstances may have caused the GST Clearing account of Mind
Games to have a debit balance as at 1 March 2025. - answerGiven that selling prices
exceed cost prices, it is normal for the GST Clearing ledger to be in credit at the end of
the period. If, however, the ledger has a debit balance, this indicates that more GST
was paid than received during the period. This is most likely due to the purchase of an
