VCE Accounting Unit 3 Chapter 1 -...
Transcript of VCE Accounting Unit 3 Chapter 1 -...
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VCE Accounting Unit 3 1. Pre double-entry
VCE Accounting Unit 3
Chapter 1 Pre double-entry
Excluding GST
Concepts and skills:
Balance Sheet
Assets and equities Stakeholders
Stock cards
Transactions evidenced by documents
Cash journals
Unclassified Cash Flow Statement
Income Statement
Reporting period
Revenue and expenses Net profit
Gross profit
Drawings
Liability
Accounting equation
Review of the elements
Agreed value
Stock for advertising purposes
Instructional videos:
Basic concepts (1 & 2): assets,
Balance Sheet, equities, owners equity, capital, liabilities, accounting equation.
Documents (simple) Stock card (simple)
Revenue (1 & 2)
Expenses (1, 2 &3)
Simple Cash Flow Statement
Income Statement (simple)
Reporting period (simple)
Drawings
Stock for advertising use
Agreed value (simple)
Podcasts:
Assets
Equities
Liabilities
Revenue
Expenses
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VCE Accounting Unit 3 1. Pre double-entry
Clean Cut Mowers. Balance Sheet at 30/6/18
Assets $ Equities $
Bank 40000 Owners equity
Stock control 20000 Capital, Bob 175000
Office assets 25000
Premises 90000
Total assets 175000 Total equities 175000
The accounting reports, like the Balance Sheet, are prepared for stakeholders. Stakeholders are individuals or businesses that are interested in the performance of the business. Examples of stakeholders include the owner, manager, potential owner, people/businesses who are owed money by the business, employees, Australian Taxation Office (ATO) etc.
Clean Cut Mowers buy and sell ride-on mowers. Clean Cut Mowers is a trading business which buys and sells mowers on a cash basis. Selling the mowers is the business‟s revenue activity. The business is owned by one person, Bob, thus
Clean Cut Mowers is a sole-trader or sole-proprietorship. On 30/6/18. Clean Cut Mowers had the following Balance Sheet.
STOCK CARD: Ride on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
30/6 Balance 10 2000 20000
7/7 CHQ 56 3 2000 6000 13 2000 26000
8/7 REC 43 2 2000 4000 11 2000 22000
28/7 REC 44 3 2000 6000 8 2000 16000
Stock card
Equities refers to who has an interest or ownership in the assets. At 30/6/18, Bob, the owner, has 100% interest or ownership in the assets. Bob‟s ownership is called owners equity or capital.
Assets and equities „balance‟ in a Balance Sheet.
„Ride on mowers‟ is the stock that is traded by Clean Cut Mowers. Detailed information about stock is recorded in the stock card: see below. Note that the stock balance at 30/6/18 is $20000 as per the Balance
Sheet of the same date: see above.
On 30/6/18 the business has 10 ride-
on mowers with a unit cost of $2000. The IN column of the stock card records all movements of stock into the business. The most common example of an IN transaction would be the purchase of stock.
The OUT column of the stock card records all movements of stock out of the business. The most common example of an OUT transaction would be the sale of stock.
The BALANCE column changes after each stock transaction and represents the value of stock on hand at any point in time.
Balance Sheet
Assets are resources under the control of the business, as a result of past events, which will provide future economic benefits.
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VCE Accounting Unit 3 1. Pre double-entry
Clean Cut Mowers. Unclassified Cash Flow Statement for July 2018.
Cash Receipts $ $
Sales 20000
Cash Payments
Stock purchases 6000
Office expenses 900 6900
Change in cash 13100
+ Cash at start 40000
= Cash at end 53100
Cash Receipts Journal (CRJ) CFS X √ √ √ √
IS √ exp. √ rev. X X
BS calc. X X calc. calc.
Date Details Doc. Bank Cost of Sales
Sales Sundry Loan Capital
8/7 SALES 43 8000 4000 8000
28/7 SALES 44 12000 6000 12000
31/7 Totals 20000 10000 20000
Cash Payments Journal (CPJ) CFS √ √ √ √ √ √ √ √
IS √ exp. X X √ exp. X √ exp. √ exp. ?
BS calc. X √ calc. X calc. X X ?
Date Details Doc. Bank Internet
Exps. Drawings Loan Interest Stock Cleaning
Office Exps.
Sundry
7/7 STOCK 56 6000 6000
17/7 OFFICE EXPS. 57 900 900
31/7 Totals 6900 6000 900
July transactions The following transactions, evidenced by documents, occurred during July 2018.
Bank of Melton
Date: 7/7/18
To: Just Mowers
For: 3 Mowers at $2000
each.
This cheque $6000
Cheque number 56
Clean Cut Mowers
Clean Cut Mowers
Receipt # 43
Date: 8/7/18
From: Cash Customers
For: Sale of 2 mowers
at $4000 each.
$: $8000.00
Thank you
Bank of Melton
Date: 17/7/18
To: OfficeWorks
For: Office expenses.
(Stationery etc.)
This cheque $900
Cheque number 57
Clean Cut Mowers
Clean Cut Mowers
Receipt # 44
Date: 28/7/18
From: Cash Customers
For: Sale of 3 mowers
at $4000 each.
$: $12000.00
Thank you
Cheque #56 is for the cash purchase of more trading stock.
Receipt #43 is for the cash sale of trading stock. Cost of sales = $4000.
Cheque #57 is for the cash payment of office expenses.
Receipt #44 is for the cash sale of trading stock. Cost of sales = $6000.
Cash Journals
Reports Clean Cut Mowers.
Income Statement for July 2018.
Revenue $
Sales 20000
Less Cost of Goods Sold
Cost of sales 10000
Gross profit 10000
Less other expenses
Office expenses 900
Net profit 9100
Clean Cut Mowers. Balance Sheet at 31/7/18
Assets $ Equities $
Bank 53100 Owners equity
Stock control 16000 Capital, Bob 175000
Office assets 25000 Add net profit 9100
Premises 90000
Total assets 184100 Total equities 184100
Profit is revenue earned less expenses incurred over the reporting period (July) and this data is reported in the Income Statement. The revenue activity for this
business is sales. Expenses are incurred to earn revenue. In July, the expenses are cost of sales and office expenses. Revenue and expense data is sourced from the cash journals and/or the Cash Flow Statement.
The Cash Flow Statement reports cash receipts and cash payments over the reporting period and shows the cash balance at the end of the reporting period. The cash flow data is sourced from the cash journals.
Net profit belongs to the owner so it is added to Capital in the new Balance at the end of the reporting period.
The data for the Balance Sheet at the end of the reporting period comes from the original Balance but takes into account any changes to assets, (such as Bank and Stock) and equities.
Total the cash journals at the
end of July.
Receipts are recorded in the Cash Receipts Journal and cheques in the Cash
Payments Journal.
From Balance Sheet.
From stock cards
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VCE Accounting Unit 3 1. Pre double-entry
Clean Cut Mowers. Balance Sheet at 1/8/18
Assets $ Equities $
Bank 53100 Owners equity
Stock control 16000 Capital, Bob 184100
Office assets 25000
Premises 90000
Total assets 184100 Total equities 184100
Balance Sheet
STOCK CARD: Ride on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/8 Balance 8 2000 16000
5/8 CHQ 58 4 2000 8000 12 2000 24000
11/8 REC 45 3 2000 6000 9 2000 18000
28/8 REC 46 5 2000 10000 4 2000 8000
Stock card
August transactions The following transactions, evidenced by
documents, occurred during August 2018.
Bank of Melton
Date: 5/8/18
To: Just Mowers
For: 4 Mowers at $2000
each.
This cheque $8000
Cheque number 58
Clean Cut Mowers
Clean Cut Mowers
Receipt # 45
Date: 11/8/18
From: Cash Customers
For: Sale of 3 mowers
at $4000 each.
$: $12000.00
Thank you
Bank of Melton
Date: 18/8/18
To: Netspace
For: Internet expenses
This cheque $500
Cheque number 59
Clean Cut Mowers
Clean Cut Mowers
Receipt # 46
Date: 28/8/18
From: Cash Customers
For: Sale of 5 mowers
at $4000 each.
$: $20000.00
Thank you
Cheque #58 is for the cash purchase of more trading stock.
Receipt #45 is for the
cash sale of trading stock. Cost of sales = $6000.
Cheque #59 is for the cash payment of internet expenses.
Receipt #46 is for the cash sale of trading stock. Cost of sales = $10000.
Cash Receipts Journal (CRJ) CFS X √ √ √ √
IS √ exp. √ rev. X X
BS calc. X X calc. calc.
Date Details Doc. Bank Cost of Sales
Sales Sundry Loan Capital
11/8 SALES 45 12000 6000 12000
28/8 SALES 46 20000 10000 20000
31/8 Totals 32000 16000 32000
Cash Payments Journal (CPJ) CFS √ √ √ √ √ √ √ √
IS √ exp. X X √ exp. X √ exp. √ exp. ?
BS calc. X √ calc. X calc. X X ?
Date Details Doc. Bank Internet
Exps. Drawings Loan Interest Stock Cleaning
Office Exps.
Sundry
5/8 STOCK 58 8000 8000
18/8 INTERN.EXPS. 59 500 500
31/8 Totals 8500 500 8000
Journals for August
Total the cash journals at the end of August.
Stock cards only record
the cost price of stock.
Capital at the start of August is the capital at the end of July. This capital figure includes the impact of the profit from July. This data comes from the last Balance Sheet.
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VCE Accounting Unit 3 1. Pre double-entry
Summary of the accounting process so far:
Start of
reporting period
Business
transactions
are evidenced by documents.
Transactions are recorded in the stock
cards and journals: Cash Receipts Journal Cash Payments Journal
End of
reporting period
Prepare Accounting Reports:
Cash Flow Statement Profit/Loss Statement
Balance Sheet
Input stage Processing stage
„Recording‟
Output stage
„Reporting‟
Reports for August
Clean Cut Mowers. Unclassified Cash Flow Statement for August 2018.
Cash Receipts $ $
Sales 32000
Cash Payments
Stock purchases 8000
Internet expenses 500 8500
Change in cash 23500
+ Cash at start 53100
= Cash at end 76600
Clean Cut Mowers. Income Statement for August 2018.
Revenue $
Sales 32000
Less Cost of Goods Sold
Cost of sales 16000
Gross profit 16000
Less other expenses
Internet expenses 500
Net profit 15500
The reports must contain relevant information for stakeholders such as the name of the business, the name of the report and the relevant date or dates. The Cash Flow Statement and Income Statement must clearly indicate the reporting period, in this case, August 2018.
Revenue can be defined as any transaction that leads to an increase in owners equity (excluding capital contribution). The most common example of revenue is sales.
Expenses can be defined as any transaction that leads to a decrease in owners equity (excluding drawings). Common examples of expenses are cost of sales, office expenses, internet expenses, wages, rent, cleaning, advertising, interest on loans, etc. You will
become skilled at identifying expenses.
If revenue is greater than expenses for the
reporting period, a profit has been generated. If revenue is less than expenses for the
reporting period, a loss has been incurred.
Clean Cut Mowers. Balance Sheet at 31/8/18
Assets $ Equities $
Bank 76600 Owners equity
Stock control 8000 Capital, Bob 184100
Office assets 25000 Add net profit 15500
Premises 90000
Total assets 199600 Total equities 199600
The stock value
must match the final balance of the stock card.
Get the Bank value from the Cash Flow Statement.
Get the
profit value
from the Income Statement.
from?
Gross profit is the difference between sales and the cost of goods sold—the profit made on the purchase and sale of stock only. Net profit is the difference between gross
profit and „other expenses‟—the final profit after all expenses have been deducted from sales.
Unit 3, Outcome 1, focuses on recording not reporting!
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VCE Accounting Unit 3 1. Pre double-entry
Clean Cut Mowers. Balance Sheet at 1/9/18
Assets $ Equities $
Bank 76600 Owners equity
Stock control 8000 Capital, Bob 199600
Office assets 25000
Premises 90000
Total assets 199600 Total equities 199600
Balance Sheet
STOCK CARD: Ride-on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/9 Balance 4 2000 8000
3/9 CHQ 60 7 2000 14000 11 2000 22000
12/9 REC 47 4 2000 8000 7 2000 14000
23/9 REC 49 3 2000 6000 4 2000 8000
30/9 REC 50 2 2000 4000 2 2000 4000
Stock card
September transactions The following transactions, evidenced by documents, occurred during September 2018.
Bank of Melton
Date: 3/9/18
To: Just Mowers
For: 7 Mowers at $2000
each.
This cheque $14000
Cheque number 60
Clean Cut Mowers
Clean Cut Mowers
Receipt # 47
Date: 12/9/18
From: Cash Customers
For: Sale of 4 mowers
at $4000 each.
$: $16000.00
Thank you
Bank of Melton
Date: 19/9/18
To: OfficeWorks
For: Office expenses
This cheque $700
Cheque number 61
Clean Cut Mowers Clean Cut Mowers
Receipt # 49
Date: 23/9/18
From: Cash Customers
For: Sale of 3 mowers
at $4000 each.
$: $12000.00
Thank you
Cash Receipts Journal (CRJ) CFS X √ √ √ √
IS √ exp. √ rev. X X
BS calc. X X calc. calc.
Date Details Doc. Bank Cost of Sales
Sales Sundry ABC Loan
Capital
12/9 SALES 47 16000 8000 16000
15/9 LOAN-ABC 48 10000 10000
23/9 SALES 49 12000 6000 12000
30/9 SALES 50 8000 4000 8000
30/9 Totals 46000 18000 36000 10000
Cash Payments Journal (CPJ) CFS √ √ √ √ √ √ √ √
IS √ exp. X X √ exp. X √ exp. √ exp. ?
BS calc. X √ calc. X calc. X X ?
Date Details Doc. Bank Internet
Exps. Drawings Loan Interest Stock Cleaning
Office Exps.
Sundry
3/9 STOCK 60 14000 14000
19/9 OFF.EXPS. 61 700 700
21/9 ADVERT. 62 1400 1400
25/9 DRAWINGS 63 2000 2000
30/9 Totals 18100 2000 14000 700 1400
Journals for September
Total the cash journals at the end of Sept.
Clean Cut Mowers
Receipt # 48
Date: 15/9/18
From: ABC Finance Co.
For: Loan.
$: $10000.00
Thank you Bank of Melton
Date: 21/9/18
To: Rez Design
For: Advertising
This cheque $1400
Cheque number 62
Clean Cut Mowers
Bank of Melton
Date: 25/9/18
To: Cash
For: Drawings
This cheque $2000
Cheque number 63
Clean Cut Mowers
Clean Cut Mowers
Receipt # 50
Date: 30/9/18
From: Cash Customers
For: Sale of 2 mowers
at $4000 each.
$: $8000.00
Thank you
The design of the journals depends on the information needs of the business—this can vary
from business to business.
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VCE Accounting Unit 3 1. Pre double-entry
Accounting equation at 30/9/18:
ASSETS EQUITIES
$223500 $223500
=
ASSETS
$223500 = EQUITIES
LIABILITIES
$10000
OWNERS EQUITY
$213500
Reports for September
Clean Cut Mowers. Unclassified Cash Flow Statement for September 2018.
Cash Receipts $ $
SALES 36000
LOAN—ABC 10000 46000
Cash Payments
DRAWINGS 2000
STOCK PURCHASES 14000
OFFICE EXPENSES 700
ADVERTISING 1400 18100
Change in cash 27900
+ Cash at start 76600
= Cash at end 104500
Clean Cut Mowers. Income Statement for September 2018.
Revenue $ $
SALES 36000
Less Cost of Goods Sold
COST OF SALES 18000
Gross profit 18000
Less other expenses
OFFICE EXPENSES 700
ADVERTISING 1400 2100
Net profit 15900
Clean Cut Mowers. Balance Sheet at 30/9/18
Assets $ Equities $
Bank 104500 Liabilities
Stock control 4000 ABC Finance Co. 10000
Office assets 25000 Owners equity
Premises 90000 Capital, Bob 199600
Add net profit 15900
Less drawings (2000)
Total assets 223500 Total equities 223500
The stock value must match the final balance of the stock card.
Get the Bank value from the Cash Flow Statement.
Cheque #63 was for drawings. Drawings is when the owner takes assets out of the business for private use. Drawings is usually cash but it can be any asset. Drawings will be reported in the Balance sheet as a negative owners equity item as it works to reduce the owners interest or ownership in the business‟s assets.
Accounting equation
The Balance Sheet is an expression of the accounting equation, that is: Assets = Equities or
Assets = Liabilities + Owners Equity or Owners Equity = Assets — Liabilities.
During September, the business borrowed $10000 cash from
ACE Finance Co. The $10000 has to be repaid and so it is a liability for the business. Liabilities are present obligations of the business that will lead to a future outflow of economic
benefits to external entities (businesses or individuals). The ABC Finance Co. has an interest or ownership in assets of the business, hence liabilities are also equities.
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VCE Accounting Unit 3 1. Pre double-entry
ASSETS LIABILITIES OWNERS EQUITY
INCREASE STOCK $14000
DECREASE CASH $14000
= +
Identify how the following transactions will impact on the accounting equation. Treat each transaction separately. Non cumulative.
Bank of Melton
Date: 3/9/18
To: Just Mowers
For: 7 Mowers at $2000
each.
This cheque $14000
Cheque number 60
Clean Cut Mowers
Clean Cut Mowers
Receipt # 47
Date: 12/9/19
From: Cash Customers
For: Sale of 4 mowers
at $4000 each.
$: $16000.00
Thank you
Bank of Melton
Date: 19/9/18
To: OfficeWorks
For: Office expenses
This cheque $700
Cheque number 61
Clean Cut Mowers
Clean Cut Mowers
Receipt # 48
Date: 15/9/19
From: ABC Finance Co.
For: Loan.
$: $10000.00
Thank you
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $16000
DECREASE STOCK $8000
NET INCREASE $8000
INCREASE $16000 SALES
DECREASE $8000 COST OF SALES
NET INCREASE $8000
= +
Difficult transaction. Cash sale of stock. The total cost of sales = $8000 (4 x $2000).
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $10000
INCREASE ABC LOAN $10000
= +
ASSETS LIABILITIES OWNERS EQUITY
DECREASE CASH $700
DECREASE $700 DUE TO
OFFICE EXPENSES
= +
Cash purchase of stock.
Loan of $10000 cash.
Cash expenses of $700. Important
On the two exams, avoid all abbreviations such as arrows : the
examiners do not like them! Also, avoid abbreviations such as „C.O.S.‟
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VCE Accounting Unit 3 1. Pre double-entry
Clean Cut Mowers
Receipt # 49
Date: 23/9/19
From: Cash Customers
For: Sale of 3 mowers
at $4000 each.
$: $12000.00
Thank you
Bank of Melton
Date: 21/9/18
To: Rez Design
For: Advertising
This cheque $1400
Cheque number 62
Clean Cut Mowers
Bank of Melton
Date: 25/9/18
To: Cash
For: Drawings
This cheque $2000
Cheque number 63
Clean Cut Mowers
Clean Cut Mowers
Receipt # 50
Date: 30/9/19
From: Cash Customers
For: Sale of 2 mowers
at $4000 each.
$: $8000.00
Thank you
ASSETS LIABILITIES OWNERS EQUITY
DECREASE CASH $1400
DECREASE $1400 DUE TO
ADVERTISING EXPENSES
= +
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $12000
DECREASE STOCK $6000
NET INCREASE $6000
INCREASE $12000 SALES
DECREASE $6000 COST OF SALES
NET INCREASE $6000
= +
ASSETS LIABILITIES OWNERS EQUITY
DECREASE CASH $2000
DECREASE $2000 DUE TO
DRAWINGS.
= +
ASSETS LIABILITIES OWNERS EQUITY
INCREASE CASH $8000
DECREASE STOCK $4000
NET INCREASE $4000
INCREASE $8000 SALES
DECREASE $4000 COST OF SALES
NET INCREASE $4000
= +
Cash expenses of $1400.
Difficult transaction. Cash sale of stock. The total cost of sales = $6000 (3 x $2000).
Cash drawings $2000.
Difficult transaction. Cash sale of stock. The total cost of sales = $4000 (2 x $2000).
Important You can use pencil in class and
on all assessment tasks including the two exams!
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VCE Accounting Unit 3 1. Pre double-entry
General Journal (GJ)
Date Details $
29/10/18 CAPITAL CONTRIBUTION OF OFFICE ASSETS (COMPUTER), MEMO #1 1000
31/10 DRAWINGS OF STOCK X 1 UNIT, MEMO #2 2000
MEMO #1: 29/10/18 The owner, Bob, contributed his personal
computer to the business (office assets). $1000.
Clean Cut Mowers. Balance Sheet at 1/10/18
Assets $ Equities $
Bank 104500 Liabilities
Stock control 4000 ABC Finance Co. 10000
Office assets 25000 Owners equity
Premises 90000 Capital, Bob 213500
Total assets 223500 Total equities 223500
Balance Sheet
STOCK CARD: Ride-on mower
2018 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/10 Balance 2 2000 4000
4/10 CHQ 64 9 2000 18000 11 2000 22000
15/10 REC 51 5 2000 10000 6 2000 12000
31/10 MEM 2 1 2000 2000 5 2000 10000
Stock card
October transactions The following transactions, evidenced by documents, occurred during October 2018.
Bank of Melton
Date: 4/10/18
To: Just Mowers
For: 9 Mowers at $2000
each.
This cheque $18000
Cheque number 64
Clean Cut Mowers
Clean Cut Mowers
Receipt # 51
Date: 15/10/18
From: Cash Customers
For: Sale of 5 mowers
at $4000 each.
$: $20000.00
Thank you
Bank of Melton
Date: 25/10/18
To: OfficeWorks
For: Power expenses.
This cheque $500
Cheque number 65
Clean Cut Mowers
Cash Receipts Journal (CRJ) CFS X √ √ √ √
IS √ exp. √ rev. X X
BS calc. X X calc. calc.
Date Details Doc. Bank Cost of Sales
Sales Loan Capital Sundry
15/10 SALES 51 20000 10000 20000
31/10 Totals 20000 10000 20000
Cash Payments Journal (CPJ) CFS √ √ √ √ √ √ √ √
IS √ exp. X X √ exp. X √ exp. √ exp. ?
BS calc. X √ calc. X calc. X X ?
Date Details Doc. Bank Internet
Exps. Drawings
ABC Loan
Interest on loan
Stock Cleaning Office Exps.
Sundry
9/10 STOCK 64 18000 18000
25/10 POWER EXPS. 65 500 500
27/10 LOAN-ABC 66 770 700 70
31/10 Totals 19270 700 70 18000 500
Journals for October
Total the cash journals at the
end of Oct.
MEMO #2: 31/10/18
The owner, Bob, took 1 unit of stock home for his private use. $2000. Drawings of stock.
Bank of Melton
Date: 27/10/18
To: ABC Finance Co.
For: Repayment of
loan including $70 interest.
This cheque $770
Cheque number 66
Clean Cut Mowers
Of course most businesses use electronic systems not these ol‟ fashioned manual
systems!
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VCE Accounting Unit 3 1. Pre double-entry
ASSETS EQUITIES
$231230 $231230
=
ASSETS
$231230 = EQUITIES
LIABILITIES
$9300
OWNERS EQUITY
$221930
Reports for October
Clean Cut Mowers. Unclassified Cash Flow Statement for October 2018.
Cash Receipts $ $
SALES 20000
Cash Payments
LOAN—ABC 700
INTEREST ON LOAN 70
STOCK PURCHASES 18000
POWER EXPS. 500 19270
Change in cash 730
+ Cash at start 104500
= Cash at end 105230
Clean Cut Mowers. Income Statement for October 2018.
Revenue $ $
SALES 20000
Less Cost of Goods Sold
COST OF SALES 10000
Gross profit 10000
Less other expenses
INTEREST ON LOAN 70
POWER EXPENSES 500 570
Net profit 9430
Clean Cut Mowers. Balance Sheet at 31/10/18
Assets $ Equities $
Bank 105230 Liabilities
Stock control 10000 ABC Finance Co. 9300
Office assets 26000 Owners equity
Premises 90000 Capital, Bob 214500
Add net profit 9430
Less drawings (2000)
Total assets 231230 Total equities 231230
Calculation space (if required)
ABC LOAN $10000 — $700 = $9300 OFFICE ASSETS: $25000 + $1000 (CAPITAL CONTRIBUTION) = $26000. CAPITAL: $213500 + $1000 CAPITAL CONTRIBUTION (OFFICE ASSETS) = $214500.
Accounting equation @ 31/10/18
Identify how the following 2 transactions will impact on the accounting
equation. Treat each transaction separately. Non cumulative.
ASSETS LIABILITIES OWNERS EQUITY
INCREASE OFFICE ASSETS
$1000
INCREASE $1000 DUE TO
CAPITAL CONTRIBUTION.
= +
MEMO #1: 29/10/18 The owner, Bob, contributed his personal
computer to the business (office assets). $1000.
MEMO #2: 31/10/18
The owner, Bob, took 1 unit of stock home for his private use. $2000. Drawings of stock.
ASSETS LIABILITIES OWNERS EQUITY
DECREASE STOCK $2000
DECREASE $2000 DUE TO
DRAWINGS.
= +
Can you think
of two separate places to find
the cost of sales data?
Eventually you will be able to identify the impact of any transaction on the
accounting equation.
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VCE Accounting Unit 3 1. Pre double-entry
A L OE R E Quick Review
9. Transactions are evidenced by … A. Cash Flow Statement. B. Income Statement. C. Documents. D. Journals.
10. An item will usually get its own column in the journals if … A. It has a high dollar value. B. It is a frequent transaction. C. It is an infrequent transaction. D. There is enough room. 11. The report that provides stakeholders with detailed information about the businesses cash resources …
A. Balance sheet B. Cash receipts journal. C. Cash flow statement. D. Income statement. 12. Owners equity can change due to … A. Revenue. B. Expenses. C. Drawings. D. All of the above.
13. If drawings exceeds profit for a reporting period, owners equity will … A. Increase. B. Decrease. C. No impact. D. Impact cannot be determined from this data. 14. The owners equity section of the Balance Sheet can report …
A. Capital plus revenue less drawings. B. Assets plus profit less drawings. C. Capital plus profit less drawings. D. Assets less loss less drawings. 15. The most likely sequence for a simple accounting process is … A. Documents, journals & stock-cards, reports. B. Journals & stock-cards, documents, reports. C. Reports, documents, journals & stock-cards. D. Documents, reports, journals & stock-cards.
16. Information in the accounting reports is said to be more reliable if … A. The Income Statement reports a profit. B. The reports are supported by documentary
evidence. C. The reports are prepared frequently. D. The Balance Sheet balances. 17. The accounting equation shows …
A. Liabilities equals assets plus owners equity. B. Assets equal liabilities plus owners equity. C. Owners equity less liabilities equals assets. D. Assets plus liabilities equals owners equity.
1. Which one of the following is the best description of an asset? A. Present obligations of the business that will lead to a
future outflow of economic benefits. B. Resources under the control of the business
which will provide future economic benefits. C. Causes an increase in owners equity. D. Causes a decrease in owners equity. 2. Which one of the following is the best description of a liability? A. Present obligations of the business that will
lead to a future outflow of economic benefits. B. Resources under the control of the business which
will provide future economic benefits. C. Causes an increase in owners equity.
D. Causes a decrease in owners equity. 3. Which one of the following is the best description of owners equity? A. Future obligations of the business. B. Resources under the control of the business which
will provide future economic benefits. C. Liabilities less assets. D. Assets less liabilities. 4. Revenue could be defined as ..
A. Future obligations of the business. B. Resources under the control of the business which
will provide future economic benefits. C. Transactions that cause an increase in owners
equity excluding capital contributions. D. Transactions that cause a decrease in owners equity
excluding drawings. 5. Expenses could be defined as …
A. Future obligations of the business. B. Resources under the control of the business which
will provide future economic benefits. C. Transactions that cause an increase in owners equity
excluding capital contributions. D. Transactions that cause a decrease in owners
equity excluding drawings. 6. The reporting period is best described as … A. Period of time over which assets are determined. B. Period of time over which profit is determined.
C. Period of time over which liabilities are determined. D. 1/7/XX to 30/6/XX 7. Equities are best described as … A. Assets and liabilities. B. Assets less liabilities. C. Liabilities and owners equity. D. Assets less owners equity. 8. In a Balance Sheet, the following „balance‟ …
A. Assets and liabilities. B. Assets and equities. C. Assets and revenues. D. Equities and liabilities.
PS: the current VCE exams do
not include multiple-choice
questions.
17 17
13
VCE Accounting Unit 3 1. Pre double-entry
The accounting equation is Assets (A)= Liabilities (L) + Owners Equity (OE) which represents the relationships in the Balance Sheet. Alternative ways to express the accounting equation are: OE = A — L and A — L = OE.
Example 1: Excludes revenue, expenses and GST.
ASSETS LIABILITIES OWNERS EQUITY = +
Transaction 1: owner contributed $100000 cash to start business.
$100000 $100000 = +
2: owner contributed personal stock to business worth $6000.
$6000 $6000 = +
3: owner contributed personal vehicle to business worth $20000.
$20000 $20000 = +
4: bought computer for $4000 cash.
$4000
$4000 = +
5: bought office desk for $2000 cash.
$2000
$2000 = +
6: borrowed $8000 from ANZ Bank.
$8000 $8000 = +
7: paid ANZ Bank $500 to reduce loan.
$500 $500 = +
8: paid $5000 cash for stock.
$5000 $5000
= +
9: owner took $1000 cash for private use (Drawings).
$1000 $1000 = +
10: borrowed additional $3000 from ANZ.
$3000 $3000 = +
Accounting Equation … again
Treat each transaction separately.
14
VCE Accounting Unit 3 1. Pre double-entry
Example 2: Includes revenue and expenses but excludes GST. Cumulative exercise.
ASSETS $100000
LIABILITIES $20000
OWNERS EQUITY $80000
= +
Transaction 1: owner contributed $6000 cash to business.
$106000 $20000 $86000 = +
Transaction 2: Sold stock for $3000 cash (cost of stock $1500).
$107500 $20000 $87500 = +
Transaction 3: Sold stock for $2000 cash (cost of stock $1000).
$108500 $20000 $88500 = +
Transaction 4: Paid wages expense $1000.
$107500 $20000 $87500 = +
Transaction 5: Paid advertising expense $800.
$106700 $20000 $86700 = +
Transaction 6: Bought stock for cash $6000.
$106700 $20000 $86700 = +
Transaction 7: Paid rent expense $2000.
$104700 $20000 $84700 = +
Transaction 8: Cash sales of stock $7000. Cost of sales $3500.
$108200 $20000 $88200 = +
Transaction 9: Cash drawings by owner for private use, $800.
$107400 $20000 $87400 = +
Transaction 10: Paid wages $1000.
$106400 $20000 $86400 = +
Transaction 11: Cash sales of stock $8000, cost of sales $4000.
$110400 $20000 $90400 = +
15
VCE Accounting Unit 3 1. Pre double-entry
The elements are: assets (A), liabilities (L), owners equity (OE), revenue (R) and expenses (E). You need to understand these terms — eventually! You could use this sheet to assist you! Why not do this in pairs? Resources?
Find the AASB Glossary to help you complete this page.
Just Computers. Balance Sheet at 31/7/21
ASSETS $ EQUITIES $
Bank 24700 LIABILIITIES
Fixtures & Fittings 2000 Loan, ANZ 10000
Stock of Computer Systems 9600 OWNERS EQUITY
Office Equipment 3700 Capital, Jennifer 30000
Total Assets 40000 Total Equities 40000
Assets Liabilities Owners Equity
A resource:
(a) controlled by an entity as a
result of past events; and
(b) from which future economic
benefits are expected to flow to the
entity.
A present obligation of the entity
arising from past events, the
settlement of which is expected to
result in an outflow from the entity
of resources embodying economic
benefits.
The residual interest in the assets of
the entity after deducting all its
liabilities.
Find the AASB definitions of the following:
The Elements … again
Just Computers, Income Statement for August 2022
Revenue $ $
Sales 29000
Less Cost of Goods Sold
Cost of sales 8700
Gross Profit 20300
Less other Expenses
Advertising 3700
Wages 12400 16100
Net Profit 4200
Revenue Expenses
The gross inflow of economic benefits during the period
arising in the course of the ordinary activities of an entity
when those inflows result in increases in equity, other than
increases relating to contributions from equity
participants (yuk!)
Decreases in economic benefits during the accounting
period in the form of outflows or depletions of assets or
incurrences of liabilities that result in decreases in equity,
other than those relating to distributions to equity
participants (yuk!)
Find the AASB definitions of the following:
A L OE R E
www.aasb.gov.au
A L OE R E
16
VCE Accounting Unit 3 1. Pre double-entry
Agreed value
Which value should the business use to value the vehicle? $40000 or $30000? The original cost of $40000 is not relevant to the business since it was paid by the owner as a private individual: the business entity did not pay $40000. Even though the $30000 is an estimate, and thus lacks
reliability, it is a more relevant valuation for the stakeholders. (Note that the use of „experts‟ does, however, help to improve the reliability of the estimate).
MEMO #66: 3/6/22 Owner contributed a personal vehicle to
the business which had originally cost her $40000 on 1/6/19. After consulting some valuation experts, the agreed value is $30000.
Ace Traders. Balance Sheet extract at 3/6/22
ASSETS $ EQUITIES $
Vehicle 30000
General Journal (GJ)
Date Details $
3/6/22 Contribution of vehicle at agreed value, memo #66 30000
Explain how memo #66 impacts on the accounting equation of Ace Traders. Assets: increase $30000
Liabilities: no impact
Owners equity: increase $30000 due to capital contribution
Stock for advertising purposes
Sometimes a business will take some of its stock to use for
promotional or advertising purposes. It might be that the business is attending a Trade Expo or other function and wants to display its stock. Perhaps the business has a travelling sales
person who takes stock to show to potential customers.
MEMO #22: 1/11/32 Took 5 iPads for advertising purposes.
STOCK CARD: iPads
2032 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/11 Balance 20 300 6000
Memo 22 5 300 1500 15 300 4500
General Journal (GJ)
Date Details $
1/11/32 Stock for advertising purposes, 5 iPads, memo #22 1500
Hi Tech Traders. Income Statement extract for November 2032.
$ $
Less other expenses
Advertising 1500
Net profit
The stock used for advertising will be reported as an expense in the Income Statement. This is an example of a non cash expense. Another example of an non cash expense is cost of sales.
18
VCE Accounting Unit 3 1. Pre double-entry
Just TVs. Balance Sheet at 1/7/28
Assets $ Equities $
Stock control 50000 Liabilities
Bank 12000 Bank of Kew loan 7000
Office assets 20000 Owners equity
Capital, Emmy 75000
Total assets 82000 Total equities 82000
The following transactions occurred during July 2028:
5/7, purchased 10 TVs at $1000 each, total $10000, cheque #124. 9/7, sold 15 TVs at $3000 each, total $45000, (cost of sales $15000), receipt #432. 10/7, took 2 TVs for business expo, memo #55, total of $2000. 13/7, owner contributed her vehicle (asset) which had an original cost of $60000 when bought in 2025 and now has an agreed value of $28000, memo #56.
14/7, paid office expenses, $3200, cheque #125. 16/7, drawings of cash $6000, cheque #126. 20/7 paid $1200, including $200 interest, to Bank of Kew, internet transfer #IT89. 22/7, sold 5 TVs at $3000 each, total $15000, (cost of sales $5000), receipt 433. 28/7, purchased 6 TVs at $1000 each, total $6000, cheque #126.
General Journal (GJ)
Date Details $
10/7/28 Took 2 TVs from stock for advertising use at expo, memo #55 2000
13/7 Owner contributed vehicle to business at agreed value, memo #56 28000
Cash Receipts Journal (CRJ) CFS X √ √ √ √
IS √ exp. √ rev. X X
BS calc. X X calc. calc.
Date Details Doc. Bank Cost of Sales
Sales Kew Loan
Capital Sundry
9/7 Sales 432 45000 15000 45000
22/7 Sales 433 15000 5000 15000
31/7 Totals 60000 20000 60000
Cash Payments Journal (CPJ) CFS √ √ √ √ √ √ √ √
IS √ exp. X X √ exp. X √ exp. √ exp. ?
BS calc. X √ calc. X calc. X X ?
Date Details Doc. Bank Internet
Exps. Drawings
Kew Loan
Interest on loan
Stock Cleaning Office Exps.
Sundry
5/7 Stock 124 10000 10000
14/7 Office exps. 125 3200 3200
16/7 Drawings 126 6000 6000
20/7 Loan/interest IT89 1200 1000 200
28/7 Stock 126 6000 6000
31/7 Totals 26400 6000 1000 200 16000 3200
Records for July
STOCK CARD: TVs
2028 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/7 Balance 50 1000 50000
5/7 Chq 124 10 1000 10000 60 1000 60000
9/7 Rec 432 15 1000 15000 45 1000 45000
10/7 Mem 55 2 1000 2000 43 1000 43000
22/7 Rec 433 5 1000 5000 38 1000 38000
28/7 Chq 126 6 1000 6000 44 1000 44000
Total cash
journals at the end of the month.
System review
19
VCE Accounting Unit 3 1. Pre double-entry
Reports for July
Just TVs. Unclassified Cash Flow Statement for July 2028.
Cash Receipts $ $
Sales 60000
Cash Payments
Drawings 6000
Kew loan 1000
Interest on loan 200
Stock purchases 16000
Office expenses 3200 26400
Change in cash 33600
+ Cash at start 12000
= Cash at end 45600
Just TVs. Income Statement for July 2028.
Revenue $ $
Sales 60000
Less Cost of Goods Sold
Cost of sales 20000
Gross profit 40000
Less other expenses
Interest on loan 200
Office expenses 3200
Advertising 2000 5400
Net profit 34600
Just TVs. Balance Sheet at 31/7/28
Assets $ Equities $
Stock 44000 Liabilities
Bank 45600 Kew loan 6000
Office assets 20000 Owners equity
Vehicle 28000 Capital 103000
Add net profit 34600
Less drawings (6000)
Total assets 137600 Total equities 137600
ASSETS LIABILITIES OWNERS EQUITY
Decrease stock $2000
Decrease $2000 due to
advertising expense
= +
Show the impact of memo #55 on the accounting equation:
ASSETS LIABILITIES OWNERS EQUITY
Increase $28000
Increase $28000 due to
capital contribution
= +
Show the impact of memo #56 on the accounting equation:
Assume that it is now discovered that wages of $2000 was not recorded in July 2028. Explain how this error would impact on:
1. The Cash Flow Statement for July: Cash payments would be understated $2000 thus the cash balance at the end would be overstated $2000.
2. The Income Statement for July: Expenses would be understated $2000 thus profit would be overstated $2000.
3. The Balance Sheet at 31/7/28: Assets: Bank would be overstated $2000. Liabilities: no impact. Owners equity: overstated $2000 due to profit impact.
20
VCE Accounting Unit 3 1. Pre double-entry
VCE Accounting Unit 3: Nano Exam 1. Marks = 34. Time = 34 minutes.
Stephanie owns and manages BusinessWorks trading in business equipment on a cash basis only. On 3/7/27 the business took 2 printers from stock so that the salesperson could demonstrate them for potential customers. Total value of stock = $1200.
1.1 What documentation would be used to record this transaction?
1 mark Memo or journal note. 1.2 List two accounting records that would be used to record this transaction.
2 marks
Record 1: General Journal Record 2: Stock Cards (OUT and BAL)
1.3 Show the impact of this transaction on the accounting equation by completing this following table:
2 marks
Cash Receipts Journal (CRJ) Date 2027
Details Doc. Bank Cost of Sales
Sales Loan Capital Sundry
30/11 Totals — 21000 4500 15000 1000 5000
Asset Liability Owners equity
Increase $________ Decrease $1200
No change
Increase $________ Decrease $_______
No change
Increase $________ Decrease $1200
No change
1.4 Which document (Doc. #99) was probably used on 3/9? Give evidence to support your answer. 1 mark
Cheque. Stock has come into the business and this business only trades on a cash basis. Doc #99 is most likely to be a cash purchase. (could be a capital contribution though unlikely).
1.5 Identify which journal would be used to record Doc. #99.
1 mark Cash payment journal. 1.6 List 3 separate types of transactions that may be recorded in the OUT column of the stock card.
3 marks
Transaction 1: Cash sales Transaction 2: Drawings of stock Transaction 3: Stock taken for advertising purposes 1.7 Stock is an asset. Provide a definition of an asset.
3 marks
A resource, under the control of the business, as a result of past events, that will provide economic benefits in the future. Examples include stock, computers and vehicle.
STOCK CARD: Leather Chairs
2027 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/9 Balance 11 1000 11000
3/9 Doc. #99 17 1000 17000
1.8 Calculate and record the total Bank value for November 2027 in the above journal. 1 mark
1.9 Indicate the impact of “Loan $1000” on the following accounting equation: 2 marks
Assets Liabilities Owners Equity
Increase cash $1000 Increase loan $1000
21
VCE Accounting Unit 3 1. Pre double-entry
1.10 How could you check or verify the accuracy of the cost of sales value of $4500? 2 marks
Check the stock cards: total of OUT columns excluding any non sale transactions. Refer back to original documentation, eg, sales receipts.
1.11 The cost of sales $4500 is an expense: explain why.
3 marks An expense leads to a decrease in owners equity, excluding drawings. Cost of sales leads to a decrease in owners equity and is not drawings so it fits the definition of an expense. (Could include reference to decrease in an asset, stock, that leads to a decrease in owners equity).
A B C
Reports Journals and stock cards
Transactions
Journals and stock cards Reports
Transactions
Transactions Journals and stock cards
Reports
1.12 Which of the above, A or B or C, best represents the order in a simple accounting system? 1 mark
C
1.13 Give 3 examples of „Reports‟. 3 marks
Report 1: Cash Flow Statement Report 2: Income Statement Report 3: Balance Sheet
The following transactions occurred during December 2028: Cash sales $3000 (cost of sales $900), paid wages $500, cash sales $4000 (cost of sales $1200), drawings of $1000, received ANZ loan $5000, paid advertising $900, purchased new computer $2500. 1.14 Calculate the net profit or loss for December. Show workings.
3 marks
Revenue: sales $3000 + $4000 = $7000. Expenses: cost of sales $900 + wages $500 + cost of sales $1200 + advertising $900 = $3500. Profit = revenue less expenses so profit = $3500.
STOCK CARD: Leather Brief Case
2028 IN OUT BALANCE
Date Details QTY. COST VALUE QTY. COST VALUE QTY. COST VALUE
1/6 Balance 40 200 8000
5/6 Rec. #75 7 200 1400 33 200 6600
10/6 Memo #13 1 200 200 32 200 6400
18/6 Rec. #76 10 200 2000 22 200 4400
28/6 Chq. #90 20 200 4000 42 200 8400
1.15 Work out the cost of sales for June 2028. 2 marks
OUT column (only sales transactions): $1400 + $2000 = $3400.
Date Journal?
5/6 Cash receipts
10/6 General
18/6 Cash receipts
28/6 Cash payments
1.16 Complete the following table to identify the relevant journal for each transaction.
2 marks
1.17 The last value in the stock card is $8400. Indicate how the manager would use this value at the end of June.
2 marks
To work out total value of stock on hand and then report that total in the Balance Sheet as an asset. (Note that leather brief case is only one type of stock traded).