VCE Accounting

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VCE Accounting 2013–2016

Written examination

Examination specifications

Overall conditions

The examination will be sat at a time and date to be set annually by the Victorian Curriculum and Assessment Authority. VCAA examination rules will apply. Details of these rules are published annually in the VCE and VCAL Administrative Handbook.

There will be 15 minutes reading time and 2 hours writing time. The examination will be marked by a panel appointed by the VCAA. The examination will contribute 50 per cent to the Study Score.

Content

The VCE Accounting Study Design 2013–2016 is the document for the development of the examination. The study design includes the Characteristics of the Study (pages 12–16). Questions will be based on the key knowledge and key skills that underpin the outcomes in Units 3 and 4. Students will be required to apply the knowledge and skills of the accounting processes undertaken in Units 3 and 4.

Students will not be required to use information and communications technology (ICT) in the examination. Students will not be required to undertake calculations relating to financial indicators in the examination; however, the underpinning knowledge, interpretation and analysis associated with these indicators are examinable.

Students will not be required to prepare graphical representations in the examination; however, the explanation and interpretation of graphical representations are examinable.

Format

The examination will consist of a series of short answer and extended response questions. These may include a variety of item types, including scenarios, questions with multiple parts, short answer questions and

extended response questions.

All questions in the examination will be compulsory. The total marks for the examination will be 100.

The examination will be in the form of a question book and an answer book.

Approved materials and equipment

• normal stationery requirements (pens, pencils, highlighters, erasers, sharpeners and rulers) • one scientific calculator

Advice

During the 2013–2016 accreditation period for the VCE Accounting Study Design, examinations will be prepared according to the examination specifications above. The examination will assess a representative

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VCE Acounting (Specifications and sample) – July 2012 2 described on pages 12–16 of the study design.

The VCAA does not publish answers for sample examinations.

The following documents should be referred to in relation to the VCE Accounting examination. • VCE Accounting Study Design 2013–2016

• VCE Accounting Assessment Handbook 2013–2016

• VCAA Bulletin VCE, VCAL and VET

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S A

M P

L E

ACCOUNTING

Written examination

Day Date

Reading time: *.** ** to *.** ** (15 minutes) Writing time: *.** ** to *.** ** (2 hours)

QUESTION BOOK

Structure of book

Number of

questions Number of questions to be answered Number of marks

11 11 100

• Students are permitted to bring into the examination room: pens, pencils, highlighters, erasers, sharpeners, rulers and one scientific calculator.

• Students are NOT permitted to bring into the examination room: blank sheets of paper and/or white out liquid/tape.

Materials supplied

• Question book of 10 pages. • Answer book of 17 pages.

Instructions

• Write your student number in the space provided on the front page of the answer book. • Answer all questions in the answer book.

• All written responses must be in English.

At the end of the examination

• You may keep this question book.

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Question 3 – continued Definethe term ‘double entry accounting system’.

Question 2 (11 marks)

Mark Brown owns and operates Mark’s Mega Movers. He has provided his accountant with the following graph displaying details of his Non-Current Assets. He purchased them all on 1 July 2009.

Historical Cost

Depreciation – 2009–10 Depreciation – 2010–11 Depreciation – 2011–12 Depreciation – 2012–13 Accumulated Depreciation – 30 June 2013

Construction

Equipment EquipmentComputer EquipmentTools and Fixtures andFittings 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

a. Using the graph, identify and justify the selection of the depreciation method used for the • Construction Equipment

• Fixtures and Fittings.

4 marks

b. Given that the Construction Equipment was depreciated using a rate of 30% per annum, calculate and show how the Construction Equipment would be reported in the Balance Sheet as at 30 June 2013.

3 marks

c. Mark stated ‘we can change methods of depreciation next year if we want to’. Using an accounting principle and a qualitative characteristic, explain whether this would be advisable.

4 marks

Courtney Hayles is the owner of Hayles Home Entertainment, a business that sells home entertainment products. At 1 June 2013 the business had the following debtors.

$

J Simon 880

M Avis 2 200

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Extracts of the Cash Receipts Journal and Sales Journal for June 2013 are provided below.

Cash Receipts Journal Date

2013 Details Rec. No. Bank Disc. Exp. Debtors Control Cost of Sales Sales Sundries GST

1 June Sales 234 1 320 800 1 200 120

3 June J Simon 235 792 88 880

9 June GST Clearing 236 3 600 3 600

14 June Sales 237 1 650 1 000 1 500 150

16 June S Slater 238 594 66 660

21 June M Avis 239 1 000 1 000

28 June Sales 240 1 320 800 1 200 120

Totals to date 10 276 154 2 540 2 600 3 900 3 600 390

Sales Journal Date

2013 Debtor NumberInvoice Cost of Sales Sales GST Debtors Control

4 June S Slater 123 400 600 60 660

10 June J Simon 124 600 900 90 990

19 June S Slater 125 300 450 45 495

22 June J Simon 126 200 300 30 330

Totals to date 1 500 2 250 225 2 475

Additional information

• On 30 June, Courtney transferred $10 000 from her personal bank account to the business bank account (as noted on the Bank Statement).

• On 30 June, the business was advised that the amount outstanding for Debtor – M Avis, should be written off (Memo 5).

• On 30 June, J Simon returned the goods he had purchased on 22 June, because they were faulty (CN 538).

a. Record the additional information in the appropriate journals. Total the journals where appropriate. Narrations are not required.

5 marks

b. Complete the Debtors Subsidiary Ledger for Debtor – J Simon as it would appear after all journals have been posted for June 2013.

You are required to balance the account.

4 marks

c. Many businesses use control accounts and subsidiary ledgers in their accounting systems. Discuss the benefits and limitations of using control accounts and subsidiary ledgers.

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Question 4 – continued Chris Laurence owns and operates Chrisso’s Fitness Warehouse, a small business selling a variety of fitness equipment.

Features of the business’s accounting system include the following.

• The business sells to customers on both a cash and credit basis. Credit is offered to reliable customers at credit terms of 5/14, n/30. The perpetual method of stock recording and the FIFO cost assignment method are used.

• Stock is marked up at a rate of 50%.

• The business prepares financial reports at the end of each month.

Chris has recorded all transactions into the relevant journals. A summary of these is provided.

Cash Payments Journal (summary) Date

2013 Details Chq. No. Bank Disc. Rev. Creditors Control ControlStock Wages Sundries GST

30 June Totals to date 34 200 1 300 27 000 4 000 3 000 1 000 500

Sales Journal (summary) Date

30 June Totals to date 30 000 45 000 4 500 49 500

Purchases Journal (summary) Date

2013 Creditor NumberInvoice ControlStock GST Creditors Control

30 June Totals to date 29 000 2 900 31 900

Cash Receipts Journal (summary) Date

2013 Details Rec. No. Bank Disc. Exp. Debtors Control Cost of Sales Sales Sundries GST

30 June Totals to date 39 300 700 18 000 12 000 20 000 – 2 000

At the end of the reporting period, Chris realised that the following documents had not been recorded.

CFW

Invoice CFW234 Date: 19 June 2013

Charge to: Rob’s Gym

Sale: 2 ZX7 Treadmills

Amount GST Invoice

$4200 $420 $4620

Terms: 5/14, n/30

CFW

Memo 9 Date: 27 June 2013

Instruction: 1 ZX7 Treadmill, at a cost of $1500, was used at a recent fitness expo and will now be used solely for advertising purposes.

CFW

Receipt 105 Date: 28 June 2013

Details: Received payment in full from Rob’s Gym for invoice CFW234.

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a. Explain what is meant by the FIFO cost assignment method.

2 marks

b. Updateand total the relevant journals with the information contained in the above documents. Narrations are not required.

5 marks

c. Explain why the stock referred to in Memo 9 should be treated as an expense.

2 marks Following a physical count of the Model ZX7 Treadmills at 30 June 2013, Chris prepared the following memo.

CFW

Memo 10 Date: 30 June 2013

Details: A physical stocktake showed 1 ZX7 Treadmill on hand.

Chris provided the following Stock Card for the ZX7 Treadmill.

Stock Item: ZX7 Treadmill Supplier: Treadies

Location: E4 Cost Assignment Method: FIFO

Date

2013 Details _{Qty Cost}IN _Total _{Qty Cost}OUT _Total _{Qty Cost}BALANCE_Total

1 June Balance 8 1 300 10 400

8 June Inv. CFW230 4 1 300 5 200 4 1 300 5 200

12 June Rec. 103 3 1 300 3 900 1 1 300 1 300

18 June Inv. ZX42 4 1 500 6 000 1

4

1 300 1 500

1 300 6 000

d. Complete the Stock Card for ZX7 Treadmills with all relevant transactions up to and including 30 June 2013.

3 marks

e. Prepare the General Journal entry to record the necessary adjusting entry for stock at 30 June 2013. A narration is required.

3 marks

f. Calculatethe Adjusted Gross Profit on the sale of ZX7 Treadmills for the month of June 2013.

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a. Define net realisable value (NRV).

2 marks

b. Explain the effects on the financial reports if a business fails to recognise NRV when valuing its stock. 3 marks

Tim owns and operates a tool shop, Tim’s Tools. He has provided you with the following budgeted information from the cash journals for the year 1 July 2013 to 30 June 2014.

Cash Receipts Journal

• Bank 311 200

• Discount Expense 1 700

• Debtors Control 180 900

• Cost of Sales 60 000

• Sales 120 000

• GST 12 000

Cash Payments Journal

• Bank 159 500

• Discount Revenue 1 500

• Creditors Control 45 000

• Stock Control 24 000

• Wages 53 000

• Sundries

Drawings 6 000

Expenses 15 000

Fixtures and Fittings 3 000

Customs Duties 2 000

Prepaid Rent Expense 8 000

Accrued Wages 2 000

• GST 3 000

Additional information (expected for year)

• Bank balance at 1 July 2013 was $26 800 • Credit Sales 50% greater than Cash Sales • Stock marked up by 100%

• Stock Loss to be 3% of total sales • Sales Returns to be 5% of total sales

• Accrued interest of $200 relating to a term deposit • Wages owing 30 June 2014 estimated to be $3100

• Balance in Prepaid Rent expense will be $1000 as at 30 June 2014

a. Prepare a Budgeted Income Statement for the year ending 30 June 2014.

9 marks

b. Prepare a Budgeted Cash Flow Statement for the year ending 30 June 2014.

6 marks Tim is pleased with the level of expected profit and cash indicated by the budgets; however, he is concerned that these results will not be achieved in 12 months time.

c. Explain how Tim could use these budgets to monitor his progress.

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A business owner has stated, ‘I am not sure I want to make a profit this year. Last year I made a loss but my bank balance increased by $8900 despite having no new loans or capital contributions’.

Explain, giving two examples, how this could occur.

On 1 October 2013, Gen Domestics traded in its old delivery van for a new delivery van from Club Motors. The old delivery van was purchased at the beginning of 2007 for $28 000 and had a carrying value at 1 October 2013 of $3500. Details of the purchase and trade-in for the new delivery van are documented in the invoice below.

Club Motors

Date 1 October 2013

Invoice no. 79

Sold to Gen Domestics

DESCRIPTION $

Delivery Van 42 000

plus GST 4 200

46 200

Less trade-in 2 000

TOTAL PRICE 44 200

Terms: Net 30 days

a. Show how the following accounts will appear in the General Ledger after all entries have been posted. • Delivery Van

• Accumulated Depreciation – Delivery Van • Disposal of Delivery Van

You are not required to balance the accounts.

6 marks

b. Explain, using the information from Gen Domestics, why the profit or loss on disposal of the van occurred.

(10)

A business owner is concerned that her business’s cash flow and liquidity are deteriorating, so her accountant has provided some information regarding the business’s short-term financial position.

Indicator 2010 2011 2012

Working Capital Ratio 2.15:1 2.25:1 2.79:1

Quick Asset Ratio 1.42:1 1.05:1 0.79:1

Creditors Turnover 17 days 16 days 15 days

Stock Turnover 58 days 79 days 98 days

Debtors Turnover 47 days 44 days 42 days

The business’s credit terms have been 2/14, n/30 since 2009. Suppliers’ credit terms are all n/30.

a. Explain how it is possible that the Working Capital Ratio trend is favourable while the Quick Asset Ratio trend is unfavourable.

2 marks

b. Suggest two types of information, other than financial indicators, that could be useful to the business owner in analysing the performance of her business.

2 marks

c. State two strategies, excluding additional advertising, that the business owner could implement to improve the Stock Turnover (that is, reduce Stock Turnover days) without affecting the Gross Profit margin.

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Belinda Brown commenced business on 1 January 2013 under the name of Bubble Baths. Her accountant provided the following Pre-adjustment Trial Balance at 30 June 2013.

Bubble Baths

Pre-adjustment Trial Balance as at 30 June 2013

Account Debit Credit

Capital 26 800

Cash at Bank 12 360

Cost of Sales 76 000

Creditors Control 63 000

Debtors Control 34 000

Discount Expense 480

Discount Revenue 800

Drawings 32 800

Freight Inward 1 000

GST Clearing 20

Interest Expense 2 400

Loan 42 000

Prepaid Advertising Expense 1 800

Prepaid Sales Revenue 1 000

Sales 152 000

Shop Fittings 2 000

Stock Control 77 500

Vehicle 46 000

Wages Expense 24 000

297 980 297 980

The accountant noted the following.

• The Prepaid Advertising Expense relates to six advertisements (one per month for six months) in ‘Beautiful Bathrooms’ magazine, commencing June 2013.

• Wages incurred for the six-month period are $25 000.

• Prepaid Sales Revenue represents a deposit on a custom-made bath, which was delivered to the customer on 30 June 2013.

a. Prepare General Journal entries to record these adjustments at 30 June 2013. Narrations are not required.

6 marks

b. Explain the relationship between the Going Concern principle and the need for balance day adjustments. 2 marks

(12)

Buckles and Belts has provided the following information, which was extracted from the Cash Flow Statement Variance Report for the month ended 31 October 2013.

Budgeted Actual Variance Fav/Unfav

Cash Sale of Vehicle 6 000 7 500 1 500 F

Receipts from Debtors 95 000 90 000 5 000 U

Loan (9 000) (8 000) 1 000 F

Interest 300 375 75 U

a. Referring to the extract above, state whether the interest is a cash inflow or cash outflow. Explain your answer.

2 marks

b. Explain how Buckles and Belts could use the information contained in the extract from the Cash Flow Statement Variance Report.

2 marks

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Instructions

• A question book is provided with this answer book. • Answer all questions in the spaces provided in this book.

• Write your student number in the space provided above on this page. • Refer to Instructions on the front cover of the question book.

ACCOUNTING

Written examination

Day Date

Reading time: *.** ** to *.** ** (15 minutes) Writing time: *.** ** to *.** ** (2 hours)

ANSWER BOOK

Figures

Words

STUDENT NUMBER

_Letter

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Definition

a. 4 marks

Construction Equipment

Method of depreciation

Fixtures and Fittings

Method of depreciation Justification

b. 3 marks

Calculation

Mark’s Mega Movers

Balance Sheet (extract) as at 30 June 2013

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Question 3 – continued

Explanation

a. 5 marks

Cash Receipts Journal Date

2013 Details Rec. No. Bank Disc. Exp. Debtors Control Cost ofSales Sales Sundries GST

1 June Sales 234 1 320 800 1 200 120

3 June J Simon 235 792 88 880

9 June GST Clearing 236 3 600 3 600

14 June Sales 237 1 650 1 000 1 500 150

16 June S Slater 238 594 66 660 21 June M Avis 239 1 000 1 000

28 June Sales 240 1 320 800 1 200 120

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Sales Journal Date

4 June S Slater 123 400 600 60 660

10 June J Simon 124 600 900 90 990

19 June S Slater 125 300 450 45 495

22 June J Simon 126 200 300 30 330

Totals to date 1 500 2 250 225 2 475

General Journal Date

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Debtor – J Simon Date

2013 Cross-reference Amount Date 2013 Cross-reference Amount

c. 6 marks

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a. 2 marks

Explanation

b. 5 marks

Cash Payments Journal (summary) Date

2013

Details Chq.

No. Bank Disc. Rev. Creditors Control ControlStock Wages Sundries GST

30 June Totals to date 34 200 1 300 27 000 4 000 3 000 1 000 500

Sales Journal (summary) Date

30 June Totals to date 30 000 45 000 4 500 49 500

Purchases Journal (summary) Date

2013 Creditor NumberInvoice ControlStock GST Creditors Control

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Question 4 – continued

Date

2013 Details Rec. No. Bank Disc. Exp. Debtors Control Cost ofSales Sales Sundries GST

30 June Totals to date 39 300 700 18 000 12 000 20 000 – 2 000

2013

Details General Ledger Subsidiary Ledger

Debit Credit Debit Credit

c. 2 marks

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d. 3 marks

Stock Item: ZX7 Treadmill Supplier: Treadies

Location: E4 Cost Assignment Method: FIFO

Date

2013 Details _Qty _CostIN _{Total Qty} _CostOUT _{Total Qty} BALANCE_Cost _Total

1 June Balance 8 1 300 10 400

8 June Inv. CFW230 4 1 300 5 200 4 1 300 5 200

12 June Rec. 103 3 1 300 3 900 1 1 300 1 300

18 June Inv. ZX42 4 1 500 6 000 1

4 1 300 1 500 1 300 6 000

e. 3 marks

2013 Details _DebitGeneral Ledger_Credit Subsidiary Ledger_Debit _Credit

f. 4 marks

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a. 2 marks

Definition

b. 3 marks

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a. 9 marks

Tim’s Tools

Budgeted Income Statement for the year ending 30 June 2014

(24)

Tim’s Tools

Budgeted Cash Flow Statement for the year ending 30 June 2014

$ $

(25)

c. 3 marks

Explanation

Question 7 (4 marks) Explanation

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a. 6 marks

Delivery Van Date

Accumulated Depreciation – Delivery Van Date

Disposal of Delivery Van

Date

b. 2 marks

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a. 2 marks

Explanation

b. 2 marks

Other information 1 Other information 2

c. 2 marks

Strategy 1

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a. 6 marks

2013 Particulars _DebitGeneral Ledger Subsidiary Ledger

$ Credit $ Debit $ Credit $

b. 2 marks

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a. 2 marks

Cash Inflow or Cash Outflow

Explanation

b. 2 marks