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The following VCE Accounting Units 3 and 4 practice exam conforms to the
examination specifications provided by the Victorian Curriculum Assessment
Authority (VCAA) on its website. The examination covers Units 3 and 4 and
consists of nine questions. The total marks for the exam are 100. An answer
book and suggested solutions follow the question book.
The practice exam and solutions are based on the authors interpretation of
the VCE Accounting Study Design (20132016).
Please note that the following questions and solutions have no official
status.
Teachers should refer to the VCAA website http://www.vcaa.vic.edu.au for
further information.
Disclaimer: This resource has been written by the author (Simon Phelan) for use with students of VCE
Accounting. This does not imply that it has been endorsed by the Victorian Curriculum and Assessment Authority
(VCAA). While every care is taken, we accept no responsibility for the accuracy of information or advice
contained in Compak. Teachers are advised to preview and evaluate all Compak classroom resources before
using or distributing them to students.
VCTA
page 1
QUESTION BOOK
Structure of book
Number of questions
9
Number of questions to
be answered
9
Number of marks
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
Answer book
Instructions
Write your name and your teachers name in the spaces provided on the front page of the answer
book.
Answer all questions in the answer book.
All written responses must be in English.
Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic
devices into the examination room.
NOTE: This practice examination has no official status and represents an indication only of the
types of questions that VCAA examiners may set.
VCTA
page 2
Question 1 (7 marks)
Mitchell Santucci sells herbal teas and coffee, which he has been importing from China and Indonesia
for the last four years. He operates his business from home on a part-time basis. The business has
grown to the point where Mitchell is ready to resign from his full-time job and open a store selling his
own brand of tea and coffee.
On 1 March 2014, Mitchell moved into new premises and contributed the following items:
Computer Equipment
Stock
$24 600
Cash at Bank
$2 670
Creditors:
Hizheng Teas
$4 800
Basic Beans
$8 720
a. Prepare the General Journal entry necessary to record the above information.
A narration is not required.
4 marks
b. Explain what is meant by the term historical cost in relation to the Computer Equipment.
2 marks
c. Mitchell paid $5 940 (including GST) on a 6-month rental agreement on the business
premises on 1 March 2014 (Chq 001).
Record this transaction in the Cash Payments Journal.
1 mark
Question 2 (5 marks)
Hannah Stefanou has just commenced operating her small business, Hannahs Hats. She sought
advice from an accountant about how to establish a suitable system of recording financial information.
The accountant provided the following advice.
An accounting system based on the double-entry system of recording and using the accrual basis for
reporting will provide the most accurate and useful information.
Explain the accountants statement with reference to appropriate accounting principles and qualitative
characteristics.
VCTA
page 3
Debtor
Inv.
No.
Cost of
Sales
Sales
Debtors
Control
GST
Jan. 31
Totals to date
5 295
10 590
1 059
11 649
Feb. 28
Totals to date
6 200
12 400
1 240
13 640
Mar. 31
Totals to date
6 540
13 080
1 308
14 388
Purchases Journal
Date
2014
Stock
Control
Inv.
No.
Creditor
GST
Creditors
Control
Jan. 31
Totals to date
5 800
580
6 380
Feb. 28
Totals to date
3 200
320
3 520
Mar. 31
Totals to date
4 700
470
5 170
Details
Rec.
No.
Bank
Disc.
Exp.
Debtors
Control
Cost of
Sales
Sales
Sundries
GST
Jan. 31
Totals to date
55 270
65
9 395
2 700
5 400
30 000
540
Feb. 28
Totals to date
17 821
120
10 540
3 200
6 400
361
640
Mar. 31
Totals to date
21 790
220
11 450
4 800
9 600
960
Note: Sundries includes a refund from the ATO on 4 February 2014 for $361.
Cash Payments Journal
Date
2014
Details
Chq
No.
Bank
Disc.
Rev.
Creditors
Control
Stock
Control
Wages
Sundries
GST
Jan. 31
Totals to date
21 310
50
2 730
4 900
800
11 550
1 380
Feb. 28
Totals to date
20 460
80
3 180
9 000
900
6 340
1 120
Mar. 31
Totals to date
25 010
140
4 450
9 600
900
8 760
1 440
VCTA
page 4
General Journal
Date
2014
Details
General Ledger
Debit
$
Jan. 25
Drawings
Credit
$
Debit
$
Bad Debts
400
800
Debtors Control
800
A. Muscat
Feb. 25
Credit
$
400
Stock Control
Feb. 3
Subsidiary Ledger
800
Sales Returns
750
GST Clearing
75
Debtors Control
825
DebtorM. Osoba
Stock Control
825
375
Cost of Sales
375
a. Using the information above, post the relevant information to the following General Ledger
accounts and complete the accounts.
Stock Control
GST Clearing
Wages
Sales Returns.
6 + 6 + 3 + 2 + 1 = 18 marks
b. Explain the role of the General Ledger in the recording process.
2 marks
c. With reference to an accounting principle, explain why ledger accounts are closed or
balanced periodically.
3 marks
VCTA
page 5
Supplier:
Woods Driver
IN
Date
Details
June 1
Chq 632
Qty
25
Unit
Cost
85
OUT
Value
$
Chq 667
13
Inv. D97
15
Recs 447475
(1)
Qty
Unit
Cost
19
50
90
BALANCE
Value
$
2 125
Recs 324346
10
Niklete Sports
85
1 615
Qty
Unit
Cost
25
85
2 125
85
510
46
90
4 140
38
90
3 420
4 500
90
720
Northern Golf Club returned 4 units purchased on 13 June due to damage. Units were
sold for $200 each plus GST (CN V37)
19 June
These 4 units were returned to the supplier for a full credit (CN 82)
23 June
29 June
30 June
VCTA
Value
$
page 6
c. Explain how the FIFO cost assignment method is demonstrated in the transaction on 13 June
2014 in the Stock Card.
2 marks
d. Identify the transactions in the Stock Card represented by the number (1).
1 mark
e. State the accounting principle that required the transaction in Memo 11.
1 mark
An assessment of stock movements for the year ended 30 June 2014 revealed the following
information.
f. Explain how the trend in Stock Turnover (All) might impact on the liquidity of the business.
3 marks
g. Explain what the graph is showing and what advice you would provide to Carl regarding his
management of stock.
4 marks
Question 5 (6 marks)
On 31 December 2013, the owner of Farrers Farmgoods decided to remodel the premises at which
the business operates. This remodel required the business to borrow a significant amount of money
from the National Bank as well as contribute some additional capital. These additional funds were
required to finance the new assets purchased by the business.
At 31 December 2014 the following information was provided.
Ratio
Return on Owners
Investment
19%
8%
Debt Ratio
40%
60%
Explain what is shown by the information in the table. In your answer, identify possible causes of the
trends shown and outline why the owner need not be concerned about the results.
VCTA
page 7
Debit
$
Credit
$
14 000
5 200
Bank
7 820
Buildings
200 000
Buying Expenses
2 500
Capital
200 920
Cost of Sales
420 000
Creditors Control
39 180
Debtors Control
25 430
Delivery Vans
80 000
DepreciationDelivery Van
2 880
Discount Expense
4 600
Discount Revenue
3 700
Drawings
52 000
GST Clearing
4 870
Interest Expense
6 000
Loan
45 000
Office Expenses
47 300
18 000
4 000
Sales
700 000
Sales Returns
1 180
Stock Control
57 000
Term Deposit
15 000
Wages
82 400
Totals
1 019 490
1 019 490
VCTA
page 8
An amount of $600 for stock withdrawn by the owner was incorrectly posted to the Advertising
account. (Memo 9)
Wages owing$1 200. (Memo 10)
$2 000 insurance is still prepaid at 31 December. (Memo 11)
The Term Deposit was opened on 1 August 2014. Interest is earned at the rate of 6% per
annum and is payable every 6 months on 31 January and 31 July each year. (Memo 12).
a. Prepare the General Journal entries to record the necessary adjustments and corrections at 31
December 2014.
Narrations are not required.
11 marks
b. Prepare the General Journal entries necessary to:
close the revenue accounts
transfer Drawings to the Capital account.
Narrations are not required.
4 marks
c. The accountant queried why the buildings were not depreciated and the owner replied: I didnt
think I needed to depreciate this asset.
Explain why it is necessary to depreciate buildings and other non-current assets.
2 marks
Question 7 (3 marks)
The following information relates to the dealings between Fargoes, a small business selling camping
equipment and Outdoor Incorporated, which is a customer.
17 April 2014
4 May 2014
Goods with a selling price of $4 000 plus GST were delivered to the customer. Stock
is sold at a mark-up of 100% (Inv. F384)
9 May 2014
Outdoor Incorporated paid the amount owing, taking advantage of the 1/14, n30
terms (Rec. C09)
VCTA
page 9
Question 8 (8 marks)
The following information for Volcamp was provided:
Debtors at 1 July 2014 is $25 680
Credit Sales for the 6 months ended 31 December 2014 are expected to be $143 000 plus GST
Sales Returns for the 6 months ended 31 December 2014 are expected to be 1% of credit
sales
Discount Expense for the 6 months ended 31 December 2014 is expected to be $5 500
Bad debts are generally 0.5% of credit sales.
The owner would like to decrease the Debtors balance at 31 December 2014 to $20 000.
a. Reconstruct the Debtors Control account to find expected receipts from Debtors for the 6
months ended 31 December 2014.
5 marks
Based on the information above, the owner expected Debtors Turnover for the period to be 29 days.
When calculated at 31 December 2014 it was determined that actual Debtors Turnover was 34 days.
b. Explain the impact of this change in Debtors Turnover on the profitability of the business and
outline one strategy the owner could implement to correct this trend.
3 marks
VCTA
page 10
Name: ______________________________
Teacher: ______________________________
ANSWER BOOK
Instructions
A question book is provided with this answer book.
Answer all questions in the spaces provided in this book.
Write your name and your teachers name in the spaces provided above on this page.
Refer to the Instructions on the front cover of the question book.
Students are NOT permitted to bring mobile phones and/or any other unauthorised electronic
devices into the examination room.
VCTA
page 11
Question 1 (7 marks)
a.
4 marks
General Journal
Date
2014
Details
General Ledger
Debit
$
Credit
$
Subsidiary Ledger
Debit
$
Credit
$
2 marks
b.
Explanation
c.
1 mark
VCTA
Details
Chq
No.
Bank
Disc.
Rev.
Creditors
Control
Stock
Control
Wages
Sundries
page 12
GST
Question 2 (5 marks)
Explanation
VCTA
page 13
6 + 6 + 3 + 2 + 1 = 18 marks
Stock Control
Date
2014
VCTA
Cross-reference
Amount
Date
2014
Cross-reference
Amount
page 14
GST Clearing
Date
2014
Cross-reference
Amount
Date
2014
Cross-reference
Amount
Date
2014
Cross-reference
Amount
Cross-reference
Amount
Wages
Date
2014
Cross-reference
Amount
Sales Returns
Date
2014
VCTA
Cross-reference
Amount
Date
2014
page 15
b.
2 marks
Explanation
3 marks
c.
Explanation
VCTA
page 16
1 + 1 = 2 marks
b.
7 marks
Stock Item:
Supplier:
Woods Driver
IN
Date
Details
June 1
Chq 632
Qty
25
Unit
Cost
85
OUT
Value
$
Chq 667
13
Inv. D97
15
Recs 447475
(1)
VCTA
Qty
19
50
90
Unit
Cost
BALANCE
Value
$
2 125
Recs 324346
10
Niklete Sports
85
1 615
Qty
Unit
Cost
Value
$
25
85
2 125
85
510
46
90
4 140
38
90
3 420
4 500
90
720
page 17
2 marks
c.
Explanation
1 mark
d.
Transactions
1 mark
e.
Accounting principle
3 marks
f.
Explanation
VCTA
page 18
4 marks
g.
Explanation
VCTA
page 19
Question 5 (6 marks)
Explanation
VCTA
page 20
11 marks
General Journal
Date
2014
VCTA
Details
General Ledger
Debit
$
Credit
$
Subsidiary Ledger
Debit
$
Credit
$
page 21
b.
4 marks
General Journal
Date
2014
Details
General Ledger
Debit
$
c.
Credit
$
Subsidiary Ledger
Debit
$
Credit
$
2 marks
Explanation
VCTA
page 22
Question 7 (3 marks)
1 mark
a.
Cash Receipts Journal
Date
2014
Details
Rec.
No.
Bank
Disc.
Exp.
Debtors
Control
Cost of
Sales
Sales
Sundries
2 marks
b.
DebtorOutdoor Incorporated
Date
2014
VCTA
Cross-reference
Amount
Date
2014
Cross-reference
Amount
page 23
GST
Question 8 (8 marks)
a.
5 marks
Debtors Control
Date
2014
Cross-reference
Amount
Date
2014
Cross-reference
Amount
3 marks
b.
Explanation
VCTA
page 24
a.
Cost: $
b.
1 + 1 + 3 + 1 = 6 marks
Purchases Journal
Date
2014
Creditor
Inv.
No.
Stock
Control
GST
Creditors
Control
Stock
Control
Wages
Details
Chq
No.
Bank
Disc.
Rev.
Creditors
Control
Sundries
General Journal
Date
2014
VCTA
Details
General Ledger
Debit
$
Credit
$
Subsidiary Ledger
Debit
$
Credit
$
page 25
GST
Stock Item:
Supplier:
GenS Jeans
IN
Date
Details
Qty
Unit
Cost
Ghou Clothing
OUT
Value
$
Qty
Unit
Cost
BALANCE
Value
$
Qty
Unit
Cost
c.
4 marks
JEANIUS
Income Statement (extract) for the month ending 31 May 2014
$
Revenue
VCTA
page 26
Value
$
4 marks
General Journal
Date
2014
Mar. 1
Details
General Ledger
Debit
$
Computer Equipment
Credit
$
Subsidiary Ledger
Debit
$
Credit
$
3 000
Stock Control
24 600
Cash at Bank
2 670
Creditors Control
13 520
Hizheng Teas
4 800
Basic Beans
8 720
Capital
16 750
b.
Explanation
Historical cost refers to the original price paid for a particular item, in this case the Computer Equipment
(1 mark). It is a reliable figure as there is a document available to support this valuation (1 mark)
VCTA
page 27
1 mark
c.
Cash Payments Journal
Date
2014
Feb. 2
Details
Prepaid Rent
Expense
Chq
No.
001
Bank
Disc.
Rev.
Creditors
Control
Stock
Control
5 940
Wages
Sundries
GST
5 400
540
Question 2 (5 marks)
Explanation
A double-entry recording system is one where each transaction results in a double entrya debit entry and
a corresponding credit entry. This means that after each transaction the accounting equation is still equal
and so errors can be detected, thereby satisfying the reliability characteristic.
The accrual basis for the preparation of accounting reports means that transactions are recorded when they
occur; in other words, credit transactions are recognised and recording doesnt have to wait for cash to be
received or paid. By recognising transactions when they occur the business is able to accurately determine
profit, recognising that for tax purposes profit must be reported periodically. The accounting principle of
reporting period requires that the life of the business be broken into regular periods of time for reporting
purposes. The recognition of transactions when they occur allows for more accurate reporting of profit
(revenue earned less expenses incurred), so better information is provided and better decisions can be
made, which conforms to the relevance characteristic.
Mark globally. Assess students responses in terms of their understanding of the concepts involved
and their reference to accounting principles and qualitative characteristics that link to the statement by
the accountant
VCTA
page 28
6 + 6 + 3 + 2 + 1 = 18 marks
Stock Control
Date
2014
Jan. 31
Feb. 28
Mar. 31
Cross-reference
Amount
Bank
4 900
Creditors Control
5 800
Cost of Sales
Date
2014
Jan. 31
375
Bank
9 000
Creditors Control
Cross-reference
Amount
Cost of Sales
5 295
Cost of Sales
2 700
Drawings
Feb. 28
Cost of Sales
6 200
3 200
Cost of Sales
3 200
Bank
9 600
Cost of Sales
6 540
Creditors Control
4 700
Cost of Sales
4 800
Balance
8 440
Mar. 31
37 575
Apr. 1
400
Balance
37 575
8 440
1 mark for all entries for each date on the debit side of account (excluding balance)3 marks
1 mark for all entries for each date on the credit side of account (excluding balance)3 marks
VCTA
page 29
GST Clearing
Date
2014
Jan. 31
Cross-reference
Bank
Mar. 31
Date
2014
1 380
Creditors Control
Feb. 28
Amount
Bank
580
1 120
Creditors Control
320
Debtors Control
75
Bank
Jan. 31
1 440
Creditors Control
470
Balance
723
Cross-reference
Amount
Bank
540
Debtors Control
Feb. 28
1 059
Bank
361
Bank
640
Debtors Control
Mar. 31
1 240
Bank
960
Debtors Control
1 308
6 108
6 108
Apr. 1
Balance
723
1 mark for all entries for each date on the debit side of account (excluding balance)3 marks
1 mark for all entries for each date on the credit side of account (excluding balance)3 marks
Wages
Date
2014
Cross-reference
Amount
Jan. 31
Bank
800
Feb. 28
Bank
900
Mar. 31
Bank
900
Date
2014
Mar. 31
Cross-reference
2 600
Amount
2 600
2 600
Cross-reference
Debtors Control
Amount
750
Date
2014
Mar. 31
Cross-reference
750
Amount
750
750
1 mark for all entries for each date in the account2 marks
1 mark for balancing/closing all accounts
Entries must be in date order (as shown) to demonstrate understanding of posting
VCTA
page 30
b.
2 marks
Explanation
The General Ledger shows a summary of all transactions relating to each item (asset, liability, expense,
revenue or owners equity) (1 mark), It allows these transactions to be grouped together so the balance
of the account can be determined periodically (1 mark).
c.
Explanation
The life of a business is assumed to be continuous, according to the going concern principle (1 mark) and
as such, unless the business periodically closes and balances accounts, it is not possible to determine
profit and assess the performance of the business (1 mark). By closing the accounts we are able to
determine profit, and balancing accounts allows preparation of the Balance Sheet to determine the financial
position of the business (1 mark).
3 marks
VCTA
page 31
1 + 1 = 2 marks
b.
7 marks
Stock Item:
Supplier:
Woods Driver
IN
Date
Details
June 1
10
Chq 632
Qty
25
Unit
Cost
85
OUT
Value
$
Qty
19
50
90
Unit
Cost
BALANCE
Value
$
2 125
Recs 324346
Chq. 667
Niklete Sports
85
1 615
4 500
6
85
Qty
Unit
Cost
Value
$
25
85
2 125
85
510
85
50
90
5 010
13
Inv. D97
90
870
46
90
4 140
15
Recs 447475
(1)
90
720
38
90
3 420
17
CN V37
42
90
3 780
19
CN 82
90
360
38
90
3 420
23
Memo 9
90
180
36
90
3 240
29
Rec. 516
90
90
35
90
3 150
30
Memo 10
90
180
33
90
2 970
Memo 11
33
12
396
33
78
2 574
90
360
VCTA
page 32
c.
2 marks
Explanation
On 13 June the business sold 10 units of stock. FIFO is demonstrated in this transaction, as prior to the
sale the business had stock with two different cost prices, resulting from two different purchases (1 mark).
The stock sold comprised the older stock and once that stock was exhausted, the newer, more expensive
stock was used to make up the numbers for the sale (1 mark).
1 mark
d.
Transactions Cash sales of stock
1 mark
e.
Accounting principle Conservatism
3 marks
f.
Explanation
The trend in the overall Stock Turnover for the business shows a deterioration over the period; that is, for
the year ended June 2012 stock was turned over every 54 days. This increased to 58 days and then 61
days for the year ended 30 June 2014 (1 mark).
This trend means stock is turned into cash at a slower rate, resulting in the business perhaps being less
able to meet its short-term debts, such as paying Creditors (1 mark). As a result, the business may go
into overdraft or have to borrow money to meet these commitments, further worsening liquidity (1 mark).
VCTA
page 33
4 marks
g.
Explanation
The graph shows the Stock Turnover for the business in general and for two particular items of stock. The
overall Stock Turnover of the business has deteriorated while the turnover for the two individual lines of
stock has improved. In both cases, the turnover is better than the turnover for the business in general.
This information suggests the business is holding some stock that is not selling well, perhaps due to
excessive holdings of these lines of stock as a result of the stock being obsolete (for example, there may
have been changes in technology since these items were produced).
In this situation, the business should identify other lines of stock that are selling well and continue to hold
those lines, while identifying the lines that are not selling well and reducing its holdings of those lines. It
could hold a sale or lower the selling price to clear this stock. In general, a better stock mix is required.
Mark globally. Assess the response in terms of students understanding of the concepts involved and
how Stock Turnover is calculated
VCTA
page 34
Question 5 (6 marks)
Explanation
The table shows the Return on Owners Investment (ROI), which is the percentage of the owners
investment in the business returned to the owner as profit. This indicator has shown a deterioration over the
relevant period. The likely cause of this deterioration is the increase in Owners Equity that probably
resulted from the owner contributing additional capital in 2014 to partly fund the remodelling of the business
premises. In addition to this indicator, the table also shows the Debt Ratio, which is the percentage of
businesss assets financed by external funds (liabilities). This ratio has also shown a deterioration, again
related to the remodelling of the business premises. This required an additional loan, thus increasing the
value of the liabilities. As the premises are valued at their historical cost, it is possible the value of the
premises were not changed to reflect the remodelling. Hence the value of assets have remained the same
while liabilities have increased, thus leading to a higher Debt Ratio.
The ROI may also have been affected by the increase in Interest Expense resulting from the new
Loan as well as other expenses associated with the remodelling. This will have lowered profit, leading
to a deterioration in the ROI.
Despite this, the owner should not be overly concerned as the remodelling is now complete and the layout
of the premises is likely to be more efficient, more welcoming and easier to use. Customers should
therefore find the business more appealing and that might lead to an increase in sales in the future, thus
offsetting the increased expenses, and ultimately leading to an improvement in profit and profitability.
Mark globally. Assess the response in terms of students understanding of the concepts involved and
whether students link the additional borrowing and capital contribution to the increase in the value of
the assets due to the remodelling of the business premises and the change in the performance
indicators. Response must include an outline of why the owner need not be concerned about the
results
VCTA
page 35
11 marks
Date
2014
Dec. 31
Details
General Ledger
Debit
$
Stock Control
Subsidiary Ledger
Credit
$
DepreciationDelivery Van
2 700
Drawings
7 700
Wages
600
Insurance Expense
1 200
1
16 000
1
1
1 200
Accrued Wages
1
1
600
Advertising
1
1
7 700
Accumulated Depreciation
Delivery Van
Credit
$
1
2 700
Stock Gain
Debit
$
16 000
375
Interest Revenue
375
1 mark for each line in the General Journal except Wages/Accrued Wages, which should be 1 mark
for both lines of entry
VCTA
page 36
b.
4 marks
General Journal
Date
2014
Dec 31
Details
General Ledger
Debit
$
Stock Gain
Credit
$
Subsidiary Ledger
Debit
$
Credit
$
2 700
Interest Revenue
375
Discount Revenue
3 700
4 000
Sales
700 000
Profit and Loss Summary
Capital
710 775
52 600
Drawings
52 600
2 marks
Explanation
Non-current assets require depreciation so the business is able to match the cost of each asset against the
revenue it helps to earn over its useful life (1 mark). This allows for a more accurate and relevant profit
figure to be determined and indirectly retains funds in the business to assist in purchasing new assets in the
future (1 mark).
VCTA
page 37
Question 7 (3 marks)
1 mark
a.
Cash Receipts Journal
Date
2014
Dec. 31
Details
Prepaid Sales
Revenue
Rec.
No.
B63
Bank
Disc.
Exp.
Debtors
Control
Cost of
Sales
Sales
500
Sundries
500
2 marks
b.
DebtorOutdoor Incorporated
Date
2014
May 31
Cross-reference
Sales/GST Clearing
Amount
3 900
Date
2014
Cross-reference
May 31
Bank/Discount Expense
Amount
3 900
VCTA
page 38
GST
Question 8 (8 marks)
a.
5 marks
Debtors Control
Date
2014
July 1
July 31
Cross-reference
Balance
Sales
GST Clearing
Amount
25 680
Date
2014
Jul 31
143 000
14 300
Cross-reference
Amount
Sales Returns
1 430
GST Clearing
143
Discount Expense
Bad Debts
Bank
Balance
182 980
5 500
715
155 192
20 000
182 980
3 marks
Explanation
The Debtors Turnover was worse than expected, meaning that it was taking longer for the business to
receive cash from its Debtors (1 mark). When this occurs it can suggest poor collection methods, which
may result in higher bad debts or an inability to meet short-term debts, leading to an overdraft or the
need for a loan, thus increasing Interest Expense (1 mark). This worsens the profitability of the business.
To improve this situation the business could increase the discount offered to Debtors for early payment or
be more proactive in chasing debts by sending reminder notices (1 mark).
VCTA
page 39
a.
Invoice Price + Customs Duty + Labelling
$60 + $9 + $1
Cost: $ 70
b.
1 + 1 + 3 + 1 = 6 marks
Purchases Journal
Date
2014
May 1
Creditor
Inv.
No.
Ghou Clothing
Stock
Control
GV25
GST
8 280
Creditors
Control
828
9 108
Details
Chq
No.
Stock Control
S259
Bank
Disc.
Rev.
Creditors
Control
Stock
Control
176
Wages
Sundries
160
16
General Journal
Date
2014
May 1
Details
General Ledger
Debit
$
Delivery Expenses
Debit
$
Credit
$
300
GST Clearing
30
Creditors Control
CreditorFasttrack Couriers
VCTA
Subsidiary Ledger
Credit
$
GST
330
330
page 40
Stock Item:
Supplier:
GenS Jeans
IN
Date
May 1
Details
Qty
Unit
Cost
Ghou Clothing
OUT
Value
$
Inv. GV25
100
69
6 900
Chq S259
100
100
Qty
Unit
Cost
BALANCE
Value
$
Qty
Unit
Cost
100
70
c.
JEANIUS
Income Statement (extract) for the month ending 31 May 2014
$
Revenue
Sales
5 540
3 794
Delivery Expenses
300
Gross Profit
4 094
1 446
VCTA
page 41
Value
$
7 000