SOL Chapter 1 Introduction

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
1. Pre double-entry
VCE Accounting Unit 3
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 businesss 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.
Balance Sheet
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
Assets are resources under the control of the business, as a result of past events, which will provide future economic benefits. Assets and equities balance in a Balance Sheet.
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. Bobs ownership is called owners equity or capital.
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.
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.
Stock card
STOCK CARD: Ride on mower 2018 Date Details 30/6 Balance 7/7 CHQ 56 8/7 REC 43 28/7 REC 44 QTY. 3 IN COST 2000 VALUE 6000 2 3 2000 2000 4000 6000 QTY. OUT COST VALUE QTY. 10 13 11 8 BALANCE COST 2000 2000 2000 2000 VALUE 20000 26000 22000 16000
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.
On 30/6/18 the business has 10 rideon mowers with a unit cost of $2000.
The BALANCE column changes after each stock transaction and represents the value of stock on hand at any point in time.
1. Pre double-entry
July transactions
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
Cheque #56 is for the cash purchase of more trading stock.
The following transactions, evidenced by documents, occurred during July 2018.
Clean Cut Mowers Receipt # 43

Date: 8/7/18 From: Cash Customers Sale of 2 mowers For: at $4000 each. $: $8000.00 Thank you
Receipt #43 is for the cash sale of trading stock. Cost of sales = $4000.
Bank of Melton
Date: 17/7/18 To: OfficeWorks For: Office expenses. (Stationery etc.) This cheque $900 Cheque number 57 Clean Cut Mowers
Cheque #57 is for the cash payment of office expenses.

Cash Journals
Cash Receipts Journal (CRJ)
CFS IS BS calc. X exp. X rev. X X calc. X calc.
Receipts are recorded in the Cash Receipts Journal and cheques in the Cash Payments Journal.
Date Details 8/7 SALES 28/7 SALES 31/7 Totals
Doc. 43 44
Bank 8000 12000 20000
Cost of Sales 4000 6000 10000
Sales 8000 12000 20000
Loan
Capital Sundry
Total the cash journals at the end of July.
Cash Payments Journal (CPJ)

CFS IS BS calc. exp. X X X calc. exp. X X calc. exp. X exp. X ? ?
Date
Details
Doc.
Bank 6000 900 6900
Internet Drawings Exps.
Loan
Interest Stock Cleaning 6000 6000
Office Exps. 900 900
Sundry
7/7 STOCK 56 17/7 OFFICE EXPS. 57 31/7 Totals
Reports
Clean Cut Mowers. Unclassified Cash Flow Statement for July 2018. Cash Receipts Sales Cash Payments Stock purchases Office expenses Change in cash + Cash at start = Cash at end $ $ 20000
Clean Cut Mowers. Income Statement for July 2018. Revenue Sales Less Cost of Goods Sold Cost of sales Gross profit Less other expenses Office expenses Net profit $ 20000 10000 10000 900 9100
6000 900
6900 13100 40000 53100
From Balance Sheet.
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.
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.
Clean Cut Mowers. Balance Sheet at 31/7/18

Assets Bank Stock control Office assets Premises Total assets 1. Pre double-entry $ 53100 16000 25000 90000 184100 Equities Owners equity Capital, Bob Add net profit Total equities $ 175000 9100 184100
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. Net profit belongs to the owner so it is added to Capital in the new Balance at the end of the reporting period.
From stock cards
Balance Sheet
Assets Bank Stock control Office assets Premises Total assets $ 53100 16000 25000 90000 184100 Equities Owners equity Capital, Bob $ 184100
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.
Total equities
184100
Stock card
STOCK CARD: Ride on mower 2018 Date Details 1/8 Balance 5/8 CHQ 58 11/8 REC 45 28/8 REC 46 QTY. 4 IN COST 2000 VALUE 8000 3 5 2000 2000 6000 10000 QTY. OUT COST VALUE QTY. 8 12 9 4 BALANCE COST 2000 2000 2000 2000 VALUE 16000 24000 18000 8000
Stock cards only record the cost price of stock.
August transactions
Bank of Melton
Cheque #58 is for the cash purchase of more trading stock.
The following transactions, evidenced by documents, occurred during August 2018.

Bank of Melton
Date: 18/8/18 To: Netspace
For: Internet expenses Date: 28/8/18 From: Cash Customers This cheque $500 Sale of 5 mowers For: Cheque number 59 at $4000 each. Clean Cut Mowers $: $20000.00 Thank you
Cheque #59 is for the cash payment of internet expenses. Receipt #46 is for the cash sale of trading stock. Cost of sales = $10000.
Journals for August

Date Details 11/8 SALES 28/8 SALES 31/8 Totals
Doc. 45 46
Bank 12000 20000 32000
Cost of Sales 6000 10000 16000
Sales 12000 20000 32000
Loan
Capital Sundry
Total the cash journals at the end of August.

Date Details
Doc.
Bank 8000 500 8500
Internet Drawings Exps. 500 500
Loan
Interest Stock Cleaning 8000 8000
Office Exps.
Sundry
5/8 STOCK 58 18/8 INTERN.EXPS. 59 31/8 Totals
1. Pre double-entry
Reports for August

Clean Cut Mowers. Unclassified Cash Flow Statement for August 2018. Cash Receipts Sales Cash Payments Stock purchases Internet expenses Change in cash + Cash at start = Cash at end $ $ 32000 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.
from?
8000 500
8500 23500 53100 76600
Clean Cut Mowers. Income Statement for August 2018. Revenue Sales Less Cost of Goods Sold Cost of sales Gross profit Less other expenses Internet expenses Net profit $ 32000 16000 16000 500 15500
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.
Gross profit is the difference between sales and the cost of goods soldthe profit made on the purchase and sale of stock only. Net profit is the difference between gross profit and other expensesthe final profit after all expenses have been deducted from sales.
Get the Bank value from the Cash Flow Statement.

Assets Bank Stock control Office assets Premises Total assets $ 76600 8000 25000 90000 199600 Equities Owners equity Capital, Bob Add net profit Total equities $ 184100 15500 199600 Get the profit value from the Income Statement.
The stock value must match the final balance of the stock card.
Summary of the accounting process so far:

Business transactions are evidenced by documents. Transactions are recorded in the stock cards and journals: Cash Receipts Journal Cash Payments Journal Prepare Accounting Reports: Cash Flow Statement Profit/Loss Statement Balance Sheet
Start of reporting period
End of reporting period
Input stage
Processing stage Recording
Output stage Reporting
Unit 3, Outcome 1, focuses on recording not reporting!
1. Pre double-entry
Balance Sheet

Assets Bank Stock control Office assets Premises Total assets $ 76600 8000 25000 90000 199600 Equities Owners equity Capital, Bob $ 199600
Stock card
STOCK CARD: Ride-on mower 2018 Date Details 1/9 Balance 3/9 CHQ 60 12/9 REC 47 23/9 REC 49 30/9 REC 50 QTY. 7 IN COST 2000
Total equities
199600
OUT VALUE 14000 4 3 2 2000 2000 2000 8000 6000 4000 QTY. COST VALUE QTY. 4 11 7 4 2
BALANCE COST 2000 2000 2000 2000 2000 VALUE 8000 22000 14000 8000 4000
September transactions
Bank of Melton
The following transactions, evidenced by documents, occurred during September 2018.


Date: 15/9/18 From: ABC Finance Co. For: $: Loan. $10000.00 Thank you
Bank of Melton
Date: 19/9/18 To: OfficeWorks For: Office expenses This cheque $700 Cheque number 61 Clean Cut Mowers
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

The design of the journals depends on the information needs of the businessthis can vary from business to business.
Journals for September

CFS IS BS calc. X exp. X rev. X
X calc.
X calc.
Date Details 12/9 15/9 23/9 30/9 30/9 SALES LOAN-ABC SALES SALES Totals
Doc. 47 48 49 50
Bank 16000 10000 12000 8000 46000
Cost of Sales 8000 6000 4000 18000
Sales 16000
ABC Loan 10000
Capital Sundry
12000 8000 36000
Total the cash journals at the end of Sept.
10000

Date Details 3/9 19/9 21/9 25/9 30/9 STOCK OFF.EXPS. ADVERT. DRAWINGS Totals
Doc. 60 61 62 63
Bank 14000 700 1400 2000 18100
Loan
Interest Stock Cleaning 14000
Office Exps. 700
Sundry
1400 2000 2000 14000 700 1400
1. Pre double-entry
Reports for September

Clean Cut Mowers. Unclassified Cash Flow Statement for September 2018. Cash Receipts SALES LOANABC Cash Payments DRAWINGS STOCK PURCHASES OFFICE EXPENSES ADVERTISING Change in cash + Cash at start = Cash at end $ 36000 10000 2000 14000 700 1400 $ 46000 Clean Cut Mowers. Income Statement for September 2018. Revenue $ SALES Less Cost of Goods Sold COST OF SALES Gross profit Less other expenses OFFICE EXPENSES 700 ADVERTISING 1400 Net profit $ 36000 18000 18000
18100 27900 76600 104500
2100 15900
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 businesss assets.
Get the Bank value from the Cash Flow Statement.
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.

Assets Bank Stock control Office assets Premises $ 104500 4000 25000 90000 Equities Liabilities ABC Finance Co. Owners equity Capital, Bob Add net profit Less drawings 223500 Total equities $ 10000 199600 15900 (2000) 223500
The stock value must match the final balance of the stock card.
Total 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.
Accounting equation at 30/9/18:

ASSETS $223500
EQUITIES $223500 EQUITIES
ASSETS $223500
LIABILITIES $10000
OWNERS EQUITY $213500
1. Pre double-entry
Identify how the following transactions will impact on the accounting equation. Treat each transaction separately. Non cumulative.
Bank of Melton
Cash purchase of stock.
ASSETS INCREASE STOCK $14000 DECREASE CASH $14000
LIABILITIES
OWNERS EQUITY

Date: 12/9/19 From: Cash Customers Sale of 4 mowers For: at $4000 each. $: $16000.00 Thank you Difficult transaction. Cash sale of stock. The total cost of sales = $8000 (4 x $2000).
ASSETS INCREASE CASH $16000 DECREASE STOCK $8000 NET INCREASE $8000 Clean Cut Mowers Receipt # 48
Date: 15/9/19 From: ABC Finance Co. For: $: Loan. $10000.00 Thank you
LIABILITIES
OWNERS EQUITY
INCREASE $16000 SALES DECREASE $8000 COST OF SALES NET INCREASE $8000
Loan of $10000 cash.
ASSETS INCREASE CASH $10000 Bank of Melton

Date: 19/9/18 To: OfficeWorks For: Office expenses This cheque $700 Cheque number 61 Clean Cut Mowers
LIABILITIES
OWNERS EQUITY
INCREASE ABC LOAN $10000
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.
ASSETS DECREASE CASH $700
LIABILITIES
OWNERS EQUITY DECREASE $700 DUE TO OFFICE EXPENSES
1. Pre double-entry
Bank of Melton
Date: 21/9/18 To: Rez Design For: Advertising This cheque $1400 Cheque number 62 Clean Cut Mowers Cash expenses of $1400.
LIABILITIES
OWNERS EQUITY DECREASE $1400 DUE TO ADVERTISING EXPENSES

ASSETS INCREASE CASH $12000 DECREASE STOCK $6000 NET INCREASE $6000 Bank of Melton
Date: 25/9/18 To: Cash For: Drawings This cheque $2000 Cheque number 63 Clean Cut Mowers
LIABILITIES
OWNERS EQUITY
Cash drawings $2000.
Important You can use pencil in class and on all assessment tasks including the two exams!
LIABILITIES
OWNERS EQUITY DECREASE $2000 DUE TO DRAWINGS.

ASSETS INCREASE CASH $8000 DECREASE STOCK $4000 NET INCREASE $4000
LIABILITIES
OWNERS EQUITY
1. Pre double-entry
Balance Sheet

Assets Bank Stock control Office assets Premises Total assets $ 104500 4000 25000 90000 223500 Equities Liabilities ABC Finance Co. Owners equity Capital, Bob Total equities $ 10000 213500 223500
Stock card
2018 Date Details QTY. 9 1/10 Balance 4/10 CHQ 64 15/10 REC 51 31/10 MEM 2 IN
STOCK CARD: Ride-on mower OUT VALUE 18000 5 1 2000 2000 10000 2000 QTY. COST VALUE QTY. 2 11 6 5 BALANCE COST 2000 2000 2000 2000 VALUE 4000 22000 12000 10000
COST 2000
October transactions
Bank of Melton
The following transactions, evidenced by documents, occurred during October 2018.

Bank of Melton
Date: 25/10/18 To: OfficeWorks For: Power expenses. This cheque $500 Cheque number 65 Clean Cut Mowers
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
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.
Journals for October

Of course most businesses use electronic systems not these ol fashioned manual systems!
Date
Details
Doc. 51
Bank 20000 20000
15/10 SALES 31/10 Totals
Cost of Sales 10000 10000
Sales 20000 20000
Loan
Capital Sundry
Total the cash journals at the end of Oct.

Date
Details
Doc. 64 65 66
Bank 18000 500 770 19270
ABC Loan
9/10 STOCK 25/10 POWER EXPS. 27/10 LOAN-ABC 31/10 Totals
Interest Stock Cleaning on loan 18000 70 70 18000
Office Exps.
Sundry 500
700 700
500
General Journal (GJ) Date 29/10/18 31/10 Details CAPITAL CONTRIBUTION OF OFFICE ASSETS (COMPUTER), MEMO #1 DRAWINGS OF STOCK X 1 UNIT, MEMO #2 $ 1000 2000 VCE Accounting Unit 3
1. Pre double-entry
10
Reports for October

Clean Cut Mowers. Unclassified Cash Flow Statement for October 2018. Cash Receipts SALES $ $ 20000 Clean Cut Mowers. Income Statement for October 2018. Revenue $ SALES Less Cost of Goods Sold COST OF SALES Gross profit Less other expenses INTEREST ON LOAN 70 POWER EXPENSES 500 Net profit $ 20000 10000 10000 Can you think of two separate places to find the cost of sales data?
Cash Payments LOANABC 700 INTEREST ON LOAN 70 STOCK PURCHASES 18000 POWER EXPS. 500 Change in cash + Cash at start = Cash at end Calculation space (if required)
19270 730 104500 105230
570 9430

Assets Bank Stock control Office assets Premises $ 105230 10000 26000 90000 Equities Liabilities ABC Finance Co. Owners equity Capital, Bob Add net profit Less drawings 231230 Total equities $ 9300 214500 9430 (2000) 231230
ABC LOAN $10000 $700 = $9300 OFFICE ASSETS: $25000 + $1000 (CAPITAL CONTRIBUTION) = $26000. CAPITAL: $213500 + $1000 CAPITAL CONTRIBUTION (OFFICE ASSETS) = $214500.
Total assets
Accounting equation @ 31/10/18

ASSETS $231230 ASSETS $231230
EQUITIES $231230 EQUITIES
LIABILITIES $9300
Identify how the following 2 transactions will impact on the accounting equation. Treat each transaction separately. Non cumulative.
MEMO #1: 29/10/18 The owner, Bob, contributed his personal computer to the business (office assets). $1000.
Eventually you will be able to identify the impact of any transaction on the accounting equation.
ASSETS INCREASE OFFICE ASSETS $1000
LIABILITIES
OWNERS EQUITY INCREASE $1000 DUE TO CAPITAL CONTRIBUTION.
MEMO #2: 31/10/18 The owner, Bob, took 1 unit of stock home for his private use. $2000. Drawings of stock.
ASSETS DECREASE STOCK $2000

1. Pre double-entry
LIABILITIES
OWNERS EQUITY DECREASE $2000 DUE TO DRAWINGS.

11
Quick Review
A L
A. B. C. D.
OE
R E
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. B. C. D. Period of time over which assets are determined. Period of time over which profit is determined. Period of time over which liabilities are determined. 1/7/XX to 30/6/XX
9. Transactions are evidenced by Cash Flow Statement. Income Statement. Documents. Journals.
PS: the current VCE exams do not include multiple-choice questions.
10. An item will usually get its own column in the journals if A. B. C. D. It has a high dollar value. It is a frequent transaction. It is an infrequent transaction. There is enough room.
11. The report that provides stakeholders with detailed information about the businesses cash resources A. B. C. D. Balance sheet Cash receipts journal. Cash flow statement. Income statement.
12. Owners equity can change due to A. B. C. D. Revenue. Expenses. Drawings. All of the above.
13. If drawings exceeds profit for a reporting period, owners equity will A. B. C. D. Increase. Decrease. No impact. Impact cannot be determined from this data.
14. The owners equity section of the Balance Sheet can report A. B. C. D. Capital plus revenue less drawings. Assets plus profit less drawings. Capital plus profit less drawings. Assets less loss less drawings.
15. The most likely sequence for a simple accounting process is A. B. C. D. Documents, journals & stock-cards, reports. Journals & stock-cards, documents, reports. Reports, documents, journals & stock-cards. Documents, reports, journals & stock-cards.
7. Equities are best described as A. B. C. D. Assets and liabilities. Assets less liabilities. Liabilities and owners equity. Assets less owners equity.
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. B. C. D. Liabilities equals assets plus owners equity. Assets equal liabilities plus owners equity. Owners equity less liabilities equals assets. Assets plus liabilities equals owners equity.
8. In a Balance Sheet, the following balance A. B. C. D. Assets and liabilities. Assets and equities. Assets and revenues. Equities and liabilities.
17 17
1. Pre double-entry
12
Accounting Equation again

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. Treat each transaction separately.
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 $2000 $2000
5: bought office desk for $2000 cash.
6: borrowed $8000 from ANZ Bank.
$8000
$8000
7: paid ANZ Bank $500 to reduce loan.
$500
8: paid $5000 cash for stock.
$500
$5000 $5000
9: owner took $1000 cash for private use (Drawings).
$1000
$1000
10: borrowed additional $3000 from ANZ.
$3000
1. Pre double-entry
$3000
+
13
Example 2: Includes revenue and expenses but excludes GST.
Cumulative exercise.
ASSETS $100000
LIABILITIES $20000
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
1. Pre double-entry
$20000
14
$90400
The Elements again
A L
OE
R E
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? www.aasb.gov.au 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 Stock of Computer Systems 9600 OWNERS EQUITY Office Equipment 3700 Capital, Jennifer Total Assets 40000 Total Equities Find the AASB definitions of the following: Assets Liabilities Owners Equity $ 10000 30000 40000
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.
Just Computers, Income Statement for August 2022 Revenue $ $ Sales Less Cost of Goods Sold Cost of sales Gross Profit Less other Expenses Advertising Wages Net Profit Revenue 3700 12400 16100 4200 8700 20300 29000
A L
OE
R E
Find the AASB definitions of the following: 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!)
1. Pre double-entry
15
Agreed value
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. 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).
General Journal (GJ) Date 3/6/22 Details Contribution of vehicle at agreed value, memo #66 $ 30000
ASSETS Vehicle
Ace Traders. Balance Sheet extract at 3/6/22 $ EQUITIES 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 Date Details 1/11 Balance Memo 22 QTY. IN COST VALUE QTY. 5 OUT COST 300 VALUE 1500 QTY. 20 15 BALANCE COST 300 300 VALUE 6000 4500
General Journal (GJ) Date 1/11/32 Details Stock for advertising purposes, 5 iPads, memo #22 $ 1500
Hi Tech Traders. Income Statement extract for November 2032. $ Less other expenses Advertising Net profit 1. Pre double-entry 1500 $
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. VCE Accounting Unit 3
16
1. Pre double-entry
17
System review
Just TVs. Balance Sheet at 1/7/28

Assets Stock control Bank Office assets Total assets $ 50000 12000 20000 82000 Equities Liabilities Bank of Kew loan Owners equity Capital, Emmy Total equities $ 7000 75000 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.
Records for July

Date
Details
Doc. 432 433
Bank 45000 15000 60000
9/7 Sales 22/7 Sales 31/7 Totals
Cost of Sales 15000 5000 20000
Sales 45000 15000 60000
Kew Loan
Total cash journals at the end of the month.
Capital Sundry

Date 5/7 14/7 16/7 20/7 28/7
Details Stock Office exps. Drawings Loan/interest Stock
Doc.
Bank
Kew Loan
124 10000 125 3200 126 6000 IT89 1200 126 6000 26400
Interest Stock Cleaning on loan 10000
Office Exps. 3200
Sundry
6000 1000 200 6000 6000 1000 200 16000 3200
31/7 Totals
General Journal (GJ) Date Details 10/7/28 Took 2 TVs from stock for advertising use at expo, memo #55 13/7 Owner contributed vehicle to business at agreed value, memo #56
$ 2000 28000
STOCK CARD: TVs 2028 Date Details 1/7 5/7 9/7 10/7 22/7 28/7 Balance Chq 124 Rec 432 Mem 55 Rec 433 Chq 126 QTY. 10 IN COST 1000 VALUE 10000 15 2 5 6 1000 6000 1000 1000 1000 15000 2000 5000 QTY. OUT COST VALUE QTY. 50 60 45 43 38 44 BALANCE COST 1000 1000 1000 1000 1000 1000 VALUE 50000 60000 45000 43000 38000 44000
1. Pre double-entry
18
Reports for July

Just TVs. Unclassified Cash Flow Statement for July 2028. Cash Receipts Sales $ $ 60000 Just TVs. Income Statement for July 2028. Revenue $ Sales Less Cost of Goods Sold Cost of sales Gross profit Less other expenses Interest on loan 200 Office expenses 3200 Advertising 2000 Net profit $ 60000 20000 40000
Cash Payments Drawings Kew loan Interest on loan Stock purchases Office expenses Change in cash + Cash at start = Cash at end
6000 1000 200 16000 3200
26400 33600 12000 45600
5400 34600
Just TVs. Balance Sheet at 31/7/28

Assets Stock Bank Office assets Vehicle $ 44000 45600 20000 28000 Equities Liabilities Kew loan Owners equity Capital Add net profit Less drawings $ 6000 103000 34600 (6000) 137600
Total assets
137600 Total equities
Show the impact of memo #55 on the accounting equation:
ASSETS Decrease stock $2000
LIABILITIES
OWNERS EQUITY Decrease $2000 due to advertising expense
Show the impact of memo #56 on the accounting equation:
ASSETS Increase $28000
LIABILITIES
OWNERS EQUITY Increase $28000 due to capital contribution
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.
1. Pre double-entry
19
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 Asset Increase $________ Decrease $1200 No change
STOCK CARD: Leather Chairs 2027 Date 1/9 3/9 Details Balance Doc. #99 QTY. 17 IN COST 1000 VALUE 17000 QTY. OUT COST VALUE QTY. 11 BALANCE COST 1000 VALUE 11000
Liability Increase $________ Decrease $_______ No change
Owners equity 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.

Date Details 2027 30/11 Totals Doc. Bank 21000 Cost of Sales 4500 Sales 15000 Loan 1000 Capital 5000 Sundry
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 Increase cash $1000 1. Pre double-entry Liabilities Increase loan $1000 VCE Accounting Unit 3 Owners Equity
20
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 Reports Journals and stock cards Transactions
B Journals and stock cards Reports Transactions
C Transactions Journals and stock cards Reports 1 mark
1.12 Which of the above, A or B or C, best represents the order in a simple accounting system? 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 Date 1/6 5/6 10/6 18/6 28/6 Details Balance Rec. #75 Memo #13 Rec. #76 Chq. #90 QTY. IN COST VALUE QTY. 7 1 10 20 200 4000 OUT COST 200 200 200 VALUE 1400 200 2000 QTY. 40 33 32 22 42 BALANCE COST 200 200 200 200 200 VALUE 8000 6600 6400 4400 8400
1.15 Work out the cost of sales for June 2028. 2 marks OUT column (only sales transactions): $1400 + $2000 = $3400.
1.16 Complete the following table to identify the relevant journal for each transaction. 2 marks Date 5/6 10/6 18/6 28/6 1. Pre double-entry Journal? Cash receipts General Cash receipts Cash payments
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). VCE Accounting Unit 3
21

SOL Chapter 1 Introduction

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

SOL Chapter 1 Introduction

Загружено:

Авторское право:

Доступные форматы

VCE Accounting Unit 3 Chapter 1

Podcasts: Assets Equities Liabilities Revenue Expenses

VCE Accounting Unit 3

VCE Accounting Unit 3

The following transactions, evidenced by documents, occurred during July 2018.

Clean Cut Mowers Receipt # 43

Clean Cut Mowers Receipt # 44

Date Details 8/7 SALES 28/7 SALES 31/7 Totals

Bank 8000 12000 20000

Cost of Sales 4000 6000 10000

Sales 8000 12000 20000

Total the cash journals at the end of July.

Cash Payments Journal (CPJ)

Bank 6000 900 6900

Internet Drawings Exps.

Interest Stock Cleaning 6000 6000

Office Exps. 900 900

7/7 STOCK 56 17/7 OFFICE EXPS. 57 31/7 Totals

6900 13100 40000 53100

From Balance Sheet.

Clean Cut Mowers. Balance Sheet at 31/7/18

From stock cards

VCE Accounting Unit 3

The following transactions, evidenced by documents, occurred during August 2018.

Clean Cut Mowers Receipt # 45

Clean Cut Mowers Receipt # 46

Journals for August

Date Details 11/8 SALES 28/8 SALES 31/8 Totals

Bank 12000 20000 32000

Cost of Sales 6000 10000 16000

Sales 12000 20000 32000

Total the cash journals at the end of August.

Cash Payments Journal (CPJ)

Bank 8000 500 8500

Internet Drawings Exps. 500 500

Interest Stock Cleaning 8000 8000

5/8 STOCK 58 18/8 INTERN.EXPS. 59 31/8 Totals

VCE Accounting Unit 3

Reports for August

8500 23500 53100 76600

Get the Bank value from the Cash Flow Statement.

Clean Cut Mowers. Balance Sheet at 31/8/18

Summary of the accounting process so far:

Start of reporting period

End of reporting period

Processing stage Recording

Output stage Reporting

Unit 3, Outcome 1, focuses on recording not reporting!

VCE Accounting Unit 3

Clean Cut Mowers. Balance Sheet at 1/9/18

The following transactions, evidenced by documents, occurred during September 2018.

Clean Cut Mowers Receipt # 47

Clean Cut Mowers Receipt # 48

Clean Cut Mowers Receipt # 49

Clean Cut Mowers Receipt # 50

Journals for September

Bank 16000 10000 12000 8000 46000

Cost of Sales 8000 6000 4000 18000

ABC Loan 10000

12000 8000 36000

Total the cash journals at the end of Sept.

Cash Payments Journal (CPJ)

Bank 14000 700 1400 2000 18100