Be Cool and Calculating
What some experienced Accounting
teacher think you will need to
concentrate on during your studies
Attempt past exams and practice exam
• Under exam conditions to get use to
completing them in the time limit.
• Every year the Examiners say student’s marks
fall toward the end of the exam, because they
have run out of time.
• I have some that you will not get off the
website so just ask.
The Exam will be 2 hours long
• The Exam will cover Unit 3 & 4.
• You can do the Exam questions in what ever
order you prefer but you must attempt every
question.
Know your Accounting Principles
and Qualitative Characteristics
• COM, REL, U Characteristics
– Comparability
– Relevance
– Reliability
– Understandability
• The others are Accounting Principles!
– C @ HER MCG
Link the Accounting Principles and
Qualitative Characteristics
• To the various topics and be prepared to
explain why these items exist.
Understandability
• The setting out of the reports so that people
who are not accountant can understand.
– Balance Sheet fully classified with headings
– Income Statement with headings
– Cash Flow with appropriate headings
Entity
• The Balance Sheet – the business assets &
liabilities are separate from the owner’s.
• Sales of a non-current asset – the residual
value that we sell the NCA for now belongs to
another business / entity.
Reporting Period
• Revenue & expense – earned or incurred in
the current reporting period are matched to
calculate profit.
• Balance Day Adjustments – revenue &
expense items are made more accurate and
matched to calculate profit.
Comparability
• Using the same Depreciation method each
year consistently means reports can be
compared.
• Using Control and Subsidiary accounts allows
for comparing & checked
Think about the theory behind the
practical
• Why do we use perpetual inventory? What is
perpetual inventory?
• Why do some businesses use Control
accounts? Why do we have subsidiary
accounts if we already have the general
ledger?
Journals
• General Journal entries are always popular.
GST
• Is not recorded on stock cards or in Stock
Control.
• Check the GST at the start in the Balance
Sheet from the previous year.
Depreciation
• If a Non Current Asset is bought part way
through the year, then it will be depreciated
for part of the year.
• If a Non Current Asset is sold in the middle of
the year, then it will be depreciated for part of
the year.
Disposal of a NCA
• If the NCA is sold, then an amount received is
recorded in the Cash Receipts Journal.
• If the NCA is traded-in to the Sundry Creditor,
then the value will be mentioned on the
invoice for the purchase of the new NCA.
• If the NCA is written off, there will be no value.
Purchase of a new Non Current
Asset
• You may be presented with an invoice that will
include a deposit (record in Cash Receipts
Journal).
• The remainder is owed to the Sundry Creditor.
• There may be discount so watch for 2/7, n/30.
• There will be GST on the purchase of a Non
Current Asset.
Accounting Reports
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Go to Template of Reports
Be familiar with the format of each
Be ready to reconstruct accounts
Don’t forget Variance reports and what they
show the owner.
• How do BDA Adjustments affect Income
Statement and Balance Sheet?
Cash Versus Profit
• Can a business make a profit and have little or
no cash?
• Can another business have plenty of cash but
make a loss?
• What about Net Cash from Operation being
positive but the business has a overdraft?
• How can these events happen?
Performance analysis
• The ratios will NOT be included in the exam.
• Read the list of ratios from the photocopy I
gave you or the wiki then memorise them.
• If you read the list every day, you will have a
good chance of remembering them.
Performance analysis
• Analyse the data
• Interpret the results
• Discuss them in relation to the needs of the
business (how improve?) and the owner.
• Why has Return on Assets decreased?
• How could the owner improve collections
from debtors?
Performance Analysis
• If you are asked to discuss a particular issue
and you are making either positive or negative
statements, make sure you provide supporting
evidence to justify your statement.
• Refer to the data presented in the question to
strengthen your point of view.
• IDL answers:
– Identify
– Define
– Link
Stock Cards will include:
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Sales returns
Purchase returns
Period costs
Product costs
FIFO
Reversing FIFO
• Make sure you are very familiar how these are
recorded on the Stock cards.
Product Costs
• Those costs that
– can be logically applied to the stock
– assist in getting the stock into position and
condition for sale
Period costs
• Cannot be
– Logically applied even though they are required to
be the stock into the position and condition for
sale
– This could include a item that links as a Product
but is so small a value that it is left as a Period cost
e.g.
Freight $10 of 100 items so 10¢ each isn’t
logical nor does it comply with Monetary – any
amount under $1 is rounded up.
Credit Sales Invoice
No. 3654
Item
TV
DVD
Stereo
Freight
Insurance
Total
Qty
10
20
20
50
Date 3.08.09
Unit Price GST
Total
$300
$30
$3300
Charged
per unit
$100
$10
$2200
Product Cost
$50
$5
$1100
$2
.20¢
$110
$200
$20
$220
$6930
Insurance: a one-off fee that must be paid
regardless of the number of units purchased
so this is a Period cost
Also, in the Answer Booklet
• If students are asked to record this transaction
in the Journals, the Answer Booklet will
provide a Purchases Journal and a General
Journal.
• Both Journals must be used – the examiners
wouldn’t provide both if they didn’t expect
both to be used.
Purchase of a Non-current assets
on credit
• Usually in combination with
– the disposal / trade-in of a Non-current asset
– and calculation of depreciation.
When a purchase is made, check
• If stock is being purchased for resale:
– Credit Purchase of stock > Purchases Journal >
Creditors Control account
• If a non-current asset is being purchase to be
used to earn revenue:
– Credit Purchase of non-current asset > General
Journal > Sundry Creditors account
BDA
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Prepaid expenses
Accrued expenses
Prepaid revenue
Accrued revenue
Stock Write Down
Bad Debts
Stock Losses
Stock Gains
Prepaid Revenue
• Students do badly in this area.
• For 2007 & 2008 exams this was examined by
looking at stock sold on credit.
Prepaid Sales - where
– Stock was ordered for delivery and payment at a
later date,
– Paid a deposit when the stock was ordered,
– Received some of the stock ordered (and an
Invoice has accompanied the stock),
– Paid the balance owing on the Invoice.
All of these transactions occur over two reporting
periods.
How to go about answering this:
• A suggested approach is to work backwards.
• Consider how the General Ledger would look
if the whole sale occurred at one time.
• Then work backwards to find the entries
required.
To do before the exam
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Plenty past exams and trial exams
Remember the basics
Practise you exam techniques
Revise carefully
Read the Assessment Reports to find out
where students made mistakes in previous
exams.
• Be prepared – the better prepared, the higher
the result.
The Exam Date
•Monday, November
11.45am to 2.00pm
th
11
• Difficult time of day – you will be hungry
• Eat something healthy before the exam
– Avoid the sugary snacks that make you jittery