Be Cool and Calculating

1. Be Cool and Calculating What some experienced Accounting teacher think you will need to concentrate on during your studies

2. 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.

3. 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.

4. Know your Accounting Principles and Qualitative Characteristics • COM, REL, U Characteristics • Comparability • Relevance • Reliability • Understandability • The others are Accounting Principles! • C @ HER MCG

5. Link the Accounting Principles and Qualitative Characteristics • To the various topics and be prepared to explain why these items exist.

6. 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

7. 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.

8. 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.

9. Comparability • Using the same Depreciation method each year consistently means reports can be compared. • Using Control and Subsidiary accounts allows for comparing & checked

10. 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?

11. Journals • General Journal entries are always popular.

12. 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.

13. 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.

14. 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.

15. 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.

16. Accounting Reports • 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?

17. 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?

18. 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.

19. 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?

20. 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

21. Stock Cards will include: • 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.

22. Product Costs • Those costs that • can be logically applied to the stock • assist in getting the stock into position and condition for sale

23. 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.

24. Credit Sales Invoice No. 3654 Date 3.08.09 Item Qty Unit Price GST Total TV 10 $300 $30 $3300 DVD 20 $100 $10 $2200 Stereo 20 $50 $5 $1100 Freight 50 $2 .20¢ $110 Insurance $200 $20 $220 Total $6930 Charged per unit Product Cost Insurance: a one-off fee that must be paid regardless of the number of units purchased so this is a Period cost

25. 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.

26. 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.

27. 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

28. BDA • Prepaid expenses • Accrued expenses • Prepaid revenue • Accrued revenue • Stock Write Down • Bad Debts • Stock Losses • Stock Gains

29. Prepaid Revenue • Students do badly in this area. • For 2007 & 2008 exams this was examined by looking at stock sold on credit.

30. 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.

31. 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.

32. To do before the exam • 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.

33. The Exam Date • Monday, November 11th 11.45am to 2.00pm • Difficult time of day – you will be hungry • Eat something healthy before the exam • Avoid the sugary snacks that make you jittery