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QCAA (QCE) Accounting — Complete accounting process for a sole trader business Questions & Answers | AusGrader

Q1

2024

QCAA

1 mark

Q1

1 mark

Reversing entries are performed to

A

close revenue and expense accounts.

B

create temporary asset and liability accounts.

C

cancel relevant balance day adjustment entries.

D

match revenues and expenses to the correct period.

Q1

2023

QCAA

1 mark

Q1

1 mark

On 30 June 2023, a business conducted a stocktake that revealed a shortage of ＄6 600 (including GST) between its actual inventories and the book value of inventories. Completing the required balance day adjustment would result in the business’s net profit figure

A

increasing by ＄6 000.

B

decreasing by ＄6 000.

C

increasing by ＄6 600.

D

decreasing by ＄6 600.

Q12

2022

QCAA

17 marks

Q12a

8 marks

Read Case study 1 (Stimulus 6–8) in the stimulus book.

Prepare a fully classified Statement of Profit or Loss for the years ended 30 June 2021 and 2022.

	2022			2021
Particulars	$	$	$	$	$	$

Statement of Profit or Loss for year ended 30 June

	2022			2021
	$	$	$	$	$	$
Sales			74 880			62 400
Less Cost of Sales			22 464			18 720
Gross Profit			52 416			43 680

Less Other Expenses
Selling Expenses
Fuel - Delivery Vehicle	1 500			1 250
Hire - Delivery Vehicle	6 000	7 500		6 000	7 250

Administrative Expenses
Depreciation - Equipment	1 245			1 205
Depreciation - Office	24			24
Electricity expense	1 600			1 600
Insurance expense	1 750			1 600
Lease expense - shed	3 600			3 600
Telephone expense	1 200	9 419		1 200	9 229

Finance Expenses
Interest expense		200	17 119		500	16 979
Net Profit			35 297			26 701

Marking Criteria

Recording Revenue and Expenses

Marking Bands

Descriptor	Marks
Correctly records as revenue and expenses for at least 10 accounts	5
Correctly records as revenue and expenses for 9 accounts	4
Correctly records as revenue and expenses for 8 accounts	3
Correctly records as revenue and expenses for 5 accounts	2
Correctly records as revenue and expenses for 3 accounts	1
None of the above	0

Execution

Descriptor	Marks
Correctly determines gross and net profit figures	1
Uses correct classifications	1
Correctly classifies accounts	1

Q12b

9 marks

Stimulus 6 identifies a goal-oriented problem for the business.

Using Stimulus 6–8 and your response to Q12a), justify your advice to Kurt.

Profitability ratios will be used in providing advice:
The gross profit (GP) ratio (70% for each year) and the net profit (NP) ratio for the two years are 43% (2021) and 47% (2022).

Assumptions:

constant expenses of the business
constant sales and cost of sales so the GP ratio will not be affected
ongoing costs, e.g. maintenance, insurance, registration, depreciation of both options are similar.

Loan repayments total ＄38 940 over the five years (＄7 788 per year) including interest of ＄8 940 over the 5 years (＄1 788 per year).
Over the five years, lease payments (＄18 000) for the shed and vehicle hire costs (＄30 000) would be incurred.
The vehicle is a depreciable non-current asset, but its lifespan could mean the need to acquire another vehicle in the near future.
The annual cash outflow is ＄9 600 for both shed lease and vehicle rental. Purchasing the shed would increase the cash outflow to ＄13 788 and purchasing the vehicle would increase the cash outflow to ＄11 388 annually. The vehicle purchase assists short-term cash flow.
Expenses would decrease by ＄1 812 per year if the shed is purchased and by ＄4 212 if the van is purchased. Both options produce a positive effect on NP ratio bringing it to 49% with shed purchase or 52% with van purchase.
Purchasing the shed provides an appreciating asset with the potential for access to future funding for the purchase of a delivery vehicle. Kurt will maintain his goal with this option.

Marking Criteria

Descriptor	Marks
Provides one or more plausible assumptions that underlie the options	1
Identifies the relevant profitability ratio: gross profit ratio	1
Identifies the relevant profitability ratio: net profit ratio	1
Calculates the GP and NP ratios for 2021 and 2022 accurately	1
Uses financial data to support the viability of one option	1
Uses financial data to support the viability of a second option	1
Explains a plausible effect on profitability for one option	1
Explains a plausible effect on profitability for a second option	1
Provides plausible advice	1

Q11

2021

QCAA

22 marks

Q11

Read Case study 1 (Stimulus 1–4) in the stimulus book.

Q11a

7 marks

Record the additional balance day adjustments in the general journal. Narrations are not required.

Business 1
General Journal (extract)

Date	Particulars	Ref	Debit ＄	Credit ＄

Business 1
General Journal (extract)

Date	Particulars	Debit $	Credit $
2021
30 June	Interest expense	250
	Accrued expense		250
	(Interest payable for 1 month)
	Rent revenue	10 500
	Unearned revenue		10 500
	(Rent received in advance for 7 months)
	Prepaid expense	660
	Telephone expense		660
	(Prepayment for telephone for 3 months)

Marking Criteria

Identification of Accounts

Marking Bands

Descriptor	Marks
Correctly identifies all 6 accounts affected by transactions	4
Correctly identifies 4 accounts affected by transactions	3
Correctly identifies 2 accounts affected by transactions	2
Correctly identifies 1 account affected by transactions	1
None of the above	0

Recording Amounts

Marking Bands

Descriptor	Marks
Correctly records amounts for all 3 adjustment entries	3
Correctly records amounts for 2 adjustment entries	2
Correctly records amounts for 1 adjustment entry	1
None of the above	0

Q11b

4 marks

Calculate the adjusted net profit as at 30 June 2021.


Net profit	$55 000
Less Accrued interest expense	$250
Less Unearned rent revenue	$10 500
Add Prepaid telephone expense	$660
Adjusted net profit	$44 910

Marking Criteria

Adjustments

Marking Bands

Descriptor	Marks
Correctly adds or subtracts from net profit for all 3 accounts	3
Correctly adds or subtracts from net profit for 2 accounts	2
Correctly adds or subtracts from net profit for 1 account	1
None of the above	0

Calculation

Descriptor	Marks
Correctly calculates adjusted net profit	1

Q11c

11 marks

Prepare a fully classified Statement of Financial Position, showing working capital.

Business 1
Statement of Financial Position as at 30 June 2021

Particulars	＄	＄	＄	＄

Business 1
Statement of Financial Position as at 30 June 2021

	$	$	$	$
Current assets
Accounts receivable control		75 000
Inventories control		35 800
Prepaid expense		660	111 460
Less Current liabilities
Bank overdraft		3 000
Accounts payable control		50 000
GST clearing		4 000
Accrued expense		250
Unearned revenue		10 500
Fixed-term loan (due 31 December 2021)		50 000	117 750
WORKING CAPITAL				(6 290)
Add Non-current assets
Property, plant and equipment
Motor vehicle	80 000
Less Accumulated depreciation — motor vehicle	12 000	68 000
Land and buildings		250 000	318 000
Investments
Debentures			18 000
Intangibles
Goodwill		25 000
Patents	15 000
Less Accumulated amortisation — patents	3 000	12 000	37 000	373 000
Less Non-current liabilities
Mortgage on land and buildings				160 000
NET ASSETS				206 710
Represented by Owner’s equity
Capital		203 800
Add Net profit		44 910	248 710
Less Drawings			42 000	206 710

Marking Criteria

Classification

Marking Bands

Descriptor	Marks
Correctly lists accounts within the main headings of classifications for all 5 sections	5
Correctly lists accounts within the main headings of classifications for 4 sections	4
Correctly lists accounts within the main headings of classifications for 3 sections	3
Correctly lists accounts within the main headings of classifications for 2 sections	2
Correctly lists accounts within the main headings of classifications for 1 section	1
None of the above	0

Adjustments

Marking Bands

Descriptor	Marks
Correctly incorporates adjustments to prepaid expenses, accrued expenses and unearned revenue for all 3 accounts	3
Correctly incorporates adjustments to prepaid expenses, accrued expenses and unearned revenue for 2 accounts	2
Correctly incorporates adjustments to prepaid expenses, accrued expenses and unearned revenue for 1 account	1
None of the above	0

Calculations

Descriptor	Marks
Correctly calculates working capital	1
Correctly calculates net assets	1
Correctly calculates owner’s equity	1

Q11

2023

QCAA

10 marks

Q11

Read Case study 1 (Stimulus 1) in the stimulus book.

Q11a

8 marks

Record the balance day adjustments in the worksheet for the two issues identified. Add the further accounts required and complete the Adjusted Balance column for the affected accounts.
Worksheet (extract) for Whitegoods Retailer as at 30 June 2023

Unadjusted Balance of Accounts		Adjustments		Adjusted Balance
		DR	CR	DR	CR
	$	$	$	$	$
Inventories	4 590
Accounts receivable	13 500
Bad and doubtful debts (expense)	9 700
Interest revenue	156
GST collected	2 300
Depreciation on retail fittings	4 000
Cost of goods sold	5 000
Sales	79 880
Sales returns and allowances	3 400
Dividends received	450
Sales commission paid	3 999
Office staff salaries	15 976
Insurance	6 000
Cartage on sales	700
Accounts payable	8 700
Bank charges	320
Rates	1 700
Sales staff wages	23 964
Repairs and maintenance of delivery vehicle	7 000
Cash at bank	15 000
Depreciation on delivery vehicle	8 000

Worksheet (extract) for Whitegoods Retailer as at 30 June 2023

Unadjusted Balance of Accounts		Adjustments		Adjusted Balance
		DR	CR	DR	CR
	$	$	$	$	$
Inventories	4 590		994	3 596
Accounts receivable	13 500	3 516	3 516	13 500
Bad and doubtful debts (expense)	9 700
Interest revenue	156
GST collected	2300		320		2 620
Depreciation on retail fittings	4 000
Cost of goods sold	5 000
Sales	79880
Sales returns and allowances	3 400
Dividends received	450
Sales commission paid	3 999
Office staff salaries	15 976
Insurance	6 000
Cartage on sales	700
Accounts payable	8700
Bank charges	320
Rates	1 700
Sales staff wages	23 964
Repairs and maintenance of delivery vehicle	7 000
Cash at bank	15 000	3 516		18 516
Depreciation on delivery vehicle	8 000
Inventory adjustment		994		994
Bad debts recovered			3 196		3 196

Marking Criteria

Adjustments

Marking Bands

Descriptor	Marks
Correctly records 7 adjustments	7
Correctly records 6 adjustments	6
Correctly records 5 adjustments	5
Correctly records 4 adjustments	4
Correctly records 3 adjustments	3
Correctly records 2 adjustments	2
Correctly records 1 adjustment	1
None of the above	0

Totals

Descriptor	Marks
Correctly totals adjusted accounts	1

Q11b

2 marks

Explain one limitation and one benefit of recording inventories at net realisable value.

A limitation of using net realisable value is that the costs associated with the sale of the inventory items are estimates only, as is the sale price.

A benefit of using net realisable value is that because its sale price and associated costs are less than the historical cost, the inventory item is more accurately reported in the accounts.

Marking Criteria

Descriptor	Marks
Explains a plausible limitation	1
Explains a plausible benefit	1

QCAA Accounting Complete accounting process for a sole trader business

Recording Revenue and Expenses

Execution

Identification of Accounts

Recording Amounts

Adjustments

Calculation

Classification

Adjustments

Calculations

Adjustments

Totals

Frequently Asked Questions

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