QCAA Accounting Fully classified financial statement reporting and analysis for a sole trader business

This calculation incorrectly includes the GST component. Prepaid rent should be recorded exclusive of GST ($12,000), so the remaining balance is calculated from that base.

This figure represents the cost of one month including GST. The question requires the remaining balance (two months) calculated on the GST-exclusive amount.

This amount represents the rent expense for the month of June ($＄12,000 / 3$), not the remaining balance in the Prepaid Rent asset account.

This amount does not correspond to the change in non-current assets or the reported cash flow figures.

This figure represents the net cash used in investing activities, which aggregates all inflows (sales) and outflows (purchases). The question asks specifically for the outflow for purchases, which must be derived from the change in the asset account.

This amount is incorrect and does not reflect the change in the Statement of Financial Position or the cash flow data.

Profitability does not negate the risks associated with poor inventory management. A declining turnover ratio suggests capital is being tied up in stock unnecessarily, which is a concern for cash flow regardless of sales volume.

While minor fluctuations are normal, a consistent downward trend over three consecutive years indicates a specific pattern of deteriorating efficiency rather than random variance.

The ratio has fallen to 4.0 compared to a benchmark of 5.15, which is a significant gap indicating underperformance relative to competitors. The trend is moving further away from the benchmark, which is a valid concern.

This option incorrectly subtracts 'Purchases returns' from the 'Net purchases' figure when calculating Cost of Goods Sold (COGS). Since the value is already listed as 'Net', returns are already deducted; subtracting them again leads to an understated COGS of $375,230$ and a ratio of $1.21$.

This calculation incorrectly uses 'Net Purchases' as the denominator instead of 'Average Inventory'. Dividing the correct COGS ($390,958$) by Net Purchases ($315,000$) results in $1.24$.

This result implies an incorrect adjustment to the inventory figures, likely subtracting the 'Inventory adjustment (shortage)' from the closing inventory again. If the average inventory is reduced by the shortage amount, the ratio increases to $1.27$.

This option is incorrect. It likely results from deducting the Provision for doubtful debts (＄300) again from the Net Accounts Receivable or treating it as a current liability. Since Accounts Receivable is listed as 'net', the provision has already been deducted.

This option is incorrect and results from a calculation error in summing the current assets or liabilities.

This option is incorrect and results from a calculation error in summing the current assets or liabilities.

Increasing credit sales when the business is already collecting slowly (45 days vs. 28 days) could worsen cash flow; the metric suggests a need to tighten credit policies rather than expand them.

Accounts receivable turnover measures how quickly the business collects money from customers, whereas paying accounts after purchase refers to accounts payable turnover.

For accounts receivable turnover in days, a lower number is better because it indicates faster cash collection. Taking 45 days compared to the industry's 28 days means the business is underperforming.

GST payable is a liability account reported on the Balance Sheet and is not included in the calculation of Gross Profit in the Income Statement.

Cartage on sales (freight outwards) is an operating expense deducted from Gross Profit to arrive at Net Profit, rather than a component used to calculate Gross Profit.

Commission revenue is considered 'other revenue' and is added to Gross Profit to determine Net Profit; it does not reduce the Sales figure used to calculate Gross Profit.

Undercapitalisation refers to having insufficient funds to support operations. An increasing ROE indicates improved efficiency or profitability, not necessarily a capital shortage that requires further investment.

While the trend is positive, claiming the owner has "maximised" profit is a definitive conclusion that cannot be drawn from a single year's increase. The metric simply shows improvement, not necessarily that the maximum potential has been reached.

Overcapitalisation typically results in a lower or decreasing ROE because excess capital is not being used efficiently to generate profit. An increasing ROE suggests the opposite: that capital is being utilized more effectively.

This calculation ignores the inventory adjustment for lower Net Realizable Value (NRV). It subtracts only the standard COGS from Net Sales ($＄270,000 - ＄85,000$), failing to account for the $＄4,500$ write-down expense.

This option incorrectly adds the inventory adjustment to the profit instead of deducting it as a cost. The calculation performed was likely Net Sales minus COGS plus the adjustment ($＄270,000 - ＄85,000 + ＄4,500$).

This figure uses Gross Sales instead of Net Sales and excludes the inventory adjustment. It fails to deduct Sales Returns ($＄10,000$) and the inventory write-down ($＄4,500$) from the calculation.

Comparing a small sole trader to large public companies listed on the ASX is not useful because of the vast differences in scale, capital structure, and operational complexity.

Comparing a local sole trader to global entities with "world's best practice" is unrealistic, as the sole trader lacks the purchasing power and economies of scale to match those costs.

Clothing retailers primarily earn income through sales revenue rather than commission revenue, making this comparison irrelevant to the business model.