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AusGrader has 109 VCAA Accounting questions on Extension of recording and reporting, all with instant AI grading and detailed marking feedback.

Use your answer for Question 12a) to record the general ledger accounts as they should have been presented. **Business 2** **General Ledger (extract)** | Date | Particulars | Debit \$ | Credit \$ | Balance \$ | Dr/Cr | |---|---|---|---|---|---| | | | | | | | | **Machinery** | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | **Accumulated depreciation** | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | **Disposal of machinery** | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

**Business 2** **General Ledger (extract)** **Machinery** | Date | Particulars | Debit | Credit | Balance | Dr/Cr | | :--- | :--- | :--- | :--- | :--- | :--- | | 1/7/2019 | Accounts payable — Machinery Retailer | 50 000 | | 50 000 | | | | Accounts payable — Machinery Installer | 1 000 | | 51 000 | | | 1/4/2021 | Disposal of machinery | | 51 000 | 0 | | **Accumulated depreciation** | | | | | | | | :--- | :--- | :--- | :--- | :--- | :--- | | 30/6/2020 | Depreciation of machinery | | 10 200 | 10 200 | | | 1/4/2020 | Depreciation of machinery | | 6 120 | 16 320 | | | 1/4/2020 | Disposal of machinery | 16 320 | | 0 | | **Disposal of machinery** | | | | | | | | :--- | :--- | :--- | :--- | :--- | :--- | | 1/4/2021 | Machinery | 51 000 | | 51 000 | | | | Accumulated depreciation of machinery | | 16 320 | 34 680 | | | | Accounts receivable — Machinery Retailer | | 25 000 | 9 680 | | | | Loss on disposal | | 9 680 | 0 | |

VCE Accounting — Extension of recording and reporting Questions & Answers

Q7

2024

QCAA

1 mark

Q7

1 mark

The following financial data has been provided for [Box] Ltd.

Extract of accounts	＄
Cash sales	220 000
Credit sales	270 000
Cost of goods sold	170 000
Repairs and maintenance	5 000
Sales salaries	125 000
Rent expense	6 000
Depreciation on delivery vehicles	8 000
Rates	1 200
Depreciation on building	6 000
Office expenses	2 000
Amortisation of goodwill	4 000
Interest paid	23 000
Net profit before tax	139 800
Income tax	41 940
Net profit after tax	97 860

Ltd’s EBITDA margin ratio, rounded to two decimal places, is

A

45.46%

B

43.82%

C

36.90%

D

36.08%

Reveal Answer

A

45.46%

This calculation incorrectly adds Income Tax (＄41,940) to Net Profit Before Tax (＄139,800). Since the starting profit figure is already before tax, adding the tax expense again is a double-counting error.

B

43.82%

This result is obtained by incorrectly adding Income Tax to Net Profit Before Tax and failing to add back the depreciation on delivery vehicles (＄8,000) to the earnings figure.

C

36.90%

Correct Answer

To calculate the EBITDA margin, first determine Total Revenue (＄220,000 + ＄270,000 = ＄490,000) and EBITDA (Net Profit Before Tax + Interest + Depreciation + Amortisation = ＄139,800 + ＄23,000 + ＄14,000 + ＄4,000 = ＄180,800). The ratio is $\frac{180,800}{490,000} \approx 36.90\%$ .

D

36.08%

This option incorrectly excludes the Amortisation of goodwill (＄4,000) from the EBITDA calculation. EBITDA requires adding back Interest, Tax, Depreciation, and Amortisation to the Net Profit.

Q11

2024

QCAA

9 marks

Q11

9 marks

Read Case study 1 (Stimulus 1) in the stimulus book.
Prepare general journal entries to record all outstanding transactions as at 30 June 2024. Narrations are not required.

Garden Supplies — General journal (extract)

Date	Particulars	DR $	CR $

Reveal Answer

Garden Supplies — General journal (extract)

Date	Particulars	DR ＄	CR ＄
30 June 2024	Machinery/bobcat	30 000
	GST clearing	3 000
	Bobcat Sellers		33 000
	(Bought machinery/bobcat from Bobcat Sellers)

	Machinery/bobcat	4 000
	GST clearing	400
	Cash at bank		4 400
	(Paid for installation of air-conditioning)

	Bobcat Sellers	1 650
	Cash at bank		1 650
	(Paid 5% deposit)

	Cash at bank	31 350
	Loan		31 350
	(Obtained a loan)

	Bobcat Sellers	31 350
	Cash at bank		31 350
	(Paid Bobcat Sellers amount owing)

	Depreciation of machinery/bobcat	3 450
	Accumulated depreciation of machinery/bobcat		3 450
	(Depreciation for nine months)

Working:
$(30\,000 + 4\,000) - 11\,000 / 5 = 4\,600 \times 9/12 = 3\,450$

Marking Criteria

Recording Entries

Marking Bands

Descriptor	Marks
Correctly records 6 general journal entries	6
Correctly records 5 general journal entries	5
Correctly records 4 general journal entries	4
Correctly records 3 general journal entries	3
Correctly records 2 general journal entries	2
Correctly records 1 general journal entry	1
None of the above	0

Recording Amounts

Marking Bands

Descriptor	Marks
Correctly records amounts in 6 general journal entries	3
Correctly records amounts in 3–5 general journal entries	2
Correctly records amounts in 1–2 general journal entries	1
None of the above	0

Q4

2023

QCAA

1 mark

Q4

1 mark

A business purchased furniture for ＄16 500 (including GST) on 30 September 2020. The furniture was to be depreciated at 10% using the straight-line method over 10 years. The owner decided to sell the furniture on 30 June 2023 for ＄12 500 cash.

Calculate the accumulated depreciation balance to be transferred to the disposal account.

A

＄3 000

B

＄4 125

C

＄4 500

D

＄4 538

Reveal Answer

A

＄3 000

This amount represents only two years of depreciation ( $2 \times ＄1,500$ ). It incorrectly ignores the additional 9 months the asset was held between purchase and the end of the first financial year.

B

＄4 125

Correct Answer

First, exclude GST to find the cost base: $＄16,500 / 1.1 = ＄15,000$ . The asset was held for 33 months (2.75 years) from Oct 2020 to June 2023. Accumulated depreciation is $＄15,000 \times 10\% \times 2.75 = ＄4,125$ .

C

＄4 500

This calculates depreciation for three full years ( $3 \times ＄1,500$ ). The asset was held for only 2 years and 9 months (2.75 years), so this overstates the accumulated depreciation.

D

＄4 538

This calculation incorrectly includes the GST component in the depreciable cost base ( $＄16,500 \times 10\% \times 2.75 \approx ＄4,538$ ). Depreciation must be calculated on the ex-GST cost of $＄15,000$ .

Q6

2020

QCAA

1 mark

Q6

1 mark

A motor vehicle was purchased on 1 July 2018 for ＄50 000 and sold on 31 October 2020 for ＄18 000. The depreciation method used is straight line. The useful life is five years, and there is no residual value. As at 30 June 2020, the accumulated depreciation for the motor vehicle was recorded as ＄20 000.

Based on this data, and rounding to the nearest whole number, the general journal entry to record the disposal would be

A

Loss on disposal of motor vehicle Dr ＄28 667
Disposal of motor vehicle Cr ＄28 667

B

Loss on disposal of motor vehicle Dr ＄12 000
Disposal of motor vehicle Cr ＄12 000

C

Loss on disposal of motor vehicle Dr ＄8 667
Disposal of motor vehicle Cr ＄8 667

D

Loss on disposal of motor vehicle Dr ＄2 000
Disposal of motor vehicle Cr ＄2 000

Reveal Answer

A

Loss on disposal of motor vehicle Dr ＄28 667
Disposal of motor vehicle Cr ＄28 667

This option incorrectly ignores the opening accumulated depreciation of ＄20,000. It calculates the carrying amount using only the current period's depreciation (＄3,333), resulting in an overstated book value and loss.

B

Loss on disposal of motor vehicle Dr ＄12 000
Disposal of motor vehicle Cr ＄12 000

This calculation fails to record the depreciation expense for the four months of the current financial year (July to October). It compares the book value as of 30 June 2020 (＄30,000) directly to the proceeds, missing the ＄3,333 adjustment.

C

Loss on disposal of motor vehicle Dr ＄8 667
Disposal of motor vehicle Cr ＄8 667

Correct Answer

The loss is calculated by comparing the carrying amount at the date of sale to the proceeds. First, update depreciation for 4 months ( $＄10,000 \times \frac{4}{12} = ＄3,333$ ), making total accumulated depreciation ＄23,333. The carrying amount is $＄50,000 - ＄23,333 = ＄26,667$ . The loss is $＄26,667 - ＄18,000 = ＄8,667$ .

D

Loss on disposal of motor vehicle Dr ＄2 000
Disposal of motor vehicle Cr ＄2 000

This result comes from incorrectly comparing the accumulated depreciation balance (＄20,000) directly to the sales proceeds (＄18,000), rather than comparing the asset's net book value to the proceeds.

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.

Reveal Answer

A

close revenue and expense accounts.

This describes closing entries, which transfer temporary account balances to permanent accounts at the end of a period, rather than reversing entries.

B

create temporary asset and liability accounts.

Reversing entries do not create new accounts; instead, they reverse the effects of specific adjusting entries made at the end of the previous period.

C

cancel relevant balance day adjustment entries.

Correct Answer

Reversing entries are recorded at the beginning of a new period to cancel out specific balance day adjustments (such as accruals), simplifying the recording of subsequent cash transactions.

D

match revenues and expenses to the correct period.

Matching revenues and expenses to the correct period is the primary purpose of adjusting entries, whereas reversing entries are an optional step for bookkeeping convenience.

Q3

2020

QCAA

1 mark

Q3

1 mark

Statement of Cash Flows (extract)

Cash flows from financing activities	Previous year ＄	Current year ＄
Inflows
Proceeds from loans and borrowings	25 000	75 000
Capital contributions	5 000	0
Outflows
Payment of drawings	(2 750)	(10 000)
Repayment of loans and borrowings	(10 000)	(25 000)
Net cash provided by financing activities	17 250	40 000

Based on the data, the financial stability of the business has

A

weakened, as there was an increase in debt finance.

B

remained consistent, as the business has increased its payments to suppliers.

C

strengthened, as the net cash provided from financing activities has increased.

D

improved, as the owner did not contribute any further capital in the current year.

Reveal Answer

A

weakened, as there was an increase in debt finance.

Correct Answer

The business significantly increased its borrowing (proceeds of ＄75,000 compared to ＄25,000 in the previous year). Higher reliance on debt financing increases financial risk (gearing), which weakens financial stability.

B

remained consistent, as the business has increased its payments to suppliers.

Payments to suppliers are classified as operating activities, not financing activities, and are not listed in this extract. The extract shows payments for drawings and loan repayments.

C

strengthened, as the net cash provided from financing activities has increased.

While the net cash inflow increased, it was driven by taking on more debt. Increased debt obligations generally reduce long-term financial stability, even if they provide immediate liquidity.

D

improved, as the owner did not contribute any further capital in the current year.

The lack of capital contributions forced the business to rely on external debt to generate cash. Relying on debt rather than equity increases financial risk, rather than improving stability.

Q9

2021

QCAA

1 mark

Q9

1 mark

A business has provided the following information from its Statement of Profit or Loss, Statement of Financial Position and Statement of Cash Flows.

	2021 ＄	2020 ＄
Drawings	60 000	60 000
Capital	390 000	465 000
Mortgage	105 000	30 000
Non-current assets	550 000	390 000
Net cash provided by (used in) investing activities	(150 000)	(60 000)

In 2021, the Statement of Financial Position will show non-current assets of ＄550 000 and the Statement of Cash Flows will show outflows for the purchase of the non-current assets of

A

＄90 000

B

＄150 000

C

＄160 000

D

＄240 000

Reveal Answer

A

＄90 000

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

B

＄150 000

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.

C

＄160 000

Correct Answer

The outflow for the purchase of non-current assets is calculated as the difference between the closing and opening balances of the non-current assets: $＄550,000 - ＄390,000 = ＄160,000$ . The difference between this purchase amount ( $＄160,000$ ) and the net investing cash flow ( $＄150,000$ ) implies there were proceeds from asset sales of $＄10,000$ .

D

＄240 000

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

Q8

2021

QCAA

1 mark

Q8

1 mark

In January 2021, a public company acquired a business using cash basis accounting, which

A

changed when the company reported its end of financial year results.

B

complicated the comparison of its financial statements over time.

C

had no effect on horizontal ratio analysis.

D

affected the industry benchmarks.

Reveal Answer

A

changed when the company reported its end of financial year results.

The fiscal year-end is determined by the parent company's existing policy and is not typically altered simply by acquiring a new subsidiary.

B

complicated the comparison of its financial statements over time.

Correct Answer

Acquisitions disrupt the consistency of financial data over time because the post-acquisition results include assets and revenues that were not present in prior periods. Furthermore, harmonizing the acquired company's cash-basis records with the public company's accrual-basis reporting adds complexity to historical comparisons.

C

had no effect on horizontal ratio analysis.

Horizontal analysis compares financial data over time; an acquisition significantly changes the scale of the financial statements, which directly distorts trend analysis.

D

affected the industry benchmarks.

Industry benchmarks are aggregate standards derived from the entire sector; a single acquisition by one firm generally does not have the weight to shift benchmarks for the whole industry.

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 ＄

Reveal Answer

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.

Reveal Answer


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	＄	＄	＄	＄

Reveal Answer

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

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.

Reveal Answer

A

increasing by ＄6 000.

An inventory shortage represents a loss of assets, which is recorded as an expense. Expenses decrease net profit rather than increasing it.

B

decreasing by ＄6 000.

Correct Answer

The inventory shortage is an expense that reduces net profit. The expense must be recorded exclusive of GST, calculated as $＄6,600 \div 1.1 = ＄6,000$ .

C

increasing by ＄6 600.

Inventory shortages are expenses that decrease net profit. Additionally, the profit and loss statement records amounts exclusive of GST.

D

decreasing by ＄6 600.

While the shortage decreases profit, the expense must be recorded exclusive of GST. The $＄600$ GST component is adjusted in the GST Clearing account (Balance Sheet), leaving only a $＄6,000$ reduction in net profit.

Q13

2022

QCAA

10 marks

Q13

10 marks

Read Case study 2 (Stimulus 9–10) in the stimulus book.

Analyse and evaluate the performance of the company to propose two recommendations to improve the profitability of the company.

Reveal Answer

Gross profit (＄50.86 m to ＄36.59 m) and net profit (＄78.13 m to ＄25.11 m) decreased from 2021. The gross margin dropped from 56.79 in 2021 above the industry benchmark of 48.43 to 40.07 in 2022, below the industry benchmark of 47.28. Net profit ratios for both years are consistently above the industry benchmarks of 22.85 and 21.65.
Cost of sales as a percentage of sales has increased by 19.45 percentage points, therefore gross profit has decreased by $14.27 m or 16.72 percentage points. Changing suppliers should be considered to reduce these costs or reduce the amount of stock kept on hand.
Sales have increased by 1% in 2022 yet the cost of these sales has increased by 46% since 2021. Considering increasing sales prices could recoup some costs. Other revenue has increased since 2021 and it may be profitable to increase these items.
Effective management of most expenses resulted in consistent or decreasing costs. The revaluation of investment properties with gains of ＄63.49 m in 2021 and ＄13.46 m in 2022 overinflated the net profit figures, particularly in 2021. This explains the positive comparison with industry benchmarks. Without the revaluation, the net profit ratios would be 16.34% (2021) and 12.76% (2022), both below the industry benchmarks.
Employee expenses decreased by ＄3.77 m, indicating a reduction in staff or movement from casual to permanent positions.
Marketing and administrative expenses have halved, indicating a reduction in spending or change of suppliers.
The profitability of the Motel Company could improve by changing purchasing policies (suppliers and quantities) and increasing selling prices.

Marking Criteria

Analysis

Marking Bands

Descriptor	Marks
Provides a detailed analysis of the scenario; supports this analysis with relevant financial data and information from the stimuli	5
Provides an analysis of the scenario; refers to relevant financial data and information from the stimuli	4
Explains the scenario; refers to financial data or information from the stimuli	3
Makes a statement about the scenario; refers to financial data or information from the stimuli	2
Makes a statement about the scenario	1
Does not satisfy any of the descriptors above.	0

Recommendations

Marking Bands

Descriptor	Marks
Provides valid and justified decisions, assessing strengths and limitations; proposes two valid recommendations; supports these two recommendations with relevant financial data and information	5
Provides valid decisions; proposes two valid recommendations; supports these recommendations with financial data and information	4
Proposes a valid recommendation; supports this recommendation with financial data or information	3
States a recommendation	2
Infers a recommendation	1
Does not satisfy any of the descriptors above.	0

Q13

2023

QCAA

29 marks

Q13

Read Case study 3 (Stimulus 4) in the stimulus book.

The Supermarket Company is considering expansion through the purchase of local grocery stores in regional Queensland towns in the next financial year. The board of directors has approached you with their comparative financial statements for analysis and evaluation, and is seeking your advice on the feasibility of the proposed expansion plans.

Q13a

12 marks

Using four relevant ratios, analyse and interpret the liquidity of The Supermarket Company across the financial years 2022 and 2023. Show your working for the ratio calculations.

Reveal Answer

Current ratio
Current assets/current liabilities
$= 210 465/181 996 = 1.16$
$= 221 573/169 305 = 1.31$

Quick Asset ratio:
Current assets –(Inventories + Prepayments)/current liabilities
$= 210 465 – 130 782/181 996 = 79 685/181 996 = 0.44$
$= 221 573 – 124 701/169 305 = 96 872/169 305 = 0.57$

Turnover of inventories
CoGS/Av inventories
$= 1 089 921/((124 701 + 130 780)/2) = 1 089 921/127 741$
$= 8.53$ times p.a. or $365/8.53 = 42.79$ days
$= 1 512 885/((86 272 + 124 701)/2) = 1 512 885/105 487$
$= 14.34$ times p.a. or $365/14.34 = 25.45$ days

A/c Receivable turnover
Net Credit Sales/Av Accts Receivable
$= 713 132/((91 360 + 71 174)/2) = 713 132/81 267$
$= 8.775$ times p.a. or $365/8.775 = 41.595$ days
$= 951 585/((64 635 + 91 360)/2) = 951 585/77 998$
$= 12.2$ times p.a. or $365/12.2 = 29.91$ days

Total sales have decreased from ＄1 676 801 in 2022 to ＄1 256 621 in 2023 — a decrease of 25%. Further, there has been a decline in the rate of collection of cash from credit customers from 30 days in 2022 to 42 days in 2023. This signifies serious issues with the credit policies of the business. The turnover of inventories has increased from 25 days (2022) to 43 days (2023), indicating that inventories are taking longer to sell.

Current ratios are below the benchmark of 2:1 and worsening, with a decrease from 1.31 in 2022 to 1.16 in 2023. This indicates a poor ability to cover current debts with current assets, especially with accounts receivable collections slower and interest bearing short-term liabilities increasing.

The Quick ratio has also worsened from 2022 to 2023, reflecting increasing inability to meet immediate debts and results are less than the benchmark of 1:1. This reflects the drop in current assets, notably accounts receivables, while current liabilities have increased since 2022. There has been an increase in cash and cash equivalents, but that would seem to have been influenced by the sale of ＄10 500 in investments and ＄5 518 of property, plant and equipment, which could reduce future earning potential.

Overall, the ratios are showing a decline in liquidity, placing the business in a poor cash position and at risk of defaulting on its debts, particularly with a doubling of tax liability and a high level of accounts payable.

Marking Criteria

Calculations

Marking Bands

Descriptor	Marks
Correctly calculates 4 liquidity ratios	4
Correctly calculates 3 liquidity ratios	3
Correctly calculates 2 liquidity ratios	2
Correctly calculates 1 liquidity ratio	1
None of the above	0

Conclusion

Marking Bands

Descriptor	Marks
States a valid and justified conclusion on the liquidity of the company AND supports conclusion with four relevant ratios AND identified trends	4
States a valid conclusion on liquidity of the company AND supports conclusion with two or three relevant ratios AND an identified trend	3
Supports conclusion with one relevant ratio AND identifies a trend	2
States a relevant ratio OR identifies a trend	1
Does not satisfy any of the descriptors above	0

Liquidity Analysis

Marking Bands

Descriptor	Marks
• provides an analysis of the liquidity of the company • identifies relevant relationships • refers to relevant financial data and information from the stimulus	4
• provides an explanation of the liquidity of the company • refers to financial data or information from the stimulus	3
• makes a statement about the liquidity of the company • refers to financial data or information from the stimulus	2
• makes a statement about the liquidity of the company	1
None of the above	0

Q13b

12 marks

Using Stimulus 4, trend analysis and two relevant ratios, analyse and interpret the stability of the company across the four years. Show your working for the ratio calculations.

Reveal Answer

Ratio	2023	2022	2021	2020
Debt ratio Total liab/total assets	250 565/490 372 = 51.096%	257 605/519 107 = 49.62%	200 305/395 720 = 50.62%	178 776/393 884 = 45.39%
Debt to equity ratio Total debt/Total equity	250 565/239 807 =1.04:1	257 605/261 502 = 0.985:1	200 305/195 415 = 1.025:1	178 776/215 108 = 0.83:1

Other plausible ratios that could have been used:

Ratio	2023	2022	2021	2020
Shareholder equity ratio Total equity/Total assets	239 807/490 372 = 48.9%	261 502/519 107 = 50.4%	195 415/395 720 = 49.4%	215 108/393 884 = 54.61%
Gearing ratio (Provided)	28%	22%	30%	13%

Long-term stability for The Supermarket Company is favourable. The reliance on debt to finance assets has increased from 45.39% in 2020 to just over 51% in 2023, due to fluctuations in total assets. As an example, investments were at a low in 2020 (＄726 000), rose to ＄11 377 000 in 2022 and dropped in 2023 closer to the 2020 value. The ratio shows that the funding from external parties has been relatively stable since the rise in 2021 to 50.62% and has remained close to the benchmark of 50%.

While there have been fluctuations in the total non-current assets over the four years, the current assets have shown a marked increase from 2021 to 2022, but then seem to have stabilised. Current liabilities increased from 2021 with rises in interest bearing and tax liabilities.

Accounts payable also increased from 2021 to 2022, but appear to have stabilised since. Non-current liabilities increased in 2022 but were paid down in 2023, as were interest bearing liabilities, contributing to the decrease in 2023 from 2022 in the total value of non-current liabilities.

The Supermarket Company has maintained a relatively constant debt-to-equity ratio close to 1:1 over the four years, so repayments on external funds can be met. The fluctuations discussed above have contributed to the total liabilities balance being relatively stable across the four years. The total equity figure has shown fluctuation in reserves and increases in retained earnings, particularly since 2021, providing evidence of stability.

Marking Criteria

Calculations

Descriptor	Marks
Correctly calculates one stability ratio	1
Correctly calculates another stability ratio	1

Conclusion

Marking Bands

Descriptor	Marks
Provides a valid and justified conclusion about the stability of the company AND supports conclusion with two relevant ratios AND identified trends	5
Provides a valid and justified conclusion about the stability of the company AND supports conclusion with one relevant ratio AND identified trends	4
States a valid conclusion about the stability of the company AND supports conclusion with one relevant ratio AND an identified trend	3
Supports conclusion with a relevant ratio OR trend	2
States a relevant ratio OR trend	1
Does not satisfy any of the descriptors above	0

Stability Analysis

Marking Bands

Descriptor	Marks
• provides a detailed analysis of the stability of the company • identifies relevant relationships • supports analysis with relevant relationships drawn from financial data and information in the stimulus	5
• provides an analysis of the stability of the company • identifies relevant relationships • refers to relevant financial data and information in the stimulus	4
• provides an explanation of the stability of the company • refers to financial data or information in the stimulus	3
• makes a statement about the stability of the company • refers to financial data or information in the stimulus	2
• makes a statement about the stability of the company	1
None of the above	0

Q13c

5 marks

Evaluate the performance of the company using Stimulus 4 and your analysis from Questions 13a) and 13b) to provide a justified decision and recommendation to the board of directors about the proposed plans.

Reveal Answer

The purchase of local grocery stores by The Supermarket Company should not be considered at this point in time. While stability of The Supermarket Company aligns with benchmarks, the company faces serious short-term liquidity issues. Cash flow is inhibited by a declining inventory turnover, with funds tied up in slow-moving stock. Significant credit policy issues are evident — cash collection rates increased over time, with a 12-day or 40% increase from 2022 to 2023. These trends must be addressed to prevent the company from defaulting on current obligations, particularly its tax liability of ＄11 724 000 — more than double that of 2022.

The desired expansion may place the company at a greater risk. Therefore, this proposal to purchase local grocery stores cannot be supported in the near future, as it will place even greater debt leverage on The Supermarket Company when it is already facing major liquidity problems.

Marking Criteria

Descriptor	Marks
Clearly explains the scenario AND makes a clear decision to propose a valid recommendation AND supports recommendation with relevant financial data and information relating to liquidity and stability	5
Explains the scenario AND makes a clear decision to propose a valid recommendation AND supports recommendation with relevant financial data and information relating to liquidity and stability	4
Explains the scenario AND states a valid recommendation AND supports recommendation with financial data or information	3
Makes a statement about the scenario AND states a recommendation AND refers to financial data or information	2
Makes a statement about the scenario OR refers to financial data or information	1
Does not satisfy any of the descriptors above	0

Q2

2025

QCAA

1 mark

Q2

1 mark

A business owner purchased a television for ＄3 960 (including GST) on 30 December 2023. The television was expected to have a useful life of six years and a residual value of ＄300. It was to be depreciated at 20% using the diminishing balance method. The owner sold the television on 30 June 2025 for ＄660 (including GST).

The loss on disposal of the television was

A

＄1 704

B

＄1 932

C

＄1 992

D

＄2 175

Reveal Answer

A

＄1 704

This incorrectly calculates a full year of depreciation in the first year instead of apportioning it for the six months the television was owned.

B

＄1 932

This correctly calculates the carrying amount but fails to exclude the GST from the sale price when determining the loss on disposal.

C

＄1 992

Correct Answer

The GST-exclusive cost is ＄3,600. Depreciation is ＄360 for the first 6 months and ＄648 for the next year, leaving a carrying amount of ＄2,592. Subtracting the GST-exclusive sale price of ＄600 gives a loss of ＄1,992.

D

＄2 175

This incorrectly uses the straight-line method of depreciation instead of the diminishing balance method specified in the question.

Q12

2021

QCAA

16 marks

Q12

Read Case study 2 (Stimulus 5–6) in the stimulus book.

Q12a

4 marks

Identify and explain the errors in Stimulus 6.

Reveal Answer

1/7/2019: Installation of machinery incorrectly recorded as revenue expenditure. Should be capitalised.

1/1/2020: Accounts payable should be Bank.

30/6/2020: Depreciation amount is incorrect due to incorrect recording of capital expenditure on 1/7/2019 (calculated on amount of ＄50 000, rather than ＄51 000).

1/4/2021: Accumulated depreciation is incorrect, due to previous years’ incorrect depreciation calculations.

1/4/2021:
• Straight line method of depreciation used instead of diminishing value.
• Depreciation was calculated for only 8 months, instead of 9 months.
• Depreciation was calculated on ＄50 000, rather than ＄51 000.

1/4/2021: Accumulated depreciation amount will need to change to reflect different depreciation figures in previous years.

1/4/2021: Not a gain on disposal; a loss on disposal.

Marking Criteria

Descriptor	Marks
Correctly identifies and explains the incorrectly recorded entries for at least 6 errors	4
Correctly identifies and explains the incorrectly recorded entries for at least 5 errors	3
Correctly identifies and explains the incorrectly recorded entries for at least 3 errors	2
Correctly identifies and explains the incorrectly recorded entries for at least 1 error	1
None of the above	0

Q12b

12 marks

Use your answer for Question 12a) to record the general ledger accounts as they should have been presented.

Business 2
General Ledger (extract)

Date	Particulars	Debit ＄	Credit ＄	Balance ＄	Dr/Cr

Machinery





Accumulated depreciation





Disposal of machinery

Reveal Answer

Business 2
General Ledger (extract)

Machinery

Date	Particulars	Debit	Credit	Balance
1/7/2019	Accounts payable — Machinery Retailer	50 000		50 000
	Accounts payable — Machinery Installer	1 000		51 000
1/4/2021	Disposal of machinery		51 000	0

Accumulated depreciation


30/6/2020	Depreciation of machinery		10 200	10 200
1/4/2020	Depreciation of machinery		6 120	16 320
1/4/2020	Disposal of machinery	16 320		0

Disposal of machinery


1/4/2021	Machinery	51 000		51 000
	Accumulated depreciation of machinery		16 320	34 680
	Accounts receivable — Machinery Retailer		25 000	9 680
	Loss on disposal		9 680	0

Marking Criteria

Machinery Ledger

Marking Bands

Descriptor	Marks
Correctly records particulars and amounts in the machinery ledger account for 3 entries, including balance	2
Correctly records particulars and amounts in the machinery ledger account for 2 entries	1
None of the above	0

Depreciation Calculation

Descriptor	Marks
Correctly calculates and records the depreciation of machinery amount using correct method of depreciation	1
Correctly calculates and records the depreciation of machinery amount using 9 months: $6 120	1

Accumulated Depreciation Ledger

Marking Bands

Descriptor	Marks
Correctly records particulars and amounts in the accumulated depreciation ledger account for 3 entries, including balance	3
Correctly records particulars and amounts in the accumulated depreciation ledger account for 2 entries	2
Correctly records particulars and amounts in the accumulated depreciation ledger account for 1 entry	1
None of the above	0

Loss on Disposal

Descriptor	Marks
Calculates the loss on disposal	1

Disposal Ledger

Marking Bands

Descriptor	Marks
Correctly records particulars and amounts in the disposal of machinery ledger account for 4 entries, including balance	4
Correctly records particulars and amounts in the disposal of machinery ledger account for 3 entries	3
Correctly records particulars and amounts in the disposal of machinery ledger account for 2 entries	2
Correctly records particulars and amounts in the disposal of machinery ledger account for 1 entry	1
None of the above	0

Q4

2024

QCAA

1 mark

Q4

1 mark

A customer has an outstanding debt of ＄56 000 that is three months overdue at 30 June. Interest at the rate of 4% p.a. is charged on overdue accounts. How would this be recorded in the general journal?

A

Interest revenue	DR	560
Accounts receivable	CR		560

B

Accounts receivable	DR	560
Interest revenue	CR		560

C

Accounts receivable	DR	2 240
Interest revenue	CR		2 240

D

Interest revenue	DR	2 240
Accounts receivable	CR		2 240

Reveal Answer

A

Interest revenue	DR	560
Accounts receivable	CR		560

This entry incorrectly reverses the accounting treatment. To record accrued interest, the asset (Accounts Receivable) must be debited to increase the balance, and Interest Revenue must be credited.

B

Accounts receivable	DR	560
Interest revenue	CR		560

Correct Answer

The interest is calculated as Principal $\times$ Rate $\times$ Time ( $＄56,000 \times 0.04 \times \frac{3}{12} = ＄560$ ). The entry correctly debits Accounts Receivable to increase the debt owed and credits Interest Revenue to recognize the income.

C

Accounts receivable	DR	2 240
Interest revenue	CR		2 240

This option calculates the interest for a full year ( $＄56,000 \times 0.04 = ＄2,240$ ). The amount must be prorated for the 3-month period by multiplying by $\frac{3}{12}$ .

D

Interest revenue	DR	2 240
Accounts receivable	CR		2 240

This option incorrectly calculates the interest for a full year instead of three months and reverses the debit and credit entries.

VCAA Accounting Extension of recording and reporting

Recording Entries

Recording Amounts

Identification of Accounts

Recording Amounts

Adjustments

Calculation

Classification

Adjustments

Calculations

Analysis

Recommendations

Calculations

Conclusion

Liquidity Analysis

Calculations

Conclusion

Stability Analysis

Machinery Ledger

Depreciation Calculation

Accumulated Depreciation Ledger

Loss on Disposal

Disposal Ledger

Frequently Asked Questions

Ready to practise VCAA Accounting?

VCAA Accounting Extension of recording and reporting

Sample Answer

Recording Entries

Recording Amounts

Sample Answer

Identification of Accounts

Recording Amounts

Sample Answer

Adjustments

Calculation

Sample Answer

Classification

Adjustments

Calculations

Sample Answer

Analysis

Recommendations

Sample Answer

Calculations

Conclusion

Liquidity Analysis

Sample Answer

Calculations

Conclusion

Stability Analysis

Sample Answer

Sample Answer

Sample Answer

Machinery Ledger

Depreciation Calculation

Accumulated Depreciation Ledger

Loss on Disposal

Disposal Ledger

Frequently Asked Questions

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