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VCAA (VCE) Accounting — Preparing and interpreting accounting reports Questions & Answers | AusGrader

Q2

2024

QCAA

1 mark

Q2

1 mark

Gross profit and net profit ratios are above industry benchmarks for Company A, and credit sales have increased by 20% on the previous year. However, the net cash flows from operating activities have decreased. This is because

A

cost of goods sold has increased.

B

payment of dividends has increased.

C

inflows have increased proportionally more than outflows.

D

customers buying on credit are not paying their accounts on time.

Q1

2020

QCAA

1 mark

Q1

1 mark

James's Business

List of accounts	＄
Accumulated depreciation — delivery van	6 800
Capital contributions	0
Cost of goods sold	25 000
Depreciation	3 400
Drawings	4 500
GST payable	10 000
Interest received	1 000
Sales	100 000
Sales returns	10 000
Wages	20 000

Following the completion of all closing entries, the owner’s equity would increase by

A

＄31 300.

B

＄38 100.

C

＄39 200.

D

＄42 600.

Q12

2024

QCAA

31 marks

Q12

Read Case study 2 (Stimulus 2, 3 and 4) in the stimulus book.

Q12a

12 marks

Use Stimulus 2 and 3 to prepare a fully classified Statement of Profit or Loss for the years ended 30 June 2024 and (projected) 30 June 2025.

Health Foods
Statement of Profit or Loss for year ended 30 June

2025			2024
$	$	$	$	$	$

Health Foods
Statement of Profit or Loss for year ended 30 June

	2025			2024
	＄	＄	＄	＄	＄	＄
Sales		78 000			60 000
Less Cost of sales
Cost of goods sold		19 550			17 000
Gross profit			58 450			43 000

Add Other Revenue
Interest revenue		790	790		790	790
			59 240			43 790
Less Other Expenses
Selling Expenses
Advertising	2 331			2 331
Delivery vehicle expenses	3 663			3 663
Depreciation on delivery vehicles	1 021			1 021
Website maintenance	666	7 681		666	7 681
Administrative Expenses
Bookkeeping expenses	1 665			1 665
Depreciation on computer equipment	1 000			1 000
Electricity	4 650			4 650
Insurance	555			555
Wages — office staff	20 000	27 870		20 000	27 870
Finance Expenses
Interest on loan	821	821		821	821
Total Expenses			36 372			36 372
Net profit			22 868			7 418

Marking Criteria

Classification Headings

Marking Bands

Descriptor	Marks
Correctly presents 4 classification headings	3
Correctly presents 2–3 classification headings	2
Correctly presents 1 classification heading	1
None of the above	0

Account Classification & Amounts

Marking Bands

Descriptor	Marks
Correctly classifies accounts and accurately records amounts for all 13 accounts for both years	5
Correctly classifies accounts and accurately records amounts for 9–12 accounts for both years	4
Correctly classifies accounts and accurately records amounts for 6–8 accounts for both years	3
Correctly classifies accounts and accurately records amounts for 3–5 accounts for both years	2
Correctly classifies accounts and accurately records amounts for 1–2 accounts for both years	1
None of the above	0

Sub-totals

Marking Bands

Descriptor	Marks
Correctly calculates 4 sub-totals for both years	2
Correctly calculates 1–3 sub-totals for both years	1
None of the above	0

Profit

Descriptor	Marks
Correctly determines gross profit figures for both years	1
Determines net profit figures for both years	1

Q12b

10 marks

Use Stimulus 2 and 3 to prepare a fully classified Statement of Financial Position for the years ended 30 June 2024 and (projected) 30 June 2025.

Health Foods
Statement of Financial Position as at 30 June

2025				2024
$	$	$	$	$	$	$	$

Health Foods
Statement of Financial Position as at 30 June

	2025				2024
	＄	＄	＄	＄	＄	＄	＄	＄
Assets
Current assets
Cash at bank		36 889				14 000
Inventories		5 800	42 689			5 800	19 800
Non-current assets

Property, plant and equipment
Computer equipment	2 500				2 500
Less accumulated depreciation on computer equipment	2 200	300			1 200	1 300
Delivery vehicles	45 000				45 000
Less Accumulated depreciation on delivery vehicles	9 521	35 479	35 779	78 468	8 500	36 500	37 800	57 600

Liabilities
Current liabilities
A/c payable		5 290	5 290			5 290	5 290
Non-current liabilities
Loan due 30 June 2030		7 000	7 000	12 290		7 000	7 000	12 290

Net assets				66 178				45 310

Owner’s equity
Capital		45 310					39 892
Add Net profit		22 868					7 418
		68 178					47 310
Less drawings		2 000		66 178			2 000	45 310

Marking Criteria

Classifications

Marking Bands

Descriptor	Marks
Correctly presents 5 classifications	4
Correctly presents 4 classifications	3
Correctly presents 2–3 classifications	2
Correctly presents 1 classification	1
None of the above	0

Account Classification & Amounts

Marking Bands

Descriptor	Marks
Correctly classifies accounts and accurately records amounts for all 10 accounts for both years	5
Correctly classifies accounts and accurately records amounts for 8–9 accounts for both years	4
Correctly classifies accounts and accurately records amounts for 5–7 accounts for both years	3
Correctly classifies accounts and accurately records amounts for 3–4 accounts for both years	2
Correctly classifies accounts and accurately records amounts for 1–2 accounts for both years	1
None of the above	0

Balancing

Descriptor	Marks
Correctly balances the Statement of Financial Position for both years	1

Q12c

4 marks

Using Stimulus 2 and 3 and your responses to Questions 12a) and 12b), calculate the following ratios for 30 June 2024 and projected ratios for 30 June 2025.
Calculations should be rounded to two decimal places.

	2025	2024
Gross profit ratio
Net profit ratio
Return on owner’s equity
Current ratio

	2025	2024
Gross profit ratio	$\frac{58\,450}{78\,000} \times 100$	$\frac{43\,000}{60\,000} \times 100$
	74.94%	71.67%
Net profit ratio	$\frac{22\,868}{78\,000} \times 100$	$\frac{7\,418}{60\,000} \times 100$
	29.32%	12.36%
Return on owner’s equity	$\frac{22\,868}{0.5(45\,310 + 66\,178)} \times 100$	$\frac{7\,418}{0.5(39\,892 + 45\,310)} \times 100$
	41.02%	17.41%
Current ratio	$\frac{42\,689}{5\,290}$	$\frac{19\,800}{5\,290}$
	8.07:1	3.74:1

Marking Criteria

Descriptor	Marks
Correctly calculates 4 ratios for both years	4
Correctly calculates 3 ratios for both years	3
Correctly calculates 2 ratios for both years	2
Correctly calculates 1 ratio for both years	1
None of the above	0

Q12d

5 marks

Using Stimulus 2, 3 and 4 and your responses to Questions 12a), 12b) and 12c), advise Tamara on how to convince Health in Your Kitchen to buy her business.

Owing to the projected increases in sales of 30% and cost of goods sold of 15%, Tamara’s gross profit is estimated to increase from 71.67% to 74.94% or by ＄15 450 in 2025. This reaches the benchmark of 75%. There is also a very pleasing increase in net profit from ＄7 418 to a projected ＄22 868 or from 12.36% in 2024 to 29.32% in 2025. Once again, these compare favourably with the current benchmark of 30%.

With the ROE of 17.41% increasing to 41.02% and the current ratio increasing from 3.74:1 to 8.07:1, the benchmark results of 40% and 2:1 respectively have been easily met. The ROE shows a healthy return and the level of the current ratio suggests the business is well able to meet its debts in the short term. With the cash balance of ＄36 889, Tamara could consider repaying the loan of ＄7 000 before the due date.

The expenses are projected to remain constant at 2024 levels. Tamara’s results are excellent overall and represent an outstanding opportunity for a ‘bricks and mortar’ business to acquire a profitable and growing ‘online’ business in order to diversify and expand.

Marking Criteria

Discussion of Ratios

Marking Bands

Descriptor	Marks
Discusses 4 ratios	4
Discusses 3 ratios	3
Discusses 2 ratios	2
Discusses 1 ratio	1
None of the above	0

Advice

Descriptor	Marks
Provides justified advice regarding the sale of her business	1

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.

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

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

VCAA Accounting Preparing and interpreting accounting reports

Classification Headings

Account Classification & Amounts

Sub-totals

Profit

Classifications

Account Classification & Amounts

Balancing

Discussion of Ratios

Advice

Analysis

Recommendations

Recording Revenue and Expenses

Execution

Frequently Asked Questions

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