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Chapter 1 - Accounting Theory Task C
1.
VCE ACCOUNTING UNIT 3 – RECORDING AND REPORTING FOR A TRADING BUSINESS CHAPTER 1 – THE NATURE OF ACCOUNTING Page | 1 Name Chapter 1 – Task C Question 1 A small business had Assets of $110,000 and Liabilities of $40,000. Define the term Owner’s Equity and state the Owner’s Equity of this business. Definition
Owner’s Equity 1 + 1 = 2 marks Question 2 In preparing a Balance Sheet as at 30 June 2015, the owner of a small business was unsure how to treat the item “Creditors”. The firm’s accountant informed the owner that “Creditors” should be classified as a Liability. Explain whether the accountant is correct and justify your opinion with reference to the definition of a Liability. Explanation 1 + 3 = 4 marks Question 3 Cash sales are reported as revenue in the Income Statement. Explain how cash sales meet the definition of Revenue. Explanation 3 marks
2.
VCE ACCOUNTING UNIT 3 – RECORDING AND REPORTING FOR A TRADING BUSINESS CHAPTER 1 – THE NATURE OF ACCOUNTING Page | 2 Question 4 During 2015 a business paid $36,000 to its insurance agency to cover insurance of the firm’s property and stock during 2016, 2017 and 2018. With reference to the elements of Accounting, explain how the $36,000 should be treated in the firm’s books as at the end of 2015. Explanation
1 + 3 = 4 marks Question 5 During February, a business incurred wages of $50,000 for work performed by their employees. The company’s policy is to pay wages in the month after the work is performed. For example, February’s wages will be paid in March. a) Explain how the unpaid wages will be treated in the firm’s Balance Sheet at the end of the February. Explanation 1 + 3 = 4 marks
3.
VCE ACCOUNTING UNIT 3 – RECORDING AND REPORTING FOR A TRADING BUSINESS CHAPTER 1 – THE NATURE OF ACCOUNTING Page | 3 b) With reference to the SAC2 definition of the accounting elements, explain how the wages incurred but not yet paid during February meet the definition of an Expense. Explanation
3 marks Total /20 marks
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