The document summarizes accounting concepts related to inventory valuation, balance day adjustments, and revenue recognition. It provides multiple examples and calculations to illustrate: (1) depreciation of non-current assets using reducing balance and straight-line methods, (2) treatment of prepaid and accrued revenues, and (3) accounting for asset disposals. The examples cover a range of scenarios for businesses including a delivery van, computer systems, and gym equipment.

1. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 1
OUTCOME 1B
Question 1 – Sporting Life
a)
General Journal
Date Particulars General Ledger Subsidiary Ledger
Debit $ Credit $ Debit $ Credit $
1 Oct Delivery Van 30000
GST Clearing 3120
Prepaid registration and insurance 1200
Creditor – Van Sales 34320
1 mark
b)
Depreciation 1 Oct 2012 – 31 Dec 2014 = 20% x $30000 / 12 = $500 x 3 months = 1500
Depreciation 1 Jan 2013 – 31 Dec 2015 = 20% x $28500 = 5700
Depreciation 1 Jan 2014 – 28 Feb 2016 = 20% x $22800 / 12 = $380 x 2 months = 760
Accumulated depreciation at 28 February 2016 = 7960
3 marks
c)
Disposal of Delivery Van
28 Feb Delivery Van 30000 28 Feb Accumulated Depreciation – Van 7960
28 Feb Creditor – Van Sales 22000
28 Feb Loss on Disposal of Van 40
30000 30000
5 marks

2. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 2
Question 2 – Greenfinger Nursery
a)
Calculation
Depreciation expense Accumulated depreciation
1 Jul – 31 Dec 2014 = 5000 x 30% = 1500 / 2 (6 months) = 750 = 750
1 Jan – 31 Dec 2015 = 5000 x 30% = 1500 = 750 + 1500
Accumulated Depreciation = $ 2250
2 marks
b)
Calculation
Existing computers = 25000 x 30% = 7500
New computer on 1 Apr 16 = 4000 x 30% = 1200 / 12 = $100 per month x 9 months = 900
Depreciation Expense = $ 8400
2 marks
c)
Computer System
1 Jan Balance 30000 31 Jan Disposal of computer sys. 5000
30 Apr Bank/Sund Cred – B Comps 4000 31 Dec Balance 29000
34000 34000
1 Jan Balance 29000
Disposal of Computer System
31 Jan Computer system 5000 31 Jan A . dep’ – Computer sy 2250
31 Jan Bank 2000
31 Jan Loss on disposal of comp. 750
5000 5000
3 + 4 = 7 marks

3. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 3
Question 3 – Findlay Builders
a)
Calculation
Deprecation = 30% x 45000 / 2
= 6750
Depreciation expense for year ended 30 June 2015 = $ 6750
Calculation
Deprecation = 30% x 38250
Depreciation expense for year ended 30 June 2016 = $ 11475
1 + 1 = 2 marks
b)
i
 1 mark = Net Profit would be $4,075 lower
 1 mark = depreciation would be $11,475 under the reducing balance method
 1 mark = depreciation would be $7,400 under the straight-line method
ii
 1 mark = Net Profit would be $194 lower
 1 mark = depreciation would be $37,194 under the reducing balance method
 1 mark = depreciation would be $37,000 under the straight-line method
3 + 3 = 6 marks
Calculations:
Reducing balance Straight-line
Period Length Depreciation Period Length Depreciation
1 Jan 2012 to 30 June 2012 0.5 year $ 6,750.00 1 Jan 2012 to 30 June 2012 0.5 year $ 3,700.00
1 July 2013 to 30 June 2013 1 year $ 11,475.00 1 July 2013 to 30 June 2013 1 year $ 7,400.00
1 July 2014 to 30 June 2014 1 year $ 8,032.50 1 July 2014 to 30 June 2014 1 year $ 7,400.00
1 July 2015 to 30 June 2015 1 year $ 5,622.75 1 July 2015 to 30 June 2015 1 year $ 7,400.00
1 July 2016 to 30 June 2016 1 year $ 3,935.93 1 July 2016 to 30 June 2016 1 year $ 7,400.00
1 July 2017 to 31 Dec 2016 0.5 year $ 1,377.57 1 July 2017 to 31 Dec 2016 0.5 year $ 3,700.00
Total $ 37,193.75 Total $ 37,000.00

4. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 4
c)
Discussion
2 marks
The depreciation method should ’t e ha ged based on the Consistency Principle because:
 The firm must continue using the same accounting methods and the straight-line method was
used in previous years.
 This will the fir ’s Depreciation Expense and Net Profit are comparable over time.
2 marks
However, the depreciation method should be changed based on the Reporting Period Principle.
 The depreciation method should be chosen which best matches the Revenue Earned with
Expenses Incurred of the asset.
 As a computer gets less efficient and earns less Revenue as it gets older, the reducing-balance
should be used as it will match less Depreciation Expenses.
4 marks

5. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 5
Question 4 – Denise’s Quilts
a)
Depreciation method 1 mark = Reducing balance depreciation
Accounting principle 1 mark = Reporting period principle
Justification
1 mark
 At the end of each period, the firm must calculate profit by matching revenues earned and
expenses incurred.
1 mark
 3Reducing balance is more effective at at hi g the deli er a ’s e pe se depre iatio
against its revenue as:
o More depreciation is charged in earlier periods when the van earns more revenue
o Less depreciation is charged in later periods when the van earns less revenue
1 + 1 + 2 = 4 marks
b)
Calculation
Depreciation = 20% x (50,000 – 10,000 – 8,000 – 6,400)
= 20% x 25,600
Depreciation expense for year ended 31 December 2013 = $ 5,120
2 marks
c)
Calculation
Depreciation = (Cost – Residual) / Life
5,000 = (40,000 – 10,000) / Life
6 = Life
Estimated useful life of asset = 6 years
2 marks

6. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 6
Question 5 – Gym World
a)
Explanation
The deposit should be treated as a liability because:
 1 mark = the firm has a present obligation to provide the treadmills to the customer.
 1 mark = the obligation arises because of a past event when the firm received a $15,000
deposit.
 1 mark = there will be a future outflow of economic benefits (in the form of treadmills)
3 marks
b)
Cash Receipts Journal
Date Details
Receipt
Number
Bank $
Debtors
Control $
Cost of
Sales $
Sales $
Sundries
$
GST $
5 Jun Prepaid sales revenue 48 15000 15000
1 mark
c)
Sales Journal
Date Debtor
Invoice
Number
Cost of
Sales $
Sales $ GST $
Debtors
Control $
16 Jun Golden Gyms 45 12500 35000 5000 40000
General Journal
Date Particulars General Ledger Subsidiary Ledger
Debit $ Credit $ Debit $ Credit $
16 Jun Prepaid sales revenue 15000
Sales revenue 15000
3 + 1 = 4 marks

7. VCE ACCOUNTING
UNIT 4 – CONTROL AND ANALYSIS OF BUSINESS PERFORMANCE
OUTCOME 1B – INVENTORY VALUATION AND BALANCE-DAY ADJUSTMENTS FOR REVENUE
Version 1a Page | 7
d)
Prepaid Sales Revenue
30 Jun Sales revenue 15000 30 Jun Bank 15000
15000 15000
3 marks
e)
General Journal
Date Particulars General Ledger Subsidiary Ledger
Debit $ Credit $ Debit $ Credit $
30 Jun Accrued interest revenue 450
Interest revenue 450
Cash Receipts Journal
Date Details
Receipt
Number
Bank $
Debtors
Control $
Cost of
Sales $
Sales $
Sundries
$
GST $
30 Sep Accrued interest revenue 15 900 450
Interest revenue 450
31 Mar Term deposit 107 20900 20000
Interest revenue 900
2 + 2 + 2 = 6 marks
f)
Explanation
If the adjustment for $450 of Accrued Revenue was NOT made then:
1 mark
Assets would be understated by $450 – in this case, the Accrued Interest Revenue asset would be
too low.
1 mark
Liabilities would not be effected.
1 mark
O er’s Equity would understated by $450 – i this case, the fir ’s Interest Revenue would be too
low.
3 marks