Flashcards
ACC1100 Exam Prep 2018
Cards in this deck (75)
- 1How are retained earnings for a period calculated?Beginning balance in retained earnings + profit (or -loss) - dividends
- 2What are the four columns in a journal?Date|Account Name (narration)|Post ref.|Debit|Credit
- 3What are the items that make up equity?Share capital + beginning retained earnings + profit (revenues - expenses) - dividends
- 4What are the steps to post a journal entry to ledger accounts?1. Enter date in account to be debited
2. Enter name of ledger account to be credited
3. Enter amount to be debited
4. Tick account no. in general journal to show entry is posted
5. Repeat steps 1-4 for the credit side - 5What are the steps to prepare a trial balance?1. List account numbers, titles and balances.
2. Total debit and credit columns
3. Verify equality of debit and credit columns - 6What would the header and column titles look like if Wong pty ltd were to do a trial balance at the end of October 2016?WONG PTY LTD
Trial Balance
as at 31 October 2016
No.| Account Title| Debit| Credit - 7What would the profit (or loss) be in each year using each method?Accrual
Year 1 = $30,000 profit
Year 2 = $0
Cash
Year 1 = $(50,000) loss
Year 2 = $80,000 profit - 8Why are adjusting entries necessary?1. To make sure revenues and expenses are recorded in the correct accounting period
2. To make sure recognition criteria are followed for assets, liabilities, revenues and expenses (conceptual framework criteria) - 9What are the 2 categories and 4 main types of adjusting entries? Give examplesPrepayments
1. Prepaid expenses ex. insurance
2. Revenue received in advance ex. partially earned service revenue received in advance
Accruals
1. Accrued revenues ex. commission revenue earned but not yet received or recorded
2. Accrued expenses ex. Accrued interest on a bank loan - 10What would the adjusting entry look like for the following? -supplies on hand 31 Oct. - $1000 -Supplies of $2500 originally recorded as an asset
- 11What would the adjusting entry look like for the following at the end of October? -Insurance paid for 1 year in advance on October 4th: $600$600/12 = $50 per month
- 12What would the adjusting entry look like for the following for the month of October? -Depreciation of office equipment: $480 p.a. or $40 monthly.
- 13What would the adjusting entry look like for the following? -$1200 received 2 October for advertising services to be completed 31 December. Services worth $400 were performed in October.
- 14What would the adjusting entry look like for the following at the end of October? -Commission Revenue earned, but not yet received or recorded - $200
- 15What would the adjusting entry look like for the following at the end of October? -Accrued interest owing on loan of $5000 -Interest rate: 12% p.aInterest owing: $5000 x 12% x 1/12 = $50
- 16What would the adjusting entry look like for the following? -Salaries outstanding for October at $400 per day-Outstanding: 3 days x $400 = $1200
- 17What are the 9 steps in the accounting cycle?1. Analyse transactions
2. Journalise the transactions
3. Post to ledger accounts
4. Prepare a trial balance
5. Journalise and post adjusting entries: prepayments/accruals
6. Prepare an adjusted trial balance
7. Prepare financial statements: Income statement, statement of changes in equity, statement of financial position
8. journalise and post closing entries
9. prepare a post-closing trial balance - 18What types of accounts are temporary and which are permanent and why?Temporary accounts relate to only a given accounting period - revenues, expenses, dividends
Permanent accounts are carried forward to future accounting periods - assets, liabilities, equity - 19What are closing entries?Closing entries are used to transfer the temporary account balances to the permanent equity account, retained earnings.
- they produce a zero balance in each temporary account - 20What is the Income Summary?A temporary account to which revenue and expense accounts are closed to, and in turn is closed to the retained earnings account.
- 21What accounts are shown in the statement of profit or loss?Revenues and Expenses
- 22What accounts are shown in the statement of financial position?Net Assets (Total assets - total liabilities)
Liabilities
Equity (Share capital + Retained earnings)
Total equity should match net assets - 23In a merchandising business, what are revenues referred to as and what categories are expenses divided into?Sales Revenue
1.Cost of sales
2. Operating expenses - 24In merchandising businesses, how is gross profit and profit(loss) calculated?Sales revenue - cost of sales = Gross profit
Gross profit - Operating expenses = Profit/(loss) - 25What is a perpetual inventory system?A detailed system in which the cost of inventory is maintained.
-Records continuously show the inventory that should be on hand ex. car dealerships, furniture stores
-Use of bar codes and optical scanners has led to wide use ex. supermarkets, department stores - 26What is a periodic inventory system?- A system in which detailed records are not maintained.
-Cost of sales is determined only at end of accounting period by a physical inventory account
-Used widely by small businesses ex. cafes, convenience stores. - 27What is the key difference between periodic and perpetual inventory systems?The point at which the cost of sales is calculated
- 28What does the journal entry look like for purchasing inventory in a perpetual system? ex. the following - Purchase of $3800 of inventory on credit from PW Audio Supply Ltd. on 5th May
- 29What are the 2 journal entries required when recording sales of inventory in a perpetual system?1. To record the sale of goods
2. To record the cost of sales - 30What would the journal entry look like for the following in a perpetual inventory system? - PW Audio Supply made cash sales of $2200 on 5th May -Cost of sales was $1400
- 31What would the journal entry look like for the following in a perpetual inventory system? -PW Audio sold $3800 to Sauk Stereo on credit on 5th May - Cost of sales was $2400
- 32When is quantity on hand and cost of sales determined in a periodic inventory system?At the end of the period.
- 33What account is used to record cost of all inventory purchased in a periodic inventory system?Purchases account
- 34What would the journal entry look like for the following in a periodic inventory system? -Sauk Stereo purchases inventory for $3800 on account from PW Audio Supply Ltd. on 5th May
- 35What would the journal entry look like for the following in a periodic inventory system? -Sale of $3800 in inventory to Sauk Stereo on credit by PW Audio Supply Ltd. (5th May)
- 36What accounts would be debited and credited for the following in a perpetual system vs. a periodic system? - Purchase of $3800 inventory on credit
- 37What accounts would be debited and credited for the following in a perpetual system vs. a periodic system? - Sale of $3800 inventory on credit (cost of sales $2400)
- 38How is cost of sales determined in a periodic system?1. Record purchases of inventory (purchases account)
2. Determine Cost of goods available for sale (Beginning inventory + cost of goods purchased(sum of all purchases of inventory))
3. Deduct cost of ending inventory (Calculated using FIFO, LIFO or Average cost method)
- 39What are the 3 cost flow assumptions; FIFO, LIFO and Average cost used to calculate?The cost of ending inventory
- 40What would the cost of ending inventory and the cost of sales be in a periodic system if during the year 550 units were sold and 450 were in inventory at the end of the year? Use FIFO method
- 41What would the cost of ending inventory and the cost of sales be in a periodic system if during the year 550 units were sold and 450 were in inventory at the end of the year? Use LIFO method
- 42What would the cost of ending inventory and the cost of sales be in a periodic system if during the year 550 units were sold and 450 were in inventory at the end of the year? Use Average cost method
- 43How would the cost of ending inventory be calculated in the following perpetual system? Use FIFO
- 44How would the cost of ending inventory be calculated in the following perpetual system? Use LIFO
- 45How would the cost of ending inventory be calculated in the following perpetual system? Use Average Cost
- 46What is CVP analysis and what questions can it help answer?Cost - Volume - Profit analysis is concerned with the change in profits in response to changes in sales volumes, costs and prices.
- How many units or services need to be sold to break even or to achieve a particular level of profit?
-What is the impact on profit of a change in the mix between fixed and variable costs?
-What is the impact on profit of a 15% increase in costs? - 47What are the 3 categories of costs?1. Fixed
2. Variable
3. Mixed - 48What are fixed costs and how are they affected by increasing levels of activity?Those which remain the same in total (within a given range of activity and timeframe)
ex. lease costs, depreceation charges
-Total fixed cost will remain the same but fixed costs per unit will decrease as the number of units produced increases - 49What are variable costs and how are they affected by increasing activity levels?Variable costs change in total as the level of activity changes
ex. ingredients in baked goods, aviation fuel for Qantas
Variable costs can be considered on either a total or unit basis. Total variable costs rise as activity increases while costs per unit stay the same. - 50When does break-even occur?When total revenue and total costs are equal resulting in zero profit
Revenue = FC + VC - 51What is the Contribution margin and how is it calculated?The gross profit of units sold after variable costs.
Calculated by deducting total variable costs from total revenue
Contribution margin per unit can be calculated by deducting variable cost per unit from revenue per unit.
CM = Revenue - VC - 52What is the formula to calculate the number of units needed to break even?Fixed costs divided by the contribution margin per unit.
- 53What would the break-even point be for the following example? Selling price $25 Purchase price $14 Fixed exhibition and costs $28 000 p.a. Fixed transport costs $10 600 p.a. Variable demo costs $1 per unit Admin fixed costs $6 400 p.a.
- 54What is the formula for the units that must be sold to earn a desired profit?
- 55Using the previous example, how would the calculation change if - VC increased to $17 per unit -FC reduced to $32000 Selling price $25 Purchase price $14 Fixed exhibition and costs $28 000 p.a. Fixed transport costs $10 600 p.a. Variable demo costs $1 per unit Admin fixed costs $6 400 p.a.
- 56What are the steps to calculate the break-even point of multiple products?1. Calculate the sales mix weight of each product
2. Calculate the weighted average CM (WACM)
3. Divide Fixed Costs by WACM - 57What are the formulas needed to calculate the sales mix of a particular product and it's weighted average contribution margin?
- 58—
- 59Using the example from the previous slide, calculate the weighted average contribution margin
- 60Continuing with the previous example, calculate the break-even units.
- 61Using previous example, determine how many of each product to sell to break-even.
- 62Flip to view breakdown of break-even analysis for previous example.
- 63What is the formula to calculate pre-tax profit?Tax rate as a decimal (ex.0.30)
- 64Calculate the pre-tax profit needed to meet an expected profit of $50,000
- 65In regards to depreciation, what is the carrying amount?The cost of an asset less accumulated depreciation
- 66What are the four factors that contribute to the decline in value of a depreciable asset?1. Usage of the asset
2. Wear and tear through physical use of the asset
3. Technical and commercial obsolescence
4. Legal life - 67What are the 3 factors in calculating depreciation?1. Cost
2. Useful life
3. Residual value (estimate of the asset's value at the end of its useful life) - 68What are the 3 methods of depreciation?1. Straight-line
2. Diminishing-balance
3. Units-of-production - 69What is the straight-line method of depreciation and how is the annual charge calculated?Depreciation expense is the same each year as benefits are consumed at the same rate each year.
- 70For the following example what would be the annual depreciation schedule using the straight-line method?Annual depreciation:
($13,000-$1,000)/5 = $2,400
- 71What would the journal entry look like for the previous example?
- 72What is the diminishing-balance method of depreciation and how is it calculated?Depreciation expense decreases each year as greater benefits are consumed earlier in assets life
-In exam, will be x times the straight line rate.
x times (100%/years of useful life) - 73Using the following example, what would the depreciation schedule look like using the diminishing-balance method if the rate is twice that of the straight-line method?Rate = 2(100%/5) = 40%
- 74What is the units-of-production method of depreciation and how is it calculated?Useful life is expressed in terms of total units of production or use expected from the asset.
- 75Using the following example of a delivery truck purchased, what would the depreciation schedule look like using the units-of-production method? 2015- 15 000 km 2016 - 30 000 km 2017 - 20 000 km 2018 - 25 000 km 2019 - 10 000 kmDepreciation per unit: $12000/100000 units = $0.12 per unit
Depreciation expense: $0.12x15000 units = $1800 etc.
Information
- Description
- Chapter 1 The Recording Process Chapter 3 Accrual Accounting Concepts Chapter 4 & 5 Reporting and Analysing Inventory Chapter 8 Reporting and Analysing Non-Current Assets Chapter 13 Analysing and Integrating GAAP Chapter 10 (Birt et. al) Cost - Volume - Profit Analysis
- Created by
- Charlotte Marko · Jun 2018
- Updated
- Jun 21, 2018
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