§-Module

Financial Accounting

11 dot points across 11 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

Why are accruals and prepayments adjusted at balance day?

Explain accrual accounting and process balance day adjustments for accrued and prepaid items.

Why accrual accounting requires balance day adjustments, and how to record accrued expenses, prepaid expenses, accrued revenue and unearned revenue.

8 min answer →

How are uncollectable debts and the risk of non-payment recorded?

Record bad debts written off and create an allowance for doubtful debts at balance day.

Writing off a confirmed bad debt, raising an allowance for doubtful debts at balance day, and showing net debtors on the balance sheet.

7 min answer →

How is the cost of a non-current asset spread across its useful life?

Calculate and record depreciation using the straight-line and reducing-balance methods.

Why depreciation is needed, how to calculate it under the straight-line and reducing-balance methods, and how accumulated depreciation gives carrying value.

8 min answer →

What do the income statement and balance sheet tell us about a business?

Prepare and interpret the income statement and balance sheet for a sole trader.

Prepare an income statement to measure profit and a balance sheet to show financial position, and see how the two reports connect.

8 min answer →

How does GST work for a sole trader and how is it recorded?

Explain how GST is collected and paid by a sole trader and record GST in transactions.

How a registered sole trader collects GST on sales, claims input credits on purchases, records the GST clearing account and settles with the ATO.

7 min answer →

How does a business protect its cash and prove the bank balance is correct?

Apply internal controls over cash and prepare a bank reconciliation statement.

Internal controls that safeguard cash, and the bank reconciliation that explains the gap between the cash ledger and the bank statement using timing items.

8 min answer →

How does the perpetual inventory system record purchases, sales and cost of goods sold?

Record inventory transactions under the perpetual system and reconcile to a stocktake.

Recording purchases, sales and cost of goods sold under the perpetual inventory system, including the two entries per sale and the inventory loss on stocktake.

8 min answer →

How do transactions flow from journals to ledgers to a trial balance?

Record transactions in the general journal and post them to ledger accounts.

Follow the recording cycle from source documents to journals, ledger posting and a balanced trial balance using double-entry.

7 min answer →

How do special journals and subsidiary ledgers handle high transaction volumes?

Record transactions in special journals and post to subsidiary ledgers and control accounts.

How the four special journals group repetitive transactions and post in total to control accounts, with subsidiary ledgers tracking each debtor and creditor.

8 min answer →

How does the accounting equation keep the records in balance?

Explain the accounting equation and the rules of double-entry recording.

Understand Assets = Liabilities + Owner's Equity and how every transaction has two equal, opposite effects under the double-entry system.

7 min answer →

Who uses accounting information and what does each user need from it?

Identify the users of accounting information and explain the decisions each needs to make.

Identify internal and external users of a sole trader's accounting information and match each user group to the decisions and reports they rely on.

7 min answer →