Accounting Q&A by dot point

Identifying the accounting elements of assets, liabilities, owner's equity, revenues and expenses, classifying assets and liabilities as current or non-current, and explaining the effect of transactions on the accounting equation

Balance day adjustments for prepaid expenses, accrued expenses, prepaid revenue and accrued revenue, and their effect on the calculation of net profit and the reporting of assets and liabilities

Explaining the distinction between cash and profit, identifying the items that cause net profit to differ from net cash flow from operations, and reconciling the two figures

Preparing a classified Income Statement, Balance Sheet and Cash Flow Statement for a trading business, and explaining the relationships between the three general purpose financial reports

Calculating and recording depreciation of non-current assets using the straight-line and reducing balance methods, and explaining the effect of depreciation on the accounting reports

Recording financial data for a trading business using a double entry system, including the role of source documents, the General Journal, the General Ledger and inventory cards in the recording process

Recording the Goods and Services Tax on sales and purchases using the GST Clearing account and reporting the GST balance as a current liability owed to or a current asset receivable from the Australian Taxation Office

Valuing inventory at the lower of cost and net realisable value and recording inventory write-downs, inventory losses and inventory gains, including the effect on the accounting reports

Recording movements of inventory on inventory cards under a perpetual system using the First In First Out and identified cost methods for purchases, sales, returns, drawings and inventory used

Distinguishing product costs from period costs and recording product costs as part of the cost of inventory while recording period costs as expenses in the period they are incurred

Explaining and applying the qualitative characteristics and the accounting assumptions of the Conceptual Framework to justify the recording and reporting of financial information

Identifying the source documents used by a trading business to record financial transactions and explaining the role of source documents in providing verifiable evidence for the accounting process

Preparing a trial balance from the General Ledger to check that total debits equal total credits and explaining the errors that a trial balance does and does not reveal

Recording bad debts written off and establishing an allowance for doubtful debts as a balance day adjustment, and reporting the net realisable value of accounts receivable

Preparing a Budgeted Income Statement, Budgeted Cash Flow Statement and Budgeted Balance Sheet for a trading business and explaining the role of budgeting in planning and decision-making

Recording the disposal of non-current assets, including by sale and trade-in, calculating the profit or loss on disposal and explaining its cause

Discussing and evaluating the ethical considerations in business decision-making, including the manipulation of profit by shifting revenues and expenses between reporting periods and the wider social and environmental responsibilities of a business

Calculating and interpreting financial indicators of profitability, liquidity and efficiency, and using them with non-financial information to evaluate business performance

Identifying non-financial information relevant to evaluating business performance and recommending strategies to improve profitability, liquidity and efficiency in light of both financial indicators and non-financial information

Preparing variance reports comparing budgeted and actual figures, classifying variances as favourable or unfavourable, and explaining their use in evaluating and controlling business performance