VCE Accounting

Unit 1 2024 Step Up Notes

Orientation objective: To understand the following terms and process in the accounting system:

Asset

Liability

Owner’s Equity

Balance Sheet
 Accounting Equation (Add to modules)
Asset = Liabilities + Owner’s equity
Are controlled by a business from past events, Are present obligations of the business from past The residual (remaining) balance of assets once all
that will provide future economic benefits. events that will result in the transfer of an liabilities are deducted that are controlled by the
economic resource. owner.

Or

Owner’s equity = Asset -- Liabilities

Examples of assets, liabilities and owner’s equity items in Accounting. Add definitions to your modules if there are unfamiliar items.

Asset = Liabilities + Owner’s equity

Bank  Bank overdraft Capital
Computer  Bank loan  Drawings
Accounts receivable / Accounts payable / creditors Net Profit
debtors
Premises Mortgage Net Loss
Office equipment
Inventory
Vehicle 
Van 
Supplies Your score: ________ / 5

Accounting Equation practice:

1. If a business has $4,000 in the bank and has a bank loan of $2,000, then owner’s equity will be? __________________________
2. If a business has $14,000 in the bank, premises of $120,000 and has a mortgage of $100,000, then owner’s equity will be?
__________________________
3. If a business has $29,000 in the bank, office equipment of $5,000, debtors of $3,000, a bank loan of $12,000 and creditors of $5,000,
then owner’s equity will be? __________________________
4. If a business has $4,000 as a bank overdraft, a bank loan of $12,000, a vehicle worth $15,000 and stock valued at $16,000 then owner’s
equity will be? __________________________
 5. If a business has capital of $114,000, has a bank balance of $25,000, stock of $5,000, a van worth $33,000 and office equipment of
$2,000, how much do they owe in liabilities? __________________________

Balance sheet and the Accounting Equation

The Balance Sheet is an accounting report that details a firm’s financial position at a particular point in time by reporting its assets, liabilities and
owner’s equity.

Asset = Liabilities + Owner’s equity

Business name
Balance Sheet as at 31 August 2016
Assets $ $ Liabilities $ $
Bank 10,000 Bank loan 25,000
Computer 5,000 Mortgage 10,000
Acc. Receivable 12,000 Acc. Payable 15,000 50,000
Inventory 50,000
Premises 11,000 88,000 Owner’s equity
Capital 38,000 38,000

Total Assets 88,000 Total Equities 88,000

Please complete the Balance Sheet below

Business name
Balance Sheet as at 31 August 2016
Assets $ $ Liabilities $ $
Bank 20,000 Bank loan 45,000
Acc. Receivable 32,000 Mortgage 67,000 ________
Premises 108,000 _________
Owner’s equity
Capital ________ ________

Total Assets _________ Total Equities ________

Activity : Classifying elements in accounting

Item Classification
a Stock of supplies

b Mortgage

c Cash at bank

d Accounts receivable

e Loan

f Accounts payable

g Equipment

h Bank overdraft

i Drawings

j Capital

Question: Are the following items assets to the entity or not?

• Trademark

• Official Facebook page of the product

• An employee’s personal Facebook page

• Private car of the business owner

• Office furniture of the business office

• Inventory

• Family pets of the business owner

• Circus animals
Activity : The accounting equation and the two-fold effect
Peter Harrison operates a small business under the name of McLean Steam Clean. The following transactions occurred during the
month of July 2014:

July
1 Peter deposited $10 000 in the business bank account.
2 He bought cleaning equipment for $3000 cash.
3 He purchased an office desk on credit (accounts payable) from Furniture Galore for $320.
4 The business received a loan of $1000 from EZ Borrowing.
5 Peter withdrew $1200 from the business to pay off his personal credit card.
6 He purchased a work van from Geelong Ford for $13 000 cash.
7 The business received a payment of $1200 cash from an account receivable.
8 Peter paid the monthly loan repayment of $50 cash.
9 He donated a laptop to the business worth $1200.
10 He paid Furniture Galore (accounts payable) $100.

Show the effect of each transaction on the accounting equation.

1 Peter deposited $10 000 in the business bank account.

Assets = Liabilities + Owner’s Equity

2 He bought cleaning equipment for $3000 cash.

Assets = Liabilities + Owner’s Equity

3 The business purchased an office desk on credit from Furniture Galore for $320.
Assets = Liabilities + Owner’s Equity

4 The business received a loan of $1000 from EZ Borrowing.

Assets = Liabilities + Owner’s Equity

5 Peter withdrew $1200 from the business to pay off his personal credit card.
Assets = Liabilities + Owner’s Equity

6 They purchased work a van from Geelong Ford for $13 000 cash.
Assets = Liabilities + Owner’s Equity

7 The business received a payment of $1200 cash from accounts receivable.

Assets = Liabilities + Owner’s Equity
8 Business paid a monthly loan repayment of $550 cash.
Assets = Liabilities + Owner’s Equity

9 He donated a laptop to the business worth $1200.

Assets = Liabilities + Owner’s Equity

10 Business paid Furniture Galore $100.

Assets = Liabilities + Owner’s Equity