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STAGE 1 ACCOUNTING SKILLS AND APPLICATIONS TASK 1 Purpose To demonstrate your understanding of accounting concepts, skills and practices related to the recording and reporting of financial information using manual methods ability to analyse, interpret and accurately communicate financial information, using appropriate and well-informed accounting terminology ability to use effective decision making skills using financial information. Description of assessment Write short answers to questions relating to the balance sheet, accounting equation, liquidity, accounting assumptions and the regulatory framework. In question 8 you will prepare a fully classified balance sheet and interpret the financial information to comment on the liquidity of the business. Remember to use appropriate accounting terminology. Uses key words and phrases from the performance standards to demonstrate level of student achievement. Assessment conditions Closed book test done individually. Calculators permitted. Time - 50 minutes. Learning Requirements Assessment Design Criteria 1. Understand the role of accounting in society 2. Record and report financial information using manual methods as well as information and communication technologies 3. Apply the principles and practices of recording and reporting financial information 4. Recognise and understand financial information for decisionmaking 5. Analyse, interpret, and communicate financial information using accounting terminology 6. Apply effective decisionmaking skills using financial and nonfinancial information 7. Recognise social, legal, regulatory, and/or ethical influences on financial recording and decisionmaking. Understanding The specific features are as follows: U1 Understanding of the role of accounting in society U2 Recognition and understanding of financial information for decision-making U3 Recognition of social, legal, regulatory, and/or ethical influences on financial recording and decision-making. Analysis and Interpretation The specific feature is as follows: AI1 Analysis and interpretation of financial information using appropriate accounting terminology. Application The specific features are as follows: A1 Application of the principles and practices of recording and reporting financial information A2 Recording and reporting of financial information using manual methods as well as information and communication technologies A3 Application of decision-making skills using financial and non-financial information. Communication The specific features are as follows: C1 Communication of appropriate financial information C2 Use of appropriate accounting terminology. Students may refer to the rubric provided over the page to identify the performance standards that they need to demonstrate to reach their highest possible level of achievement. Page 1 of 6 Stage 1 Accounting annotated task for use from 2011 769808432 (revised October 2010) © SACE Board of South Australia 2010 Stage 1 Accounting Skills and Applications Task 1 Balance Sheet 1. What is the purpose of the balance sheet? 2. State the accounting equation in two different forms. 3. A business has working capital ratio of 2:1. What does this mean? 4. A proprietor of a hardware store has a loan from the National Bank. The total amount of the loan is $22,000. Of this amount $12,000 is expected to be paid within the next year, with the remainder being paid in the following 12 months. How should this loan be treated in a fully classified balance sheet? 5. Explain what is meant by transactions having a twofold effect on a balance sheet. Use an example to help explain your answer. Page 2 of 6 Stage 1 Accounting annotated task for use from 2011 769808432 (revised October 2010) © SACE Board of South Australia 2010 6. In each of the following problems determine the owner’s equity in the business. (a) Harris Hardware Store Motor vehicles $12,000; Buildings $25,000; Cash at bank $4000 (b) Modor Music Shop Inventory $11,200; Motor vehicles $32,000; Debtors $1500; Creditors $4300 (c) Grey’s Newsagency Cash in hand $600; Furniture $1400; Inventory $1250; Loan from K. White $300; Debtors $1200; Creditors $1150; Bank overdraft $320 (d) Black’s Shoes Inventory $44,000; Bank overdraft $2700; Vehicles $13,000; Creditors $3250; Debtors $1350; Loan to G. Brown $140: Equipment $700 The increasing difficulty of each part of question 6 provides opportunities for students of varying abilities to demonstrate their understanding and application of the ‘owner’s equity’ section of the balance sheet. 6 (a) and (b) enables students to demonstrate their ability to apply their knowledge of owner’s equity in a practical situation. 6 (c) and (d) provide opportunities for the student to demonstrate higher levels of understanding. Page 3 of 6 Stage 1 Accounting annotated task for use from 2011 769808432 (revised October 2010) © SACE Board of South Australia 2010 7. (a) Use the information on the following Balance Sheet to define the following terms. Balance Sheet of Heather’s Trinkets As at 31st December 2005 ASSETS LIABILITIES Current Bank Debtors Inventory 20 000 16 000 12 000 48 000 Current Creditors Loan (due 30/6/2006) 14 000 9 000 23 000 Non-current Mortgage Non-current Machinery Motor Vehicles Office equipment Premises 96 000 44 000 18 000 120 000 OWNER’S EQUITY Capital Add net profit Less drawings 80 000 205 000 24 000 6 000 223 000 278 000 TOTAL EQUITIES TOTAL ASSETS Debtors 326 000 Current Assets Non-current Liabilities Equities Inventory 326 000 7 (b) provides the opportunity for students to demonstrate Analysis and Interpretation at the highest level of the performance standards. 7 (b) Heather’s Trinkets are considering expanding their premises at a cost of $200,000. How do you suggest they finance this expansion? Page 4 of 6 Stage 1 Accounting annotated task for use from 2011 769808432 (revised October 2010) © SACE Board of South Australia 2010 (a) Use the following information provided by ‘Hugh’s Renovations’ to prepare a fully classified Balance Sheet. 8. As at June 2007 Capital 100000 Equipment 30000 Creditors 1800 Cash on hand 300 Inventories 9000 Mortgage 55000 Bank overdraft 4230 Land & Buildings 120000 Vehicles 10000 Bank Loan (due 1/12/07) 5000 Drawings 2500 Debtors 1200 Question 8 provides an opportunity for the students to demonstrate their ability to produce a highly accurate balance sheet in a practical context. (b) Calculate the working capital ratio and comment on the liquidity of this business. 9. (a) What do accountants mean by historical costs? (b) What do accountants assume about the life of a business? Why is this done? (c) Why is ‘consistency’ important in accounting? (d) What is meant by the term verifiability and give an example of its use in accounting. This assessment begins with simple tasks such as recall of knowledge and understanding and progresses to questions that allow for higher order responses. This is a comprehensive end of semester assessment task designed for students who have completed their study of all aspects of a fully classified balance sheet including analysis. Page 5 of 6 Stage 1 Accounting annotated task for use from 2011 769808432 (revised October 2010) © SACE Board of South Australia 2010 Performance Standards for Stage 1 Accounting A Understanding Analysis and Interpretation Application Communication Comprehensive understanding of the role of accounting in society. Astute analysis and interpretation of financial information using appropriate accounting terminology. Highly proficient application of the principles and practices of recording and reporting financial information. Highly accurate communication of appropriate and specific financial information. High degree of accuracy in the recording and reporting of financial information using manual methods as well as information and communication technologies. Highly appropriate and wellinformed use of a range of accounting terminology. Astute and detailed recognition and understanding of financial information for decision-making. Perceptive and well-informed recognition of social, legal, regulatory, and/or ethical influences on financial recording and decisionmaking. B Detailed understanding of the role of accounting in society. Detailed recognition and understanding of financial information for decision-making. Astute application of decision-making skills using financial and nonfinancial information. Well-considered analysis and interpretation of financial information using appropriate accounting terminology. Well-informed recognition of social, legal, regulatory, and/or ethical influences on financial recording and decision-making. C Appropriate understanding of the role of accounting in society. Appropriate recognition and understanding of financial information for decision-making. Basic understanding of the role of accounting in society. Some recognition and understanding of some financial information for decision-making. Considered analysis and interpretation of financial information using mostly appropriate accounting terminology. Emerging awareness of the role of accounting in society. Emerging awareness of the purpose of financial information for decisionmaking. Limited recognition of a social, legal, regulatory, or ethical influence on financial recording and decisionmaking. Page 6 of 6 Appropriate and well-informed use of accounting terminology. Competent application of the principles and practices of recording and reporting financial information. Competent recording and reporting of financial information using manual methods as well as information and communication technologies. Competent communication of appropriate financial information. Generally appropriate and informed use of accounting terminology. Appropriate application of decisionmaking skills using financial and nonfinancial information. Some consideration and basic use of financial information using some appropriate accounting terminology. Some recognition of one or more social, legal, regulatory, and/or ethical influences on financial recording and decision-making. E Mostly accurate recording and reporting of financial information using manual methods as well as information and communication technologies. Mostly accurate communication of appropriate financial information. Thoughtful application of decisionmaking skills using financial and nonfinancial information. Informed recognition of social, legal, regulatory, and/or ethical influences on financial recording and decisionmaking. D Proficient application of the principles and practices of recording and reporting financial information. Some basic application of one or more principles and/or practices of recording and reporting financial information. Communication of some basic financial information. Inconsistent use of some accounting terminology. Recording and reporting of some basic financial information using manual methods and/or information and communication technologies. Application of some basic decisionmaking skills using financial and nonfinancial information. Attempted consideration of simple financial information with limited use of appropriate accounting terminology. Few elements of application of one or more of the principles or practices of recording and reporting financial information. Attempted recording of aspects of simple financial information using manual methods or information and communication technologies. Limited communication of some aspects of simple financial information. Attempted use of a limited range of accounting terminology. Limited application of any decisionmaking skills relevant to financial and non-financial information. Stage 1 Accounting annotated task for use from 2011 769808432 (revised October 2010) © SACE Board of South Australia 2010