It's A Corporate World - Go Figure
The Age
Wednesday May 8, 2002
BARELY a day passes without the news media reporting on the demise of a large corporation, the mismanagement of a business's finances, the woes of a cashstrapped sporting organisation. In the end, it's all about financial management. How to record, report and analyse information and how to effectively advise, implement and guide interested parties through troubled times. Today's VCE accounting students may well be tomorrow's business leaders. Here's how we start.
Recognise and understand the relevant accounting principles and assumptions. These principles are the cornerstone of the accounting recording and reporting system. What is the importance of saying that financial information must be relevant and reliable, that reports must be prepared on a timely basis, that the owner and the business must adhere to the entity assumption, that the business is a going concern? Can you explain these concepts and can you apply them?
The accounting study design (Unit 3) is a crucial document in your leadup to the June accounting paper. While the commonly used textbooks cover the content of the study design effectively, in some respects they also cover peripheral areas of accounting. When setting this year's exam, the panel of writers would have been very careful to ensure that all questions asked were formulated strictly from this study design.
Here's my point: the recording for trading stock using the perpetual inventory method is required to be known but the concept of stock writedowns (and the application of the lower of cost and net realisable value) is not required. Or, students must know how to calculate and record only those balanceday adjustments stipulated in Area of Study 1. The posting of journals to accounts in the general ledger (for debtors) must be known, but not the transaction involving discounts given to debtors for early repayment. I'm sure that your teacher has taught you on a ``need to know basis" only, but make a point of carefully dissecting the study design as a forerunner to your revision program.
There are three questions in the accounting paper but not each question necessarily carries equal marks. Every question must be answered (there are no choices).
There is a fair spread of theoretical and practical questions. Theory questions normally follow on from the practical component in a sensible, relevant progression. Try to use key words in your theory responses. For instance, a question asking to define profit under accrual accounting methods should elicit this response: ``Profit equals revenues/incomes earned matched against expenses incurred in each accounting period" - a number of key words make for easy identification and marking. In a practical sense, where a question asks a student to prepare a journal entry to adjust for prepaid advertising, the simple writing of ``advertising" confuses the marker. Does this refer to prepaid advertising or to advertising expense? Make your responses clear and unambiguous (or ``marker friendly").
While a partial answer is not ideal, it is better than no answer at all. For a question asking you to identify and explain the accounting concept that determines the value of noncurrent assets to be recorded in the balance sheet (worth two marks), the student who simply says ``historical cost" would gain one mark. The additional mark can be gained by mentioning ``purchase price" and ``costs incurred in getting the asset into a position ready to earn revenue". Workings must also be shown, as marks may be scored even if the final answer is incorrect.
Be prepared to write clearly using a dark pencil. Make sure that any changes to your answer are made on the spot - planning to revisit gaps in answers at the end of the exam will become impossible if you forget or run out of time. Judge the length of your written answers by the number of marks allocated to that question plus the space provided for your response in the answer booklet.
How do we revise? In the face of examination pressure, many students will attempt to secondguess the thought processes of exam setters and choose and revise only those areas that are likely to be on a paper. Be better prepared than this. List all the points made in the study design. Dissect each point and appreciate both theoretical and practical angles.
Attempt as many exam questions as possible and identify the area of the study design that each question relates to. You will discover patterns in the way questions are asked and this will act to reassure you. Look at solutions, if available, and spend some time getting to understand the marking structure - knowing what the examiners are looking for in the responses goes a long way when developing your answers.
In the leadup to the exam, allocate time efficiently. An hour's study at a time in any subject is sufficient. You may revisit accounting three or four times a day, but only for an hour at a time, on different topics.
More and more, life is business and as successful accounting students you are conditioning and preparing yourself well for the future.
TIM HABBEN IS THE CHAIR OF THE JUNE ACCOUNTING EXAMSETTING PANEL. HE TEACHES BUSINESS STUDIES AT MELBOURNE GRAMMAR SCHOOL.
© 2002 The Age