VCE Accounting sample questions

Question 1

A business pays $1,320 (including GST) for twelve months of insurance on 1 April 2026. The reporting period ends on 30 June 2026. The amount reported as Insurance Expense for the period ended 30 June 2026 is:

Accepted Answer

D. $300

Question 2

On 1 May 2026 a business purchased inventory on credit from Coastal Supplies for $4,400 including GST.

Record this transaction in the General Journal. A narration is not required.

Accepted Answer

Inventory .............................. Dr 4,000
GST Clearing ........................... Dr   400
      Accounts Payable — Coastal Supplies ..... Cr 4,400

Question 3

Explain why depreciation is recorded even though it does not involve any payment of cash.

Accepted Answer

Depreciation allocates the cost of a non-current asset over the periods in which it helps to earn revenue. Under the accrual basis, expenses are recognised in the period the benefit is consumed rather than when cash changes hands. Without it, profit would be overstated in every period after the purchase, and the asset would remain in the Balance Sheet at a value it no longer has.

Question 4

A business reports a Net Profit of $48,000 but its bank balance has decreased by $6,000 over the same period. Give two reasons this is possible.

Accepted Answer

First, profit is calculated on an accrual basis: credit sales are included in revenue before the cash is received, so a large increase in Accounts Receivable raises profit without raising cash. Second, cash can be spent on items that are not expenses — repaying a loan, purchasing a non-current asset, or drawings by the owner all reduce the bank balance without reducing profit.

VCE Accounting practice exams and worked solutions

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