June 2026
The 2025 VCE Accounting exam showed that calculation alone is not enough.
Students had to prepare journals, ledgers and reports, but many of the most important marks came from explaining the meaning of accounting information. The exam asked students to analyse business performance, discuss ethical and financial considerations, explain accounting treatment, interpret trends and justify recommendations.
This is what makes VCE Accounting more demanding than many students expect.
A student may know how to calculate depreciation, prepare a ledger or complete a report. But the highest marks often require something more: the ability to explain why the treatment is appropriate and what the information means for the business.
In Accounting, numbers only become useful when they support judgement.
The service station question required more than profit
Question 5 focused on Gazza’s Gas, the only service station open 24 hours a day in a large regional town.
The business operated three eight-hour shifts each day. The 10 pm to 6 am shift was the least profitable, but it provided an all-night service to the town and employment for local university students. The owner was prepared to continue the night shift if it generated at least $60,000 per year towards overall profit. At the same time, there had been instances of customers driving off without paying and antisocial behaviour after 10 pm.
This was not a purely numerical question.
Part a required students to calculate the profit generated by the 10 pm to 6 am shift under the current wage rate and with a proposed 20% wage increase. Part b then asked students to discuss whether the shift should continue, with reference to financial and ethical considerations.
That second part mattered.
The calculation was the foundation, not the final answer.
Financial judgement needed to use the calculation
For the 10 pm to 6 am shift, average daily sales were $3,700 and the Gross Profit Margin was 12%.
This meant daily gross profit was:
$3,700 × 12% = $444
At the current wage rate of $30 per hour, one staff member working eight hours would cost:
$30 × 8 = $240 per day
Daily shift profit would therefore be:
$444 − $240 = $204
Across 365 days, annual shift profit would be:
$204 × 365 = $74,460
If wages increased by 20%, the hourly wage would become $36. Daily wages would be:
$36 × 8 = $288
Daily shift profit would become:
$444 − $288 = $156
Across the year:
$156 × 365 = $56,940
This is where the judgement begins.
At the current wage rate, the night shift exceeds the owner’s $60,000 threshold. With the wage increase, it falls below that threshold.
A strong response needed to use this calculation directly. The recommendation could not simply say that the shift was profitable or unprofitable. It needed to identify how the proposed wage increase changed the decision.
Ethical considerations had to be specific
The Gazza’s Gas question also required ethical reasoning.
The ethical considerations were not vague. They came directly from the scenario.
The service station was the only 24-hour option in a large regional town. Continuing the night shift could support the community by allowing access to fuel, food and convenience items overnight. This may be especially important for shift workers, travellers, emergency situations or residents who rely on the service outside normal trading hours.
The shift also provided employment for local university students, who viewed the work as a valuable source of income. Removing the shift could reduce income opportunities for those students.
At the same time, staff safety was a serious concern. The scenario referred to customers driving off without paying and antisocial behaviour after 10 pm. The owner had an ethical responsibility to provide a safe working environment. If one staff member is working alone overnight, the risk may be difficult to justify without additional safeguards.
A strong answer needed to weigh these considerations.
Ethics in Accounting is not a decorative paragraph. It shapes the recommendation.
Recommendations needed balance
A high-scoring recommendation for Gazza’s Gas could reasonably go in more than one direction, provided the reasoning was strong.
One response might recommend continuing the shift at the current wage rate because it generates more than $60,000 per year and provides an important community service. However, it should also recommend additional safety measures, such as stronger security, improved lighting, panic alarms, remote monitoring or rostering a second staff member during higher-risk periods.
Another response might recommend reconsidering the shift if the wage increase is necessary to retain suitable staff, because the projected annual contribution falls below the owner’s threshold. However, the answer would still need to acknowledge the ethical impact on the town and the employees.
The strongest responses avoided treating the calculation as the whole decision.
They recognised that accounting information supports decision-making, but does not remove the need for judgement.
Return on Assets required interpretation
Question 6 moved from decision-making to profitability analysis.
Earthwrkx had an increasing Asset Turnover and increasing Sales, but Return on Assets was decreasing. The owner was hopeful that the faster Asset Turnover and rising Sales meant Return on Assets would improve. The accountant was concerned.
This was a subtle question because the indicators seemed to point in different directions.
Return on Assets measures how effectively a business uses its assets to generate profit. A decline in Return on Assets means the business is earning less net profit per dollar of assets controlled.
That should concern the owner.
Even if sales are increasing, the business may not be converting those sales into profit effectively. The business may be experiencing worsening expense control, lower mark-up, higher Cost of Sales, increased wages, increased depreciation, more advertising expenses or other cost pressures.
A higher sales figure can look positive. But if expenses are rising faster than sales, profitability can still weaken.
That was the accounting judgement required.
Sales growth did not guarantee improved profitability
Question 6b asked students to explain how both Sales and Asset Turnover may increase while Return on Assets declines.
This question tested the relationship between indicators.
Asset Turnover measures how efficiently the business uses assets to generate Sales. If Sales increase while average total assets remain stable or increase more slowly, Asset Turnover can improve.
Return on Assets, however, is based on Net Profit, not Sales.
If the business has rising Sales but worsening expense control, Net Profit may fall or grow too slowly. This can cause Return on Assets to decline even while Asset Turnover improves.
The report noted that higher-scoring responses recognised this relationship. The key issue was likely a fall in Net Profit Margin caused by expenses increasing faster than Sales.
This is an important VCE Accounting lesson.
Sales are not profit.
Efficiency in generating Sales is not the same as profitability.
Accounting indicators must be read together
Question 6 shows why students should not analyse indicators in isolation.
Asset Turnover improving suggests the business is generating more Sales from its assets. That is a positive sign for efficiency.
Return on Assets declining suggests the business is generating less profit from its assets. That is a negative sign for profitability.
Both can be true at the same time.
This is why performance analysis requires interpretation. A student who simply says “Asset Turnover increased, so the business is performing better” misses the more important issue. The business may be selling more while retaining less of those sales as profit.
That is a serious concern.
The owner’s optimism needed to be tested against the accountant’s concern.
High-scoring Accounting responses can explain that tension.
Accounting element definitions had to be applied
Question 6c asked students to explain how Sales meets the definition of one accounting element.
The relevant element was revenue.
This kind of question looks simple, but it requires precise theory. A strong response needed to explain that Sales increase assets, such as Bank or Accounts Receivable, and increase owner’s equity, other than through a capital contribution.
The answer could not stop at “Sales is revenue”.
It needed to apply the definition.
For example, when a business sells goods, it earns revenue because the sale increases assets through cash received or an amount owed by a customer. This increase contributes to profit and therefore increases owner’s equity. It is not a contribution by the owner.
This is where students often lose theory marks. They know the label, but do not explain how the item meets the element definition.
VCE Accounting theory rewards exact application.
Balance-day adjustments tested judgement about timing
Question 7 required students to record a series of adjustments for 454High at 31 October.
The information included inventory on hand, accrued wages, prepaid insurance, depreciation, an unpaid electricity bill and a cash deposit received before goods had been provided.
This was a technical question, but it still required judgement.
Each adjustment depended on timing.
Had the expense been incurred?
Had the benefit been consumed?
Had the revenue been earned?
Did the business have a present obligation?
Should the item be reported as an asset, liability, revenue or expense?
The report noted several common errors, including recording only one day of accrued wages instead of two, treating the full insurance payment as Insurance Expense, not including new equipment in the depreciation calculation, and failing to recognise the customer deposit as Unearned Sales Revenue.
These errors came from misreading the timing of the business event.
Accounting is period-based. The date matters.
The customer deposit was a liability
The $800 deposit received on 31 October was especially important.
The business had received cash for a sales order, but the goods had not yet been provided. That meant the revenue had not been earned.
The correct treatment was to recognise Bank and record Unearned Sales Revenue as a liability.
This is a clear example of accounting judgement. The cash movement alone does not determine the treatment. The business has an obligation to provide goods in the future or refund the customer. Until that obligation is satisfied, the amount is a liability.
If the deposit were recorded as Sales, revenue and profit would be overstated, and liabilities would be understated.
The correct treatment gives a more faithful representation of the business’s position.
Current liabilities had to include all obligations
Question 7b asked students to prepare the Current Liabilities section of the Balance Sheet.
The correct section included:
- Accounts Payable
- GST Clearing
- Accrued Electricity Expense
- Accrued Wages Expense
- Unearned Sales Revenue
The report noted that many students omitted liabilities created by the balance-day adjustments.
This is a common problem. Students may record an adjustment in the General Journal but fail to carry its effect into the financial report. That breaks the reporting process.
A liability is not included only because it appeared in the original Trial Balance. It must be included if it exists at balance day.
Accrued expenses are obligations. Unearned Sales Revenue is an obligation. GST Clearing is an obligation. Accounts Payable is an obligation.
The Balance Sheet must show those obligations.
Disposal questions required step-by-step judgement
Question 8 involved the trade-in of an old delivery van and purchase of a new one.
This question required students to calculate depreciation to the date of disposal, complete the Disposal of Delivery Van account, calculate depreciation for the year, and show the effect on the Cash Flow Statement.
The process had to be sequenced correctly.
First, depreciation on the traded-in van had to be calculated for the six months to 31 December. Since the van originally cost $40,000 and straight-line depreciation was 15% per annum on cost, six months of depreciation was $3,000.
Only then could the carrying value be updated and the disposal recorded.
The trade-in allowance was $10,000. Since the van’s carrying value after depreciation was lower than before, students needed to determine the resulting loss or gain on disposal through the Disposal account.
This was not a one-step calculation.
It required orderly accounting treatment.
Depreciation depended on ownership period
Question 8c required students to calculate depreciation of delivery vans for the year ended 30 June 2025.
The report noted that only 12% of students received full marks for this part.
The difficulty was that different vans were owned for different periods.
The traded-in van was owned for six months of the year before disposal. The remaining old van was owned for the full year. The new van was purchased on 31 December and owned for six months.
This required three separate depreciation calculations:
- depreciation on the traded-in van for six months
- depreciation on the remaining old van for the full year
- depreciation on the new van for six months
The report identified a common error: students calculated depreciation as if the assets were owned for the full year.
That is a timing error.
Depreciation must reflect the period for which the business controlled and used the asset.
Cash Flow Statements needed cash, not trade-in value
Question 8d asked students to show the effect of the disposal of the old van and purchase of the new van on the Cash Flow Statement.
This required students to distinguish between cash and non-cash components.
The trade-in allowance was not a cash inflow. It reduced the amount paid for the new van. The Cash Flow Statement should report actual cash paid or received.
This is the same distinction that appeared elsewhere in the paper.
Profit is not cash. Trade-in value is not cash. Depreciation is not cash. A loss on disposal is not cash.
The Cash Flow Statement records cash movement.
Students who lose sight of that principle often misclassify disposal and purchase transactions.
Why judgement mattered across the paper
The later questions in the 2025 Accounting exam show that the subject rewards judgement in several forms.
Students had to judge whether a night shift should continue. They had to judge whether rising Sales were enough to offset declining Return on Assets. They had to judge whether Sales met the definition of revenue. They had to judge whether a customer deposit was revenue or a liability. They had to judge which liabilities existed at balance day. They had to judge how long assets had been owned for depreciation purposes.
None of these tasks can be completed properly by memorising a format alone.
The format matters.
But the decision behind the format matters more.
What future Accounting students should learn from 2025
The 2025 VCE Accounting exam shows that students need to practise explanation and judgement alongside calculation.
Students should be able to:
- use calculations to support recommendations
- discuss ethical and financial considerations together
- interpret Return on Assets, Asset Turnover and Sales as connected indicators
- explain why Sales meets the definition of revenue
- apply timing principles to balance-day adjustments
- recognise customer deposits as liabilities when goods have not been provided
- include all current obligations in the Balance Sheet
- sequence depreciation and disposal entries correctly
- calculate depreciation based on ownership period
- distinguish cash movements from non-cash trade-in amounts
These skills are essential because Accounting reports are used for decisions.
Students need to show that they understand those decisions.
How ATAR STAR approaches accounting judgement
At ATAR STAR, Accounting is taught as both a technical and decision-making subject.
Students learn the formats, but they also learn the reasoning behind them. They practise explaining accounting treatments, interpreting indicators, justifying recommendations and applying assumptions to unfamiliar scenarios.
The 2025 Examination Report confirms why this matters. High-scoring responses were not only accurate. They were reasoned.
They showed why the accounting treatment made sense.
That is what separates calculation from Accounting.