Corporate Accounting Tutorial Project

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HI5020
CORPORATE ACCOUNTING
TUTORIAL PROJECT
TRIMESTER 1, 2021
Assessment Weight: 50 total marks
Instructions:
 All questions must be answered by using the answer boxes provided in this paper.
 Completed answers must be submitted to Blackboard by the published due date
and time.
Submission instructions are at the end of this paper.
Purpose:
This assessment consists of six (6) questions and is designed to assess your level of
knowledge of the key topics covered in this unit
HI5020 Tutorial T1 2021

Question 1 ( 7 marks)
(a) Differentiate between the ‘definition of assets’ and ‘recognition criteria of assets’
provided in the conceptual framework of accounting. (3.5 marks)
ANSWER: ** Answer box will enlarge as you type
Definition of assets as per the concept of accounting: Assets are those resources held and control
by the business entity through which the business and its management expects and ensures
future inflows in to the business in terms of generating revenues and profits. The assets included
both current and fixed assets held by the business. Assets of the business are presented in the
statement of financial position of the business, also known as balance sheet of the company.
When the financial statements of a concern are prepared on the basis of IFRS, then the
“recognition of assets” in the books of accounts must fulfil the prior condition for recognition of
assets that are as follows:
It must be the resource under the control of the business.
There must be an expectation to generate economic benefits for the entity in the future.
The cost or value of the assets must be measured in a reliable manner.
From these conditions stated above it can be concluded that an asset being a resource though
controlled by an entity but does not have an economic value for the business, then it cannot be
recognised as assets in the statement of financial position.
(b) Can an entity include an asset in its balance sheet that it does not legally own?
Explain your answer in relation to the definition of the assets and recognition
criteria of assets. (3.5 marks)
ANSWER: ** Answer box will enlarge as you type
As per the definition of “assets” and “recognition of assets” the assets can be included in the
balance sheet of the company or can be recognised as an asset only if an entity has a legal
ownership of the assets. The ownership of the assets is one of the necessary conditions as stated
in the conceptual framework of accounting provided by IFRS. If there is an illegal control of the
asset and even it is generating economic value for the entity, then also it cannot be included in
the balance sheet as the asset is not under the control of the business in legal terms.
Question 2 (7 marks)
HI5020 Tutorial T1 2021

Pheonix Limited made an offer to the public via a prospectus of 1,000,000 shares with an
issue price of $1.00 per share. The shares were payable as $0.50 on application and a
further $0.20 on allotment and $0.30 on call. Applications closed on 1 March 2020 and
1,500,000 applications were received (an oversubscription of 500,000 shares). Allotment
was made on 20 March 2020. The company allotted 1,000,000 shares and the excess
application monies were retained against allotment and call amounts. The call money
was due on 1 October 2020. All monies to be paid have been received on time except
100,000 shareholders who could not pay the call money. These 100,000 shares were
forfeited by the management on 20 November 2020.
Prepare the journal entries to record the above.
ANSWER:
Journal entries in the books of Pheonix Ltd.
Date Particulars Debit Credit
1st March
2020
Bank account
To share application account
(received application money on 1500000 shares
@0.50 per share)
750000
750000
20th
March
2020
Share application account
To share capital account
(transferring amount received on application in
share capital account)
500000
500000
20th
March
2020
Share allotment account
To share capital account
(The amount due on allotment @0.20 per share
on 1000000 shares)
200000
200000
20th
March
2020
Share application account
To share Allotment account
(Amount due on allotment adjusted against
excess money received on application.)
200000
200000
1st
October
2020
Share first call account
To share capital account
(Amount due on first call @0.30 per share on
1000000 shares)
300000
300000
1st
October
Bank account ( note 1)
Share application account
225000
50000
HI5020 Tutorial T1 2021