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Key problems with the statement of financial position

   

Added on  2019-11-08

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Solution -1MEMODate: 9th September, 2017To: JenniferFrom: Chief Accountant Subject:Key problems with the statement of financial positionThis is in reference to the statement of financial position prepared by you. The following arethe key problems with the statement of financial position:a.As per AASB 101, the balance sheet should contain sufficient disclosures as regardsto current and non-current classification. It means every asset or liability realizable orpayable within 12 months of reporting date should be classified as current and elseas non-current. Your statement of financial position does not give such classification.The relevant text of AASB 101, para 51 is reproduced herein below:“An entity shall present current and non-current assets, and current and non-currentliabilities, as separate classifications on the face of its balance sheet.”b.Further, the given statement of financial position fails to meet the presentationcriteria and structure prescribed by AASB 101. As per the prescribed structure aminimum of following items should be disclosed on the face of balance sheet. Theseincludes:a.Property, Plant and Equipmentb.Investment Propertyc.Intangible assetsd.Financial assetse.Cash and cash equivalentsf.Trade receivableg.Trade payableh.Financial liabilitiesi.Provisionsj.Reserves and Equity attributable to shareholders.The revised statement of financial position is attached with this Memo for yourkind perusal. c.Further the items should be properly categorized into assets and liabilities and shouldbe presented as per the given structure, i.e. firstly assets should be presentedfollowed by liabilities. The para 68A of AASB 101, requires the presentation offinancial position in a sequential manner as explained above. The relevant text isreproduced below:“68A. The face of the balance sheet shall also include line items that present thefollowing amounts: (a) the total of assets classified as held for sale and assets included in disposalgroups classified as held for sale in accordance with AASB 5 Non-current Assets Heldfor Sale and Discontinued Operations; and (b) liabilities included in disposal groups classified as held for sale in accordance withAASB 5.”
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Enclosures:1.Revised Statement of Financial PositionWESLEY LTD.STATEMENT OF FINANCIAL POSITIONFor the year ended on 30 June, 2017 (Amount in $) ParticularsAs at 30 June, 2017Current assetsCash and cash equivalents4,000Trade and other receivables160,000Inventories36,000Other assets10,000Total current assets210,000Non-current assetsProperty, plant and equipment610,000Investment Property114,000Intangible assets94,000Other assets36,000Total non-current assets854,000 Total assets - (a)1,064,000Current liabilitiesTrade and other payables110,000Short term borrowings62,000Current tax liabilities8,000Provisions40,000Financial liabilities100,000Total current liabilities320,000Non-current liabilitiesFinancial liabilities500,000Total non-current liabilities500,000Total liabilities - (b)820,000Net assets (a-b)244,000Equity Ordinary share capital 200,000
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Reserves24,000Retained earnings20,000Total equity244,000Solution-2Journal Entries in the books of Ansett Ltd DateDescriptionDebitCredit31-Jul-16Bank (5,500,000*1.5)8,250,000Share Application Money8,250,000(To record share application money received on 5,500,000 shares)12-Aug-16Share Application Money8,250,000Share Capital (5,000,000*1.5)7,500,000Bank (500,000*1.5)750,000(To record allotment of shares and excess amount returned)12-Sep-16Share Allotment (5,000,000*0.3)1,500,000Share Capital1,500,000(Share allotment due)12-Sep-16Bank1,500,000Share Allotment 1,500,000(To record amount received on share allotment)20-Mar-17Share First Call (5,000,000*0.2)1,000,000Share Capital1,000,000(Share first call due)30-Apr-17Bank ((5,000,000-50,000)*0.2)990,000Share First Call990,000(To record amount received on first call except for 50,000 shares)31-May-17Share Capital (50,000*2)100,000Share First Call (50,000*0.2)10,000Forfeited Shares A/c90,000(To record forfeiture of shares due to non-payment of call money)05-Jun-17Bank (50,000*1.7)85,000Forfeited Shares A/c15,000Share Capital (50,000*2)100,000(To record reissue of shares at $1.70)05-Jun-17Forfeited Shares A/c5,000Bank5,000
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