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The Statement of Financial Position | Study

   

Added on  2020-04-01

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Solution -1MEMORANDUMDate: 9th September, 2017To: JenniferFrom: Chief Accountant Subject: Key problems with the statement of financial position prepared by JenniferDuring verification of financial statement sent by you, we have come across certain issues, which are listed below:a.Current /non-current classification – The presented statement of financial position does not provide theclassification of items as per their liquidity, i.e. current and non-current in accordance with AASB 101. As perAASB 101, any assets or liability expected to be realized or settled within the company’s normal operatingcycle or 12 months from the reporting date should be classified as current and all other as non-current. Therelevant text of para 51 of AASB 101 states that:“An entity shall present current and non-current assets, and current and non-current liabilities, as separateclassifications on the face of its balance sheet.”b.Minimum Items to be displayed– As per AASB 101, the assets and liabilities should be properly presentedand grouped. As per AASB 101, the statement of financial position should contain the following line items.The balance sheet prepared by you fails to meet these criteria. “As per AASB 101,a.property, plant and equipment;b.investment property;c.intangible assets;d.financial assets (excluding amounts shown under (e), (h) and (i));e.investments accounted for using the equity method;f.biological assets;g.inventories;h.trade and other receivables;i.cash and cash equivalents;j.the total of assets classified as held for sale and assets included in disposal groups classified asheld for sale in accordance with AASB 5 Non-current Assets Held for Sale and DiscontinuedOperations;k.trade and other payables;l.provisions;m.financial liabilities (excluding amounts shown under (k) and (l));n.liabilities and assets for current tax, as defined in AASB 112 Income Taxes;
The Statement of Financial Position | Study_1
o.deferred tax liabilities and deferred tax assets, as defined in AASB 112;p.liabilities included in disposal groups classified as held for sale in accordance with AASB 5;q.minority interest, presented within equity; andr.issued share capital and reserves attributable to owners of the parent (AASB 101, par. 54).”c.Format of financial statement – Further, the format used for preparation of statement of financial positionshould correspond with the format prescribed by AASB 101. The statement prepared by you is not inaccordance with the prescribed format. As per AASB 101, para 55,“AASB 101.55 requires entities to present additional line items, headings and subtotals in the statement offinancial position when such presentation is relevant to an understanding of an entity’s financial position.”d.Sub classification in notes – Further, sub classification of line items is required to be provided in notes toaccounts of the financial statements. For example, the classification of share capital to be disclosed innumber of shares and amount, further into preference share capital and ordinary share capital, etc.Enclosures:1.Revised Statement of Financial Position
The Statement of Financial Position | Study_2
WESLEY LTD.STATEMENT OF FINANCIAL POSITIONFor the year ended on 30 June, 2017ParticularsAmount as on 30 June, 2017Current assets Cash and cash equivalents4,000 Trade and other receivables160,000 Inventories36,000 Other assets10,000Total current assets210,000Non-current assets Property, plant and equipment610,000 Investment Property114,000 Intangible assets94,000 Other assets36,000Total non-current assets854,000 Total assets1,064,000Current liabilities Trade and other payables110,000 Short term borrowings62,000 Current tax liabilities8,000 Provisions40,000 Financial liabilities100,000Total current liabilities320,000Non-current liabilities Financial liabilities500,000Total non-current liabilities500,000Total liabilities 820,000Equity Ordinary share capital 200,000 Reserves24,000 Retained earnings20,000Total equity244,000Total liabilities and equity1,064,000
The Statement of Financial Position | Study_3

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