Accounting and Financial Management Report: Corrections and Analysis

This report addresses accounting and financial management principles, focusing on the analysis of financial statements and necessary corrections. The report begins with a newsletter summarizing recent developments in Australian and International accounting standards, including updates from AASB and IFRS. The core of the report involves correcting errors in financial statements prepared by a trainee accountant at Whirl Limited. Detailed corrections are provided for various issues, such as misclassifications of expenses, incorrect handling of dividends, improper grouping of cash and receivables, and misplacement of liabilities and assets. The report provides a clear understanding of how to apply accounting standards to ensure accuracy in financial reporting, referencing specific standards like AASB 101. It covers a range of corrections, from adjusting repair expenses to properly classifying provisions and loans, ensuring a thorough and accurate presentation of financial data.

0ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial Management
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING AND FINANCIAL MANAGEMENT
Table of Contents
Answer to Question 1.................................................................................................................2
Answer to Question 2.................................................................................................................4
References..................................................................................................................................8

2ACCOUNTING AND FINANCIAL MANAGEMENT
Answer to Question 1
NEWSLETTER
NATIONAL NEWS FROM 1 DECEMBER 2018 TO 31 MARCH 2019
REVIEW DEAFT FOR FATAL FLAW:
AASB 2019-X PROPOSED STANDARD
BY AASB (DATE: 24 JANUARY, 2019)
The Conceptual Framework for Financial
Reporting is introduced by the AASB for
important changes by the proposed standard of
AASB 2019-X. Comments have been invited
by AASB from the interested parties on or
before 22 Match, 2019 (aasb.gov.au, 2019).
NEW INTRODUCED AUSTRALIAN
ACCOUNTING STANDARDS (DATE: 20
DECEMBER, 2018)
In order to give more accurate definition of the
business, two new standards have been
introduced by AASB which are AASB 2018-6
and AASB 2018-7. AASB 2018-6 explains the
definition of business under AASB 3 Business
Combination and AASB 2017-7 explains
definition of material by amending AASB 101
Presentation of Financial Statements
(aasb.gov.au, 2019).
RIGHT-FOR-USE ASSET’S
ACCOUNTING STANDARD FOR NOT-
FOR-PROFIT COMPANIES (DATE: 24
DECEMBER, 2018)
Some key amendments have been brought in
by the AASB in the Australian Accounting
Standards for the accounting operations of the
Not-for-Profit companies by the introduction
of AASB 2018-8. Under this new standard, the
lessees of not-for-profit companies will get a
provisional choice for measuring a class of
right-of-use assets (aasb.gov.au, 2019).
NEW COMPLICAIONS FOR AASB’S
NEW REPOTING PERIOD (DATE: 30
JANUARY, 2019)
The new complications for the financial
reporting period on or after 1 January, 2019
have been brought in by the AASB. Three
specific standards contain these complications;
they are AASB 1 First Time Adoption of
Australian Accounting Standards, AASB 15
Revenues and AASB 1059 Service Concession
Arrangement: Grantors (aasb.gov.au, 2019).

3ACCOUNTING AND FINANCIAL MANAGEMENT
INTERNATIONAL NEWS FROM 1 DECEMBER, 2018 TO 31 MARCH, 2019
NEW LEASE STANDARD OF IFRS 16
LEASES (DATE: 8 JANUARY, 2019)
IFRS has brought certain key amendments in
lease accounting through the introduction of
IFRS 16 Leases. Under this new lease
arrangements, it is no longer needed to
establish difference between finance and
operating lease since IFRS 16 Leases puts the
obligation on the lessees to recognize right-of-
use assets and liabilities in the company’s
balance sheet (ifrs.org, 2019).
ALTERATIONS IN FINANCIAL
LIABILITIES (DATE: 21 FEBRUARY,
2019)
Certain amendments have been brought in in
IAS Statement of Cash Flows by the
International Accounting Standard Board
(IASB) in the financial year of 2017. Now, it
is the obligation on the business organizations
to ensure the needed disclosures related to the
alterations in the liabilities as a result of the
inclusion of different financial liabilities. The
main intention of the IASB behind the
introduction of these amendments is to ensure
the fact that the various users of the financial
statements to evaluate the changes in the
liabilities (ifrs.org, 2019).
IFRS’S DISCLOSURE INITIATIVES –
PRINCIPLES DISCLOSURE PROJECT’S
SUMMARY (DATE: 21 MARCH, 2019)
A specific document has been published by the
IFRS foundation for summarizing the works
completed by the IASB in relation to
Disclosure Initiative – Principles of
Disclosures. Two aspects have been
summarized in this document which are
research and feedback on disclosure initiatives
and the board’s decision in relation to
Targeted Standards – Level Review of
Disclosure (ifrs.org, 2019).
UPDATES OF THE IASB FOR JANUARY
2018 (DATE: 25 JANUARY, 2019)
Certain updates have been released by the
IASB regarding their existing accounting
standards. The aspects that have been
considered for discussion are amendments in
IFRS 17, proposed amendments in IAS 12,
Rate-regulated activities and Extractive
Activities (ifrs.org, 2019).

4ACCOUNTING AND FINANCIAL MANAGEMENT
Answer to Question 2
It can be seen from the provided information of Whirl Limited that the new trainee
accountant of the company has made many mistakes in the financial statements. The
following discussion shows the necessary corrections:

5ACCOUNTING AND FINANCIAL MANAGEMENT
Correction 1 – The new accountant has added the repair expenses with the property, plant
and equipment in the balance sheet. In actual, repair expenses need to be recorded in the
income statement since it is an expenses. Thus, $3000 is shown in the income statement
Correction 2 – The trainee accountants has shown the dividend in income statement while
subtracted it from share capital and added it with retained earnings. However, the dividend of
$50000 needs to be adjusted from the retained earnings.

6ACCOUNTING AND FINANCIAL MANAGEMENT
Correction 3 – The accountant has mistakenly shown the cash at bank and cash management
account separately in the balance sheet. As per correction, both these values need to be shown
under the cash and cash equivalent in the balance sheet.
Cast at bank $92,000
Cash Management Account $120,000
Total $212,000
Correction 4 – By mistake, the trainee has shown both the trade receivable and inventory
together, but they should be shown on separate basis. In actual, allowance for doubtful debt
needs to be subtracted from the trade receivables.
Trade Receivables $140,000
Less: Allowance for Doubtful Debts $3000
Total $137,000
Correction 5 – The trainee accountant has adjusted trade payable from the asset side of the
balance side. As per correction, trade payable of $26,000 should be shown under the current
liabilities in the balance sheet.
Correction 6 – Both materials and work-in-progress are show separately in the asset side of
the balance sheet, but in correction, they should be shown under inventory.
Raw Materials $110,000
Add: Work-in-Progress $128,000
Total $238,000
Correction 7 – Prepaid insurance worth $3000 is mistakenly reported in the income
statement of the company. As per correction, prepaid insurance is a current asset and needs to
be shown in the balance sheet.
Correction 8 – The trainee has reported the accumulated depreciation in the liability side. In
actual, accumulated depreciation worth $30,000 should be deducted from property, plant and
equipment.
Property, plant and equipment and intangible assets $348,000

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Less: Accumulated depreciation $30,000
Total $318,000
Correction 9 – Both the provisions are separately recorded in the liability side of the balance
sheet. As per correction, both these provisions should be recorded as the provision as current
liabilities.
Provision for warranty $6000
Add: Provision for annual leave $18,000
Total $24,000
Correction 10 – Both the long-term loans from Westpac and Commonwealth bank have been
recorded separately in the balance sheet. As per the correction, they should be combined as
loan under the non-current liabilities.
Loan from Westpac bank $80,000
Loan from Commonwealth bank $20,000
Total $100,000
Correction 11 – The trainee accountant has not separated the assets and liabilities in the
proper manner in the balance sheet due to the fact that only assets and liabilities have been
reported. In accordance with the Paragraph 66-76 of AASB 101, the trainee accountant
should segregate the assets and liabilities among current and no-current assets and liabilities
(aasb.gov.au, 2019).

8ACCOUNTING AND FINANCIAL MANAGEMENT
References
Aasb.gov.au. (2019). Presentation of Financial Statements. Retrieved 7 April 2019, from
https://www.aasb.gov.au/admin/file/content105/c9/AASB101_07-15.pdf
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/01/ifrs-16-is-now-effective/
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/02/feature-changes-in-financing-
liabilities/
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/03/disclosure-initiative-principles-of-
disclosure-project-summary-now-available/
IFRS . (2019). Ifrs.org. Retrieved 7 April 2019, from
https://www.ifrs.org/news-and-events/2019/01/january-iasb-update-published/
News . (2019). Aasb.gov.au. Retrieved 7 April 2019, from
https://www.aasb.gov.au/News/New-compilations-for-reporting-periods-beginning-
on-or-after-1-1-19?newsID=310722
News . (2019). Aasb.gov.au. Retrieved 7 April 2019, from
https://www.aasb.gov.au/News/New-Accounting-Standard--Right-of-Use-Assets-of-
Not-for-Profit-Entities?newsID=310718
News . (2019). Aasb.gov.au. Retrieved 7 April 2019, from
https://www.aasb.gov.au/News/New-Australian-Accounting-Standards?
newsID=310717
News . (2019). Aasb.gov.au. Retrieved 7 April 2019, from
https://www.aasb.gov.au/News/Fatal-flaw-review-draft---Proposed-Standard-AASB-
2019-X-Amendments-to-Australian-Accounting-Standards---References-to-the-
Conceptual-Framework?newsID=310721