Financial Accounting Assignment: Banking, Shares, and Tax Calculations

This financial accounting assignment solution provides a detailed analysis of several key accounting concepts. The first section addresses a letter to the International Accounting Standards Board (IASB) discussing the effective communication of financial information, specifically focusing on the annual reports of ANZ Bank and Westpac Group. It provides recommendations for improving financial reporting, emphasizing entity-specific information and standardized formatting. The second section presents journal entries for share capital transactions, including application, allotment, calls, forfeitures, and reissuance of shares. Detailed workings are provided to support the journal entries. The third section focuses on tax calculations, including worksheets for current tax liability, deferred tax, and related journal entries. The assignment covers both income tax expense and refundable tax, including the calculation of taxable income, deferred tax assets and liabilities, and the recording of relevant journal entries. This assignment provides a comprehensive overview of financial accounting principles and their practical application.

Running head: FINANCIAL ACCOUNTING
Financial accounting
Name of the University
Name of the student
Authors note

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FINANCIAL ACCOUNTING
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................6
Answer to Question 3:.....................................................................................................................9
Requirement i:.............................................................................................................................9
Requirement ii:..........................................................................................................................10
Requirement iii:.........................................................................................................................11
Answer to Question 4:...................................................................................................................13
Answer to Question 5:...................................................................................................................16
Reference & Bibliography:............................................................................................................18

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FINANCIAL ACCOUNTING
Answer to Question 1:
To,
Chairperson
International standard accounting board
30 cannon street, London- EC4M 6XH, United Kingdom
Date: 20th August, 2017
Subject: Guiding and recommending on use of formatting and principles in financial report
Sir,
The proposition of IASB concerning the effective communications of financial
information of entities, I have planned to make s submission in response to the same. I have been
considering investments in two banking institutions that is ANZ bank and Westpac group. It has
been explained that prepares of the financial statement regards the exercise as complex and many
tomes it is perceived by investors that performance is depicted in insufficient manner using the
financial statements. Valuable information in the annual report is drowned by poor presentation
and organization of financial data (Burcă & Cotleţ, 2014). This makes it difficult for investors to
take any viable financial decisions. After going through the annual reports presented by both
organizations, I have thought that there is need to increase the financial statements
communication effectiveness. There needs to be more standardization in terms of both
disclosures and preparation of financial statements.
I have gone through the proposition of set of principles of effective communication that
comprise of being clear and simple, entity specific, linked to related information, organized for

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FINANCIAL ACCOUNTING
highlighting important matters, no unnecessary duplication, in appropriate format and
comparable. After the analysis of annual report for financial year 2016 for both ANZ bank and
Westpac Group, it has been ascertained that there are some of the effective principles of
communication is lacking while some of the principles they are complying. Good and reputed
banks would provide investors with much detailed information that would assist them in making
financial decisions. Banks are required to make and provide with the proper segmental analysis
and their liquidity and credit risks.
After going through and analyzing the annual reports and the information and
components contained therein, I have come across some of the facts that both organizations have
and not have made the disclosures. Westpac has done separate segmental analysis and there is a
consistent segment definition. On other hand, ANZ bank has not done a separate analysis and
have not adopted a segmentation approach. They have depicted in their notes to finance
statements rather than showing it separately. Basel are comprehensive set of measures of reforms
for strengthening the regulation of banking industry. It was ascertained after evaluation of the
annual report that ANZ bank have not disclosed any information about Basel requirements
separately. There was also not separate disclosure of the liquidity and credit risks. It was mainly
mentioned in the notes to financial statements. On the other hand, Westpac has made appropriate
disclosure of information and requirements of Basel and types of risks involves in banking
industry. Regarding Tier I and Tier II, there was nothing properly mentioned in the annual report.
However, this particular area was properly highlighted in the annual report of Westpac. Westpac
has properly presented the divisional performance as against ANZ that did not presented this
particular area.

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FINANCIAL ACCOUNTING
Banks have also not been able to depict their performance trend using graphical
presentation that will be helpful to investors in comparing and easily analyzing their performance
(Ginesti et al., 2013). In spite of narrative disclosure in some context, it would have been
appropriate to use the graphical presentation. In light of above facts identified, there is a need to
have significant improvement in financial report communication. I would like to recommend
some of the principles that IASB should put the most to work is entity specific and to make it
comparable. Financial report of organizations should follow the principle of being entity specific
and way of presentation. Principle of entity specific makes the information available in the
annual report that is tailored according to the circumstances of the entity rather than being
generic. General information are readily available outside the annual reports, therefore
presenting the information that is specific to entities would be suitable (Weil et al., 2013).
Moreover, information should be presented in a way that makes easy comparison across
reporting period and among entities keeping in mind that usefulness of information should not be
compromised. This can be done by using graphical presentation of certain available information
in the annual report.
The draft of disclosure initiatives provided by IASB also involves provision of guidance
on formatting. It is perceived my stakeholders and investors of organization, that communication
effectiveness of financial information can be improved with the use of proper formatting. Reason
is attributable to the fact that there would be easy comparison of particular organization over two
different reporting period and it would also facilitate comparison between entities.
Recommendation of board for using the proper format to depict the financial information are
based on many reasons. Various organizations in financial services such as banks have published
reports that provides guidance on using the table and graphs in their annual report (Edwards,

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FINANCIAL ACCOUNTING
2013). Moreover, there also exists uncertainty about the use of proper formats in preparation of
annual reports. The communication of information to stakeholders would be improved by
making effective use of formatting. It is for all the above-mentioned reasons and the facts that I
have ascertained from analyzing the annual reports of two banking institutions, there is a need to
make use of formatting as one of the principles that will help in generating effective
communication of financial information contained in the financial report of organizations. I think
that using the appropriate format for presenting the financial investors would be useful to
investors in in making the analysis and comparison.
Nonetheless, the development of format should be highly dependent upon the factors that
are entity specific. This is so because, in some case, depending upon the types of information to
be disclosed, using the tabular form would be more appropriate. There is a need to develop some
in depth guidance on using the formatting in the financial statements of organization.
Effectiveness of information contained in the notes disclosures can be further improved with the
help of appropriate formatting. The components of proper formatting includes different types of
formats that would be applied according to the nature of business entity and would be entity
specific (Tokar, 2015). There should be common type of formatting and some of the formatting
should be done depending upon circumstances of entities and their operation. Such type of
disclosure would be in the interest of investors or stakeholders as well as preparers of financial
statements. Furthermore, non-monetary guidance on use of formatting also needs to be
developed.
As an investor, I would recommend that IASB should include some the principles of
effective communication of financial information. The most effective principle would be entity
specific, as it will assist the investors in generating information easily along with making it able

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FINANCIAL ACCOUNTING
to easily compare the financial information across entities and between reporting periods.
Moreover, the guidance on formatting also needs to be developed further by taking into
consideration some organization specific factors.
Yours sincerely,
XYZ
Answer to Question 2:
In the books of Harriette Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
31/03/2017 Bank A/c. Dr. $8,200,000
To. Preference Share
Application A/c. $1,600,000
To. Ordinary Share Application
A/c. $6,600,000
(Being application money received for 2,000,000
ordinary shares and 1,000,000 preference shares)
15/4/2017
Preference Share
Application A/c. Dr. $1,600,000
To. Preference Share Capital
A/c. $1,600,000
(Being application money received for pf. Shares
transferred to Pf. Share capital)
Ordinary Share
Application A/c. Dr. $6,600,000
To. Ordinary Share Capital A/c. $6,000,000
To. Ordinary Share Allotment
A/c. $600,000
(Being application money received for ordinary share
capital transferred to ordinary share capital and excess
amount adjusted with due allotment)

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FINANCIAL ACCOUNTING
Ordinary Share Allotment
A/c. Dr. $3,000,000
To. Ordinary Share Capital A/c. $3,000,000
(Being allotment money due on alloted shares)
15/5/2017 Bank A/c. Dr. $2,400,000
To. Ordinary Share Allotment
A/c. $2,400,000
(Being due allotment money received)
1/8/2017 Ordinary Share Call A/c. Dr. $1,000,000
To. Ordinary Share Capital A/c. $1,000,000
(Being call money due on alloted shares)
1/9/2017 Bank A/c. Dr. $975,000
Calls-in-Arrear A/c. Dr. $25,000
To. Ordinary Share Call A/c. $1,000,000
(Being due call money received except for 50000 shares)
15/9/2017
Ordinary Share Capital
A/c. Dr. $250,000
To. Calls-in-Arrear A/c. $25,000
To. Ordinary Share Forfeiture
A/c. $225,000
(Being the 50000 shares, for which call money is due,
forfeited accordingly)
Bank A/c. Dr. $210,000
Ordinary Share
Forfeiture A/c. Dr. $40,000
To. Ordinary Share Capital A/c. $250,000
(Being the forfeited shares reissued for $4.20 per
shares)
Cost of Forfeiture &
Reissue A/c. Dr. $7,500
To. Bank A/c. $7,500
(Being cost of forfeiture and reissue of shares paid)
Ordinary Share
Forfeiture A/c. Dr. $185,000
To. Cost of Forfeiture & Reissue
A/c. $7,500

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FINANCIAL ACCOUNTING
To. Capital Reserve A/c. $177,500
(Being the balance of share forfeiture a/c. after
adjusting with cost of forfeiture and reissue transferred
to capital reserve)
Workings:
Particulars
Nos. Of
Shares
Value per
Share Amount
Pf. Share Application Received A 800000 $2
$1,600,00
0
Ordinary Share Application Received B 2200000 $3
$6,600,00
0
Ordinary Share Application Alloted C 2000000 $3
$6,000,00
0
Ordinary Share Application Adjsuted
D=B-
C 200000 $3 $600,000
Ordinary Share Allotment Due E 2000000 $1.50
$3,000,00
0
Ordinary Share Allotment Received F=E-D 1800000
$2,400,00
0
Ordinary Share Call Due G 2000000 $0.50
$1,000,00
0
Ordinary Share Call Received H 1950000 $0.50 $975,000
Calls-in-Arrear I 50000 $0.50 $25,000
Share Capital Forfeited J 50000 $5 $250,000
Share Forfeiture K=I-J 50000 $225,000
Share Capital received fro Reissue L 50000 $4.20 $210,000
Share forfeiture adjusted with
reissue M=J-L 50000 $40,000

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FINANCIAL ACCOUNTING
Answer to Question 3:
Requirement i:
Worksheet for Current Tax Liability/(Refundable):
Particulars Amount Amount
Accounting profit before tax $66,000
Add:
Doubtful Debt Expense $5,000
Annual Leave $23,000
Warranty Expense $12,000
Depreciation Expense for accounting purpose $60,000
Insurance $40,000 $140,000
$206,000
Less:
Government Grant $20,000
Bad debt expense $1,000
Annual Leave Paid $3,000
Insurance Paid $50,000
Warranty Expense Paid $2,000
Depreciation Expense for Tax Purpose $50,000 $126,000
Taxable income $80,000
Tax on taxable income @30% $24,000
Less: 30% Tax paid on Sales Revenue $205,800
Income Tax Refundable ($181,800
)

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FINANCIAL ACCOUNTING
Deferred Tax Worksheet:
Particulars Carrying
Amount
Tax Base Taxable
Temp’y
Diffs
Deductible
Temp’y Diffs
$ $ $ $
Assets
Cash $10,000 $10,000
Trade Receivables $125,000 $125,000
Allowance for Doubtful Debts ($4,000) $0 $4,000
Inventories $60,000 $60,000
Prepaid Insurance $10,000 $10,000
Goodwill $20,000 $20,000
Equipment $300,000 $300,000
Accumulated Depreciation ($60,000) ($50,000) $10,000
Liabilities
Trade Payables $35,000 $35,000
Provision for Warranties $10,000 $10,000
Provision for Annual Leave $20,000 $20,000
Loan Payable $90,000 $90,000
Total Temporary differences $10,000 $44,000
Deferred tax liability (30%) $3,000
Deferred tax asset (30%) $13,200
Requirement ii:
Dr. Cr.
Date Particulars Amount Amount
30/06/201
7 Income Tax Expense A/c. Dr. $24,000
Income Tax Refundable A/c. Dr. $181,800
To, Advance Tax Paid A/c. $205,800
(Being Income tax expenses adjusted with advance tax
paid and income tax refundable recorded)

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FINANCIAL ACCOUNTING
$13,200
Deferred Tax Assets A/c. Dr. $3,000
To,
Deferred Tax Liability
A/c. $10,200
To, Income Tax Expense A/c.
(Being deferred tax assets and deferred tax liabilities
recorded)
Profit & loss A/c. $21,000
To, Income Tax Expense A/c. $21,000
(Being income tax expense transferred to P/L A/c.)
Requirement iii:
Worksheet for Curret Tax Liability/(Refundable):
Particulars Amount Amount
Accounting profit before tax ($44,000)
Add:
Doubtful Debt Expense $5,000
Annual Leave $23,000
Warranty Expense $12,000
Depreciation Expense for accounting purpose $60,000
Insurance $40,000 $140,000
$96,000
Less:
Government Grant $20,000
Bad debt expense $1,000
Annual Leave Paid $3,000
Insurance Paid $50,000
Warranty Expense Paid $2,000
Depreciation Expense for Tax Purpose $50,000 $126,000
Taxable income ($30,000)
Tax on taxable income @30% $0

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FINANCIAL ACCOUNTING
Less: 30% Tax paid on Sales Revenue $172,800
Income Tax Refundable ($172,800
)
Deferred Tax Worksheet:
Particulars Carrying
Amount
Tax Base Taxable
Temp’y
Diffs
Deductible
Temp’y Diffs
$ $ $ $
Assets
Cash $10,000 $10,000
Trade Receivables $125,000 $125,000
Allowance for Doubtful Debts ($4,000) $0 $4,000
Inventories $60,000 $60,000
Prepaid Insurance $10,000 $0 $10,000
Goodwill $20,000 $20,000
Equipment (Net) $300,000 $300,000
Accumulated Depreciation ($60,000) ($50,000) $10,000
Liabilities
Trade Payables $35,000 $35,000
Provision for Warranties $10,000 $0 $10,000
Provision for Annual Leave $20,000 $0 $20,000
Loan Payable $90,000 $90,000
Total Temporary differences $10,000 $44,000
Deferred tax liability (30%) $3,000
Deferred tax asset (30%) $13,200
Workings:
Base
Particulars
Accountin
g Tax
Equipment-at Cost $300,000 $300,00

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FINANCIAL ACCOUNTING
0
Useful Life (in years) 5 6
Depreciation Expenses p.a. $60,000 $50,000
Period of Utilization (in years) 1 1
Accumulated Depreciation $60,000 $50,000
Equipment (net Value) $240,000
$250,00
0
Particulars Amount
Doubtful Debt Expense $5,000
Less: Prov. For Doubtful debt $4,000
Bad Debt Expense $1,000
Annual Leave Expense $23,000
Less: Prov. For Annual Leave $20,000
Annual Leave Paid $3,000
Warranty Expense $12,000
Less: Prov. For Warranty $10,000
Warranty Expense Paid $2,000
Insurance Expense $40,000
Add: Prepaid Insurance $10,000
Insurance Paid $50,000
Answer to Question 4:
In the books of Snowy Ltd.
Journal Entries

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FINANCIAL ACCOUNTING
Dr. Cr
Date Particulars Amount Amount
1/7/2015 Plant-A A/c.
$150,00
0
Plant-B A/c.
$250,00
0
Bank A/c.
$400,00
0
(Being Plant A and Plant B acquired for cash)
30/6/2016 Depreciation Expense A/c. 65000
Accum. Dep. - Plant A A/c. 15000
Accum. Dep. - Plant B A/c. 50000
(Being depreciation charged on Plant A & Plant B)
Accum. Dep. - Plant A A/c. 15000
Loss on Revaluation A/c. $15,000
Plant A A/c. $30,000
(Being Plant A revalued at fair value and loss on revaluation
recorded)
Accum. Dep. - Plant B A/c. 50000
Gain on Revaluation A/c. $35,000
Plant B A/c. $15,000
(Being Plant B revalued at fair value and gain on revaluation
recorded)
Gain on Revaluation A/c. $35,000
Loss on Revaluation A/c. 15000
Asset Revaluation Reserve A/c. $20,000
(Being the gain and loss of revaluation transferred to asset
revaluation reserve)
Deferred Tax Assets A/c. $10,500
Deferred Tax Liabilities A/c. $4,500
Income Tax Expense A/c. $6,000
(Being deferred tax recorded for the asset revaluation)
30/06/201
7 Depreciation Expense A/c. 72083

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FINANCIAL ACCOUNTING
Accum. Dep. - Plant A A/c. 13333
Accum. Dep. - Plant B A/c. 58750
(Being depreciation charged on Plant A & Plant B)
Accum. Dep. - Plant A A/c. 13333
Gain on Revaluation A/c. $8,333
Plant A A/c. $5,000
(Being Plant A revalued at fair value and gain on revaluation
recorded)
Accum. Dep. - Plant B A/c. 58750
Loss on Revaluation A/c. $46,250
Plant B A/c.
$105,00
0
(Being Plant B revalued at fair value and loss on revaluation
recorded)
Gain on Revaluation A/c. $8,333
Asset Revaluation Reserve A/c. $37,917
Loss on Revaluation A/c. $46,250
(Being the gain and loss of revaluation transferred to asset
revaluation reserve)
Deferred Tax Assets A/c. $2,500
Income Tax Expense A/c. $11,375
Deferred Tax Liabilities A/c. $13,875
(Being deferred tax recorded for the asset revaluation)
Workings:
Computation of Revaluation Gain/(Loss) & Deferred Tax:
Year
Opening
Balance
Estimated
Life (in
years)
Residua
l Value
Depreciatio
n p.a.
Closing
Value
Fair
Value
Revaluatio
n
Gain/(Loss)
Deferred
Tax Assets/
(Liabilities)
A B C D=(A-C)/B E=A-D F G=F-E H=Gx30%
Plant A:
2015-
16 $150,000 10 $0 15000
$135,00
0
$120,00
0 ($15,000) ($4,500)
2016-
17 $120,000 9 $0 13333
$106,66
7
$115,00
0 $8,333 $2,500

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FINANCIAL ACCOUNTING
Plant B:
2015-
16 $250,000 5 $0 50000
$200,00
0
$235,00
0 $35,000 $10,500
2016-
17 $235,000 4 $0 58750
$176,25
0
$130,00
0 ($46,250) ($13,875)
Answer to Question 5:
Calculation of Impairment Loss:
Particulars Amount
Fair Value,less, Cost to Sell $820,000
Value in Use $900,000
Recoverable Amount $900,000
(Higher of Fair Value & Value
in use)
Less: Carrying Amount of CGU
$1,055,00
0
Total Impairment Gain/(Loss)
($155,000
)
Allocation of Specified Impairment Loss:
Particulars
Carrying
Amount Fair Value
Impairmen
t Loss
Total Impairment Loss $155,000
Less:
Cash $32,000 $32,000 $0
Land $600,000 $520,000 $80,000
Inventory $5,000 $5,000 $0
Accounts Receivable $13,000 $13,000 $0
Patent $60,000 $50,000 $10,000
Goodwill $15,000 $0 $15,000
Balance Impairment Loss $50,000

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FINANCIAL ACCOUNTING
Impairment Loss Allocation as per Weightage:
Particulars
Carrying
Amount
Net
Carrying
Amount Weightage
Impairmen
t Loss
Balance Impairment Loss $50,000
Motor Vehicle $300,000
Less: Accum. Depreciation
($120,000
) $180,000 55% $27,273
Plant & Equipment $200,000
Less: Accum. Depreciation ($50,000) $150,000 45% $22,727
Total $330,000 $330,000 100% $50,000
In the books of Blizzard Ltd.
Journal Entries
Dr. Cr.
Date Particulars Amount Amount
30/06/2017 Impairment Loss A/c. $155,000
Land A/c. $80,000
Patent A/c. $10,000
Goodwill A/c. $15,000
Motor Vehicle A/c. $27,273
Plant & Equipment A/c. $22,727
(Being assets under the specific cash generating unit
impaired)
Profit & Loss A/c. $155,000
Impairment Loss A/c. $155,000
(Being impairment loss transferred to P/L A/c.)

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FINANCIAL ACCOUNTING
Reference & Bibliography:
Baxter, W. T. (2014). Accounting theory (Vol. 3). Routledge
Bonin, H. (2013). Generational accounting: theory and application. Springer Science &
Business Media
Burcă, V., & Cotleţ, D. (2014). Considerations on IASB Recent Issued Standards.
Craig, D., & Michaela, R. (2014). Financial Accounting Theory.
Deegan, C. (2013). Financial accounting theory. McGraw-Hill Education Australia.
Edwards, J. R. (2013). A History of Financial Accounting (RLE Accounting) (Vol. 29).
Routledge.
Ginesti, G., Macchioni, R., Sannino, G., & Drago, C. (2013). Firms’ Disclosure Compliance with
IASB's Management Commentary Framework: An Empirical Investigation.
Henderson, S., Peirson, G., Herbohn, K., & Howieson, B. (2015). Issues in financial accounting.
Pearson Higher Education AU.
Picker, R., Clark, K., Dunn, J., Kolitz, D., Livne, G., Loftus, J., & Van der Tas, L.
(2016). Applying international financial reporting standards. John Wiley & Sons.
Tokar, M. (2015). What kind of accounting standards should the IASB write?. Journal of
Accounting and Management Information Systems, 14(3), 439-452.

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FINANCIAL ACCOUNTING
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: an introduction to
concepts, methods and uses. Cengage Learning.
Williams, J. (2014). Financial accounting. McGraw-Hill Higher Education.