Application accounts  LO5, 6 Sea Horse Ltd has announced a renounceable rights issue of 1‐for‐4 based on shares held at 2 July 2019. The shareholders have to exercise their rights by 31 August 2019, and pay $2 per share on application. At the end of the company’s reporting period, 30 June 2019, half of the company’s shareholders have applied for the new shares, and the company has received $3.5 million. The monies received have been recorded in an ‘application account’. The accountant of Sea Horse Ltd plans to report the application account as a liability in the statement of financial position prepared at 30 June 2019, arguing that this is consistent with the accounting used for new issues of shares by the company. Required Write a report to the accountant of Sea Horse Ltd, critiquing the accountant’s decision.