Accounting Assignment 2

Question 2

Question 2 (15) XY Limited is a company that provides financial support to its clients with a financial period ended 31 December 2020. On the 15 of January 2021, a significant client of XY Limited, Tant Pty Ltd, had their assets frozen in a process of legal investigations against fraud and inappropriate accounting treatment of their financial statements, with possibility of liquidation. The court had ordered Tant Pty Ltd to close down their operations for investigation purposes. On 31 December 2020, XY Limited had a Debtors balance of NAD 1000000 of Tant (Pty) Ltd with payment terms of 60 days. On the 31 January 2021, the court declared Tant Pty Ltd to be liquidated. XY Limited is entitled to a liquidation claim of NAD 100,000 only. According to the investigations, Tant Pty Ltd has been in the financial struggle since 01 September 2020 , with all conditions leading to the liquidation having been met already in November 2021. XY Limited reports their financial statements to stakeholders on the 31 March 2021. Required: a) Disccuss the difference between adjusting and non-adjusting events after reporting period. (5) b) Discuss whether the event above is an adjusting event for XY Limited in the 2021 financial period. (5) c) Prepare disclosures in the financial statements of XY Limited. (5) Question 2 (15) XY Limited is a company that provides financial support to its clients with a financial period ended 31 December 2020. On the 15 of January 2021, a significant client of XY Limited, Tant Pty Ltd, had their assets frozen in a process of legal investigations against fraud and inappropriate accounting treatment of their financial statements, with possibility of liquidation. The court had ordered Tant Pty Ltd to close down their operations for investigation purposes. On 31 December 2020, XY Limited had a Debtors balance of NAD 1000000 of Tant (Pty) Ltd with payment terms of 60 days. On the 31 January 2021, the court declared Tant Pty Ltd to be liquidated. XY Limited is entitled to a liquidation claim of NAD 100,000 only. According to the investigations, Tant Pty Ltd has been in the financial struggle since 01 September 2020 , with all conditions leading to the liquidation having been met already in November 2021. XY Limited reports their financial statements to stakeholders on the 31 March 2021. Required: a) Disccuss the difference between adjusting and non-adjusting events after reporting period. (5) b) Discuss whether the event above is an adjusting event for XY Limited in the 2021 financial period. (5) c) Prepare disclosures in the financial statements of XY Limited