Two transactions took place in the year which met the definition and recognition criteria of an expense. The transaction did, however, have a distinct difference which is highlighted below: (i) Transaction one resulted in the decrease of the bank account, an asset; and (ii) Transaction two resulted in a loan liability being created

As the accountant was confused with the conceptual treatment of the transactions, he examined another set of financial statements, showing non-compliance with IFRS, which treated transaction one as an expense but transaction two as the issue equity preference shares. The accountant has therefore decided to follow this treatment but is concerned it is not correct. Do you agree with the treatment? (4 marks)