Xero Corrections Approved (Phase 1–3)

Decision to remediate identified Xero account structure issues. Approved approach spans three phases: diagnostic (complete), corrections (in progress), and monitoring (planned). Purpose: restore Balance Sheet accuracy and P&L integrity before Income Tax Lodgement.

Scope

Phase 1 (Complete): Diagnostic analysis of 8 major account issues across Square Capital loans, Westpac loan, Lumi refinancing, clearing accounts, and balance sheet structure. Deep dives completed for each issue with transaction-level verification.

Phase 2 (In Progress): Post corrective journals and consolidate accounts:

1. Square Capital loans — net off SQ-600001 and SQ-800004; write off $3,251.25 residual
2. Westpac loan — transfer 901 balance to WL (fix wrong-account coding)
3. Zeller EFTPOS — reclassify ~$209,000 from SQ-600000 to dedicated Zeller clearing account
4. Archive zero-balance loan accounts (11 accounts)

Phase 3 (Planned): Set up bank rules and ongoing monitoring:

1. Obtain Westpac loan amortisation schedule; set up bank rule for principal/interest split on $2,315/month repayment
2. Obtain Lumi loan schedule; set up bank rule for principal/interest split on $1,603.63/week repayment
3. Establish reconciliation process for Square Balance ($4.67M unreconciled) vs bank statement
4. Weekly clearing account monitoring to catch future miscoding

Approved Corrections

Journal 1: Net off Square Capital accounts

Account	Debit	Credit
SQ-600001 Square Capital Loan Payable (Legacy)	$244,367.14
SQ-800004 Square Loan Payments		$244,367.14
Description: Net off fully-repaid Square Capital loan accounts

Outcome: Clears mismatched balances between principal (SQ-600001) and repayment (SQ-800004) accounts. Leaves $3,251.25 residual in SQ-600001.

Journal 2: Write off Square Capital remainder

Account	Debit	Credit
SQ-600001 Square Capital Loan Payable (Legacy)	$3,251.25
[P&L expense—Prior Period Adjustment or Loan Write-Off]		$3,251.25
Description: Write off residual after Square loans fully repaid via Lumi

Outcome: Eliminates $3,251.25 phantom balance. (Residual could be accumulated interest, rounding differences, or genuine write-off; amounts to immaterial after full loan repayment via Lumi on 28 Mar 2024.)

Journal 3: Consolidate Westpac loan accounts

Account	Debit	Credit
WL Westpac Loan of 100,000	$11,575.00
901 Loan-Westpac		$11,575.00
Description: Transfer misallocated loan repayments from 901 to WL

Outcome: Fixes wrong-account coding. Brings WL to correct net balance of $88,425.00 (principal of $100,000 less repayments of $11,575). Zeros 901 account for archiving.

Account reclassification: Zeller EFTPOS

• Create new Zeller clearing account in Xero (Current Asset, BAS Excluded)
• Reclassify 30 Zeller “Receive Money” entries ($208,965 total) from SQ-600000 to new Zeller account
• Post year-end clearing journal for any remaining balance
• Status: Pending approval; detailed journal list to be prepared

Account archiving

Archive 11 zero-balance loan accounts (fully repaid historic shareholder/director loans and legacy facilities):

• 333 Loan - Markus
• 446 Loan - Mathew
• 501 Loan - Mat
• 502 Loan - Square
• 599 Loan - Minh
• 909 Loan - (unknown)
• 910 Loan - Finance
• 911 Loan - Mathew (duplicate of 446?)
• 912 Loan - Maggie
• 920 Loan - Get Capital
• 921 Loan - (unknown)

Pending Items Requiring Further Information

Journals NOT proposed yet; require external information first:

1. Lumi principal/interest split — requires Lumi loan amortisation schedule showing principal and interest for each weekly repayment from 28 Mar 2024 onwards. Needed to retroactively correct FY25 and set up ongoing auto-split.

2. Westpac principal/interest split — requires Westpac loan amortisation schedule for Oct 2025 facility. Needed to retroactively correct Nov 2025–Mar 2026 repayments and set up ongoing auto-split.

3. Loan-POOF reconciliation — requires confirmation from parent entity (Pride of Our Footscray Ltd) that the $124,050.84 balance in account 900 matches their corresponding receivable in their books. Also requires confirmation of whether interest is being charged on this related-party loan.

4. Square Balance ($4.67M) reconciliation — requires manual investigation of settlement transaction history to match Amaka entries against bank feed. Timing: Medium priority; plan for Phase 3.

Financial Impact Summary

Balance Sheet corrections:

• SQ-600001 cleanup: Reduces phantom liability by $247,618.39
• SQ-800004 cleanup: Clears debit balance of $244,367.14
• Westpac account consolidation: Net balance corrected to $88,425.00 (no total change, but fixes liability direction)
• Zeller reclassification: Moves asset from SQ-600000 to Zeller clearing account (reclassification only; no balance change)

P&L impact:

• Square residual write-off: $3,251.25 one-time P&L adjustment (immaterial)
• Interest allocation corrections: Deferred to Phase 2 (pending loan schedules)

Tax implications:

• No tax impact from Journals 1–3 (all Balance Sheet corrections, BAS Excluded)
• Material tax impact from interest allocation (deferred) — estimated $8,850–$10,000 additional FY25 deduction once interest schedule obtained

Timeline

• Phase 1 (Complete): Diagnostics finished 22 Mar 2026 (Run 3 audit report)
• Phase 2 (Target): Journals 1–3 to be posted upon Mat’s approval; Zeller reclassification and archiving to follow within 7 days
• Phase 3 (Planned): Bank rule setup and monitoring process, dependent on Westpac and Lumi schedules being obtained (target: April 2026)

Success Criteria

1. ✓ All balance sheet misstatements identified and quantified (Phase 1 complete)
2. ✓ Correction journals prepared and ready to post (Phase 1 complete)
3. Journals 1–3 posted and verified (Phase 2 in progress; awaiting Mat approval)
4. Zeller and legacy accounts cleaned up (Phase 2 pending)
5. Bank rules configured for Westpac and Lumi (Phase 3 pending loan schedules)
6. Reconciliation procedures documented and implemented (Phase 3 pending)
7. ITR can be prepared with confidence in underlying Xero data (milestone: dependent on completing Phase 2)

Related Pages

• Forensic Audit Run3 — source document for all issues identified
• Loan Accounts Diagnostic — detailed account-by-account analysis
• Square Xero Settlement Analysis — clearing account structure and issues
• Tax Lodgement — downstream dependency on Xero correction completion