Financial Accounting II

Lecture 04

Preparation and Presentation of Financial Statements

• Companies Ordinance 1984

(4th and 5th Schedule)• International Accounting Standards (IAS)

OR

International Financial Reporting Standards (IFRS)

Companies Ordinance 1984• The Companies Ordinance 1984 is an

Ordinance issued by Government of Pakistan

• It regulates establishment and management of Limited Companies.

4th and 5th Schedule• 4th Schedule of The Companies Ordinance

1984 provides disclosure requirement for the Listed Companies.

• 5th Schedule of The Companies Ordinance 1984 provides disclosure requirement for the Non-Listed Companies.

• 4th and 5th Schedules of The Companies Ordinance 1984 consist of three parts: Part I – Definitions and general

requirements for preparation and presentation of financial statements.

Part II – Requirements for Balance Sheet.Part III – Requirements for Profit and

Loss Account.

4th and 5th Schedule

International Accounting Standards• International Accounting Standards (IAS)

are issued by International Accounting Standard Board (IASB).

International Accounting Standards• Only those IAS are applicable in Pakistan

that are recommended by The Institute of Chartered Accountants of Pakistan and adopted and notified by Securities and Exchange Commission of Pakistan (SECP).

Book of Accounts to be Kept by Companies

Every company shall keep at its registered office proper books of account with respect to:

a) All sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place;

b) All sales and purchases of goods by the company;.

c) All assets of the company:

Book of Accounts to be Kept by Companies

d) All liabilities of the companies: and

e) In the case of a company engaged in production, processing, manufacturing or mining activities, such particulars relating to utilisation of material or labour or to other inputs or items of cost as may be prescribed, if such class of companies is required by the Authority by a general or special order to include such particulars in the books of accounts:

Annual Accounts• It is the responsibility of the directors of

every company to prepare annual accounts of the company.

Preparation of Accounts [Section 233]

• Directors of every company should lay before the Annual General Meeting, Balance Sheet, Profit and Loss or Income and Expenditure Account as the case may be.

• First annual accounts of the company will be prepared within eighteen (18) months of the incorporation of the company.

Preparation of Accounts [Section 233]

• Subsequently annual accounts will be prepared every year.

• In addition listed companies are required to prepare Quarterly and Half Yearly accounts.

Preparation of Accounts [Section 233]

Presentation of Balance Sheet

2004 2003Note Rs'000 Rs'000

ASSETSNon-Current Assets

Fixed Assets 5 588,704 672,466 Capital Work in Progress 6 627,126 231,340 Long Term Loans 7 2,898 2,639 Deferred Cost 8 346 2,419

1,219,074 908,864 Current Assets

Stores and Spares 9 95,281 117,811 Stock in Trade 10 1,005,315 1,013,483 Trade Debts 11 136,229 168,346 Advances, Deposits, Prepayments 12 23,698 32,185 and Other ReceivablesCash and Bank Balances 13 24,620 21,725

1,285,143 1,353,550 2,504,217 2,262,414

ABC Food Processing and Packing Co Ltd.Balance Sheet As At June 30, 2004

2004 2003Note Rs'000 Rs'000

ASSETSNon-Current Assets

Fixed Assets 5 588,704 672,466 Capital Work in Progress 6 627,126 231,340 Long Term Loans 7 2,898 2,639 Deferred Cost 8 346 2,419

1,219,074 908,864

ABC Food Processing and Packing Co Ltd.Balance Sheet As At June 30, 2004

Current AssetsStores and Spares 9 95,281 117,811 Stock in Trade 10 1,005,315 1,013,483 Trade Debts 11 136,229 168,346 Advances, Deposits & Prepayments 12 23,698 32,185 and other receivablesCash and Bank Balances 13 24,620 21,725

1,285,143 1,353,550 2,504,217 2,262,414

Title and Reporting Currency• Name of the entity.• Date on which the balance sheet is being

drawn.• Currency in which balance sheet is presented.• Reporting period if it is less or more than one

year.

Comparative Figures• Clause 6 of Part I of Fourth Schedule:

Except for the first financial statements laid before the company, financial statements shall also give the corresponding figures for the immediately preceding financial year.

Financed ByShare Capital and Reserves

Share Capital 92,364 92,364 Accumulated Profit / (Loss) 1,639,309 1,376,739

Shareholders Equity 1,731,673 1,469,103 Long Term Liabilities

Deferred Taxation 13 30,796 45,205 Obligation Under Lease Finance 14 - -

30,796 45,205 1,762,469 1,514,308

Current LiabilitiesShort Term Finances 15 - 144,331 Current Maturity of Obligation 16 - 1,316 Under Lease FinanceCreditors, Accrued and Other Liabilities 17 415,362 322,746 Provision for Taxation 181,667 166,164 Other Provisions 18 5,020 4,110 Divided Payable 19 139,699 109,439

741,748 748,106 2,504,217 2,262,414

Financed ByShare Capital and Reserves

Share Capital 92,364 92,364 Accumulated Profit / (Loss) 1,639,309 1,376,739

Shareholders Equity 1,731,673 1,469,103 Long Term Liabilities

Deferred Taxation 13 30,796 45,205 Obligation Under Lease Finance 14 - -

30,796 45,205 1,762,469 1,514,308

Current LiabilitiesShort Term Finances 15 - 144,331 Current Maturity of Obligation 16 - 1,316 Under Lease FinanceCreditors, Accrued and Other Liabilities 17 415,362 322,746 Provision for Taxation 181,667 166,164 Other Provisions 18 5,020 4,110 Divided Payable 19 139,699 109,439

741,748 748,106 2,504,217 2,262,414

Heading for Non-Current AssetsCompanies Ordinance IAS

Fixed AssetsProperty Plant and Equipment

Intangible Assets

Long Term Investments Investment in Associates

Long Term Loans & Advances

Other Financial Assets

Long-term Deposits, Prepayments and Deferred Costs

Fixed Assets• Fixed assets (other than investments) shall be

distinguished between tangible and intangible and shall be classified under appropriate sub-heads, duly itemized such as-

Fixed Assets• Tangible;

LandBuildingsPlant and MachineryFurniture and FittingsVehiclesCapital Work in Progress Others (to be specified);

Fixed Assets• Intangible:

Goodwill; Patents, Copyright, Trade Marks and

Designs; and Others (to be specified).

5. Fixed Assets

RParticulars As On As On A As On On For As On

Jul 01 Addition Disposal Jun 30 T Jul 01 Disposal The Jun 302003 2004 E 2003 Year 2004

Owned Assets

Freehold Land 108,978 - - 108,978 - - - - - Factory Building on Free hold Land 231,849 545 - 232,394 10 130,667 - 16,988 147,655 Employees Quarters 526 - 526 - 10 526 526 - - Plant, Machinery and Equipment 1,015,671 11,507 308 1,026,870 10 588,108 308 74,178 661,978 Other Machinery and Equipment 24,274 443 - 24,717 10-12 17,971 - 1,507 19,478 Furniture, Fixture and Office equipment 34,167 873 8 35,032 20-25 23,882 8 3,510 27,384 Vehicles 33,383 9,795 3,435 39,743 20 17,459 1,376 6,452 22,535

1,448,848 23,163 4,277 1,467,734 778,613 2,218 102,635 879,030 1707*

Assets subject to finance lease

Vehicles 3,938 - 3,938* - 20 1,707 1,707* - - 3,938 - 3,938 - 1,707 1,707 - -

Total 2004 1,452,786 23,163 8,215 1,467,734 780,320 3,925 102,635 879,030

Total 2003 x x x x x x x x

* These leased assets have been transferred to owned assets during the period.

5.1 Depreciation charge for the year has been allocated as follows:2004 2003

Rs'000 Rs'000Cost of sales 95,579 x

Selling and Marketing Expenses 1,975 x

General and Administrative expenses 5,081 x102,635 x

Cost Accumulated Depreciation

5. Fixed Assets

RParticulars As On As On A

Jul 01 Addition Disposal Jun 30 T2003 2004 E

Owned Assets

Freehold Land 108,978 - - 108,978 - Factory Building on Free hold Land 231,849 545 - 232,394 10 Employees Quarters 526 - 526 - 10 Plant, Machinery and Equipment 1,015,671 11,507 308 1,026,870 10 Other Machinery and Equipment 24,274 443 - 24,717 10-12Furniture, Fixture and Office equipment 34,167 873 8 35,032 20-25Vehicles 33,383 9,795 3,435 39,743 20

1,448,848 23,163 4,277 1,467,734

Cost

Rs' 000R WDVA As On On For As On As OnT Jul 01 Disposal The Jun 30 Jun 30E 2003 Year 2004 2004

- - - - - 108,978 10 130,667 - 16,988 147,655 84,739 10 526 526 - - - 10 588,108 308 74,178 661,978 364,892

10-12 17,971 - 1,507 19,478 5,239 20-25 23,882 8 3,510 27,384 7,648

20 17,459 1,376 6,452 22,535 17,208

778,613 2,218 102,635 879,030 588,704

Accumulated Depreciation

Assets subject to finance lease

Vehicles 3,938 - 3,938* - 20 3,938 - 3,938 -

Total 2004 1,452,786 23,163 8,215 1,467,734

Total 2003 x x x x

* These leased assets have been transferred to owned assets during the period.

5.1 Depreciation charge for the year has been allocated as follows:2004 2003

Rs'000 Rs'000Cost of sales 95,579 x

Selling and Marketing Expenses 1,975 x

General and Administrative expenses 5,081 x102,635 x

20 1,707 1,707* - - - 1,707 1,707 - - -

780,320 3,925 102,635 879,030 588,704

x x x x x