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 Schedule
• 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.
 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.
 Preparation of Accounts [Section 233]
• 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.
Presentation of Balance Sheet
 ABC Food Processing and Packing Co Ltd.
Balance Sheet As At June 30, 2004
2004 2003
Note Rs'000 Rs'000
ASSETS
Non-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 Receivables
Cash 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 2003
Note Rs'000 Rs'000
ASSETS
Non-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 receivables
Cash 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 By
Share 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 Liabilities
Short Term Finances 15 - 144,331
Current Maturity of Obligation 16 - 1,316
Under Lease Finance
Creditors, 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 By
Share 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 Liabilities
Short Term Finances 15 - 144,331
Current Maturity of Obligation 16 - 1,316
Under Lease Finance
Creditors, 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 Assets
Companies Ordinance IAS
Property Plant and
Fixed Assets
Equipment
Intangible Assets
Long Term Investments Investment in Associates
Long Term Loans &
Other Financial Assets
Advances
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;
 Land
 Buildings
 Plant and Machinery
 Furniture and Fittings
 Vehicles
 Capital Work in Progress
 Others (to be specified);
 Fixed Assets
• Intangible:
 Goodwill;
 Patents, Copyright, Trade Marks and Designs;
and
 Others (to be specified).
ed Asse ts

Cost R Accumulate d Depreciation

Particulars As On As On A As On On For A
Jul 01 Addition Disposal Jun 30 T Jul 01 Disposal The Ju
2003 2004 E 2003 Year 2
ned Assets
ehold Land 108,978 - - 108,978 - - - -
tory Building on Free hold Land 231,849 545 - 232,394 10 130,667 - 16,988
ployees Quarters 526 - 526 - 10 526 526 -
nt, Machinery and Equipment 1,015,671 11,507 308 1,026,870 10 588,108 308 74,178
er Machinery and Equipment 24,274 443 - 24,717 10-12 17,971 - 1,507
niture, Fixture and Office equipment 34,167 873 8 35,032 20-25 23,882 8 3,510
hicles 33,383 9,795 3,435 39,743 20 17,459 1,376 6,452

1,448,848 23,163 4,277 1,467,734 778,613 2,218 102,635 8

1707*
ets subject to finance lease
hicles 3,938 - 3,938* - 20 1,707 1,707* -
3,938 - 3,938 - 1,707 1,707 -
al 2004 1,452,786 23,163 8,215 1,467,734 780,320 3,925 102,635 8
al 2003 x x x x x x x

hese leased assets have been transferred to owne d assets during the period.

preciation charge for the year has been allocate d as follows:

2004 2003
Rs'000 Rs'000
t of sales 95,579 x
ing and Marketing Expenses 1,975 x
neral and Administrative expenses 5,081 x
102,635 x
5. Fixed Assets

Cost R
Particulars As On As On A
Jul 01 Addition Disposal Jun 30 T
2003 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 10-12
Furniture, Fixture and Office equipment 34,167 873 8 35,032 20-25
Vehicles 33,383 9,795 3,435 39,743 20

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

 Rs' 000
R Accumulated Depreciation WDV
A As On On For As On As On
T Jul 01 Disposal The Jun 30 Jun 30
E 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

 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'000
Cost of sales 95,579 x
Selling and Marketing Expenses 1,975 x
General and Administrative expenses 5,081 x
102,635 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