Financial Accounting

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Lecture – 43

Question

• Sheraz Limited is a manufacturing company

• You are provided with the trial balance and other information of the company for the year ended June 30, 2002.

• You are also provided with the comparative figures of balance sheet items.

Required

• You are required to prepare Financial Statements of the Company for the year ended June 30, 2002.

Financial Accounting

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Lecture – 43

Trial Balance

DEBIT CREDITRs'000 Rs'000

Tangible Fixed AssetsFixed Assts At Cost

Freehold Land 9,550 Building 15,815 Plant and Machinery 54,636 Furniture and Fixture 2,698 Motor Vehicles 24,111 Leased Vehicles 22,123

Accumulated DepreciationBuilding 10,775 Plant and Machinery 47,315 Furniture and Fixture 2,474 Motor Vehicles 12,347 Leased Vehicles 12,186

Capital Work in Progress 4,075

Sheraz Ltd.Trial Balance as On June 30 2002

Financial Accounting

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Lecture – 43

Long Term InvestmentsInvestment in Shares of Co. A 20,000 Investment in Shares of Co. B 2,500 Prov. For Diminution in Value Co. B 1,250

Term DepositsTerm Deposits (Long Term) 3,069

Current AssetsStores and Spares 1,114 Stock in Trade Jul 01 2001 -

Raw Material 13,264 Packing Material 42,189 Finished goods 85,296

Trade DebtsTrade Debts 18,185 Provision for Doubtful Debts 223

Advances, Deposits & Prepayments - Advances 2,434 Deposits 816 Prepayments 1,637

Financial Accounting

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Lecture – 43

Accrued Profit on Bank Deposits 388 Advance Excise Duty 2,601 Sales Tax Refundable 8,492 Other Receivables 375 Dividend Receivable 25,000

Cash and Bank - Cash in Hand 3,330 Cash at Bank - Current 25,024 Cash at Bank - Savings 16,521

Current LiabilitiesShort Term Running Finance 5,257 Creditors, Accrued & Other Liabilities -

Creditors 63,016 Customers Deposits 22,571 Accrued Expenses 22,448 Other Liabilities 1,826

Tax Payable 3,858 Dividends 200

Financial Accounting

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Lecture – 43

Long Term and Deff. LiaDeferred Tax 3,000 Obligation Under Lease Finance 15,282

Share Capital 50,000 General Reserve 104,000 Sales -

Gross Sale - Domestic 751,244 Gross Sale - Export 93,305 Sales Tax 106,158

Cost of SalesPurchases - Raw Material 291,569 Purchases - Packing Material 190,295 Overheads

Wages 23,155 Stores Consumed 7,922 Traveling and Conveyance 158 Repairs and Maintenance 10,267 Insurance 345 Fuel and Power 23,339 Wastage and Breakage 6,552 Excise Duty 49,671 Miscellaneous Expenses 7,412

Financial Accounting

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Lecture – 43

Administrative Expenses - Salaries and Wages 36,117 Postage and Telegram 1,652 Traveling and Conveyance 1,075 Repairs and Maintenance 1,272 Insurance 1,179 Printing and Stationery 1,121 Rent, Rates and Taxes 1,155 Auditors' Remuneration 161 Legal and Professional 768 Donations 81 General Expenses 400

Selling and Distribution Expenses - Salaries and Wages 23,227 Postage and Telegram 1,578 Traveling and Conveyance 2,616 Repairs and Maintenance 6,168 Vehicle Running 859 Printing and Stationery 497 Rent, Rates and Taxes 1,954

Financial Accounting

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Lecture – 43

Advertising 19,254 Outward Freight 9,628 Sales Staff Incentives 1,642 Petrol, Oil etc. 8,561 Miscellaneous Expenses 1,392

Financial Charges - Markup on Loans 282 Finance Lease Charges 1,750 Bank Charges 825

Other Expenses and Provisions - Other Income -

Profit on Bank Deposits 974 Dividend Income 25,100 Foreign Exchange Gain 5,732 Gain on Disposal of Fixed Assts. 692 Sale of Scrap 1,470

Income Tax for the year 14,800 Unappropriated Profit B/F 5,555

1,262,100 1,262,100

Financial Accounting

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Lecture – 43

Adjustments1 Provision for diminution in the value of investments to be

increased to Rs. 1,875,0002 Long term deposits maturing during the year Rs. 291,0003 Provision for doubtful debts to be increased by Rs. 987,0004 60% Dividend declared.5 Liability against lease finance payable in next financial year

Rs. 6,643,0006 Autohrised capital consists of 10,000,000 shares of Rs. 10 each.7 Transfer to general reserve Rs. 21,0008 Addition in Fixed Assets, Plant and Mach. 2,262,000

Plant and Machinery Rs. 2,262,000 Furniture Rs. 989,000 Owned Vehicles Rs. 1,758,000

Additional Information

Financial Accounting

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Lecture – 43

9 Cash received on disposal of vehicles Rs. 1,316,00010 Depreciation Building 10% Plant and Furniture 15% and

Vehicles 20% on written down value.No depreciation in year of sale and full dep in the year ofpurchase.

11 Distribution of Depreciation Building and Plant to Cost of Sales Furniture and Owned Vehicles to Administrative Expenses Leased Vehicles to Selling Expenses

12 Closing StocksRaw Material 27,545 Packing Material 74,731 Finished Goods 78,550

13 Tax paid during the year amounts to Rs. 16,414,000.

Financial Accounting

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Lecture – 43

2002 2001Note Rs'000 Rs'000

Sales 14 738,391 xCost of Goods Sold 15 572,210 xGross Profit 166,181 x

Sheraz Ltd.Profit and Loss Account for the Year Ended June 30, 2002

Profit and Loss Account

Financial Accounting

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Lecture – 43

14. Sales2002 2001

Note Rs'000 Rs'000Gross Sale - Domestic 751,244 xGross Sale - Export 93,305 xLess: Sales Tax 106,158 x

738,391 x

Notes to the Accounts

Financial Accounting

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Lecture – 4315. Cost of Goods Sold

2002 2001Note Rs'000 Rs'000

Raw Material - Opening Stock 13,264 xRaw Material - Purchases 291,569 xLess : Raw Material - Closing Stock 27,545 xRaw Material Consumed 277,288 x

Packing Material - Opening Stock 42,189 x190,295 x

Less: Packing Material - Closing Stock 74,731 xPacking Material consumed 157,753 x

Overheads Wages 23,155 x Stores Consumed 7,922 x Traveling and Conv. 158 x Repairs and Maint. 10,267 x Insurance 345 x Fuel and Power 23,339 x Wastage and Breakage 6,552 x Excise Duty 49,671 x Misc. Expenses 7,412 x Depreciation 3.1 1,602 x

130,423 xCost of Production 565,464 x

Finished Goods - Opening Stock 85,296 xLess: Finished Goods - Closing Stock 78,550 x

Cost of Goods Sold 572,210 x

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