FINANL PROJECT

FINANCIAL ACCOUNTING 2
SHEZAN FOOD

Submitted By:
Um e Laila
MBA 1

MAY 14, 2020

Table of Contents
Chapter 10: Long-Term Assets: Fixed and Intangibles .................................................................. 4
Property, plant and equipment .................................................................................................... 4
Long-term Investments ............................................................................................................... 4
Long-term receivables ................................................................................................................ 4
Long-term Deposits .................................................................................................................... 4
Deferred Taxation ....................................................................................................................... 4
Natural Resources ....................................................................................................................... 5
Intangibles ................................................................................................................................... 5
Disposals ..................................................................................................................................... 5
Amortization ............................................................................................................................... 5
Chapter 11: Current Liabilities ....................................................................................................... 5
Trade and other payables ............................................................................................................ 5
Contract liabilities ....................................................................................................................... 5
Unclaimed dividend .................................................................................................................... 5
Interest accrued on borrowings ................................................................................................... 5
Current portion of long-term loan ............................................................................................... 5
Short-term borrowings ................................................................................................................ 6
Refund liability ........................................................................................................................... 6
Provision for taxation.................................................................................................................. 6
Chapter 13: Corporations: Stock Transactions and Dividends ....................................................... 6
Share capital ................................................................................................................................ 6
Reserves ...................................................................................................................................... 6
Unappropriated profits ................................................................................................................ 6
Chapter 14: Long Term Liabilities ................................................................................................. 7
Long-term loan............................................................................................................................ 7
Deferred taxation ........................................................................................................................ 7
Chapter 15: Investment and Fair Value Accounting....................................................................... 7
Debt Investments ........................................................................................................................ 7
Equity Investments...................................................................................................................... 7
Fair Valuing and Reporting Investments .................................................................................... 7
Chapter 16: Statement of Cash Flows ............................................................................................. 8
 Cash Flow from Operating Activities ......................................................................................... 8
Cash Flow from Investing Activities .......................................................................................... 8
Cash Flow from Financing Activities ......................................................................................... 8
References: ...................................................................................................................................... 9
 Chapter 10: Long-Term Assets: Fixed and Intangibles
Company has listed five long term assets

Property, plant and equipment

Property, plant and equipment except for freehold land and leasehold land held on 99 years lease,
are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Free
hold and lease hold land are stated at cost.

Depreciation is calculated using the reducing balance method, which are considered appropriate
to write off the cost of the assets over their useful lives.
This comprise of assets that are divided under the 2 main heading.

Operating fixed asset Capital working asset

 Increase the asset worth
 Freehold land and leasehold land no
change
 Other asset like machinery, equipment , has
been depreciated under balance method
and new purchases made are added at their
book value
 Increase in net worth
 This is stated at cost including
capitalization of borrowing costs. It
consists of expenditures incurred and
advances made, in respect of fixed assets,
in the course of their construction and
installation.

Long-term Investments
The company has invested in 0.35% of the issued certificate capital of the Modaraba. Long-term
investment value includes the worth of the certificate plus the gain on the remeasurement.

Long-term receivables
This represents receivable from Utility Stores Corporation against sales made in prior years
which has been classified as long term, based on expected pattern of recovery. In compliance
with IFRS, this receivable has been discounted to present value.

Long-term Deposits
Company has made long-term deposits in utilities companies and other companies to earn a
return on investments.
Deferred Taxation
Deferred tax is provided using the financial position method for all temporary differences at the
reporting date between tax base of assets and liabilities and their carrying amounts for financial
reporting purposes.
These comprises of
a) Deferred tax liabilities on taxable temporary differences; Created due to accelerated
depreciation method used.
b) Deferred tax assets on deductible temporary differences
 Natural Resources
The company does not own natural resources.

Intangibles
Company does not own any intangible assets e.g. patent, goodwill

Disposals
The gain or loss on disposal or retirement of an asset represented by the difference between the
sale proceeds and the carrying amount of the asset is recognized as an income or expense. Loss
on disposal of biological assets has been recorded on the Profit and Loss

Amortization
Financial assets at amortized cost are subsequently measured using the effective interest rate
(EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss
when the asset is derecognized, modified or impaired. The Company’s financial assets at
amortized costs includes long-term receivables, trade debts, deposits, loans and advances and
interest accrued.

Chapter 11: Current Liabilities

Types of current liabilities owned by the company that are due to paid with-in one year are as
follows

Trade and other payables

These are payable due to parties like creditors, depositors, Distributors’ credit balances, accrued
expenses, payable to staff provident fund, sales tax payable, workers’ Welfare Fund.

Contract liabilities
These are liabilities for goods that has been paid by the customers but company has yet to deliver
goods to the customers.

Unclaimed dividend
The company unclaimed dividend are those dividend which have been paid by the company but
they are not taken or claimed by the shareholder due to some reason.

Interest accrued on borrowings

Company has accumulated interest expenses on the money they have borrowed from the
creditors.

Current portion of long-term loan

This represents long term loan obtained from a commercial bank, payable in five equal semi-
annual instalments with a grace period of six months. The rate of mark-up is 3 months KIBOR +
0.25% per annum payable semiannually. This current portion of long-term loan represent the
amount to be paid due within year.
 Short-term borrowings
The aggregate short term borrowings available from commercial banks under mark-up / interest
arrangements and un-utilized portion of the said facility amounts to RS/ 376,383.

Refund liability
It the amount that company is not entitled to but are liable to be refunded to the customers.

Provision for taxation

A provision is recognized in the statement of financial position when the Company has a legal or
constructive obligation as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can
be made of the amount of obligation. This is the estimate amount company expects to pay to
income taxes for the current year.

Chapter 13: Corporations: Stock Transactions and Dividends

Share capital
Company have authorized share capital: Ordinary shares of Rs. 10/- each 10,000,000. And
company has issued 798,600 during the year at Rs/ 10/-each.

 Directors, Chief Executive Officers, and their spouse and minor children 31.62%
 Associated Companies, undertakings and related parties 0.294%
 Banks Development Financial Institutions, Non-Banking Financial Institutions 0.0107%
 Modarabas and Mutual Funds 21.7709%
 Insurance Companies 0.8961%
 General Public
o a. Local 39.2020%
o b. Foreign 0.0013%

Reserves
Reserves include additional paid in capital from issuing stocks and any unappropriated profits for
the year. Reserves are sometimes set up to purchase fixed assets, pay an expected legal
settlement, pay bonuses, pay off debt, and pay for repairs and maintenance.
Reserves has two account, 1) Capital, merger reserves 2) Revenue, general reserves.

Unappropriated profits
Earnings not paid out as dividends but instead reinvested in the core business or used to pay
off debt. Unappropriated profit is part of shareholder equity.
 Chapter 14: Long Term Liabilities
Company has only two accounts under the long-term liability.

Long-term loan
This represents long term loan obtained from a commercial bank, payable in five equal semi-
annual instalments with a grace period of six months. The rate of mark-up is 3 months KIBOR +
0.25% per annum payable semi-annually. The facility is secured against a first exclusive
registered charge on the plant and machinery up to RS. / 733,334.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the
liabilities are derecognized as well as through the EIR amortization process.

Deferred taxation
Deferred tax liability is recognized for all taxable temporary differences. Deferred tax assets and
liabilities are measured at the tax rates that are expected to apply to the period when the liability
is settled based on tax rates that have been enacted.

Chapter 15: Investment and Fair Value Accounting

Debt Investments
The company does not made any debt investments in forms of bonds.

Equity Investments
The company has not made any investments in stocks of any other company.

Fair Valuing and Reporting Investments

The carrying values of all liabilities and financial assets reflects in the financial
statements at their fair values. Fair value is determined on the basis of objective evidence
at each reporting date. However, since the company does not hold any debt or equity
instrument, this does not apply for this fiscal year.
 Chapter 16: Statement of Cash Flows
Cash Flow from Operating Activities
The company used the indirect method of calculating the cash flows from operating
activities. In this method, adjustments are made to the Net Income to determine the cash
generated from operations. A positive balance shows that cash expenditures (outflows)
were less than cash generated (inflows).

Cash Flow from Investing Activities

The expenditures include purchase of fixed assets, dividend received and sale proceeds
from the disposal of property plant and equipment. A negative balance shows that the
expenditures on fixed assets were greater than the proceeds of asset’s sales and dividend
received.

Cash Flow from Financing Activities

Dividends were paid in this year. Loan was obtained and a portion of principal of long
term debt was repaid. A net positive value shows that the inflows (money raised) are
greater than the outflows (repayments).
References:
https://shezan.pk/wp-content/uploads/2020/01/Shezan-Annual-Report-2019.pdf