Milestone 2

Samuel O. Owa (047805)

MBA Learner

Nexford University

ACC 6050: Accounting and Financial Reporting

Greg Harms

June 30, 2021

 Part 1

Company Name: FinOps Culinary Services Limited

Location: Lagos, Nigeria

Product: Fast food meals and drinks

Adopted Accounting Standard: International Financial Reporting Standards (IFRS)

List of Business Accounts (Chart of Accounts)

Low High
Non-Current Assets 0000 0999
Restaurant Equipment
Current Assets 1000 1999
Receivables 1000 1099
Bank 1100 1199
Temporay Investments 1200 1299
Prepayments 1300 1399
Inventories 1400 1499
Current Liabilities 2000 2599
Payables 2100 2199
Accruals 2200 2299
Non-Current Liabilities 2600 2999
Long term loans 2600 2699
Equity & Reserves 3000 3999
Share capital 3100 3199
Revenue Reserve 3900 3999
Revenue 4000 4999
Sales-Food 4000 4099
Sales-Drink 4100 4099
Other Income 4500 4999
Hall rental 4600 4699
Cash Overage 4700 4799
Cost of Sales 5000 5999
COS-Food 5100 5199
COS-Drinks 5200 5299
Operating Expenses 7000 7999
Staff cost 7100 7199
Rent & Service Charge 7200 7299
Repairs & Maintenance 7300 7399
Sales & Marketing Expenses 7400 7499
Depreciation 7500 7599
Financial Charges 7600 7699
Journal Entries
1 Description Dr Cr
Restaurants Equipment 6,000,000.00
Equity 6,000,000.00

Being the cost Kitchen Equipment purchased for company use of business owner
2 Description Dr Cr
Rent & Rates 6,500,000.00
Bank 6,500,000.00
Year 2021 rent payment
3 Description Dr Cr
Cash 6,525,000.00
Bank 12,250,000.00

Receivables 2,705,000.00
Revenue: Food 13,962,000.00
Revenue: Drink 7,518,000.00
Being Revenue from items sold to customers
4 Description Dr Cr
Inventory: Food 5,500,000.00
Inventory: Drinks 3,500,000.00
Bank 5,500,000.00
Trade Payables 3,500,000.00
Being purchase of inventory

5 Description Dr Cr
Staff Cost 5,400,000.00
Bank 5,400,000.00
Being staff emoluments
6 Description Dr Cr
Repirs & Maintenance 245,675.00
Cash 245,675.00
Being repair of restaurant equipment
7 Description Dr Cr
COS: Food 6,562,140.00
COS: Drinks 2,255,400.00
Inventory: Food 6,562,140.00
Inventory: Drinks 2,255,400.00
Being cost of goods sold
8 Description Dr Cr
Financial charges 1,152,350.00
Accrued Expenses 1,152,350.00
Being Interest charges
9 Description Dr Cr
Pre-paid expenses 250,000.00

Bank 250,000.00
Being insurance premium
10 Description Dr Cr
Depreciation 1,154,820.00
Accumulated Depreciation 1,154,820.00
Being Depreciation charged for the year
11 Description Dr Cr
Insurance 600,000.00
Pre-Paid expenses 600,000.00
Being Car insurance charged
12 Description Dr Cr
Insurance 600,000.00
Pre-Paid expenses 600,000.00
Being Car insurance charged
13 Description Dr Cr
Cash 5,350,000.00
Hall rental 5,350,000.00
Being Hall rental income
14 Description Dr Cr
Restaurant equipment 1,523,000.00
Bank 1,523,000.00
Being the cost restaurant equipment purchased
15 Description Dr Cr
Cash 232,000.00
Cash Overage 232,000.00
Being excess cash amount
16 Description Dr Cr
Trade Payables 3,575,000.00
Bank 3,575,000.00
Being Payment to vendors
17 Description Dr Cr
Temporary Investment 8,575,000.00
Equity 8,575,000.00
Being Cash placement in 90 days Treasury bill IFO the company the director
18 Description Dr Cr
Long term Loans 5,575,000.00
Long term Loans 5,575,000.00
Being 24 Assets Finance facility for restaurant Cooling system
Trial Balance showing the effect of opening balances and the journal entries of the
above transactions
New Transactions
Opening Bal Dr Cr Balance
Non-Current Assets
Restaurant Equipment 2,345,000.00 13,098,000.00 1,154,820.00 14,288,180.00
Current Assets

Receivables 2,705,000.00 2,705,000.00

Bank 2,752,350.00 24,357,000.00 22,993,675.00 4,115,675.00
Temporay Investments 2,500,000.00 8,575,000.00 11,075,000.00
Prepayments 3,250,000.00 250,000.00 3,500,000.00
Inventories 6,745,050.00 9,000,000.00 8,817,540.00 6,927,510.00
Current Liabilities
Payables (1,545,750) 3,575,000.00 3,500,000.00 (1,470,750)
Accruals (237,200) 1,152,350.00 (1,389,550)

Non-Current Liabilities
Long term loans 5,575,000.00 (5,575,000)
Equity & Reserves
Share capital (15,809,450) 14,575,000.00 (30,384,450)
Revenue Reserve - -
Revenue -
Sales-Food 13,962,000.00 (13,962,000)
Sales-Drink 7,518,000.00 (7,518,000)
Other Income
Hall rental 5,350,000.00 (5,350,000)

Cash Overage 232,000.00 (232,000)

Cost of Sales -
COS-Food 6,562,140.00 6,562,140.00
COS-Drinks 2,255,400.00 2,255,400.00
Operating Expenses -
Staff cost 5,400,000.00 5,400,000.00
Rent & Service Charge 6,500,000.00 6,500,000.00
Repairs & Maintenance 245,675.00 245,675.00
Sales & Marketing Expenses -
Depreciation 1,154,820.00 1,154,820.00
Financial Charges 1,152,350.00 1,152,350.00
- 84,830,385.00 84,830,385.00 -
Statement of Financial Position
FinOps Culinary Se rvice s Limite d
State me nt of Financial Position as at M ay 31st 2021
NGN'000
Non-Curre nt Asse ts
Restaurant Equipment 14,288

Total Non-curre nt Asse ts 14,288

Curre nt Asse ts
Cash & Cash Equivalenst 4,116
Temporary Investments 11,075
Trade Receivables 2,705
Inventories 6,928
Prepayments 3,500
Total Curre nt Asse ts 28,323

Total Asse ts 42,611

Share holde rs Equity

Share Capital 30,384
Revenue Reserve 3,792
Total Share holde rs Equity 34,176

Non-Curre nt Liabilitie s
Long Term Loans 5,575

Total Non-Curre nt Liabilitie s 5,575

Curre nt Liabilitie s
Trade Payables 1,471
Accruals 1,390

Total Curre nt Liabilitie s 2,860

Total Liabilitie s 8,435

Total Liability & Share holde rs' Equity 42,611

Income Statement

FinOps Culinary Services Limited

Income Statement for the Period ended 31st May 2021
NGN'000
Revenue 21,480
Cost of Sales (8,818)
Gross Profit/(Loss) 12,662
Other Income 5,582
Operating Income 18,244

Operating Expenses (12,146)

EBITDA 6,099
Depreciation (1,155)
EBIT 4,944
Financial Charges (1,152)
EBT 3,792
Statement of Changes in Equity
FinOps Culinary Services Limited
Statement of Changes in Equity
Retained
Share capital Earnings Total Equity
NGN'000 NGN'000 NGN'000
For the period ended 31/05/2021

As at Beginning of Period - - -
Share Capital 30,384 - 30,384
Profit/Loss for the period - 3,792 3,792
Total comprehensive income as at period end - - -
30,384 3,792 34,176

Statement of Cash Flows

FinOps Culinary Services Limited
S ta te me n t o f Ca s h flo w fo r th e p e rio d e n d e d Ma y 3 1 s t 2 0 2 1
NGN'000
Cash Flow from Operating Activites
Net Profit 3,791.62
Adjustments:
Depreciation 1,154.82
Add/Less Changes in Current Assets
Temporary Investments 8,575.00
Trade Receivables 1,363.33
Inventories 250.00
Prepayments 182.46
Add/Less Changes in Current Liabilities
Trade Payables 75.00
Accruals 1,152

Net Cash Flow from Operating Activities 16,545

Cash flow from Investing Activities

Purcahse of Fixed Asets (9,606)

Net Cash flow from Investing activities (9,606)

Cash Flow From Financing Activities

Loans (5,575)

Net Cash flow from Financing Activities (5,575)

Net Cash Flow 1,363.32

Opening Cash Balance 2,752.35

Cash and Cash Equivalents 4,115.67

Ratio Calculation
Type of Ratio Formula Ratio Calculation
Workings Ratio
Current ratio Current Asset 28,323
9.90
Current Liability 2,860
Workings Ratio
Net Profit Ratio Net Income 3,792
0.18
Net Sales 21,480
Workings Ratio
Return on Assets Net Income 3,792
0.09
Total Assets 42,611
Workings Ratio
Inventory Turnover Cost of Sales 8,818
1.27
Inventory 6,928
Workings Ratio
Gross Profit Ratio Gross Profit 12,662
0.59
Net Sales 21,480

Part 2

How Working With Multiple Currencies Can Have An Effect On Financial On

Financial Statements

Now that FinOps Culinary Services now has an international business presence in London

and the United States of America, it has two other different currencies (pounds sterling the US dollar)

that are now part of its business operations. For the purpose of reporting its financial transactions, the

company is not allowed via its financial statements and annual reports, the company is precluded from

using more than one currency, in other words, the company can only use one currency for reporting.

To issue a financial statement that is reported in a single currency, the company needs to carry out

currency translation, which according to Anastasia B (September, 2019), is “the process of quoting

the amount of money in one currency in the denomination of another currency. FinOps requires this

process as an integral part of recording its financial transactions because it is usually used in the

statement of financial positions (balance sheets).

Currency translations will aid FinOps in creating financial statements in a single

currency. Thereby also assisting it in meeting governing tax authorities' requirement of the

use of only one denominated currency as part of its recording procedure. The use of a single

currency in financial statements will make these statements easier to read, understand, and
analyze as it will be close to being impossible to draw reasonable conclusions from a

financial statement that is reported in more than one currency.

Steps for Currency Translation

Currency translation can be achieved in three distinct steps highlighted below:

 Determination of FinOps’ functional currency for its business

 Re-measurement of the financial statements of the business in the functional currency

 Recording of the gains and losses on the translation of currencies

Functional Currency Determination

The functional currency of FinOps is the currency in which it prepares its financial statement

which is this case is the Nigerian Naira because the company is headquartered in Nigeria.

Although, the functional currency is usually that of the company where the business's main

headquarters are, there are other ways that the functional currency may be decided. An

alternative to the use of the main headquarter is the adoption of a currency in which the

majority of the business operations are carried out.

Re-measurement of Financial Statements of the businesses in its functional Currency

After the determination of its functional currency, the next step is for Finops to ensure that its

financial statements are reported only in the selected currency. Each aspect of the financial

statements will be translated into a single currency and this involves calculating the total of

the following items:

 The company’s assets and liabilities

 Specific items in the income statement (Revenue, expenses, gains, and losses)

 Business allocations such as depreciation and amortization

 Cash flows
The company will essentially keep track of the dates on which any or all of the above-listed

transactions occur. While currency translation often majorly takes place at the end of a

financial year, the rates used are determined by the date of the transaction in some cases.

Recording of the gains and losses on the translation of currencies

A currency translation will usually lead to translation adjustments which must be recorded on

the company’s balance sheet. The gains or losses sequel to translation is mentioned in the

equity section of the balance sheet. Additionally, FinOps has required to records the

adjustment in its profit or loss statement of comprehensive income.

Steps That Finops will take to reduce the risk of loss when working with multiple

currencies.

According to Craig Anthony (August, 2020), “currency risk is the risk that one currency

will move against another currency, in a negative manner thereby affecting an investment's

overall return”. In other words, the rate of exchange between the two currencies can move

adversely and erode the returns of foreign investment. Investors can accept currency risk and

hope for the best, or they can employ hedging strategies to mitigate or eliminate the risk. The

steps FinOps can take to reduce the risk of loss while working with multiple currencies

include:

 By making investments into two currencies or other investments to offset any losses

that may arise from currency exchange rates

 At the start of an investment, by buying contracts or options against loss

 By making use of phone apps and other electronic resources to manage investments in

real-time

 By purchasing contracts in foreign market futures

 By short selling of currency investments

 References

Anastasia Belyh. (September 23. 2019). Financial Statements: How Does Currency

Translation Work. Retrieved from: https://www.cleverism.com/financial-statements-

currency-translation-work/

Craig Anthony. (August 9, 2020) .Three Strategies to Mitigate Currency Risk. Retrieved

from: https://www.investopedia.com/articles/investing/041916/3-strategies-mitigate-

currency-risk-eufx.asp