Financial Accounting

Lecture 13
 Current Assets
Comp Ordinance 1984 Fourth Schedule
• Stocks / Inventory
• Raw Material
• Finished Goods
• Work in Process
• General Stores / Spares
• Tools
• Marketable Securities
• Loans and Advances
• Cash and Bank Balances
• Current assets shall be classified under
sub-heads appropriate to the company’s
affairs, including, where applicable, the
following:
• General Stores and spare parts
distinguishing, where practicable,
each from the other.
• Loose tools Moulds / Dies.
• Stock-in-trade, distinguishing
where practicable, between
stock of raw materials and
components
work in progress
stock of finished products and
other stocks
• In the case of above three sub-
heads, the respective basis of
valuation shall be stated.
• If the basis such as “cost”, “net
realizable value” or cost or net
realizable value whichever is lower” is
given, there shall also be given to the
extent practicable a general indication
of the method of determining the
“cost” or “net realizable value” e.g.,
“average cost”, “first-in, first out” or
“last in, first out”.
• Where the basis is of valuation
involves departure from the
recognized accounting principles,
the reasons there for along with
financial impact.
• Trade debts which shall include
amounts due in respect of goods
sold or services rendered or in
respect of other contractual
obligations but shall not include the
amounts which are in the nature of
loans or advances.
Classification of Debt:

• Debts considered good and debts

considered doubtful or bad shall be
separately stated.

• Debts considered good shall be

distinguished between those which
are secured and those for which the
company holds no security other than
the debtor’s personal security.
• Loans and advances due for
repayment within a period of twelve
months from the date of the balance-
sheet.
• Showing separately those considered
good and those considered doubtful
or bad debts.
• Trade deposits and short term
prepayments and current account
balances with statutory authorities.
• Bills receivable.
• Marketable securities, other than
long-term investments.
• Interest accrued or interest
outstanding.
• Other receivables specifying
separately the material items.
• tax refunds due from
Governments, showing separately
excise duties, customs duties,
sales tax, income tax etc.
• Cash and bank balances, distinguishing
between.
 Cash in hand,
 Cash in transit and
 balance with banks indicating the nature
thereof, e.g., on current or deposit account
• Amounts required to be kept in special or
separate accounts under any law shall be
shown separately.
• In case of trade debts, loans and advances and
other receivables following information shall
also be disclosed.

 The aggregate amount due by directors,

chief executive, and executives of the
company and any of them severally or jointly
with any other person.

 aggregate amount due by associated

undertakings, controlled firms and managed
modarabas, names to be specified in each
case.
the maximum amount of debts
under each of the preceding items,
at any time since the date of
incorporation or since the date of
the previous balance-sheet,
whichever is the later. Such
maximum amounts to be calculated
by reference to month-end
balance.
• Provision, if any, made for
diminution in the value of or loss in
respect of any current asset shall
be shown as deduction from the
gross amount of the respective
assets.
• If in the opinion of the directors any of
the current assets have, on realization
in the ordinary course of the
company’s business, a value less
than the amount at which they are
stated in the financial statements, a
disclosure of the fact that the directors
are of that opinion together with their
estimates of the realizable value and
the reasons for assigning higher
values in the balance-sheet shall be
required.
 Current Assets – Disclosures (Samples)
• Stores and Spares – Policy Note
 Stores and spares are valued at lower of
cost or net realizable value. Cost is
calculated using weighted average method.
Stores in transit are valued at invoice value.

• Notes to the accounts

Notes 20-2 20-1
• Stores and Spares
Stores xxx xxx
Spares xxx xxx
Stores in Transit xxx xxx
 Current Assets – Disclosures (Samples)
• Trade Debtors
• Notes to the accounts
Notes 20-2 20-1
• Trade Debtors
Secured xxx xxx

Unsecured – Considered Good

Associated Undertakings xxx xxx
Others xxx xxx
xxx xxx
– Considered Doubtful xxx xxx
Less provision for doubtful debts xxx xxx
xxx xxx
xxx xxx
 Current Assets – Disclosures (Samples)
• The maximum aggregate amount
at the end of any month during the
year from associated undertaking
was Rs. xxxx.
 Current Assets – Disclosures (Samples)
• Advances, Receivables, Prepayments and other
Receivables
• Notes to the accounts
Notes 20-2 20-1
Advances – considered good
Executives xxx xxx
Other Employees xxx xxx
xxx xxx
Suppliers of goods – Considered Good
Security deposits xxx xxx
Prepayments xxx xxx
xxx xxx
Due from associated undertaking xxx xxx
 Current Assets – Disclosures (Samples)
Other Receivables
Considered Good xxx xxx
Considered Doubtful xxx xxx
Less Provision for doubtful
balances xxx xxx
xxx xxx
xxx xxx
• No advances were given to the directors of the
company.
• The maximum aggregate amount at the end of
any month during the year from associated
undertaking was Rs. xxxx.
 Current Assets – Disclosures (Samples)
• Cash and Bank Balances
• Notes to the accounts
Notes 20-2 20-1
Cash at Bank
Current accounts xxx xxx
Saving accounts xxx xxx
xxx xxx
Cash in Hand xxx xxx
xxx xxx