Ali M. Yusuf
201201237
Sana Alamri
Class 1
Financial Accounting For Companies
PART 1:
Infoland Plus
Statement of Comprehensive Income
For month ended 31st January 2013
Notes
BD
Credit Sales
5700
Cash Sales
1
48600
Cost of goods sold
2
-30470
Gross profit
23830
Expenses
Entertainment
Warranty Expenses
Office Expenses
Travel Expenses
Salaries Expenses
Shipment Expenses
Furniture deperciation expense
Equipments depreciation expense
Net income
10740
BD
-120
-2600
-1560
-540
-1400
-6670
-150
-50
Infoland Plus
Statement of changes in owner's equity
for the month ended 31st January 2013
Share
Retained earnings
Capital
Opening balance as at 1 Jan
900000
49040
2014
Withdrawls
-1820
Net income
10740
Closing balance as at 31 Jan
898180
59780
2014
Total
94904
0
-1820
10740
9579
60
Infoland Plus
Statement of financial position
As at 31st January 2013
Notes
BD
BD
BD
Non current assets
Buildings
Furniture
Accumulated Depreciation Furniture
Equipments
Accumulated Depreciation Equipments
Total Non-current Assets
Current Assets
Inventory
Account Receivable
Bank
Petty Cash
Total current assets
Total assets
Owner's Equity
Ending balance of equity, as at
31st Jan 2014
Total Owner's Equity
158060
4100
-940
2340
-250
163310
4
5
50960
10650
732800
240
794650
957960
957960
957960
Notes:
1. The total Cash sales total of BD48600 is a combination of different items
sold which are:
Cameras Sales Income
Mobiles Sales Income
Camera Accessories
Income
Mobile Accessories
Income
Computers Sales
Income
Computers Accessories
Income
CCTV Sales Income
18800
5200
15700
870
3330
510
4190
2. The Cost of goods sold of BD30470 is cost of all goods purchased and later
sold and these goods are:
Cost of Good Sold - Cameras
Cost of Good Sold - Mobiles
Cost of Good Sold - CCTV
Cost of Good Sold - Cameras
Accessories
Cost of Good Sold - Mobiles
Accessories
Cost of Good Sold Computers Accessories
Cost of Good Sold Computers
10710
3780
2390
9950
640
350
2650
1300
540
760
Cameras
Mobiles
CCTV
Cameras Accessories
Mobiles Accessories
Computers Accessories
Computers
14400
7560
4580
10520
3310
2890
7700
5. The Bank amount of BD732800 is a broken into the following different bank
amounts:
AlBaraka Bank
BBK Bank
Saving Account
97600
34580
0
28940
0
PART 2:
Introduction/Background
National Bank of Bahrain (NBB) is one of the first local banks formed in 1957
and is steadily growing to be the best provider of all banking services. With
26 branches and 59 ATMs NBB has a major share in the commercial & retail
banking industry in Bahrain and therefore has an important role in the
economy. The Bank is now trying to open up and enter new markets and a
good step taken is opening branches in Riyadh(KSA) and Abu Dhabi (UAE)
two cities in different countries of the GCC. As the business is listed in
Bahrain Stock exchange it is owned by private shareholders and the
Government of Bahrain. It employees 570 people who try to serve the
customers and helping them with all banking services and making all the
latest technology available for them in order to have a unique banking
experience.
(National Bank of Bahrain , 2014)
Looking at the financial statements of NBB for year ended 31st December
2013 and as that date, NBB is applying the IAS 1 requirements in formation
and preparing of its financial statements. Firstly, there is a preferred naming
for each financial statement stated by the IAS 1 and these names are used in
presentation of NBB's financial statements. A good example is the naming of
the statements of financial position which is used to be called 'balance sheet'
and now NBB updated the name to IAS 1 preferred name. Secondly, IAS 1
requires notes to be written especially for expenses if they are presented by
function which a brief presentation grouping expenses which has same
function as one expense in order to present the financial statements in an
easier way to understand by the end users who might not be familiar with all
accounting principles. According to that requirement, NBB is using notes
nearly in every account they write in their statements and all details of each
number and each account written has a classification and a clear explanation
that helps internal and external users to understand the statements. A good
example is the expenses of NBB which is classified by function and therefore
grouped and presented in brief and then they classified nature of each exact
expense in the notes provided.
Moreover thirdly, the classification in the statement of financial position is a
requirement by IAS1 in two ways, either it is classified by Non-current and
current or presented in liquidity order so that it is clear which are current and
which are non-current and the best presentation is the one which has both
ways. In NBB's statement of financial position accounts are not classified as
current and non-current assets but are classified by liquidity from the most
liquid to least liquid which makes it easy to know which is current and which
is non-current and is understandable and by this NBB successfully applies this
requirement by IAS1. Adding to that, one of the important requirements by
IAS1 is showing the effect of income tax and profit before tax and the final
net income after tax is deducted and that is clearly shown in the statement of
profit and loss presented by NBB for the year of 2013.
Finally, an important requirement by IAS1 is the formation and presentation
of the statement of changes in equity. The main requirements here are
showing clear income and profits for the period, showing all the changes that
affected the equity and also showing an opening and closing balances for the
equity. This is all applied by NBB in a perfect professional way as net
income/profit for the year is clearly identified and added to the retained
earnings. Nevertheless, all changes in treasury, shares capital and reserves
are clearly shown in the statement of changes in equity even with notes that
explain them more in order to help all end users to understand the exact
changes in equity. Beside all that closing and opening balances are clearly
shown with dates and for all equity accounts and for final total equity.
Advantages of IAS1
The first advantage of using IAS1 is that it helps in understanding the
financial position of the business and its liquidity in a realistic way and also
shows all changes that happened during the financial period in the process of
the business and its position. Furthermore, this helps in making the previous
statements more understandable and helps in making future predictions and
forecasts for risks and budgets.
Secondly, IAS1 helps in making the financial information more relevant and
realistic as it requires apply of all important accounting standards and
concepts, like accrual basis -matching concept- and prudence concept. Also
other concepts like going concern all help understanding the reliable
information easily. This helps end users internally and externally in making
decisions, for example managers can make better decision that helps the
business and investors can know whether company is good to invest in or no.
Thirdly, IAS1 makes it easier to compare the financial statements and position
with past years and even with future statements to be presented in future.
Added to that, it helps in comparing business performance with performance
of other similar businesses in the industry even if the business are
international. The reasons helping in comparison is because most companies
are now starting to use IAS & IFRS in presenting/forming their financial
statements and also classification and format required by IAS1 is very easy to
understand and helps in comparing with any other statement no matter how
it is presented.
Recommendations
The first recommendation for NBB is related to the presentation of liabilities
and assets in the statement of financial position. As stated above they are
not classified in current/non-current and therefore classifying them will be a
good idea in making them more understandable and clear for end users.
Secondly, NBB is recommended to write more details in their statements as it
will help them reduce notes which are so long to read. An example in doing
this is stating expenses by nature rather than by function. This will help end
users know more and understand the statements easily without any need to
refer the notes especially that the notes are not easy to understand by any
random user.
Reference:
Christian, D., ludenbach, N., (2013). IFRS Essentials.(1st Ed.). United kingdom:
John Wiley & Sons Ltd.
National Bank of Bahrain - Home. (2014, January 1). National Bank of Bahrain
- Home. Retrieved April 29, 2014, from http://www.nbbonline.com/default.asp?
action=category&id=23
Appendix:
1) Business information:
Name: Infoland Plus
Contact name: MR. Hassan Alali
Number: 39200730
Account Name
Type
Owner withdrawls
Cash Capital
Retained earnings
Equity
Equity
Equity
Petty Cash
AlBaraka Bank
BBK Bank
Saving Account
Credit Sales
Cameras Sales Income
Mobiles Sales Income
Camera Accessories Income
Mobile Accessories Income
Computers Sales Income
Computers Accessories Income
CCTV Sales Income
Cost of Good Sold - Cameras
Cost of Good Sold - Mobiles
Cost of Good Sold - CCTV
Cost of Good Sold - Cameras
Accessories
Cost of Good Sold - Mobiles
Accessories
Cash
Cash
Cash
Cash
Income
Income
Income
Income
Income
Income
Income
Income
Cost of Sales
Cost of Sales
Cost of Sales
Cost of Sales
Cost of Sales
60600
60700
12100
12200
12300
11100
13100
13150
50100
50200
50300
50400
50500
50600
50700
50800
50900
50950
14100
14200
14300
14400
14500
14600
14700
Cost of Sales
Cost of Sales
Fixed Assets
Fixed Assets
Fixed Assets
Account Receivable
Accumulated
Depreciation
Accumulated
Depreciation
Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Expenses
Inventory
Inventory
Inventory
Inventory
Inventory
Inventory
Inventory