Accounting System of EMCO

Industries Limited

Prepared by: Munawar Zaheer

Bilal Amjad
M.Usman Ijaz
AGENDA
 INTRODUCTION
 ACCOUNTING SYSTEM
 FINANCIAL STATEMENTS
 RATIOS ANALYSIS
 CONCLUSION
INTRODUCTION
 The company is incorporated in Pakistan
and listed on Karachi, Lahore and
Islamabad Stock Exchanges
 The company is principally engage in
manufacture and sale of high/low tension
electric porcelain insulators, switchgear
and ceramic tiles.
ACCOUNTING SYSTEM
 EMCO is using an accounting system that
is designed by their IT Department to
maintain books of accounts
 They generally called this software an
ERP (Enterprise Resource Planning)
system
PERPETUAL INVENTORY SYSTEM

 EMCO industry is a large company with

professional management and its employees
and management needs information about
their goods in inventory and quantities of
products that are selling so they are using
perpetual inventory system which means that
they record all transactions involving cost of
the merchandize are recorded immediately as
they occur. They are continuously updating
their accounting record after every transaction.
 ACCOUNTS DEPARTMENT

SALE DEPARTMENT PURCHASE DEPARMENT

RATIOS ANALYSIS
RATIOS 2009 2008
Current ratio 0.88 0.83
Quick ratio 0.46 0.45
Inventory 2.93 2.75
turnover
DSO 66 65
F.A.T 1.27 1.096
T.A.T 0.72 0.65
Debt ratio 75% 74%
 CURRENT RATIO:
Current ratio indicates the extent to which current
liabilities are covered by assets expected to be
converted into cash in the near future. Emco current ratio
in 2009 is than 2008 which means that Emco’s liquidity
position is stronger so in the near future it will not face
any problem in meeting it’s current liabilities
 QUICK RATIO:
Quick ratio is a variation of current ratio. It measures
the company ability to use its cash or assets to retire
current liabilities. So the company’s quick ratio is higher
than the previous year which shows that the company
can easily pay-off it’s current liabilities without liquidating
it’s inventory
 INVENTORY TURNOVER:
Inventory turnover ratio is high. It indicates
that company is not holding excessive stock.
Stocks are immediately used in manufacturing
processes after its purchase. This shows that
company management is efficiently handling
stocks of the company.
 TOTAL ASSET TURNOVER:
Total asset turnover ratio is higher than the
previous year which indicates that all assets are
working at full capacity and efficiently
participating in the production process.
 DEBT RATIO:
Company’s debt ratio this year is 75% which
is slightly higher than previous year ratio. This
indicates that its creditors have supplied a major
portion in the firm total financing. The company
might find it difficult to borrow additional funds
without first raising equity capital through a stock
issue. Creditor might be reluctant to lend firm
more money.
CONCLUSION
 After the severe economic recession
around the globe and poor market
situation the company beard some serious
loss but now things are looking up for
EMCO corp.
 Talking of their accounting system, with
the right acct.system the company is
moving on the right track and in the right
direction.