about Financial Accounting

About TMA:

The TMA covers the financial accounting concepts and practices in the businesses; as you work, you will gain confidence in your ability to use the financial statements of real company. It is marked out of 100 and is worth 20% of the overall assessment component. It is intended to assess students’ understanding of some of the learning points within chapters 1 to 4. This TMA requires you to apply the course concepts.

The TMA is intended to:

• Increase the students’ knowledge about the reality of the accounting as a profession.

• Assess students’ understanding of key learning points within chapters 1 to 4.

• Develop the ability to understand and interact with the nature of the financial statements in reality.

• Develop students’ communication skills, such as memo writing, essay writing, analysis and presentation of material.

• Develop basic ICT skills such as using the internet.

The TMA requires you to:

1. Review various study chapters (from Chapter 1 to 4) of the textbook “Horngren’s Financial and Managerial Accounting, The Financial Chapters, 5th edition” and apply some of the concepts within it.

2. Conduct a simple information search using the internet.

3. Present your findings and your answers within the specified word count.

4. You should use a Microsoft Office Word and Times New Roman Font of 12 points.

5. You should read and follow the instructions below carefully. Each part of the process will carry marks for the assignment.

General instructions for students:

Plagiarism: It’s imperative that you write your answers using your own words. Plagiarism will be penalized depending on its severity and according to AOU plagiarism policy.

Word count: Your answers are expected to be within the specified word count. A 10% deviation from word count limit is acceptable. Not adhering to specified word count could result in the deduction of up to 4 marks of your total TMA mark.

Referencing: You are expected to use the Harvard referencing style for in-text referencing and list of reference at the end. Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

E-library: You are expected to use E-library sources to support your answers. A minimum of 3 sources is required. Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

Format and Presentation: In your answer, you should explain each point or inquire separately.

Use the following headings (below) to make up the different sections of your answer:

Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

The TMA Questions

Part (A): “Since 1976 The Journey Continues” (The Saudia Dairy and Foodstuff Company: SADAFCO: 2015/2016 Annual Report)

[35 marks in total]

The Saudia Dairy and Foodstuff Company (SADAFCO) story began on 21 April 1976 when a joint venture between three dairy companies in Jeddah, Madinah and Dammam was formed between Saudi, Kuwaiti and European businessmen and the company began production at the Jeddah Factory in 1977. Ten years later the European partners sold their shares to the Saudi and Kuwaiti shareholders and in 1990 the three companies merged into one to officially form Saudia Dairy and Foodstuff Company. An initial public offering (IPO) led to the company’s listing on the Saudi Arabian Stock Exchange, Tadawul, on 23 May 2005. The company celebrates its 40th anniversary in 2016.

“Since 1976 The Journey Continues” SADAFCO addressed its 2015/2016 annual report. To display and download Sadafco Annual Report 2016-2016 in English on PDF Form – 52 pages, access following web page at: http://sadafco.com/content/annual-report-2015-2016

(Or you can copy and paste the above address)

Instructions:

Use the annual report to answer the following questions:

1. What are the standards that govern the preparation of the consolidated financial statements 2015/2016?

[3 marks]

1. SADAFCO is a leading, world-class, Saudi Arabia-based company), what are the main activities of the Company?

[3 marks]

1. Go through “Auditors’ Report to the Shareholders of Saudia Dairy and Foodstuff Company (SADAFCO) ” and answer the following questions:

   1. Who is responsible for the preparation of these consolidated financial statements?

1. 1. What is the name of the independent auditor, what is his responsibility, and what are the standards that govern his audit?

[5 marks]

1. Identify Net Sales for the years 2015/2016 and 2014/2015. Did Net Sales increase or decrease in 2015/2016 compared with 2014/2015? Comment.

[8 marks]

1. Identify Net Income (Profit) for the years 2015/2016 and 2014/2015. Did Net Income (Profit) increase or decrease in 2015/2016 compared with 2014/2015. Based on this, was the year 2015/2016 better or worse than the year 2014/2015? Comment.

[8 marks]

1. Compute the debt ratio for SADAFCO as of March 31, 2016 and March 31, 2015. Comment on your answer.

[8 marks]

Part (B): Accounting Cycle Comprehensive Problem

[65 marks in total]

Arab Cleaning Service, Inc. completed the following transactions during July, 2016:

July 1 Shareholders invested $15,000 cash in the business in exchange for common stock.

1 Purchased equipment for $10,000, paying $3,000 cash and the balance on account.

3 Purchased cleaning supplies for $1,700 on account.

1. Paid $1,800 for a one-year insurance policy, effective July 1.

12 Performed cleaning services for customers on account for $4,200.

18 Paid $1,000 of amount owed on equipment, and $400 of amount owed on cleaning

supplies.

20 Paid $1,900 for employee salaries.

1. Collected $2,400 from customers billed on July 12.

25 Performed cleaning services for customers on account for $2,100.

31 Paid gasoline for the month on the equipment, $400.

31 Paid cash dividends of $500.

Adjustment data consist of:

1. Unbilled fees for services performed at July 31 were $1,300.

2. Depreciation on equipment for the month was $200.

3. Prepaid insurance expired, $150.

4. An inventory count shows $280 of cleaning supplies on hand at July 31.

5. Accrued but unpaid employee salaries were $630.

Requirements:

1. Record the July transactions in the journal (Explanations are not required).

[11 marks]

1. Post the July transactions to the ledger accounts using T-accounts.

[11 marks]

1. Prepare a trial balance (before adjustments) at July 31, 2016.

[3 marks]

1. Journalize and post adjusting entries.

[10 marks]

1. Prepare an adjusted trial balance at July 31, 2016.

[3 marks]

1. Prepare Arab Cleaning Service’s income statement and statement of retained earnings for

the month ended July 31, 2016, and the classified balance sheet on that date (On the income statement, list expenses in decreasing order by amount – that is, the largest expense first, the smallest expense last).

[15 marks]

1. Journalize and post the closing entries.

[8 marks]

1. Prepare a post-closing trial balance at July 31, 2016.

[4 marks]

End of Questions

Good Luck

Prof. Ahmad Al-Omari,

BE210/4 GCC, Kuwait Branch