You are required to help Mr. Saleem take the right decision about the best source of finance by preparing an appropriate table identifying the sources of finance avaliable to Mr. Saleem

Scenario

You work for Al Midan Accountacy firm in Dubai. Mr. Saleem approached you seeking your help to start his own

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computer trading business in Dubai, United Arab Emirates. The list of proposed start-up, resources costs and

operating costs of a computer business are given below:

 

 

Start-up costs

License fee

Chamber of commerce charges

Economic department fee

Civil defence charges

Labour department fee

Immigrations department charges

Resources costs

Office equipment

Office furniture

Delivey van

Airconditioner for office

Showcases and racks

Tools for office

NIVE | Assignment Brief | Sept 2014         Page 3 of 9

 

 

Operating costs

Purchase of computers

Rent of showroom

Salaries of staff

Insurance of cars

Utilitie of office

Advertisement for business

 

Task 1 (P1, P2) 

You are required to help Mr. Saleem take the right decision about the best source of finance by preparing an

appropriate table identifying the sources of finance avaliable to Mr. Saleem.

1.1 Identify different sources of finance for the business.

P1.1

 

1.2 Prepare a suitable schedule to assess the implications of different sources of fianance avaliable to Mr. Saleem’s

business with referecne to the following aspects:

 

 Legal

 Financial and dilution

 Bankruptcy and dilution

P1.2

1.2.2 List and briefly explain at least FOUR more resources that Mr. Saleem could benefit from in the future.

 

1.3 Write a paragraph to evaluate the appropriate sources of fianance considering the following aspects:

 

 Suitablility of purpose

 Advantages

 Disadvanteges

1.4 Write a paragraph to analyse the costs of different sources of finance you identified for Mr. Mohammad’s business

in Task 1.1 of the assignment.

P2.1

 

 

Scenario

Al Wasil Law Associates is a public limited company providing law services in Dubai. Mr. Hadad, the Chairman of Al

Wasil Law Associate hires the services of Talal Abu Gazalah as an external auditor of the company. You work as an

audit manager in Talal Abu Gazalah.

The accounts department of Al Wasil Law Associates has presented the required information to you for the year

ended on December 31, 2012. After completing the audit work you presented the following financial reports to Mr.

Hadad on behalf of Talal Abu Gazalah.

 

 

 

 

P1.3

P1.1

 

L5 

 

 

 

 

Al Wasil Law Associates

Income Statement 

For the year ended December 31, 2012.

Description Amount in (AED) Amount in (AED)

 

Revenues:

Service revenue

Commision income

Total revenue

Expenses:

Salaries

Supplies

Advertisement

Utilities

Rent

Insurance

Interest

Depreciation furniture

Depreciation equipment

Total expenses

Net profit

Al Wasil Law Associates

Retained Earnings Statement

NIVE | Assignment Brief | Sept 2014         Page 4 of 9

 

 

2,000,000

120,000

640,000

300,000

250,000

150,000

180,000

10,000

10,000

5,000

3,000

 

 

 

 

 

2,120,000

 

For the year ended December 31, 2012.

Description Amount in (AED)

Retained earnings as on January 1,2012

Net profit

Dividend paid

Retained earnings as on December 31,2012

Al Wasil Law Associates

Balance Sheet

As on December 31, 2012.

Description Amount in (AED) Amount in (AED)

Curren assets

Cash

Accounts receivable

Office supplies

Prepaid insurance

Fixed assets

Office furniture

Office equipment

Total assets

Current Liabilities 

Accounts payable

Interest payable

Service revenue received in advance

 

700,000

1,800,000

700,000

190,000

 

495,000

497,000

500,000

10,000

100,000

 

 

1,548,000

572,000

572,000

(100,000)

472,000

3,390,000

 

 

992,000

4,382,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

L5 

 

 

Commission received in advance

Salaries payable

Long-term liabilities

Bank loan

Owner’s Equity

Share capital

Retained earnings

Total liabilities and owner’s equity

Al Wasil Law Associates

Cash Flow Statement

NIVE | Assignment Brief | Sept 2014         Page 5 of 9

 

 

60,000

240,000

 

1,000,000

 

2,000,000

472,000

For the year ended December 31, 2012.

Description Amount in (AED) Amount in (AED)

 

Cash flows from operating activities

Sales

Increase in accounts receivable

Increase in office supplies

Increase in prepaid insurance

Depreciation of furniture

Depreciation of equipment

Increase in accounts payable

Increase in interest payable

Service revenue received in advance

Commission received in advance

Salaries payable

Net cash provided by operating activities

Cash flows from investing activities

Purchased office equipment

Purchase of office furniture

Net cash used by investing activities

Cash flows from financing activities

Issue of shares

Proceeds from bank loan

Payment of dividend

Net cash provided by financing activities

Net increase in cash

Cash at the beginning of period

Cash at the end of period

572,000

(1,800,000)

(700,000)

(190,000)

5,000

3,000

500,000

10,000

100,000

60,000

240,000

 

 

(500,000)

(500,000)

2,000,000

1,000,000

(100,000)

 

 

 

 

 

910,000

 

1,000,000

2,472,000

4,382,000

(1,200,000)

 

 

 

(1,000,000)

 

 

 

 

 

Mr. Hadad is not satisfied with the performance of the company. As your audit firm prepared the financial reports  of

the company, he asked your advice on the following: