Scenario
You work for Al Midan Accountacy firm in Dubai. Mr. Saleem approached you seeking your help to start his own
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
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Operating costs
Purchase of computers
Rent of showroom
Salaries of staff
Insurance of cars
Utilitie of office
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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
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Utilities
Rent
Insurance
Interest
Depreciation furniture
Depreciation equipment
Total expenses
Net profit
Al Wasil Law Associates
Retained Earnings Statement
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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: