Question

Case Scenario: 3
AbdulSalam LLC’s financial position as of 30th September 2020 is as follows:
Statement of Finanancial Position

Equity and Liabilities	OMR’000	Assets	OMR’000
Share capital	5260	Inventory : Raw Materials	2500
Debentures	1540	Inventory : Finish goods	3000
Net Profits	2500	Other assets	3800
	9300		9300

The company management has been decided the following ‘creative accounting’ measures:
a) Inventory: Raw Materials - Increase the raw material inventory by OMR 300 000 to represent low provision for obsolete raw materials.
b) Inventory: Finish goods – Decrease the finish good inventory by OMR 100 000 to represent damaged finish goods.
The question: Redraft the Statement of Financial Position as of 30th September 2020 to reflect the above Creative Accounting measures.

Answer 1

Redrafted Statement of Financial position as of September 30th, 2020

Equity and Liability	OMR '000'	Assets	OMR '000'
Share capital	5260	Inventory: Raw material (Increase by OMR 300000 as per 'creative accounting' measures)	2800
Debentures	1540	Inventory: Finished goods (Decrease by OMR 100000 as per 'creative accounting' measure)	2900
Net profits	2700	Other assets	3800
	9500		9500

(Rise of Raw material inventory by OMR 300000 and reduction of finished goods inventory by OMR 100000, ultimately increases the total assets by OMR 200000. This overstates the Net income by similar amount as well raising it from OMR 2500000 to OMR 2700000.Only then can the Statement of financial position tally)

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