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

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.

Business   Accounting   
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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)

(If there are any issues or questions, kindly let me know in comments. If the solution is to your satisfaction, a thumbs up would be appreciated. Thank You)

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