With the rapid development of economic systems universe widely, and consecutive, with globalisation, international trade has become a important component of every economic system. Therefore, export and import industry has been well developed to back up for the smooth conductivity of international trade and to fulfill the sophisticated demands of international trade. Still being a developing state, Sri Lanka, has geared up its import and export industry since last twosome of decennaries, with the ground of successful part from few export and import companies. Amongst them, “ Trans Orbit Logistics Pvt. Ltd, ” has been lending to a significant part of the industry.
Trans Orbit Logisticss Pvt. Ltd is presenting supply concatenation direction solutions, including international and domestic transit, repositing, imposts, securities firm, freight forwarding and trade consulting services. Founded in 2003, as a messenger and air cargo company, now it has spanned its range of the service comprehensively by supplying supply concatenation direction solutions to the Earth every bit good. With lone seven old ages of history, it has been successfully runing and meanwhile frontward looking for several variegations. Presently, the company is runing with two subdivisions, with the purpose of presenting value added service.
The service delivered by the company is spanned into five major countries, refering every facet of the industry. The company is covering service countries as follows.
Specialized logistics – The service trades with provision and buying of risky goods. The company provides a entire solution to get the better of the complexnesss accompanied by the motion of risky stuffs, particularly through air.
Air freight logistics – The company facilitates cost sensitive air shipment demands.
Cross trade solutions – The company plays the function of 3rd party, in footings of organizing cargo between the client and the terminal user.
Sea cargo logistics – The company provides comprehensive ocean cargo service to and from the universe ‘s major markets.
Document logistics. – It is the service of supplying to the full customized logistics for industrial merchandise industries.
1.1 Company vision, mission ; A ; aims
As non assets based company our investings are made in people and systems. Through organic growing, non acquisition, we give our clients and employee ‘s peace of head cognizing their twenty-four hours to twenty-four hours concern wo n’t be disrupted ; our systems unity is kept integral, non disrupted by companies whose concern was founded on a different platform. Our clients are most interested in the quality and consistence of service we provide irrespective of the state in which we ‘re making concern.
To be the regional best manned and managed integrated supply concatenation Management Company, we thrive in innovations of new constructs, solutions to give our clients several options for their transit demands.
We provide complete supply concatenation solutions including Customs Brokerage and Freight Forwarding, Fulfillment and E-Commerce Fulfillment, Real Estate Services, Small Parcel Delivery, Transportation and Transportation Management, Value Added Services and value added repositing.
General Discussion on fiscal coverage
2.1 Financial coverage
It is a procedure of showing fiscal informations of a company ‘s place, runing public presentation, and financess flow for an accounting period. Fiscal statements along with related information may be contained in assorted signifiers for external party usage such as in the one-year study, SEC Form 10-K, and prospectus.
Aims of fiscal coverage
The cardinal aim of fiscal coverage is to supply information about the current fiscal position of the company. Different sorts of information searchers as stockholders, directors, employees, authorities etc. would necessitate fiscal information in order to take determinations sing the allotment of scare resources for assorted utilizations. Therefore, the procedure of fiscal coverage provides a comprehensive apprehension about the fiscal public presentation of the company in order to help the determination shapers.
The manager board and the top direction of a company represent the stockholders as a whole and act as the agent of them. The extreme duty of the direction is to pull off the financess and other resources invested by the stockholders and to supply information and feedback on their investing sporadically. Therefore, fiscal describing delivers information sing the use and the public presentation of the resources and financess.
2.3 Regulatory Framework of fiscal coverage
The regulative model for fiscal coverage can be explained as follows.
2.3.1 Companies Act no 07 of 2007
The current Company ‘s Act no07 of 2007 was passed by the parliament in 2007, replacing the old Company ‘s Act no17 of 1982. It has been marked a important stat mi rock in the success of Sri Lankan companies. The Act contains 534 subdivisions, which wrap up the overall public presentation of the company, including the direction and disposal of a company.
A company incorporated under the Company Act is categorized chiefly into three subdivisions as follows,
Limited company – It is a company, which issues portions and the portion holders have liability to lend to the assets of the company.
Unlimited company -A company, which issues portions and where the stockholders have unlimited liability towards lending to the assets of the company.
Company limited by warrant -A company which does non publish portions, and the members of the company should set about the part towards the assets in the event of the company is being settlement, in an sum specified by the articles of the company.
A brief lineation of the Company Act is as follows, Section 148 – Duty to maintain accounting records
The subdivision 148 outlines the responsibility of a company which is registered under the Company Act to maintain accounting records. Furthermore it deals with the duty in entering and explicating the company ‘s minutess accurately, and it specify following point every bit good,
The fiscal place of the company should enable to find a sensible truth at any given clip.
Directors should fix the fiscal statements in conformity to the Act.
The fiscal statements of the company should be decently audited.
Section 149 – Topographic point where accounting records are kept
The Act outlines the accounting record of a company should be kept in Sri Lanka, either the registry permits a company to maintain its accounting records outside Sri Lanka under the undermentioned guidelines,
The company should guarantee the histories and the returns of the operation should unwrap with a sensible truth the fiscal place at intervals non transcending six months.
The readying of the fiscal statements should follow with the Act.
Section 150 -Obligations to fix the fiscal statements
The Act emphasizes that the manager board of a company should guarantee the readying of the fiscal statements are completed within six months or within an drawn-out period licenses by the Register after the balance sheet day of the month of the company. And the fiscal statements of the company should be certified by a member of the company who is responsible for the readying of the fiscal statements and dated and signed on behalf of the board by two managers.
Section 151 – Contentss and the signifier of fiscal statements
The fiscal statements of a company should give a true and just position of,
The province of personal businesss of the company every bit at the balance sheet day of the month.
The net income or loss or income and outgo as the instance may be for the accounting period stoping from the balance sheet day of the month.
2.3.2 Sri Lanka Accounting Standards
Accounting criterions are performed in order to keep the uniformity in accounting criterions. Presently, Sri Lanka is following Sri Lankan Accounting Standards issued conformity to the Sri Lanka Accounting and Auditing Standards Act no 15 of 1995. The Act emphasizes on the issue of Accounting Standards under an Accounting Standards Committee which consists of 12 members as follows,
Members of the ICASL including the president
Members nominated by CIMA, Sri Lankan Division
Register of companies
Director General of CSE
Campaigner of the Governor of the Central Bank
Campaigner of the Federation of Chamber of Commerce and Industry
Presently, ICASL has issued 46 Accounting Standards as follows,
2.3.3 International Accounting Standards ( IAS )
International Accounting Standards ( ISA ) was issued by the International Accounting Standards Committee Foundation ( IASC Foundation ) . The construction of the IASC foundation can be viewed as follows.
Trustees of the IASC Foundation
Presently there are 22 legal guardians made up as follows,
Six legal guardians from North America ( including Canada )
Six legal guardians from Europe
Six legal guardians from Asia
Four legal guardians from other countries
International Accounting Standards Board ( IASB )
The legal guardians of the IASC Foundation have appointed 14 members to the IASB. Of the 14 members, 12 members including the president work as full clip members, o2 members were on a portion clip footing. For any accounting criterion issued by IASB to be approved merely 07 out of 14 members should hold.
Up to 1st April 2001, IASC was responsible for issue criterions where the IASC issued the International Accounting Standards ( IAS ‘s ) from 1st April 2001 ; IASB was handed over the duty of publishing the accounting criterions.
IASB will publish International Financial Reporting Standards ( IFRS ‘s ) . Once, IASB took over the duty of publishing the criterions they accepted the IAS ‘s in issue with the understanding of change overing the ISA ‘s into IFRS ‘s in the hereafter. As at today there are 09 IFRS ‘s in issue along with the 41 IAS ‘s.
Specific treatment on fiscal coverage of Trans Orbit Logistics Pvt. Ltd.
3.1 Key stakeholders of the company
As Trans Orbit Logistics Pvt. Ltd. is little concern organisation, the group of stakeholders consists of few of them. Three major stakeholders can be identified as follows.
Government is chiefly prosecuting to the concern patterns with the outlook of bear downing revenue enhancement. The income revenue enhancement and VAT are bear downing from the concern. The company is apt to pay income revenue enhancement and the sum of VAT to the Inland Revenue Department. The procedure of fiscal coverage allows authorities to place the degree of income revenue enhancement can be charged from the company and moreover it allows clear uping the minutess that have been done in order to calculate out the sum of VAT to be paid by the company. Fiscal studies send to the Inland Revenue Department quarterly.
Fiscal Institutes ( Banks )
The company has obtained loans from Hatton National Bank in order to continue concern maps. Furthermore the company has leased all of its vehicles at Peopless Renting Company. Therefore the fiscal institutes are refering about the fiscal position of the company. The fiscal institutes are cognizant about the ability of the company to pay the rental sum and the loan sum. Therefore the map of fiscal coverage which delivers information on current fiscal public presentation of the company is utile for the fiscal institutes in footings of make up one’s minding to travel in front with the company with many more minutess.
The manager board consists of five representatives. The construction of the board represents the Chairman, fundamentally the Managing Director, two Directors and two stockholders who are non managers. Basically, the Chairman is engaged with the duty of the overall public presentation of the company. And the two managers are managing selling, operations and finance maps of the company. Finally, the two stockholders represent the other stockholder as a whole in footings of act uponing to the determination devising procedure. The manager board meeting is held quarterly and a study of fiscal analysis of last three months are handed over to the manager board.
Regulatory Framework for fiscal coverage of Trans Orbit Logistics Pvt. Ltd.
The company is following regulative model which is applicable in general for all the companies in footings of readying of fiscal statements and can be viewed as follows. The company does non run into any specific regulations and ordinances in footings of readying of fiscal studies.
3.2.1Company Act No. 07 of 2007
The company is fixing its fiscal studies chiefly in conformity to four subdivisions out of 534 subdivisions contained in the Act. The four subdivisions are as follows,
Section 148- Duty to maintain accounting records.
Section 149 – topographic point where the accounting records are kept.
Section 150 – duty to fix fiscal statements.
Section 152 – contents and the signifier of fiscal statements.
3.2.2 Foreign Currency exchange regulations and ordinances
All the foreign currency minutess done by the company should be in conformity to the Exchange Control Act No. 24 of 1953. Furthermore all of the minutess are performed under the control degree of the Central Bank and the foreign exchange direction maps are exercised on behalf of the authorities by the Central Bank.
3.2.3 SLAS ‘s
The company is fixing the fiscal studies in conformity to all the 46 accounting criterions.
3. 3 Tax
The liability for revenue enhancement has been computed in conformity with the proviso of the Inland Revenue Act No. 38 of 2000.
3.3.1 Current income revenue enhancement
Current income revenue enhancement liability for the current period is measured on the footing of the income or the net incomes generated from the relevant period. The proviso for income revenue enhancement is computed in conformity with the prevalent revenue enhancement rates.
3.3.2 Differed revenue enhancement
Differed revenue enhancement is computed on the footing of liability method, on all impermanent differences at the balance sheet day of the month.
Accounting policies and process of readying of fiscal studies
4.1 Significant Accounting policies of Trans Orbit Pvt. Ltd
4.1.1 Cardinal accounting premises and policies
Footing of readying
The fiscal statements are prepared in conformity with the historical cost convention, whereby minutess are recorded at the values predominating on the day of the months when the assets were acquired, liabilities incurred or the capital obtained.Further the fiscal statements are in conformity with the Sri Lankan accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka.
The liability for the revenue enhancement has been computed in conformity with the proviso of the Inland Revenue Act, No. 38 of 2000 and amendments made thereto.
Post balance sheet events
All material events happening after the balance sheet day of the month have been considered and where necessary accommodations have been made in the fiscal statements.
4.1.2 Assetss and bases of their rating
Assetss classified as current assets in the balance sheet are hard currency and those which are expected to recognize in hard currency, during the normal operating rhythm of the company ‘s concern, or within one twelvemonth from the balance sheet day of the month, whichever is shorter. Assets other than the current assets are those which the company intends to keep beyond a period of one twelvemonth from the balance sheet day of the month.
Property, works and equipment and depreciation.
Value of belongings, works and equipment are stated at cost less accrued depreciation, provided on the footing stated in ( three ) below.
Cost of belongings, works and equipment is the cost of acquisition together with any disbursals incurred in brining the assets to its working status and location for its intended usage. Outgo incurred for the intent geting, widening or bettering assets of a lasting nature by agencies of which to transport on the concern or to increase the gaining capacity of the concern is besides treated as capital outgo and included under the seashore of such assets.
No depreciation is provided in the twelvemonth of acquisition while full twelvemonth ‘s depreciation is provided in the twelvemonth of disposal.
Where belongings, works and equipment have been financed by renting agreements, which transfers significant benefits and hazard of ownership, the assets are treated as if they have been purchased outright and are included in belongings, works and equipment which are depreciated over the shorter of the estimated utile lives of the assets or the lease term. The capital component of the leasing committedness has been shown as an duty under finance rental. The involvement component in lease payment is absorbed into the Income Statement over the lease period.
Trade and other receivables
Trade and other receivables are stated at the sums they are estimated to recognize, proviso is made where necessary for bad and dubious debts.
Cash and hard currency equivalent
Cash and hard currency equivalent are defined as hard currency in manus, and bank demand sedimentations in bank and short- term extremely liquid investings, readily exchangeable to cognize sums of hard currency and capable to undistinguished hazard.
For the intent of Cash Flow Statement, hard currency and hard currency tantamount consist of hard currency in manus, and sedimentations held in bank and cyberspace of short – term loans and bank overdraft.
The Cash Flow Statement has been prepared utilizing indirect method.
4.1.3 Liabilitiess and commissariats
Liabilitiess classified as current liabilities in Balance Sheet are those duties collectible on demand or within one twelvemonth from the Balance Sheet day of the month. Items classified as non – current liabilities are those duties which expire beyond a period of one twelvemonth from the balance sheet day of the month. All known liabilities have been accounted for in fixing the fiscal statements.
Defined part program – Defined Provident Fund and Employee Trust Fund
All employees who are eligible for Defined Provident Fund Contributions and Employee Trust Fund Contribution are covered by relevant part financess in line with several position and ordinances.
Gross is matched with the related outgo and is recognized in conformity with Sri Lanka Accounting Standards No. 29 in the undermentioned mode:
Employee turnovers – The turnovers represent the committee, managing, Packaging and certification charges and are recognized upon public presentation of services.
Other income -on accrual footing
Additions or losingss of a gross nature ensuing from a disposal of belongings, works and equipment have been accounted for in the Income Statement.
All outgo, including the undermentioned incurred in runing the concern are charged against gross in geting at the net income or loss from operations.
All disbursals incurred in the daily operating of the concern.
All disbursals incurred in regard of concern development.
Finance cost – Interest disbursals are recognized as an disbursal in the period in which they are incurred.
Procedure of readying of fiscal statements
With the rapid enlargement of the company during last twelvemonth, the company tends to switch to computerise accounting system from manual accounting system. Presently, the company uses the Tally Accounting bundle. Even though the company is utilizing an accounting bundle the manual system still prevails.
As the company deals with freight service, courier service, transportation and client clearance, the company is utilizing occupation bing system to calculate out the cost of each dealing. Once a dealing is confirmed by the client the dealing is given a occupation figure and included in the occupation registry. The gross and outgo relevant to each occupation is recorded in the accounting bundle and in the manual system every bit good.
The chief beginning of income is from cargo forwarding and messenger service and chief disbursals related to each occupation consist of occupation handling disbursals, certification disbursals, usage fees, transit, cargo charges etc. general operating expenses are entered into the accounting bundle individually and recorded in the manual system every bit good. The concluding analysis of entire outgo and gross is computed quarterly through the accounting bundle and fix a study to the top direction. The consequences of the manual system are analyzed hebdomadal by the Financial Controller of the company.
Failings of the bing fiscal coverage map and recommendations
Some issues have been incurred with the execution of a computerized accounting system late. The issues can be listed down as follows.
The computerized accounting system is non updated.
Presently, the system is non supplying up-to -date accounting information. This is chiefly because of the entrance of past records are still ongoing and the manual system is still bing along with the computerized system. Furthermore, it is because of the deficiency of staff members to manage the accounting map with a specified cognition on accounting bundles.
A comprehensive fiscal analysis is non carried out.
The company is merely concentrating on keeping and fixing the fiscal statements ( balance sheet, income statement, statement of alterations in equity and the hard currency flow ) . Apart from readying of basic statements, the company is non measuring the fiscal position through ratio computation. Profitability ratios, pitching ratios and efficiency ratios are non calculated due to predominating issues. Nevertheless, the computation of ratios depicts the world of fiscal public presentation and it will let to the stakeholders to take up their determinations with a more accurate position of the company. Furthermore, presently the company has taken a sensible sum of loans ; therefore the computation of pitching ratio will supply a more elaborate analysis.
Following options can be introduced as to get the better of the above issues.
Train the bing staff members to manage the computerized accounting bundle expeditiously.
Recruit another employee to the finance section.
Start up ciphering the ratios which allows to a comprehensive fiscal analysis.
Basically the study consists of the cardinal overview of fiscal coverage and how the fiscal coverage is carried out in an organisation.
The procedure of fiscal coverage is dealt with communicating of information to assorted stakeholders. Financial coverage allows the stakeholders to take up determinations sing the company. And the basic aims of fiscal coverage are to ease to the determination devising procedure and to execute direction answerability.
The regulative model for the procedure of fiscal coverage consists of regulations and ordinances which should be considered when fixing the fiscal statements. The Company Act, SLAS ‘s, IAS ‘s are some of ordinances that should be performed during the fiscal coverage procedure.
Trans Orbit Logisticss Pvt. Ltd. Is a company which delivers the service of cargo forwarding, and courier service etc. The study delivers the cardinal thought about fiscal coverage of the company. Furthermore identifies predominating drawbacks of the procedure and possible suggestions are recommended every bit good.