The Industrial Equipment Distribution Accounting Essay

Published: 2021-06-18 09:25:05
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ABSTRACT
This report represents the overall experience and tasks that I have been acquiring during the coop training program at Olayan Financing Company (OFC). The report is divided into two main parts. The first one is the company profile and the second one is the job activities that I have been doing during the Coop training program.
ACKNOWLEDGMENT
There are many important people who have contributed a lot in my COOP period and without them, it was not possible to finish such a period. Therefore, I would like to extend my greatest thanks to Dr. Mohammed Ramady who have helped me a lot. In addition, I would like to extend my thanks to Mr. Youssef Ali who was my advisor in the company.
TABLE OF CONTENTS
1. COMPANY PROFILE
1.1 History
1.2 Products and Services
1.3 Partners & Principals
1.4 Saudi Operations
2. JOB HISTORY
2.1. Job Discretion
2.2. Detailed Job Reporting and Tasks Carried Out
2.2.1. Accounting
Introduction
Team work
Individual assignments
Problems
Suggested solutions
2.2.2 Treasury
Introduction
Definition
Team work
Individual Assignments
Collection of Data
Risk Analysis
Management Risk
Competition in the Market:
Chances of Non-payment
Projected Profitability
2.2.3 Internal Auditing for Baxter
Introduction
Team work
Individual assignments
Problems
Suggested solutions
CONCLUSION
REFERENCES
APPENDIX
1. COMPANY PROFILE
1.1 History
The company was founded in 1969 in Riyadh. Olayan Financing Company W.L.L. is a subsidiary of Olayan Financing Company W.L.L. operates as an industrial, trading, services, and investment conglomerate. It distributes consumer goods, hospital supplies, office automation products, building supplies, telecommunications equipment, and industrial equipment. The company also involves in industrial services, project and construction management, real estate development, property management, financial and investment services, and food services. In addition, the company manufactures consumer, industrial, and medical products. It operates in Saudi Arabia and the Middle East. The company was founded in 1969 and is based in Riyadh, Saudi Arabia. Olayan Financing Company W.L.L. operates as a subsidiary.
1.2 Products and Services
Olayan Financing Company W.L.L. operates as an industrial, trading, services, and investment conglomerate. It distributes consumer goods, hospital supplies, office automation products, building supplies, telecommunications equipment, and industrial equipment. The company also involves in industrial services, project and construction management, real estate development, property management, financial and investment services, and food services. In addition, the company manufactures consumer, industrial, and medical products. It operates in Saudi Arabia and the Middle East.
Olayan Financing Company (OFC) holds and manages all of The Olayan Group’s businesses and investments in Saudi Arabia and the Middle East, including joint ventures with major multinationals. Established in 1969, OFC today is a fully diversified industrial, trading, services, and investment conglomerate.
With some 40 affiliated companies, it is ranked consistently in the Saudi top 10. OFC companies handle products from more than 200 suppliers and principals. As marketers of famous brand names, these companies work closely with their trading partners to maintain the quality, integrity, and visibility of each line. Distribution operations currently are concentrated in fast-moving consumer goods, hospital supplies, office automation products, building supplies, telecommunications equipment, and industrial equipment. Other OFC companies are engaged in industrial services, project and construction management, real estate development, property management, financial and investment services, and food services.
Still others manufacture consumer, industrial, and medical products. The management of Olayan Financing Company is progressive in outlook. It provides strategic direction to the operating companies; guides them in synergistic, integrated growth; provides a range of central business services; and maintains sound financial foundations for the enterprise as a whole.
1.3 Partners & Principals
These enduring partnerships range in industries as diverse as confectionery and heavy machinery. Many of them date back to the beginnings of the Group itself, while others are relatively new. All help set the standards in their industries. Examples of the well-known partners are:
Acer
Coca-Cola
Kraft
Burger King
Australian Rice Growers
 Colgate-Palmolive
Kimberly-Clark
Exel
1.4 Saudi Operations
Consumer Products Distribution
Bottling and distribution in association with Coca-Cola, Kraft Foods, Nestle, Kimberly-Clark, Colgate-Palmolive, SunRice, Energizer, Nabisco, Pillsbury and others. Partner brands range from Coca-Cola to Kraft Cheese, KitKat to Tang
Consumer Products Manufacturing
Light manufacture and marketing of personal care products, biscuits, and paper cups in association with Kimberly-Clark, Colgate-Palmolive, Nabisco and Huhtamaki. Partner brands range from Kleenex to Ritz, Colgate toothpaste to Huggies diapers
Financial & Investment Services
 Investment in Saudi and Middle East public equities
Food Service
Burger King franchisee for Saudi Arabia and master franchisee for the Arab Middle East. Texas Chicken master franchisee in Oman, Bahrain and Qatar and franchise operator for the UAE and Egypt
Health Care Supplies & Services
Medical products from Baxter, Cardinal Health, Edwards Lifesciences, and others, plus local manufacture with Kimberly-Clark of disposable surgical coverings.
Industrial Equipment Distribution
Sales and support of powerful products such as Kenworth and Scania trucks, Cummins-Onan engines and generator sets, Case farm equipment, Pierce pivot sprinkler systems and Atlas Copco industrial compressors and tools.
Industrial Services & Fabrication
Oil industry testing, inspection and repair, drilling materials and services, industrial engineering, total complex turnarounds, machining and re-manufacturing, precision parts fabrication, hazardous waste processing. International partners or technology providers include Descon, Weir, and Tuboscope/Varco
Manufacturing
Aluminum extrusion and building products fabrication, solar panels, stretch film wrap, PVC pipe, reinforcing steel and soft drink cans
Office Automation
Sales and support of high-tech equipment from industry leaders, including Xerox, Toshiba, NEC, Thermedics, Fichet-Bauche, and Acer. Also the AlphaGraphics Printshops franchisee for Saudi Arabia
Project Management
In association with CH2M Hill, planning and management of major infrastructure projects
Real Estate & Property Management
Property investment and development Kingdomwide and operation of a residential and office complex in the Eastern province
Supply Chain Management
Logistics and supply chain management operations, in joint venture with Exel Overseas Limited (United Kingdom), one of the world's leading logistics services providers. Exel supports the Olayan companies in Saudi Arabia and offers a broad range of contracted logistics services to other companies in the Kingdom
2. JOB HISTORY
2.1. Job Discretion
Introduction to the company
Accounting
Treasury
Internal Audit
week
2 months
2 months
2 months
2.2. Detailed Job Reporting and Tasks Carried Out
2.2.1. Accounting
Introduction
The purpose of the department is for invoices payment and registrations
The work done:
Invoices payment by cheques or money transfer
Performing cash position at the end of each month for the company at all banks that it deals with and monitoring the money transfer and ensuring its origin and finalizing the checking of the company
Performing bank re-cancelation at the end of each month to check that the company has correct records consistence with the banks
Team work
The work that is done in the department is as follows:
1- Bank reconciliation
2- Expense report
3- Petty cash
4- Cash position
The accounting department is composed of 8 members. These 8 employees are:
1-
2-
3-
4-
5-
6-
7-
8-
Individual assignments
Bank reconciliation
I’ve been given information about this procedure of doing the bank reconciliation of different banks. I have prepared bank reconciliation between SABB and OLAYAN FINANCING COMPANY which is done by taking the accounts that is not found in the other part and record these accounts as outstanding checks.
Petty cash
It is a way to save time and money by giving an employee the authority to handle the small internal expenses and keep a receipt for every individual expense to prove that this amount of money has been paid to this expense and I’ve been given a petty cash to calculate all the expenses.
One of the tasks that I’ve been given was preparing some project folders by collecting the accounts that belong to this project. Also, I’ve done some payables booking through Microsoft Dynamics GP and print out some PV papers.
Furthermore, I’ve done some deposit issuance by filling the deposit slips with the needed information and attach them with the original checks.
Cash position
In doing cash position we put all the numbers in ‘000 and we round any number exceeds 500 and if the number is 500 we balance the numbers by rounding the half and leave the other half as it is. If the number is below 500 we cancel it out.
Also, for:
Transfers to banks
Time deposits
Buying or selling of foreign currencies
loans
We balance the account by putting the opposite amount (-/+) in the bank account.
After that, we deduct all these accounts by all the payrolls.
I’ve set with Mr. Cheringal Balagopal (treasury administrator) to discuss some treasury functions such as:
Money transfers.
Foreign exchange.
Facility agreements.
Internal transfer voucher
I’ve learnt how to do internal transfer voucher which is simply that if an employee spent money on any expense that the company should cover we credit his account and we debit this expense and the employee will ask the company to pay this expense so we debit the employee account and credit the company account and we issue the internal transfer voucher.
Extension report
Every employee in the company has an extension number and all the calls that been made are divided into two things:
1- Business calls: all the calls that related to the business and these calls cost are paid by the company.
2- Personal calls: all the calls have nothing to do with the business and the cost of these calls are paid by the employee who made that call.
All calls are booked in Excel Sheet.
Problems
The only problem in this period of time was the time. Of course, I had to understand and know the procedures of the company first, but then the time needed for completing the daily work was short because of the many activities needed. These daily activities besides the ones mentioned above were:
1- To check and balance revenues of all operating departments and generate and submit reports to accounts on daily basis and the accountant review the information.
Balances all revenue reports with individual outlet reports
Balances adjustment vouchers with the system reports
Transfers all cash check out folios with supporting to accounts as per system report
Performs system back up prior to release of the computer for next day transactions
2- To perform all aspects of revenue control of all operating departments and keep the management well informed by producing daily revenue report.
Verifies cash transactions
Prepare daily reports
Calculates and verifies other operating department revenue on daily basis
Performs surprise spot checks
Collecting all outstanding accounts receivables
Ensures customers invoices are prepared
Ensures accounts receivable over 60 days are promptly pursued for collection
Prepares monthly statements and reminders monthly and when ever needed
Suggested solutions
The use of advanced information Technology center will generate better output and it will be useful for all employees and trainees to complete their work. The system can use different rights for different trainees, employees, supervisors and managers. The rights of each user will enable the company to maintain high level of security for its information and in the same time, trainees will be able to benefit from the system fully o complete their work and to reduce the time needed and the effort spent.
2.2.2 Treasury
Introduction
The work done:
Transferring money from the main account of the company to its minor accounts according to the need and based on the system of the company
Registering these accounts and their payment methods
Trying to find the best offer from banks for time deposit and register it in the company’s system
Buying foreign currencies according to the need of the company
Seeking the best offers for loans
Definition
The typical job of a treasury department includes managing currency risks and raising debt apart from playing in the bond and equity markets if the company has enough funds to invest.
1. General financial oversight
Oversee and present budgets, accounts and financial statements to the management committee
Liaise with designated staff about financial matters
Ensure that appropriate financial systems and controls are in place
Ensure that record-keeping and accounts meet the conditions of funders or statutory bodies
Ensure compliance with relevant legislation.
2. Funding, fundraising and sales
Advise on the organization's fundraising strategy
Ensure use of funds complies with conditions set by funding bodies
Ensure fundraising and sales complies with relevant legislation and is bound by effective financial systems and controls
Ensure effective monitoring and reporting
3. Financial planning and budgeting
Prepare and present budgets for new or ongoing work
Advise on financial implications of strategic and operational plans
Present revised financial forecasts based on actual spend.
4. Financial reporting;
Present regular reports on the organization’s financial position
Prepare accounts for audit and liaising with the auditor, as required
Advise on the organization’s reserves and investment policy.
Team work
Quality: We work hard to earn and maintain our clients’ trust and confidence. So that we can provide quality professional services in an independent, objective, and ethical manner, we have implemented a number of global professional development initiatives and quality and compliance safeguards.
Services Offered: the company provides a range of services, including accounting and auditing, operations, advisory, business risk services, technology and security risk services, transaction advisory, and human capital services.
Industry Focus: The Centers are dedicated to bringing insights to clients, sponsoring dialogue among industry stakeholders and linking our professionals to facilitate collaboration and knowledge sharing. Our member firms provide specific services for industries on a country-by-country basis.
Culture: the company would not be such a successful organization without great people and strong teamwork. We provide our people with solid career growth opportunities and a people-oriented workplace environment. Our philosophy, quite simply, is that when our people achieve their best, so do our clients and our business prosper.
Individual Assignments
One of the projects that I was assigned to do was the make a risk analysis for the company to be used for searching for loans. The analysis that I performed based on four points that are important for any banks. The purpose was to locate the weaknesses that the company has from the point of view of banks to solve it to get the best terms of loans possible from the Saudi banks.
Collection of Data
During this project, I have used the two methods. The first one is to collect information about the company from the media to assess the company’s position. Based on that, the second one is to conduct meeting with the key people in the departments that I can access. I had to take prior permission before each meeting. The analysis that I made was as the following:
1- Risk Analysis
Management Risk
The future management of the company is very important for the prompt repayment of the loan. Unless the company properly, it is very difficult for the company to succeed in the new business. The various long term polices relating to the operation of the company are decided by the management. If there are any wrong decisions taken by the management, then that will affect the profitability of the company and in worst case the survival of the company. But the company is managed directly by the owners with the support of professional employees. They have managed the company very well for the last so many years and their business of paint cans is increase steadily. Hence, the chances of any major management risk are very minimal.
Competition in the Market:
The performance of the company depends on how effectively it competes with its competitors in the industry. There are lots of competitors in market. However, the company is ranked very high in this competition and the market needs the services that are provided for other companies especially with the strong performance of the Saudi private sector and the high oil prices. Because of that, the company can withstand in the market, even though there is lots of competition.
Chances of Non-payment
The chances of non-payment of the loan are a very dangerous risk which no bank wants to happen. The company is a profit making company and is financial position is very good profit. In addition, its relationship with the SABB which is the main banks that the company deals with is very good because of that, there is no need to worry about the repaying capacity of the company to pay the installments in time.
Projected Profitability
The company has projected very good profits for the coming years. Since, the demand for finance services is increasing. The sales and profit margin of the company will also increase. The company is having very good customer base and good distribution channels. This will definitely help the company to increase the sales levels at a faster speed.
2.2.3 Internal Auditing for Baxter
Introduction
During the Coop report, one of the projects that I have participated was the internal auditing of a company called Baxter for medical supplies. The work done was as the following:
Internal audit for Baxter company which is located in the second Industrial city in Dammam
Checking some types of assets and their status
Checking purchasing orders
Reviewing balance sheet and income statement
Comparing it with the income statement provided by an international Auditing company.
Team work
This project was done by a team of four people. The rest of team is regular employees and I was the only COOP training student in the team. The names of the teams are as the following:
1-
2-
3-
4-
Individual assignments
I was assigned for the check of the existing assets and that was done by checking the type of inventory that the company has. First the inventory process divided into two main categories:
Physical inventory: were the accountants and salesmen go to the warehouse and allocate the available products, the good and defected items.
Books inventory: were each item or product goes in or out of the warehouse is recorded in "Stock Card". These cards are revised at the same time of actual inventory by other accountants or salesmen.
After finishing physical and books inventory, a comparison is made between them to see any difference or gap between them:
if the physical inventory > books inventory, then that stands for one of two:
Some items were not registered at the books when the items received, and this solved by re-enter these items to the system.
Returnable from customers also signed out but not signed in when they returned in.
If the physical inventory < books inventory, a physical revision must be made. If the difference occurs again, then the possibilities are as follows:
Misallocation for the physical inventory.
Some damaged products; these items should be reported and marked by the head warehouses manager to put a specific percentage for the amount damaged.
Accidents of stealing from inside the warehouse, which is almost impossible to happen because the heavy weight of the building materials.
From doing the inventory and comparing it with the result of the records of the company, we found that the inventory has no problem and there are no missing items of the company. Full description of the inventory is shown in the Appendix
Problems
There are many problems that I have faced during this process. One of the biggest problems is that the company does not have organized shelves for its inventory and the process took very long because of this point. In addition, there are no index cards that show the status of the inventory and its location. Because of these problems, the number of damaged inventory is listed in the table below and they are considered to be high.
DMC #
PART Number
Issued Date
Quantity defected
Material Type
QA Disposition
Defected Reason
Value (SR)
12-106FD
AKSB9408
3-Apr-12
2812 EA
Finished goods
expired
Expired Materials
88,296.00
12-129
231667158
3-Apr-12
288
Raw Material
discarded
received outside the carton
2,302.78
12-125
KS3001017
3-Apr-12
5000 EA
Raw Material
discarded
no longer be produced
1,265.00
12-124
232501300
3-Apr-12
400 EA
Raw Material
discarded
received outside the carton
866.56
12-123
232501073
3-Apr-12
2500 EA
Raw Material
discarded
received outside the carton
338.10
12-122
AKSB2322
3-Apr-12
1120 EA
Finished goods
expired
Expired Materials
4,531.37
12-121
AKSB4957
3-Apr-12
240 EA
Finished goods
expired
Expired Materials
7,403.72
12-120
AKSB4954
3-Apr-12
235 EA
Finished goods
expired
Expired Materials
6,595.73
12-119
AKSB5709
3-Apr-12
4 EA
Finished goods
expired
Expired Materials
154.49
12-118
AKSB5707
3-Apr-12
18 EA
Finished goods
expired
Expired Materials
499.51
12-117
AKSB4956
3-Apr-12
240 EA
Finished goods
expired
Expired Materials
7,348.90
12-116
AKSB5620
3-Apr-12
98 EA
Finished goods
expired
Expired Materials
3,992.89
12-115
AKSB5621
3-Apr-12
98 EA
Finished goods
expired
Expired Materials
4,046.61
12-114
AKSB5347
3-Apr-12
24 EA
Finished goods
expired
Expired Materials
659.40
12-113FD
AKSB4955
3-Apr-12
825 EA
Finished goods
expired
Expired Materials
23,420.00
12-112FD
AKSB4953
3-Apr-12
1420 EA
Finished goods
expired
Expired Materials
39,596.00
12-111
220201144
3-Apr-12
1300 Kg
Raw Material
discarded
plastic sealer was broken
12-110Fd
20204051
3-Apr-12
75 Kg
Raw Material
discarded
received with cut
669.00
12-109FD
220201135
3-Apr-12
50 kg
Raw Material
discarded
Bags damage in the container
119.60
12-108
220201144
3-Apr-12
1300 Kg
Raw Material
discarded
plastic sealer was broken
12-107FD
20204051
3-Apr-12
25 Kg
Raw Material
discarded
plastic bag is cut / open
223.00
12-104FD
AKSB9408
13-Apr-12
1448 EA
Finished goods
expired
near expiry date 26-3-12
45,467.00
12-105FD
AKSB9408
13-Apr-12
1016 EA
Finished goods
expired
near expiry date 24-3-12
31,902.00
12-103FD
AKSB5215
13-Apr-12
768 Bages
Finished goods
discarded
Load 4 trucks failed during sterilization due to sudden droped of power supply
29,301.35
12-101FD
232501567
30-Nov-11
17000
Raw Material
discarded
carton found wet also inside injection site was wet
5,651.14
12-100FD
KS3001004
30-Nov-11
2000
Raw Material
discarded
old materials obseleted
6,401.00
12-099FD
KS3001003
30-Nov-11
1907
Raw Material
discarded
old materials obseleted
461.49
12-098FD
220201135
30-Nov-11
25 Kg
Raw Material
discarded
received with cut
59.80
12-097FD
AKSB1062
30-Nov-11
1080 EA
Finished goods
expired
near expiry date 4-4-12
4,498.00
12-096FD
221101007
30-Nov-11
14 Rolls
Raw Material
discarded
Adhesive not as per standard
185.00
12-095FD
AKSB0163
30-Nov-11
156 units
Finished goods
expired
Expired
789.00
12-094FD
AKSB1092
30-Nov-11
200 units
Finished goods
expired
Expired product
832.00
12-093FD
AKSB1072
30-Nov-11
5240 units
Finished goods
expired
Expired product
21,809.00
12-092FD
AKSB0063
30-Nov-11
4602 units
Finished goods
expired
Expired product
21,925.00
361,610.44
47,843.82
The total amount of money lost because of the problems of inventory was found to be SR 361,610.44. This amount could be reduced or even eliminated if the warehouse was organized and connected with the IT in a professional way.
Suggested solutions
At the end of the project, there were many suggestions that were made for improving the assets monitoring in a more professional way. First of all, because of the large inventory of the company, the company should establish an inventory committee. The function of the committee will be as the following:
The committee of the inventory is divided for 4 different units:
Physical Inventory unit.
Revision unit.
Monitoring unit.
Supervision unit.
Physical Inventory Unit:
It includes the branches management from the outer regional area that the inventory is worked on it, and some of the salesmen and the workers. This unit will handle to count the tangible items which are available at the warehouse. Each two members will count a specific kind of materials; each member has to count independently. Their final count of the total should be equal to each other; otherwise they have to recount. They have also to check for the damages and the stood items.
Revision Unit:
This unit includes the financial management, the IT department, and the central head office. Their main objective is to mark all the last documents of (cash or credit sale invoice, internal receiving voucher, internal issue notes, branch transfer note, returnable, and material receiving note).
Monitoring Unit:
The main objective to this unit is to prepare and cooperating for dividing the team of the counting and setting the mission for each one. This unit include of the central head office and the internal control. They monitor the overall operation of the inventory counting and solving the variances if happened between the members of the other unit.
Supervision Unit:
This unit is the root of the other units. It includes of the Accounting manager, central warehouse manager, and the IT manager. Their objective is to set the guide of the process of the inventory and receive the last reports of the inventory to revise, process, and document the inventory report to send it to the general manager.
The company uses JDE software but it is not fully implemented in all departments and some of the work depends. The software should be used in all departments because of thse following reasons:
The coordination between the different departments of the company is necessary.
The process in which the inventory is handled is insufficient and it cases lots of wastes of time, money and human resources. The inventory which is the most important department of the company must be run effectively and in a manner that enables the company to take fast decisions about areas such as sales, exporting and marketing.
Even though the company is using JDE ERP, but the efficiency of the software is low because it is not integrating the core department of the company in one software package that can take care of marketing, sales, warehouses and inventory, management and decision making, finance and accounting.
CONCLUSION
I think I earned a good experience and learned more about the business and how most of the good companies are operating, the time has gone so fast and I really enjoyed working for Olayan Financing Company (OFC) and hopefully it would be my place of work after I graduate from KFUPM. Working with Olayan Financing Company (OFC) was a rich and important experience because this company works as an external auditor for many Saudi local companies.
There are many new concepts that I have learned during the coop program. These new concepts are the function of treasury and accountant skills. In addition to that, I have learned the different procedures done by the company for all of these functions and how to assess inventory and the procedure needed for doing that..

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