This document is a group assignment for a Fundamentals of Accounting module. It discusses sources of finance for Dialog Axiata PLC, Sri Lanka's largest telecommunications provider. Dialog uses both internal sources like retained profits from operations and external sources such as loans and share capital. The assignment analyzes how Dialog utilizes different financing methods and their implications. It includes declarations by four students on the originality of their work.

1. Fundamentals of Accounting Group Assignment
1. Course: BSc. In Information Technology (spec). In Information Systems
2. Year: 3 3. Semester: 1 4.Module Code: BM111
5. Module Name: Fundamentals of Accounting
6. Lecturer-in-charge: Ms. Chalani Kuruppu
7. Title of assignment: Fundamentals of Accounting, Group assignment
8. Supervisor:
Declaration:
We certify that:
 This assignment is our own work, based on our personal study and research.
 We have duly acknowledged all material and sources used in the preparation of this
assignment.
 Neither the assignment, nor a substantial part of it, has been previously submitted for
assessment in SLIIT or any other institution.
 We have not copied in part, or in whole, or otherwise plagiarized the work of other
students. We are fully aware of the rules and regulations of SLIIT regarding plagiarism
and exam malpractices. We understand that all of us are liable to bearthe consequences
of (anyone involved in) plagiarism.
 The use of any material in this assignment does not infringe the intellectual
property/copyright of a third party.
 All resources documents/reference materials are attached to this document.
Student ID Student Name Signature Contribution %
**
IT15118028 K.U.K Perera
IT15054364 H.A.M Peiris
IT15070890 W.S.S De Silva
IT15045454 T. M. N Darshana
Date ofAssignment: 07/03/2017 Due Date: 19/04/2017 Date ofSubmission: 19/04/2017

2. FUNDAMENTAL OF ACCOUNTING 1

3. FUNDAMENTAL OF ACCOUNTING 2
Acknowledgement
We wish to express our sincere gratitude to Ms.Chalani Kuruppu for the
direction she provided us in preparing and developing this report statement.
As well we would want to expressed gratefulness gratitude to the Dialog Axiata PLC
management and employees specially Mr.Jihan Akbar-Associate Service Centre Manager in
Dialog Axiata PLC and senior general manager of CRM billing and fulfillment Mr.Asela perera
for their support and encouragement in integration this report and gave us the details we needed
to make this report successfulness.
Finally we would like to thank all the persons who support us in preparing this report.

4. FUNDAMENTAL OF ACCOUNTING 3
Abstract
The main objective of this assignment is to identify how the business
organization raises finance for different operations and analyze the implication of the above
identified sources of finance towards the selected business organization. As for our assignment
module Fundamental of Accounting we have selected Dialog Axiata PLCs as a company. In
this assignment we have prepared this report which consists of Sources of finance of and how
they use these sources for their financial activities.
Dialog Axiata PLC Is the Sri Lanka's largest telecommunications service provider with the
country's largest mobile network operator of 11.8 million customers and authority a 50% of the
Sri Lankan mobile market. Dialog is an ancillary of Axiata Group Berhad which owns 83.32%
controlling stake of the company while the rest is held by the shareholders.
Our findings indicate that Dialog Axiata PLCs main source of fund raising finance internal
and external use couple of sources, along with its benefits and costs of using these sources are
present in the following report and few suggestion for the company which they can usage other
than the current sources of finance for their forthcoming financial objectives.

5. FUNDAMENTAL OF ACCOUNTING 4
Table of contents
 Submission of Group Assignment
 Title Page
 Acknowledgement
 Abstract
01. Introduction………………………………………………………..5
02. Understanding of Sources of Finance………………………...7
 Internal Sources of Finance………………………………8
I. Retained Profits...……………………………………….9
II. Realizing Service……………………………………….10
III. Depreciations…………………………………………...12
 External Sources of Finance……………………………..13
I. Share Capital…………………………….......................14
II. Loans……………………………………………………16
III. Overdraft Facilities…………………………………….17
IV. Debentures……………………………………………...18
03. Conclusion………………………………………………….19
04. Reference List……………………………………………....20
05. Appendix…………………………………………………....21

6. FUNDAMENTAL OF ACCOUNTING 5
01. Introduction
The Dialog Axiata PLC, a subsidiary of Axiata Group Berhad operates
Sri Lanka’s largest and fastest growing mobile telecommunications network. The Company is
also one of the important listed company on the Colombo Stock Exchange in terms of market
capitalization. Dialog is also Sri Lanka’s largest Foreign Direct Investor (FDI) with
investments totaling over USD 1.9 billion.
Dialog Company was founded in 1993 August 27, earlier it’s a MTN Networks (Pvt) Ltd (1993-
2005) after listed (2005) on the Colombo Stock Exchange it was became Dialog Telekom PLC
(2005-2010). In 2005 was a significant year for Dialog Telekom PLC as planned to go ahead
with largest Initial public offering (IPO) notice by the Sri Lankan capital markets in an attempt
to finance widen network. Dialog Telekom made history on the first trading day when trading
commenced at a price of LKR 14.25 making Dialog Telekom the first Sri Lankan Company to
attain the USD1 billion market capitalization. In 2010, after happened in few capitalization
changes Dialog Telekom PLC became Dialog Axiata PLC.
The following head of states who have served as chief executive officer (CEOs) of Dialog
Axiata PLC in its history and present time.
 Mohammed Said Mohammed Ali (1993–1996)
 Dr. Hans Wijayasuriya (1997–2016)
 Supun Weerasinghe (2017)
In 2016 "Dialog" brand name was valued at LKR 26,098 Million and as the 4th most valuable
brand in the country by business magazine LMD in its annual facts. And Dialog has topped Sri
Lanka’s Corporate Accountability rankings for the past 5 years in succession. And this
Company has received numerous local and international awards including the National Quality
Award and Sri Lanka Business Excellence Award.

7. FUNDAMENTAL OF ACCOUNTING 6
Dialog Axiata supplements its market leading position in the
Mobile Telecommunications sector with a powerful footprint and strong market presence in
Sri Lanka. Dialog Axiata is also control and owns different subsidiary companies:-
 Dialog Broadband Networks (Pvt) Ltd (100%)
 Dialog Television (Pvt) Ltd (100%)
 Dialog Holdings Lanka (Pvt) Ltd (100%)
 Digital Commerce Lanka (Pvt) Ltd (100%)
 Digital Health (Pvt) Ltd (70%)
 Dialog Business Services (Pvt) Ltd (100%)
Dialog Axiata is an investor under the sponsor of the Board of Investment of Sri Lanka and
invested over USD1.96 billion towards the development of telecommunications infrastructure,
then turn into the single largest contributor to Sri Lankan foreign direct investment (FDI).
For all of this Business Operations ‘Dialog Axiata PLC’ needs to raise funds. For that they
used many internal and external sources. By developing this report we have discussed how they
collect these funds, what sources they used for the fund raising purpose and how they maintain
their business functions by that sources.

8. FUNDAMENTAL OF ACCOUNTING 7
02. Understanding Source of Finance
Finance is the life-blood of an organization. Without finance, the
business would not be able to exist and or operate, expand, or innovate that’s why finance is a
broad term that describes two related activities: the study of how money is managed and the
actual process of acquiring needed funds. There are several sources of financing can be
classified on different bases. They are:
1. According to the Time period:-
 Long term
 Short term
2. According to the Ownership:-
 Owned capital
 Borrowed capital
3. According to the Basis of convenience:-
 Security financing
 Loan financing
4. According to the Sources of finance:-
 Internal Sources of Finance
 External Sources of Finance
For our assignment we only consider the classification according to
sources of finance. Among these two major methods (Internal and External) of a company can
take initiative to increase their sources, manage their financial assets among many others, but
mainly to finance their organization in order to engage under smooth financial conditions.

9. FUNDAMENTAL OF ACCOUNTING 8
 Internal Sources of Finance
The funds that raised within the organization is called internal
sources or the financial activities that caused for the financial expansion of the organization.
There are many types of internal sources that a business can obtain funds:-
I. Retained profits
II. Sale of Assets
III. Depreciation
IV. Working capital
V. Realizing stocks
Retained ProfitsWorking Capital Sale of Assets Depreciation Savings
Overall:
Advantages of Internal Finance:-
 No guarantee or bond will be needed.
 Payment of interest or dividends is not needed therefore less cost.
 Liabilities of the organization will not increase.
 No control procedures regarding creditworthiness.
 No due payments for external parties.
Disadvantages of Internal Finance:-
× Expensive because internal financing is not tax-deductible.
× Limited in volume.
× Arise Opportunity Cost.
× Capital of the organization will not increase.

10. FUNDAMENTAL OF ACCOUNTING 9
In Dialog Axiata PLC we could identified main internal sources as Retained Profits,
Reserves, Realizing Services (Telecommunication and other).
I. RetainedProfits
Retained Profit year end = Retained Profit year beginning + Profits/Losses - Dividends
Retained profit is the remaining portion of the company’s profit after
paying shareholders dividends or Profits generated by a company that are not divided among
shareholders as dividends. Retained profit is to be re-invested within the company for other
financial purposes.
Retained profits are Dialog Axiata PLC’s main source of internal finance for major investments
in areas such as upgrading technology and operations, development of telecommunications
infrastructure, and Renovations.

11. FUNDAMENTAL OF ACCOUNTING 10
Advantages can obtain Retained Profit:-
 Cost free source of finance, as finance cost payments aren’t
required.
 Economical and convenient source of finance.
 No expenses or legal formalities involved.
 Strengthen the financial position of a business and thereby give
financial stability to the company
Disadvantages can obtain Retained Profit:-
× Retained profit can be insufficient on its own and may need to be
used in combination with other sources of finance.
× The proportion of retained profit available to a company is
depending on the dividend percentage.
× A high dividend payment will reduce the accumulation available for
re-investment within the company.
× Due to higher profit, company management may change the
dividend percentage to create price changes in their tendency. Such
price fluctuations may cause detriment for the shareholders.
II. Realizing Services
The Dialog Company provides telecommunications services in Sri Lanka.
The services include mobile, Internet, international gateway, data and backbone, fixed wireless,
and transmission infrastructure services, as well as media related services. The company also
provides a several multi-sensory connectivity services, including Dialog TV, a direct to home
satellite television service, and Dialog Global which operates a portfolio of international
telecommunication services. So we can mention their main internal source of finance providing
services to the customers.

12. FUNDAMENTAL OF ACCOUNTING 11
Advantages of Realizing Services:-
 More internal sources are generating.
 Not arising liabilities to company.
 Quick way of raising organizational funds.
 Not changes or effect for Working capital of organization.
Disadvantages of Realizing Services:-
× Some related services and technologies are so dynamic therefor
quickly outdated its big cost to organization.
× Have to make some effort to sell the services to customers.
× Generating several expenses related to these realization services to
customers (Marketing and Operational activities).

13. FUNDAMENTAL OF ACCOUNTING 12
III. Depreciations
The value of property, plant and equipment’s typically depreciated over
the estimated life of the assets, because even the long term assets become obsolete or useless
after period of time. Depreciation is the method of allocating amount of costs to the appropriate
period. Related to Dialog Axiata PLC, Depreciation of asset start when it’s available for use.
Depreciation on other assets is calculated using the straight-line method to allocate their cost
to residual values over the estimated useful lives, as follows
Advantages of Depreciation:-
 It provide uniform charge each and every year.
 Risk free, no opportunity cost and no interest payments need to be made.
 Depreciation is a tax deductible expense spending.
 It doesn’t overstate the value of company’s profit.
Disadvantages of Depreciation:-
× Assume fixed assets gives same amount of service annually throughout its
useful life.
× Concerns stemming from insufficient funds cannot be reduce by imposing
more depreciation.
× Due to the inevitable fall in purchasing power caused by inflation.
Assets Per Annum %
 Buildings 2.5
 Building - electrical installation 12.5 - 50
 Building - leasehold property Over lease period
 Computer equipment 20 - 50
 Telecom equipment 5 - 20
 Customers’ premises equipment 33 - 100
 Office equipment 20 - 50
 Office equipment - test phones 50
 Furniture and fittings 20 - 50
 Toolkits 10
 Motor vehicles 20

14. FUNDAMENTAL OF ACCOUNTING 13
 External Sources of Finance
Sources of funds that coming from outside an organization. External sources
can be further categorized into:
 Ownership finance:-
 Share Capital in the form of Ordinary Shares and Preference
Shares.
 Non ownership finance:-
 Bank loans
 Hire purchase
 Leasing
 Bank overdraft
 Debentures
Overall:
Advantages of External Finance:-
 External sources of finance help a company grow faster, achieving
the economies of scale necessary to compete with the rival firms on
regional, national, or even international level.
 External sources of finance also leverage the returns for the
entrepreneur.
 External finance provides the room for faster growth, allowing the
company to operate on a far bigger scale.
Disadvantages of External Finance:-
× Payments for debt financing or dividends for equity financing can
limit a company's ability to reinvest in expansions.
× A company that depend too heavily on external financing may find
itself being influence by outsiders.
× For a Public Limited Company, external financing may come from
the issuance of new shares. This can decrease the owner's equity and
may be loss of ownership.

15. FUNDAMENTAL OF ACCOUNTING 14
Dialog Axiata PLC raise their funds externally by following methods. They
are Share Capital, Bank loans, Loan from parent company Overdraft facility, and Debentures
are main methods of company external resource accumulative.
I. Share Capital
It’s external source of finance where the company's equity has been
collected by auctioning shares (Ordinary shares or preference shares) to shareholders for cash
or an equivalent item of capital value.
Dialog Axiata is a Public Limited Company which listed in the CSE therefore Dialog Company
can issue their Ordinary and Preference shares to the public, and this company can get unlimited
number shareholders.
Through Ordinary Shares a company can raise their capital by auctioning
shares to the normal public. Company should pay dividends for shareholders as form their
annually profit. If the profit increases percentage dividend of ordinary shareholders also
increases.
Advantages of Ordinary Share Capital:-
 Shareholders have the right to vote.
 Ordinary shareholders of company can participate in meetings of the company.
 Shareholders have the ability to elect the board of directors of company.
 They are the real owners of the company.
Disadvantages of Ordinary Share Capital:-
× Each and every time Share prices fluctuate a lot, therefore investors investment might
dreadful.
× Sometimes agency problem will occur (Shareholders elect a Board of Directors and
Board of Directors then hire Management Officers).
× High risk because they aren’t getting a fixed dividend.
× Low priority is given when allocating dividends, dividends are paid only after paying
debenture holders and preference holders.

16. FUNDAMENTAL OF ACCOUNTING 15
Preference Shares consists of the equal procedure as ordinary shares but
preferences shares dividend doesn’t depend on their annual profit preference shareholders gain
a fixed dividend unlike ordinary shareholders. Somehow right to the return of capital when the
company is wound up.
Advantages of Preference Share Capital:-
 It is helpful for raising long term capital for the company
 No need of property bond on these shares.
 Rate of return is guaranteed less risk.
 Redeemable preference shares have the added advantages of repayment of capital
whenever there is surplus.
Disadvantages of Preference Share Capital:-
× Preference shareholders cannot participate in company meetings.
× Shareholders haven’t got voting power.
× Preference shares are liabilities to the company.
× Company has a permanent burden to pay a fixed rate of dividend before paying
anything on the other shares.

17. FUNDAMENTAL OF ACCOUNTING 16
II. Loans
Loans is a credit based money issued by a firms, promising to repay within
interest on or before a fixed date. This is an external finance method which business
organization’s use to increment funds. As for Dialog Company have taken loans for some
instances. There are three types of loans Current Bank Loans, Non-Current Bank Loans
And Loan From Parent Company. Dialog Company contribute this loans for their long-
term and short term projects of the company.
Advantages of Loans:-
 Greater certainty of funding, provided, and solution for preventing of
ownership.
 Can be used when company is in need of massive amount of money for
investment and emergency situations.
 Loans carry a lower rate of interest compared to an overdrafting facility
that provides by banks.
Disadvantages of Loans:-
× Have to repay with interest, emerging extra cost to company.
× Company become debtor, External Liabilities are increasing.
× Loans takes longer time for the funds to be made available.
× Banks often search a company’s past credit history to ensure it can pay
its debt with interest.

18. FUNDAMENTAL OF ACCOUNTING 17
III. Overdraft Facilities
An overdraft facility is a formal adjustment with a bank that allows an
account holder to draw on funds in excess of the amount on deposit. This is a short term
loan facility given to current account holders. Dialog’s being a large company with
several functions, often experiences shortages of cash. This form of facilities is most
commonly used by businesses as a way of generating their working capital more
flexible.
Advantages of Overdraft Facilities:-
 Interest paid only for borrowed amounts.
 Banks have flexibility to adjust the level of over-draft facility.
 It allows company to borrow up to agreed limits without notification for
as long as they wish.
 They are easy and quick to arrange, providing a smooth cash-flow.
 Overdrafts are quicker to obtain and easier to arrange compared to loans.
Disadvantages of Overdraft Facilities:-
× Due to the terms and conditions, the bank can recall the entire
overdraft at any time.
× Cannot be used to borrow large amounts.
× Not generally available for a long period of time.
× Overdrafts carry interest and fees often at much higher rates than loans.
× Risk of reduction limit.

19. FUNDAMENTAL OF ACCOUNTING 18
IV. Debentures
Debenture is a long term loan which is usually assure against a specific asset
or the overall asset of a Company. A debenture is repayable and may have fixed rate or floating
rate of interest. Dialog Company can issue debentures to collect funds because Dialog is a
Public Limited Company.
Debentures are disparate from ordinary shares due to the following reasons.
 The lender has no voting rights in the company.
 Debenture holders get an interest.
 Debenture holder is a creditor of the Company.
Advantages of Debentures:-
 The Control of the company is not surrendered to debenture holders
because they do not have any voting right.
 Cost of debenture is relatively lower than share capital.
 Interest on debentures is an allowable expenditure under income tax
act, hence incidence of tax on the company is decreased.
Disadvantages of Debentures:-
× Debentures are issued to trade on equity but too much dependence on
debentures increases the financial risk of the company.
× Cost of raising capital through debentures is high (high stamp duty).
× Payment of interest on debenture is obligatory and hence it becomes
burden if the company incurs loss.
× Redemption of debenture involves a larger amount of cash outflow.

20. FUNDAMENTAL OF ACCOUNTING 19
03. Conclusion
Though the studies of sources of finance used by Dialog Axiata PLC we
can come into conclusion that sources of finance are essential things to an organization to
achieve the goals and objectives are as follows and their existence depend on this sources.
Dialog Axiata PLC has many financing methods and strategies to operate in. As mentioned
above it is visible that the company is stable and has financial strength to continue its business
operations in the future. Being a CSE Listed Public Limited Company as well as a multinational
company the organization has proven themselves worthy and powerful competitor in the
Telecommunication sector.
The company currently has high retained profit in their business giving rise to the possibility
of future growth of the company and also we can see they provide less amount dividends for
their shareholders. High retain profits will help the business to grow faster but negatively low
dividends is demotivate present shareholders and potential shareholders to doing investments
to this company.
Dialog Company currently has telecommunications infrastructure development and equity
investments on their asset base. As a parent company, Dialog must provide resources to their
subsidiaries. As for Dialog Company have taken Bank loans for some instances Current Bank
Loans, Non-Current Bank Loans And Loan From Parent Company contribute for their long-
term and short term projects for the company. Debentures and not mostly used in this company
to generate money, because Dialog tries to fund mainly through ordinary share capital as they
do not want to expand their external liability.
In closure, Dialog Axiata PLC has made justifiable selections in their sources of finance. We
do recommend exploring debentures since it’s transferable and no additional activities
required, making it safer and more flexible than a bank loan. So our opinion, debenture methods
to raise funds for the Company and take the advantages for their future business activities.

21. FUNDAMENTAL OF ACCOUNTING 20
04. Reference
I. Dialog Axiata PLC Annual Report 2015
Overview
https://www.dialog.lk/
II. Colombo Stock Exchange (CSE)
https://www.cse.lk/
III. Investopedia
http://www.investopedia.com/
IV. Business Dictionary
http://www.businessdictionary.com/

22. FUNDAMENTAL OF ACCOUNTING 21
05. Appendix
Dialog Axiata PLC
End.