An Executive Summary of the Wesfarmers ltd and Woolworths Group Ltd

Corporate Accounting

EXECUTIVE SUMMARY
This project is being summaries by taking specific information about the corporate
accounting. It consists of various rules and regulation that can help accounting in analysing the
overall performance of the both the company. In order to get more reliable results two of the
main companies is taken for this particular analysis such as Wesfarmers ltd and Woolworths
group ltd. Different types of accounting statements, comprehensive incomes report and other
accounting statements are discussed under this report. Understanding of accounting for corporate
income tax is also being covered under this project so that specific knowledge about tax paid by
both the companies can easily be analysed. Overall evaluation is done to reach at specific
outcomes so the effective decisions can be made in near future.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
Table of Contents.............................................................................................................................3
INTRODUCTION...........................................................................................................................1
OWNERS’ EQUITY.......................................................................................................................1
(i): Listing item of equity and associated information about the companies.........................1
(ii): Comparative analysis.......................................................................................................2
CASH FLOW STATEMENT..........................................................................................................3
(iii): Listing of cash flow statements......................................................................................3
(iv): Comparative analysis......................................................................................................3
(v): Comparative analysis along with proper insight.............................................................4
OTHER COMPREHENSIVE INCOME STATEMENT................................................................5
(vi): Items in comprehensive profit and loss statements of both company............................5
(vii): Essential for reporting income statements.....................................................................8
(viii): Comparative analysis...................................................................................................9
(ix): Comprehensive income be included in evaluating the performance of manager...........9
ACCOUNTING FOR CORPORATE INCOME TAX....................................................................9
(x): Tax expenses shown in financial statements of both the companies...............................9
(xi): Effective tax rate...........................................................................................................10
(xii): Deferred tax assets / liabilities.....................................................................................11
(xiii): Evaluation on Deferred tax liabilities.........................................................................12
(xiv): Cash tax amount using in book tax amount................................................................12
(xv): Calculation of cash tax rate for both the company......................................................12
(Xvi): Reasons of variation in cash tax rate and book rate...................................................12
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14
Appendix........................................................................................................................................15

INTRODUCTION
Corporate accounting is a specialized branch of accounting that deals with the accounting
for companies, formulation of final accounts and cash flow statements. The actions that
managers take to increase the value of their firm to the shareholders and techniques as well as
analysis used to allocate financial resources within an organisation. In accordance to analyse the
significance of this concepts, the two companies are selected which are listed on ASX
(Australian securities Exchange). The first company is chosen is “Wesfarmers Ltd” which is
having one of the largest business operations in chemicals, fertilisers and coal mining. While the
another one is “Woolworths group limited” which is more trusted brands in retailing, serving
millions of customer every day. This project covers various information about owners’ equity,
cash flow statements of the mentioned two companies under this report. Apart from this,
accounting for corporate income tax is also being illustrated effectively in this project
(Etxeberria and Ortas, 2017).
OWNERS’ EQUITY
(i): Listing item of equity and associated information about the companies
Equity items: These are said to be owner capital worth that is being derived among total
assets and liabilities they are carrying with them. The data is taken from both Woolworths group
limited and Wesfarmers ltd. There are various types of equity accounts that combine to make up
total shareholders’ equity. It consists of common stock, preferred stock, contribution surplus,
additional paid up capital and retained earnings. These are mentioned as per the financial
statement prepared by the company. some of them are discussed underneath:
 Common stock: It is said to be the security that represent ownerships within an
organisation. Common stock is considered as securities, shares, bonds and debentures
retain by organisation of other companies. The main reason of fluctuation in the value of
stocks occurs due to fluctuations in dividends or interest income received by
organisation. For example, Wesfarmers and Woolworths group retain the common stocks
and the fluctuation will be based upon change in dividends and interest income. Holders
of common stock exercise control by electing a board of directors and making vote on
corporate policy. (Zadek, Evans and Pruzan, 2013).
 Retain earnings: These are said to be net revenue after dividends that are present with
the company to reinvestment in the company’s core business or to pay their all-time
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debts. They used to record all this information under shareholder equity on their balances
sheet. Wesfarmers and Woolworth group Ltd retain earnings affected by the increase or
decrease in net income and dividends paid to shareholders. Because of this, any items that
drive net value higher will affect the retained earnings.
 Reserve: Such kind of gains incurred by the company are set aside for upcoming
contingencies. Capital under this account is being procured either from sale of fixed
assets or form overall shareholders equity. These items are shown on the balance sheet of
both Woolworths group limited as well as Wesfarmers ltd. The changes under this varies
with the total net earnings and loss a company is getting within an accounting period of
time.
Items Year Wesfarmers ltd Woolworths group Ltd
Common stock 2017 22,242 9526
2016 21,909 8471
2015 21,844 10834
Retained earning 2017 2742 3554
2016 874 3125
2015 1509 5830
Reserve 2017 190 176
2016 166 156
2015 156 201
(ii): Comparative analysis
In context to examine total liabilities and equities of both the companies, debt equity ratio
is taken into account to compare the debt paying capabilities of such kind of organisation.
Wesfarmers ltd Woolworths group Ltd
The total debt/equity ratios of this capital for
the last three year is 0.18.
There are specific results collected from the
total debt and equity of the company.
1.39+1.74+1.28=4.41/3=1.47
After making reliable performance analysis of
this company, it can be said that this particular
organisation is more responsible to pay off
However, this company is having much higher
ratio of 0.07 because of which it can be said
that they are not being able to similar as Wes
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their liabilities in coming future time. farmer in accordance with debt payment
system.
CASH FLOW STATEMENT
(iii): Listing of cash flow statements
This is said to be one of the effective report of every data associated with cash inflows
and outflows generated by the company from the various activities. This statements indicate
specific changes in the cash value with the both companies. Such items are recorded in a
systematic statements and some of the associated items are mentioned underneath:
Interest received: It is known as incomes or cash inflows which indicated in the different
venture capital. From the statement of cash flows prepared by Wesfarmers Ltd is changing in the
overall investment value (Edwards, 2013). It can be earned by proper investment in different
venture. Such as operating, financing and investing activities. Like for examples, this
organisation has made valuable amount of earning from all activities such as, net cash from
operating activities is 4226 and 3365 in 2017 and 2016 respectively. While, overall investment
made within the period of time is -53 and -2132, whereas financing activities are incurring net
cash of 3771 and 1339 respectively in those two years.
Borrowing costs: In an organisation, borrowing funds from outside parties, they have to
incur certain expenditure which are transacting in the head of borrowing costs. As per the total
cash flow statements of Wesfarmers Ltd, these cost have mentioned under operating activities.
Such kind of cash outflows from the company will be showing overall investment they are done
within the same segment. The capital expenditure cost was bear by the company in the form of
capital expenditure was 1.55 in last financial year by Wesfarmers Ltd.
Income tax received: Basically, incomes tax is a considered as cash outflow but in the
case of Woolworths group Ltd they are getting positive balance. This positive balance is that
outcome of rebate which has been retained through this companies against their taxation. This
cash inflow in transaction under the head of operating activities are recorded as 122 in 2017 and
-362 in 2016. It is very less as compare to other company.
(iv): Comparative analysis
Operating activities Investing activities Financing activities
According to this activities of
Wesfarmers Ltd, it has been
These are considered as one of
the overall cash flows
It is known as specific
transaction done with the
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