Corporate and Financial Accounting Task 2022

Running head: CORPORATE AND FINANCIAL ACCOUNTING
Corporate and financial accounting
Name of the student
Name of the university
Student ID
Author note

1CORPORATE AND FINANCIAL ACCOUNTING
Abstract
Aim of the task is to analyse the financial statements of 2 ASX listed entities Rio Tinto and
BHP Billiton for the past 3 years covering 2016 to 2018. The report will concentrate on
different items reported under the owner’s equity section and liability section of both the
entities and will report the movements for those amount along with the reasons behind the
same. Further, in next section the report will focus on small proprietary entity, large
proprietary entity and reporting entity ad the reporting requirements of these entities.

2CORPORATE AND FINANCIAL ACCOUNTING
Table of Contents
Introduction............................................................................................................................3
Part A.....................................................................................................................................3
(i) Owner’s equity............................................................................................................3
(ii) Movement of each item under owner’s equity..........................................................4
(iii) Liability......................................................................................................................5
(iv) Movement of each item under owner’s equity..........................................................6
(v) Advantages and disadvantages of source of funds.................................................7
Part B.....................................................................................................................................8
Conclusion.............................................................................................................................9
Reference.............................................................................................................................10

3CORPORATE AND FINANCIAL ACCOUNTING
Introduction
Being the pioneer in metal and mining sector, Rio Tinto is engaged in producing
essential material required for human progress. Major products of the organisation include
copper, aluminium, gold, diamond, uranium, iron ore and industrial materials including
titanium oxides, borates and salt. Minerals and metals produced by them plays major role
in hosting day to day items as well as innovative technologies. That assists in working in
modern life (Riotinto.com 2019). On the other hand, BHP Billiton that is the outcome of a
merger among Billiton and Broken Hill Proprietary (BHP). It is engaged in production of
copper, steel, silver, oil, gas and aluminium. It has interests in transportation and
engineering (BHP 2019.).
Part A
Balance sheet of the entity represents the shareholder’s equity, assets and liabilities
at a particular point of time and offers the basis to compute the return rate and analysis of
capital structure.
(i) Owner’s equity
Rio Tinto – looking into the balance sheet of Rio Tinto for the past 3 years covering the
years 2016 to 2018 it can be identified that the owner’s equity section of the balance sheet
includes the following items –
 Share capital – share capital is the fund raised by the entity in exchange of
issuance of ownership interests in entity though shares. Generally there 2 types of
share capital including preferred stock and common stock. However share capital
of Rio Tinto only includes ordinary shares. An ordinary share that is also known as
common shares are with lower priority for the assets of the entity and receive only
dividends with the managements of the entity’s discretion (Williams and Dobelman
2017).
 Share premium account – it represents the difference among the issue or
subscription price and share’s par value. This account is statutory reserve account
and is not distributable.
 Other reserves – other reserves of Rio Tinto includes different reserves like capital
redemption reserves, cash flow hedge reserve, revaluation reserve on account of
available for sale and foreign currency translation reserve (Robinson et al. 2015).
 Retained earnings – it is the profit generated by the firm which is not distributable to
the stockholders and is reported after making payment for dividends. If the entity
has large amount of retained earning balance it suggests that the entity is
financially healthy (Wahlen, Baginski and Bradshaw 2014)
BHP Billiton – looking into the balance sheet of BHP Billiton for the past 3 years covering
the years 2016 to 2018 it can be identified that the owner’s equity section of the balance
sheet includes the following items –
 Share capital – share capital of BHP Billiton includes fully paid ordinary shares,
shares with special voting and preference shares. Shares with special voting are
issued by BHP Billiton and BHP Billiton Plc. jointly to facilitate the joint voting by the
shareholders. Preference shares are with the right of repayments for the value paid
up on nominal value and unpaid dividends, if any on prior basis against holder of
other share class in the instance of winding up or return of the capital (Hotchkiss,
Strömberg and Smith 2014)