A Project on Corporate Accounting EXECUTIVE SUMMARY

Corporate Accounting

EXECUTIVE SUMMARY
This project summarises that corporate accounting is that branch of accounting system
which deals with developing financial statements of business organisations. Two companies
which are listed on ASX are selected named as Abacus Property Group and Aspen Group, both
are operating in Real estate business. In order to answer all the questions of this project, various
analyses have been conducted. Equities and debts are analysed to ascertain profitability of both
the companies. Tax revenue and liabilities are analysed to determine tax assets of both the
companies.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................4
QUESTION 1: OWNERS EQUITY................................................................................................4
Equity items................................................................................................................................4
Comparative analyses..................................................................................................................5
QUESTION 2: CASH FLOWS STATEMENT .............................................................................5
Listing of cash flow items...........................................................................................................5
Comparative analyses..................................................................................................................6
Comparative analyses along with insights..................................................................................7
QUESTION 3: COMPREHENSIVE INCOME STATEMENT.....................................................7
Items in comprehensive income statement.................................................................................7
Rationale for comprehensive income statement.........................................................................8
Comparative analyses..................................................................................................................9
Comprehensive income in evaluating performance of managers of a company.........................9
QUESTION 4: ACCOUNTING FOR CORPORATE INCOME TAX..........................................9
Tax expenses shown in financial statements of both the companies..........................................9
Effective tax rate.......................................................................................................................10
Deferred tax assets/liabilities....................................................................................................10
Evaluation on Deferred tax liability..........................................................................................11
Cash tax amount using book tax amount..................................................................................11
Determination of cash tax rate and its evaluation.....................................................................11
Reasons of variation in cash tax rate and book tax rate............................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
APPENDIX....................................................................................................................................14
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INTRODUCTION
Corporate accounting is a special branch of accounting which deals with accounting
processes for companies. It includes proper preparation of financial accounts such as profit and
loss account, balance sheet and cash flow statement. In order to understand significance of this
concept, two companies are chosen which are listed on Australian Securities Exchange (ASX).
The first company which is selected is Abacus Property Group which operates in Australia and
New Zealand. Another company which is chosen from the same industry of real estate is Aspen
Group which has headquarters in New South Wales, Australia. In this project report, both the
companies are compared in detail using financial statements of both the organisations. Concept
of corporate income tax is also discussed by using tax assets and liabilities of both the
companies. The aim main of this report is to interpret and evaluate significance of corporate
accounting business organisations (Dhaliwal, 2012).
QUESTION 1: OWNERS EQUITY
Equity items
Equity items are the owner's capital value which is the deviation between total assets and
liabilities (Edwards, 2013). Equity items for Abacus Property Group and Aspen Group are listed
below which are shown in their financial statements:
 Underlying profit for Abacus equity shareholder – Underlying profit is the income
which is earned by Abacus Group from equity after setting off all expenses and losses.
According to the income statement of this company, this equity item is showing
increasing trend; 128334 in year 2015, 124011 in year 2016 and 186802 in year 2017.
This change has occurred due to change in costs of the company.
 Issued capital – Value of shares which are issued to the public is the issued capital. This
is the part of company's authorised capital. This item is shown in the balance sheet of
Aspen Group which is continuously decreasing by every passing year. 514000 in 2015,
501000 in 2016 and 500000 in 2017. This capital is observed to be decreasing every year
as the shares which are issues are on declining stage.
 Reserves – These are the profits of a company which are set aside for future
contingencies. Funds in this account is procured either from sale of fixed assets or from
shareholder's equity. This item is shown in balance sheet of Aspen Group according to
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which, this company has significantly low reserves amounting to 2660 in year 2015, 69 in
year 2016 and 2030 in year 2017 this low value of reserves is due to low profit earning by
the organisation.
Comparative analyses
In order to identify debt and equities of both the companies. Debt equity ratio is
ascertained in order to compare debt paying ability of these organisations (Epstein, 2018).
Abacus Property Group Aspen Group
Average debt equity ratio of this company for
3 years is 0.03
Average debt equity ratio of this company for 3
years is 0.07
After analysing performance of this company it
can be said that this organisation is more able
to pay off their debts in future.
Whereas, Aspen group has higher ratio of 0.07
due to which it can be said that they are not as
able as Abacus when it comes to debt payment
system.
QUESTION 2: CASH FLOWS STATEMENT
Listing of cash flow items
Cash flow statements is the aggregation of all the data regarding cash inflows and
outflows which is typically divided intro three classes. This statement shows changes in the cash
value of an organisation (Feng, 2011). There are various items which are recorded in CFS and
some of them are mentioned below:
 Interest received – Interest which is received is a kind of income or cash inflow which is
shown in operating activities in cash flow. This can be earned through investments in
various ventures. From the cash flow statement of Aspen Group, this inflow is changing
every year due to change in overall investment value. For example, this organisation
invested 46000 in year 2015 and has earned interest of 1192. In year 2016 and 2017, this
income was recorded as 867 and 773.
 Borrowing costs – When an organisation borrows funds from external parties, they has
to incur some expenses which are transacting under the head borrowing costs. According
to the cash flow statement of Aspen Group, these costs have recorded under operating
activities. These costs are cash outflow for an organisation, in year 2015 this cost was
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recorded as 7289 and 2057 in 2016. In 2017 there was no such costs because there were
no borrowings in this years.
 Income tax received – Typically income tax is a cash outflow but in the case of Aspen
Group, cash flow statements shows positive balance of income tax (Fisher, 2012). This
positive balance is the result of rebate which is received by this company against their
taxation. This cash inflow is transacting under operating activities and recorded as 556 in
year 2016. In the year of 2015 and 2017, there was not any such type of cash inflow
because rebates are not received every year.
 Repayment of borrowings – This is an expense under which borrowed fund is repaid to
the parties. This item is listed under financing activity as the borrowings can be for longer
time period. This item shows negative balance in cash flow. In year 2015 this balance
was recorded as 8641, 12869 in 2016 and 697 in 2017. This balance is constantly
changing because repayment of borrowing is dependent upon the value of borrowed fund
of Aspen Group.
Comparative analyses
Operating activities Investing activities Financing activities
From the cash flow statement
of Abacus property group, it
has been seen that net cash
flow from operating activities
is 104707 in year 2017, 81532
in 2016 and 95919 in 2015
which is way higher than
Aspen group. Operating cash
flows of Aspen are 3415 in
2015, 4718 in 2016 and 4968
in 2017. The reason behind
this wide difference is huge
turnover and employability
ratio of Abacus due to which
After analysing CFS of both
companies, it has seen that
Abacus Property is having
negative investing income as
(1966) in year 2015, (220488)
in 2016 and positive income of
55390 in 2017. This income is
seen to be less satisfying as
after low operating income,
Aspen Group has managed to
gain higher income in every
year according to their
operating income. (46429) in
2015, 115741 in 2016 and
Financing activity effects
operations of an organisation
for a longer period of time. In
the case of Abacus Property
Group, both income or loss
from financing activities are
way higher than Aspen Group.
Income of Abacus from
financing activity recorded as
(168789) in 2017, 146986 in
2016 and (119366) in 2015.
Whereas financing income of
Aspen is 19170 in 2015,
(93499) in 2016 and (8438) in
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