Corporate Accounting: Process and Importance in Organizations

This report evaluates the process and importance of corporate accounting in organizations, with a focus on Myer Limited and Kathmandu Limited. It covers topics such as owner's equity, debt and equity position, cash flow statement, comparative analysis, and comprehensive income statement.

Running Head: Corporate Accounting
1
Project Report: Corporate Accounting

Corporate Accounting
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Executive summary
This report has been prepared in order to identify the process and the importance of
the corporate accounting in an organization. This report mainly concentrates on the recording
and the presentation of various accounting transaction and the figures in the annual report of
the company. In this report, the Myer limited and Kathmandu limited has been taken into
context to measure and identify their corporate accounting process. If an organization does
not focus on the corporate accounting process than the social accountability of the business
becomes lower. All the main figures and the recording has been studied and evaluated in the
report.

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Contents
Introduction.......................................................................................................................5
Company overview...........................................................................................................5
Myer limited.................................................................................................................5
Kathmandu limited.......................................................................................................5
Owner’s equity..................................................................................................................6
i. List of the equity items.........................................................................................6
ii. Debt and equity position......................................................................................7
Cash flow statement..........................................................................................................8
iii. List of the cash flow items...................................................................................8
iv. Comparative analysis.........................................................................................10
v. Comparison........................................................................................................10
Comprehensive income statement..................................................................................11
vi. List of the comprehensive income statement items...........................................11
vii. Why not added in the P&L a/c.......................................................................12
viii. Comparative analysis......................................................................................13
ix. Performance of manager’s evaluation................................................................13
Accounting for corporate income tax.............................................................................13
x. Taxation expenses of the company....................................................................13
xi. Effective tax rate calculations and analysis.......................................................14
xii. Deferred tax assets and liabilities...................................................................14
xiii. Changes in DTA and DTL.............................................................................14
xiv. Calculate of cash tax amount..........................................................................15
xv. Cash tax rate...................................................................................................15

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xvi. Book and cash tax rate....................................................................................16
Conclusion......................................................................................................................16
References.......................................................................................................................17

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Introduction:
The corporate accounting process is the part of accounting. The main focus of
corporate accounting is on the accounting treatment of all the financial figures and the
activities of the business. The corporate accounting is mainly inspired by the accounting
standards and the accounting policies. It explains that an organization is required to manage
and record all the financial figures and the accounting transactions of the business in better
and described way so that it becomes easier for the managers, employs, customers, suppliers,
investors and the other stakeholders of the business to measure the overall performance of the
business (Gorry, Hassett, Hubbard and Mathur, 2017).
Corporate accounting keeps a track on the financial statement and recording process
of the company in order to follow the proper accounting guidelines. In this report, the Myer
limited and Kathmandu limited has been taken into context to measure and identify their
corporate accounting process. The financial items of the business and the relevant financial
notes of the business have been studied in the report to evaluate the performance of corporate
accounting in an organization.
Company overview:
The brief description of both the companies is as follows:
Myer limited:
Myer limited is a retail company. The head market of the company is Australia. It is
an upmarket departmental store in the Australian states. The company is also a self governing
territory among the two territories of Australia. The main product and services of the business
includes variety of products such as children’s clothing, footwear, accessories, electrical
products etc. the company also deals in the home products, electronic products etc. the
company has been funded 118 years back in 1900. Total 14000 people are working with the
company to help and run the business (Home, 2018).
Kathmandu limited:
Kathmandu limited is also a retail company. The company is operating its business in
the Australian and New Zealand market. It is a transactional chain in the Australian states.
The company is one of the transactional chains in Australia. The main product and services of

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the business includes variety of products such as apparel, equipment etc. the company also
deals in the outdoor product etc. the company has been funded 31 years back in 1987 (Home,
2018). Total 2000 people are working with the company to help and run the business.
Owner’s equity:
The owner’s equity is a financial head which is shown in the balance sheet of an
organization under the liability and shareholder head. It describes about the total fund which
has been generated and managed by the business through selling the ownership and the profit
amount of the business.
i. List of the equity items:
The equity items describe the funds which are managed by the business to run the
business and invest into the long term projects to improve the return level of the business. On
the basis of the study on annual report (2017) of Myer limited and Kathmandu limited, it has
been found that the equity items of the companies are contributed equity, reserves and
retained earnings. The contributed equity defines the investment done by the shareholders in
the company. The equity position of Myer and Kathmandu limited has been changed by
0.00% and 0.01% from 2016 in 2017.
In addition, the retained earnings stand for the few % from the net profit of an
organization which is kept by the company and not paid to the shareholder as dividend. This
amount is kept for the business activities. The retained earnings position of Myer limited has
been reduced by 9.84% and in case of Kathmandu limited, the retained earnings have been
improved by 10.19%. Lastly, the reserve is the amount which is maintained for the business
to compensate the sudden loss of the business (Gorry, Hassett, Hubbard and Mathur, 2017).
The reserve level of both the companies depict about the reduction from last year. The below
table represent the equity items and the changes which has occurred into the performance of
the business.
Equity Items
Myer Limited Kathmandu Limited
AUD in '000 2017 2016 Changes 2017 2016 Changes
Stockholders' equity
Contributed equity 739329 739338 0.00% 200209 200191 0.01%
Retained earnings 342146 379483 -9.84% 149893 136033 10.19%
Reserves -8607 -11056 -22.15% -23002 -24541 -6.27%

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Total stockholder's
equity
1072868 1107765 -3.15% 327100 311683 4.95%
ii. Debt and equity position:
Debt and equity position describe the capital structure position of a company. A
business is always required to manage the optimal capital structure of the business where the
risk position and the cost position of the business is lower in order to improve the investment
position and reduce the financial risk position of the business. The debt and equity weight
must be maintained by the business in such a way that the cost of capital of the business
could be reduced and the financial leverage position of the business could also be lowered
(Rees and Shane, 2012).
In order to evaluate the debt and equity position of Myer limited and Kathmandu
limited, the long term debt and equity worth of both the business has been calculated from the
annual report of the business to evaluate the capital structure position of the business.
Through the calculations on Myer limited, the debt equity position of the company is 29.70%
which expresses that the financial gearing ratio of the business is lower. Though the cost
position of the company is higher and still, in the industry the position of the company is
competitive (Annual report, 2017).
Further, in case of Kathmandu limited, the debt weight of the company against the
total equity amount is 13.67%. It describes that the main focus of the company is on the
equity level only in order to reduce the risk position of the company. But along with this, the
cost of the company has been higher. The annual report (2017) explains that the director has
depicted to make improvements in the capital structure to maintain the overall position of risk
and cost of the business.
Debt / Equity calculations
Myer
Limited
Kathmandu
Limited
AUD in '000 2017 2017
Long term
debt 318647 44723
Equity 1072868 327100
Debt / Equity 29.70% 13.67%

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(Annual report, 2017)
Cash flow statement:
The cash flow statement is a financial statement which is shown in annual report and
prepared after the statement of financial position and financial performance. It describes
about the total cash outflows and inflows of the company which has been generated and paid
by the business in a particular time period.
iii. List of the cash flow items:
The cash flow items describe the funds which has been either paid or received by the
business in a particular time period and these transactions are related to the business, its
activities and the financial position. On the basis of the study on annual report (2017) of
Myer limited and Kathmandu limited, it has been found that the cash flow items of the
companies are investment into the PPE, subsidiary businesses, amount received from the
customers and paid to the suppliers, dividend amount paid, issues of shares, proceed of
borrowings, buy back of shares etc. The cash flow statement defines the cash position of the
company.
Figure 1: Cash flow statement of Myer
On the basis of the figure 1, it has been measured that the receipts from the customer
defines the cash inflows which has been received by the business. The reduction has been

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seen in that level and along with that, the payment of the company has also been reduced.
Though, it has been found that the overall position of the operating cash flow of the company
has been reduced.
Further, the investing cash flow contains the activities which are related to the
investment into the new plants, building, fixed assets and the subsidiaries of the business. The
investing cash position of Myer limited has been reduced because of the higher investment
into PPE and intangible assets of the business (Annual report, 2017). Lastly, the investing
cash flow contains the activities which are related to the investment into the new plants,
building, fixed assets and the subsidiaries of the business. The investing cash position of
Myer limited has been reduced because of the higher investment into PPE and intangible
assets of the business.
Figure 2: Cash flow statement of Kathmandu
On the basis of the figure 2, the improvement has been seen in the receipts from
customers and along with that, the payment of the company has also been increased. Though,
it has been found that the overall position of the operating cash flow of the company has been
reduced (Bardley, 2007).

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Further, the investing cash flow has been improved from the last year because of the
reduction into the investment position of the business. Lastly, the financial cash flow contains
the higher expenses of the business. It explains that the overall cash position of the business
has been changed.
iv. Comparative analysis:
The main cash flows of both the companies have been evaluated further. On the basis
of the below table, it has been recognized that the operating activities of both the companies
have been improved by 54.03% and 127.07%. Along with that the cash outflow from the
investing activities of Myer limited has been improved and the cash outflow of Kathmandu
limited has been reduced (Gorry, Hassett, Hubbard and Mathur, 2017). Lastly, the cash
outflow from the financing activities of Myer limited has been reduced and the cash outflow
of Kathmandu limited has been improved. It explains that the changes have seen in both the
companies.
Myer Limited Kathmandu Limited
AUD in '000 2017 2016 2015 Changes 2017 2016 2015 Changes
Net cash used for operating
activities 149278 149490 96915 54.03% 67273 69080 29627 127.07%
Net cash used for investing
activities -109456 -58251 -62350 75.55% -13275 -23191 -19980 -33.56%
Net cash provided by (used
for) financing activities -54438 -99355 -54806 -0.67% -57382 -40730 -14898 285.17%
(Annual report, 2017)
v. Comparison:
The cash position of both the companies has been compared with each other. On the
basis of the evaluation, it has been recognized that the Kathmandu limited has made better
changes into its cash inflow position and due to which the cash position of the business has
been improved. The below table better explains the changes and the comparison of both the
companies:
Myer Limited Kathmandu Limited
AUD in '000 2017 2016 Changes 2017 2016 Changes
Net cash used for operating
activities 149278 149490 -0.14% 67273 69080 -2.62%
Net cash used for investing
activities
-
109456 -58251 87.90%
-
13275
-
23191 -42.76%

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Net cash provided by (used for)
financing activities -54438 -99355 -45.21%
-
57382
-
40730 40.88%
(Annual report, 2017)
Comprehensive income statement:
The comprehensive income statement is a one of the financial statement which is
prepared and shown in the annual report of a company. It describes about those items which
is not added in the profit and loss statement even though they affect the profit position of an
organization. It describes about the total fund and profit which has been affected due to other
factors of the business.
vi. List of the comprehensive income statement items:
The item list is as follows:
Figure 3: Comprehensive income statement of Myer limited

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Figure 4: Comprehensive income statement of Kathmandu limited
vii. Why not added in the P&L a/c:
The comprehensive income statement is other statement which is not included in the
profit and loss statement of the business even though the nature of the statement. Both the
statement describe about the revenue and expenses of the business. But the reason behind not
adding these items into the profit and loss statement is their relevancy (Bamber, Jiang,
Petroni and Wang, 2010). These items are not directly related with the operations of the
business and they occur because of the changes into the government policies, economical
position, fiscal policies, foreign currency fluctuations etc.

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The involvement of these items in the income statement of the business could
manipulate the actual profitability figures of the business which has been generated from the
real and main operations and the activities of the business.
viii. Comparative analysis:
The comprehensive income statement outcome has affected the overall profit level of
the business. In case of Myer limited, it has been found that the comprehensive income
statement of the company brief $ 876000 profit in the company which has improved the
profit level of the Myer limited from $ 11939000 to $ 12815000. Further, in case of
Kathmandu limited, it has been found that the comprehensive income statement of the
company brief $ 418,000 profit in the company which has improved the profit level of the
Myer limited from $ 38039,000 to $ 38457,000. It explains that the comprehensive income
statement has positively impacted on the income statement of both the companies.
ix. Performance of manager’s evaluation:
Almost all of the businesses make the profitability level of the business a base to
measure the overall performance and the work done by the management for the betterment of
the company. If the comprehensive item would be added in the income statement of the
business than it would change the profitability level and reason behind those changes are not
in the hand of managers. Due to it, the base would be manipulated and a better evaluation
cannot be done on the performance of the managers. Thus, it has been concluded that while
measuring the performance of the managers, comprehensive income must not be added.
Accounting for corporate income tax:
The accounting for corporate income tax is a major part of the business as the rates
charged on the business is always different from the amount which must be paid by the
business and the amount which has been paid by the business (Bradley, 2017). It describes
about the total changes in the taxation amount and their impact on all the three final financial
statement of the business.
x. Taxation expenses of the company:
Annual report (2017) of Myer limited and Kathmandu limited describe the below
expenses which has been paid as tax to the Australian government:

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Income tax expenses
Myer
Limited
Kathmandu
Limited
AUD in '000 2017 2017
Income tax
expenses 18274 16935
(Annual report, 2017)
xi. Effective tax rate calculations and analysis:
The effective tax rate of the business has been calculated further to measure the actual
% of tax which has been paid by the business for that particular period. The below table
expresses the effective tax rate of Myer limited is very higher (Egger, Eggert, Keuschnigg
and Winner, 2010). The effective tax rate of Myer limited and Kathmandu limited is 60.48%
and 30.81%.
Effective tax rate
Myer
Limited
Kathmandu
Limited
AUD in '000 2017 2017
Income tax
expenses 18274 16935
EBT 30213 54974
Effective tax rate 60.48% 30.81%
(Annual report, 2017)
xii. Deferred tax assets and liabilities:
DTA and DTL position of both the companies have been found from the annual report
(2017). The below table explains the figures:
Deferred tax assets and liabilities
Myer
Limited
Kathmandu
Limited
AUD in '000 2017 2017
Deferred tax
liabilities 84574 34027
(Annual report, 2017)
The DTL position has been occurred in both the companies because of the lower
payment than the actual payment in the current year (Annual report, 2017).

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xiii. Changes in DTA and DTL:
The changes into the DTL position of both the companies have been seen from the last
year. The DTL position of Myer has been reduced while the DTL level in Kathmandu has
been improved.
Changes in Deferred tax assets and liabilities
Myer Limited Kathmandu Limited
AUD in '000 2017 2016 Change 2017 2016 Change
Deferred tax liabilities 84574 88444 -4.38% 34027 33247 2.35%
(Annual report, 2017)
xiv. Calculate of cash tax amount:
The cash tax rate of the company has been calculated further. It depicts the figure
which has been paid by the company in case in the particular time period. The cash tax
amount of the business has been calculated through making the required amendments in the
business. The cash tax of Myer limited is $ 22,144,000 and the amount of cash tax in
Kathmandu limited is $ 16,155,000. The calculations of cash tax amount of the business are
as follows:
Cash tax rate
Myer
Limited
Kathmandu
Limited
AUD in '000 2017 2017
Book Income tax expenses 18274 16935
ADD: Increment in the deferred tax
assets 0 0
Less: Increase in deferred tax liabilities -3870 780
Cash tax amount 22144 16155
(Annual report, 2017)
xv. Cash tax rate:
. The cash tax rate of Myer limited is 73.29% and the rate of cash tax in Kathmandu
limited is 29.39%. The calculations of cash tax amount of the business are as follows:
Cash tax rate
Myer
Limited
Kathmandu
Limited
AUD in '000 2017 2017

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Book Income tax expenses 18274 16935
ADD: Increment in the deferred tax
assets 0 0
Less: Increase in deferred tax
liabilities -3870 780
Cash tax amount 22144 16155
EBT 30213 54974
Cash tax rate 73.29% 29.39%
(Annual report, 2017)
xvi. Book and cash tax rate:
Lastly, the study has been done in the book rate and the cash tax rate of the business. In
case of Myer limited and Kathmandu limited, the book tax rate of the business is 30% on the
basis of the Australian taxation rate. Further, the cash tax rate of the business is 13.29% and
29.39%. It explains major differences in case of Myer limited and almost similarity in
Kathmandu limited.
Tax rate changes
Myer Limited
Kathmandu
Limited
AUD in '000 2017 2017
Book tax rate 30% 30%
Cash tax rate 73.29% 29.39%
(annual report, 2017)
Conclusion:
On the basis of the overall study on Myer limited and Kathmandu limited as well as
on the basis of the study on the corporate accounting and its process, it has been measured
that if an organization does not focus on the corporate accounting process than the social
accountability of the business becomes lower. Because at that position, the investors, analyst,
financial stakeholders and other stakeholders of the business find it difficult to measure and
decode the information in their own way. Thus, it has been found that the corporate
accounting process must be followed by the business to maintain the overall performance in
the market.

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References:
Annual Report. 2016. Kathmandu Limited. [Online]. Available at:
http://www.annualreports.com/HostedData/AnnualReportArchive/K/ASX_KMD_2016.pdf
[accessed 21/9/18].
Annual Report. 2016. Myer Limited. [Online]. Available at:
http://investor.myer.com.au/FormBuilder/_Resource/_module/dGngnzELxUikQxL5gb1cgA/
file/Myer_Annual_Report_2016.pdf [accessed 21/9/18].
Annual Report. 2017. Kathmandu Limited. [Online]. Available at:
https://www.kathmanduholdings.com/wp-content/uploads/2012/08/Kathmandu-Annual-
Report-2017_online.pdf [accessed 21/9/18].
Annual Report. 2017. Myer Limited. [Online]. Available at:
http://investor.myer.com.au/FormBuilder/_Resource/_module/dGngnzELxUikQxL5gb1cgA/
file/Myer_Annual_Report_2017.pdf [accessed 21/9/18].
Bamber, L.S., Jiang, J., Petroni, K.R. and Wang, I.Y., 2010. Comprehensive income: Who's
afraid of performance reporting?. The Accounting Review, 85(1), pp.97-126.
Bradley, S., 2017. Inattention to Deferred Increases in Tax Bases: How Michigan Home
Buyers Are Paying for Assessment Limits. Review of Economics and Statistics, 99(1), pp.53-
66.
Egger, P., Eggert, W., Keuschnigg, C. and Winner, H., 2010. Corporate taxation, debt
financing and foreign-plant ownership. European Economic Review, 54(1), pp.96-107.
Gorry, A., Hassett, K.A., Hubbard, R.G. and Mathur, A., 2017. The response of deferred
executive compensation to changes in tax rates. Journal of Public Economics, 151 (2), pp.28-
40.
Ho, A.T., 2017. Tax-deferred saving accounts: Heterogeneity and policy reforms. European
Economic Review, 97 (1), pp.26-41.
Home. 2018. Kathmandu Limited. [Online]. Available at: https://www.kathmandu.co.nz/
[accessed 21/9/18].

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Home. 2018. Myer Limited. [Online]. Available at: https://www.myer.com.au/ [accessed
21/9/18].
Rankin, M., Ferlauto, K., McGowan, S.C. and Stanton, P.A., 2012. Contemporary issues in
accounting. Milton, Australia: Wiley.
Rees, L.L. and Shane, P.B., 2012. Academic research and standard-setting: The case of other
comprehensive income. Accounting Horizons, 26(4), pp.789-815.