Corporate Accounting Report Abstract

RUNNING HEAD: CORPORATE ACCOUNTING 0
Corporate Accounting
Report

Corporate Accounting 1
Abstract
There are different sources of raising funds, the choice of source depend on various
factors such as cost of raising fund, time and ownership. In order to understand the
concept of sources of raising funds two companies are chosen that are Rio Tinto and BHP
Billiton both the companies operate in metal and petroleum industry. The report highlights
the different sources that are available for companies and the sources they used in order
to raise funds. After that a brief overview of AASB 137 standard is given and asset and
liabilities classification of both the companies are given. At last, asset measurement use
by both the companies is disclosed. It is concluded from report that both the companies
witch to internal sources to raise funds that are retained earnings and reserves.

Corporate Accounting 2
Table of Contents
Introduction............................................................................................................................3
Different sources of Funds.....................................................................................................3
Evolution................................................................................................................................4
Demerits and merits...............................................................................................................4
Liabilities classification...........................................................................................................5
Assets classification...............................................................................................................5
AASB137................................................................................................................................6
Conclusion.............................................................................................................................7
References.............................................................................................................................8
Appendix................................................................................................................................9

Corporate Accounting 3
Introduction
There are different sources that are used by the companies to raise funds. The main
sources of funds are divided into two categories; external sources and internal sources.
Funds are raised by the organizations to grow and expand in the market by investing in its
products or services. Companies use different source for raising funds in order to reduce
its cost and to gain maximum return with minimum risk. Companies mainly raise funds
through two sources that are equity and debt. Both the sources have some advantage and
disadvantage (Cornwall et.al, 2019). This report includes different sources of funds used
by BHP Billiton and Rio Tinto. Both these companies operate in the same segment.
Further, report includes evolution of sources by analyzing last 3 years financial statement
of companies. At last, asset classification and liabilities classification are disclosed by
considering AASB 137 “provisions contingent liabilities and contingent assets”. At last,
analyses of both the companies are done followed by conclusion.
Rio Tinto
Rio Tinto is Australian multinational company that operates in metal and mining segment.
In 2018, the company had turnover of US$ 40,522 billion with net income of US$ 13,925
billion. It is analysed from the balance sheet that the company mainly depend on two
sources of funds that are retained earnings and long term borrowings. In 2018, long term
borrowings of the company were $12,847 and retained earnings was $27,025. This
indicates that the company keep aside most of its profits in order to expand and grow in
the market. The company mainly depend on debts as compare to shareholder equity as
total shareholders’ equity in 2018 was $3,688. From the information taken from company’s
balance sheet it can be said that Rio Tinto mainly depend on internal sources of funds and
from external sources portion of debt in the capital structure is greater ( Rio Tinto, 2018).
BHP Billiton
BHP group limited operates in mining, petroleum and metal industry. The company was
established in 1885 and headquartered in Melbourne, Australia. BHP Billiton was formed
when BHP and Billiton merged in 2001. The annual turnover of the company in 2018 was
US$43,638 billion and net income was US$4,823 billion. It is analysed that the company
expanded its operations from last 3 years and due to that raise funds from different
sources. The capital structure of the company consists of both internal and external
sources. The external sources include debt and equity, debt of BHP Billiton in 2018 was
$24,069 and equity was $2,243. This indicates that the company mainly raise funds
through debts. The internal sources include retained earnings and reserve of the company
and retained earnings of the company in 2018 was $51,064 and reserve was $2,290 (BHP
Billiton, 2018). In a nutshell, BHP Billiton depends on internal sources for expansion and
growth in the market.
Different sources of Funds
There are many sources of raising funds but some of the most common sources that are
used organizations are long term loans, borrowings, equity, venture capital, reserves,
debentures and retained earnings. The choice of source depends on the company and
includes various factors such as cost of raising funds, time period and control. It is
essential for the companies to evaluate all the sources and opt for the source that benefit
the company by getting maximum return with minimum expenses. It became challenging