(Solution) Corporate Accounting : PDF

Corporate Accounting

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................1
TASK 1: OWNER'S EQUITY........................................................................................................1
Listing equity items and their changes........................................................................................1
Comparative analysis of debt and equity position of both the companies..................................2
TASK 2: CASH FLOW STATEMENTS........................................................................................3
Listing the items of cash flow statements and its changes..........................................................3
Comparative analyses of CFS of both the companies using three activities...............................4
Comparative analysis of selected companies along with insights..............................................5
TASK 3: Other Comprehensive income statement..........................................................................5
Items in comprehensive income statement.................................................................................5
Rationale for comprehensive income statement.........................................................................6
Comparative analyses..................................................................................................................6
Comprehensive income in evaluating performance of managers of a company.........................7
TASK 4: Accounting for Corporate income tax..............................................................................7
Tax expenses shown in financial statements of both the companies..........................................7
Effective tax rate.........................................................................................................................7
Deferred tax assets/liabilities......................................................................................................8
Evaluation on Deferred tax liability............................................................................................8
Cash tax amount using book tax amount....................................................................................8
Determination of cash tax rate and its evaluation.......................................................................9
Reasons of variation in cash tax rate and book tax rate..............................................................9
CONCLUSION................................................................................................................................9

REFERENCES..............................................................................................................................10
APPENDIX....................................................................................................................................11

EXECUTIVE SUMMARY
This project summarises that corporate accounting is a process of developing financial
statements and interpreting them in order to perform comparative analyses. Two companies
which are listed on ASX are selected named as LandMark White Limited and Land & Homes
Group operating in real estate. In order to better understand this project financial statements of
both the countries are analysed. Tax revenue and liabilities are analysed to determine tax assets
of both the companies.

INTRODUCTION
Corporate accounting is a process of preparation and analysing the financial statements of
a corporate. Corporate includes various business entities which are formed with an objective to
run a lawful business. In order to understand this company, two companies are chosen in this
organisation which operates in same industry and that is real estate. LandMark White Limited
and Land & Homes Group are two companies which are chosen and analysed by evaluating their
annual reports in order to evaluate owner's equity, cash flow statements and tax liabilities of both
the companies (Dhaliwal and et. al., 2012).
TASK 1: OWNER'S EQUITY
Listing equity items and their changes
In terms of financing and accounting, equity refers to ownership or stocks. Equity items
are those units of ownership which includes equity shares. These items represents capital
contributed by the owners or the difference between a company's total assets and its total
liabilities (Edwards, 2013). In this project, two companies dealing in real estate are selected and
they are LandMark White Limited and Land & Homes Group. Equity items of these two
companies are listed below along with their reasons of change which are sourced from equity
position statement of both the companies :
Share capital/Ordinary shares – Share capital is the fund which is earned by an
organisation by selling their ordinary shares in public. This amount of equity shares is changes
over time and company wishes to increase this amount in order to increase their capital (Epstein,
2018). From the statement of changes in equity of both the companies, various changes are seen.
In case of Land & Homes Group limited, ordinary shares are reflecting an increasing trend. In
the year 2015, these shares were 52163223, 60541493 in 2016 and 69078509 in 2017. The
reason for its increasing trend is issuance of new shares in market. This increase is beneficial for
the company but not for the investors as it shows that there is less proportion of ownership of
investors in firm's capital. In the case of LandMark White Limited, there is also an increasing
trend like the other company. Share capital of this company in 2015 was 6008000, 6050000 in
2016 and 33773000 in 2017. The main reason of its change is that this company is successful in
paying their debts and new capital is supplied to them by new issue.
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Share option reserve – This reserve is a collection of shares which are reserved for the
employees or other internal company personnel. These shares are granted to the employees as an
option against their loyalty and integrity towards company. The main aim of this reserve is to
reward their employees for their contribution. In the case of LandMark White Limited, there
were 62000 dollars of shares were reserves for this category in the year of 2015, 322000 in 2016
and nil in 2017. The reason for its change is simply directional to contribution of employees. It
can be said that in 2017, all of these shares were distributed to employees for their hard work. In
the case of Land & Homes Group limited, there were no shares in option reserve for the years of
2015 and 2016 but in 2017, an amount of 23961 is reflected.
Retained earnings/losses – These are the net earnings which is not distributed to the
shareholders and is stocked for the purpose of reinvestment. In the case of Land & Homes
Group limited, company is facing retained losses. In the year of 2015, retained losses of this
company were 52453877, 54106509 in 2016 and 54091844 in 2017. The reason for this
difference is issuance of dividend to shareholders. In the case of LandMark White Limited,
retained earnings are increasing every year due to non distribution of dividend to shareholders
and revenues are more than expenditures. In the year 2015, these earnings were 605000,
1229000 in 2016 and 1279000 in 2017.
Comparative analysis of debt and equity position of both the companies
Debt and equity position of a company can be ascertained by determining their debt
equity ratio (Feng and et. al., 2011). This ratio can be ascertained by following the formula
which states total liabilities/ shareholder's equity*100. This ratio is calculated below by
considering financial data of both the companies:
2015 2016 2017
LandMark White
Limited
0.52:1 0.47:1 0.55:1
Land & Homes Group
limited
0.3:1 0.68:1 0.44:1
From the above debt equity analysis, it can be ascertained that overall performance of
LandMark White Limited is more sound than Land & Hones Group Limited. The evidence of
above statement is the ratios which are calculated from the financial information of both the
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