HA2032 Corporate and Financial Accounting Report 2022

HA2032
Corporate and Financial Accounting
1

Abstract
This report aim to review the sources of finances used Wesfarmers and Woolworth
during the last three years and make comparison on use of these sources by each company. It has
been evaluated that both the selected companies make use of equity as well as debt sources of
finance depending upon the requirement and to manage the capital funds needed. This report will
also evaluate classification of entities on the basis on small proprietary company, large
proprietary company and entities that are regarded as reporting entities.
2

Contents
Abstract............................................................................................................................................2
Introduction......................................................................................................................................4
Part A: Use of different sources of finance for raising the funds....................................................4
A (i): Items recorded under owner’s equity section of both the selected companies with
detailed explanation of each of the item......................................................................................4
A (ii): Movement in each item of owner’s equity mentioned above during the period of three
years.............................................................................................................................................5
A (iii): Items of liabilities sections recorded by each of the selected company and
understanding of each item..........................................................................................................8
A. (IV): Movement in each of items recorded under each of items for both the selected
companies with reason.................................................................................................................9
A. (V): Advantages and disadvantages of each of sources of finance used by the selected
companies...................................................................................................................................10
Part B: Critical examination of the concepts of small proprietary company, large proprietary
company and reporting entity........................................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
3

Introduction
The purpose of this report is to evaluate the different sources of funds used by company
to make available funds to finance the assets. In addition to this, report will evaluate purpose of
classification of entities for reporting purposes. Sources of funds has been classified into two
board categories, they are internal sources of finance and external sources of finance. Internal
sources of finance are generated internally and there is no need to pay any additional charge or
dividend to make available such funds. Retained earnings are only source fund that can be
internally generated. Newly established organization cannot make use of retained earnings due to
non availability of profits during start up phase. On the other hand, external sources can be
obtained from various sources such as banks, financial institutions, and issue of ordinary shares,
preferences shares, bonds, debentures, venture capital, and many other sources. External sources
of funds can be classified as equity sources and debt sources depending upon the charge each
source bear with them. Examples of equity sources are ordinary capital, preference capital, and
retained earnings. On other hand, examples of debt sources of finance includes borrowing from
banks, debentures, venture capital, loans from financial institutions, and many more.
Two ASX companies selected to understand the use of sources of funds are Wesfarmers
and Woolworth. Annual reports of year 2016, 2017 and 2018 have been extracted for both
companies from their respective websites.
Part A: Use of different sources of finance for raising the funds
A (i): Items recorded under owner’s equity section of both the selected companies with
detailed explanation of each of the item
Owner’s equity refers to source of funds contributed by the owner’s of company ie
shareholders of such company. This source of funds is prominent and does not bear any fixed
charge. As discussed earlier, some of important items of owner’s equity are ordinary capital,
retained earnings and reserves.
Owner’s equity items presented in balance sheet of Wesfarmers Group:
 Issued capital
 Retained Earnings
 Reserves
(Wesfarmers: Annual Report, 2017 and Wesfarmers: Annual Report, 2018)
Owner’s equity items presented in balance sheet of Woolworth Group
 Contributed Equity
 Reserves
4