Corporate & Financial Accounting - Assignment

Corporate
&
Financial
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
ASSESSMENT TASK:...................................................................................................................3
PART A...........................................................................................................................................3
(i)..................................................................................................................................................3
(ii) Movement in items reported under owner equity section with reason:.................................5
(iii) Items reported under liabilities section by both companies:.................................................9
(iii). Explanation about movement in items reported under liabilities head with reason:.........10
PART B..........................................................................................................................................12
Concepts of small proprietary company, large proprietary company and reporting entity:......12
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Corporate and financial accounting relates to business tasks which are dedicated in
funding, managing capital-structure, reporting of business's fiscal events, and evaluation with
aims to maximise yields and value for shareholders or investors (Adesara, 2016). Ultimate
motive here is to enhance creditability of corporation's final accounts because these are not only
supports corporation's decisions but also guides investors to take cost-effective investing
decisions. This study comprises complete and thorough analysis of balance sheet of companies
named Wesfarmers Ltd and Woolworths Group Ltd. Both these companies are top retailer of
Australia.
ASSESSMENT TASK:
PART A
(i)
Items reported under owners’ equity section:
Wesfarmers Ltd:
2018 2017 2016
Issued capital 22277 22268 21937
Reserved shares -43 -26 -28
Retained earnings 176 1509 874
Reserves 344 190 166
Total stockholders'
equity
22754 23941 22949
Woolworths Group Ltd
2018 2017 2016
Issued capital 6055 5615 5252
Reserved shares 278 -42 -69
Retained earnings 4073 3797 3124

Reserves 75 156 163
Total stockholders'
equity 10481 9526 8471
Following is an explanation of items reported by both companies, as follows:
Issued Capital: In this head company has reported securities issued. Wesfarmers Ltd
has issued share capital in year 2016 and 2017, due to which issued capital of company is
increased from AUD 21937 million in 2016 to AUD 22268 million in year 2017 and then AUD
22277 million in year 2018. Woolworths Group Ltd also reported increase in issued capital
which is (AUD in million) 6055, 5615 and 5252 in year 2018, 2017 and 2016 respectively.
Reserved Shares: Capital which is part of Authorized capital but remain unissued are set
aside or kept for reserve or further issuance, regarded as reserved shares. It is simply a reserve
which is used by company only for any contingent capital loss or other capital statutory
adjustment. Here in Wesfarmers Ltd company has reported reserved shares of -43, -26 and -28 in
year 2016, 2017 and 2018 respectively. While Woolworths Group Ltd has reported reserved
shares amounting 278, -42 and -28 in year 2018, 2017 and 2016 respectively.
Retained Earnings: It is part of net-income remain after payment of dividends to
company's shareholders. Company Wesfarmers has reported retained earnings of AUD 176
million, AUD 1509 million and AUD 874 million respectively in year 2018, 2017 and 2016.
While Woolworths Group Ltd has reported AUD 4073 million, AUD 3797 million and AUD
3124 million of retained earnings in 2018, 2017 and 2016 respectively.
Reserves: It is an amount of profit which is reserved by company and which will be used
by company for payment of any future contingency or expenditure. AUD 344 million, AUD 190
million and AUD 166 million in year 2018, 2017 and 2016 has been reserved by Company
Wesfarmers. Whereas Woolworths has reported reserve amounting AUD 75 million, AUD 156
million and AUD 163 million respectively in year 2018, 2017 and 2016.

(ii) Movement in items reported under owner equity section with reason:
Wesfarmers Ltd:
Issued Capital:
Company's issued capital has been increased during three years. Here such increase is
reported due to issuance of capital by company in year 2017 of AUD 9 million and in year 2016
of AUD 331 million.
Reserved shares:
Reserved share of company is negatively increased during 3 years. Such negative
increase is resulted from Acquisition of shares on-market for the purpose of Key-Executive
Equity Performance Plan (KEEPP) of AUD 17 million during year 2018 and decrease in year
2017 due to Equity dividends i.e. AUD 1 million and receipts from in-substance options
amounting AUD 1 million.
2018 2017 2016
21700
21800
21900
22000
22100
22200
22300
22400
Issued capital
2018 2017 2016
-50
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
Reserved shares

Retained earnings:
Retained earnings of company is increased in year 2017 and further decreased in year
2018. Increase in year 2017 is resulted due to adjustment of net profit i.e. AUD 2873 million,
Pre-measurement-loss on benefit plan AUD 3 million, payment of equity-dividend of 2235
million. Whereas decrease in retained earnings in year 2018 is due to adjustment of 1197 million
net profit and 2529 million of equity dividend payment.
Reserves:
2018 2017 2016
0
200
400
600
800
1000
1200
1400
1600
Retained earnings
2018 2017 2016
0
50
100
150
200
250
300
350
400
Reserves

Company's reserve has been increases over the three-year period. In year 2017 company
has made reserve of AUD 24 million after providing exchange loss. Whereas in year 2018
company has made net addition of AUD 154 million.
Woolworths Group Ltd:
Issued Capital:
Company has issued fresh share amounting AUD 363 million in year 2017 and in AUD
440 million. Overall increase during 3-year is reported by company.
Reserved shares:
Here an increase in company's reserved share from 2016 to 2018. As during 2017
company has appropriated reserved share amount for option plans and also company has
reserved share during 2017 and 2018.
2018 2017 2016
4800
5000
5200
5400
5600
5800
6000
6200
Issued capital
08/07/1905 09/07/1905 10/07/1905
-100
-50
0
50
100
150
200
250
300
Reserved shares

Retained Earnings:
Due to increase in company's share in year 2017 and 2018, company's retained earning
amount has been increased. In 2016 company's retained earnings was 3124 million which has
been increase to 4073 million.
Reserve:
2018 2017 2016
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Retained earnings
2018 2017 2016
0
20
40
60
80
100
120
140
160
180
Reserves

Company has appropriated its reserve during 2017 and 2018 for accumulated losses and
foreign exchange loss incurred by company. Company has appropriated 7 million and 81 million
during year 2017 and 2018 respectively.
(iii) Items reported under liabilities section by both companies:
Wesfarmers Ltd:
Liabilities 2016-06 2017-06 2018-06
Current liabilities
Short-term debt 1632 1347 1159
Accounts payable 6491 6615 6541
Deferred income taxes 29 292 299
Other current liabilities 2272 2163 2026
Total current liabilities 10424 10417 10025
Non-current liabilities
Long-term debt 5671 4066 2965
Pensions and other benefits 180 180 167
Other long-term liabilities 1559 1511 1022
Total non-current liabilities 7410 5757 4154
Total liabilities 17834 16174 14179
Woolworths Group Ltd:
Liabilities 2016-06 2017-06 2018-06
Current liabilities
Short-term debt 490 253 604
Accounts payable 4809 5068 5316
Deferred income taxes 40 81 110
Other current liabilities 3653 3422 3166
Total current liabilities 8993 8824 9196
Non-current liabilities
Long-term debt 3868 2775 2199
Capital leases 3 2 -
Pensions and other benefits 165 172 100

Minority interest 311 350 368
Other long-term liabilities 1691 1266 1214
Total non-current liabilities 6039 4566 3881
Total liabilities 15032 13390 13077
Following is explanation of items reported by both companies in their respective financial
statement as follows:
Short-term debt: Short-term debt, also known as current debts, are fiscal commitments
of a corporation which are supposed to be repaid within one year.
Accounts payable: When a business buys on loan products that need to be repaid in short time,
it is recognised as Payable Accounts (Jie, Xi and Chaoyang, 2015). This is regarded as liability
and is subject to current-liabilities heading. Accounts Payable is a quick-term debt repayment to
prevent default.
Deferred income taxes: These are amount of taxes which will be ultimately paid by
corporation over company's assessed taxable net-income but which is still not due. Any
difference amount between tax amount reported and amount paid is assessed by different tax
computation in corporate accounting and local-tax legislation.
Long-term debt: It is certain amount of company's debts-outstanding heaving maturity
period of more than 12 months. It is regarded as non-current liability while preparation of of
corporation’s financial statement. Maturity period in respect of LTD generally can vary between
12 months to above 30 years. Typically, this type of debts encompasses mortgages loans, issued
bonds, debentures, bank loans and so on other long period debts.
Capital leases: It is amount of lease, in this kind of lease only lessor finances or makes
payment of instalment in respect of leased asset. While other incidental or non-incidental
ownership or possession rights are transferred to lessee. It leads to redecoration leased asset since
lessee's property in its general ledger, as a fixed asset. Only Woolworths Limited has capital
lease of 3 million and 2 million in year 2016 and 2017 respectively.
Pensions and other benefits: It is simply an amount of obligation which will arise in
future in respect of payment of pension and other retirement benefits to employee.
Minority interest: It is interest or ownership holding in any enterprise which is below
50% in other enterprise.

(iii). Explanation about movement in items reported under liabilities head with reason:
Short-term debt: In Wesfarmers Ltd short-term debts are 1632million, 1347million and
1159 million in year 2016, 2017 and 2018 continuously. Such decrease in short-term debt is due
to repayment of debts during such period. While in Woolworths Group Ltd.’s short-term debts
are 490 million, 253 million and 604 million respectively in year 2016, 2017 and 2018. This
Increase is due to addition in short-term debts which is taken by company from local lenders.
Accounts payable: Company Woolworths balances of accounts payable are 5316 million,
5068 million and 4809 million in year 2018, 2017 and 2016. Increase shows that company's
credit sale is increased over the period. While Wesfarmers Ltd reported balance of accounts
payable 6541 million, 6615 million and 6491 million respectively in year 2018, 2017 and 2016.
Here also such fluctuation in accounts payable is due to increase or decrease in credit sales.
Deferred income taxes: Wesfarmers Ltd has liability of deferred tax of 299 million in
2018, 292 million in 2017 and 29 million in 2016. While Woolworths has reported deferred
income tax of 110 million, 81 million and 40 million in year 2018, 2017 and 2016 respectively.
Increase in deferred income-tax liability is due to accumulation of income tax liability and
provision.
Long-term debt: Wesfarmers Ltd.’s long term debt is 5671million in 2016, 4066 million
in 2017 and 2965 million in 2018. While Woolworths's long term debt are 3868 million, 2775
million and 2199 million in year 2016, 2017 and 2018 respectively. In both companies there is
increase in long term debt due to addition of new long-term debts.
Pensions and other benefits: Wesfarmers Ltd has reported liability of pension and other
benefit of 180 million in year 2016 and 2017, and 167 million in year 2018. While Woolworths
reported obligation of pension and other benefits of 165 million, 172 million and 100 million in
year 2016,2017 and 2018 respectively. As employees increases in company, amount of this head
increases.
Minority interest: Woolworths Limited has reported amount of minority interest of
311million in year 2016, 350 million in year 2017 and 368 million in year 2018. Increase is due
to change in shareholding in another company.
(v) Advantages and disadvantages of different sources of funding.
Funding is related to the act of raising monetary funds which help an organisation to
manage and control its different operation in appropriate manner (Kai, 2015). There can be

number of option for raising funds such as equity debts, retained earnings, working capital loans
etc. From the annual report of both companies it has been determined that there are number of
sources of raising fund that are classified below:
In the context of Wesfarmers Ltd the funding source is discussed underneath
Issued capital: This mainly relates to the shareholders' amount of stocks maintained by the
business. In certain words, the shares that the investors allocate or eventually keep are called the
issued capital. Some of its advantages and disadvantages are as follows:
Advantages:
 It helps the Wesfarmers Ltd to raise considerable funds which support in doing business
operation more accurately.
 This type of funding basically has lower risk of finance structure than debts.
Disadvantages:
 This is considering to be time consuming and costly methods as compared to another
source of funding.
 Equity financing have higher cost of capital as compared from debt financing.
From the balance sheet of Woolworths Group Ltd.’s the source of funds is discussed below:
Long-term debt: Some of the common example of long term debts are bank loan, bonds etc.
There benefits and drawbacks are discussed below:
Advantages:
 Debt is the cheapest source of long-term finance because the interest received on debts is
tax-deductible.
 This help to decrease the taxable income for respective firm benefiting to pay less tax in
the following year.
Disadvantages:
 Debt typically has a specific date of maturation due to which sometime leads to slow
working.
It is considering to be the riskiest sources of financing because the company have to pay
principle and interest at the particular period of time (Levi and Newton, 2016).

PART B
Concepts of small proprietary company, large proprietary company and reporting entity:
A proprietary company is a form of privately held company in Australia and South Africa that is
either limited or unlimited (Peerapongpipath and Hensawang, 2019). These forms of companies
do not follow jurisdiction and restrictions on what they do or cannot do. Proprietary companies
are segregated into two types on the basis of scale of operations. Small scale proprietary
company and large scale proprietary company.
Small scale proprietary company: Companies that satisfies any of the following two
criteria turns out to be a small scale proprietary company.
 The consolidated revenue for the financial year of the company and any entity is $25
million and more
 the value of consolidated assets at the end of the financial year of the company or an
entity the is controlled by the main organisation is $12.5 million or more
 the company or any entity controls 50 or more employees at the end of the financial year.
A proprietary company is defined as large scale proprietary company when any of the
two conditions is satisfied by the organisation.
The consolidated revenue for the financial year of the company and any entity is $50 million and
more (Pozniak, Bellanca and Vullo, 2016).
 the value of consolidated assets at the end of the financial year of the company or an
entity the is controlled by the main organisation is $25 million or more
 the company or any entity controls 100 or more employees at the end of the financial
year.
Large proprietary companies must prepare and lodge a financial report and a director for
each financial year. The accounts must be audited unless any relief is granted to the organisation.
Reporting Entity Concept:
This concept was adopted by the Australian accounting profession in June 1992 in an
attempt to reduce the reporting requirements by the application of accounting standards
(ZHANG and ZHU, 2015). Under this concept “reporting entities” are required to prepare a
financial report in compliance with all accounting standards and interpretation referred to as
General Purpose Financial Reports. On the other hand, “non-reporting entities” have an option to
prepare Special Purpose Financial Reports.

CONCLUSION
From the above report, it has been concluded that analysis of financial statements specially
equity and liabilities is significant to improve company's capital structure. An increase or
decrease in issued capital may be due to additional issue or buyback respectively may hinder or
promote the performance of companies. Small proprietary companies must prepare and lodge a
financial report and a director for each financial year. The accounts must be audited unless any
relief is granted to the organisation. Debts that matures in more than a respective year and are
regarded in two viewpoints such as financial investing and statement reported by the user.
REFERENCES
Books and Journals:
Adesara, D. N., 2016. Deliberative Study of Financial Management of Barclays Company.
International Journal of Management, IT and Engineering. 6(9). pp.45-51.
Jie, Y., Xi, C. and Chaoyang, X., 2015. Does Managerial Self-interest Lead to the Corporate
Herd Investment?. Communication of Finance and Accounting, (9), p.20.
Kai, C.H.A.N.G., 2015. The Effect of Environmental Information Disclosure on Financial
Performance——Empirical Evidence from Cross-sectional Data of Heavy-pollution
Industries in China. Collected Essays on Finance and Economics, (1), p.10.
Levi, M. and Newton, D., 2016. Flash of green: are environmentally driven stock returns
sustainable?. Managerial Finance. 42(11). pp.1091-1109.
Peerapongpipath, P. and Hensawang, S., 2019. The Influence of Institutional Shareholdings on
Corporate Governance: Empirical Evidences of the Listed Companies on the Stock
Exchange of Thailand in the SET100. Asian Administration & Management Review.
2(1).
Pozniak, L., Bellanca, S. and Vullo, F., 2016. Determinants of internet financial communication:
evidence from AIM Italia. International Advances in Economic Research. 22(1).
pp.111-112.
ZHANG, L. and ZHU, T., 2015. Tax collection, corporate tax avoidance and corporate
investment efficiency. Journal of Audit & Economics, (2), p.9