Source of Finance Assignment 2022

SOURCE OF FINANCE
FROM:
DATE:
SUBJECT: SOURCE OF FINANCE

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Introduction:
AGL Energy limited is an Australian listed public entity which is engaged in the
generation and retailing the electricity and gas for various residential and commercial
uses. The entity is involved in the generation of the energy from the power stations
which uses thermal power, natural gas, wind power and hydroelectricity, solar energy
and gas storage. The entity has also entered in the residential and commercial gas
market. It is the largest private owner and operator of the renewable energy in Australia.
Origin Energy is the renowned listed public energy company in the Australia
headquartered in Sydney. The core business activity of the entity includes exploration
and production of natural gas, generation of the electricity, wholesale and retail sale of
the electricity and gas and also involved in the sale of liquefied natural gas. This entity is
the largest power generation portfolio and this represent about 13% of the power
generation capacity in the national market of electricity. The entity is very active in the
renewable energy area.
PART A
i) Analysis of the owner equity section:
It is the most significant part of the balance sheet of any entity and it states the amount
invested by the owners deducted by the drawings made by them from the entity and the
net profit of the entity is added to it (Deloitte n.d). It consists of various parts such as
share capital, reserves and retained earnings. It can also be defined as the source for
the acquisition of various capital assets and also considered as the source of finance for
the entity. On the basis of the accounting principle the value of the equity is not
measured at fair market value (Conover et. all 2011).
Equity section of AGL Energy Limited
The equity sections comprises of the following line items such as:
a) Issued capital
b) Reserves
c) Retained earnings

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Equity section of Origin Energy Limited
d) Share capital
e) Reserves
f) Retained earnings
Issued capital/share capital is the amount of the shares that are sold and held by the
shareholders of the entity and thus shareholders or investors consists of retail investors
or large institutions and many other. In other words the issued capital is the amount of
the shares that the entity has actually offered to the sale to the investors.
Reserves can be stated as the part of the profit of the entity which is kept separately for
the future purpose for various uses such as to boost and maintain the financial position
of the entity. There are various purposes for which reserve can be utilized such as for
purchase of capital assets, making payment of the debt and for various funding option in
case of new investment and thus the reserves are of two types which includes general
reserve and specific reserve (Brown, R. and Whittington, M. 2007).
Retained earnings can be defined as the amount of the remaining net profit which is
adjusted for the payment of the dividend to the shareholders of the entity. Further the
amount of retained earnings is arrived after deducting the dividend paid or any amount
distributed to the shareholder of the business from the net income of the entity.
ii) Movement in the item of the equity section:
The movement of the equity of the AGL Energy can be discussed as follows:
a) Issued capital: The issued capital of the entity in the year 2017 has decreased from
previous year due to the transactions related to the on-market buy back of the shares
and in current year 2018 there is no change in the amount of the issued capital as there
is no transaction related to the equity.
b) Reserves: There is upward movement in the amount of reserve of the entity in the year
2017 as compared to previous year due to the comprehensive net income and in the

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year 2018 there is downward movement in the reserve of the entity in the year 2018 due
to loss in the hedging reserve and due to the share based payment.
c) Retained earnings: There is upward movement in the amount of the retained earnings
which is due to the transaction related to profit earned by the business during the year
and the comprehensive income of the year. Further it is decreased by payment of
dividend with the net increase in the amount. Also there is upward movement in the
amount in the year 2018.
The movement of the equity of the Origin Energy can be discussed as follows:
a) Share capital: There is no movement in the amount of the share capital over the period
of three years ( Origin Energy 2018).
b) Reserves: There is downward movement in the amount of the reserve in the year 2017
due to the comprehensive loss in the various types of reserves and there is increase in
the amount of reserves in the year 2018 due to the other comprehensive income.
c) Retained earnings: There is downward movement in the amount of the retained
earnings due to the loss suffered by the entity in the year 2017 (Origin Energy 2017).