Corporate Accounting Analysis Report: LandMark White & Land & Homes

This report provides a comprehensive analysis of corporate accounting, focusing on the financial statements of LandMark White Limited and Land & Homes Group, both operating in the real estate sector. The report delves into owner's equity, examining equity items like share capital and retained earnings, and conducts a comparative analysis of their debt and equity positions using debt-equity ratios. It further explores cash flow statements, detailing items like interest received and property payments, and provides a comparative analysis of the companies' cash flows across operating, investing, and financing activities. The study also touches upon other comprehensive income statements, explaining their rationale and offering comparative analyses. Additionally, it investigates accounting for corporate income tax, analyzing tax expenses, effective tax rates, and deferred tax assets/liabilities. The report concludes with a comparative evaluation of the financial performance of both companies, providing valuable insights into their accounting practices and financial health.

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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companies. In the case of LandMark White Limited, debt equity ratio was 0.52:1 in 2015, 0.47:1
in 2016 and 0.55:1 in 2017. This ratio shows that this company procures less debt capital when
compared to equity capital.
In the case of Land & Homes Group Limited, debt equity ratios are comparatively lower
than the other company. In the year of 2015, this ratio was reflected as 0.3:1, 0.68:1 in 2016 and
0.44:1 in 2017. The reason of these changes are this company prefers to increase their capital by
issuing shares in public rather than lending amount in order to increase the capital. Debt capital
of this company is lower than equity capital which shows that company is paying extra cost for
obtaining equity capital as debt capital funding is considered as cheaper to procure.
TASK 2: CASH FLOW STATEMENTS
Listing the items of cash flow statements and its changes
Cash flow statement is a kind of financial statement which shows all cash inflows and
outflows of a company. These inflows and outflows are divided into three categories and that is
operating, investing and financing. The main aim of this statement is to record items of cash and
cash equivalents (Fisher and Krumwiede, 2012). Some of these items are discussed below which
are shown in the CFS of both the selected companies.
Interest received – This is considered as cash inflow which is received from the deposits
which are deposited in banks and other financial institutions. This interest is considered a income
by the organisation from operating activities. According to the cash flow statement of LandMark
White Limited, it has been seen that in year 2015 this income was amounting 21000, 8000 in
2016 and 15000 in 2017. These fluctuations are the result of unbalanced deposits in the bank due
to which its interest is also fluctuates. According to the CFS of Land & Homes Group Limited,
there is no interest received in 2015. But in the year of 2016, interest amounting 33752 is
received and 12565 is received in 2017. These changes in the value of interest are the result of
unbalanced deposits by this company due to which they are earning non proportionate amount of
interest.
Payments for property – This item is recorded in investing activities head of both the
company. This item is concerned with paying the due amount against the property which is
acquired by an organisation, it is a cash outflow. From the cash flow statement of LandMark
White Limited, there is an outflow of cash amounting 198000 in 2015, 242000 in 2016 and
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140000 in 2017. The above changes in the amount of payment of property reflects that what
value of property is purchased by the company. According to the CFS of Land & Homes Group
Limited, cash outflow against purchased property is amounting to 27051 in 2017, 2512 in 2016
and nil in 2015 as there were no properties purchased in the year of 2015.
Issue of shares – This item shows that what value of shares are issued in the respective
year by the organisation (Gallhofer, 2011). This item is transacted in financing activities in CFS
of both the companies as cash inflows. From the CFS of Land & Homes Group Limited, it can be
said that in the year 2015, shares amounting 145000 were issued, 2055000 in 2016 and 8606028
in 2017. The fluctuations in the amount of issued shares are because of variations in the value of
issued capital. A company issues shares according to the requirement of capital thus, necessity of
funds directly affects value of issued shares. With the same reason of variation, LandMark White
Limited has issued shares amounting 18669 in 2017.
Comparative analyses of CFS of both the companies using three activities
Operating activities Investing activities Financing activities
2015 Operating activities are the
operations which are related
with day to day functions of
an organisation. According to
the cash flow statement of
LandMark White Limited,
operating activities are
showing a positive balance of
324000. This inflow is
ascertained after deducting
operating activities expenses
from receipts. Unlike this
company, CFS of Land &
Homes Group Limited is
showing a negative balance
or cash outflow of 320096.
Investing flows are the
operations which are related
with the gains and losses of
investments. From the cash
flow statements of both the
companies, it has been seen
that there was no value in the
investing activity of Land &
Homes Group Limited and in
case of other company, an
outflow of 788 is recorded.
These are the operations
which affects capital of an
organisation. The total of
financing side of Land &
Homes Group Limited is
amounting to be 334944.
And from the other
company, total of
financing side is recorded
as an outflow of 1034.
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2016 CFS of Land & Homes
Group Limited and
LandMark White Limited
shows negative balance of
1248352 and positive balance
of 2452000.
In the year 2016 also,
LandMark White Limited is
facing a positive balance and
other company is facing
negative balance, which
shows that LandMark White
Limited is more efficient
when it comes to cash
position.
Financing activity shows
a contrasting reaction,
LandMark White Limited
is facing a cash outflow
of 993000 and other
company is facing inflow
of 218880637.
2017 LandMark White Limited is
having 4717000 of cash
inflow and other company is
having 21507771 as cash
outflow.
LandMark White Limited is
having cash outflow of
17391000 and other
company is also having
outflow of 42254.
Financing activities of
these companies are
showing values such as
21066814 in Land &
Homes Group Limited
and 17319000 in
LandMark White
Limited.
Comparative analysis of selected companies along with insights
Land & Homes Group Limited LandMark White Limited
According to CFS of this company, operating
and investing activities are reflecting cash
outflows and financing activities are showing
cash inflows. From which it can be said that
this company is better then other when it
comes to organisational operations but in the
case of multiplying the funds, there is a lack of
appropriate knowledge and skills.
Cash flow statement of this company reflects
whole of contrasting nature, as value of
operating activities are positive and values of
investing and financing activities are negative.
From this it can be said that this company is
company is earning more revenues from its
regular activities but is heavily engaged in
investment and financing.
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TASK 3: Other Comprehensive income statement
Items in comprehensive income statement
Comprehensive income statements includes all the expenses and revenues which are not
realised yet. This statement is known as statement of unrealised gains and losses (Hillier, 2011).
According to the annual reports of the selected companies, there is no break down of this
statements is given as these companies has a small value contributed against this comprehensive
income. The only item which is mentioned in this statement is net total comprehensive income
which is discussed below:
Net total comprehensive income – From the comprehensive statement of Land &
Homes Group Limited, it has been seen that this company is having comprehensive loss of
1257751 in the year of 2015. This loss is a result of high investment and financing losses such as
purchase of heavy machineries. In the year of 2016 and 2017 comprehensive income of (150343)
and 14665 is faced.
LandMark White Limited is facing completely contrasting situation, where management
of this organisation is earning comprehensive income as this company is considers their
operating activities as the key of high incomes. In the year of 2015, company is earning profit of
779000, 1659000 in 2016 and 1626000 in 2017. The reason behind this contrasting position of
both the company is directly proportional to their cash flow position.
Rationale for comprehensive income statement
Comprehensive income statement shows financial gains and expenses which are
unrealised by an organisation (Jones, 2012). The reason behind preparing this statements by the
chosen company is to list those items which can not be recorded in usual income statements as
the gains and losses derived from these operations are related with investing and financing
activity. A typical income statement is meant to transact expenses and incomes which are earned
by an organisation from operating activity. But in order to gain more profit, these companies has
also earned profit from other activities too due to which a comprehensive statement is developed.
Comparative analyses
Land & Homes Group Limited LandMark White Limited
From the comprehensive statement of this
company it has been seen that this company is
A contrasting situation is faced in the
comprehensive statement of this company
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investing a lot in capital assets due to which
they are facing comprehensive losses despite if
the year of 2017.
according to which this company is facilitated
by comprehensive incomes due to which high
profits from investing and financing activities.
If comprehensive income and loss is recorded in typical income statement, then company
has to face issues regarding classifying profits and losses earned and incurred by various
activities such as operating, investing and financing. Profit which is attributable to shareholders
is derived from both income statement and comprehensive statement due to which both of these
statements are equally important for them.
Comprehensive income in evaluating performance of managers of a company
Comprehensive incomes such as gains from investing and financing activities should be
considered by the managers of an organisation while evaluating the performance of their
company (Kim, 2012). Both the companies which are selected in this report should consider their
comprehensive statement while analysing position of their companies. The reason behind above
statement is that income which is recorded in this statement is earned from investing and
financing activities and these activities are also a part of an organisation.
TASK 4: Accounting for Corporate income tax
Tax expenses shown in financial statements of both the companies
Tax expenses are the expenditures which has to be paid by an organisation against the
facilities provided by the government (Schaltegger, 2017). Tax expenses for both the companies
are shown below:
LandMark White Limited -
Particulars 2017
Current year tax expense 702000
Deferred tax expense 60000
Total income tax 762000
From the above tax expenses statement, it can be said that this company has to pay a total
of 762000 in 2017 from their incomes.
Land & Homes Group Limited -
Particulars 2017
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Prima facie tax 4400
Non deductible expenses 1368
Current year income tax not recognised -5768
Due to some unrecognised difference and carried forward tax expenses, there is nil
liability of income tax expense on this organisation.
Effective tax rate
This tax rate is determine by an organisation in order to ascertain their effective tax value
which is needed to paid by them so that all of their liabilities will be paid off (Watson, 2015).
Effective tax rate can be determined using income tax expense and earnings before tax. This rate
is calculated below:
Effective tax rate Income tax expense/earnings before tax
LandMark White Limited 762000/2388000 = 0.3190
Land & Homes Group Limited 0/14665 = 0
Due to nil income tax liability of Land & Homes Group Limited, their effective tax rate is
also zero. From the above effective tax rate ascertainment, it has been seen that LandMark White
Limited has higher effective tax rate which is 0.3190.
Deferred tax assets/liabilities
Deferred tax liability is refers to the due tax amount which is assessed but not yet paid
due to few transactions such as sales receivables (Zadek, 2013). Deferred tax liability of both the
companies which are selected is discussed below:
Land & Homes Group Limited – There is no deferred tax assets are recognised in this
organisation but few unrecognised deferred tax assets are unused tax losses and accruals which
collectively valued to 1741148.
LandMark White Limited – From the balance sheet and tax liability sheet of this
company, it has been said that total deferred tax liability of 60000 is recognised by this
organisation. The rationale behind recognising this liability is origination and reversal of
temporary differences.
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