HI5020 Corporate Accounting: Wesfarmers and Woolworths Analysis

This report provides an in-depth analysis of corporate accounting practices, focusing on two prominent Australian Securities Exchange (ASX)-listed companies: Wesfarmers and Woolworths. The study examines key financial statements, including the income statement, balance sheet, and cash flow statement, to evaluate the companies' accounting processes. It explores owner's equity, cash flow management, comprehensive income statements, and corporate income tax accounting. The report includes comparative analyses of equity items, cash flow components, and comprehensive income statement items, assessing the financial performance and the impact of various accounting practices on the two companies. The analysis covers the main equity items, the debt-to-equity ratios, and the comprehensive income statement components. The report also details the cash flow items from operating, investing, and financing activities, providing a comparative analysis of these categories for both companies. Furthermore, it analyzes tax expenses, effective tax rates, deferred tax assets and liabilities, cash tax amounts, and cash tax rates. The report highlights differences and similarities in the companies' accounting approaches, providing insights into their financial health and management strategies.

Running Head: Corporate Accounting
1
Project report: Corporate Accounting

Corporate Accounting
2
Executive summary:
The report has been prepared to identify the concepts of the corporate accounting. It
makes aware to the business and other stakeholders of the business about the final financial
statement of the business, their items, their recording process etc. In the report, Wesfarmers
limited and Woolworth’s group has been taken into the concern to conduct the study of
corporate accounting. The final financial statement of the business such as income statement,
balance sheet and cash flow statement of both the companies have been measured to identify
their corporate accounting process. The owner’s equity, cash flow statement, comprehensive
income statement and the taxation recording in the books have been studied mainly.

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Contents
Introduction.......................................................................................................................5
Wesfarmers limited and Woolworths group.....................................................................5
Owner’s equity..................................................................................................................5
1. Equity items.........................................................................................................6
2. Comparative analysis...........................................................................................6
Cash flow statement..........................................................................................................7
3. Cash flow items....................................................................................................7
4. Comparative analysis of broad categories............................................................8
5. Comparative analysis of companies.....................................................................9
Comprehensive income statement..................................................................................10
6. Items in comprehensive income statement........................................................10
7. Reasons behind not adding it into profit and loss statement..............................11
8. Comparative analysis.........................................................................................11
9. Evaluation of performance of managers............................................................12
Accounting for corporate income tax.............................................................................12
10. Tax expenses..................................................................................................13
11. Effective tax rate.............................................................................................13
12. Deferred tax assets and liabilities...................................................................13
13. Changes in the deferred tax amount...............................................................14
14. Cash tax amount.............................................................................................14
15. Cash tax rate...................................................................................................15
16. Cash tax rate and book tax rate.......................................................................15
Conclusion......................................................................................................................16

Corporate Accounting
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References.......................................................................................................................17

Corporate Accounting
5
Introduction:
Corporate accounting is the part of accounting which mainly focuses on the
accounting process of the business. It evaluates the identification, reporting and the
presentation of all the financial transactions in the financial report of the business. The
process of corporate accounting makes sure that each of the company follows the proper
accounting guidelines and the accounting standards to manage the performance of the
business and offer the transparent and correct information to the related parties and
stakeholders of the company (Lee and Lee, 2006).
The main objective behind preparing this report is to be aware about the final
financial statement of the business, their items, their recording process etc. In the report,
Wesfarmers limited and Woolworth’s group has been taken into the concern to conduct the
study of corporate accounting.
Wesfarmers limited and Woolworths group:
Wesfarmers limited is a public company which is situated in the Australian market.
The company is running under the retail industry. It has been founded in 1914. Since 1914,
various strategies and policies have been changed by the company. The company is operating
its business through various subsidiaries in Australia, Asia and Europe region. The company
mainly offers the chemicals, fertilizers, safety products; coal mining etc. the company was the
highest revenue generating company in the year of 2016 in Australian market. It is also
largest private employer in the Australian market (Home, 2018). It employees around
2,20,000 people.
Woolworths limited is a public company which is situated in the Australian market.
The company is running under the retail industry. It has been founded in 1924. Since 1914,
various changes have been seen and done by the company. The company is operating its
business through various divisions in Australia, New Zealand and India (Home, 2018). The
company mainly offers the supermarket services in the market where huge number of
products and liquors are supplied.
Owner’s equity:
Owner’s equity represent about the total contribution of shareholders in the company.
It is the major component of balance sheet of the company. The equity amount is calculated

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through deducting the drawings from the total investment and adding the net profit amount
from the beginning of the business.
1. Equity items:
The annual report (2018) of Wesfarmers and Woolworths has been studied and it has
been found that following are the main equity items of the business:
Equity Items
WESFARMERS
LTD
WOOLWORTHS
GROUP LTD
2018-06 2018-06
Stockholders' equity
Common stock 22234000 6055000
Other Equity 344000 278000
Retained earnings 176000 4073000
Accumulated other comprehensive income 75000
(Annual report, 2017)
The owner’s equity of the company is the combination of common stock, other equity,
retained earnings and accumulated other comprehensive income. Common stock is the main
equity of the business which has been raised through issuing the shares of the company in the
market. Further, the other equity comprises the additional amount from issuing the shares
which has not been recorded in the common stock head. Retained earnings describe about the
profit which has not been divided among the shareholders and has been kept by the company
for future investment (Lumby and Jones, 2007). The accumulated other comprehensive
income contains the unrealized gain and loss on those items which has been classified in the
other comprehensive income of the business.
2. Comparative analysis:
Debt and equity are the main capital sources of a business to raise the funds. The debt
and equity position of a business describe about the total cost of capital and the associated
risk of the business. the debt and equity position of both the companies are as follows:
Equity Items
WESFARMERS
LTD
WOOLWORTHS
GROUP LTD
AUD in thousands 2018-06 2018-06
Debt 4154000 3881000

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Equity 22754000 10481000
Debt / Equity 18.26% 37.03%
(annual report, 2017)
The table represent that the debt level of Wesfarmers is 18.26% against the total equity
of the business. On the other hand, the debt equity position of Woolworths limited is also
37.03%. the debt level of Both the companies are quite lower than the equity position of the
company. It explains that the cost of the companies are higher while the associated risk with
the capital position of both the companies are lower.
Cash flow statement:
Cash flow statement represents about the total cash outflows and cash inflows in the
company in a particular time period. It is the major part of final financial statements. The
amount from operating activities, investing activities and the financing activities is calculated
through evaluating all the cash inflows and outflows of the business along with their nature.
3. Cash flow items:
The annual report (2018) of Wesfarmers and Woolworths has been studied and it has
been found that following are the main cash flow items of the business:
Figure 1: Cash flow items of Woolworths

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(annual report, 2018)
Figure 2: Cash flow items of Wesfarmers
(annual report, 2018)
On the basis of the above images, it has been found that the main cash flow items of
both the companies are related to three broad categories of the company. Mainly, the receipts
from customers, payment to suppliers, income tax paid, net financing cost (paid) are the part
of the operating cash flows of the business. These are related to daily operations of the
company and brief about the total cash flows which would generally take place in an
organization.
Further, the cash flows from investing activities are payment for PPE, proceeds from
the sale of PPE, proceeds from sale of subsidiaries, payment for the purchase of the business,
repayment of the acquisition etc which are related to the investment position of the company
and it affects the operations of the company for a longer period (Morris, 2017).
In addition, the cash flows from financing activities are proceeds from share issues,
repayment of borrowing and proceed of borrowings, dividend payment etc which are related
to the financial position of the business. After it, there are few other items as well in the cash
flow statement which are not related to the normal activities of the business but still the cash
position of the company has been affected because of it. The items include effects of
exchange rate on the foreign currency.
4. Comparative analysis of broad categories:
The comparative analysis has been done on the major broad categories of cash flows
which are cash flow from operating activities, investing activities and the financing activities.
The details of the major categories of Wesfarmers limited are as follows:

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WESFARMERS LTD
AUD in '000 2018-06 2017-06 2016-06
Net cash used for operating activities 4158000 4226000 3365000
Net cash used for investing activities -658000 -53000
-
2132000
Net cash provided by (used for) financing
activities
-
3752000
-
3771000
-
1333000
(Morningstar, 2018)
The table describes that the net cash flow from operating activities of the company has
been improved from 2016 in 2017 but in the year of 2018, a decrement has been seen in the
position because of the lower receipts from the customers. Further, the investing cash flow
position of the company explains that the company has controlled on the investing expenses.
Due to which the cash position from investment activities have been improved. Lastly, the
cash flow position from financing activities has been studied and it has been evaluated that
the total cash flows of the company has been lowered. The overall cash flow position of the
company is depicting about the decrement in the cash flow position of the company.
Further, the details of the major categories of Woolworths limited are as follows:
WOOLWORTHS GROUP
LTD
AUD in '000 2018-06 2017-06 2016-06
Net cash used for operating activities 2690000 3122000 2930000
Net cash used for investing activities
-
1510000
-
1431400
-
1266700
Net cash provided by (used for) financing
activities
-
1060000
-
1729300
-
1474900
The table describes that the net cash flow from operating activities of the company has
been lowered from 2016 in 2017 but in the year of 2018, a decrement has been seen in the
position because of the higher payments to the suppliers. Further, the investing cash flow
position of the company explains that the company has improved the investment level in the
business. Due to which the cash position from investment activities have been lowered.
Lastly, the cash flow position from financing activities has been studied and it has been
evaluated that the total cash flows of the company has been improved. The overall cash flow
position of the company is depicting about the decrement in the cash flow position of the
company.

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5. Comparative analysis of companies:
Further, the comparison has been done among both the companies to identify the
changes in the cash flow level from last year. In case of Wesfarmer’s limited, it has been
found that the operating cash flows have been reduced by -1.61%, investing activities brief
about improvement in the cash outflow of the business by 1141.51% and the financing
activities explain -0.50% reduction in the cash outflows. It further explains that the total cash
outflow position of the company has been lowered (Annual report, 2018).
In addition, according to the cash flow statement of Woolworths limited, it has been
found that the operating cash flows have been reduced by -6.15%, investing activities brief
about improvement in the cash outflow of the business by 5.49% and the financing activities
explain 38.70% reduction in the cash outflows. It further explains that the total cash outflow
position of the company has been lowered.
WESFARMERS LTD
WOOLWORTHS GROUP
LTD
AUD in '000 2018-06 2017-06 Changes 2018-06 2017-06 Changes
Net cash used for
operating activities 4158000 4226000 -1.61% 2930000 3122000 -6.15%
Net cash used for
investing activities -658000 -53000 1141.51%
-
1510000
-
1431400 5.49%
Net cash provided by
(used for) financing
activities
-
3752000
-
3771000 -0.50%
-
1060000
-
1729300 -38.70%
(Morningstar, 2018)
In context with both the companies, it has been found that the cash flow position of
Woolworths limited is still better in the industry. The cash position of Wesfarmers has been
hampered at great level.
Comprehensive income statement:
Comprehensive income statement represents about the items which has not been
realized in the income statement of a business.
6. Items in comprehensive income statement:
The annual report (2018) of Wesfarmers and Woolworths has been studied and it has
been found that following are the main comprehensive income statement items of the
business:

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Figure 3: Wesfarmers limited
(Annual report, 2018)
Figure 4: Woolworths limited
(Annual report, 2018)
7. Reasons behind not adding it into profit and loss statement:
The above items have not been represented in the profit and loss account because of
their un-realization and thus a new statement has been prepared by the business by the name
of the comprehensive income statement. Comprehensive income statement represents about
the items which has not been realized in the income statement of a business. These items do
not affect the operations of the company but it has affected the profitability level of the
business because of it, these items are presented in the comprehensive income statement of
the business.
8. Comparative analysis:

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The comparison has been done among both the company’s comprehensive income
statement further to measure the differences in both the companies. Below table describe the
changes among both the companies:
Comprehensive income statement Items
WESFARMERS LTD
WOOLWORTHS
GROUP LTD
AUD in thousands
2018-
06
2017-
06 Change 2018-06 2017-06 Change
Exchange differences on the
transactions of the foreign operations -2 15
-
113.33% 34 4 750.00%
Unrealized losses on cash flow
hedges -136 -34 300.00% -11 1
-
1200.00%
Realized losses transferred to net
profit 92 147 -37.41% -92 -4 2200.00%
Realized losses transferred to non
financial assets 84 -257
-
132.68% 11 -3 -466.67%
Share of associates and joint venture
reserve - 8 17 2 750.00%
Tax effect -17 46
-
136.96% -1 3 -133.33%
Remeasurement loss on defined
benefit plan -5 -5 0.00% 0 -1 -100.00%
Tax effect 2 2 0.00% 0
(Annual report, 2018)
On the basis of the study, it has been realized that the position of Wesfarmers limited is
better than the Woolworths limited. Both the companies are following the same policies to
manage the performance of the business.
9. Evaluation of performance of managers:
The other comprehensive income statement briefs the additional losses or gain which
has not been recorded in the income statement of the company. A company must not use the
figures if comprehensive income statement while measuring and evaluating the performance
of the managers. As the losses and gain are nowhere related to the operations of the company
and these take place because of the additional factors.
Accounting for corporate income tax:

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Recording and presenting the financial accounting items is one of crucial part of the
corporate accounting. The corporate income tax recording has been focused in the report.
10. Tax expenses:
The total tax expenses of the company are as follows:
Tax expenses
WESFARMERS
LTD
WOOLWORTHS GROUP
LTD
AUD in
thousands 2018-06 2018-06
Income tax
expenses 1246000 718000
(Annual report, 2018)
11. Effective tax rate:
Effective tax rate of WES and WOW are as follows:
Effective tax rate
WESFARMERS
LTD
WOOLWORTHS GROUP
LTD
AUD in thousands 2018-06 2018-06
Income tax expenses 1246000 718000
EBT 3850000 2394000
Effective rate (tax expenses /
EBT) 32.36% 29.99%
(Morris, 2017)
The table explains 32.36% and 29.99% effective tax rate of WWES and WOW
respectively in 2018.
12. Deferred tax assets and liabilities:
Deferred tax assets and the liabilities of the business are as follows:
Deferred tax assets and liabilities
WESFARMERS
LTD
WOOLWORTHS
GROUP LTD
AUD in thousands 2018-06 2018-06

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Deferred tax assets 971 271
These items have been recorded in the balance sheet of the company because of the
additional payment to tax amount to the government and it will be adjusted in next year
(Gorry, Hassett, Hubbard and Mathur, 2017).
13. Changes in the deferred tax amount:
Further, the changes in the deferred tax amount of both the companies have been
studied and the below outcome has been got:
WESFARMERS LTD
WOOLWORTHS
GROUP LTD
AUD in
thousands
2018-
06
2017-
06 Change 2018-06
2017-
06 Change
Deferred tax
assets 971 1042 -6.81% 271 372
-
27.15%
It express that the Woolworths’s tax assets have been lowered by 27.15% and the
Wesfarmers position has been reduced by 6.81%.
14. Cash tax amount:
Further, the cash tax amount of both the companies has been calculated, Cash tax
amount is the total amount which has been paid by the company to the Australian
government in cash (Ho, 2017). The calculation of cash tax amount is done through adding
the increment of the deferred tax assets and reduction in the deferred tax liabilities in the
income tax expenses of the business. The below table describe about the total cash tax
amount of the company:
Calculation of cash tax amount
WESFARMERS
LTD
WOOLWORTHS
GROUP LTD
AUD in thousands. 2018-06 2018-06
Book Income tax expenses 1246000 718000
ADD: Increment in the
deferred tax assets -71 -101

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unleveraged cash taxes 1245929 717899
The book tax amount of Wes is $ 12,46,000. However, the paid amount by the
company is $ 12,45,929 which has taken place due to the deferred tax assets of the company.
Further, the book amount of WOW is $ 7,18,000. However, the paid amount by the company
is $ 7,17,8999 which has taken place due to the deferred tax assets of the company.
15. Cash tax rate:
The cash tax rate of the companies has been calculated further to identify the total cash
amount which has been paid by the company (Bradley, 2017). The cash tax rate calculations
of WOW and WES are as follows:
Calculation of cash tax amount
WESFARMERS
LTD
WOOLWORTHS GROUP
LTD
AUD in thousands. 2018-06 2018-06
Book Income tax expenses 1246000 718000
ADD: Increment in the deferred tax
assets -71 -101
unleveraged cash taxes 1245929 717899
EBT 3850000 2394000
Effective rate (tax expenses / EBT) 32.36% 29.99%
(annual report, 2018)
It explains that the paid amount of the company is very lower. WES and Wow has paid
32.36% and 29.99% tax respectively in the current year. The cash tax rate of WES is higher.
16. Cash tax rate and book tax rate:
Further, the below table describe about the differences in the cash tax rate and book tax
rate.
Calculation of book and cash tax rate
WESFARMERS
LTD
WOOLWORTHS GROUP
LTD
AUD in
thousands. 2018-06 2018-06

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Book tax rate 32.36% 29.99%
Cash tax rate 32.36% 29.99%
It expresses that in case of both the companies, the book tax rate is quite similar with
the cash tax rate of the company.
Conclusion:
To conclude, the corporate accounting plays an important role in a business as well as
among the stakeholders of the business because of its wider concept and easier accessibility.
The process of corporate accounting makes sure that each of the company follows the proper
accounting guidelines and the accounting standards to manage the performance of the
business and offer the transparent and correct information to the related parties and
stakeholders of the company. Thus, each of the company is required to follow the proper
standards and the policies to manage the position of the business.

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17
References:
Annual report. 2017. Wesfarmers group limited. [online]. Available at:
http://www.wesfarmers.com.au/docs/default-source/reports/j000901-
ar17_interactive_final.pdf?sfvrsn=4 [accessed 16/9/18].
Annual Report. 2018. Wesfarmers group limited. [online]. Available at:
http://www.wesfarmers.com.au/util/news-media/article/2018/08/14/wesfarmers-2018-full-
year-results [accessed 13/9/18].
Annual Report. 2018. Woolworths group limited. [online]. Available at:
https://www.woolworthsgroup.com.au/icms_docs/195396_annual-report-2018.pdf [accessed
13/9/18].
Bradley, S., 2017. Inattention to Deferred Increases in Tax Bases: How Michigan Home
Buyers Are Paying for Assessment Limits. Review of Economics and Statistics, 99(1), pp.53-
66.
Gorry, A., Hassett, K.A., Hubbard, R.G. and Mathur, A., 2017. The response of deferred
executive compensation to changes in tax rates. Journal of Public Economics, 151 (2), pp.28-
40.
Ho, A.T., 2017. Tax-deferred saving accounts: Heterogeneity and policy reforms. European
Economic Review, 97 (1), pp.26-41.
Home. 2018. Wesfarmers group limited. [online]. Available at:
http://www.wesfarmers.com.au/ [accessed 13/9/18].
Home. 2018. Woolworths group limited. [online]. Available at:
https://www.woolworthsgroup.com.au/ [accessed 13/9/18].
Lee.C.F and Lee, A, C,.2006. Encyclopedia of finance. Springer science, new York.
Lumby,S and Jones,C,.2007, Corporate finance theory & practice, 7th edition, Thomson,
London.
Morningstar. 2018. Wesfarmers group limited. [online]. Available at:
http://financials.morningstar.com/cash-flow/cf.html?t=WES&region=aus&culture=en-US
[accessed 13/9/18].

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Morningstar. 2018. Woolworths group limited. [online]. Available at:
http://financials.morningstar.com/cash-flow/cf.html?t=WOW&region=aus&culture=en-US
[accessed 13/9/18].
Morris, J.L., 2017. Classification of Deferred Tax Assets and Deferred Tax Liabilities: An
Evaluation of FASB's Attempt at Standards Simplication. Journal of Accounting and
Finance, 17(8), pp.198-208.