Corporate and Financial Accounting Report: Fund Sources Analysis

This report analyzes the fund sources of Bellamy Australia and A2 Milk Company, focusing on equity and liabilities over a three-year period. It examines share capital, retained earnings, and reserves within owner's equity, along with borrowings, provisions, income tax payable, and trade payables in the liability section. The report highlights movements in equity and liabilities for both companies, identifying trends and changes. It also discusses the merits and demerits of different funding sources, considering implications for company ownership and financial stability. Furthermore, the report addresses the classification of companies based on size and their respective compliance and reporting requirements, providing a comprehensive overview of corporate financial accounting principles and practices. The report covers the analysis of financial statements, including equity and liability sections, and discusses the impact of financial decisions on company performance.

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Corporate and financial accounting

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Executive summary
The report has been prepared for the Bellamy Australia and A2 Milk Company. In this, there is
the consideration which is given to the funds which are collected with the use of various sources.
The items of the equity have been taken into account and also the amounts which are collected
with the help of debts and borrowings have also been taken into account. There are various
changes which are made in them and the review of the same has been made in which all of them
have been identified and considered in an appropriate manner. There is the determination of the
reason for changes which have taken place. The conditions and the concepts which are involved
for the large proprietary company and small proprietary company have been taken into account
and in that the needs which will be required to be fulfilled with respect to the compliance have
also been undertaken.

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Table of Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Part A...............................................................................................................................................4
i) Items under owners’ equity......................................................................................................4
ii) Movement in each item of equity............................................................................................5
iii) Items under the liability section.............................................................................................6
iv) Changes in items involved in liabilities.................................................................................7
v) Merits and demerits of the sources of funds............................................................................9
Part B...............................................................................................................................................9
Large and small proprietary company-related concept...............................................................9
Compliance and reporting requirements....................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

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Introduction
In the company, there is the need to manage all of the aspects in the best possible manner and
one such concept is the maintenance of the funds which are required. This is done with the help
of proper identification and arrangement of the funds. There will be consideration of the various
sources which are available and then the decision is taken to choose the appropriate method. This
will be requiring the analysis of the current situation. Due to this, the report will be made in
which all of the funds which have been collected with different sources will be taken into
account. There are equity funds which are created in the company and in that also there are
several elements which are involved and will be taken into account. The debts which have been
taken will also be ascertained and the changes which are taking place in them from the past 3
years will be provided for. There will be various impacts which will be faced by the company
with their adoptions and all of them will be discussed. The manner in which the proper
classification of the companies can be made will be considered and all the conditions in this
respect will be provided. The company will have to face the implication of the same and that
will, therefore, be taken into use.
Part A
i) Items under owners’ equity
Equity is the main source which is used in the company for the arrangement of the funds and
meeting the requirements in an effective manner. There are several other options also in which
the complete equity is classified and all of them are discussed below. In them, there are different
components which are involved and shall be understood. This will be helping the company in
taking them in consideration for the making of the future decisions.
Share capital: This covers the capital which is raised by the company with the use of the shares.
In this company will be allowed to issue the shares to the public and they will be investing in the
same (Warusawitharana and Whited, 2015). By the help of this, an amount will be collected
which is identified to be the share capital. In this, the right on the company will be provided to
the investors and they will be able to involve in the company’s actions.

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Retained earnings: The earnings are made in the business and it is the responsibility of the
company to use them in the most adequate manner. There are various purposes for which the
same can be used and the division of the same will be made in such manner that the best results
are obtained by the company. In this, the company will be considering that emergencies may
arise in the business and for that the amount shall be secured. This lead to the creation of the
retained earnings which will be used by the company at the time of requirement.
Reserves: They are the amounts which are kept to meet the expenses which are in relation to
some particular task. The reserves are created for a specific task and will be used only for that.
This is kept separately and will be providing the company with the security about that particular
and important activity (Boubakri et al., 2012). They are also included in the equity as they are the
funds of the company on which no charge is created.
ii) Movement in each item of equity
Bellamy's
Australia
Particulars 2016 2017 2018
Owner's equity 83221 91259 207358
Change in equity 8038 116099
2016 2017 2018
83221 91259
207358
Bellamy's Australia
Owner's equity
There is the equity which is held by the Bellamy and the changes which are taking place in the
same can be identified with the help of the graph. It can be noted that there is an increase which

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is taking place in the same and more addition made in 2018 (Bellamy’s Australia limited, 2017).
This is because of the increase in all the categories and there are more shares which have been
issued and that raised the share capital of the company. The company has made a high income
and due to that, the retained earnings which are made by the company have also increased.
A2 Milk company
Particulars 2016 2017 2018
Owner's equity 133078 241482 555709
Change in equity 108404 314227
2016 2017 2018
133078
241482
555709
A2 Milk company
Owner's equity
The increase is made by the company in relation to the equity and the same is represented in the
graph in which there is more increase in the year 2018. The earnings in the company have
increased and because of that, there is a rise in the retained earnings (A2 Milk Company, 2017).
The reserves of the company have also increased and that has led to the overall increase in the
owner’s funds. This will be good as the company will be having the sufficient owned funds
which will be reducing the requirement of other sources.
iii) Items under the liability section
The company is allowed to borrow the funds from outside the company and they are considered
the external sources. In this, there are various borrowings and other liabilities which are created
and will be taken into account. The company will be required to make the payments in relation to
them and the most important among them are as follows:

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Borrowings: Under this, the company will be taking funds from the external financial institutes
and there will be various laws which will be applicable in this respect (He and Xiong, 2012).
They will be required to pay the interest at the fixed rate which is provided in the loan
agreement. The repayment of the debt will be made as per the contract and there will be
installments which will be involved in the same.
Provisions: The Company is required to consider all of the risks which are involved in the
business for the payments which will be received in the coming period. This is done with the
help of the creation of the provisions in which an amount is secured in respect of the particular
activity. This will be maintained by the company till the risk is not eliminated and once the same
is done the provision will be written off.
Income Tax payable: There are certain legal liabilities also which are to be met by the company
and they shall be taken into account in the best possible manner. The earning which is made is
the income o the company and on the same, it is required to pay the tax which is at the fixed rate
and will be paid at the time they are due (Nassr and Wehinger, 2014). There will be an amount
which will be required for the same and it will be provided in the accounts in relation to the
same.
Trade payable: There are various parties to whom the amount is payable on the purchases which
are made from them. The company does not have that amount of cash to make all the purchases
by the same. Due to the same, the company will be required to make the credit purchases and an
amount will be due on them which are identified as the trade payables. With the help of this, the
funds are available on a temporary basis or it can be said that company cam purchase without
making the payment instantly.
iv) Changes in items involved in liabilities
Bellamy's
Australia
Particulars 2016 2017 2018
Total liability 60280 65382 73454
Change in liability 5102 8072

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2016 2017 2018
0
10000
20000
30000
40000
50000
60000
70000
80000
Bellamy's Australia
Total liability
There is an upward trend which is identified in the liabilities and this is increasing in a constant
manner in every year. They will be required to manage them in such a manner that all of them
are repaid in the provide time frame (Bellamy’s Australia limited, 2018). The increase is taking
place because of the trade payables which shows that the company has made the credit purchases
and the amount for the same is overdue. This will be required to be met on time and for the given
period the company has financed its needs with the help of the same.
A2 Milk company
Particulars 2016 2017 2018
Total liability 77074 102448 166869
Change in liability 25374 64421
2016 2017 2018
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
A2 Milk company
Total liability
The liabilities in A2 milk Company is increasing at a high rate in 2018. The company is

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involving the accounts payable in its accounts and they are increasing rapidly. The company will
be required to make the proper steps by which the situation can be controlled (A2 Milk
Company, 2018). There is also the increase in the tax payable which is because of the increase in
the earnings which is made by the company.
v) Merits and demerits of the sources of funds
The sources which are used by the company have several impacts on the business and that is
required to be taken into consideration so that the decisions can be made by the company in
relation to that. The consideration will be given and the source which will be providing the
company with the additional benefits will be taken into account. There is the more use of the
equity which is beneficial as there is no additional payment which needs to be made in the same.
There will be the owner of the company but the company will need to maintain the appropriate
level under this. If there will be more issue which will be made then the ownership of the
business will be in danger (Abdulsaleh and Worthington, 2013). To control the same there will
be adequate analysis and then the appropriate amount will be issues in public. If the liabilities an
into account then the company will have to consider the coverage ratio and will have to identify
the amount for which the liability can be borne in a proper manner. There is the payment of the
interest which will be made and so the amount of the liability shall be such for which the interest
can be paid with the available earnings (Chinaemerem and Anayochukwu, 2013). The company
has the option to raise a high amount with this but this will be creating the liability for the
company.
All of these are the important parts and needs to be considered in the making of any decision.
The company is required to choose the funds in a very correct manner and for that they will be
required to take the advantages as well as the disadvantages in consideration. By that benefits
will be made and there will be no issues which will be faced for the coming period. The decision
shall be such which will be overall cost of the funds will be reduced and company will be able to
save the additional funds.

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Part B
Large and small proprietary company-related concept
The classification of the company is made in various categories and in that there is the need for
the proper identification of the conditions which are responsible for the same. There are various
laws which are applicable and in that the conditions are specified according to which the
classification of the large proprietary company and the small proprietary company will be made
(ASIC, 2019). The conditions which will be describing the large companies are as provided
below:
 The revenue before 1 July 2019 should be 25 million or more and after this date, the revenue
will be made at the $50 million or more.
 The employees count shall be more than 50 before 1 July 2019 and after that, it shall be
maintained at 100 or more employees.
 The limit for the gross total assets is also specified and in that there will be the maintenance
of the assets at or above the level of $25 million after 1 July 2019 and before that at $12.5
million.
There will be the maintenance of the conditions which are provided above and with the
completion of any of two, there will be the identification of the company as the large proprietary.
If this will not be made possible then the company will be a small proprietary company. These
conditions will be taken into account and decisions will be made accordingly. In the given the
case, there is the fulfillment of the conditions and the company will be considered as the large
proprietary company.
Compliance and reporting requirements
The company will be categorized in any of the class and with that, there will be various
obligations which will be created on them. There are several requirements which need to be
followed by the company and the compliance will be made when the identification of the
reporting requirements will be made. It has been identified that the company which will be
considered as the large proprietary company will be making all of the financial and director’s
reports. They will be preparing them in an adequate manner and then the same will be provided

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to the specified authorities. There will be proper submission which will be made and the time
limit is made which will be followed in relation to them for all the years. It will also be required
to undertake the audit procedure which is mandatory and in that all of the accounts will be
considered in the process of auditing (Yang and Jia, 2012). This will be required to be performed
in a compulsory manner and the company will have to follow them until the relaxation is
provided by ASIC.
The conditions and compliance requirements which are specified will be applicable to the large
company in a compulsory manner bur the small company has the option to consider them or not.
If they wish to carry the provided procedure then no restriction is imposed but it will not be
mandatory for them to undertake the provided process. It is always of the benefit for the
company if the requirements are fulfilled and the accounts are kept in an appropriate manner.
Due to this it shall be noted by all that there are various steps which are taken and by the help of
them the best of the results will be attained.
Conclusion
The analysis of the equity and liabilities has been made in the report for the A2 milk Company
and Bellamy Australia Company. In that, all of the elements which are involved have been
identified and considered in the report. The categorization of them is made in an effective
manner and the fluctuations which are taking place have been taken into account into an account
in an appropriate manner. The reasons for the fluctuations have also been identified and given in
the report. There is the description of all the liabilities which are involved and with that, the
obligations which are faced by the company are incorporated appropriately. There is the
identification of the concept which is applicable to the large and small companies. The
compliance requirement for them which needs to be fulfilled has also been identified.

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References
A2 Milk Company. (2017) annual report. [Online] Available at:
https://thea2milkcompany.com/wp-content/uploads/The-a2-Milk-2016-2017-Annual-Report-
spreads.pdf [Accessed 24 September 2019]
A2 Milk Company. (2018) annual report. [Online] Available at:
https://thea2milkcompany.com/wp-content/uploads/A2M-Annual-Report-FY18.pdf [Accessed
24 September 2019]
Abdulsaleh, A.M. and Worthington, A.C. (2013) Small and medium-sized enterprises financing:
A review of literature. International Journal of Business and Management, 8(14), p.36.
ASIC. (2019) Are you a large or small proprietary company. [Online] Available at:
https://asic.gov.au/regulatory-resources/financial-reporting-and-audit/preparers-of-financial-
reports/are-you-a-large-or-small-proprietary-company/ [Accessed 24 September 2019]
Bellamy’s Australia limited. (2017) annual report. [Online] Available at:
http://www.annualreports.com/HostedData/AnnualReportArchive/B/ASX_BAL_2017.pdf
[Accessed 24 September 2019]
Bellamy’s Australia limited. (2018) annual report. [Online] Available at:
http://www.annualreports.com/HostedData/AnnualReports/PDF/ASX_BAL_2018.pdf [Accessed
24 September 2019]
Boubakri, N., Guedhami, O., Mishra, D. and Saffar, W. (2012) Political connections and the cost
of equity capital. Journal of corporate finance, 18(3), pp.541-559.
Chinaemerem, O.C. and Anayochukwu, O.B. (2013) Impact of external debt financing on
economic development in Nigeria. Research Journal of Finance and Accounting, 4(4), pp.92-98.
He, Z. and Xiong, W. (2012) Debt financing in asset markets. American Economic
Review, 102(3), pp.88-94.
Nassr, I.K. and Wehinger, G. (2014) Non-bank debt financing for SMEs. OECD Journal: