Corporate and Financial Accounting Report: Analysis of Bank Finances

This report provides an executive summary and detailed analysis of the financial accounting practices of the Bank of Queensland and Commonwealth Bank. It examines the sources of funds, focusing on equity and liability components, and analyzes their movements over a three-year period. The report includes an examination of items under owners’ equity such as ordinary share capital, retained profits, and reserves, as well as items under liabilities including deposits, borrowings, and tax liabilities. Furthermore, it explores the merits and demerits of different funding sources and discusses the concepts applicable to large and small proprietary companies, including the implications of compliance and reporting requirements. The analysis includes tables illustrating changes in equity and liabilities, offering insights into the financial performance and strategies of both banks.

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Corporate and financial accounting

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Executive summary
The sources of the funds are required to be maintained in an adequate manner and the same for
the bank of Queensland and commonwealth bank have been taken into consideration. The report
identified two sources and the discussion of them has been carried out. There are various changes
which have taken place and with that reasons because of which the modifications are taking
place have been identified. The main concepts which are to be understood with respect to the
large and small proprietary companies have been taken into account. The impact which will be
made on the company due to the same has also been identified.

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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) Movement in items involved in liabilities..............................................................................7
v) Merits and demerits of the sources of funds............................................................................8
Part B...............................................................................................................................................8
Concept in large and small proprietary company........................................................................8
The implication of compliance and reporting requirements........................................................9
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

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Introduction
Finances are the main requirement of the business and for that, it is required that there shall be
the use of the appropriate source which is available in this respect. In the process of collection of
funds, there are various options which are available and they shall be evaluated in an effective
manner. There is a need to consider all of the aspects in relation to them so that the appropriate
decision can be made. In the business, there are various changes which take place and it is
necessary that the changes shall be identified. The deviation which is involved is due to some
reason and the same shall also be identified so that it can be considered for the decision making
in the future period. All of the changes which are taking place in relation to the equity and
liability will be analyzed in the provided report. All of this will be performed in relation to the
bank of Queensland and commonwealth bank. There will be involvement of the merits and
demerits which are involved in relation to the available sources. There is the need to understand
the main concept which is involved behind the small and large proprietary company and for that
proper discussion of the same will be made. The implication which is made on the business due
to the different types in respect of the reporting and compliance requirements will also be
identified for the effective implementation.
Part A
i) Items under owners’ equity
In the business, there is the involvement of the owner and they are also responsible for the
operations in the company. Due to that, there is a need for investment of the funds by them. The
entire amount which is brought into the business by the owner is considered as the owner’s
equity. In this category, there are various items which are involved and the details of the same
are provided below:
Ordinary share capital: The Company involves the shares which are issued in the public and
they will be required to be issued in such manner that the capital of the company is increased. In
the business, there are various issues which are made under several schemes and they will be
termed as the ordinary share capital. They are issued in the market and those who will to become
the investor of the company purchase them. By the help of this, all of the parties become the

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shareholders and have certain rights in the company.
Retained profits: There are profits which are made by the company and in each year there are
certain purposes for which the same is used. It is required that they shall be used in the most
effective manner. Out of the total earnings some is used to pay the dividends to the shareholders
and some of the amounts are invested in other purposes. There is the policy in the business and
according to that a certain sum is retained by the company and is saved for being used in the
future when the same will be needed. The amount which is kept separately for further use is
termed as the retained profits.
Reserves: In the business, there are certain projects which are required to be undertaken and also
the liabilities are involved which are to be met. There is the need to ensure that they are paid in
the proper manner and the risk which is involved is covered in an adequate manner. For this
purpose, there is an amount which is kept as reserves for some particular task. This amount will
be retained but will be used only for the purpose for which the same has been saved.
ii) Movement in each item of equity
Commonwealth
bank
Particulars 2016 2017 2018
Owner's equity 60564 63716 67860
Change in equity 3152 4144
Bank of
Queensland
Particulars 2016 2017 2018
Owner's equity 3587 3788 3856
Change in equity 201 68
In the owners’ equity, there are various changes which are made and the movements are taking
place. It has been analyzed that in case of commonwealth bank there is the increase which is
taking place and in that the amount of the total equity was $6564 in 2016 and then it increased by
$3152 and reached to $63716 in 2017 (Commonwealth bank, 2018). The increase has been made
in this year because of the rise which is noted in the ordinary shares. The rise is continuing and
the share capital of the company is increasing. The rise which is seen is due to the shares which

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have been issued by the company. With that, the amount which is involved in the retained
earnings has also increased and that is leading to the increase which is noted. There is the
downfall in the number of reserves and because of that, there is some decline which is covered
by the increase in other elements. There are the fluctuations which are made in all the amounts
and because of that, the final change in the amount of the equity is being noted.
The bank of Queensland is also facing the fluctuations and in that also the increased has been
noted. The equity of the company is increasing from $3587 to $3788 and further to $3856 until
the year 2018. All of the changes have been because of the increase which is made in the issued
capital of the company which is rising (Bank of Queensland, 2017). The amount which has been
retained by the company from the profits has also been considered and there is the increase
which is made in the same and due to that, the final result is the increase in the amount of the
equity of owner.
iii) Items under the liability section
In the company, there are various debts which are taken to meet the requirement of the funds and
they are considered as the liability of the company. They can be in various forms and due to that
the total liability of the company comprises of various elements and a description of them is
provided below:
Deposits and borrowings: The amount which is collected by the company in the form of loans is
the amount which is taken from the external parties. In that, there will be a liability which will be
created on the company for the repayment (Denis and McKeon, 2012). In addition to the
principal amount, there is an interest which will also be applicable on the same and that will also
be required to be paid on time.
Tax liability: The income is made by the company and on that, there is the tax liability which is
created. There is this liability which is created as per the law and company is required to meet
them. The amount will be paid on a regular basis when it becomes due.
Accounts payable: The Company involves various payables which are because of the credit
purchase that is made in the business. In that, the liability is created and the company is required
to pay back the amount in some time to the creditors (De Mooij, 2012). This will be the liability

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of the company which will be met in an adequate manner.
Derivative financial liability: This is a financial liability which is created on the company and
this will be incurred when the derivative will mature and will be paid at that time
Provisions: There is the risk which is involved in the business and to deal with that the provision
is made and that will be used for that particular risk (Colla, Ippolito and Li, 2013). The losses
which will be made due to the risk will be covered with the help of the provision which is
created.
iv) Movement in items involved in liabilities
Commonwealth
bank
Particulars 2016 2017 2018
Total liability 872437 912658 907305
Change in liability 40221 -5353
Bank of
Queensland
Particulars 2016 2017 2018
Total liability 47266 47870 49124
Change in liability 604 1254
The changes which are taking place in the liability are presented in the table above and in that it
is identified the same has increased in 2017 and after that decline has been made in the same in
2018 (Commonwealth bank, 2017). This is for the commonwealth bank and the change is made
because the company has taken the additional borrowings and also the repayment of the same is
made which led to the further decline in balances.
In the case of bank of Queensland there is the increase which is made in the amount of the
liabilities and this is because of the several changes (Bank of Queensland, 2018). Company has
made the borrowings and also the credit purchase is made due to which the total amount of the
liability has been increased.

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v) Merits and demerits of the sources of funds
The company is using various sources for the collection of the funds and in that there is the
inclusion of the debt and equity. They are used and there are several positive and negative
aspects which are required to be faced by the company. There is the saving of the cost which will
be made in case of the equity as there will be no charges which will have to be paid on the fixed
basis on the shares which are issued (Fu, Carson and Simnett, 2015). The company can raise a
limited amount with the help of this as there is the risk of ownership of the business and due to
this, it cannot be used much in the company.
The remaining collection of the funds will be made with the help of the borrowings and that will
be costlier for the company as there will be an additional expense which will have to be incurred
by the company. There will be a fixed rate of the interest which will be required to be paid on the
entire amount which is borrowed. The main merit of this source is that the large amount can be
collected with the help of this.
Part B
Concept in large and small proprietary company
In the market, there are various companies which are operating and they are to be classified into
two main parts which are the large proprietary company and small proprietary company. In the
making of the differentiation among them, there will be various aspects which will be taken into
account (ASIC, 2019). The large company will be the one which will be satisfying the following
conditions:
 The gross total assets which are maintained by the company together with the controlling
entities shall be equal to $25 million or more than that for the period after 1 July 2019 and in
relation to the earlier period the limit will be $12.5 million.
 The consolidated revenue will also be considered in the same and they shall be either $50
million or higher and for the earlier period, this will be $25 million.
 The employees after the period of 1 July 2019 shall be 100 or higher and for the earlier
period shall be 50 or more.

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The large company will be the one which will be fulfilling the two conditions out of the above-
provided conditions. The rest of the companies will be considered as a small proprietary
company. The conditions which are provided shall be fulfilled and then only the company will be
classified as the large company.
The implication of compliance and reporting requirements
The companies are divided in the provided category and then they are required to comply with
the requirements which are specified in this respect. There are various laws and regulations
which will be applicable to the companies and they will be needed to fulfill them in the best
possible manner. There is the need to incorporate the laws in the system by which the company
will be able to manage all the needs and there will be no default which will be made. In a large
company, it is required that all of the reporting shall be made in the best manner. There will be
reports which will be prepared by the directors and in addition to that financial report will also be
made. All of the reports which will be prepared will be lodged by the company and there will be
the timely submission of them which will be made. There is the specified limit which is specified
in this respect and it is required that the same shall be fulfilled in an adequate manner.
Another condition which is to be met is the performance of the audit which is compulsory for the
companies lying in this category (Vanstraelen and Schelleman, 2017). This is the condition
which will be followed in all the circumstances and in that all of the information of the company
will be evaluated. There are some specified conditions in which the ASIC provides relief from
the same to the company. They are mandatory in relation to the large companies and for other
companies they are optional. They can comply with all of them but will not be liable for the
same.
Conclusion
The report has been prepared for the commonwealth bank and bank of Queensland and in that
there is the consideration of the sources which the company has used for the funds. In that, there
are two main categories which have been taken into account which are the liabilities and equity.
All of the main elements which are involved in the same have been identified and the changes
which are made in them have also been taken into account. The advantages and disadvantages of

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them have been discussed. There is the consideration of the concept which is involved and also
the implication of being the large and small company have been taken into consideration.

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References
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 23 September 2019]
Bank of Queensland. (2017) annual report. [Online] Available at:
https://www.boq.com.au/content/dam/boq/files/reports/annual-report/annual-report-2017.pdf
[Accessed 23 September 2019]
Bank of Queensland. (2018) annual report. [Online] Available at:
https://www.boq.com.au/content/dam/boq/files/shareholder-centre/financial-results/2018/
FY2018_Annual_Report.pdf [Accessed 2 September 2019]
Colla, P., Ippolito, F. and Li, K. (2013) Debt specialization. The Journal of Finance, 68(5),
pp.2117-2141.
Commonwealth bank. (2017) annual report. [Online] Available at:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/annual-
reports/annual_report_2017_14_aug_2017.pdf [Accessed 2 September 2019]
Commonwealth bank. (2018) annual report. [Online] Available at:
https://www.commbank.com.au/content/dam/commbank/about-us/shareholders/pdfs/results/
fy18/cba-annual-report-2018.pdf [Accessed 23 September 2019]
De Mooij, R.A. (2012) Tax biases to debt finance: Assessing the problem, finding
solutions. Fiscal studies, 33(4), pp.489-512.
Denis, D.J. and McKeon, S.B. (2012) Debt financing and financial flexibility evidence from
proactive leverage increases. The Review of Financial Studies, 25(6), pp.1897-1929.
Fu, Y., Carson, E. and Simnett, R. (2015) Transparency report disclosure by Australian audit
firms and opportunities for research. Managerial Auditing Journal, 30(8/9), pp.870-910.
Vanstraelen, A. and Schelleman, C. (2017) Auditing private companies: what do we

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know?. Accounting and Business Research, 47(5), pp.565-584.