• Posted on December 7, 2020
• Unique Submission Team

ACC102 ACCOUNTING

Part A

1. In the financial term, current liabilities refer to those liabilities that should be paid in short term. The annual report of Wesfarmers includes the current liabilities in the balance sheet. In this, it is found that the total of the current liability is $10417 million at the end of the year 2017.
2. At the same time, it is also found that current liability of the company has decreased at some level. It is because at the end of the financial year 2016, the total of the current liability was $10424 million. Hence, it is analysed that current liability of the company decreased by $7 million in this year (Wesfarmers, 2017). Furthermore, in this, it is also found that current liability of the company classified in the six major classes.
3. It is found that the current liability of the company is classified into different items such as trade and other payables, interest bearing loans and borrowings, income tax payables, provision, derivatives and others.
4. The liability of business is a significant term for which company is liable to pay. The liability of the company is recorded in the balance sheet of the company in the financial statement.
5. The annual report of Wesfarmers at end of the financial year 2017 shows that there are various significant liabilities of the company. In this, it is determined that major liability of the company can be recognised as the trade and other payables.
6. In the end of the financial year 2017, it is found that the value of trade and other value is due $6615 million that is largest compared to other liabilities items in the current and non-current liability.
7. In the total liability of the company, trade and other payable is approx 40.9%. At the same time, it is also found that the interest bearing loans and borrowings can also be recognised as major liability of the company that contributes 25.1% in the total liability of the company (Wesfarmers, 2017). Therefore, it can be summarised that Trade and other payables and Interest-bearing loans and borrowings are major liability of Wesfarmers.
8. The given balance of Wesfarmers in the financial report of the company includes the provision in the current liability and non –current liability. In this, it also identified that the provision recorded in the current liabilities is recorded by the $1743 million. This current liability includes various items with different amount. The financial report represents that current provision includes below items:

Current Items in provision	2017	2016
Employee benefit	1150	1154
Self insured risk	277	302
Restricting and make good	84	119
Lease provision	2	5
Off Market contracts	52	72
other	178	209
Total	1743	1861

[Source: Wesfarmers, 2017]

The above table shows the provision in the current liability section includes employee benefit $1150million, self insured risk $277 million, restricting and make good $84 million, Lease provision $2 million, off market contracts $52 million and other $178 million.

These all items have different speciality (Wesfarmers, 2017). In this, employees benefit is kind of benefit to employees more than their salary. Self insured risk provides the risk covers to the employees at the work place and outside of the workplace.

Restricting and make good is also related extra benefit of the employees. Lease provision provides benefit to employees as providing their lease amount. The definition of provision provided by IAS37/AASB137 provides the satisfaction in the entire context.

In the context of Wesfarmers, it is found that the company liability for employee benefit has decreased in this year. In this, it is found that in the financial year 2016, the provision value for employee benefit was $1154million that decreases $4million in the financial year 2017. Hence, the liability of the company in the context of employee benefit was recorded $1150 million.

4. The financial statement and report of Wesfarmers show the below information on the interest bearing loans.

Interest-bearing loans and borrowings	2017	2016
Current
Unsecured
Bank debt	378	1132
capital market debt	969	500
Total	1347	1632
Non Current
unsecured
bank	863	1450
Capital market debt	3203	4221
Total	4066	5672
Total of current and non current	5413	7303

[Source: Wesfarmers, 2017]

The above table defines that company has been successful to repay the bank loan in the current financial year. In this, it is found that Wesfarmers paid $754 million bank debt. At the end of the financial year 2017, the bank debt remaining $378 million that was $1132 million.

At the same time, the company has been successful reduce Bank debt in the non current liability. It has reduced $863 million from $1450 million. Moreover, the capital market debt also declined by $3203 million from $4221 million (Wesfarmers, 2017).

5. From the analysis of the financial report of the company, it is found that Wesfarmers has not any non-current liabilities that are secured. In this, it is found that current liabilities of the company are unsecured.
6. The term secured liability means any liability of the company that is guaranteed by assets. In the context of Wesfarmers, it is found that is no any liability that is guaranteed by any assets. Hence, it can be said that creditors and investor of the company are not guaranteed by the company by any assets.
7. At the same time, the annual report of the Wesfarmers also includes the non current provision in the balance sheet at liability side. The company has significant list of item that are contained in the non current provision. The list of items that is considered in the non-current provision is below:

Non- Current items in provision	2017
Employee benefit	180
Self insured risk	339
mine and plant rehabilitation	269
Restricting and make good	147
Lease provision	233
Off Market contracts	182
Other	161
Total	1511

[Source: Wesfarmers, 2017]

 The above table includes all the general terms that are employee benefit, self insured risk, mine and plant, rehabilitation, restricting and make good, lease provision, off market contracts and others.

Part B

1. The annual report of Woolworth includes all the financial statement of the company such as the balance sheet, income statement, cash flow statement and equity statement. From the study of the financial statement of the company, it is also found that company has gross profit $15928.9 million operating revenue. In this, there are some deductions for income tax expense for the company.
2. In this, it is found that branch expense is main tax deduction for company. It is because it provides highest tax deduction to the company that is recorded by the $10671.4 million (Woolworths, 2017).
3. At the same time, administration expenses are also considered as the deduction in the income tax expense. It is recorded by $3175.7 million at the end of the 2017. The company also got the tax deduction in the calculation of the income tax as the financing cost that is recorded by the $193.6 million. As concerning of this tax deduction, the treatment of shows that profit of the company before tax is $2132.4million.
4. In this, the tax expenses are recorded by $650.4 million. Hence, the profit of the company is calculated by $1482 million. At the same time, $111.4 million also recognised as the profit from discontinued operation after tax (Woolworths, 2017).

Furthermore, it can also be explained that these deductions in the income tax expenses are also considered in partnership firm. It is because partnership is also a kind of the firm. The treatment of the income tax in the public and partnership is done in the similar manner. Due to this, expense item be seen in the income statement of a partnership.

2. In the financial statement of Woolworth, the term retained earning refers to the percentage of the net profit that not paid out as dividends. The retained earning can be invested in the business again. It can also be used to pay the debt. In the financial statement of Woolworth, the retained earnings are recorded with the equity. In the company, the earned profit is allocated as the retained earnings (Meijerink et al., 2016). The retained earnings is calculated by the help of the below formula

Retain Earnings = beginning RE + dividends – Dividends

On the other hand, in the financial statement of the partnership, the concept is retained earnings cannot be seen. In this, the earned profit is allocated among the partners on the basis of the percentage of the share in the business (Asgari et al., 2015).

For example, in the partnership, there are two partners such as A and B and both have the equal shares in the business, 50% each. The business earned $10 million profit at the end of year. In this cash, the profit in the partnership will be divided equality $5 million in each. The allocation of the profit in the partnership is totally different from the company.

3. In the business environment, the company and partnership both are the different in the nature. Woolworth is public company that represent to an association of persons who invest money towards a common stock. These investors run the business and share the profit and loss of the business. On the other hand partnership is common action of the two or more person for running a business (Ball et al., 2017).
4. These partners also share the profit and loss. In the company, profit of the company is divided among all the partners as the retain earning. This process is done on the basis of the dividend policy of the company. On the other hand, in the partnership, the division of the profit and loss is a very simple process because in this, profit and loss is divided according the % of the share of partner. In the context of the company, the profit is called retain earning and in partnership, profit is called by the same words.
5. Issued capital only comes in the under the public company. In the public company, capital of the company is divided into small unities as the share. The term issued capital is recognised when company needs to money (Collins et al., 2014). On the other hand, in partnership, capital is only invested by the partners of the firms.
6. The financial statement of the company includes mainly three statements such as balance sheet, income statement, and cash flow statement. The cash flow statement for the both company and partner are similar in the nature that shows the cash out flow and inflow in the financial year of the company. It concern on all financial activities of the company that happened in the cash.
7. The cash flow statement of the company shows financing and taxes related expenses with including all kind of the obligations (Bollerslev & Zhou, 2015). The cash flow statement of the partnership and company also shows the future activities. In the same concern of this, in the partnership and company, the cash flow statement is similar as the income statement of the both.
8. Therefore, it can be said that the partnership also requires such kind of the statement that can be known as the cash flow statement. From the above discussion, it is found that in the company and partnership, financial statement such as income statement and cash flow statement are prepared in the similar manner. Hence, it can be said that partnership also needs to prepare the cash flow statement in the same context of the Woolworth (Robinson & Sensoy, 2016).

References

Asgari, M. R., Pour, A. A. S., Zadeh, R. A., & Pahlavan, S. (2015). The relationship between firm’s growth opportunities and firm size on changes ratio in retained earnings of listed companies in Tehran Stock Exchange. International Journal of Innovation and Applied Studies, 10(3), 923.

Ball, R., Gerakos, J. J., Linnainmaa, J. T., & Nikolaev, V. V. (2017). Earnings, retained earnings, and book-to-market in the cross section of expected returns.

Bollerslev, T., Xu, L., & Zhou, H. (2015). Stock return and cash flow predictability: The role of volatility risk. Journal of Econometrics, 187(2), 458-471.

Collins, D. W., Hribar, P., & Tian, X. S. (2014). Cash flow asymmetry: Causes and implications for conditional conservatism research. Journal of Accounting and Economics, 58(2-3), 173-200.

Meijerink, J. G., Bondarouk, T., & Lepak, D. P. (2016). Employees as active consumers of HRM: Linking employees’ HRM competences with their perceptions of HRM service value. Human resource management, 55(2), 219-240.

Robinson, D. T., & Sensoy, B. A. (2016). Cyclicality, performance measurement, and cash flow liquidity in private equity. Journal of Financial Economics, 122(3), 521-543.

Wesfarmers (2017). Annual report.  Retrieved from: http://www.wesfarmers.com.au/docs/default-source/reports/j000901-ar17_interactive final .pdf? sfvrsn=4

Woolworths (2017). Annual report. Retrieved from: https://www.woolworthsgroup.com.au/icms_docs/188795_annual-report-2017.pdf