Current liabilities for the company include liabilities like creditors or trade payables, interest-bearing loans along with the amounts of the tax liability of the company. Moreover, the current liability section also includes information about provisions and other liabilities.
- It includes the benefits that the company pays to its employees. As stated by Johnston et al. (2017, p.456), the employee benefits paid by the company represents the number of leave benefits and other service entitlements that are paid along with the salary or the entitlements that are paid to the employees in unforeseen circumstances.
- The amount of provision includes items like wages and salaries and the non-monetary benefits that are paid to the employees. The annual leave benefits paid to the employees and the long leave benefits paid to the employees so they are items of provisions (Hussey & Ong, 2017).
- Moreover, the provision part of the balance sheet also includes a provision regarding the leases and the mining lease agreements. It also includes certain insured risks that are paid to the workers (Hussey & Ong, 2017).
- Along with these, the provision contains certain uncertain amounts of tax liabilities which may arise in future.
The non-monetary benefits are non-recurring benefits. There is a chance that they may occur in future. Such amount comes under provision because these may occur if the employee performs well.
The lease agreements are the contracts that may fall on the company for remediation of various areas. Besides, the insured risks are the injury compensation that is paid to an employee if he or she gets injured.
Lastly, the tax liability is a liability that may arise in future. Such liabilities are the deferred tax liabilities.
According to AASB 137 provision is referred to as any amount of money that has been kept aside by a company to counterfeit unforeseen circumstances (Tran & Zhu, 2017, p.757). The items that are placed under provisions in the financial report of Wesfarmers for 2017 are correct because all of these expenses are used to counterfeit uncertain events in future. So the definition of the provision as per IAS 37 is satisfied by the items. From 2014 the liabilities for the employee benefits have increased from 7746 to 9132 million dollars in 2017. The number of employee benefits was 8847 million dollars. So it has increased about 1600 million dollars approximately.
So it is clear, that the amount of interest-bearing loan had increased about 1300 million dollars approximately from 2014 to 2017 after all the adjustments (Colla, 2017, p.217).
On the other hand, the amount of money raised by Wesfarmers from interest-bearing loans in the current liabilities is 1362 in the recent financial year. Wesfarmers have paid approximately 300 million dollars out of the amount so after paying the amount the interest-bearing loan comes to 1347 (GRADE). In the year 2014, Wesfarmers had an interest-bearing loan of 745 million dollars in the current liabilities section which had increased to 1913 million dollars in the year 2015. The amount had decreased to 1362 in 2016 and then 1347 in 2017.
So it is clear that the amount of interest-bearing loan in the current liabilities of Wesfarmers has increased by 900 million dollars from 2014-2017 after all the adjustments.
On the other hand for partnership business, there are partners who invest in the business. A partnership business is not a legal form of an entity so the amount of tax is not deducted from the profit of the partnership business. In case of a partnership business, the profits that are divided amongst the partners are taxed. The business owes to the partners so partners have to pay tax on their profit earnings from the business. In case of partnership the partner's files returns on form 1065, represent their own income from the business and their expenses. For this reason, the income tax does not appear in brackets in the income statement of the partnership business.
On the other hand, Woolworths is a company form of business. Its capital is divided into parts called shares. The appropriation profit is exposed to dividends to shareholders of the company. In a company form of business like Wools Worth the total profit available for appropriation is allocated to shareholders in form of dividends from equity shares or other shares, or retained earnings and reserves (GRADE, p. 2058).
The main reasons for the differences in the allocation of appropriation of total profit are:
The difference in structure- Woolworth is a company form of business in which the capital investment is in the form of shares (Rose, 2017, p.225). Out of the total appropriation profit shareholders get dividends but in case of the partnership then there is no question of shares. Partners pay cash as capital.
Liability- Partnership business has unlimited liability but Wool Worth is a company so it has limited liability. Partners have to bear all responsibilities from their shares of profit.
The difference in taxation- As Wool worth is a company business the taxation is different from that of partnership. In case of the partnership, partners are taxed on their individual profit but the overall net profit of Woolworth is Subject to tax (Irvine & Moerman, 2017, p.35).
In case of the partnership business, there is no question of shares issue or subscription. A partnership business is confined to one or more partners who contribute cash as capital. Besides partnership business does not issue shares to outsiders as Woolworth. A partnership business is confined to partners and not public but Wools Worth invites people from all over the globe to become owners by buying its shares. In case of Woolworth, the company has a limit to raising capital known as authorised capital. Out of the Authorised capital, certain portions are issued to the public. So the term Issued capital is valid for Woolworth and not applicable to the partnership (Evans, 2017).
On the other hand in case of the partnership, the business is limited to partners. A partnership business does not issue shares. The partners only share profits and losses along with liabilities. Besides, a partnership business is unlike a company business which carries for the lifetime (Srivastava, Shervani, & Fahey, 1999, p.168). In case of the partnership, the business may be wound up with the death, dissolution or insolvency of a partner. So it is not required to get information about future prospects. Moreover, the inflow and outflow of cash in case of partnership business can be estimated through revaluation. So typical partnerships do not make CFS and include it in financial statements.
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