Exercise 4.1
Study the vocabulary:
| 1. | retrieval of information | 1. | |
| 2. | a filing system | 2. | () |
| 3. | to require | 3. | |
| 4. | a title | 4. | |
| 5. | a resemblance | 5. | , |
| 6. | Asset Accounts | 6. | |
| 7. | Liabilities Accounts | 7. | |
| 8. | Owner's Equity Accounts | 8. | |
| 9. | a chart of accounts | 9. | () |
Exercise 4.2
Read and translate the text:
1. When large amounts of data are gathered in the measurement of business transactions, a method of storage and retrieval of information is required. In other words, there should be a filing system to sort out or classify all the transactions of a business. Only in this way can financial statements and other reports be prepared quickly and easily.
2. This filing system consists of accounts. An account is the basic storage unit for data in accounting. In its simplest form an account has three parts: a title that describes the asset, liability, or owner's equity account, a left side, which is called the debit side, and a right side, which is called the credit side. This form of the account, called a T account because of its resemblance to the letter 'T', is used to analyze transactions. It appears as follows:
| Title of Account | |
| Left or Debit Side | Right or Credit Side |
Thus any entry made on the left side of the account is a debit, or debit entry, and any entry made on the right side of the account is a credit, or credit entry. The terms debit (abbreviated Dr, from the Latin debere) and credit (abbreviated Cr, from the Latin credere) are simply the accountant's words for left and right.
3. There are different types of accounts. The most commonly used ones are as follows: Asset Accounts, Liabilities Accounts and Owner's Equity Accounts. In a manual accounting system each account is kept on a separate page or card. These pages or cards are placed together in a book or a file. This book or file, which contains all groups of the company's accounts, is called a ledger. In a computer system, which most companies have today, the accounts are maintained on magnetic tapes or discs. However, as a matter of convenience, the accountant still refers to the group of company accounts as the ledger. To be able to find an account in the ledger easily and identify accounts when working with accounting records, accounts are numbered. A list of these accounts is usually called a chart of accounts.
4. Different companies have different charts of accounts. Every company develops a chart of accounts for its own needs. The specific accounts used by a company depend on the nature of the companys business. A steel company will have many equipment and inventory accounts, whereas an advertising company may have few. Each company must design its accounts in a way that reflects the nature of the business and the needs of its management in directing that business.
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Exercise 4.3
Read the text again and choose the best variant:
A method of storage and retrieval of information is necessary in the...
a) amount of business contacts
b) quantity of commercial relations
c) measurement of business transactions
2. Financial statements and other reports can be prepared quickly and easily only when there is
a) a system of sorting out of some transactions in a business
b) a filing system to sort out or classify all the transactions of a business
c) sorting out or classification of all the operations in a business
3. The basic storage unit for data in accounting is
a) a title
b) a debit side
c) an account
4. A ledger is a book which contains all groups of
a) Asset Accounts
b) the company's accounts
c) Owner's Equity Accounts
5. The specific accounts used by a company depend on
a) nature of the companys business
b) the accounts used in the country of business
c) the size of the company
Exercise 4.4
Fill in the gaps from the table. Then read and translate:
| Form; amounts; transactions; resemblance; title; credit; financial; retrieval; accounts; classify |
1. When large 1 of data are gathered in the measurement of business 2 , a method of storage and 3 of information is required. In other words, there should be a filing system to sort out or 4 all the transactions of a business. Only in this way can 5 statements and other reports be prepared quickly and easily.
2. This filing system consists of 6 .An account is the basic storage unit for data in accounting. In its simplest 7 an account has three parts: a 8 that describes the asset, liability, or owner's equity account, a left side, which is called the debit side, and a right side, which is called the 9 side. This form of the account, called a T account because of its 10 to the letter 'T', is used to analyse transactions.
Exercise 4.5
Read the whole text again and choose the best answer:
1. Why is the method of storage and retrieval of information required?
a) Because of the large amount of data gathered in the measurement of business transactions
b) Because there shouldnt be a filing system to sort out or classify all the transactions of a business.
2. What does the filing system consist of?
) The filing system consists of accounts.
b) The filing system consists of debit and credit.
3. Why is T account called so?
) Because the word Title begins from the letter T.
b) Because it is alike the letter 'T'.
4. Where is each account kept in a manual accounting system?
) In a manual accounting system each account is kept placed together in a book or a file.
b) In a manual accounting system each account is kept on a separate page or card.
5. In which way must each company design its accounts?
a) Each company must design its accounts in a way that shows the nature of its business.
b) Each company must design its accounts in a way that is opposite to the nature of its business.
TEXT 5
RELATIONSHIPS BETWEEN
FINANCIAL STATEMENTS
Exercise 5.1
Study the vocabulary:
| assess | |||
| alternative | |||
| claims | |||
| to cover the periods of time | |||
| to deal with | - - | ||
| essential | |||
| reporting | |||
| efforts | |||
| to be closely interrelated | ' | ||
| Their importance leis in the fact that | , | ||
| last but not least | , | ||
| objective | |||
| to provide | |||
| to present different views on smth | ... | ||
| purpose | |||
| performance | |||
| to regard |
Exercise 5.2
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Read and translate the text:
As it is known, financial reporting has several objectives. First of all the financial statements should provide useful information for making investments and credit decisions. Second, information provided should also be useful in assessing cash flow prospects. And last but not least, all the financial statements should provide information about the sources of the business, claims to those resources and changes in them.
There are three main financial statements: the balance sheet, the income statement, and the cash flow statement. They are all closely interrelated and based on the same underlying transactions information. At the same time they present different views of business activity.
It should be said, that the balance sheet, the income statement and the cash flow statement cannot be regarded as alternatives to each pother. They are all rather important in terms of presenting key financial formation about the business. For example, the balance sheet is generally prepared at the beginning and ending points in time. It gives a static look in financial terms where the business stands.
Unlike the balance sheet, both the income statement and the cash flow statement cover the period of time between the two balance sheets. And their importance lies in the fact that they help explain essential changes that take place during this period.
Thus, it is right to say, that all financial statements are closely tied to time periods. But each of them relates to the period of time it covers in a different way. Two of the statements - the income statement and the cash flow statement - deal with the activities of the business over time. One statement - the balance sheet - shows the state of the business at a particular point in time.
All three financial statements contain important information. At the same time each of them includes different information and so has a different purpose. For example, the balance sheet provides information about assets, liabilities and owner's equity. In other words, it shows what the business looks like at a specific date. The income statement explains changes in the financial position - of the business that result from its transactions. The cash flow statement explains the ways cash increased and decreased during the business performance. In a word, all the financial statements sum up in a meaningful and useful way the financial results of a business. However, it should be mentioned that they are not perfect pictures of the real things but the accountant's best efforts to represent what is real.
Exercise 5.3
Read the text again and choose the best variant:
1. It is well-known that financial reporting
a) has many objectives
b) has several objectives
c) has the only objective
2. The financial statements should provide
a) useful information for making investments and credit decisions
b) financial statements shouldnt provide any financial transaction
c) useful information for making investments and credit decisions, should provide information about the sources of the business and these information must be useful in assessing cash flow prospects
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3. The main financial statements
a) expanditures
b) the balance sheet
c) the cash flow statement, the income statement, the balance sheet
4. The financial statement are
a) rather important in presenting key financial formation about the business
b) not so important in business
5. All financial statements contain
a) unimportant information about business activity
b) important information about business activity
Exercise 5.4
Fill in the gaps from the table. Then read and translate:
| important claims investments alternatives flow views assessing transactions objectives cash |
As it is known, financial reporting has several 1. First of all the financial statements should provide useful information for making 2 and credit decisions. Second, information provided should also be useful in 3 cash flow prospects. And last but not least, all the financial statements should provide information about the sources of the business, 4 to those resources and changes in them.
There are three main financial statements: the balance sheet, the income statement, and the 56 statement. They are all closely interrelated and based on the same underlying 7 information. At the same time they present different 8 of business activity.
It should be said, that the balance sheet, the income statement and the cash flow statement cannot be regarded as 9 to each pother. They are all rather 10 in terms of presenting key financial formation about the business.
Exercise 5.5
Read the whole text again and choose the best answer:
1. How many financial statements are there?
a) four
b) three
c) two
2. Are they closely interrelated?
a) no, they are not
b) yes, they are
3. When is the balance sheet prepared?
a) at the ending points in time
b) in the middle points in time
c) at the beginning and ending points in time
4. Did all financial statement closely tie?
a) yes, they did
b) no, they didnt
5. Why the financial statements are closely interrelated?
a) they are based o the same underlying transaction information
b) they are all rather important in terms of presenting key financial formation about the business
6. What sort of look does the balance sheet give?
a) a static look in financial terms where the business stands
b) a non-static look in financial terms where the business stands
TEXT 6
FINANCIAL STATEMENTS
Exercise 6.1
Study the vocabulary:
| financial statement | () | ||
| financial performance | () | ||
| to compile | , ( ) | ||
| auditor | , | ||
| annual report | |||
| profit and loss account | |||
| (P&L)/income statement | |||
| revenue | , ., | ||
| expenditure | , , | ||
| turnover | |||
| balance sheet | , | ||
| mortgage | , , | ||
| cash flow statement | () | ||
| to accuse of | |||
| window drawing | , | ||
| creative accounting |
Exercise 6.2 Match the words with their meanings:
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| 1. financial statement | a) |
| 2. financial performance | b) () |
| 3. to compile | c) , , |
| 4. annual report | d) , , |
| 5. profit and loss account | e) |
| 6. revenue | f) |
| 7. expenditure | g) , , |
| 8. mortgage | h) , ( ) |
| 9. cash flow statement | i) () |
| 10. creative accounting | j) () |
Exercise 6.3 Read and translate the text:
A company and its shareholders need to know information about the companys financial performance. This information is compiled by the company accountants and checked by independent auditors. The companys annual report consists of three financial statements:
- profit and loss account/P&L (BrE) or income statement (AmE). This account shows the revenue (money coming into the business) and expenditure (money going out). It also shows the companys turnover (total sales), costs and overheads.
- balance sheet This account shows the financial situation of the company on a particular date, usually the end of the financial year. It consists of a list of assets (cash investments, property and debtors money owed by customers) and liabilities (all the money that the company will have to pay out, such as taxes, mortgage and money owed to suppliers). Firms in a good situation are said to have a strong balance sheet and those that are not, a weak one.
- cash flow statement This document shows the flow of cash in and out of the business. It includes sale of assets, issuing of shares, payment of dividends, trading profits and many other activities.
When companys accounts are presented in a way that makes performance look better than it really is, the company may be accused of window dressing or creative accounting.
Exercise 6.4
Read the text again to find out which of the following statements are correct:
1. A company and its shareholders need to know information about the companys financial performance.
2. The companys annual report consists of four financial statements.
3. The Profit and Loss Account (P&L) (BrE) or income statement (AmE) shows the revenue and expenditure.
4. The Profit and Loss Account (P&L) also shows the companys turnover, costs and overheads.
5. The Balance Sheet shows the flow of cash in and out of the business.
6. The balance Sheet shows the financial situation of the company on a particular date, usually the end of the financial year.
7. Firms in a good situation are said to have a strong balance and those that are not, a weak one.
8. Cash flow statement includes sale of assets, issuing of shares, payment of dividends, trading profits and many other activities.
9. Cash flow statement shows the revenue and expenditure.
10. Cash flow statement shows the flow of cash in and out of the business.
Exercise 6.5
Match words from list A with words from list B that have a similar meaning:
| A | B |
| 1. account | a) expenditure |
| 2. check | b) gain |
| 3. revenue | c) blame |
| 4. window dressing | d) report |
| 5. accuse | e) income |
| 6. profit | f) verify |
| 7. expenses | g) creative accounting |
Exercise 6.6
Match words from list A with words from list B that have an opposite meaning:
| A | B |
| 1. profit | a) to accuse |
| 2. assets | b) to look worse |
| 3. a strong balance sheet | c) loss |
| 4. to look better | d) liabilities |
| 5. to absolve | e) a weak balance sheet |
Exercise 6.7
Match words with the correct definition:
| 1. accountant | a) a person who examines the accounts of an organization to check they are true and correct |
| 2. auditor | b) a person who keeps records and provides information about a companys or persons money |
| 3. annual report | c) a summary list of income and expenses for a business |
| 4. profit and loss account | d) a report, containing financial results, presented each year by the directors to the members and shareholders of a company |
| 5. revenue | e) an amount of money spent |
| 6. expenditure | f) money received from the sale of goods or services |
| 7. turnover | g) a long-term loan from a bank for buying property, which is used as security |
| 8. mortgage | h) the total business done by an organization in a given period |
| 9. creative accounting | i) statement of what a company owns, or assets, and owes or liabilities |
| 10. balance sheet | j) accounting which follows the literal rules of legislation and accounting standards but succeeds nevertheless in presenting an unduly favorable picture of a companys position or progress |
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Exercise 6.8
Fill in the gaps with the appropriate word or phrase:
| accountant performance revenue expenditure auditors performance cash flow revenue mortgage expenditures turnover balance sheet |
1. My prepares my tax returns every year.
2. The were called to inspect the accounts.
3. The government has a huge need for tax .
4. The company has made several big on new equipment.
5. That company has a $10 million a year .
6. The flat was bought with a $ 100,000 .
7. The majority of the governments comes from taxes.
8. The company wont be able to increase on technologyin the coming year.
9. Financial accounts give information about financial of a company.
10. Analysis of our during the last year shows that approximately one third of our revenue came from the Asian markets.
11. The accountant prepared the companys for the year.
12. The in our company is good because we take in much more money than we spend.
Exercise 6.9
Fill in the missing prepositions:
| for from by in to to in of of about |
An annual report is prepared the management a company whose stock is traded publicly. It contains written and financial statements the progress the company in the previous financial year. An annual report performs a useful function a free market system, transmitting information the company its shareholders and investing public. Although the report is addressed shareholders, other people who have a stake the business - stakeholders such as employees, suppliers, customers, and lenders - will find it informative. Such a report acts as good public relations the company.
