Stock opinion, inflation, price under, debenture, financial accounting, stockbroker, consumer price index, exchange rate, equity financing, portfolio, bond.
1. Лицо, обслуживающее торговлю ценными бумагами без принятия права на их владение.
2. Договор между двумя инвесторами, один из которых получает право на покупку акций у другого или продажу другому по заранее оговоренной цене в любое время в течение оговоренного периода.
3. Отрасль бухгалтерского дела, которая связана с предоставлением финансовой информации за пределами организации.
4. Увеличение своих денежных фондов в обмен на долю своей собственности и долю в управлении.
5. Продолжительный рост среднего уровня цен на все товары и услуги.
6. Индекс цен, рассчитанный для группы товаров и услуг, входящего в потребительскую корзину среднего городско жителя.
7. Процентное отношение средневзвешенных цен одного периода к средневзвешенным ценам базового периода.
8. Количество денежных единиц одной национальной валюты, необходимое для покупки одной денежной единицы другой национальной валюты.
9. Долговые обязательства, предусматривающие выплату определенной суммы в оговоренный срок с выплатой процента в течение всего срока.
10. Негарантированная облигация.
11. Совокупность ценных бумаг, которыми владеет инвестор.
SPEAK AND WRITE.
1. Speak on the basic elements of financial system.
2. Speak on the main types of financing.
3. Describe the main types and characteristics of financial markets.
4. Differentiate between European and American terms of quotation.
5. Suggest and defend your own definition of finance.
6. Identify the key difference between finance at the macro and micro level.
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7. Briefly explain the nature of interest rate.
8. Describe several factors that need to be taken into account when defining risks.
9. Should opening a financial institution be more complicated than starting a business as a florist? Why? What special controls, if any, should the government exercise over financial institutions?
10. Comment on the following statement: “Inflation is the cruelest tax”.
11. “Career opportunities in finance are great” Outline as many points as you can to support this statement.
12. Summarize the information of the Unit to be ready to speak on Finance. The first step to be done is to write the plan of your future report.
13. Choose any question (problem topic) relating to Finance and make a 10-15 minute report in class. Refer to different additional sources to make your report interesting, instructive and informative.
U N I T8
Accounting is the language of
business
ACCOUNTING and AUDITING
Your vocabulary
Account
- a detailed record of all the money that a person receives and spends.
Accountant
- a person whose job is to inspect or keep accounts.
Accounting
- the system that measures business activities, processes that information into reports, and communicates these findings to decision makers.
Accountancy
- the theory and practice of keeping and inspecting accounts.
Audit
- the inspection of an organization’s annual accounts.
Auditor
- a person who carries out an audit.
Ex. 1. Translate the following sentences into Russian. Pay special attention to the words in bold. They are your professional vocabulary.
1. The money that a business spends in order to produce goods or services is its costs.
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2. Fixed costs do not vary in relation to the output level of goods or services; variable costs do.
3. Direct costs are directly related to the things produced. In manufacturing, for example, direct costs include raw materials and wages and indirect costs may include things like social security charges on top of the wages.
4. Overhead costs or overheads are used to mean different things, but usually cover all the regular non-production costs of running a business, such as salaries and telephone bills, and can be extended, for example, to include the cost of marketing and R&D activities.
5. A company's financial performance for a period is its results, which it reports in the form of a profit and loss account, indicating whether it has made a profit or a loss.
6. The equivalent document in the US is the income statement. A pre-tax profit or loss is one calculated before tax is taken into account.
7. The accuracy of accounts such as the balance sheet and the profit and loss account is checked and supposedly guaranteed by auditors, outside accountants who specialize in this.
8. When a company's 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.
9.The bottom line is an informal way of talking about the results of a company: the so-called bottom line of the profit and loss account. The bottom line also means the final result or the most important aspect of something.
10.Assets and liabilities are normally shown on a firm's balance sheet: a "photograph" taken, normally once a year, of its financial situation at that time. Firms in a good situation are said to have a strong balance sheet and those that are not, a weak one.
11.Things that are not shown in the balance sheet but in a footnote, for example, are off-balance sheet.
12.A company's balance sheet may include provisions for potential losses, such as bad debts, debts that may never be paid.
13.If it looks almost certain that a debt will not be paid, it is considered a write-off and written off.
14.A company supplying goods or services to another company does not, of course, usually expect to be paid immediately, but after an agreed period. This is trade credit.
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15.Amounts that a business is waiting to be paid by its customers are accounts receivable or receivables. Customers owing money in this way are debtors.
16.Money that a business owes to its suppliers are accounts payable or payables. Suppliers waiting to be paid are creditors.
17.The cash flow of a business is the actual movement of money into and out of it, independently of how much it owes and is owed.
18.Cash flow is also used to refer exclusively to cash flowing into a company from sales.
19.When sales reach a level where revenues match costs, a company or product breaks even. 20.This is break even or the break even point, a crucial figure when calculating the return on investment (ROI) for a given business or product.
Ex.2. Match each word in column A with its definition in column B.
A B
1. on account a. unimportant
2. account for b. on one’s behalf
3. by all accounts c serve as or provide an explanation for
4. call to account d. because of
5. of no account e. require an explanation from
6. of some account f. important
7. on one’s account g. in everyone’s opinion
8.on account of h. consider
9.on no account i. under no circumstances
10.take into account. j. use smth fully and profitably
11.put (take) smth to good account k.to be paid for later
Use the words from column A to fill in the blanks
1. She told me not to run … … … my illness.
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2. … … … she was a very clever young lady.
3. You can have it … … .
4. If you buy something … …, you take it away with you and pay for it at a later date.
5. How do you … … losing such a large sum of money?
6. In this new job she can … her talents … … … .
7. Their reactions were … … … to me.
8. … … … must strangers be let in.
9. We’ll certainly … your feelings .. … .
10. I was … … … for my conduct by the headmaster.
Ex. 3. Write down a synonym for each of the words on the left. Choose from the ones on the right.
1. responsible a. buy
2. public b. influence
3. earnings c. costs
4. purchase d. information
5. impact e. provide with
6. acquire f. employ
7. expenses g. in charge of
8. supply h. obtain
9. hire i. state-owned
10. evidence j. income
Using these words ask your partner as many questions as you can.
Ex. 4. Join the halves.
1. Before making a loan, potential lenders…
2. Both profit and non-profit organizations…
3. Public accountants are those who…
4. Several accounting organizations have formulated…
5. To do an audit, there must be information in a …
6. It is important to obtain a sufficient…
7. The final stage in the audit process is…
8. Very often the general public…
9. The function of accounting is to provide certain types of…
10. Auditing is the process of recording, classifying and summarizing economic…
a. serve the general public and collect professional fees for their work
b. quality and volume of evidence to satisfy the audit objectives
c. the audit report
d. quantitative information that management can use to make decisions
e. verifiable form and some standards by which the auditor can evaluate the information
f. determine the borrower’s ability to meet scheduled payment.
g. confuses auditing with accounting.
h. codes of ethics that govern the behaviour of their members.
i. events in logical manner for the purpose of providing financial information for decision-making.
j. deal with budgets, payrolls, rent payments, and the like.
Ex.5. Before you begin this exercise, be sure that you know the meaning of the words and word-combinations given below. From the list, choose a word or word combination that fits both grammatically and contextually in each blank. Use each word only once and add noun or verb endings if necessary.
direct costs, fixed costs, income statement, costs, indirect costs, assets and liabilities, earnings, balance sheet, timely information, revenue, entry, depreciation.
1. Substance should triumph are form in situations of window-dressing and off-… financing.
2. It is argued that …should be brought together on the balance sheet if this is necessary to give a true and fair view, whether or not the information involved is specifically required be legislation.
3. Firms locate their production and other operations internationally for reasons that are more complex then the simple minimization of … .
4. Mainly because of higher …, a German manufacturing worker costs almost twice as much per hour as a British one.
5. The … shows the amount that the company earned during the year.
6. After deducting the costs of goods sold and other expenses, the firm had total … before interest and taxes of S 10mln.
7. Lufhansa’s cost problem is illustrated in a comparison with British Airways, when personnel …amount to about 24 per cent of revenues against Lufhansa’s 33 per cent.
8. Any gain in market share fattens profit, because … are high and variable costs are low.
9. There remains, of course, the risk of capital …
10. The purpose of adjusting … is to bring the accounts to their proper balances before the financial statements are prepared.
11. This matching of expenses and … is necessary for the income statement to present an accurate picture of the profitability of a business.
12. Since those interested in the activities of a business need … , financial statements must be prepared periodically.
Ex. 6. Complete the table.
| Noun | Adjective | Verb | Meaning |
| account profit finance system dependence quality explanation | -- payable comparable liable total | trace transfer manage accept require recognize estimate observe enter |
Ex. 7. Study the difference between the following synonyms. Only one meaning of the word is given here. Consult a good dictionary to find the meanings and some more synonyms to the given words. Then use them in the sentences that follow.
Evaluate. If you evaluate something you decide on its significance, value, or quality after carefully studying its good and bad features.
Estimate. If you estimate an amount or quality you calculate it approximately, you make judgment about it based on the available evidence.
Appreciate. If you appreciate something, for example a piece of music or good food, you recognize and understand the good qualities or features that it has and like or admire it because of them.
1. They meet monthly to discuss policy and … the current political situation.
2. They really … the peace and quiet of rural Wales.
3. The hurricane caused damage … at 300 mln pounds.
4. How would you … our chances.
5. He is the kind of individual that’s very hard to … .
6. The lawyers … the property at 90 thousand pounds.
7. The builder … the cost of repairing of roof at 600 pounds.
8. It can explain why actual costs varied from cost … .
9. I would … the size of the garden at 1000 square metres.
Ex. 8. What can we do with information? We can record it, store, buy, classify… Add as many verbs to this line as you can. Explain the action each verb names and the purpose of this action.
e.g. When we classify the information, we subdivide it into groups according to some criteria to use it purposely in different situations.
LET’S READ AND TALK
T E X T 1
What do you know about accounting? How old is it? What century does it date back? When you hear the word ‘accountant’, what kind of work do you draw in your mind?
HISTORY OF ACCOUNTING
Accounting has been called ‘the language of business’. Perhaps a better term is the ‘language of financial decisions’. The better you understand the language. The better you can manage the financial aspects of living.
Accounting has a long history. Some scholars claim that writing arose in order to record accounting information. Account records date back to the ancient civilisations of China, Babylonia, Greece, and Egypt. The rulers of these civilisations used accounting to keep track of the cost of labour and materials used in building structures like the great pyramids.
Accounting developed further as a result of the information needs of merchants in the city-states of Italy during the 1400s. In that commercial climate the monk Luca Pacioli, a mathematician and friend of Leonardo da Vinci, published the first known description of double-entry bookkeeping in 1494.
The double-entry accounting system -- in which for every ‘debet dare’ there is a ‘debet habere’ – has evolved to the point where it is very much like the present day system. Debet dare and debet habere are Latin terms meaning ‘should give’ and ‘should have’ respectively.
The pace of accounting development increased during the Industrial Revolution as the economies of developed countries began to mass-produce goods. Until that time, merchandise had been priced based on managers' hunches about cost, but increased competition required merchants to adopt more sophisticated accounting systems.
In the nineteenth century, the growth of corporations, especially those in the railroad and steel industries, spurred the development of accounting. Corporation owners—the stockholders—were no longer necessarily the managers of their business. Managers had to create accounting systems to report to the owners how well their businesses were doing.
The role of government has led to still more accounting developments. When the federal government started the income tax, accounting supplied the concept of "income." Also, government at all levels has assumed expanded roles in health, education, labour, and economic planning. To ensure that the information that it uses to make decisions is reliable, the government has required strict accountability and compliance with standards in the business community.
Accounting standards may be defined as «... uniform rules for external financial reporting applicable either to all or to a certain class of entity». Accounting standards may be viewed as a method of resolving potential conflicts of interests between the various user groups which have access to company accounts. The various groups have different objectives, information needs, and capacities for the generation and interpretation of information and, therefore conflicts may arise between groups outside the entity. It is a role of accounting standards to attempt to reconcile the conflicts. A number of important issues for the accounting profession should be mentioned here. These issues are as follows:
- Reliability. Accounting information should be reliable in use.
- Uniformity. The pressure for the standardization of accounting practices is to ensure a uniformity of treatment of data and hence an identity of the meaning of information.
- Comparability. Reliability and uniformity are integrated in the notion of comparability.
- Judgment. Accountants say that they should be allowed to exercise some judgment in interpreting data. This implies that some variety should be allowed for in the procedures available for transforming data into information.
Accounting practice and financial reporting regulation have shown great variety internationally. In recent years there has been growing interest in the harmonization of international accounting. Factors which have stimulated the movement towards harmonization have included the increasing internationalization of business, the importance of multinational companies in the world economy, and the development of international capital markets. In 1973 the International Accounting Standards Committee (IASC) was established in an attempt to coordinate the development of accounting standards internationally.
T E X T 2
WHAT IS ACCOUNTING?
The study of accounting begins with the understanding of the way in which accountants see the business enterprise. Accountants frequently refer to a business organization as an accounting entity or a business entity. A business entity is any business organization such as a hardware store or grocery store that exists as an economic unit. As an economic unit, the business enterprise acquires, organizes and transforms factors of production in its activity of producing goods and services. This activity may be presented as the following.
the input factors are combined an output flow of
(land, buildings, equipment, ------ and transferred ------- goods and services
material, labour) into
The accounting interpretation is an abstraction of the reality portrayed above. The business enterprise is viewed as a system of monetary flow, instead of a system of physical flows. In accounting, business activities are associated with transactions and, indeed, are limited to transactions. Thus, unless there is a transaction there is no observable business activity.
A transaction occurs whenever the firm enters into a legal contract for the acquisition of means of production or the sale of goods and services. Business activities which do not lead to transactions remain unrecognized in accounting. Transactions involving the acquisition of factors of production lead either to an outflow of money immediately or an obligation to pay money at a later date. Transactions by which the firm sells goods or services lead to an inflow of money or the right to receive money at a future date. The accounting interpretation of business activities leads to further analysis of these transactions.
First, transactions between the firm and its markets – both its supply markets and its selling markets – are defined as «external transactions». The totality of «external transactions» forms the subject matter of financial accounting. General purpose of financial statements (reports) is to provide most of the information needed by external users of financial accounting. These financial statements are formal reports providing information on a business entity’s financial position (solvency), cash inflows and outflows, and the results of operations (profitability). Financial accounting information is historical in nature, reporting on what has happened in the past. Hence, the external users rely on relevant and reliable financial statements to make present decisions about future events.
Second, transactions within the firm, consisting of the exchanges which occur between the various departments are defined as «internal transactions». The totality of «internal transactions» forms the subject matter of cost or management or managerial accounting. Managerial accounting information provides special information for the managers of a business entity. The kind of information used by managers may range from very broad, long-range planning data to detailed explanation of why actual costs varied from costs estimates. The purpose of managerial accounting is the generate information that a manager can use to make sound internal decisions.
1. What does the study of accounting begin?
2. In what way may the activity of an organization be presented?
3. What is business activity associated with in accounting?
4. When does a transaction occur?
5. What business activities are recognized in accounting?
6. How can transactions be classified?
7. What is financial accounting?
8. What is managerial accounting?
T E X T 3
Read the following text. How many parts does it consist of ? Give the title to the text and to its parts. Define the key-sentence of each paragraph.
Accounting is shaped by the environment in which it operates. Just as nations have different histories, values, and political systems, they also have different patterns of financial accounting development. In a number of countries accounting information is directed primarily toward the needs of investors and creditors, and «decision usefulness» is the overriding criterion for judging its quality. Financial accounting in the US and Great Britain has had such an orientation for many years. Moreover, these countries have large and developed stock exchanges and bond markets. As a result, a great deal of information is disclosed in companies’ financial reports; and determining profitability is an objective of financial accounting. However, in other countries, financial accounting has a different focus and performs other roles. For example, in some countries, financial accounting is designed primarily to ensure that the proper amount of income tax is collected by the national government. This is the case in most South American countries. In other countries, financial accounting is designed to help accomplish macroeconomic policies, such as achieving a predetermined rate of growth in the nation’s economy. Whether income tax and economic policy information is also useful to individual investors and creditors is somewhat beside the point. In such countries as Switzerland, Germany, and Japan the environment is characterized by a few, very large banks that satisfy most of the capital needs of business. Ownership also tends to be concentrated. The information needs are satisfied in a relatively straightforward way – through personal contacts and direct visits. Not surprisingly, the financial reports tend not to contain as much information as US companies’ reports. And since banks are the primary source of capital, financial accounting is oriented toward creditor protection. France and Sweden offer still another orientation of financial accounting. National government plays a strong role in managing the country’s resources. Governments also actively ensure that businesses have adequate capital and will lend or even invest in companies if necessary. Financial accounting is oriented toward decision making by government planners.
T E X T 4
BUSINESS DOCUMENTS
The analysis of the transactions complete, what is the next step in the accounting process? How does an accountant present the results of the analysis? We now look at the financial statements. These business documents report financial information about the entity to persons and organizations outside the business.
The primary financial statements are the (1) balance sheet (2) income statement, (3) statement of owner's equity, and (4) statement of cash flow.
The balance sheet lists all the assets, liabilities, and owner's equity at a point in time, usually the end of a month or a year. The balance sheet is like a snapshot of the entity. For this reason, it is also called the statement of financial position. A balance sheet is made up of two lists, placed side by side. On the left the company lists everything it owns, such as cash and ‘fixed assets’ called property, plant, equipment, which include everything from buildings and trucks to tools, pencils, and copy machines. This list is labeled assets. On the other side, the company lists its liabilities, consisting of all the claims to the company’s assets, from creditors and from the company owners. The lists end up being exactly equal – whatever assets are not claimed by the company’s creditors belong to the owners.
MAIN STREET STORE, INC
Balance Sheet
August 31, 20XX
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