PUBLIC AND PRIVATE ACCOUNTANTS
Vocabulary L i st
public accountant
private accountant
practise judgement
certified public accountant
holder of a license be authorized
to grant a license state government
to keep knowledge up to date integrity
confidentiality
to be held in low esteem to have much in common auditing
consulting services tax planning
cost accounting capital budgeting budgeting for current
financial information system professional body
частнопрактикующий (лицензированный) бухгалтер
бухгалтер, действующий в пределах одной фирмы
иметь частную практику мнение, суждение
дипломированный частнопрактикующий бухгалтер
владелец (держатель) лицензии иметь право, быть уполномоченным предоставлять лицензию правительство штата
поддерживать знания на современном уровне (зд.) высокая профессиональная репутация конфиденциальность
не пользоваться уважением иметь много общего
аудит
консультационные услуги планирование налогообложения производственный учет
составление смет капитальных расходов operations составление смет текущих расходов финансовая информационная система профессиональная организация
TEXT 3
The accounting profession in the market economy consists of public and private ac-countants. Public accountants are independent professionals who provide services for a fee. Accountants who are employed by business firms are known as private accountants.
The main form of business organization in the accounting profession is partner-ship, though some public accountants practise alone and the others have formed pro-fessional corporations. Public accountants try to avoid limited liability, because they believe that professionals should take full responsibility for their judgements.
The title certified public accountant refers to the holder of a license to practise public accounting. The license is granted by a state government. It is granted to people who meet educational and experience requirements and pass an examination. All Ameri-can certified public accountants are expected to keep their knowledge up to date and to
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maintain the highest standard of integrity, professional independence and confidentiality. In Russia accountants also try and do their best to keep up high professional stan-
dards. For many years they were held in a very low esteem in the country, now the situation is changing for the better. Public accountants in Russia offer different ser-vices. The main service is auditing. Besides, public accounting firms offer consulting services, some accountants are also active in tax planning and preparation of tax re-turns. Russian and American public accountants have much in common.
The work of private accountants in Russia differs greatly from what American ac-countants employed by business firms do because Russia is only entering a market economy.
Accountants who work for the US business firms have wide responsibilities. Their duties include cost accounting, capital budgeting for current operations, tax planning, they must know how to design financial information systems, and do may other things.
Answerthequestionsonthetext: 1. What are public accountants?
2. What are private accountants?
3. How do public accountants organize their activities? 4. Who can get a license to practise public accounting? 5. What services do Russian public accountants provide?
FindEnglishequivalentsforthefollowingRussianphrasesfromthetext: заниматься чем-либо; предоставлять услуги на платной основе; организовать
товарищество; избегать ограниченной ответственности;
брать на себя ответственность за свои решения; иметь право выдавать ли-цензию; удовлетворять требованиям в отношении уровня образования и опыта работы; сдать экзамен; профессиональная репутация; конфиденциальность; поддерживать высокие профессиональные стандарты; аудит; иметь много обще-го; отличаться в значительной степени;
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производственный учет; составление смет капитальных расходов; со-ставление смет текущих расходов.
SayinafewwordswhatthetextisaboutUsetheopeningphrasesgivenabove.
EXERCISES
Work on vocabulary and grammar
Exercise1.
a) Study the key words in the dictionary:
Balance sheet, account, depreciation, cost, expenses, assets, loss.
b) Think of the words describing characteristics that make information useful.
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c) Think of the nouns that are most often used with the following verbs:
to measure, to ensure, to communicate, to prepare, to debit, to credit, to draw up, to disclose, to report.
d) Match the verbs from (1) with the nouns from (2) below: 1) to meet 2) needs
to ensure provision of information to harmonize standards
to develop performance to assess service
to provide license
to grant accounting standards
Exercise2.
a) Supply the articles where necessary. b) Write down 3-5 questions on the text.
c) Explain what information must be disclosed in the accounting records. Say what you have learned from the text about the UK rules for the preparation of accounting records.
Accounting Records
Every company must keep accounting records sufficient: - to show and explain ... company's transactions;
- to disclose ... financial position of the company at any time with reasonable accuracy;
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- to enable the directors to ensure that... annual accounts comply with ... statutory requirements.
The records may contain entries of daily receipts and payments,... record of assets and liabilities and, where the business involves dealing in goods, stocktaking records and details of goods bought and sold.
The directors of every company have a duty to prepare annual accounts. The ac-counts must be made up to .. .company's accounting date (its financial year-end) and in accordance with the specified accounting principles. In ... UK, for example, they include ... following:
- The company is presumed to be ... going concern.
- Accounting policies are applied consistently from ... year to year. - The amount of any item is determined on ... prudent basis.
- The accounts are prepared on ... accrual basis.
Details of any departure from these principles, the reasons for it, and its effect must be explained in ... note to the accounts.
In ... UK company accounts are almost invariably prepared using the historical cost accounting convention, with or without modification to reflect changes in ... val-ue of certain assets. However, ... Company Act 1985 provides alternative accounting rules which permit company to recognize ... full impact of inflation and changing prices in their accounts.
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Along with ... rules applying to the preparation of accounts, there is ... overriding requirement that the balance sheet must give ... "true and fair" view of the state of af-fairs of the company and that... profit and less account must give ... "true and fair" view of the company's profit and loss.
Until 1992, cash basis accounting was ... only method recognized in ... Russia. Al-though the new accounting regulation permits the administration to select... method of recognized revenue and expenses,... traditional methods is sill dominant.
Wordsyoumayneed:
accounting records stocktaking records accounting date accrual basis departure Companies Act overriding
бухгалтерские счета, бухгалтерская отчетность книга учета запасов
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отчетная дата принцип начислений (зд.) отклонение Закон о компаниях первостепенный
Exercise3.
a) Open the brackets putting the verbs in the correct form.
b) Say what is a Chart of Accounts in Russia and what it provides for.
In the West each company (to have) a certain freedom in the design of its own set of accounts so as to reflect the nature of its business and the needs of its management in directing that business. In Russia this process (to regulate) centrally, there (to be) a tradition of using a uniform Chart of Accounts.
The first uniform Chart of Accounts (to appear) in Russia in the 1920s. It (to intend) for industries only and was revised periodically. In 1961 the first national uniform Chart of Accounts (to create) and put into operation. With only insignificant changes, this chart (to use) in accounting practice until 1992. In 1992 transition to a new chart (to make). The current Chart of Accounts (to consist) of about 100 accounts and 60 sub-accounts grouped into 10 main sections. All accounts included in this uniform chart (to call) "synthetic" (main or summary) accounts. On the basis of this chart, each en-terprise also may create a set of "analytic" (supporting) accounts if needed to supple-ment the synthetic accounts. The Chart of Accounts can be considered the most im-portant element of the accounting system in Russia because it (to determine) the accounting practice and other elements of the system.
The Chart (to provide) for the following: an interrelated classification, grouping, and generalization of information about business activities of enterprises, a unified methodological basis for the organization of accounting in the whole national econo-my, an effective system of control of indicators for business activities, comparability of accounting procedures used and information generated in the accounting systems of different enterprises, etc.
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Wordsyoumayneed:
Chart of Accounts set of accounts
план счетов перечень счетов
Exercise4.
a) Fill each gap with a suitable word from the box.
b) Sum up the text in 5-7 sentences and present your summary in class.
c) Name the most important events in the development of the accountancy profes-sion in the world.
accountants principles organized members
Back profession creation throughout
Number role organizations functions
Accountancy Profession
The organization of the accountancy profession dates __ to January 1853 when eight accountants in Edinburgh, Scotland met for the purpose of seeking recognition of their __ as a separate and distinct profession. Their discussion of their professional situation resulted in the __ of the Institute of Chartered Accountants of Edinburgh. Since that time numerous professional accountancy organizations have been estab-lished __ the world. The process is going on.
In 1977 the International Federation of Accountants (IFAC) was established. Its initial membership was 63 organizations representing 49 countries, but within a decade, the __ grew to 105 organizations from 79 countries. The establishment of the IFAC recognized the need for international coordination of the objectives of pro-fessional accountancy organizations and means of achieving those objectives. Accountancy is an international profession. Under the conditions of global interde-pendence of countries through trade, finance, and crossborder investments, the __ of the IFAC is becoming more important.
The size and principles of accountancy __ vary. Some organizations comprise ac-countants working in commerce, industry, and government organizations, as well as in public practice (auditing), others consist solely of members in public practice.
The main follows:
of the accountancy profession may be summarized as
- to protect the public by ensuring the observance by its members of the highest __ of professional and ethical conduct;
- to promote and increase the knowledge, skills, and proficiency of members of the organization and students;
- to preserve the professional independence of __ in whatever capacities they may be serving;
- to maintain the legitimate rights of its __. IFAC was __ in recognition of the grow-ing changes towards inter-nationalization of the world economy, business and trade.
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Wordsyoumayneed:
Institute of Chartered Accountants proficiency
Институт дипломированных бухгалтеров (зд.) опыт
Exercise5.
Read the dialogue, translate the Russian remarks into English and act it out: Foreigner: As far as I know, in the past the major function of your accountants
was to control whether enterprises achieved the plan targets. Has the accounting sys-tem changed of late?
Russian: Политика экономических реформ вызвала необходимость создания эффективной системы бухучета. В этом направлении уже проделана большая работа.
F.: What accounting principles is your system based on at present?
R.: Наша система учета основана на системе двойной записи. Учет в основ-ном ведется на основе кассового принципа учета.
F.: Your system seems to be formalized. It is based on the uniform chart ofaccounts (план счетов) and forms of record keeping and reporting (формы учета и отчетности).
R.: Стремясь способствовать прямым иностранным инвестициям путем соз-дания совместных предприятий, наше правительство поставило задачу внедре-ния системы учета, сопоставимой с международными стандартами. Была разра-ботана процедура составления ежегодной финансовой отчетности, одобрен план счетов для совместных предприятий.
F.: It is also important to recognize that the development of accounting in any country is impossible without developing the accounting profession. Is anything being done in this direction?
R.: Да, мы разрабатываем и внедряем новые стандарты, организуем профес-сиональную подготовку и переподготовку бухгалтеров.
F.: 1 am glad to hear that the full potential of accounting is appreciated in your country now.
DISCUSSION
Exercise6.
a) Read the texts aud single out the main facts.
b) Present them in a short review and compare the information and viewpoints in Text (1) and Text (2).
T ex t (1 )
For many years the accounting system in Russia was criticized by Western aca-demicians for its failure to adhere to Western accounting principles. Such criticism is no longer valid. Since the early 1990s, accounting in the Russian Federation has changed significantly.
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The year 1991 was crucial in accounting development in Russia due to the follow-ing three events:
– Publication of the new Chart of Accounts;
– Production of a new set of financial statements similar to those used in West-ern Accounting;
– Beginning of preparations for radical change in accounting and auditing regu-lation.
In 1992, Regulation on Accounting and Reporting in the Russian Federation was approved by decree of the Government of Russia. The document diminished the con-trol function of accounting and declared the following equal objectives of accounting:
1. Maintenance of control over the availability, movement, and use of material, manpower and monetary resources according to approved norms and estimates;
2. Provision of full and reliable information about the performance and financial results of an enterprise, which is indispensable for operational management as well as for investors, suppliers, customers and creditors, tax, financial, and bank authorities, and others interested in the financial and business activity of the enterprise.
An essentially new Russian accounting system has come into being with the intro-duction of the new Chart of Accounts which includes greater cohesion to international accounting norms.
The essential elements of accounting methodology are as follows:
– Documents form the legal foundation for recording transactions according to the approved rules of bookkeeping. No entry should be made unless the bookkeeper has the primary document.
– Taking inventory is the sole means of controlling the physical safety of assets and their valuation. It is the main method of supervising persons who are financially responsible for assets. The safeguarding of assets is always entrusted to a financially responsible person.
– The uniform Chart of Accounts, which provides the nomenclature of accounts and correspondence among them, must be used by all types of enterprises.
– Double entry is a traditional accounting concept that is accepted in Russia as it is in all developed countries.
– Internal reporting includes the general ledger, summary (principal) account registers, primary documents, inventory data, etc. External reporting includes the Bal-ance Sheet, Statement of Financial Results and Their Uses, and supplemental forms that are uniform and obligatory for all types of enterprises. Nonprofit organizations and banks have their own uniform charts of accounts and financial reporting forms. Reporting is carried out according to the statutory regulation and presented within strictly prescribed time limits.
– Information generated by the accounting system must be timely, reliable, full, accurate, and objective.
– Historical cost accounting is the only method of internal and external reporting permitted.
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Wordsyoumayneed:
primary document taking inventory sole
financially responsible person nomenclature
correspondence internal reporting general ledger
summary account register inventory data
external reporting
Statement of Financial Results and Their Uses
financial reporting form historical cost accounting
первичный документ инвентаризация единственный
материально-ответственное лицо номенклатура (перечень наименований) корреспонденция (счетов)
внутренняя отчетность главная бухгалтерская книга сводный журнал инвентарные данные внешняя отчетность
Отчет о финансовых результатах и их использовании
бланк финансовой отчетности
учет на основе стоимости приобретения
Tex t (2 )
From the international perspective, it is important to remember that while based on similar principles, Russian accounting does not fully meet international accounting standards (IAS). The main differences are as follows:
– Sales are usually recorded on a cash basis. The cost of goods/services deli-vered but not yet paid for remains on the balance slieet until payment is received. Most Russian taxes are sales-based. As a result, companies try to minimize sales in their accounts. When sales are recorded on a cash basis, allowances are not made for bad debt, in spite of the fact that bad debts may represent a considerable share of ac-counts receivable. Sales figures for Russian companies tend to be understated com-pared with the accrual sales of Western companies.
– Cost of goods sold. Russian companies report the full cost goods sold, which includes production costs, transportation, depreciation, marketing, and financial ex-penses. No cost items are disclosed separately. Social costs are not included in the cost of goods sold.
– Depreciation. Only a straight-line depreciation method is allowed. The depre-ciation rates are fixed by the government and are as a rule significantly lower than in the West. Accelerated straight-line depreciation has been permitted since January 1, 1995 but is still rarely used.
– Fixed assets. Fixed assets pose the most serious problem. Fixed assets are ac-counted for a historical cost and cover property, plant and equipment. Land is not treated as a fixed asset and does not appear on the balance sheet at all. Even if depre-ciation rates are lower than in the West, fixed assets are generally undervalued com-pared with Western practice.
– Accounts receivable. Since most Russian companies record sales when they receive payment, the sales margin is not accrued until that time. Therefore accounts
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receivable are understated given that the sales margin is not reflected. Overdue ac-counts receivable are not disclosed separately.
– Consolidation of accounts. Russian companies, including holding companies, are not required to submit consolidated reports. No consolidation standards have been established yet. Some of the holding companies prepare aggregated reports, summing up 100 % of all subsidiaries and associates without accounting for intragroup transac-tions and minorities. Consequently, the reported results of Russian holding companies are usually significantly overstated.
All other aspects of Russian accounting are basically in line with IAS. The Russian government is taking measures to eliminate the most serious divergences.
Wordsyoumayneed:
bad debts
accounts receivable
straight-line depreciation method
accelerated straight-line depreciation method
sales margin overdue
consolidation of accounts
IAS – international accounting standards
divergence
безнадежные долги дебиторская задолженность метод равномерного начисления износа
метод ускоренного начисления износа доход от продаж просроченный консолидация счетов
международный бухгалтерский стандарт
отклонение
Exercise7.
Read the dialogue, sum the its content using the phrases given below and act it out: The dialogue is about ...;
According to the dialogue ...;
The experts make it clear that... (stress the point that...; draw the attention of... to the fact that...; suggest, remind, promise);
Finally, the experts come to the conclusion that... (agree about...).
ACCOUNTING METHODS
American: Accounting is a kind of data processing and recording. In my country it's usually the accountant who decides on the form which this recording shall take and on the methods to be used.
Russian: Do you mean that in writing financial statements for stockholders and lenders accountants can make the firm look strong and healthy and when preparing tax returns, on the other hand, they can make the firm look poor and weak?
Am.: Accountants prepare financial statements according to rules set by law and
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by the accounting profession itself. Often the rules allow more than one way of re-porting information.
R.: Accounts can be kept on an accrual or a cash basis. How do the two methods differ in real life?
Am.: Firms that keep their accounts on an accrual basis report costs and revenues in the year in which sales are made even if the customers do not pay until later. Those that keep their accounts on a cash basis report costs and revenues in the year in which payment is made.
R.: I know that each method has its pros and cons. But how does each method af-fect the way the outside users of the income statement and the balance sheet see the image of the company?
Am.: The accrual basis matches the income statement more closely to the bal-ance sheet and accrual basis accounts show rapidly rising income. But little of the income is cash!
R.: What is more, the accrual basis assumes that all accounts receivable will be collected, but in reality some may not.
Am.: For these reasons, some people think the cash. basis is a more prudent way to draw up an income statement. Accountants have also to decide how to determine the monetary value of an item included in a financial statement.
R.: What problems can arise here?
Am.: Assets can be recorded at the amount of cash paid to acquire them at me time of their acquisition.
R.: At the historical cost, in other words.
Am.: Yes. In addition, current, replacement cost and net realizable value can be used. R.: Are goods held in inventory another problem area?
Am.: Yes, there are two ways of dealing with inventories. One is FIFO, theother is LIFO.
R.: Theoretically, I believe, we can argue in favour of both methods. Whichworks better in real life?
Am.: In recent years many firms have switched from FIFO to LIFO. R.: Do you have an explanation?
Am.: Yes. During periods of inflation, LIFO results in a higher cost of goods and, hence, a lower reported income. As a result a firm that uses LIFO pays less income tax.
Wordsyoumayneed:
accounting method cash basis monetary
value of an item
current replacement cost
net realizable cost inventories
FIFO LIFO
метод учета
метод записи доходов и издержек на счетах только при их поступлении и выплате; кассовая база стоимость операции {статьи в балансе)
в денежном выражении
чистая (потенциальная) стоимость реализации товарно-материальные запасы
«первая партия в приход – первая в расход» «последняя партия в приход – первая в расход»
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Exercise8.
Give extensive answers to these discussion questions:
1. What is the role of accountancy in a free-market economy? 2. What is managerial accounting?
3. Who needs the information provided in financial statements? 4. How are accountants classified in Russia?
5. What services do public accountants offer their clients?
6. What is done in this country to create a strong and respected professional body of accountants?
7. What accounting system is most widely practised in the world?
8. In what way does cash basis accounting differ from accounting on accrual basis? 9. What do you think of the problem of harmonizing national accounting standards?
Exercise9.
Write a short paragraph, explaining:
a) What accounting is and what role it plays in a free-market economy. b) What sort of statement the balance sheet is.
c) What sort of statement the income statement is.
d) The difference between the two branches of accounting. e) Accounting principles.
f) The functions of the Chart of Accounts.
Exercise10
Prepare a short talk on the following:
a) The work of public accountants, private accountants, and accountants who work for units of the government and non-for-profit firms firms.
b) Why do all firms need both fixed and working capital?
c) How is Russian accounting developing? Do any of the Big Eight have offices in Russia?
d) What are your own sources of funds? Earnings from employment? Contribu-tions from parents or others?
e) If you are a student, describe the fixed capital and working capital of your uni-versity. List some fixed assets that it owns.
Exercise11.
A company needs the chief accountant, who will: – maintain accounts payable ledger;
– supervise banking and cash activities, supply contracts, reconciliation of bank statements;
– deal with local tax authorities;
– work directly with the CFO (chief financial officer – старшее должностное лицо по финансовым вопросам, главный сотрудник по финансовым вопросам);
– supervise the accounting department;
– cooperate with internal and external auditors.
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The requirements include: – excellent English;
– degree in accounting;
– knowledge of the Russian accounting system;
– familiarity with GAAP (generally accepted accounting principles – общепри-нятые принципы бухгалтерского учета);
– proper computer skills;
– ability to work independently.
Do many applicants stand a good chance?
Reading practice
Exercise11.
Read the text that follows to find the answers to the following questions: – What financial document presents the position of the enterprise?
– What can assets include?
– What can liabilities include? – What is equity?
– What financial document measures the performance of the enterprise?
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