Exercise 5. Complete the gaps with the verbs in the correct tense form.

Once during lunchtime I had to change some money – as usual US dollars for rubles – and went to the kiosk in a building on the main walking street in the old town.

There was a queue of about half a dozen people also waiting to change their dollars. Now queuing is something that the English (1)______ (do) when they have to but tend to think how to avoid the queue – usually find another place or later time.

This time I (2)______ (save) by a young man who (3)______ (suggest) that if I wanted to change a few dollars we (4)______ (can) do it quicker outside in the street. I (5)______ (follow) him outside and gave him the two $50 notes. While I (6) _____ (wait) for the money I (7)______ (tap) on the shoulder by another young man who (8)______ (explain) to me that it was a slightly dangerous practice to change money on the street.

I (9)_______ (embarrass) by this warning and now (10)______ (want) to get out of this situation as soon as possible. I (11)______ (turn) to the chap and he returned the money immediately and went down the street. I stuffed the money in the pocket and (12)______ (go) in the other direction to find another place to change my cash. But when I (13)______ (take) the two notes out my pocket I (14)______ (see) two one dollars notes! I might have saved ten minutes but I (15)______ (lose) nearly $100 instead and all because of my own stupid greed and impatience.

I was still wondering where to seek help when I (16)_____ (see) the two chaps who (17)______ (take) my dollars. I (18)______ (come) up to them and asked if they wanted me to explain the story to the militiaman who was a few meters away. They quickly handed me the two $50 notes – which this time I (19)______ (check) before pocketing them.

I was so glad to have my greed rewarded with some great luck that I gave them back their two one dollar notes – so they could catch someone else out? I don’t know why!

Exercise 6.

a) Use a word or phrase from each box to make common word combinations (you can use words from the left box more than once).

Fulfill	a business' financial performance
apply for	expenses
draw up	strict regulations
Incur	confidential information
evaluate	legal duty
rely on	a balance sheet
Impose	an overdraft

b) Compose your own sentences using the above word combinations.

Over to you

Give a brief written description of what accounting documents reveal.

UNIT IV

The ROLE of ACCOUNTING in BUSINESS

Warm up

1. Do you think that a business can do without accounting?

2. What is the purpose of collecting data regarding financial deals and transactions by a company’s management?

3. Name a few users of accounting reports of business companies.

Section A

Reading 1

Accounting: General Concept

Accounting is a vital part of all businesses, sometimes referred to as “the language of business”. The American Institute of Certified Public Accountants has described it as the art of recording, classifying, and summarizing transactions and events which are, in part at least, of financial character, and interpreting the results thereof.

The first stage of accounting activities involves collecting, recording, summarizing, analyzing, verifying and assessing various data regarding financial deals and transactions of a particular individual or business entity. After completion of this time-consuming work these data have to be presented or reported. Accounting reporting is the process of generating accounting reports, also commonly referred to as financial statements, from a business's accounting data.

Therefore, at the second stage the collected financial and other relevant information is used as the basis for reports, financial statements and declarations (such as balance sheets and income declarations). Such documents provide precise evaluations of assets and liabilities of respective business enterprises, as well as the results of their financial operations. They are the end-product of accounting, giving a clear picture of effectiveness of business activities of economic organization in the period of time under consideration.

The completion of an accounting task is normally followed by another stage of finance work, which requires financial directors to draw conclusions regarding the efficiency of the existing structure of management, to develop new financial strategies, to take cash flow controlling decisions and other steps in the field of corporate governance.

Discussion

Answer the following questions:

1) What is the first stage of accounting work?

2) What are accounting documents based upon?

3) What is the end-product of accounting?

4) What do accounting reports, statements and declarations help us to evaluate?

5) How do financial directors use the accounting reports?

Reading 2

Financial Accounting

The main purpose of financial accounting is to provide information, vital for the assessment of profitability, liquidity, solvency and stability of business organizations. Though this information is primarily for outside users, it is very helpful for internal decision making and planning, arranging corporate managerial work in accordance with regulatory requirements. Such information is the scorecard by which a company’s past performance is judged by government agencies (such as taxation authority), stockholders, potential shareholders, creditors, banks, economists, analysts, etc. Financial reports are historically factual and have predictive value to those who wish to make financial decisions or investments in a company.

Preparing financial accounting statements is mandatory, especially for publicly traded firms, i.e. limited companies or whose shares are bought and sold on an open market. The frequency of financial reporting is well-defined. Reports are usually created for a set period of time, such as a fiscal year or a shorter term. Accountants typically prepare annual, semi-annual and quarterly reports, summarizing an organization’s financial data that are taken from its records.

Statutory accounts are required to comply with specific local and international accounting standards and formats, such as International Financial Reporting Standards (IFRS), used in over 110 countries around the world, including those in the European Union. Financial accounting in the USA, however, is still drafted according to GAAP - Generally Accepted Accounting Principles. The law requires that annual reports are audited by independent auditing organizations, such as Certified Public Accounting (CPA) firms in the USA.

Discussion

Answer the following questions:

1) What kind of information does financial accounting provide?

2) Who are major users of financial accounting documents?

3) Is financial accounting future or past oriented?

4) What is the frequency of financial accounting reports?

5) Do they prepare statutory accounts as directed by the company’s management?

6) Are there any standards to regulate accounting work?

Reading 3

Managerial Accounting

Managerial (or management) accountingis another major branch of accounting, basically dealing with confidential financial reports for the exclusive use of top management within an organization. Such documents are not required by the law and are not necessarily related to a certain time span. In management accounting systems there is no requirement for an independent external review. Managerial reports are used in planning and controlling operations, in decision making and risk management. Therefore, they are future-oriented and have forecasting value to those within the company. Such reports may include sales forecasting reports, budget and comparative analysis, feasibility studies, merger or consolidation reports.

Unlike financial accounting, relating to the entire organization, management accounting may be selectively focused on particular products and their costs, on work efficiency. The central element in managerial accounting is cost accounting, which is based on the concept of calculating costs that are assigned to a product or service. There are other important concepts of management accounting. Lean accounting, for example, is about accounting for lean enterprise. Resource consumption accounting (RCA) provides managers with information needed in an organization’s optimization. Throughput accounting facilitates the introduction of modern production processes. Transfer pricing is used in manufacturing and banking.

Discussion

Answer the following questions:

1) Is managerial accounting intended to reveal the situation within business organizations to the general public?

2) Is managerial accounting work mandatory and required to be performed on the regular basis?

3) What is the use of managerial reports?

4) What managerial accounting product can forecast the results of a planned company merger?

5) Can managerial accounting help to foresee the costs of introducing a new product line?

6) What kind of managerial accounting can help to optimize the use of resources by an enterprise, to make the work of an enterprise more cost-efficient?

Section B