II. The Financial Statements

Lesson 4

Texts: Text A: The Financial Statements

Text B: The Accounting Period

Text A

The Financial Statements

Most people[13] go to a doctor once a year to get acheckup to make sure everything is all right with their health[14].Similarly,companiesare interested in their financial health. Where does the revenue of the company come from? Where does the company spend its money? How much profit is it making? Where is its cash coming from, and where is it going to?

Companies give answers to such questions in five documents, called financial statements: the balance sheet, income statement, statement of changes in shareholders’ equity, statement of cash flows and footnotes.

The balance sheet presents a snapshot of the company’s resources and claims against those resources at a specificpoint of time.

The income statement shows the profitability of a company over a specified period of time. A company’s profit or net income is equal to its revenues and gainsminus its expenses and losses.

The statement of changes in shareholders’ equity analyzes the changes from year to year in shareholders’ equity.

The statement of cash flows reports the net cash (inflowsminus outflows) from the three principal business activities – operating, investing and financing.

The footnotesprovide more detailed information on the balance sheet and income statement.

These financial statements present the accounting information in formal reports that tell interested groups, such as managers, creditors, potential investors and government agencies, how the business is doing. These reports are prepared from accounting information obtainedfrom the various business transactions.

Thus, transactions involving assets, liabilities and capital become the data used in the preparation of the financial statements.

Text B

The Accounting Period

Financial statements are prepared at leastonce a year. This is known as the accounting period. An accounting period may follow the calendar, in which case it begins on January 1 and ends on December 31 of the same year. This business then has a calendar year accounting period. Any business that has an accounting period consisting of 12 months other than a calendar year is generally known as a fiscal-year accounting period.

Organizations may prepare financial statements for periods of time that are less than the accounting period; such statements are generally known as interim statements. An interim statement is prepared for a period of time other than a fiscal or calendar year. Examples of interim statements are statements prepared for 6-month, 3-month, or even monthly periods. Regardless of the periods of time covered by the individual financial statements, the kinds of information presented by the various statements do not change.

WORDLIST

	accounting period [`piǝriǝd]	учётный период
	checkup [`tʃek`ʌp]	проверка, контроль; зд. диспансеризация
	similarly	так же, подобным образом
	to be interested [`intristid] in (doing) smth	быть заинтересованным в чём-л., интересоваться чем-л.
	to spend (spent, spent)	тратить (деньги, время)
	statement of charges in shareholders’ equity	отчёт об изменениях в средствах акционеров
	statement of cash flows	отчёт о движении денежных средств
	footnotes [`futnǝuts]	примечания; сноски
	to present [pri`zent]	представлять
	specific [spi`sifik]	конкретный
	profitability [,profitǝ`biliti]	прибыльность, доходность
	net	чистый, без вычетов
	net income	чистый доход
	gains syn. revenue,income,profit	доходы
	inflow [`inflǝu]	приток
	outflow [autflǝu]	отток
	to provide [prǝ`vaid] to provide for	снабжать, обеспечивать предусматривать
	to obtain [ǝb`tain]	получать, добывать
	thus	таким образом
	at least [li:st]	по крайней мере
	fiscal year	финансовый год
	interim statement [`intǝrim]	промежуточный отчёт
	regardless of [ri`ga:dlis]	независимо от
	to cover [`kʌvǝ]	покрывать, охватывать

WORK ON THE TEXTS

Text A

Ex.1. Найдите в тексте соответствие следующим русским фразам.

1. Большинство людей раз в год ходят к врачу, чтобы проверить здоровье.

2. Точно также компании интересуются своим финансовым здоровьем.

3. Откуда приходит доход компании?

4. Какой доход получает компания?

5. Откуда берутся наличные средства и куда они идут?

6. Компании дают ответы на эти вопросы в пяти документах, называемых финансовой отчётностью…

7. … баланс, счёт прибылей и убытков, отчёт об изменениях в средствах акционеров, отчет о движении денежных средств и примечания.

8. Баланс представляет собой моментальный снимок…

9. Ресурсы компании и права на эти ресурсы в конкретный момент времени.

10. Счёт прибылей и убытков отражает прибыльность компании в течение конкретного периода времени.

11. Прибыль или чистый доход компании равняется её доходам и прибыли за вычетом её расходов и убытков.

12. В Отчёте об изменениях в средствах акционеров даётся анализ ежегодных изменений в акционерном капитале.

13. Отчет о движении денежных средств учитывает чистые наличные поступления (протоки и оттоки) от трёх основных видов коммерческой деятельности – операционной, инвестиционной и финансовой.

14. Примечания предоставляют более подробную информацию о балансе и отчёте о прибылях и убытках.

15. Эта финансовая отчётность представляет данные бухучёта в официальных отчётах.

16. Заинтересованные лица, такие как менеджеры, кредиторы, перспективные инвесторы и государственные органы.

17. Данные бухучёта говорят о том, как работает предприятие.

18. Эти отчёты подготавливаются на основе данных бухучёта, полученных от различных коммерческих сделок.

19. Сделки с активами, пассивами и капиталом используются при подготовке финансовой отчётности.

Ex. 2. Найдите в тексте предложения, в которых говорится, что

1. Most companies want to make sure that they are financially healthy.

2. Answers are found in five documents.

3. The balance sheet gives an idea of the company’s resources and sources of funding (финансирования) at a certain point of time.

4. The income statement gives an idea how profitable the company is.

5. The statement of changes in shareholders’ equity gives an analysis of the changes in the shareholders’ equity.

6. The statement of cash flows reports the gains from the three principal business activities – operating, investing and financing.

Ex. 3. Выразите согласие или несогласие.

1. Companies are not interested in financial analysis.

2. The principal components of the financial statements are the balance sheet, income statement, statement of changes in shareholders’ equity, statement of cash flows and footnotes.

3. The income statement reports on the company’s performance during the year.

4. The statement of changes in shareholders’ equity reflects the activity in the equity section of the balance sheet.

5. The statement of cash flows does not report on the movement of cash by the company.

6. The footnotes provide detailed information on cash flows.

7. The financial statements do not present valuable information to investors.

Ex. 4. Проверьте, как вы поняли текст. Ответьте на вопросы.

1. What questions do financial statements answer?

2. What are principal financial statements?

3. What does the balance sheet reflect?

4. What information is given in the income statement?

5. What information is given in the statement of changes in shareholders’ equity?

6. What does the statement of cash flows show?

7. What details are given in the footnotes?

8. What people are interested in the financial statements?

Ex.5. Употребите вместо прочерков подходящие слова из рамки.

lists, investors, items, expense, position, strength, loss, year, earned

The income statement shows how much the company ___ or lost during the ___.

While the balance sheet shows the financial ___ of the company by reflecting its financial ___ at a given date, the income statement may be of greater interest to ___ because it shows the result of its operating activities for the whole year. It serves as a valuable guide for future activities.

The income statement ___ revenue and ___. A comparison of these two ___ will show either net income or net ___.

TEXT B

Ex. 6. Найдите в тексте соответствие русским фразам.

1. Финансовая отчётность подготавливается, по крайней мере, раз в год.

2. Это называется отчётным периодом.

3. Отчётный период может совпадать с календарным…

4. Это предприятие имеет отчётный период, совпадающий с календарным годом.

5. Отчётный период, состоящий из 12 месяцев не совпадающий с календарным годом, обычно называется отчётным периодом финансового года.

6. Организации предоставляют финансовую отчётность за периоды времени, меньше чем отчетный период…

7. Такие отчёты обычно известны как промежуточные отчеты.

8. Промежуточный отчёт составляется за период времени, отличный от финансового или календарного года.

9. Примерами промежуточных отчётов могут быть отчёты, подготовленные за 6-месячный, 3-месячный или даже месячный период.

10. Независимо от периодов времени, охватываемых отдельными финансовыми отчётами, вид информации, предоставленной различными отчётами, не меняется.

Ex. 7. Найдите в тексте предложения, в которых говорится, что

1. Financial statements are prepared on a regular basis.

2. Accounting periods may be different.

3. Interim statements may cover various time periods.

4. All the financial statements regardless of the period have the same kind of information.

Ex. 8. Выразите согласие или несогласие.

1. Financial statements are always prepared for a given period of time.

2. An accounting period may be based on different time periods.

3. Interim statements are not practised.

4. The information given in different financial statements remains the same.

Ex. 9. Проверьте, как вы поняли текст. Ответьте на вопросы.

1. What time does the accounting period cover?

2. What does a calendar year accounting period mean?

3. What does a fiscal year accounting period mean?

4. What is the idea of interim statements?

5. For what periods are interim statements prepared?

Ex. 10. Заполните пропуски словами из рамки.

Remember: to draw up a balance sheet –составить баланс

joint-stick company –акционерная компания

tax liability –налоговые обязательства

longer, a firm, prepare, once, business, weekly, chosen

Accounting period is the period over which ___ prepares its income statement and at the end of which it draws up its balance sheet. Joint stock companies ___ these accounts at least ___ a year, but trading companies prepare trading accounts much more frequently, perhaps ___ to check the progress of their ___.

An accounting period for tax purposes is the period for which corporation tax liabilitymust be calculated. An accounting period can never be ___ than 12 months but it can be less. The dates for the accounting period are ___ by the company.

to make – to do to doделать, выполнять какое-либо действие, работу to makeделать, создавать, производить

Оба глагола входят в большое количество сочетаний.

To do

To make

to do businessторговать, заниматься коммерческой деятельностью to do an exerciseделать упражнение to do a jobвыполнять работу to do one’s bestприлагать все усилия to do one’s dutyвыполнять свой долг to do one’s hairпричёсываться to do smb goodприносить к.-л. пользу to do smb harmпричинять вред к.-л. to do sportsзаниматься спортом to do a sumрешать арифметическую задачу to do a translationсделать перевод to do wellпреуспевать, что-то делать успешно to do withoutобходиться без … to do workделать работу

to make adjustmentsвносить уточнения/поправки to make an appointmentназначить встречу to make arrangements forдоговориться о ... to make a calculationсделать подсчёт to make a callпозвонить по телефону to make a careerсделать карьеру to make changesвносить изменения to make a contractзаключить контракт to make a decisionпринять решение to make an entryвносить запись to make a fortuneразбогатеть to make an impression onпроизвести впечатление на …. to make to make a mistake (an error)сделать ошибку to make moneyзарабатывать деньги to make paymentпроизводить платёж to make preparationsподготавливать to make a profitизвлечь прибыль to make progressделать успехи, продвигаться вперёд to make a recordделать запись to make a reservationзабронировать to make a speechпроизнести речь

Ex. 16. Выберите правильный вариант.

1. Each time a bookkeeper (makes, does) a record of transactions he/she (makes/does) an entry.

2. An error (has been done, has been made).

3. Every entry a bookkeeper (makes, does) in the journal is posted to a ledge account. All bookkeepers know how (to make, to do) it.

4. The report (made, done) at the meeting was interesting.

5. He (has done, has made) the translation. It’s well (done, made).

6. You can easily (do, make) without these materials.

7. Is there anything I can (do, make) for you?

8. The company (made, did) a considerable profit last year.

9. Payment (will be made, will be done) on time.

10. They (made, did) a reservation at our hotel.

11. The annual report will be (made, done) by the end of the week.

REVISION EXERCISES

Ex. 19. Дайте развёрнутые ответы на вопросы.

1. What documents are financial statements based on?

2. What does the balance sheet show?

3. What information does the income statement have?

4. What changes are reflected in the statement of changes in shareholders’ equity?

5. What business activities provide cash flow?

6. What is the importance of footnotes?

7. What is the idea of the accounting period?

8. What is the purpose of the interim statements?

9. What is the importance of accepted accounting standards?

10. What groups of people are interested in financial statements?

Ex. 20. а) Прочитайте текст и переведите его.

Remember: to conform to smth [kǝn`fᴐ:m]соответствовать чему-л.

to meet the requirements [ri`kwaiǝmǝnts]удовлетворять требованиям

true and fair representationточное и беспристрастное представление

The heart of an annual report is the financial statement which must conform to accounting and reporting standards established by the Financial Accounting Standards Board (FASB)[15], the Securities and Exchange Commission (SEC)[16] and various committees of the American Institute of Certified Public Accountants (AICPA)[17]. Because financial statements are very structured, they do not meet the requirementsof any one group, and each group of users will not find information of interest. But because of the high degree of structure and accepted accounting principles, users of financial statements can be sure that the information they receive adheres to the principle of true and fair representation;they can review the financial statement of a company in New York or California and decide to buy stock, lend money, or in some other way become involved with the company, only on the basis of its audited financial statements.

Financial statements provide the substance of the annual report. At a minimum, they consist of a balance sheet, income statement, statement of cash flows, and the accompanying notes and auditor’s opinion.

б) Ответьте на вопросы.

1. What is the function of the financial statements?

2. What agencies make the rules of accounting and reporting standards?

3. For what users are the financial statements intended?

4. What is the major principle of any financial statements?

5. What decisions are taken on the basis of financial statements?

6. What minimum requirements are the financial statements to meet?

Ex. 21. Ответьте на вопросы.

1. What role do the regulatory agencies play in the matter of x. meet?

1. um requirements are the f g and reporting standards?

1. tatement of cash flows, and the accompanying notes and auditor'on financial statements?

2. What is the importance of structure?

3. What is the importance of the principle of true and fair representation?

Ex.22. Заполните пропуски словами из рамки.

Statement of Cash Flows

investing, decisions, flows, transactions, selling

The statement of cash ___ examines the changes in cash resulting from business activities. Cash flow analysis is necessary to make proper investing as well as to maintain operations.

Cash flows are separated by business activity. They are the following: operating, ___ and financing.

Operating activities include receipts from customers, payments to employees and suppliers, any other cash flows from ___ not classified as investing or financing.

Investing activities include making loans, buying and ___ of fixed assets.

Financing activities cover borrowing and repaying money, making ___ on issue of shares or paying dividends.

Ex.23. Заполните пропуски предлогами, где необходимо.

1. In the USA foreign companies have to prepare their financial statements ___ conformity with the generally accepted accounting principles.

2. The lawyers provide the managers ___ legal advice and services.

3. The budget provides ___ a salary increase next year.

4. Transactions which involve ___ assets, liabilities and capital are used in the preparation ___ financial statements.

5. Companies are interested ___ their financial strength.

6. Their situation is similar ___ ours.

7. Their revenue comes ___ different sources.

8. The company has spent a lot of money ___ supplies.

9. The balance sheet is a list of all the assets owned ___ a business and all the liabilities owed ___ a business ___ a particular moment.

10. The income statement reports the results ___ business activities ___ a period of time, typically a fiscal year.

11. Revenues show the inflow of new assets ___ the business ___ the earnings process. Expenses show the outflow ___ assets.

Ex.24. Заполните пропуски артиклями, где необходимо.

I.

Each income statement contains information unique to ___ company preparing it. Depending on ___ activities of ___ company, ___ income statement may contain ___ following sections: Sales and Operating Revenues, Cost of Goods Sold, Gross Profit, Operating Expenses, Other Revenues, Other Expenses.

The importance of ___ income statement is that it gives the reader ___ opportunity to see whether ___ activity was profitable during ___ year. It also gives ___ idea how cash flows are going into and out of ___company and thus gives an idea of whether or not ___ company has the resources to repay debts as well as to return cash to ___ owners.

II.

1. Every company wants to know where ___ revenue comes from.

2. ___ income statement reports ___ results of business activities for ___ period of time, typically ___ fiscal year.

3. Revenues show ___ inflow of new assets to ___ business.

4. Expenses show ___ outflow of assets from ___ business.

5. ___ statement of changes in shareholders’ equity analyzes ___ changes from year to year in ___ shareholders’ equity.

6. ___ statement of cash flows reports ___ net cash (inflows minus outflows) from ___ three principal business activities – operating, investing and financing.

7. This financial statements present ___ accounting information in ___ formal reports.

8. Transactions involving assets, liabilities and capital become ___data used in ___ preparation of ___ financial statements.

9. Financial statements are usually prepared once ___ year.

10. ___ accounting period may follow ___ calendar.

11. ___ interim statement is prepared for ___ period of time other than ___ fiscal or ___ calendar year.

12. Regardless of ___ periods of time covered by ___ individual financial statements, ___ information presented by them is ___ same.

Lesson 5