Trading and profit and loss accounts

Счета торговли, прибылей и убытков

Probably the main objective of the accounting function is the calculation of the profits earned by a business or the losses incurred by it. The earning of profit is after all usually the main reason why the business was set up in the first place, and the proprietor will want to know for various reasons how much profit has been made. First he will want to know how the actual profits compare with the profits he had hoped to make. He may also want to know his profits for such diverse reasons as: to assist him to plan ahead, to help him to obtain a loan from a bank or from a private individual, to show to a prospective partner or to a person to whom he hopes to sell the business, or maybe he will need to know his profits for income tax purposes.

In the case of a trader, meaning by this some one who is mainly concerned with buying and selling, the profits are calculated by drawing up a special account called a Trading and Profit and Loss Account. For a manufacturer it is also useful to prepare Manufacturing Accounts (счета производственных издержек) as well.

Undoubtedly one of the most important uses of the trading and profit and loss account is comparing the results obtained with the results expected. Many businesses attach a great deal of importance to their gross profit percentage. This is the amount of profit made, before deducting expenses, for every $100 of sales. In order that this may easily be deduced from the profit calculations, the account in which profit is computed is split into two sections – one in which the gross profit is found, and the next section in which the net profit is calculated.

Gross Profit (calculated in the Trading Account) – This is the excess (превышение) of sales over the cost of goods sold in the period.

Net profit (calculated in the Profit and Loss Account) – What remains after all other costs used up in the period have been deducted from the gross profit.

The gross profit, found by the use of the Trading Account, is the excess of sales over the cost of goods sold. The net profit, found when the Profit and Loss Account is prepared, consists of the gross profit plus any revenue other than that from sales, such as discounts received or commissions earned, less the total costs used up during the period (минус все расходы за данный период). Where (в том случае, когда) the cost of goods sold is greater than the sales the results would be a Gross Loss, but this is a relatively rare occurrence. Where the costs used up exceed the gross profit plus other revenue then the result is said to be a Net Loss. By taking the figure of sales less the cost of goods sold, it can be seen that the accounting custom is to calculate a trader’s profit only when the goods have been disposed of and not before (только после поставки товаров, а не до того).

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Balance sheet layout

Структура балансового отчета

You would not expect to go into a first-class store and see the goods for sale all mixed up and not laid out properly. You would expect that the goods would be displayed so that you could easily find them. Similarly in balance sheets we do not want all the items shown in any order. We would really want them displayed so that desirable information could easily be seen.

For people such as bank managers, accountants and investors who look at a lot of different balance sheets, we would want to keep to a set pattern so as to enable comparison of balance sheets to be made easier.

Let us look at the assets side first. We are going to show the assets under two headings, Fixed Assets and Current Assets (основные средства и оборотные средства).

Assets are called Fixed Assets when they are of long life, are to be used in the business and were not bought with the main purpose of resale. Examples are buildings, machinery, motor vehicles and fixtures and fittings (принадлежности и приспособления).

On the other hand, assets are called Current Assets when they represent cash or are primarily for conversion into cash or have a short life. An example of a short-lived asset is that of the stock of oil held to power the boilers (для нагрева фабричных котлов) in a factory, as it will be used up in the near future. Other examples of current assets are cash itself, stocks of goods, debtors and bank balances.

There is a choice of two methods of listing the assets under their respective headings. The first, being the most preferable since it helps standardize the form of sole traders’ accounts with those of limited companies, is that the assets are listed starting with the most permanent asset, or put it another way, the most difficult to turn into cash, progressing to the asset which is least permanent or easier to turn into cash. The fixed assets will thus appear under that heading followed by the current assets under their heading. The other method, used by banks but fast falling into disuse in most other kinds of organizations, is the complete opposite. In this method it is the least permanent asset that appears first and the most permanent asset which appears last.

The order of the other side of the balance sheet is preferably that of starting with capital, progressing via long-term liabilities such as loans not requiring repayment within the near future, and finishing with current liabilities (краткосрочные обязательства), being liabilities such as debts for goods which have to be discharged in the near future. This then would be the order in which the claims against the assets would be met. The other method of listing the liabilities is the complete opposite of this, starting with current liabilities and finishing at the bottom with capital. This method conflicts with company accounts and is best avoided if the benefits of standardization are to be attained.

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Basic concepts

Основные принципы

The money measurement concept (принцип денежного выражения)

Accounting is only concerned with those facts that can be measured in monetary terms with a fair degree of objectivity. This means that accounting can never show the whole of the information needed to give you a full picture of the state of the business or how well it is being conducted. Accounting does not record that the firm has a good, or a bad, management team. It does not show that the poor morale (нездоровый моральный климат) prevalent among the staff is about to lead to a serious strike, or that various managers will not cooperate with one another. Nor will it reveal that a rival product is about to take over a larger part of the market occupied at present by the firm’s own goods.

This means quite simply that just looking at a set of accounting figures does not tell you all that you would like to know about a business. Some people imagine that accounting gives you a full picture, but from what has been said they are quite obviously deluding themselves. Others would maintain (существует также мнение) that really accounting ought to put monetary values on these other factors as yet ignored in (которые пока не находят отображения в) accounting. Those who object to this state that this would mean a considerable loss of objectivity. Imagine trying to place a value of the future services to be given to the firm by one of its managers. Different people would tend to give different figures, and so, at present, as the final accounts are of a multi-purpose nature, which figures would be acceptable to the many parties who use the accounts? As the answer is that no one set of acceptable figures could be agreed in this case by all parties, then in accounting as it stands the task is just not undertaken at all. It would seem likely that, eventually the vital factor of placing a value on labor and management, usually known as human asset accounting (учет человеческого капитала) will play a full part in the construction of balance sheets.

The going concern concept (принцип работающего предприятия)

Unless the opposite is known accounting always assumes that the business will continue to operate for an indefinitely long period of time. Only if the business was going to be sold or closed down would it be necessary to show how much the asset would fetch (какую сумму можно выручить от реализации средств фирмы). In the accounting records normally this is assumed to be of no interest to the firm. This is obviously connected with the cost concept (принцип стоимости), as if firms were not assumed to be going concerns the cost concept could not really be used, e.g. if firms were always to be treated as though they were going to be sold immediately after the accounting records were drafted (по составлении бухгалтерской отчетности), then the saleable value of the assets (продажная цена активов) would be more relevant than cost.

The business entity concept (принцип целостности предприятия)

The transactions recorded in a firm’s books are the transactions that affect the firm. The only attempt to show how the transactions affect the owners of a business is limited to showing how their capital in the firm is affected. For instance, a proprietor puts $1,000 more cash into the firm as capital. The books will then show that the firm has $1,000 more cash and that its capital has increased by $1,000. They do not show that he has $1,000 less cash in his private resources. The accounting records are therefore limited to the firm and do not extend to (не распространяется на) the personal resources of the proprietor’s.

The realization concept (принцип реализации)

In accounting, profit is normally regarded as being earned at the time when the goods or services are passed to the customer and he incurs liability for them, i.e. this is the point at which the profit is treated as being realized. Note that it is not when the order is received, nor the contract signed, neither is it dependent on waiting until the customer pays for goods and services. It can mean that profit is brought into account in one period, and it is found to have been incorrectly taken as such when the goods are returned in a later period because of some deficiency (по причине имеющихся дефектов). Also the services can turn out to be subject to an allowance (предмет внесения поправки) being given in a later period owing to poor performance (из-за низкого качества) if the allowances or returns can be reasonably estimated and adjustment may be made (можно внести поправку) to the calculated profit in the period when they passed (реализуются) to the customer.

The dual aspect concept (принцип двойственности)

This states that there are two aspects of accounting, one represented by the assets of the business and the other by the claims against them (требования к ним). The concept states that these two aspects are always equal to each other. In other words:

Assets = Liabilities + Capital

Double entry (двойная запись) is the name given to the method of recording the transactions so that the dual aspect concept is upheld (соблюдается).

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