Try and match the words on the left with their definitions on the right

1.	analysis	a)	to produce or bring into being; create;
2.	computerize	b)	to take away or subtract (a number, quantity parts, etc.)
3.	to design	c)	to work out the structure or form of something as by making a sketch, outline, pattern or plans;
4.	invention	d)	a series of observations, measurements or facts; information;
5.	enthusiastic	e)	the division of a physical or abstract whole into its constituent parts to examine or determine their relationship or value;
6.	to generate	f)	something that is invented;
7.	a record	g)	(computing) to enter or retain information in a storage device;
8.	to deduct	h)	to process or store information or data by means of or in a computer;
9.	data	i)	filled with or motivated by enthusiasm; fanatical; keen;
10.	to store	j)	a written account of some transaction that serves as legal evidence of the transaction;

Exercise 7.4

Read the text and find out whether the following statements are true of false:

The computer is an electronic tool that is used to collect and organize information.

a) True

b) False

Accountants were the least enthusiastic users of computers.

a) True

b) False

Nowadays computers do all the work instead of accountants.

a) True

b) False

4. Computers make accountants’ work easier.

a) True

b) False

Today computers perform one main function.

a) True

b) False

Computerized accountancy systems are quite unusual these days.

a) True

b) False

Very few businesses can produce detailed accounts.

a) True

b) False

8. Computers can’t be used to generate complete sets of financial reports.

a) True

b) False

The accounting information system plays the primary role of managing the flow of economic data.

a) True

b) False

There are still some activities computers cannot replace.

a) True

b) False

Exercise 7.5

Read the middle part of the text and focus on the functions computers perform today:

Today computers perform a number of functions.

Ø First, they collect and store data, information and instructions.

Ø Second, they calculate and generate information from various data.

Ø Third, they control processes and machines by giving instructions.

Ø And last but not least they communicate data and information to other machines.

Ø It should be stressed that computers work at least a million times faster a human being, they never make mistakes, do not get bored and more accurate than people. That's why computerized accountancy systems are quite common these days.

Exercise 7.6

Read the text once again and fill in the gaps:

a)	systems	f)	machines
b)	information	g)	add
c)	reports	h)	perform
d)	accounts	i)	faster
e)	data	j)	store

Today computers 1… a number of functions. First, they collect and 2… data, information and instructions. Second, they calculate and generate 3… from various data. Third, they control processes and 4… by giving instructions. And last but not least they communicate 5… and information to other machines. It should be stressed that computers work at least a million times 6… a human being, they never make mistakes, do not get bored and more accurate than people. That's why computerized accountancy 7… are quite common these days. Many businesses can produce detailed 8… and send out bills using computer programs. Computers may be used to generate complete sets of financial …9 immediately upon the request. As it is known, they can …10 and subtract at the speed of light.

UNIT 4
FINANCIAL STATEMENTS

TEXT 1. THE MAIN USERS OF ACCOUNTING INFORMATION

TEXT 2. DESIRABLE QUALITIES OF FINANCIAL INFORMATION

TEXT 3. THE ROLE OF ACCOUNTS

TEXT 4. THE TYPES AND THE TITLES OF ACCOUNTS

TEXT 5. ACCOUNTING COMMUNICATION THROUGH FINANCIAL STATEMENTS

TEXT 6. RELATIONSHIPS BETWEEN FINANCIAL STATEMENTS

TEXT 7. FINANCIAL STATEMENTS

TEXT 8. ASSETS

TEXT 9. FINANCIAL STATEMENTS ANALYSES

TEXT 10. THE BALANCE SHEET

TEXT 1

THE MAIN USERS OF ACCOUNTING INFORMATION

Exercise 1.1

Study the vocabulary:

1. to make informed judgments and decisions	1. приймати інформативно обґрунтовані думки та рішення
2. livelihood	2. засоби до прожиття
3. to allocate available recourses	3. розміщувати наявні ресурси
4. scarce	4. недостатній; мізерний; рідкісний
5. to rely on	5. покладатися, сподіватися на
6. to increase wealth	6. збільшувати добробут
7. lender	7. кредитор
8. supplier	8. постачальник
9. to exercise a day-to-day control of the business	9. здійснювати щоденний контроль бізнесу

Exercise 1.2

Read and translate the text:

The purpose of accounting is to provide economic information which permits users to make informed judgments and decisions. They decide how to allocate available resources best. As a rule, resources are generally scarce in relation to needs, and so users rely on accounting reports to ensure the efficient and effective allocation of supplies.

It is possible to classify users of accounting information into major groups in the world of business. Users within each group are considered to have very similar information needs.

Owners normally invest in a business in order to increase their wealth. The major decision confronting owners and potential owners is whether or not to invest or retain an investment in a business. In order to make an investment decision of this nature owner need to assess the likely future returns from their investment. In addition, possible future risks must be considered. Owners and potential owners should be satisfied that the potential returns are adequate given the potential risks involved in the business.

Lenders can be divided into two groups: short-term lenders and long-term lenders.

Short-term lenders (i.e. those who lend money for up to a 12-month period) will normally be concerned with the 'liquidity' of the business. The term 'liquidity' refers to the availability of cash, or near-cash items such as short-term investments. Short-term lenders will normally view liquidity as an important indicator of the ability of the business to pay short-term obligations when they fall due.

Like owners, long-term lenders are concerned with the longer term prospects of the business. They are interested in likely future risks and rewards, and in the efficiency of management.

Suppliers of goods and services need to ensure that a business is able to pay for the goods and services provided. They will, therefore, be concerned with the liquidity of a business. It is quite common to find that some suppliers provide a business with a substantial and continuous flow of goods and services. For suppliers in this position, the long-term prospects of the business may be of great interest.

Managers exercise a day-to-day control of the business. In carrying out their duties they must make different kinds of economic decisions and will, therefore, require different kinds of accounting information.

Where customers regard a business as an important supplier of goods or services they will require information to satisfy themselves that the business can be relied upon as a continuing source of supply. The current financial condition of the business and likely future performance and prospects will, therefore, be of interest.

Employees will rely on a business for their livelihood and will often have a long-standing relationship with the business. Their concerns will be for security and prospects of employment and its financial rewards. Employees will require information concerning possible changes in employment levels, the conditions of service and the ability of the business to meet pay demands. Information relating to the performance and prospects of individual units of the business will be useful in addition to information concerning the progress of the business overall.

Governments may require information concerning a business for different reasons. Governments use information on profits made in order to assess liability for taxation. In addition, information concerning financial condition or profits may be useful in assessing the effects of government policies or for deciding on the level of grants or subsidies to be provided.

Governments sometimes wish to regulate the activities of certain businesses. For example, there may be a policy to prevent the growth of monopolies in business and to encourage the spread of competition. Such a policy may be seen as being in the best interests of the consumer. Where anti-monopoly policies are being pursued, governments may take a keen interest in the sales and profits achieved by large businesses.

The public.Businesses operate within a community. The workforce will often be drawn from the community, and the businesses may use community-owned resources such as the roads. Members of the public may, therefore, wish to assess whether or not the business is a 'good citizen'. To help make such an assessment it may be useful to receive information on such matters as employment policies, environmental policies and donations to community programmes.

Competitors may take a keen interest in the financial condition and performance of a business for various reasons.

Firstly, a competitor may consider taking over the business. In this case, it will have a particular interest in such information as the sales and profits achieved and the value of resources held by the business. Secondly, a competitor may require information concerning performance of the business in order to make comparisons of relative efficiency. Finally, a competitor may seek information concerning a business in order to predict future strategies. For example, the building up of large cash balances by a business may indicate the possible threat of a take-over bid in the future.

Exercise 1.3

Read the text again and put the users of accounting information in the correct order:

a) the public b) owners c) governments d) lenders e) competitors f) employees g) managers h) suppliers of goods and services

Exercise 1.4

Read the text again and find out whether the following statements are true or false:

1. Short-term lenders view liquidity as an important indicator of businesses' ability to pay short-term obligations when they fall due.

2. Suppliers of goods and services need to ensure that a business is able to pay for the goods and services provided.

3. The efficient allocation of resources requires the use of reliable information

4. It is impossible to classify the major users of accounting information.

5. When making investment decisions potential owners are not usually interested in assessing future returns from their investments.

6. Managers don’t need accounting information for carrying out their duties.

7. Governments never regulate the activities of certain businesses.

8. The public can wish to receive from the businesses information on such matters as employment policies, environmental policies and donations to community programmes.

9. Competitors may require information concerning performance of the business if they want to make relative comparisons.

Exercise 1.5

Read the text and fill in the gaps. Then read and translate:

The purpose of …1… is to provide economic …2… which permits users to make informed judgments and …3…. They decide how to …4… available resources best. As a rule, resources are generally …5… in relation to …6…, and so users rely on …7… to ensure the efficient and effective allocation of supplies.

It is possible to classify …8… of accounting information into major …9… in the world of business. Users within each group are considered to have very similar information …10 .

TEXT 2

DESIRABLE QUALITIES
OF FINANCIAL INFORMATION

Exercise 2.1

Study the vocabulary:

1. relevance	1. доречність, значимість
2. to influence the decisions and judgments of users	2. впливати на рішення та міркування, думки користувачів
3. it embodies the basic idea	3. це втілює основну думку
4. in order to meet the needs of users	4. для того, щоб відповідати потребам користувача
5. irrelevant	5. недоречний
6. benefit	6. користь, прибуток
7. to justify	7. виправдовувати, пояснювати, підтверджувати
8. feedback	8. зворотній зв’язок
9. to predict	9. передбачати
10. to evaluate	10. оцінювати
11. objectivity	11. об’єктивність
12. impartiality	12. об’єктивність, безсторонність
13. a delay	13. затримка, зволікання
14. verifiability	14. можливість перевірити
15. bias	15. відхилення, систематична помилка, похибка
16. freedom from bias	16. неупередженість
17. to complicate	17. ускладнювати

Exercise 2.2

Match the words with their meanings:

1. relevance	a) ускладнювати
2. benefit	b) неупередженість
3. feedback	c) об’єктивність
4. to evaluate	d) можливість перевірити
5. objectivity	e) зворотній зв’язок
6. impartiality	f) відхилення, систематична помилка, похибка
7. verifiability	g) оцінювати
8. bias	h) об’єктивність, безсторонність
9. to complicate	i) доречність, значимість
10. freedom from bias	j) користь, прибуток

Exercise 2.3

Read and translate the text:

In order for accounting information to be considered useful it should possess certain qualities. These are: relevance, objectivity, timeliness, comparability, understandability.

These qualities may at times be in conflict with one another and some compromise between them may have to be made. The view as to what constitutes a satisfactory compromise may well vary between users or groups of users.

The most important quality is certainly relevance.Accounting information is said to be relevant if it has the potential to influence the decisions and judgments of users. Relevance is often regarded as the primary quality of accounting information as it embodies the basic idea that accounting exists in order to meet the needs of users. Accounting information which is irrelevant provides no benefits to users and does not, therefore, justify the costs of producing the information. It has been suggested that accounting information will be relevant if it helps users to predict the future and/or provides feedback to users which helps them evaluate the accuracy of earlier predictions.

Another important quality is objectivity.Objectivity, i.e. impartiality, can be divided into two elements: verifiability, and freedom from bias.

Verifiability suggests that the information produced can be independently observed or tested. This means that qualified accountants handling the same basic data but working independently would produce the same results.

Freedom from bias suggests that the information produced will not favor the interests of a particular group of users at the expense of another.

The higher the degree of objectivity the greater the confidence users are likely to have in the information produced.

Apart from relevance and objectivity accounting information should be timelyin the sense that it should be produced 'reasonably soon' after the end of the accounting period to which it relates. If there is too long a delay, the accounting information produced will lose the relevance it otherwise might have had.

Accounting information should also be timely in the sense that the reporting intervals should be frequent enough to meet the user's needs. If the reporting interval is too long, information produced may only be available after the point in time when a decision should have been made.

When arriving at judgements or decisions users will often compare accounting information produced by different businesses. It is therefore useful if items or events common to different businesses are measured and presented in the same manner. Similarly, items or events occurring within the same business should be measured and presented in the same manner from one period to another. In other words accounting information should possess the quality of comparability.

And last but not least is understandability.Users will only be able to employ accounting information in a sensible way if they are able to understand it. This means that accounting information should be set out in a clear and logical manner and not be unnecessarily complicated.

Exercise 2.4

Read the text again and choose the best variant:

1. In order for accounting information to be considered useful it should:

a) possess verses and poems

b) possess certain qualities

c) possess questions and answers

2. The most important quality is certainly…

a) relevance

b) remuneration

c) reward

3. Another important quality is…

a) object

b) complex object

c) objectivity

4. Apart from relevance and objectivity accounting information should be…

a) timely

b) temporary

c) permanent

5. And last but not the least is…

a) verifiability

b) comparability

c) understandability

Exercise 2.5

Fill in the gaps. Then read and translate:

items judgmentscomparability compare period therefore presented measured business manner

When arriving at …1… or decisions users will often…2…

accounting information produced by different businesses. It is …3…useful if items or events common to different businesses are …4…and presented in the same …5… Similarly …6…or events occurring within the same …7…should be measured and …8…in the same manner from one …9…to another. In other words accounting information should possess the quality of …10….

Exercise 2.6

Read the text again to find out which of the following statements are correct:

1. If accounting information is irrelevant, it does not help users in making decisions and judgments.

2. Relevance is the primary quality of accounting information because accounting exists to meet the needs of users.

3. Qualified accountants working independently with the same basic data produce different results.

4. Accounting reports should be frequent enough to meet the user's needs.

5. It is not important if economic items or events are not presented in the same manner.

6. The quality of understandability suggests that accounting information should be set out in a clear and logical manner.

7. The desirable qualities of accounting information are never in conflict with one another.

Exercise 2.7

Read the text again and put the sentences into a chronological order:

1.Apart from relevance and objectivity accounting information should be timely in the sense that it should be produced 'reasonably soon' after the end of the accounting period to which it relates.

2.These qualities may at times be in conflict with one another and some compromise between them may have to be made.

3.When arriving at judgements or decisions users will often compare accounting information produced by different businesses.

4.Freedom from biassuggests that the information produced will not favor the interests of a particular group of users at the expense of another.

5.Useful qualities of accounting information are: relevance, objectivity, timeliness, comparability, understandability.

6.Another important quality is objectivity.

7.And last but not least is understandability.

8.The most important quality is certainly relevance.

TEXT 3

THE ROLE OF ACCOUNTS

Exercise 3.1

Study the vocabulary:

	assets		активи
	to come under criticism		піддаватися критиці
	to compute		розраховувати
	design		складати
	to earn the same amount of money		заробити ту ж саму кількість грошей
	equity		капітал
	to fail to do smth.		не бути в змозі
	historical data		дані за минулий період
	liabilities		пасиви
	in monetary terms		в грошовому виразі
	inherently		властиве
	to see the data as а piece of information		розглядати дані як одиницю інформації
	specific		особливий
	to store		зберігати
	storage		зберігання
	relevant		значущий
	whereas		тоді як

Exercise 3.2

Read and translate the text:

An account can be defined as the basic storage unit for data in accounting. All the transactions that occur in a business are sorted out classified through the use of accounts. An accounting system has separate accounts for each asset, each liability, and each component of owner's equity. But each business must design its accounts in a way that may reflect its nature and the needs of its management. So, different businesses may keep a different number of accounts. For example, a very small company may need only a few accounts whereas a multinational corporation can keep thousands of them. The specific accounts used by a business depend on its nature.

As a rule, accounts are usually kept in books of accounts. Books of accounts reflect all kinds of business transactions – sales, payment, profits losses etc. They also show the effect of different transactions on the financial position of a firm or a person doing business. In general, accounts are prepared to perform three main functions: first, to show the financial position of a business; second, to enable the income tax computations to be prepared; third, to provide management with necessary information to control the activity of a business.

Very often accounts fail to present a real picture of affairs. This is why the systems of accounts and the main methods of their classification came under criticism in many countries of late. The accounts are believed to be inherently narrow even if they comprehensively present every relevant fact about business activity. They are also said to have certain limitations. First of all, financial accounts report only events which can be expressed in monetary terms. Another limitation is that financial statements report events that have already happened, and they do not show what might have accrued, or what might occur in the future. For example, the fact that a business earned 10 billion hrivnas last year does not necessarily indicate that it will earn the same amount next year. Meanwhile businesses are most interested in what will happen in the future. Historical data is of little use to management who should consider the future when making decisions. Usually managers see the data reflected on the accounts as only one piece of a large body of information to be examined before making decisions.

Exercise 3.3

Read the text again and choose the best variant:

1. An account can be defined as…

a) the secondary storage unit for data in accounting

b) the aggregate storage unit for data in bookkeeping

c) the basic storage unit for data in accounting

2. An accounting system has…

a) general accounts for each asset

b) separate accounts for each asset, each liability and each component of owner’s equity

3. Each business must design its accounts in a way…

a) that may not reflect its nature and needs of its management

b) that reflect its nature and needs of its management

4. Accounts are usually kept in…

a) bookkeeping magazines

b) in books of accounts

5. Books of accounts reflect…

a) profit losses

b) tax revenues and expenditures

c) all kinds of business transactions

6. Accounts are prepared to perform such function…

a) they show the financial position of a business

b) they provide management to control the activity of a business and enable the income tax computations

c) in general accounts perform three main functions

Exercise 3.4

Fill in the gaps from the table. Then read and translate:

Storage company accounts multinational separate nature equity transactions specific component

An account can be defined as the basic …1… unit for data in accounting. All the …2…that occur in a business are sorted out classified through the use of …3…. An accounting system has …4…accounts for each asset, each liability, and each …5…of owner's …6…. But each business must design its accounts in a way that may reflect its nature and the needs of its management. So, different businesses may keep a different number of accounts. For example, a very small …7… may need only a few accounts whereas a …8…corporation can keep thousands of them. The …9…accounts used by a business depend on its …10….

Exercise 3.5

Read the whole text again and choose the best answer:

1. How can an account be defined?

a) account is an aggregate storage unit for data in bookkeeping

b) account is the basic storage unit for data in accounting

2. What sort of accounts has an accounting system?

a) only one kind of accounts

b) has separate accounts for each asset etc

3. How many accounts does a business need?

a) two accounts

b) a few accounts

c) the number of accounts used by a business depend on its nature