Exercise 6.10 The Profit and Loss Account and Balance Sheet are two important documents used in preparing financial statements. Which of the following is a definition of a
– Profit and Loss Account?
– Which defines a Balance Sheet?
1) Statement showing income and expenses resulting from trading over a period of time.
2) Statement of financial position at a specific point of time.
TEXT 7
ACCOUNTING COMMUNICATION THROUGH
FINANCIAL STATEMENTS
Exercise 7.1
Study the vocabulary:
| a feature | особливість, характерна риса | ||
| the required information | потрібна інформація | ||
| to consider | обговорювати, обдумувати, приймати до уваги | ||
| achieved or failed to achieve its objective of earning an acceptable income | досяг чи не мав успіху у досягненні своєї мети отримання допустимого прибутку | ||
| major deficiency | головний недолік | ||
| the accounting period | звітний період; фінансовий рік | ||
| cash movements | обіг готівки | ||
| head | тут заголовок | ||
| to be headed in a similar way | мати подібні заголовки | ||
| note | тут банкнота | ||
| bonds | облігації | ||
| to receive interest | отримати прибуток (відсоток) |
Exercise 7.2
Read and translate the text:
Financial statements are a central feature of accounting because they are the primary means of communicating important accounting information to users. It is helpful to think of these statements as a model of the business enterprise. As is true of all models, however, financial statements are not perfect pictures of the real things but the accountant's best effort to represent what is real. Three major financial statements are used to communicate the required information about the business. Each of them deals with a particular aspect of financial conditions.
The first financial statement usually prepared is the income statement or profit and loss account. As a rule, it shows a firm's revenue, generated over a period and all the relevant costs incurred in this period. In other words, it summarizes the amount of revenues earned and expenses incurred over a period of time. Many people consider it to be the most important financial report because its purpose is to measure whether the business achieved or failed to achieve its objective of earning an acceptable income. But it has become clear recently that the income statement has one major deficiency. It only shows the changes in financial position caused by those operations that produced an income or loss. Many important events, especially those relating to investment and financing activities can take place during the accounting period and not appear on the income statement.
The second financial statement is, certainly, the balance sheet. The purpose of the balance sheet is to show the financial position of a business at a particular date. For this reason, it is often called the statement of financial position and is dated as of a certain date. The third financial statement is the cash flow statement. It shows a company's sources and uses of cash during an accounting period. This statement is useful in giving an indication of cash movements during a period and the cash balance at the end of the period.
It should be noted that each statement is headed in a similar way. Each identifies the company and the kind of statement for the user. Users of financial statements fall into two broad categories: internal and external. Management is the main internal user while creditors and investors are external users. Creditors make loans in the form of trade accounts, notes, or bonds, on which they receive interest. Investors buy capital stock, from which they hope to receive dividends and an increase in value. All the users are interested in receiving reliable formation from the financial statements to make decisions.
Exercise 7.3
Read the text again and choose the best variant:
1. Financial statements are a central feature of accounting because they are [the primary means of communicating important accounting information to users].
a) the primary means of communicating important accounting information to users.
b) the most important means of accounting information to consumers.
c) the central resources of accounting information to managers.
2. Financial statements are [the accountant's best effort to represent the real situation].
a) perfect pictures of the real things;
b) the accountant's best effort to represent the real situation;
c) the accountant's effort to characterize the unreal pictures of the actual things
3. The first financial statement usually shows [the summary of the amount of revenues earned and expenses incurred by a firm over a period of time].
a) a firm's profit, generated over a period and all the most important costs earned in this period.
b) a firm's income, produced in time and all the relevant costs incurred in this period.
c) the summary of the amount of revenues earned and expenses incurred by a firm over a period of time.
4. The purpose of the balance sheet is [to show the financial position of a business at a particular date].
a) to show the financial situation of a business in a particular date;
b) to show the financial position of a business at a particular date;
c) to show the fiscal point of a business at a particular day
5. The cash flow statement shows [a company's sources and cash movements during an accounting period].
a) a company's sources and uses of foreign currency during an accounting period;
b) a company's sources and cash movements during an accounting period;
c) a company's sources and expenditures during an accounting period
Exercise 7.4
Read the last paragraph of the text again and fill in the gaps. Then read and translate:
| company; decisions; statement; interest; reliable; dividends; loans; user; internal; creditors; |
It should be noted that each…1…is headed in a similar way. Each identifies the…2…and the kind of statement for the ...3…. Users of financial statements fall into two broad categories: …4… and external. Management is the main internal user while …5… and investors are external users. Creditors make …6…in the form of trade accounts, notes, or bonds, on which they receive …7…. Investors buy capital stock, from which they hope to receive …8… and an increase in value. All the users are interested in receiving …9… formation from the financial statements to make…10….
Exercise 7.5
Read the whole text again and choose the best answer:
1. Which financial statement shows the financial position of a business at a particular date?
a) the balance sheet
b) cash flow statement
c) the income statement
2. Why do many people consider the income statement to be the most important financial report?
a) because it measures an income of a business;
b) because its purpose is to measure whether the business completed earning earning an acceptable profit;
c) because its purpose is to see the size of the acceptable income of a business;
3. Why do you think the income statement have the deficiency?
a) because all unimportant eventscan appear on the income statement;
b) because it only shows the changes in financial position caused by those operations that produced an income or loss;
c) because allinvestment and financing activities can’t take place during the accounting period;
4. What is the purpose of balance sheet?
a) The purpose of the balance sheet is to show the financial problems of a business.
b) The purpose of the balance sheet is to show the economic position of a company at a particular time.
c) The purpose of the balance sheet is to show the financial position of a business at a particular date.
5. Which financial statement shows a company's sources and uses of cash during an accounting period?
a) the balance sheet
b) the income statement
c) the cash movement.
TEXT 8
ASSETS
Exercise 8.1
Study the vocabulary:
| current assets | оборотні кошти; поточні активи |
| fixed assets | основні фонди; фіксовані активи |
| tangible assets | матеріальні активи; реальний основний капітал |
| intangible assets | нематеріальні активи |
| financial assets | фінансові активи |
| long-term assets | довгострокові активи |
| cash in (at) bank | банківська готівка |
| cash on (in) hand | залишок грошових коштів у касі; касова готівка; кошти у касі |
| plant and equipment | продуктивні кошти (у балансі); основні фонди (у балансі) |
| property, plant and equipment | нерухоме майно; основні фонди (у балансі) |
| liquidity | ліквідність |
| presumed liquidity | передбачувана ліквідність |
| undertaking | 1) підприємство, справа; 2) зобов’язання, гарантія; 3) положення (стаття) договору |
| the undertaking’s activities | діяльність підприємства |
| depreciation | амортизація; зниження вартості активів у бухгалтерській звітності |
| accumulated depreciation accounts | амортизаційний фонд |
| accounting period | звітний період |
| the next accounting period | наступний звітний період |
| miscellaneous | 1) інше, різне (про записи господарських операцій, що не можуть бути віднесеними ні до яких із стандартизованих груп) 2) також частина назви відповідних статей у фінансовій звітності |
| miscellaneous assets | інше майно; інші активи |
Exercise 8.2
Match the terms with their correct translation:
| 1. оборотні кошти | a) fixed assets |
| 2. основні фонди | b) long-term assets |
| 3. матеріальні активи | c) plant and equipment |
| 4. нематеріальні активи | d) depreciation |
| 5. довгострокові активи | e) accounting period |
| 6. залишок грошових коштів у касі | f) accumulated depreciation accounts |
| 7. продуктивні кошти (у балансі) | g) intangible assets |
| 8. амортизація | h) cash in (on) hand |
| 9. амортизаційний фонд | i) current assets |
| 10. звітний період | j) tangible assets |
Exercise 8.3
Read and translate:
The assets of an European company are usually divided into two major categories: fixed assets and current assets.
The fixed assets category includes intangible assets, tangible assets, and financial assets.
The current assets category includes stocks, debtors, investments, and cash at bank and in hand.
In the United States, the assets of a company are usually divided into five categories:1) current assets, 2) investments, 3) property, plant and equipment;
4) intangible assets 5) other assets.
These categories are listed on the balance sheet in decreasing order of their presumed liquidity.
Exercise 8.4
If necessary read the text again and make up a sentence using the words and word combinations from the box:
| and tangible assets, The category financial assets. intangible assets, include fixed assets |
| and cash at bank The and in hand. current assets includes category stocks, investments, debtors, |
Exercise 8.6 Read and translate:
Current assets are those assets of a company that are reasonably expected to be realized in cash, sold or consumed during one year or during the normal operating cycle of the business.
Fixed assets are long-term assets acquired for use in business operations. Fixed Assets accounts are also known as Capital Assets, Long-Term Assets, Long-Lived Assets, or Plant and Equipment. The value of these assets – with the exception of land – is depreciated over their expected lives. Past depreciation is recorded in the Accumulated Depreciation account.
The Investments category of a US Corporation’s Balance Sheet includes assets that are not used in the normal operation of a business and that management does not plan to convert to cash within the next accounting period.
The Property, plant and equipment category includes tangible, long-term assets acquired for use in business operations.
Intangible assets are those assets which have no material substance, as compared to tangible or physical assets such as buildings and land.
Other Assets is a category some US companies use for miscellaneous assets that are not specified elsewhere on the balance sheet. Other companies group under this heading investments, intangible assets, and all the other assets owned by a company other than current and fixed assets.
Exercise 8.7
Match the terms with their correct translation:
| 1. investments | a) керівництво |
| 2. Balance Sheet | b) конвертувати |
| 3. management | c) інше майно (активи) |
| 4. next accounting period | d) де-небудь ще |
| 5. to convert | e) інвестиції |
| 6. miscellaneous assets | f) володіти |
| 7. to specify | g) баланс; балансовий звіт |
| 8. elsewhere | h) заголовок |
| 9. heading | i) вказувати |
| 10. to own | j) наступний фінансовий звіт |
Exercise 8.8
If necessary read the text again and fill in the gaps with the proper words from the box:
| plant business equipment year tangible cash intangible assets land material |
Current assets are those …1… of a company that are reasonably expected to be realized in …2… , sold or consumed during one …3… or during the normal operating cycle of the …4… .
The Property,…5…and…6…category includes …7… , long-term assets acquired for use in business operations.
…8…assets are those assets which have no …9… substance, as compared to tangible or physical assets such as buildings and …10….
Exercise 8.9 Read and translate:
Study these words first:
| 1. to comprise | 1. включати |
| 2. excerpt | 2. відривок |
| 3. EEC (European Economic Community) | 3. Європейське економічне співтовариство |
“Whether particular assets are to be shown as fixed assets or current assets shall depend upon the purpose for which they are intended. Fixed assets shall comprise those assets which are intended for use on a continuing basis for the purposes of the undertaking’s activities.”
(Excerpt from Directive 78/660/EEC)
Exercise 8.10
If necessary read the excerpt again and choose the best ending:
1) Whether particular assets are to be shown as fixed assets or current assets shall depend upon …
a) the purpose of the Chief accountant
b) the aim of the Balance Sheet
c) for which they are intended
2) Fixed assets shall comprise those assets which are intended for …
a) use on a continuing basis
b) use on a temporary basis
c) use on a contemporary and temporary basis
Exercise 8.12
Fill in the missing words in the sentences below. Choose from the following:
| in, assets, tangible, depreciation, patents, from |
1. Total assets as of December 31, 2003, increased by €184 million, or 32.7%, …December 31, 2002.
2. The most common types of intangible assets are …, copyrights, franchises or licenses, trademarks or trade names, and goodwill.
3. At December 31, 2003 and 2002, the Company had patents, trademarks and other identifiable intangible … with a value of $124.0 million and $128.6 million, respectively.
4. The increase in current assets is largely due to increases … notes receivable and prepaid expenses.
5. The … net assets of this company were appraised at €950,000 on December 31, 2002.
6. Property, plant, and equipment include buildings $2,525,000 less accumulated depreciation of $461,000; equipment $642,000 less accumulated … of $208,000; and land $856,000.
TEXT 9