V. Say if the following statements are true or false. Correct the false ones

1. Prepaid expenses are not assets.

2. A liability is a debt.

3. Account Payable is similar to the Accounts Receivable.

4. Business’ buildings appear in the Land Account.

VI. Answer the questions to the text:

1. What are assets?

2. What does the Cash account show and include?

3. What kind of records are the Notes Receivable?

4. Does a business have a separate asset account for each type of equipment?

5. What does Notes Payable record?

UNIT 11

I. Memorize the following words:

owner’s equity – собственный акционерный капитал компании

withdrawal – снятие (денег со счета)

capital – капитал; состояние, накопления, сбережения

to merge – сливать(ся), соединять(ся) (into, with)

II. Translate the following words and word combinations:

claim, net income, net losses, revenue, ledger, expense

III. Read and translate the text. While reading continue making your own list of

business terms:

TYPES OF ACCOUNT

Part 2

Some other accounts may be as follows:

Owner's Equity. The claim that the owner has on the assets of the business is called owner's equity. In a proprietorship or a partnership, owner's equity is often split into separate accounts for the owner's capital balance and the owner's withdrawals.

Capital. This account shows the owner's claim to the assets of the business. After total liabilities are subtracted from total assets, the remainder is the owner's capital. The balance of the capital account equals the owner's investments in the business plus its net income and minus net losses and owner withdrawals. In addition to the capital account, the following accounts also appear in the owner's equity section of the ledger.

Withdrawals. When the owner withdraws cash or other assets from the business for personal use, its assets and its owner's equity both decrease. The amounts taken out of the business appear in a separate account entitled Withdrawals, or Drawing. If withdrawals were, directly in the capital account, the amount of owner withdrawals would be merged with owner investments. To separate these two amounts for decision making, businesses use a separate account for Withdrawals. This account shows a decrease in owner's equity.

Revenues. The increase in owner's equity from delivering goods or services to customers or clients is called revenue. The ledger contains as many revenue accounts as needed. If the business loans money to an outsider, it will also need an Interest Revenue account. If the business rents a building to a tenant, it will need a Rent Revenue account. Increases in revenue accounts are increases in owner's equity.

Expenses. The cost of operating a business is called expense. Expenses have the opposite effect of revenues, so they decrease owner's equity. A business needs a separate account for each category of its expenses, such as Salary Expense, Rent Expense, Advertising Expense, and Utilities Expense. Expense accounts are decreases in owner's equity.

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