Accounting

Accounting is recording, classifying, summarizing and interpreting financial transactions to provide management and other interested parties with information they need to make correct financial decisions. Accounting process consists of two parts: bookkeeping, that is, mechanical process of recording, classifying and posting financial entries into the ledger, and accounting itself, that is, interpreting of financial data, making financial statements, designing accounting information system within a business and advising management on financial matters. Accounting deals with accounts, that is, financial entries grouped together by common characteristics.

Assets are everything that a business owns. Buildings, equipment, machinery, land are fixed assets; money, cash, accounts receivable are current assets.

Liabilities are obligations, debts of a business, what it owes to creditors, banks, suppliers, investors, customers and so on.

Owner’s equity is the capital which the owner will receive if he sells all assets and pays all his liabilities. Owner’s equity is assets minus liabilities.

Revenues are incoming money or gross income or profit before taxes.

Expenses mean outgoing money including salaries and wages, rent, traveling and entertainment expenses.

The final products of accounting are financial statements: Balance Sheet that shows financial position of a business at a definite point of time, and Income Statement (G.B. - Profit and Loss Account) that shows financial position of a business over a definite period of time: month, quarter, year.

The system of bookkeeping is based on the principle of the double entry, which means that each transaction is entered twice, as a credit in one account and as a debit in another account. If we deposit $ 100 US with a bank, for example, the bank enters a debit for the receiver and a credit for the giver. The former represents an asset to the bank, since it is a sum of money at the bank’s disposal, as well as a liability, since one day it will have to be repaid.

Accounting is done by accountants. Highly qualified accountants (in the USA certified public accountant - CPA, in Great Britain chartered accountant - CA) can perform audit.

Exercise 3. Answer the following questions.

1. What do we call ‘accounting’?

2. What is the aim of accounting?

3. What are the two parts of accounting process?

4. How does bookkeeping differ from accounting?

5. Into what categories are all accounts grouped?

6. What do the following groups of financial entries like assets,

liabilities, owner’s equity, revenues, expenses characterize?

7. What are the final products of accounting?

8. What is the main difference between the balance sheet and the income statement?

9. How is the principle of double entry applied?

10. What do we call people who perform accounting and audit?

Exercise 4. Translate into English.

підведення підсумку; фінансові операції; зацікавлені сторони; механічний процес запису; за спільними ознаками; зобов’язання; включаючи; заробітна платня; фінансовий звіт; у певний момент часу; за певний проміжок часу.

Exercise 5. Translate into Ukrainian.

Interpreting; to make correct decisions; financial data; entries grouped together; debs of a business; incoming/outgoing money; the final product; financial position of a business; each transaction is entered twice; the former; at the bank’s disposal.

Exercise 6. Match and learn the pairs of synonyms.

A: obligation, enter, interpret, definite, supplier, gross income

B: particular, explain, provider, post, revenue, debt.

Exercise 7. Match and learn the pairs of opposites.

A: incoming, correct, debit, receiver, assets;

B: credit, liabilities, outgoing, wrong, giver.

Exercise 8. Learn the plural form of the words of Greek and Latin origin. Translate them into Ukrainian:

datum –data; analysis –analyses;

medium – media; basis – bases;

index – indices; phenomenon – phenomena;

Use the correct form of the words given above in the following sentences:

1. This event was widely commented in mass …. 2. Employment is one of the most important … of economic activity. 3. Our group performed a thorough … of the Ukrainian steel market. 4. What financial… will you use in preparing income statement? 5. He has been observing these atmosphere … for several years. 6. Accounting provides the … for making correct decisions.

Exercise 9. Read and translate the following pairs of words:

account-to account; post- to post; rent- to rent; record- to record;

show- to show.

Use the proper form of the word in the following sentences, translate the sentences.

1. He will … you his last article on interpreting statistical data. 2. She … all the expenses of the family. 3. How much does he pay for the … of this house? 4. This exhibition is a real … of the latest computer technology. 5. With what bank will you open your …? 6. I prefer to … a flat as I intend to stay here only for several months. 7. Service industry … for 65 % of the gross national product in the U.K. 8. Who is in charge of receiving … in your office? 9. Which of your bookkeepers … financial data into the ledger? 10. There are too many mistakes in this …. We cannot publish it.

Exercise 10. On the basis of the text define the following terms:

accounting; bookkeeping; balance sheet; income statement; the principle of double entry.

Exercise 11. Complete the following sentences:

Assets is everything … while liabilities is….

Revenues means … money while expenses ….

Owner’s equity is ….

Exercise 12. Complete the sentences with the proper words from the list below:

interpret; to enter; position; bookkeeping; the double entry; by common characteristics

1. Accounting consists of … and accounting itself. 2. In bookkeeping we apply the principle of …. 3. Financial entries grouped together … are called accounts. 4. How would you … these financial transactions? 5. The financial … of their business is very stable. 6. Haven’t you forgotten … this transaction twice?

Exercise 13. Translate into English.

1. Ми вирішили відкрити рахунок в цьому банку.2. У них не має поточних активів, щоб виплатити зарплату.3. Вони вже виплатили всі свої борги.4. Ми щойно занесли цю операцію в книгу. 5. Вона заборгувала велику суму грошей і вирішила продати акції, щоб виплатити борг. 6. Фінансові звіти є кінцевим продуктом бухгалтерського обліку.

Grammar point:

The Past Perfect tense: Active and Passive forms (p.143).

The Past Perfect Continuous tense (p.144)

* Past Indefinite vs. Past Perfect

* Compare the use of Past Indefinite and Past Perfect.

We use Past Indefinite to say that something happened in the definite moment in the past.

We use Past Perfect to say that something happened before a definite moment in the past.

e.g. When I arrived home (a definite moment in the past) mother had already come from work (action happened before this moment).

Exercise 14. Use the verbs in brackets either in Past Indefinite or Past Perfect:

1. He (study) economics at school before he (enter) the college. 2. The room (be) empty; everybody (go). 3. I (complete) my report by 7 and (send) it with the evening post. 4. When I (ask) her about the essay she (say) she (complete) it long ago. 5. He (correct) the error he (make) the day before. 6. On my way home I (remember) that I (forget) the documents in the office. 7. He (discuss) the problem with a lot of people before he (make) the decision. 8. The auditor (make) his conclusions only after he (examine) all relevant documents.

Exercise 15. I. Read the beginning of these true travellers’ stories and match them to the right endings.

1. Sir Collin Marshall, Chief Executive of British Airways, was having difficulty finding his way in New York. A woman was passing by so he stopped her and asked for directions. The woman pulled down her dark glasses and stared at him angrily.

2. Tom Brown’s Skoda had broken down so he had left it on the motorway and returned home by train. But 73-year-old Tom felt worried. He was sure he had forgotten something. What had he left behind? Half way through tea he remembered.

3. A journalist from The Times newspaper was watching his suitcase vanish into the X-ray machine at Tangier airport when he suddenly remembered he had packed two antique guns inside. Terrified, he rushed to the operator and explained what he had done.

A. He had left Mrs Brown sitting on the back seat.

B. “Don’t worry, sir,” came the reply. “Our machines will never pick them up.”

C. “Do I look like a goddam road map?” she asked.

2. Look at the first story again. Two past tenses are used to tell the story. What tense is used to

a) set the scene and describe the circumstances of the story?

b) describe the main events in the story?

3. Look at the second story again. Two past tenses are used to tell the story too. What tense is used to describe

a) events that happened after Tom returned home?

b) events that happened before he returned home?

4. Look at the third story again. Underline the examples of the past indefinite, past continuous and past perfect tense. Explain why these tenses are used.

Exercise 16. Make the following sentences passive.

1. He had done everything to save the situation. 2. They had calculated gross income by January,15^th. 3. We had provided the relevant information before the beginning of the meeting. 4. Distributors had already supplied these goods to our stores. 5. Accountants had prepared the Income Statement by the beginning of the quarter.

Exercise 17. Join two sentences into one using the conjunction before.

1. They examined the accounts. They made a correct decision. 2. We classified all financial transactions. We posted the financial entries into the ledger. 3. He accumulated the data. He interpreted them. 4. I studied accounting. I got this job. 5. The accountants prepared the Balance Sheet. The transaction was completed. 6. She got her first job. She graduated from the institute.

Exercise 18. Read the following sentences and compare the use of Past Perfect Simple and Past Perfect Continuous.

1. They had discussed this problem in details before they came to an agreement. They had been exchanging their opinions for several hours.

2. I got this job after I had been interviewed twice. I had been looking for a job for the last two months.

3. She was promoted after she had improved the work at this department. She had been working at this project for several months.

Exercise 19. Use the verbs in brackets either in Past Perfect Simple or Past Perfect Continuous. Mind the verbs that are not used in Continuous tenses.

1. The manager (to hold) the staff meeting for two hours when the director entered the room. 2. She remembered that she (to forget) to post the last entry into the ledger. 3. He (to serve) in this house for six years when the incident happened. 4. I was very angry because someone (to ring) all night. 5. She (to see) the news on TV before he told it to her. 6. I was too upset with the result as I (to prepare) this report for so long. 7. She (to be) in her office for nearly three hours when the accountant brought in the information she (to ask) for. 8. He was tired as he (to look) through the documents for the last three hours.

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