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UNIT VI EVALUATING PERFOMANCE OF THE FIRM
Glossary
to evaluate оценивать
account счет (банковский)
accounts (pl.) расчеты, отчетность, сводка
accounts receivable (AmE)= счета дебиторов (в балансе),
debtors (BrE) дебиторская задолженность (сумма),
счета к получению
accounts payable (AmE)= счета кредиторов (в балансе),
creditors (BrE) кредиторская задолженность (сумма),
счета к оплате
accountant бухгалтер
accounting бухгалтерский учет
balance sheet балансовый отчет
bill счет (к оплате), вексель
excise акциз, акционерный сбор, лицензия
income statement отчет о доходах
liabilities денежные обязательства
assets and liabilities активы и пассивы
intangible assets нематериальные активы
tax налог
depreciation амортизация, снижение стоимости
permanence неизменность, прочность
постоянство
entry бухгалтерская проводка, запись
expense account cчет подотчетных сумм
petty cash мелкие суммы,
статьи (прихода,расхода)
payroll фонд зарплаты (предприятия)
receipt расписка в получении, квитанция
invoice счет-фактура,(товарная) накладная
Ex. 1 Translate the following word combinations. Mind the model "Noun +Noun+(Noun)”.
business firm, market value, retail trade, wholesale trade, revenue service, business tax, company reputation, cash assets, bank account, cash reduction, profits tax, unit cost; production-line economy, mass-production technique, income tax return, production-line basis, business opportunity, payment terms.
Ex. 2 Read and translate the following definitions. Find Russian equivalents for the underlined words.
An asset is something that has value, or the power to earn money. These include:
1. current assets: money in the bank, investments that can easily be turned into money, money that customers owe, stocks of goods that are going to be sold.
2. fixed assets: equipment, machinery, buildings and land.
3. intangible assets: things which you cannot see. For example, goodwill: a company's good reputation with existing customers, and brands: established brands have the power to earn money.
Liabilities are a company's debts to suppliers, lenders, the tax authorities, etc. Debts that have to be paid within a year are current liabilities, and those payable in more than a year are long-term liabilities, for example bank loans.
A company's balance sheet gives a picture of its assets and liabilities at the end of a particular period, usually the 12-month period of its financial year. This is not necessarily January to December.
Ex. 3 Make sure you remember the following words. Pay attention to the sentences with these words to see how to use them correctly.
income – доход, приход (за какой-либо период)
revenue – доход, источник дохода, (множ.) доходные статьи.
receipts – денежные поступления, выручка, доход
earnings – заработок, трудовой доход, доход, прибыль,
поступления
Ex. 4 Building your business vocabulary is very important. Some new business terms introduced in this unit are printed below, along with definitions. Please match each with its proper definition after reading the texts of this unit.
a) asset b) liability c)owner's equity d) balance sheet e) capital stock f) retained earnings g) revenues h) expenses i) income statement g)current liability k) accounting .
1. A financial statement that shows what a firm owns, what it owes, and what the owner's equity is worth at a given point of time
2. A claim held by someone against a firm's assets.
3. A financial statement that summarizes revenues, expenses, and net profit or loss.
4. The original investment of the stockholder-owners.
5. The amount of resources used by a firm in the pursuit of revenues,
6. Whatever a firm, organisation, or person owns that has a dollar value.
7. The amount of cash or accounts receivable a firm receives in payment from others over a period of time.
8. The amount of a firm's assets minus the amount of its liabilities,
9. The profits the firm has plowed back into the firm.
10. A debt that will be paid off within a year of the balance sheet date.
11. The process of measuring, interpreting and recording data that reflect the financial condition of a firm.
Ex. 5 Based on the meaning of the following synonyms, choose the most appropriate word for making sentences with the phrases below e.g: Builders provide to their clients an estimate of construction costs before actually beginning the work.
Estimate – implies a judgement, considered or casual, that precedes or takes place of actual measuring or counting or testing out;
Appraise – commonly implies the fixing by an expert of the monetary worth, but may be used of any critical judgement;
Evaluate – suggests an attempt to determine either a relative or intrinsic worth of smth in terms other than monetary;
Assess – implies a critical appraisal for the purpose of understanding or interpreting, or as a guide in taking action.
· The ability of students for awarding rates.
· Real estate (at certain sum) for tax purposes.
· Damages (at certain sum) for preparing a lawsuit.
· The amount of income for completing tax returns.
· A person at their face value.
· The cost of work for negotiations with a client.
· The potential of an employee for a preliminary report to the management.
· The outcome of a proposed business strategy for reporting to a stockholders’ meeting
· The costs of an implementing a new production technique before a detailed analysis.
· A diamond for setting a price.
· A company for investment purposes.
· A business proposal for drawing up a contract.
Assignment to text 1:
1. Read the following abstract from the interview. Find answers to the following questions:
· What activity is the company involved in?
· What profession is described?
· What functions do employees of the company perform?
· What is the difference between an accountant, a book-keeper and an auditor?
Text 1 Interview of an Accountant
Hi, I'm Fiona and I'm an accountant. I have received professional training in the field of accounting. As an accountant I’m involved in the design and maintenance of a system of financial records and the interpretation of the data contained in them. I work in Edinburgh for one of the big accountancy firms. We design bookkeeping and accounting system. We also construct and interpret financial statements. It’s accountant who can tell what financial statements mean. Moreover, we look at the financial records or accounts of a lot of companies. We work with the accountants of those companies, and the people who work under them: the bookkeepers. Bookkeepers usually do not have as much training as accountants. They record the day-to-day transactions of the company in the proper account. Obviously, accounting is more sophisticated than bookkeeping.
Sometimes we act as auditors - specialist outside accountants who audit a company's accounts,- that is, we check them at the end of a particular period to see if they give a true and fair view (an accurate and complete picture). An audit can take several days, even for a fairly small company.
When a company's results are presented in a way that makes them look better than they really are, even if it follows the rules, it may be accused of creative accounting or window dressing. Of course, I never do this! I like my profession- accountancy.
Assignment to text 2:
1. Read the text and find answers to the following questions:
· What is the main function of accounting?
· What is considered to be basics of accounting?
· What can be considered as a toolkit for accounting?
2. Read the text once more and identify the sentences-definitions.
3. Find the paragraph in which double-entry book-keeping is explained. Reduce it in order to give a short and clear explanation.
4. Translate the text.
Text 2 Accounting
One of the critical components of the operation of a business is a timely and accurate system of accounting that an entrepreneur or a company needs to consider. The entrepreneur needs to understand the accounting equation: assets= liabilities + owner’s equity. Within these three areas accounts are divided by: 1) assets, 2) liabilities, 3) owner’s equity or net worth, 4) revenue, and 5) expenses.
The accounting procedure utilized in a basic accounting system is the double entry bookkeeping cycle. Each transaction account has two sides, the debit or left side and the credit or right side. Increases in asset accounts are recorded as debits. Increases in liability and owner’s equity accounts are recorded as credits. Revenue increases are recorded as credits since they increase the equity. Increased expenses are recorded as debits because they decrease the equity.
The balance of an account is the difference between total debits and credits. Asset and expense accounts normally show debit balances; and liability, owner’s equity, and revenue accounts usually show a credit balance.
It’s necessary to determine the accounting period over which the financial activities of the business are measured. This can be a fiscal year beginning at any given time during a year and lasting for 12 months. It can also run the length of a calendar year.
Once these basics are understood and decided upon, the business owner will need to develop and utilize source documents to keep track of transactions. These source documents can include the following: daily summary of cash and sales activities, deposits and withdrawals from accounts, petty cash vouchers, payroll records, receipts, invoice vouchers and purchase vouchers. After these source documents have been organized, transactions will be recorded in books. Periodically information from the books is compiled into financial statements. These three basic financial statements are an income statement, a balance sheet and a statement of changes. The income statement compares revenues and expenses by identifying profit or losses. A balance sheet shows the status of assets, liabilities and equity accounts on a given day. A statement of changes in financial position indicates where money has come from and where it has gone from the beginning of an accounting period to the end.
Assignments to text 3:
1. Translate the headline of the text
2. Read the text and say what the main types of financial statements are.
3. Look through the text and find all the sentences which clarify the differences in the financial statements.
4. Look through the text and find explanations of the following:
· balance of an account
· application of funds
· source of funds
5. Translate the text.
Text 3 Financial Statements
The complex organisation of a modern firm makes it important to keep systematic records of the claims of different classes of people against it. The accounting instrument employed for this purpose is called a balance sheet, or a statement of financial position. On the left side of the sheet are listed all the wealth and all the claims to wealth owned by the firm, together with the value of each. These are the firm's assets. Assets are usually classified and listed in order of their liquidity, that is, by the ease with which they can be converted into money. Cash and bank accounts, the most liquid assets, are listed at the top, with accounts receivable (bills due from customers and others), which are somewhat less liquid next, and land and buildings that take time and trouble to sell listed last.
On the right side of the balance sheet are listed all the claims against the firm's assets, 1iabi1ities and debts owed to people outside the firm. They are listed first and usually listed according to their permanence. Current liabilities, which are least permanent, include bills and accounts payable to individuals and to other firms, amounts owed to banks on short-term notes, payroll due to workers, and other debts due to coming in the immediate future. Outstanding bonds are a longer-term liability. The residual, or balance, left over after subtracting all liabilities from the total value of assets, is the ownership equity.
The statement is called a “balance sheet” because the total of the claims must exactly equal, or balance, the total of, the assets. There is, of course, nothing mysterious about this. It simply means that whatever part of the value of the assets is not owed to somebody else is automatically part of the owners’ equity. The balance sheet summarises the firm's financial position at a given moment of time and it necessarily changes from moment to moment to reflect the changes in that position as the firm does business.
As the balance sheet summarizes the financial position of the firm on a given date, the income statement summarizes the firm's productive operations during a given period of time, usually a fiscal year. The income statement is a systematic summary of revenues and costs, organized to enable owners to see how the firm has operated. It gives figures for total sales or turnover (the amount of business done by the company during the year) and for costs and overheads. The first figure should be greater than the second: there should generally be a profit – an excess of income over expenditure. Part of the profit is paid to the government in taxation, part is usually distributed to shareholders as a dividend, and part is retained by the company to finance further growth, or repay debts, to allow for future losses, and so on. Although accountants differ in the exact arrangement of items and in the amount of detail given, the essence of the income statement is to show the year’s total receipts, total costs and profit. The statement also shows the allocation of profit between dividends and retained earnings, and the distribution of the dividends among the different classes of shareholders. In fact, the income statement can be reorganised to show the value added by the firm’s operations and the distribution of this value among the different participants in production.
A third financial statement has several names: the statement of changes in the USA, the source and application of funds statement, the source and uses of funds statement, the funds flow statement, the cash flow statement, the movement of funds statements. As all these alternative names suggest, this statement shows the flow of cash in and out of the business between balance sheet dates. Sources of funds include trading profits, depreciation provisions, borrowing, the sale of assets, and the issuing of shares. Applications of funds include the purchase of fixed financial assets, the payment of dividends and the repayment of loans, and, in a bad year, trading losses.
If a company has a majority interest in other companies, the balance sheets and profit and loss accounts of the parent company and the subsidiaries are normally combined in consolidated accounts.
Assignment to text 4:
1. Look through the text concentrating on the word “audit” and its derivatives.
2. Write down the main issues of the text
3. Read the text once more, check and correct your list of issues if necessary.
4. Divide the text into paragraphs to make it easier for comprehension. Try to restructure the text accordingly.
5. Read and translate the following words and word combinations:
accuracy, annual general meeting, board of directors, checking, deficiencies, determine, deviations, directives, external, implemented, ratified, shareholders (GB) or stockholders (US), standard operating procedures, subsidiaries, a synonym, transnational corporations (TNC)