Topic №3 «a Balance Sheet and an Income Statement and the Importance of them»

1. A balance sheet ( or statement of financial position), is a summary of a firm’s assets, liabilities, and owner’s equity accounts at a particular time, showing the various money amounts that enter into the accounting equation.

2. The balance sheet must demonstrate that the accounting equation does indeed balance.

3. That is, it must show, that the firm’s assets are equal to its liabilities plus its owner’s equity.

4. The balance sheet is prepared at least once a year, and most firms also have balance sheets prepared semi-annually, quarterly, or monthly.

5. An income statement is a summary of a firm’s revenues and expenses during a specified accounting period.

6. The income statement is sometimes called the statement of income and expenses.

7. It may be prepared monthly, quarterly, semiannually, or annually.

8. An income statement covering the previous year must be included in a corporation’s annual report to its stockholders.

9. The information contained in these two financial statements becomes more important when it is compared with corresponding information for previous years, for competitors, and for the industry in which the firm operates.

10. A number of financial ratios can also be computed from this information.

11. These ratios provide a picture of the firm’s profitability, its short-term financial position, its activity in the area of accounts receivables and inventory, and its long-term debt financing.

12. Like the information on the firm’s financial statements, the ratios can and should be compared with those of past accounting periods, those of competitors, and those representing the average of the industry as a whole.

Questions for Discussion:

1. Give the definition of a balance sheet.

2. What must a balance sheet show?

3. How often is the balance sheet prepared?

4. What is an income statement?

5. How often may an income statement be prepared?

6. What can be computed from the information contained in a balance sheet and an income statement?

7. What kind of picture do the financial ratios provide?

Topic №4 «Money»

1. It is common knowledge that money rules the world.

2. Money is anything that is generally accepted by people in exchange for the things they sell or the work they do.

3. Gold and silver were once the most common forms of money.

4. Before paper and coins were introduced as permanent forms of paying, people used a variety of other objects to serve as money for selling goods: shells (in India), metal disks (first forms of money, Tibet), rice (China), etc.

5. However, today money consists mainly of paper bills and coins, made of various metals, and besides, of cheking account deposits.

6. Each country has its own basic unit of money.

7. In the United states, for example, the basic unit is the U. S. dollar.

8. Canada uses the Canadian dollar, France the franc, Great Britain the pound sterling, and Russia the ruble.

9. The money in use in the country is called currency.

10. Money, in general, has three main uses.

11. The first, and most important, is a medium of exchange-that is, something, that people will accept for their goods or services.

12. The second use of money is that it serves as a unit of account, i. e. people state the price of goods and services in terms of money; the third use of money is as a store of wealth, i. e. people can save money and then use it to make purchases in the future.

Questions for Discussion:

1. What is money?

2. What is currency?

3. Can you say how many uses has money in general?

4. What is the most important use of money?

5. What is the second use of money?

6. What does the second use of money mean?

7. What is third function of money and what does is mean?