Exercises

Ex. 1. Answer these questions:

A. 1. What role does an accounting system play in an economy?

2. Into what phases is accounting broken down?

3. What is an accounting equation?

4. What is the most widely practiced principle of bookkeeping?

5. What does the balance sheet list?

6. What is shown in the income statement?

B. 1. What is the role and functions of accountancy in a free-market economy?

2. Who uses financial information?

3. What are the major objectives of financial statements?

4. What is "useful" information for users?

C. 1. What are public accountants?

2. What are private accountants?

3. How do public accountants organize their activities?

4. Who can get a license to practice public accounting?

5. What services do Russian public accountants provide?

Ex. 2. Give derivatives of:

account statement measure reliability comparability confidential

performance transaction available materiality independent consult

record debit relevance substance practice

manager credit prudence consistency license

Ex. 3. Say in a few words what the main text is about.

Ex. 4. Sum up the content of the dialogues.

Ex. 5. Work on vocabulary and grammar.

a) Study the key words of the unit in the dictionary at the back of this book:

Balance sheet, account, depreciation, cost, expenses, assets, loss;

b) Think of the English synonyms to these Russian verbs:

относить (на), отражать (в учете), учитывать;

c) Think of the words describing characteristics that make information useful;

d) Think of the nouns that are most often used with the following verbs:

to measure, to ensure, to communicate, to prepare, to debit, to credit, to draw up, to disclose, to report;

e) Match the verbs from (a) with the nouns from (b) below:

a) to meet b) needs

to ensure provision of information to harmonize standards to develop performance to assess service

to provide a boost

to give license

to enhance accounting standards

to grant targets

to achieve credibility

Ex. 6.

a) Supply the articles where necessary.

b) Write down 3-5 questions about the text.

c) Explain what information must be disclosed in accounting records. Say what you have learned from the text about the UK rules for the preparation of accounting records.

Accounting Records

Every company must keep accounting records sufficient:

• to show and explain ... company's transactions;

• to disclose... financial position of the company at any time with reasonable accuracy; and

• to enable the directors to ensure that ... annual accounts comply with... statutory requirements.

The records must contain entries of daily receipts and payments,... record of assets and liabilities and, where the business involves dealing in goods, stocktaking records and details of goods bought and sold.

The directors of every company have a duty to prepare annual accounts. The accounts must be made up to ... company's accounting date (its financial year-end) and in accordance with the specified accounting principles. In ... UK, for example, they include ... following:

• The company is presumed to be ...going concern.

• Accounting policies are applied consistently from ... year to year.

• The amount of any item is determined on ... prudent basis.

• The accounts are prepared on ... accrual basis.

Details of any departure from these principles, the reasons for it, and its effect must be explained in ... note to the accounts.

In the United Kingdom company accounts are almost invariably prepared using the historical cost accounting convention, with or without modification to reflect changes in ... value of certain assets. However, ... Company Act 1985 does provide alternative accounting rules which permit companies to recognize ... full impact of inflation and changing prices in their accounts.

Along with ... rules applying to the preparation of accounts, there is ... overriding requirement that the balance sheet must give ... "true and fair" view of the state of affairs of the company and that... profit and loss account must give ... "true and fair" view of the company's profit or loss.

Until 1992, cash basis accounting was ... only method recognized in ... Russia. Although the new accounting regulation permits the administration to select ... method of recognizing revenue and expenses, ... traditional method is still dominant.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
accounting records stocktaking records accounting date accrual basis departure Companies Act overriding	бухгалтерские счета книга учета запасов отчетная дата принцип начисленный отклонение Закон о компаниях первостепенный	бухгалтерські рахунки книга обліку записів звітна дата принцип нарахування відхилення Закон про компанії першорядний

Ex. 7.

a) Supply the prepositions where necessary.

b) Explain the objective of Financial Statements and say what ensures usefulness of information disclosed in them to the users.

The objective of financial statements is to provide useful information ... users. Among the users are present and potential investors, lenders, suppliers and customers, employees, governments… home and host countries, the public at large, and also those who act... behalf of users.

The objectives of financial statements are defined ... the needs of users. In general, information must be provided about the financial position, performance and changes ... financial position of an enterprise.

Such information is useful to a wide range ... users in making decisions and is necessary to keep management accountable ... the resources entrusted ... it. Financial statements can also provide useful information to governments for making policy decisions, although governments often require special-purpose reports as well. More specifically, a variety of users need to be able to assess the performance of an enterprise and thus are interested, among other things,... the cash flow of the enterprise. For example, investors must know if they will receive dividends and when they should buy, hold and sell stock. Lenders are interested in determining whether interest and principal... loans will be paid when due. Suppliers, other creditors and customers must determine whether they will be paid ... time or will continue to receive a product or service on which they might depend. Employees are interested in the continuation of their employment and, therefore, in the stability and profitability ... their employment Members of the public are also interested in the impact of the activities of the enterprise ... the general welfare.

The usefulness of information can be determined ... its relevance to the needs of the users and the extent ... which users can rely ... such information. Other important characteristics of useful information include comparability and understandability. Besides, users benefit more ... information that is available at the time it is required, information provided long after it is needed is... little relevance.

Financial statements should disclose all items that are material enough to affect evaluations or decisions.

The information published ... reporting enterprises must assist users ... predicting future prospects of the enterprise.

Transactions and events that form the basis of financial statements are sometimes open ... different interpretations. They can be viewed according to their legal form or their economic reality. Enterprises should emphasize the economic substance of transactions and events.

Information must be free ... bias with respect ... various users, it should assist in decision-making but should not influence decisions in a predetermined direction.

Financial statements should be prepared in a comparable way so that the performance of different enterprises, or of the same enterprise over time, can be examined. The comparability of financial statements is enhanced ... the relative stability of accounting policies, which specify the methods by which a reporting enterprise measures, accumulates and summarizes the economic events and data ... its records. Stability means that no change in accounting policies will be made unless it is clearly necessary.

Comparability across enterprises requires that a consistent set of definitions, units of measurement, assumptions, measurement techniques and reporting intervals be applied. If financial statements from enterprises in different countries are to be compared, the users must be aware ... the relative differences among national accounting policies.

Comparability can be enhanced by the harmonization of national standards or the adoption of international standards.

Based on: Objectives and concepts Underlying Financial Statements, ISAR, 1989

Words you may need:

Англійський варіант	Російський варіант	Український варіант
the public at large to be aware disclose reporting enterprise bias predetermined understandability	широкая публика понимаемость раскрывать предприятие, подающее свою отчетность необъективность предопределенный быть осведомленным	широка публіка розумілість разкривати підприємство,яке надає свою звітність необ’єктивність визначений бути довіданим

Ex. 8.

a) Open the brackets putting the verbs in the correct form.

b) Say what is a Chart of Accounts in Russia and what it provides for.

In the West each company (to have) a certain freedom in the design of its own set of accounts so as to reflect the nature of its business and the needs of its management in directing that business. In Russia this process (to regulate) centrally, there (to be) a tradition of using a uniform Chart of Accounts.

The first uniform Chart of Accounts (to appear) in Russia in the 1920s. It (to intend) for industries only and was revised periodically. In 1961 the first national uniform Chart of Accounts (to create) and put into operation. With only insignificant changes, this chart (to use) in accounting practice until 1992. In 1992 transition to a new chart (to make). The current Chart of Accounts (to consist) of about 100 accounts and 60 subaccounts grouped into 10 main sections. All accounts included in this uniform chart (;o call) "synthetic" (main or summary) accounts. On the basis of this chart, each enterprise also may create a set of "analytic" (supporting) accounts if needed to supplement the synthetic accounts. The Chart of Accounts can be considered the most important element of the accounting system in Russia because it (to determine) the accounting practice and other elements of the system.

The Chart (to provide) for the following: an interrelated classification, grouping, and generalization of information about business activities of enterprises, a unified methodological basis for the organization of accounting in the whole national economy, an effective system of control of indicators for business activities comparability of accounting procedures used and information generated in the accounting systems of different enterprises, etc.

Words you may need:

Англійський варіант	Російський варіант	Український варіант
set of accounts synthetic account analytic account interrelated classification grouping methodological basis indicator	перечень счетов синтетический счет аналитический счет взаимосвязанная классификация группировка методологическая база показатель	перелік рахунків сінтетичний рахунок аналітичний рахунок взаімопов’язана класифікація групування методологічна база показник

Ex. 9.

a) Fill each gap with a suitable word from the box.

b) Sum up the text in 5-7 sentences and present your summary in class.

c) Name the most important events in the development of the accountancy profession in the world.

accountants principles organized members

Back profession creation throughout

Number role organizations functions