II. Answer the following questions:

1. What is bookkeeping?

2. Whom did we call traditionally “a bookkeeper”?

3. What term came into popular usage after growing record-keeping in importance and stature?

4. For person with what responsibilities the title “accountant” is reserved?

5. For whom the title “bookkeeper” is used?

6. How do we call “a bookkeeper” in a large organization?

7. How to call the same specialist in a small enterprise?

8. What is the distinction between the accountant and the bookkeeper in general?

II. The nature and purpose of accounting the main users of accounting information

I. Read the following words and word-combinations:

judgements and decisions, available, scarce, to ensure, efficient, allocation, owners, to assess, availability, source, livelihood, grants, to encourage, pursued, assessment, environmental policies, require, the value of resources, threat.

II. Read the text to find out the needs of different users.

The purpose of accounting is to provide economic information which permits users to make informed judgements and decisions. They decide how to allocate available resources best. As a rule, resources are generally scarce in relation to needs, and so users rely on accounting reports to ensure the efficient and effective allocation of supplies.

It is possible to classify users of accounting information into major groups in the world of business. Users within each group are considered to have very similar information needs.

Owners normally invest in a business in order to increase their wealth. The major decision confronting owners and potential owners is whether or not to invest or retain an investment in a business. In order to make an investment decision of this nature owners need to assess the likely future returns from their investment. In addition, possible future risks must be considered. Owners and potential owners should be satisfied that the potential returns are adequate given the potential risks involved in the business.

Lenders can be divided into two groups: short-term lenders and long-term lenders.

Short-term lenders (i.e. those who lend money for up to a 12-month period) will normally be concerned with the 'liquidity' of the business. The term 'liquidity' refers to the availability of cash, or near-cash items such as short-term investments. Short-term lenders will normally view liquidity as an important indicator of the ability of the business to pay short-term obligations when they fall due.

Like owners, long-term lenders are concerned with the longer term prospects of the business. They are interested in likely future risks and rewards, and in the efficiency of management.

Suppliers of goods and services need to ensure that a business is able to pay for the goods and services provided. They will, therefore, be concerned with the liquidity of a business. It is quite common to find that some suppliers provide a business with a substantial and continuous flow of goods and services. For suppliers in this position, the long-term prospects of the business may be of great interest.

Managers exercise a day-to-day control of the business. In carrying out their duties they must make different kinds of economic decisions and will, therefore, require different kinds of accounting information.

Where customers regard a business as an important supplier of goods or services they will require information to satisfy themselves that the business can be relied upon as a continuing source of supply. The current financial condition of the business and likely future performance and prospects will, therefore, be of interest.

Employees will rely on a business for their livelihood and will often have a long-standing relationship with the business. Their concerns will be for security and prospects of employment and its financial rewards. Employees will require information concerning possible changes in employment levels, the conditions of service and the ability of the business to meet pay demands. Information relating to the performance and prospects of individual units of the business will be useful in addition to information concerning the progress of the business overall.

Governments may require information concerning a business for different reasons. Governments use information on profits made in order to assess liability for taxation. In addition, information concerning financial condition or profits may be useful in assessing the effects of government policies or for deciding on the level of grants or subsidies to be provided.

Governments sometimes wish to regulate the activities of certain businesses. For example, there may be a policy to prevent the growth of monopolies in business and to encourage the spread of competition. Such a policy may be seen as being in the best interests of the consumer. Where anti-monopoly policies are being pursued, governments may take a keen interest in the sales and profits achieved by large businesses.

The public. Businesses operate within a community. The workforce will often be drawn from the community, and the businesses may use community-owned resources such as the roads. Members of the public may, therefore, wish to assess whether or not the business is a 'good citizen'. To help make such an assessment it may be useful to receive information on such matters as employment policies, environmental policies and donations to community programmes.

Competitors may take a keen interest in the financial condition and performance of a business for various reasons.

Firstly, a competitor may consider taking over the business. In this case, it will have a particular interest in such information as the sales and profits achieved and the value of resources held by the business. Secondly, a competitor may require information concerning performance of the business in order to make comparisons of relative efficiency. Finally, a competitor may seek information concerning a business in order to predict future strategies. For example, the building up of large cash balances by a business may indicate the possible threat of a take-over bid in the future.