IV. Read paragraph 1 again. Which of these phrases best serves as a title for it?

1. The aims of accounting systems.

2. The functions of accounting systems and their differentiation in design and complexity.

3. Differences between the accounting system of a small store and that of a big international firm.

V. Re-read paragraph 3, then read the statements below. Which of them best expresses its main idea?

1. When making decision concerning the nature of accounting system, it is necessary to analyse all the expected benefits it can provide.

2. The choice of accounting system is generally determined by the level of business complexity and the manager's needs.

3. The first consideration to be taken into account when deciding on the design and sophistication of accounting system should be certainly costs of operating it.

VI. Read the text again to answer the following questions.

1. What is accounting concerned with?

2. What exactly functions must accounting perform?

3. What differs with accounting systems in practice?

4. What elements are common to all accounting systems?

5. What factors should be taken into account when designing an accounting system for a business?

6. Is it important for all users to consider and weigh the costs of the accounting system against the expected benefits?

7. What accounting system will satisfy the owner of a small grocery store?

8. What accounting system will be good enough for a senior manager of an international firm?

IV. Financial statements accounting communication through financial statements

I. Practice in reading these words and word-combinations:

feature, required information, revenue, incurred, deficiency, caused, particular date, to measure, achieved, an acceptable income, source, a particular date, an accounting period, two broad categories, internal, external, reliable.

II. Read the text to find out through what financial statements accounting information is communicated to users.

Financial statements are a central feature of accounting because they are the primary means of communicating important accounting information to users. It is helpful to think of these statements as a model of the business enterprise. As is true of all models, however, financial statements are not perfect pictures of the real things but the accountant's best effort to represent what is real. Four major financial statements are used to communicate the required information about the business. Each of them deals with a particular aspect of financial conditions.

The first financial statement usually prepared is the income statement or profit and loss account. As a rule, it shows a firm's revenue, generated over a period and all the relevant costs incurred in this period. In other words, it summarises the amount of revenues earned and expenses incurred over a period of time. Many people consider it the most important financial report because its purpose is to measure whether the business achieved or failed to achieve its objective of earning an acceptable income. But it has become clear recently that the income statement has one major deficiency. It only shows the changes in financial position caused by those operations that produced an income or loss. Many important events, especially those relating to investment and financing activities can take place during the accounting period and not appear on the income statement.

The second financial statement is, certainly, the balance sheet. The purpose of the balance sheet is to show the financial position of a business at a particular date. For this reason, it is often called the statement of financial position and is dated as of a certain date. The third financial statement is the cash flow statement. It shows a company's sources and uses of cash during an accounting period. This statement is useful in giving an indication of cash movements during a period and the cash balance at the end of the period.

It should be noted that each statement is headed in a similar way. Each identifies the company and the kind of statement for the user. Users of financial statements fall into two broad categories: internal and external. Management is the main internal user while creditors and investors are external users. Creditors make loans in the form of trade accounts, notes, or bonds, on which they receive interest. Investors buy capital stock, from which they hope to receive dividends and an increase in value. All the users are interested in receiving reliable formation from the financial statements to make decisions.

Comments

a feature – особливість, характерна риса

the required information – потрібна інформація

to consider – обговорювати, обдумувати, приймати до уваги

achieved or failed to achieve its objective of earning an acceptable income – досяг чи не мав успіху у досягненні своєї мети отримання допустимого прибутку

major deficiency – головний недолік

the accounting period – звітний період; фінансовий рік

cash movements – обіг готівки

head – тут заголовок

to be headed in a similar way – мати подібні заголовки

note – тут банкнота

bonds – облігації

to receive interest – отримати прибуток (відсоток)

III. Re-read the text to find out which of its paragraphs deals

1. the cash flow statement;

2. a brief description of financial statements as a central feature of accounting;

3. the statement of owner's equity;

4. the balance sheet;

5. users of financial statements.