4. Answer the following questions

1. What do accountants have to follow when writing accounts and financial statements?

2. What are the main assumptions?

3. What are subsidiaries?

4. What are the most important accounting principles?

V. Match the accounting assumptions and principles (1-6) to the activities they prevent (a-f)

conservatism principle matching principle separate entity assumption revenue recognition principle time-period assumption unit-of-measure assumption

showing a profit divided into US dollars, euros, Swiss francs, etc publishing financial statements for a 15-month period, because this will show better profits waiting until customers pay before recording revenue waiting until customers pay before recording expenses listing the owners’ personal assets in a company’s financial statement valuing assets and estimating future revenue at the highest possible figures

VI. Complete the sentences

1. A company’s … … does not have to begin on 1 January, like the calendar year.

2. If an American company owns a company in Britain, this is a … .

3. Multinationals, with companies in lots of different countries, combine all their results in one set of….. .

4. Every entry in a company’s accounts must be …: there must be a document available showing that is true.

VII. Complete the table with words from the text and related forms. Put a stress mark in from of the stressed syllable in each word. The first one has been done for you. Then complete the sentences below with words from the table

Verb	Noun (s)	Adjective
As`sume		-
	disclosure	-
-	objectivity
recognize		-
-	subjectivity
-	verification

1. Both the internal and the external auditors have to … the accounts.

2. Companies have to … all relevant financial information in their annual reports.

3. Despite the … principle, accountants have to make some subjective judgements.

4. Even if a company is going through a bad period, for accounting purposes we … it’s a going concern.

VIII. Think it over and write a report

Look at the Annual Reports of one or two companies. How many of the assumptions and principles described here are mentioned in the notes to the financial statements?

IX. Test your English.

Complete the following words

1. This company has supplied goods but

has not received any money for them yet. CREDITOR

2. Companies make this when they sell

their goods for more then it costs

them to make them. P T

3. Companies make this when they sell

their goods for less than it costs them

to make them. L S

4. Goods which are bought by the

company. P ES

5. Goods which the company has

available to sell. S K

6. An amount of money which is taken

out of an account . W D L

7. Customers who have received goods

but not paid for them yet. D RS

8. A reduction in the price which is

offered to customers. D C T

9. This is the name of the difference

between the credit and debit sides of

an account. B E

Key: 2 Introducing accounting 1