Lesson 15 Balance sheet

Ex. 1. Read and translate the text.

Balance sheet, its content and structure

A balance sheet is a way of economic grouping and generalized reflection in the monetary assessment of the statе of economic resources on the composition and placement and the sources of their formation with targeted appointment on a certain date. As a rule, the balance is composed on the last day of the reporting period (month, quarter, year). For separate reflection of economic resources and their sources of formation the balance sheet is constructed in the form of two-sided (bilateral) table. On the left hand of the balance, called assets, the layout of economic resources is shown, and on the right, that is a liability, are the sources of funds and their appointment. Assets and liabilities of the balance sheet consist of individual articles. Each of them reflects the value of a certain economic similar type of means or their sources. In the assets of balance there are articles, which include material assets, intangible assets and cash equivalents. In the liabilities of balance there are articles, which reflects the sources of economic resources (authorized, additional and reserve capital, profit, Bank loans, etc.) The lack of results of the assets and liabilities of the balance sheet indicates the presence of errors in the accounts or in the preparing of the balance sheet.

BALANCE

Assets	Sum, hrv.	Liabilities	Sum, hrv.
fixed assets	690 000	authorized capital	800 000
tangible assets	150 000	Profit	50 000
Uncompleted production	24 000	Bank loans	30 000
Cash	1000	Suppliers	50 000
calculations in banks	85 000	target financing	20 000
Total:	950 000	Total:	950 000

The overall results of the assets and liabilities of the balance sheet equal to each other. This is an obligatory condition for the correctness of its compilation.

A bank’s balance sheet presents financial information comparing what a bank owns with what it owes and the ownership interest of stockholders. Assets indicate what the bank owns; liabilities show what the bank owes; and equity refers to the owners interest such as:

Assets = Liabilities + Equity

VOCABULARY:

balance sheet liabilities

assessment value

composition intangible

placement authorized

sources profit

formation bank loans

targeted appointment lack

construct stockholders

two-sided table owner’s equitу

assets maturities

earnings interest rates

surplus

Ex. 2. Answer the questions.

1. What is balance sheet?

2. When is balance sheet composed?

3. What is the structure of balance sheet?

4. What do assets include?

5. What do liabilities include?

Ex. 3. Find the English equivalents in the column “B”.

“A” “B”

1. звітний період 1. certain date

2. двостороння таблиця 2. economic resources

3. відсутність підсумків 3. material assets

4. господарські засоби 4. the monetary assessment

5.резервний капітал 5. аs a rule

6. як правило 6. authorized capital

7. грошова оцінка 7. two-sided table

8. матеріальні цінності 8. reserve capital

9. певна дата 9. the lack of results

10. статутний капітал 10. reporting period

11. наявність помилок 11. the presence of errors

GLOSSARY OF KEY TERMS

balance sheet	Statement of the financial position of a company at a particular time, such as the end of the financial year or the end of a quarter, showing the company’s assets and liabilities; the company balance sheet for 1990 shows a substantial loss; the accountant has prepared the balance sheet for the first half-year COMMENT: the balance sheet shows the state of a company’s finances at a certain date; the profit and loss account shows the movements which have taken place since the last balance sheet
liability	Responsibility for a payment (such as the repayment of a loan); liabilities = debts of a business, including dividends owed to the shareholders; the balance sheet shows the company’s assets and liabilities; current liabilities = debts which a company has to pay within the next accounting period (in a company’s annual accounts, these would be debts which must be paid within the year and are usually payments for goods or services received)
equity capital	A company’s capital which is invested by shareholders, who thus become owners of the company (note that preference shares are not equity capital, since they involve less risk and do not share in the profitability of the company)
surplus	Extra stock, something which is more than is needed: a budget surplus = more revenue than was planned for in the budget; to absorb a surplus = to take a surplus into a larger amount
deficit	Amount by which spending is higher than income; the accounts show a deficit = the accounts show a loss; to make good a deficit = to put money into an account to balance it; balance of payments deficit or trade deficit = situation when a country imports more than it exports and so pays out more in foreign currency than it earns: deficit financing = planning by a government to cover the shortfall between fax income and expenditure by borrowing money
leverage	(a) relation between a company’s capital borrowed at a fixed interest and the value of its ordinary shares (also called “gearing”); (b) borrowing money at fixed interest which is then used to produce more money than the interest paid
maturity	Date of maturity or maturity date = date when a government stock or an assurance policy or a debenture will become due for payment

Ex. 4. Ask all the types of questions to the following sentences.

1. The overall results of the assets and liabilities of the balance sheet equal to each other.

2. This is an obligatory condition for the correctness of its compilation.

Ex. 5. Fill in a missing word. Choose from the box.

Liabilities, equity, deficit, maturities, earnings, interest rates, assets, surplus

Like other financial intermediaries, commercial banks facilitate the flow of funds from ... spending units (savers) to … spending units (borrowers). Three financial characteristics stand out. First, most banks own few fixed. They have few fixed costs and thus low operating leverage. Second, many banks … are payable on demand or carry short-term … so depositors can renegotiate deposit rates as market … change. This creates significant asset allocation and pricing problems. Third, banks operate with less … capital than nonfinancial companies, which increases financial leverage and the volatility of … .