Банковское дело. Бухучет на предприятии

ACCOUNTING PRINCIPLES AND CONCEPTS

The accounting system in any given country is one of the key ele­ments of the economic system. It is determined to a significant extent by the level and direction of the economic system’s development.

The most important theoretical concept of the Anglo-American ac­counting may be summed up as follows: the subject of accounting is the calculation of the financial results of an economic entity’s business activity.

Accounting is used to describe the transactions entered into by all kinds of organizations.

Accounting can be divided into three phases: capture, processing and communication of financial information.

The first phase, the process of capturing financial information and recording it, is called book-keeping. Accounting, in the true sense of the word, extends far beyond the actual making of records. It includes their analysis and interpretation, it shows the relationship between the financial results and events which have created them.

Accounting can show the managers or owners of a business whether or not the business is operating at a profit, whether or not the business will be able to meet its commitments as they fall due.

Accounting is based on the accounting equation, which states that a firm’s assets must equal its liabilities plus its owners’ equity.

Assets and liabilities, profits or losses are listed in financial state­ments. The two main types of financial statements are the balance sheet and the income statement (profit and loss account).

The balance sheet lists a firm’s assets, liabilities and owner’s equi­ty at a point of time.

Changes in the balance sheet are made according to the principle of double-entry bookkeeping. This principle made its appearance in

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the 13th century in Northern Italy. It was improved and disseminated at the end of the 14th century by the work of Luca Pacioli, a monk and a university teacher. This principle states that each transaction must be recorded on the balance sheet as two separate entries so that the accounting equation will hold at all times, 3 the totals of each side will always equal one another, and that this will always be true no mat­ter how many transactions are entered into.

Balance sheets are drawn up periodically: monthly, quarterly, half — yearly, annually.

There is an account for every asset, every liability and capital. Ac­counts can be prepared either on a cash or accrual basis. Each ac­count should be shown on a separate page.

The double entry system divides each page into two halves. The left-hand side is called the debit side, while the right-hand side is called the credit side.

The balance sheet shows a lot of useful financial information, but it does not show everything. A firm’s sales, costs, and profits for a giv­en period are shown in an income statement.

DIALOGUE Accountancy in a free-market economy

Russian: What is the role of accountancy in a free-market economy?

American: Well, in a free-market environment, accounting pro­vides sort of a vehicle for transmitting information⁴ about the per­formance of enterprises to those with an interest in it.

R.: Would it be correct, in that case, to sum up the basic functions of accounting in a market economy as measuring economic activity of an enterprise and its profit, showing changes in its financial position and ensuring that a fair report of the economic status and perform­ance is made available to all those concerned.

Am.: Yes, you are right. I’d like to add that these functions are per­formed at two different levels.

R: We know that your accountants communicate financial infor­mation to many people. What users need financial information?

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Am: I’m coming to the point. One branch of accounting, called managerial accounting, provides information that managers use in making decisions within the firm. Other accountants prepare finan­cial reports for outside users. This branch of accounting is known as financial accounting.

R.: Financial accounting is only making its first steps in our coun­try and we arc having lots of teething problems. How does your ac­counting meet the needs of the users?

Am.: Our accounting standards and objectives of financial state­ments fully meet the users’ needs for useful information.

R.: What basic principles ensure the provision of such information in the manner the market requires?

Am.: First of all, accounts must be prepared on a going-concern basis.

R.: What exactly does it mean?

Am.: It means accounting is based on the assumption that the busi­ness in question6 will continue to operate. Besides, accounts must reflect the economic substance of the situation rather than simply its legal form.

R.: What other characteristics make information useful for the users?

Am.: First of all, I’d single out relevance, timeliness, prudence, re­liability, materiality, consistency, and comparability.

R.: As far as I know, these concepts are recognized internationally. But users of information often fail to gel a true and fair view of busi­ness operations.

Am.: That depends on a number of factors. But I personally be­lieve that in the present conditions, we all need to work harder to har­monize national accounting systems so as to make it easier for users to assess financial information. I can’t agree more, particularly taking into account growth of transnational corporations and increasing in­terdependence of financial markets.

VOCABULARY LIST A. Accounting n бухгалтерский учет

to a significant extent в значительной степени

phase n стадия, фаза

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capture n	(зд.) получение (информации)
processing n	обработка (информации)
communication n	передача (информации)
recording n	запись (информации)
bookkeeping	счетоводство
record n	запись; v записывать,
at a profit	с прибылью отражать в отчетности
to meet one’s commitments	выполнять обязательства
to fall due	наступать (об обязательствах); подлежать оплате, подлежать выполнению
accounting equation	бухгалтерское равенство
assets n	активы
equal v	равняться, быть равным
liabilities n	пассивы, обязательства
owners’ equity	собственный (акционерный) капитал компании
financial statements	финансовая отчетность
balance sheet	балансовый отчет, баланс
income statement	отчет о прибылях и убытках
profit and loss account	счет прибылей и убытков
double-entry bookkeeping	бухгалтерский учет по методу двойной записи
entry n	запись, проводка
account n	счет
cash basis	метод записи доходов и издержек на счетах только при их поступлении и выплате; кассовая база
accrual basis	метод начислений при учете доходов и издержек на счетах; запись доходов и издержек в момент завершения операции

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Debit	дебет
debit side	левая сторона баланса, дебет счета
credit n	кредит
credit side	правая сторона баланса, кредит счета
B. accountancy n	бухгалтерский учет
performance n	показатели деятельности, результаты работы
fair adj	(зд.) честный, правильный, справедливый
economic status	экономическое положение
user n	пользователь
managerial accounting	управленческий учет
outside user	внешний пользователь
financial accounting	финансовый учет
teething problems	проблемы, возникающие на этапе становления (начальном этапе)
going concern basis	принцип работающего предприятия
Assumption n	посыл, предположение, допущение
economic substance	экономическая сущность
characteristics of information	характеристика информации
relevance n	релевантность
timeliness n	своевременность
Prudence	благоразумие, предусмотрительность
Reliability	надежность
materiality n	материальность, существенность
Consistency n	неизменность, преемственность
comparability	сравнимость, сопоставимость
true and fair view	правильное представление (о чем-л.)
harmonize v	гармонизировать, сближать

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EXERCISES

Exercise 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 practised 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-mar-

ket economy?

2. Who uses financial information?

3. What are the major objectives of financial statements?

4. What is «useful» information for users?

Exercise 2. Find English equivalents for the following Russian phrases from the main text and the dialogue.

A. ключевой элемент экономической системы; финансовые результаты хозяйственной деятельности хозяйствующего субъекта; сделки, в которые вступают различные организа­ ции; получение, обработка и передача информации; отра­ жение информации в финансовой отчетности; работать с прибылью; выполнять свои обязательства; бухгалтерское равенство; активы должны быть равны пассивам; в балансе отражаются...; учет по принципу двойной записи; отражать в балансе, составлять баланс; счет прибылей и убытков;

B. передавать информацию; измерять; изменения в финансо­ вом положении предприятия; финансовый учет; управлен­ ческий учет; проблемы начального периода; цели финан­ совой отчетности; принцип работающего предприятия; экономическая сущность; давать истинное представление о деятельности фирмы; сближать принципы учета.

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

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Banking accounting of a company

All the three existing types of markets — money markets, share (stock) markets and commodity markets — function in close connec­tion with the banking sphere.

Nowadays one can speak of a global banking system although banks, of course, continue to play their local, more traditional role: opening and managing accounts, giving loans, and fulfilling all kinds of other operation to assist agriculture, industry and commerce.

Traditional instruments of international bank payments are letters of credit and documentary collection bills.

Documentary collection bills are presented to the importer’s bank or its correspondent by the exporters together with all the shipping, insurance and other documents specified in the contract. If the docu­ments are in order the importers instruct their bank to pay and then collect the shipping documents.

The process of payment from bank to bank has been greatly quick­ened by the introduction of SWIFT system (Society for Worldwide International Financial Telecommunication). This network nowadays covers thousands of banks in about a hundred countries. A message to pay money sent through the computers of SWIFT system can be re­ceived in the matter of seconds.

The role of correspondent banks — is nowadays also permanently growing. A correspondent bank is the one which carries the deposit balance of another bank situated in another city of country. This ex­change of services between banks greatly facilitates international pay­ments.

Some of the basic terminology connected with banking includes interest rates (percentages that a bank earns by giving out loans), de­posits (i. e. money placed in a bank), remittances (i. e. transfer of money), etc.

Interest rates and bank rates, naturally, differ from country to coun­try, from bank to bank, and from client to client, but one of the most in­fluential indices here is LIBOR (London Interbank Offered Rate).

One of the relatively new developments in banking is the industry of plastic (credit) cards. By issuing credit cards to individual clients and thus encouraging them to spend money, the banks tap the almost inex-207

haustible resources of the consumer sector. This system was pioneered by the USA where plastic cards have proved a goldmine for banks, but now credit cards are issued by virtually all big banks around the world.

N o t e s:

money markets

share (stock) markets

commodity markets

opening and managing accounts collection bill

SWIFT (Society for Worldwide International Financial Telecommunication)

correspondent banks

interest rates

remittance n

bank rates

LIBOR (London Interbank Offered Rate)

денежные (валютные) рынки

фондовые рынки

товарно-сырьевые рынки

Открытие и ведение счетов Инкассо

СВИФТ (Международное общество межбанковских коммуникаций)

банки-корреспонденты

процентные ставки

перечисление денег

банковские ставки

ставка ЛИБОР (ставка предложения (продавца) на лондонском межбанковском рынке депозитов — важнейший ориентир процентных ставок на международном рынке ссудных капиталов, фиксируется на основе ставок ведущих банков на 11 часов утра)

Exercise 1. Read and translate.

Exercise 2. Say in a few words what the text is about.

Exercise 3. Complete the following sentences.

1. SWIFT system covers...

2. The role of correspondent banks...

3. ...is the one which carries the deposit balance of another bank sit­uated...

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4. The basic terminology connected with...

5. All existing types of markets — money markets, share (stock) mar­kets and commodity markets — function...

6. The relatively new developments in banking is...

7. Interest rates and bank rates, naturally, differ from...

8. This system was pioneered by the USA...

Exercise 4. Find English equivalents for the following Russian phrases from the text.

Сеть включает в себя; выплатить деньги; послать распоряжение; терминология, связанная с банковским делом; процентные ставки; значительно ускорен; процесс оплаты; впервые введена; осуществлять баланс депозитов.

Exercise 5. Read the dialogue, sum up its content and act it out.

Accounting Methods

American: Accounting is a kind of data processing and recording. In my country it’s usually the accountant who decides on the form which this recording shall take and on the methods to be used.

Russian: Do you mean that in writing financial statements for stockholders and lenders accountants can make the firm look strong and healthy and when preparing tax returns, on the other hand, they can make the firm look poor and weak?

Am.: Accountants prepare financial statements according to rules set by law and by the accounting profession itself. Often the rules al­low more than one way of reporting information.

R.: Accounts can be kept on an accrual or a cash basis. How do the two methods differ in real life?

Am.: Firms that keep their accounts on an accrual basis report costs and revenues in the year in which sales are made even if the cus­tomers do not pay until later. Those that keep their accounts on a cash basis report costs and revenues in the year in which payment is made.

R.: I know that each method has its pros and cons. But how does each method affect the way the outside users of the income statement and the balance sheet see the image of the company?

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Am.: The accrual basis matches the income statement more close­ly to the balance sheet and accrual basis accounts show rapidly rising income. But little of the income is cash!

R.: What is more, the accrual basis assumes that all accounts re­ceivable will be collected, but in reality some may not.

Am.: For these reasons, some people think the cash basis is a more prudent way to draw up an income statement. Accountants have also to decide how to determine the monetary value of an item included in a financial statement.

R.: What problems can arise here?

Am.: Assets can be recorded at the amount of cash paid to acquire them at the time of their acquisition.

R.: At the historical cost, in other words.

Am.: Yes. In addition, current replacement cost and net realizable value can be used.

R.: Are goods held in inventory another problem area?

Am.: Yes, there are two ways of dealing with inventories. One is FIFO, the other is LIFO.

R.: Theoretically, I believe, we can argue in favour of both meth­ods. Which works better in real life?

Am.: In recent years many firms have switched from FIFO to LIFO.

R.: Do you have an explanation?

Am.: Yes. During periods of inflation, LIFO results in a higher cost of goods and, hence, a lower reported income. As a result a firm that uses LIFO pays less income tax.

Words you may need:

accounting method метод учета

cash basis метод записи доходов и издержек

на счетах только при их поступлении и выплате; кассовая база

pros and consза и против

the image of a company репутация, имидж компании

monetary value of an item стоимость операции (статьи в балансе)

в денежном выражении

current replacement cost текущая восстановительная стоимость

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net realizable value чистая (потенциальная) стоимость

реализации

inventories products товарно-материальные запасы

Exercise 6. Give extensive answers to these discussion questions.

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

2. What is managerial accounting?

3. Who needs the information provided in financial statements?

4. How are accountants classified in Russia?

5. What services do public accountants offer their clients?

6. What is done in this country to create a strong and respected pro­fessional body of accountants?

7. What accounting system is most widely practised in the world?

8. In what way does cash basis accounting differ from accounting on an accrual basis?

9. What do you think of the problem of harmonizing national ac­counting standards?

10. In order to get prepared for participation in the class discussion of the questions, write a short paragraph, explaining?

11. What accounting is and what role it plays in a free-market economy?

12. What sort of statement the balance sheet is?

13. What sort of statement the income statement is?

14. The difference between the two branches of accounting?

15. Exercise 6. Prepare a short talk on the following?

16. Why do all firms need both fixed and working capital?

17. How is Russian accounting developing? Do any of the Big Eight have offices in Russia?

18. What are your own sources of funds? Earnings from employ­ment? Contributions from parents or others?

Exercise 7. If you are a student, describe the fixed capital and working capital of your college or institute. List some fixed assets that it owns.

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U n i t 4

FINANCIAL STATEMENTS AND THEIR ELEMENTS ФИНАНСОВАЯ ОТЧЕТНОСТЬ И ЕЕ ЭЛЕМЕНТЫ

Accounting in a Company

Work of no ...company is possible without measuring and record­ing the financial data concerning its activity. This process is called ac­counting and the main document of it is called ... balance sheet of .... company.

... balance sheet consists of two parts: assets and liabilities, which should be equal in ...sum, thus balancing each other.

Besides this ....balance, which is one of .... main organizational principles of any ....company, accounting serves many other.... pur­poses, for example, the company’s communications with ....organiza­tions outside of ....it, e.g. banks or tax ....inspections

More or less brief summaries of .... company’s performance bal­ance sheet are called in Britain «accounts» and in America «financial statements». This ...information is carefully studied by a bank credit­ing a company.

N o t e s:

balance sheet баланс (документ)

assets n активы

liabilities n расходы

Exercise 1. Supply the articles where necessary. Exercise 2. Write down 5 questions about the text.

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 accura-

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cy; 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:

accounting records бухгалтерские счета, бухгалтерская

отчетность

stocktaking records книга учета запасов

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accounting date отчетная дата

accrual basis принцип начислений

departure n (зд.) отклонение

overriding adj первостепенный

Companies Act Закон о компаниях

Exercise 3. Explain what information must be disclosed in accounting records.

Exercise 4. Say what you have learned from the text about the UK rules for the preparation of accounting records.

Exercise 5. Supply the articles where necessary.

Exercise 6. Write down 3-5 questions about the text.

Financial Statements

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.

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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 understand ability. 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 I 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.

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Words you may need:

the public at large широкая публика

understandability n понимаемость; (зд.) читаемость

disclose v раскрывать (информацию)

reporting enterprise предприятие, подающее свою отчетность

bias n необъективность, предвзятость

predetermined adj предопределенный, заранее решенный

to be aware of знать, быть осведомленным (о чем-л.)

Exercise 7. Supply the prepositions where necessary.

Exercise 8. Explain the objective of Financial Statements and say what ensures usefulness of information disclosed in them to the users.

CHART Or ACCOUNTS

Exercise 1.

1. Open the brackets putting the verbs in the correct form.

2. 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 (to 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

216

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:

set of accounts перечень счетов

synthetic account синтетический счет

analytic account аналитический счет

Interrelated classification взаимосвязанная классификация

grouping n группировка

Methodological basis методологическая база

indicator n показатель

Exercise 2. Read the text that follows to find the answers to the follow­ing questions.

1. What financial document presents the position of the enterprise?

2. What can assets include?

3. What can liabilities include?

4. What is equity?

5. What financial document measures the performance of the enter­prise?

BALANCE SHEET

The position of the enterprise is presented in the balance sheet. That statement shows resources and the claims to or interests in them and provides an indication of the financial strength of the enterprise.

The balance sheet includes the following elements:

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Assets

Assets include property, plant and equipment, financial leases, in­vestments in subsidiaries and other enterprises; long-term receivables; purchased goodwill, patents, trade marks and similar intangibles; marketable securities; current receivables (or trade debts); invento­ries; cash and bank balances; and prepaid expenses.

Assets arise from past events, which may be cash or non-cash transactions. Assets may be purchased, exchanged for other assets, self-generated or received as grants or donations.

An asset is recognized when it is reasonably certain that the future economic benefit embodied in it will flow to the enterprise.

In a number of countries, intangible assets such as concessions, patents, licences, trade marks and similar rights and assets may be recognized in the balance sheet only if they were acquired for a valua­ble consideration. A number of countries allow assets to be carried on the balance sheet only if the reporting enterprise is the legal owner.

Liabilities

Liabilities include long-term loans and debentures, short-term loans, and bank overdrafts, parables, pension plans and similar finan­cial obligations. The scope of definition of liabilities covers obliga­tions whose financial amounts can or cannot be established precisely. It therefore covers what is usually described as provisions in some countries. Provisions are labilities, the amount of which cannot be es­tablished precisely, or the occurrence of which is uncertain. In some countries, provisions may not be used to adjust the value of assets. In those countries, value adjustments on debtors are referred to as write­downs. In other countries, write-downs on debtors are commonly re­ferred to as provisions. Provisions should be distinguished from re­serves, which are amounts set aside under equity for future use with respect to obligations which may arise from probable or possible events.

A liability is recognized when it is reasonably certain that a future reduction in economic benefit will result from the settlement of the obligation.

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Equity

Paid-in capital is treated differently in many countries, in some of which all amounts paid in by equity shareholders, are classified as paid-in and are not further categorized. In other countries, paid-in capital is divisible into two types: that relating to the par value of the shares offered for sale and that relating to share premium or addition­al capital. In consolidated balance sheets, the amount of equity should be given separately for the shareholders of the parent enter­prise and for other shareholders.

Equity is a residual arising from the deduction of liabilities from the assets of the reporting enterprise. Equity arises from two sources: that provided by shareholders (for example, paid-in capital) and that generated by the activities of the enterprise (for example, earnings less distributions to shareholders, unrealized surpluses).

Exercise 3. a) Study the Balance Sheet and the Income Statement of a British company given below: