Revision exercises

Ex. 10. Дайте развёрнутые ответы на вопросы.

1. What information is contained in the income statement?

2. What role does the income statement play in accounting?

3. Why are investors interested mostly in the income statement?

4. What comparisons are made in the income statement?

5. What period of time does the income statement usually cover?

Ex. 11. a) Прочитайте и переведите текст.

Remember: through [θru:] через, посредством

Every business exists to earn a profit. The profit is realized through revenue earned by an organization as a result of the sale of a service or product by that business.

Profit and revenue are not the same. Profit represents the income that a business has earned after certain deductions have been made from revenues.

Every business,, regardless of its nature, has to incur certain costs in order to operate. They are known as expenses. Expenses are generally known as the “cost of doing business”. Examples of business expenses are rent expense, insurance expense, salary expense and supplies expense. Expenses are necessary, because they have to be incurred to obtain revenue which will be translated into profits for the business.

б) Ответьте на вопросы.

1. What is the source of profit?

2. What is the difference between profit and revenue?

3. How is profit calculated?

4. What makes expenses necessary?

5. What expenses have to be incurred to operate a business?

Ex. 12. a) Прочитайте и переведите текст.

Remember: ratio [`reiʃiǝu] соотношение, коэффициент

ESP (earnings per share) прибыль на одну акцию

yield [ji:ld] доходность

to reconcile [`rekǝnsail] приводить в соответствие, согласовывать

turnover [`tǝ:n`ǝuvǝ] оборот, суммарная стоимость продаж компании

pre-tax profit (profit before tax) прибыль до вычета налогов

profit after tax прибыль после вычета налогов

listed companies компании, акции которых котируются на фондовой бирже

EBITRA (earnings before interest, tax, depreciation and amortization) доходы до отчислений на уплату процентов и налогов, а также на амортизацию

The profit and loss account (P&L), called the income statement in the US, shows the profit or loss a company has made over a period of time. The ratios investors look at most often, such as the EPS and yield are calculated using numbers from the P&L.

In a simple case the profit or loss equals the increase or decrease in the company’s assets as shown on the balance sheet. This is rarely exactly true and the statement of total gains and losses reconciles the P&L to the changes in equity shown on the balance sheet.

The P&L can be misleading and there are a number of accounting techniques that can shift losses (or gains, although that is rarer) from the P&L to the balance sheet. The P&L should be looked at together with the notes, the cash flow statement¹⁸ (which is harder to manipulate) and the other accounting statements.

The shortest possible P&L would be: sales less costs = total profit.

In accordance with the accrual principle, costs and revenues are arranged in such a way that, for example, sales and purchases made on credit during a year, but perhaps not yet paid for, will be included in the P&L for the year.

The general form of a P&L looks something like this:

Sales	Also called revenues or turnover
Cost of sales	The direct costs of things sold
Gross profit	Sales minus cost of sales
Other operating expenses	Depreciation, administration, marketing etc.
Operating profit	Gross profit less other expenses
Interest costs	Interest payable less receivable
Pre-tax profit	Operating profit
Tax
Profit after tax	Pre-tax profit less tax
Dividends
Retained profit	Profit after tax less dividends
Earnings per share

The most detailed profit and loss account is given in the annual report, but UK listed companies are required to make annual and half year results announcements as well. The full year results statement is shorter and cover the same period as the annual report, but in is released earlier.

Many companies make quarterly announcements, as companies in the US and many other countries are required to.

In addition, the P&L (perhaps together with other information) usually gives us enough information to calculate several other profit numbers as EBITRA.

б) Ответьте на вопросы.

1. What useful information can be obtained from the P&L?

2. What does the P&L show in its simple form?

3. What document adjusts the P&L to the changes in the equity?

4. Why is it necessary to examine the income statement together with the other documents?

5. How is the accrual principle connected with P&L?

6. What does the P&L look like?

7. How often are UK listed companies to present income statements?

8. What companies are required to produce quarterly statements?

9. What does EBITRA mean?

Ex.13. Заполните пропуски словами из рамки.

expenses, products, the sources, interest expenses, sold cost

An income statement totals up all ___ of revenue (such as sales of ___, income from services, rental revenue) and subtracts the ___associated with them (such as the cost of buying or manufacturing of goods that are ___, compensation of the people and the ___ of administering the company, including the ___ on funds borrowed.

Ex.14. Заполните пропуски предлогами, где необходимо.

1. The income statement shows a company’s profitability ___a certain period of time.

2. Any income statement is divided ___ two parts.

3. Various costs are subtracted ___ the revenue.

4. The balance sheet shows the financial position ___ a given date.

5. The income statement is ___ greater interest ___ investors.

6. The record ___ a few years is more important than the figure of any single year.

7. Expenses are compared ___ revenues in the income statement.

8. When the total revenue exceeds ___ total expenses, the excess represents the net income.

9. The date assigned ___ the income statement covers a period of time.

10. It is true ___ all income statements, regardless ___ the period covered.

11. The income statement starts ___ a company’s revenue.

12. The managers and owners of the business want to know how much money has come ___ its operations.

Ex.15. Заполните пропуски артиклями, где необходимо.

1. What does ___ income statement show?

2. The income statement compares ___ revenue earned for a period of time with ___ expenses incurred for ___same period.

3. If total expenses are greater than revenue, resulting difference is known as ___ net loss.

4. If ___ revenue exceeds ___ expenses, the excess is known as net income.

5. ___ date assigned to ___ income statement covers a period of time.

6. ___ income statement reports ___ results of business activities for ___ period of time, typically ___ fiscal year.

7. The results are classified as ___ revenues and ___ expenses.

8. Revenues measure ___ inflow of net assets to ___ business.

9. Expenses measure ___ outflow of assets from ___ business.

10. Annual business income or loss is calculated by subtracting ___expenses which occurred during ___ year from ___ revenues earned during ___year.