Vocabulary exercise: match the words with their definitions

assets

auditing

bookkeeping

cost accounting

expenditure

financial accounting

income

liabilities

management accounting

tax accounting

1. Anything owned by a company – cash, buildings, machines, etc.

2. Calculating how much tax an individual or a company should pay – or trying to reduce the figure.

3. Checking and evaluating financial records.

4. Determining the unit cost of a manufactured product, including indirect costs.

5. Keeping financial records and preparing financial statements.

6. Money that a company will have to pay for something else – bills, debits, interest, taxes, etc.

7. Recording transactions in ledgers.

8. The money that a company receives from supplying goods or services.

9. The money that a company spends.

10. The use of company’s accounting data by its managers for planning and control.

Letters of Credit

A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. Letters of credit are often used in international transactions to ensure that payment will be received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped.

Irrevocable letter of credit – ILOC (безотзывный аккредитив) - a letter of credit that can't be canceled. This guarantees that a buyer's payment to a seller will be received on time and for the correct amount.

Revocable letter of credit (отзывной аккредитив) – a letter of credit which can be cancelled.

Invoice (счет, счет – фактура) is essentially a detailed bill left by vendors and outside suppliers for goods or services rendered to a company. A typical invoice lists:

• A unique reference number (in case of correspondence about the invoice)

• Date of the invoice.

• Tax payments if relevant (e.g. VAT)

• Name and contact details of the seller

• Tax or company registration details of the seller (if relevant)

• Name and contact details of the buyer

• Date that the product was sent or delivered

• Purchase order number (or similar tracking numbers requested by the buyer

to be mentioned on the invoice)

• Description of the product(s)

• Unit price(s) of the product(s)

• Total amount charged

• Payment terms (including method of payment, date of payment, and details

about charges late payment)

Pro forma invoice (про форма, предварительный счет). In foreign trade, a pro forma invoice is a document that states a commitment from the seller to provide specified goods to the buyer at specific prices. It is not a true invoice, because the seller does not record a pro forma invoice as an accounts receivable and the buyer does not record a pro forma invoice as an accounts payable. A pro forma invoice is not issued by the seller until the seller and buyer have agreed to the terms of the order. In few cases, pro forma invoice is issued for obtaining advance payments from buyer, either for start of production or for security of the goods produced.

Extension

Read about the steps in a transaction involving a letter of credit and put them in the correct order. Use the pictures to help you.