Английский язык для бухгалтерского дела. English for Accounting. Учебное пособие

this statement among its annual financial statements. The statement of cash flows summarizes receipts and disbursals of cash in three areas: operations, investements and financing. An analysis of cash flows provides a good idea of a company′s liquidity, or ability to pay its short-term obligations when they become due; the cash-flow status is thus one good indicator of financial health.

Notes: 1. to resort to smth. - прибегать к … (например, к помощи)

2.one-time transaction - одноразовая сделка

3.income statement - (I/S) отчёт о финансовых результатах

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UNIT IX

Text for Study: Financial Analysis (Text A) Grammar Guide: Subjunctive Mood

Supplementary Reading: The Preparation of Budgets (Text B); A Company Income Statement (Text C)

PRE-TEXT TASKS

1.Practise the pronunciation of the following words and memorize them.

1.competitor [kqm'petItq] - конкурент

2.disclosure [dIs'klqVZq] - обнаружение, раскрытие (выдача сведений)

3.tough [tAf] - зд. трудный

4.converse ['kOnvE:s] - обратное утверждение

5.to gauge [geIG] - точно измерять, оценивать

6.recession [rI'seS(q)n] - спад

7.tricky ['trIkI] - хитрый, обманный

8.techniques [tek'ni:ks] - технические приемы

9.rigorous ['rIgqrqs] - строгий, cуровый

10.discretion [dIs'kreS(q)n] - осмотрительность, осторожность

11.manufacturer [mxnjV'fxktS(q)rq] - изготовитель

12.wholesaler ['hqVl ,seIlq] - оптовый торговец

13.downward ['daVnwqd] - в сторону уменьшения

14.depreciation [dIpri: SI'eIS(q)n] - амортизация, износ

15.procedure [prq'si:Gq] - процедура

16.estimate ['estImIt] - оценка

17.earnings ['E:nINz] - прибыль

18.arrangement [q'reInGmqnt] - расположение, классификация

19.legitimately [lI'GItImItlI] - законно

20.unfamiliar [,Anfq'mIlIq] - неосведомленный

I. Remember the negative prefixes of the words in the right hand column, translate the words. Mind that their meanings are international.

closure - disclosure familiar - unfamiliar

controllable - uncontrollable efficiency - inefficiency realistic - irrealistic

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effective - noneffective

III. Study the meanings of the following word combinations from Text A to avoid any difficulty in understanding.

1.to take into account - принять во внимание

2.healthy profit margins - разумные пределы прибыли

3.how various accounting matters have been handled - как осуществлялся контроль за различной бухгалтерской деятельностью

4.before payments are due - до того, как оплата произведена

5.to allocate an equal amount - распределять равную сумму

6.to do well - преуспевать, процветать

7.tax bill - сумма взимаемых налогов

8.to have a powerful impact - оказывать огромное влияние

IV. Find the English equivalents for the following Russian word combinations.

1.преуспевающая компания

2.амортизационные отчисления

3.компания аутсайдер

4.возврат в значительных масштабах

5.в разумных пределах

6.“призрачная прибыль”

7.пополнить запасы товаров

8.уменьшить выплату налога наличными a. sizable returns

b. ‘phantom’ profit

c. the worst-run company d. to restock the shelves e. the best-run company

f. to lower cash tax payments g. within reasonable limits h. depreciation expenses

** *

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Read Text A for detailed understanding and do the tasks givenafter it.

Text A

FINANCIAL ANALYSIS

Organization and individuals use financial statements - balance sheet, income statements, statements of cash flows, and others - to spot problems and opportunities. In analyzing financial statements, managers and outsiders try to evaluate a company′s performance in relation to the economy as a whole and to the company′s competitors, taking into account methods the company has used in making various accounting disclosures. To perform this analysis, most users look at historical trends and certain key ratios that indicate how the company is performing.

The state of the economy as a whole has a big impact on most industries and companies.Take the housing industry. When times are tough, people tend to put off buying a new house, and home builders’sales drop. Hard times may make even the the best-run companies look weak. The converse is also true: good times are likely to improve the earnings of even the worstrun businesses.

In gauging the quality of a company, it is important to take into account these uncontrollable economic forces and then examine how the company has responded compared to its competitors. For example, sales growth may slow during a recession for all companies in an industry. But a company that maintains healthy profit margins while its competitors struggle may be assumed to be doing well.

Comparing one company to another may be tricky because of the subjectivity involved in accounting techniques. Some accountants - like some professors - are tough graders: they take the most conservative approach to everything. Others allow a more liberal interpretation of the rules.Thus, a company that gets the equivalent of a B on its financial report card may well be better managed than a competitor that gets an A using less rigorous accounting methods.To be sure you aren’t comparing apples to oranges, you must question how various accounting matters have been handled.

When are revenues recorded?

Companies have some discretion in deciding when to record a sale on their books.Therefore, in evaluating an income statement, you would have to ask, “are these sales really firm?” Some manufacturers load up

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their distributors with supplies well before payments are due and create the impression that sales are booming. In fact, these producers have not generated revenue but have merely transferred inventory to their wholesalers. If the product does not sell well, the producer may have to accept sizable returns from distributors; at this point, the producer will have to revise the sales figures downward.The conservative accounting approach is to record revenues only after all potential returns can reasonably be projected.

Which depreciation method is used?

Accountants may use any of several methods of calculating depreciation expenses. But different depreciation methods require different procedures. All the methods are based on the accountant’s estimate of the usefull life of each fixed asset. Estimates of usefull life may vary - can a delivery truck be expected to last ten years, or is five years more realistic?

The methods chosen to depict the pattern of a fixed assets‘s depreciation, however, can make financial statements trickier to analize. One commonly used method, e.g, allocates an equal amount of depreciation expense to every year of the assets’s estimated useful life, while another method permits more depreciation expense to be deducted in the early years of the asset′s life than in its later years.Thus, the depreciation method used can make a company look more or less profitable.

How is cost of goods sold calculated?

A company can also raise or lower its earnings by changing the way it calculates the cost of goods sold. Let’s say that you are in the retail motorcycle sales business, buyig bikes from the manufacturer and reselling them to customers. Over a year or two, the manufacturer might raise its prices, so your inventory would consist of machines that had cost you different amounts.You might have five motorcycles that you bought several months ago for $ 2,000 each and five that you have just bought for $2,200 apiece. If you sell five bikes for $3,000 each, you’ll have revenues of $ 15,000. But which five bikes did you sell? If you assume that you sold the oldest bikes first, your gross profits will be $5,000 ($15,000 in revenues less $10,000, or five bikes at $2,000 each).But if you assume that you sold the newest bikes first, your gross profits will be only $4,000 ($15,000 less $11,000, or five bikes at $2,200 each).

Whether your gross profit is $4,000 or $5,000 depends on which method you use to determine the cost of inventary. The “first in, first out” method or FIFO, treats inventory costs as if they were on a conveyor belt travelling through the balance sheet to the income statement. The costs you

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enter in your books as the units purchased are assigned in the same order to the units as they are sold. This is the method you are using if you figure that you have sold the five $2,000 “old” bikes. The “last in, first out” method, or LIFO, is like stacking inventory costs in a box.When a layer of costs is at the bottom, it can’t be reached until all the layers above it are removed. This is the method you are using if you figure that you have sold the five $2,200 “new” bikes.

____________________FIFO_______________LIFO___________

_______________________________________________________

Note that in this example, the tax is 25 percent higher with the FIFO method than with LIFO method.

In general, however, neither FIFO nor LIFO is necessarily better.The point to remember is that during periods of price changes in an industry,two firms, doing equally well in most respects, could legitimately report different levels of profit. After a superficial look at the financial statements, a person unfamiliar with accounting might conclude that the firm using FIFO was more profitable. But the firm using LIFO might actually be better managed, because its use of that method would reduce its tax bill. Because the inventory costing method has such a powerful impact on net income, a company must state in the footnotes to its financial statements which method it has used.

COMPREHENSION CHECK

I. Find the synonyms among the following words and word combinations:

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fixed asstes, costs, competitors, gauging, respond, rivals, measuring, react, recession, rigorous, inventories, decline, strict, stock, expenses, long-term assets, target, objective.

II. Match the words and the abbreviations (1-5) with their explanations (a-e).

1.Depreciation

2.Wholesalors

3.LIFO

4.EIFO

5.Distributor

a.a retailer who has arranged with one or more suppliers to sell a product or range of products.

b.method of pricing inventory under which the cost of the first goods acquired are the first ones charged to the cost of goods sold.

c.accounting procedure for systematically spreading the cost of a tangible asset over its estimated useful life.

d.firms that sell products to other firms that buy them for resale or for industrial use.

e.method of pricing inventory under which the cost of the last goods acquired are the first ones charged to the cost of goods sold.

III.Answer the following questions:

1.How do managers and outsiders evaluate a company’s performance in analysing financial statements?

2.What uncontrollable economic forces should be taken into account in gauging the quality of a company?

3.How can a company raise or lower its earnings?

4.How do different methods of costing inventory effect taxes?

5.What is the difference between FIFO and LIFO, and which produces the lower profit figure in times of high inflation?

6.How do manufacturers create the impression that the sales are booming?

IV. Say whether these statements are true or false.

1.The state of the economy as a whole has no impact on most industries and companies.

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2.Sales growth slows during a recession for all companies in an industry.

3.These is no need for companies to have any discretion in deciding when to record a sale on their books.

4.Accountants may use any of several methods of culculating depreciation expenses.

5.Firms often opt for FIFO to lower their cash tax payments.

V. Find the sentences in which the following word combinations are used. Translate them into Russian.

1.key ratios

2.sales growth

3.sizable returns

4.inflated price

5.tax payments

VI. Find the sentences with the Complex Subject in the text and translate them.

VII. Find attributes expressed by Participle II, write them out.

VIII. Make up a summary of Text A.

GRAMMAR GUIDE

Subjunctive Mood

Subjunctive Mood is used in subject clauses introduced by it.

e. g. 1. It is necessary that you should pay all invoices not later than 30 days from the day of issue.

2.It is desirable that the economy should contain elements of both private and public enterprise.

3.It is important that they should carry out these changes as quickly

as possible.

Note: The combination should + Infinitive is the analytical form of Subjunctive I. It is used for all persons singular and plural.

Subjunctive Mood is used in object clauses after the verbs to insist, to suggest, to demand, to order.

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Read text B for the information that will help you to answer the

following questions. Do the tasks given after the text. 1. How can we define a budget?

2.What objectives must the budget meet?

3.What are the types of forecasting methods used in practice?

4.Why is it necessary to review forecasts?

5.What are the major points to remember when preparing cash budgets?

6.Why is the cash budget very important?

Text B

THE PREPARATION OF BUDGETS

In general terms the budgets will look like a detailed set of accounts but with target rather than actual figures. They may also contain nonfinancial measures such as labour hours and units produced. Budgets vary greatly from one organization to another.

A budget can be defined as a programme of action which management sets out to achieve in order to meet a given objective. It often represents a forecast after it has been adjusted for spending on the limiting factor. Allowance will also have been made for any other policies and plans which senior management wants to implement. As can be seen in Figure 1, budgets will be prepared for each of the main account headings, leading to the cash budget and the master budget.

Fig. 1 THE PREPARATION OF BUDGETS

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