IX. Practise the pronunciation of the following words.

a) stress the first syllable:

measuring, budget, checkbook, income, assets, revenue, turnover, vital, stockholder, agency, challenge, owner, banker, creditor, monetary, record, huge, data, summarize, merchandise, balance, inventory, entity, phase, maintenance, forecast, adequacy;

b) stress the second syllable:

account, accounting, accountant, accountable, describing, interpreting, expense, example, society, returns, supply, financial, outsider, include, investor, device, extend, incur, transaction, event, diverse, entire, involve, decision, executive, mechanical, repetitive, proficient.

X. Before you read the text answer the following questions.

1. What do you know about accounting? How old is it?

2. What role does accounting play in our economic and social life?

3. What does the study of accounting give every educated person?

XI. Read and memorize the words and word-combinations.

account — бухгалтерський рахунок

accountant — 1) бухгалтер, рахівник

2. кваліфікований бухгалтер

3. ревізор, контролер

Certified Public Accountant (CPA) — (AE) дипломований бухгал­тер вищої кваліфікації; аудитор

Chartered Accountant (CA) — (BE) сертифікований (дипломова­ний) бухгалтер, бухгалтер-експерт

Certified General Accountant (CGA) — дипломований бухгалтер і аудитор

Certified Management Accountant — дипломований бухгалтер з менеджменту

accounting — 1) облік, бухгалтерський облік

2. облікова справа;

3. ведення бухгалтерських книг

accounting concept — концепція (поняття, принцип) бухгалтер­ського обліку

adequacy — відповідність, адекватність

assets and liabilities — активи і пасиви

bookkeeping — ведення бухгалтерських книг

data — дані

earnings per share — дохід на одну акцію

entity — економічна одиниця, об'єкт, самостійний господарчий підрозділ, організація, підприємство

to extend — надавати (позику, тощо)

to file — надавати документ

income tax returns — декларація про прибутковий податок

to incur — нести (збитки); брати на себе (витрати)

interpreting — тлумачення

inventory turnover — коефіцієнт обігу (обороту) товарно-матеріальних запасів

to keep track — слідкувати, стежити, відстежувати

maintenance — збереження, утримання, додержання

outsider — аутсайдер (особа або підприємство, які не належать до монопольного об'єднання)

XII. Text b What is accounting

Some people think of accounting as a highly technical field which can be understood only by professional accountants. Actually, nearly everyone practices accounting in one form or another on an almost daily basis. Accounting is the art of measuring, describing, and in­terpreting economic activity. Whether you are preparing a household budget, balancing your checkbook, preparing your income tax return, or running General Motors, you are working with accounting concepts and accounting information.

Accounting has often been called the «language of business». Such terms as assets, liabilities, revenue, expense, cash flow, inventory turnover, and earnings per share are but a few examples of technical accounting terms widely used in the business community. Every inves­tor, manager, and business decision maker needs a clear understanding of accounting terms and concepts.

The accounting function is vital to every unit of our society. An individual must account for his or her income, and must file income tax returns. Often an individual must supply personal accounting informa­tion in order to buy a car or home, to qualify for a college scholarship, to secure a credit card, or to obtain a bank loan. Large corporations are accountable to their stockholders, to governmental agencies, and to the public. Therefore, some knowledge of accounting is needed by all citizens if they are to act intelligently in meeting the challenges of our society.

The purpose of accounting is to provide financial information about an economic entity to decision makers. Business executives and manag­ers need the financial information provided by an accounting system to help them plan and control the activities of the business. For example, management needs answers to such questions as the profitability of each department of the business, the adequacy of the company's cash position, and the trend of earnings. Thus, accounting is the connecting link between decision makers and business operations.

Financial information about the business is also needed by out­siders. These outsiders include owners, bankers, other creditors, potential investors, labour unions, the government, and the public, because all these groups have supplied money to the business or have some other interest in the business.

The functions of an accounting system

An accounting system consists of the methods and devices used by an entity to keep track of its financial activities and to summarize these activities in a manner useful to decision makers. Regardless of whether the accounting system is simple or not, three basic steps must be performed as data concerning financial activities are col­lected and processed—the data must be recorded, classified, and summarized.

Recording financial activity. The first function of the accounting sys­tem is to create a systematic record of the daily business activity, in terms of money. For example, goods and services are purchased and sold, credit is extended to customers, debts are incurred, and cash is received and paid out. These transactions are typical of business events which can be expressed in monetary terms, and must be entered in accounting records.

Classifying data. A complete record of all business activities usually amounts to a huge volume of data — too large and diverse to be useful to decision makers such as managers and investors. Therefore, the data must be classified into related groups or categories of transactions. For example, grouping together those transactions in which cash is received or paid out is a logical step in developing useful information about the cash position of the business.

Summarizing the data. To be useful to decision makers, accounting data must be highly summarized. The employees responsible for order­ing merchandise need sales information summarized by product. Store managers will want sales information summarized by departments. Outsiders, such as the company's stockholders and the InternalRevenue Service, probably will be most interested in a single sales figure which represents the total sales of the entire company.

These three steps we have described — recording, classifying, and summarizing — are the means of creating accounting information. However, the accounting process includes more than the creating of information. It also involves communicating this information to interested parties and interpreting accounting information to help in the making of specific business decisions.

The distinction between accounting and bookkeeping.

People with little knowledge of accounting may fail to understand the difference between accounting and bookkeeping. Bookkeeping means the recording of transactions, the record-making phase of ac­counting. The recording of transactions tends to be mechanical and repetitive; it is only a small part of the field of accounting and probably the simplest part. Accounting includes not only the maintenance of ac­counting records, but also the design of efficient accounting systems, the performance of audits, the development of forecasts, income tax work, and the interpretation of accounting information. A person might become a reasonably proficient bookkeeper in a few weeks or months; however, to become a professional accountant requires several years of study and experience.