Accounting

The word accounting most often conjures up images of tedious¹ figures, thick glasses, and headaches. However, the savvy² businessperson realizes that accounting has come to be known as the language of business with good reason. Accounting conveys important financial information that is used in the management planning, control, and decision-making processes integral to achieving organizational objectives. Some command of this language is a necessity for those who wish to participate in these processes.

In a broad sense, accounting is the process of identifying, measuring, and communicating economic information about an organization for the purpose of making decisions and informed judgments. (Accountants frequently use the term entity instead of organization because it is more inclusive.)

The definition of accounting can be expressed schematically as follows:

Accounting is the process of:

Identifying Measuring Communicating

economic information about an entity

>

for decisions and informed judgments

Who makes these decisions and informed judgments? Users of accounting information include the management of the entity or organization, the owners of the organization (who are frequently not involved in the management process), potential investors in and creditors of the organization, employees, and various central and local governmental agencies that are concerned with regulatory and tax matters. Exhibit 1 illustrates some of the users of accounting information.

Exhibit 1. Users and Uses of Accounting Information

User	Decision / Informed Judgment Made
Management	When performing its functions of planning, directing, and controlling, management makes many decisions and informed judgments. For example, when considering the expansion of a product line, planning involves identifying and measuring costs and benefits; directing involves communicating the strategies selected; and controlling involves identifying, measuring, and communicating the results of the product line expansion during and after its implementation.
Investors	When considering whether or not to invest in the common stock of a company, investors use accounting information to help assess the amounts, timing, and uncertainty of future cash returns3 on their investment.
Creditors	When determining how much merchandise4 to ship to a customer before receiving payment, creditors assess the probability of collection5 and the risks of late (or non-) payment.
Employees	When planning for retirement, employees assess the company's ability to offer long-term job prospects and an attractive retirement benefits package.
SEC (Securities Exchange Commission) (USA)	Whether or not financial statements issued to investors fully disclose all required information.

Accounting information must be provided for just about every kind of organization. Accounting for business firms is what many people initially think of, but not-for-profit social service organizations, governmental units, educational institutions, social clubs, political committees, and other groups all require accounting for their economic activities.

Notes

1) tedious a – нудный, утомительный

2) savvy a – сообразительный, смекалистый

3) cash returns – денежная доходность (рентабельность)

4) merchandise n – товары

5) collection (of payments) – получение денег (платежей)

2. Give your arguments to confirm or refute the following statements from the text.

● The word accounting conjures up images of tedious figures, thick glasses, and headaches.

● Accounting has come to be known as the language of business with good reason.

● Accounting information must be provided for every kind of organization.

3. Enumerate the users of accounting information and explain why they are interested in it.

DEVELOPING VOCABULARY

1. Match the words on the left to the right definitions. Before doing it study the Note below.

Note. In standard American English speech the terms ‘accounting’ and ‘accountancy’ are more or less equivalent, but to nit-pick, ‘accounting’ is the process/activity of preparing financial statements, etc, while ‘accountancy’ is more like a subject or profession. However, one should note that ‘accountancy’ is very uncommon in everyday American English speech – most people prefer ‘accounting’ as a catch-all term.

1) accountancy n 2) accounting n 3) account n 4) accountant n 5) accounts n

a) a detailed record that a business keeps of the money it receives and spends; the part of the organization that keeps records of the money received and spent b) the activity of keeping records c) the theory of keeping financial records; the profession or business of an accountant d) a person who keeps and examines the financial records e) an arrangement with a bank, shop, or other organization by which they take care of your money or allow you to buy things and pay for them later

2. Using your findings in Activity 1, fill in the missing words in the sentences below. Choose from those given in the box. You can use one word more than once.

account accounts accountant accounting accountancy

1) She’s been working as an _______ with this firm for several years now.

2) He’s at university studying _______.

3) The directors of the company approve the _______ at the end of the _______ year.

4) Can you check that the figures have been entered correctly in the bank _______?

5) Most people in the profession read _______ magazines and journals in order to stay informed.

6) Each branch of the bank maintains its own full _______ system.

7) A bookkeeper writes details of financial transactions in the _______.

8) The management of the company have not yet decided on their _______ plans.

9) The chief _______ has completed the draft ________ for this year.

10) They have opened an _______ for the consignment to Moscow.

11) ________ is really not an exact science.

12) A business manager needs some ________ knowledge in order to understand what he reads in the company ________.

3. The word account has varied usage in English; apart from the main meanings given in the vocabulary section it can also form several phrases.

What are the meanings of the phrases in bold type in the sentences (1-10) below? Choose the correct definition from the list (a-j) on the right and think about the corresponding Russian equivalents, consult a dictionary if you find it necessary.

Can you account for your absence last Friday? Can you give a detailed account of what happened? The accounts had to be adjusted on account of the discovery that a major debtor had gone bankrupt. Students account for the vast majority of our customers. This financial consultancy has won two new accounts in Eastern Europe. They are regular customers in the shop and are now able to buy on account. Employees must on no account make personal telephone calls from the office. If you take inflation into account, we actually spend less now. By all accounts, they will benefit greatly if the deal goes through. Students account for the vast majority of our customers. We gave a good account of ourselves, coming second overall.

people say report under no circumstances form the total of consider explain big customers for themselves because of on credit represent to behave or perform very well

4. Translate the following sentences from Russian into English, using the phrases from Activity 3.

1) Как Вы объясняете снижение доходов компании в прошлом квартале?

2) Четверть всего экспорта приходится на нефть.

3) Вам придется представить детальный отчет о Ваших расходах за данный период.

4) Мы хорошо зарекомендовали себя, получив звание «Брэнд года».

5) Ни в коем случае не опаздывайте на завтрашнее совещание.

6) По общему мнению, цены на нефть снизятся в следующем году.

7) Она не могла работать полный рабочий день из-за детей.

8) Я надеюсь, вы примете во внимание, что я болел накануне экзамена.

9) Моя функция – искать новых заказчиков для нашей фирмы.

10) Эти товары были приобретены в кредит.

5. Complete the following “spidergram” with verbs from the text that can take the word information as an object. Make up sentences with these word combinations.

use

provide