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2 курс ФК, ЕП, УП Денне / ІІ курс денне Англійська мова / Англійськамова ФК English for future financiers.doc
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Current Fixed assets

cash in hand

or in the bank

accounts receivable (amounts due from customers)



Equipment, plant, machinery

prepaid expenses (advance payments of insurance, rent, etc.)

inventories(materials, supplies or goods on hand)


readily marketable securities (expected to be sold within one year)

Goodwill, patents, trademark, copyrights


b) distinguish between current and fixed assets.

2. Here are some answers about assets of a company. Write the questions.

a) What ______________?

Assets are the resources owned by a business

b) How_______________?

Liquid asset is the asset which is easily turned into cash without loss of value whilst illiquid asset is the one which is difficult to turn into cash without loss of value.

c) Why_______________?

Fixed assets are normally those which the business intends to hold for more than one year and which are not intended for resale.

d) What___________________?

Both patents and copyright attempt to protect the originators of an idea from exploitation by other people.

e) In what way______________?

Current assets are those which are used up in the day – to – day operations of a business and which can be converted into cash faster and without potential loss of value.

f) What____________________?

Current assets include stock, debtors and prepayments, cash at bank and cash in hand.

g) Which___________________?

Money lent to the business and also money invested in the business by the owners.

h) When____________________?

Current liabilities payments are to be made in the current financial year.


Work in small groups.

Define a patent and discuss why patents, goodwill and trademarks are considered assets of a business.


  1. Read text 9 using your dictionary to help with new words.


Balance sheet

A balance sheet is the financial statement that reports the financial condition of a firm at a specific time as recorded by an accountant. It is composed of assets and liabilities.

A balance sheet provides a summary of the way in which a business has used the resources available to it over a period of time. In Table 1 you can see the balance sheet of the Baines Nursery at the start of trading.

Table 1 Balance sheet, Baines Nursery at start of trading

Balance sheet: Baines Nursery as at 30 September 2004

Freehold land/buildings £ 30000 Proprietor's capital £35000

Cash at bank £ 5000

Between 1 October and 14 November the Baines employ a builder to undertake the necessary alterations. For the purposes of this case study we will assume that the cost of the alterations was exactly the same as his estimate, £10 000. He funded the alterations by borrowing £10 000 from the bank. This gives the following action:

  • Assets (freehold property)+£10 000

combined with a reaction:

  • Assets (bank loan)-£10 000

Table 2 Balance sheet, Baines Nursery, after alterations to premises

Balance sheet: Baines Nursery as at 30 November 2004

Freehold land/buildings £40000 Proprietor's capital £35000

Cash at bank £ 5000 Bank loan £10000

The Baines buy fixtures and fittings together with equipment to the value of £5000. Again this is an assets +/ assets- transaction.

Table 3 Balance sheet, Baines Nursery, after purchase of fixtures, fittings and equipment and grant of bank loan

Balance sheet: Baines Nursery as at 31 December 2004

Freehold land/buildings £40000 Proprietor's capital £35000

Fixtures & fittings £ 5000 Bank loan £10000

Cash at bank £—

The Baines are now short of money. They negotiate an overdraft for £1000. This increases both their liabilities and their assets.

Table 4 Balance sheet, Baines Nursery, after negotiation of overdraft

Balance sheet: Baines Nursery as at 31 January 2005

Freehold land/buildings £40000 Proprietor's capital £35000

Fixtures & fittings £ 5000 Bank loan £10000

Cash at bank £ 1000 Overdraft £ 1000

Table 5 Balance sheet, Baines Nursery, after first six months' profit

Balance sheet: Baines Nursery as at 31 July 2005

Freehold land/buildings £40000 Proprietor's capital £35500

Fixtures & fittings £ 5000 Bank loan £10000

Cash at bank £ 500

After six months in operation the Baines have accumulated enough cash to pay off their overdraft with £500 to spare. Their cash figure will fall (assets-) but so will the overdraft disappear (liabilities-) and the proprietors' capital will be increased by the amount of their own money now in the bank. This is, of course, a very simple form of balance sheet but it does illustrate the principles contained in all balance sheets. On the right are the liabilities or the sources of funds used by a business. On the left the listed assets show how these funds have been used.

Table 6 Columnar form of balance sheet

Balance sheet as at.................

£000 £000 £000


FIXED ASSETS Cost Deprec. Net

Freehold premises 4000 1000 3000

Leasehold premises 1000 370 630

Plant and machinery 5000 2355 2645

Motor vehicles 970 200 770

Investments 10970 3925 7045


Stock (inventories) 5500

Debtors and prepayments 1500

Marketable (liquid) securities 500

Bank balance and cash 100




Creditors 1754

Tax and prepayments in coming year 500

Bank overdraft 451

Proposed dividends 335






Ordinary shares 5300

Preference shares 2100





Debentures 12400

The way in which the balance sheet in Table 5 is presented is called the T form. It is still in use but most large businesses now use the columnar form, as shown in Table 6. This has the major advantage of distinguishing clearly between the sources and use of funds and it is generally accepted as an easier form to interpret.

The balance sheet shows the position of a business at a given moment but it does not tell us how the business reached that position, the level of its sales and how the profit made had been divided between the various parties with a claim to it. For this information we need two other financial statements: the profit and loss account and the funds flow statement.

  1. Comprehension check.

Working in pairs, answer the questions.

a) What is a balance sheet?

b) Why is it necessary for a business to provide a balance sheet for report?

c) What is the difference between the columnar form and the T form?

d) What are two other financial statements?

  1. Read the text again. Find and write down words in the text that mean the same as the following words and definitions. They are in the same order as they appear in the text.

a. a written statement showing the value of a company at a particular time

b. something such as money, workers, or equipment that can be used to help a business

c. an arrangement in which someone completely owns a building or a piece of land

d. money in the form of notes and coins

e. to agree to be responsible for a job or project and do it

f. a change in the form of something

g. the amount of money that is needed in order to buy, pay for, or do something

h. a statement telling a customer how much money you will charge if they employ you to do a particular piece of work

i. to provide the money for something that costs a lot

j. to receive and use money that belongs to someone else and promise to give it back to them later

k. money provided by a bank to a customer, for an agreed purpose and period of time

l. the buildings that a business or organization uses

m. a piece of furniture or equipment that is fixed in its place and is considered part of the building

n. a piece of something that you connect to something

o. the action or process of buying or selling or doing something related to business

p. to buy something

q. to be pressed for money

r. an agreement with your bank that allows you to spend money when you have no money left in your account

s. a person, place or thing that provides something you need or want

t. assets which are expected to stay in the business for longer than the given accounting period. The business will need them to continue operations in future

u. assets which are “used up” in the day - to – day operations of a business and which can be converted into cash faster and without potential loss of value

v. property or goods that you agree to give to someone who has lent you money if you cannot pay the money back

w. to take an amount or number from a total

x. regular costs and money owed

y. an official arrangement with a company in which the company promises to pay a fixed rate of interest on money you have invested in it

z. an official document that lists the amounts of money that have been put in or taken out of a bank account

  1. Working in pairs, compare the net profit of Baines’ Nursery after tax with the amount of money they invested in the business. Assuming banks are paying 10 per cent interest on deposit accounts should the Baines be pleased with the results of their first year’s trading? Explain your answer.

  1. Look at this example of a balance sheet. Replace the underlined words or phrases with a word or phrase from the box with a similar meaning.

bank overdraft land preference shares tax

capital reserves ordinary shares share capital working capital creditors plant stock


Balance sheet as at 31 December 2004


Fixed assets

(1) Property 420

Buildings 180

(2) Equipment and machinery 100

Total fixed assets 700

Current assets

Raw materials } (3) goods

Work-in-progress } held in 200

Finished goods } storage

Debtors 90

Cash in bank 60

Total current assets 350

Current liabilities

(4) People owed money 80

(5) Money owed to the bank 50

(6) Money owed to the government 35

Total current liabilities 165

(7) Net current assets 185

Net assets 885


(8) Money invested in the company and represented by shares

(9) Shares paying a variable dividend to shareholders 500

(10) Shares paying a fixed dividend to shareholders 300

(11) Shares held in a special fund used to pay off

creditors if the company goes into liquidation 85

Total 885


  1. Read text 10 using your dictionary to help with new words.