8. Assets

Shareholders` equity is the owners` claim on the assets of a firm. Unlike creditors, the owners have a residual interest. That is, owners have a claim on all assets in excess of those required to meet creditors` claim. The shareholders` equity generally comprises two parts: contributed capital and retained earnings. Contributed capital reflects the assets invested by shareholders in exchange for an ownership interest. Retained earnings represent the earnings, or profits, realized by a firm since its formation in excess of dividends distributed to shareholders. In other words, retained earnings are earnings reinvested by management for the benefit of the shareholders. Management directs the use of firm’s assets so that over time more assets are received than are given up in obtaining them. This increase in assets, after any claims by creditors, belongs to the firm’s owners. Most firms reinvest a large percentage of their earnings for growth and expansion rather than distributing all earnings as dividends.

Liabilities plus shareholders` equity are referred to as total equities or simply equities. Assets are resources of the firm. That is,

Assets = Liabilities + Shareholders` Equity.

Liabilities and Shareholders` Equity are the claims on the resources of the firm. Thus:

Resources = Claims on Resources.

In the balance sheet the resources are viewed from two viewpoints a listing of the assets under the control of the firm and a listing of the parties external to the firm who has a claim on these assets. This equality of total assets and total equities is though to be the source of the name “balance sheet”, since the total amount of the assets must always balance the total amount of the equities.

I . Прочитайте та перекладіть текст

II. Визначте, які з поданих тверджень відповідають змістові тексту. Запишіть номери цих речень.

1.Management reinvests earnings for the benefit of the shareholders.

2. Total equities are shareholders’ equity plus liabilities.

3. The total amount of assets does not always balance the total amount of the equities.

4. Most firms distribute all earnings as dividends.

5. Creditors’ claims result from benefits previously provided by a firm.

6. A balance sheet is a statement of financial position.

7. The shareholders’ equity consists of three parts.

III. Прочитайте наступні питання. До кожного питaння пропонуються 3 варіанти відповідей. Запишіть номер питання та літеру того варіанту , який ви вважаете правильним.

1. What are earnings?

A. resources;

B. assets;

C. income.

2. What is total equities?

A. retained earnings;

B. liabilities plus shareholders’ equity;

C. shareholders’ equity.

3. Who has a residual interest?

A. managers;

B. creditors;

C. owners.

4. How many parts does the shareholders’ equity comprise?

A. three;

B. four;

C. two.

5.Who directs the use of a firm’s assets?

A. manager;

B. management;

C. accountant.

6. What capital reflects the assets invested by shareholders in exchange for an ownership interest?

A. contributed capital;

B. retained earnings;

C. residual interest.

7. What is the source of the name “balance sheet”?

A. equality of total assets and total equities;

B. equality of shareholders’ equity and contributed capital;

C. equality of contributed capital and retained earnings.

IV. З поданих словосполучень виберіть те, яке відповідає змісту наступних речень:

1. The assets invested by shareholders are reflected by the ….

1. retained earnings;

2. shareholders’ equity;

3. contributed capital.

2. Unlike the owners, creditors haven’t ….

1. contributed capital;

2. residual interest;

3. creditors’ claims.

3. Contributed capital and retained earnings are ….

1. the shareholders’ equity;

В. all assets;

С.the claims on the resources;

4. Most firms use their earning for…

A. dividends;

B. expansion;

C. exchange;

5.Management reinvests earnings for the benefit of…

A. owners;

B. creditors;

C. managers;

6. Liabilities are… .

A. resources;

B. claims;

C. obligations;

7. Balance sheet is … .

A. manufacturing report;

B. financial statement;

C. management report;

V. Виберіть і напишіть замість крапок форму дієслова, яка б відповідала граматичним нормам англійської мови.

1. Creditors… the resources of firm;

A. claim;

B. claims;

C. claiming;

2. Merchandise inventory … sold to customers;

A. am;

B. is;

C. are;

3. Employees … claim on the assets of a firm.

A. have;

B. having;

C. has;

4. Liabilities … from benefits previously received by a firm

A: resulting;

B: results

C: result;

5. The firm … its earrings for growth next month;

A. reinvests;

B. will reinvest

C. reinvested

6. The use of a firm’s assets… by its management.

А. have directed

B. is directed

C. is directing

7. A part of increase in assets … to the firm’s owners.

A. belong

B. belonging

C. belongs

IV. З підкреслених слів або словосполучень виберіть те, яке треба змінити, щоб речення відповідaло граматичним нормам англійської мови.

1. Financial reporting is provided information that is useful to investors.

2. A major function of accounting is provider information useful for make

A B C

decisions.

3. Financial accounting is concerned with the preparation of reporting.

A B C

4. Labour services have provided by employees, who have a claim on the

A B

assets of the firm.

C

5. Liabilities consist of money for goods supplying to the firm.

A B C

6. The accounting equation is expressed in a financial position statement

A B

calling the Balance Sheet.

C

7. Goods are sometimes sold at the same price at which they are buy.

A В C