Main Street Store, Inc.

Statement of Cash Flows

For the Year Ended August 31,20XX

Cash flows operating activities:

Net income …………….18,000

Add (deduct) items not affecting cash:

Depreciation expense ……… 4,000

Increase in accounts receivable 80,000

Increase in merchandise inventory (170,000)

Increase in current liabilities ..67,000

Net cash used by operating activities 161,000

Cash flows investing activities:

Cash paid for equipment 40,000

Cash flows from financing activities:

Cash received from issue of long-term debt 50,000

Cash received from sale of common stock 190,000

Payment of cash dividend on common stock 5,000

Net cash provided by financing activities 235,000

Net increase in cash for the year 34,000

Good record keeping by a business is not only wise but is required by law. Legal and financial questions may be raised by various agencies, banks, and employees. The questions may be accurately answered when written records of business proceedings are kept. By recording daily transactions, the owner can learn from mistakes and avoid errors in the future. Even if profits are not distributed to shareholders, any organization needs a P&L to account for its activities to see whether it is being efficiently and honestly run.

IV. Join the halves. Can you tell more about each of the financial statement?

A.	B.
Balance sheet	measures the performance of the enterprise
Income statement or (P&L)	measures the actual flow of funds
The statement of owner’s equity	lists all the assets, liabilities, and owner’s equity at a point in time.
Statement of cash flow	presents a summary of the changes that occurred in the owner’s equity of the entity during a specific time period

V. Answer the questions to the text:

1. What are the main business statements?

2. What do they show?

3. What does a cash flow measure?

4. Why is good record keeping important for the owner?

UNIT 6

I. Memorize the following words:

The sale and the purchase transactions – операции купли - продажи

investment – инвестирование, вложение денег, капитала

financial status – финансовый статус

loss – убытки

profit – прибыль

II. Translate the following words and word combinations:

To reflect, concern, profitability, the reverse case, to address, on a yearly basis

III. Read and translate the text: financial accounting

The classification of financial accounting transactions reflects the concern with two major interests in financial accounting. The first is addressed to the analysis of the profitability of the business. This is done normally on a yearly basis by comparing the sale and the purchase transactions and establishing the difference, with either a loss or a profit for the year. A profit will be shown when sale transactions are greater than the purchase transactions during the year; a loss will be shown in the reverse case. In financial accounting, the operating cycle is conventionally treated as a period of one year. This suggests that the profit or loss is a short-term analysis of business activities.

The second major interest in financial accounting is directed to the analysis of those transactions having a long-term impact on the firm.

These transactions include, on the one hand, investment transactions by which the firm acquires assets of potential use for more than one accounting period, and, on the other hand, financial transactions by which the firm obtains funds for use for more than one year.

Financial accounting brings together investment and financial transactions in a statement of the financial status, or structure, of the enterprise which is commonly known as the balance sheet.