Unit 12 accounting Word list

Accounting – бухгалтерское дело, учёт, расчёт, начисление; account – счёт, учёт; accountant – бухгалтер, счетовод, учётчик; ledger – бухгалтерская книга, регистрационный журнал; sales ledger – книга продаж (дебиторов); debtor – дебитор, должник; purchases ledger – книга закупок, поставщиков (кредиторов); creditor – кредитор; cash book – кассовая книга, книга учёта денежных средств; nominal (or general) ledger – номинальная бухгалтерская книга, общий гроссбух; final account – итоговый счёт, окончательный счёт; profit and loss account – результативный счёт, счёт доходов и расходов; net profit – чистая прибыль, чистый доход; revenues (income) – доход, выручка, прибыль; revenue expenditure – текущие затраты; balance sheet – бухгалтерский баланс, балансовый отчёт; expenses – расходы, издержки; assets – активы, средства, имущество, капитал; liabilities – долги, денежные обязательства; capital expenditure – капитальные расходы, затраты, издержки; cash flow statement – отчёт о движении денежных средств, баланс оборотных средств; liquidity – ликвидность; liquidity ratio – коэффициент ликвидности; liquid assets ratio – коэффициент быстрой ликвидности; profitability ratio – коэффициент рентабельности, прибыльности, доходности; rate of return on capital – прибыль на инвестированный капитал; net profit margin – рентабельность чистой прибыли, чистая рентабельность продаж; current ratio – коэффициент ликвидности, коэффициент покрытия долгов; acid test ratio – коэффициент критической оценки, коэффициент быстрой ликвидности; efficiency ratio – коэффициент эффективности; rate of stock turnover – скорость оборота акций; rate – учётная ставка, коэффициент.

Text study

The role of a private sector firm’s accounting function is to record, present and analyze financial information. This information is recorded in accounts which are grouped into ledgers:

• the Sales Ledger contains the accounts of debtors (customers buying on credit);

• the Purchases Ledger holds the accounts of creditors (suppliers of goods on credit);

• the Cash Book contains records of cash and bank transactions;

• the Nominal (or General) Ledger stores the other accounts.

These accounts are then presented and summarized in the firm’s final accounts.

Profit and Loss account

Purpose: To calculate net profit.

Contents: Revenues (income) and expenses: revenue expenditure.

Balance Sheet

Purpose: To show the firm’s financial position.

Contents: Assets (items owned by the firm) and Liabilities (items owed by the firm): capital expenditure.

Accountants also produce cash flow statements which analyze the movements in the cash and bank balances and summarize the firm’s liquidity that is its ability to meet its debts as they fall due.

Accounting ratios are used to analyze financial information. Two major profitability ratios are:

ROCE (return on capital employed) = Net Profit x 100 / Capital Employed

This shows the rate of return on capital, and can be compared with the rate an investor could receive elsewhere, for example by investing in a safer fixed-interest source such as a building society account.

Net Profit Margin = Net Profit x 100 / Sales

This shows how many pence in each ₤’s worth of sales is represented by net profit. This gives information on whether the selling price could be dropped (by cutting this margin) in an attempt to increase sales.

The main liquidity ratio is the Current Ratio:

Current Ratio = Current Assets / Current Liabilities

A ratio of 2:1 tells us that there is Ј2 cash or “near-cash” available to pay short-term debts. The difference between the current assets (stock, debtors and cash) and current liabilities (creditors and bank overdraft) is called Working Capital. In practice, many large firms, especially in the retail sector, have a negative working capital, a ratio less than 1:1, but still survive financially.

Accountants also remove stock from the Current Assets total to calculate the Liquid Assets (also known as the Acid Test) ratio. This informs them whether the firm’s cash and debtor resources are sufficient to meet its own short-term debts, without having to sell any stock.

Efficiency ratios are also used by accountants. These include “debtor days” and “creditor days” which show how many days’ credit the firm allows and takes respectively. This is important information for credit control purposes.

Debtor Days = Debtors x 365 / Sales

Creditor Days = Creditors x 365 / Purchases

Another efficiency ratio is the Rate of Stock Turnover (“Stockturn”) which calculates the number of times the firm’s average stock is sold or “turned over” during the period.

Rate of Stock Turnover = Cost of Sales / Average Stock