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МИНИСТЕРСТВО ОБРАЗОВАНИЯ И НАУКИ РФ ФЕДЕРАЛЬНОЕ ГОСУДАРСТВЕННОЕ БЮДЖЕТНОЕ ОБРАЗОВАТЕЛЬНОЕ УЧРЕЖДЕНИЕ ВЫСШЕГО ПРОФЕССИОНАЛЬНОГО ОБРАЗОВАНИЯ «ВОРОНЕЖСКИЙ ГОСУДАРСТВЕННЫЙ УНИВЕРСИТЕТ»

ACCOUNTING AND AUDITING

Учебно-методическое пособие

Составитель Е.В. Ушакова

Воронеж Издательский Дом ВГУ

2014

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Утверждено научно-методическим советом факультета романо-германской филологии 23 сентября 2014 г., протокол № 7

Рецензент: профессор, заведующий кафедрой английского языка гуманитарных факультетов Воронежского государственного университета А.П. Бабушкин

Учебно-методическое пособие подготовлено на кафедре английского языка гуманитарных факультетов факультета романо-германской филологии.

Рекомендовано студентам 1-го курса магистратуры (заочное отделение) экономического факультета.

Для направлений: 080100 – Экономика, 080200 – Менеджмент, 080300 – Финансы и кредит

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UNIT 1. Accounting

LEAD IN

1. Discuss these questions.

1.Why do you need the accounting information?

2.What accounting documents do you know?

1. General definition of accounting

Today, it is impossible to manage a business operation without accurate and timely accounting information. Managers and employees, lenders, suppliers, stockholders, and government agencies all rely on the information contained in two financial statements. These two reports — the balance sheet and the income statement – are summaries of a firm's activities during a specific time period. They represent the results of perhaps tens of thousands of transactions that have occurred during the accounting period.

Accounting is the process of systematically collecting, analyzing and reporting financial information. The basic product that an accounting firm sells is information needed for the clients.

Many people confuse accounting with bookkeeping. Bookkeeping is a necessary part of accounting. Bookkeepers are responsible for recording (or keeping) the financial data that the accounting system processes. The primary users of accounting information are managers. The firm's accounting system provides the information dealing with revenues, costs, accounts receivables, amounts borrowed and owed, profits, return on investment, and the like. This information can be compiled for the entire firm; for each product; for each sales territory, store, or individual salesperson; for each division or department; and generally in any way that will help those who manage the organization. Accounting information helps managers plan and set goals, organize, motivate, and control. Lenders and suppliers need this accounting information to evaluate credit risks.

Stockholders and potential investors need the information to evaluate soundness of investments, and government agencies need it to confirm tax liabilities, confirm payroll deductions, and approve new issues of stocks and bonds. The firm's accounting system must be able to provide all this information, in the required form.

2. The basis for the accounting process

The basis for the accounting process is the accounting equation. It shows the relationship among the firm's assets, liabilities, and owner's equity. Assets are the items of value that a firm owns — cash, inventories, land, equipment, buildings, patents, and the like. Liabilities are the firm's debts and obligations — what it owes to others.

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Owner's equity is the difference between a firm's assets and its liabilities — what would be left over for the firm's owners if its assets were used to pay off its liabilities. The relationship among these three terms is the following:

Owners' equity = assets — liabilities (The owners' equity is equal to the assets minus the liabilities).

For a sole proprietorship or partnership, the owners' equity is shown as the difference between assets and liabilities. In a partnership, each partner's share of the ownership is reported separately by each owner's name. For a corporation, the owners' equity is usually referred to as stockholders' equity or shareholders' equity. It is shown as the total value of its stock, plus retained earnings that have accumulated to date. By moving the above three terms algebraically, we obtain the standard form of the accounting equation:

Assets = liabilities + owners' equity (The assets are equal to the liabilities plus the owners' equity).

3. A balance sheet

A balance sheet (or statement of financial position), is a summary of a firm's assets, liabilities, and owners' equity accounts at a particular time, showing the various money amounts that enter into the accounting equation. The balance sheet must demonstrate that the accounting equation does indeed balance. That is, it must show that the firm's assets are equal to its liabilities plus its owners' equity. The balance sheet is prepared at least once a year. Most firms also have bal- ance-sheets prepared semiannually, quarterly, or monthly.

4. An income statement

An income statement is a summary of a firm's revenues and expenses during a specified accounting period. The income statement is sometimes called the statement of income and expenses. It may be prepared monthly, quarterly, semiannually, or annually. An income statement covering the previous year must be included in a corporation's annual report to its stockholders.

5. The importance of the above two statements

The information contained in these two financial statements becomes more important when it is compared with corresponding information for previous years, for competitors, and for the industry in which the firm operates. A number of financial ratios can also be computed from this information. These ratios provide a picture of the firm's profitability, its short-term financial position, its activity in the area of accounts receivables and inventory, and its long-term debt financing. Like the information on the firm's financial statements, the ratios can and should be compared with those of past accounting periods, those of competitors, and those representing the average of the industry as a whole.

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COMPREHENSION

I. Answer the questions

1.What is accounting? Give a short definition.

2.Is it possible to manage a business operation without accurate and timely accounting information?

3.Who needs accounting information? Explain why.

1.What is the basis for accounting process?

2.State the standard form of the accounting equation.

3.What is a balance sheet? Give a short definition.

4.What must a balance sheet show?

5.What is an income statement?

9.What can be computed from the information contained in a balance sheet and an income statement?

10.Do the ratios computed from this information provide a picture of a firm's profitability and its financial position?

11.Is this information for competitors?

LANGUAGE PRACTICE

1.Insert the necessary word or word combination.

2.Managers, lenders, suppliers and government agencies relay on the information contained in two ....

3.These two reports — the balance sheet and ... —are summaries of a firm's activities during a specific time period.

4.The basis for the accounting process is ... .

5.Assets are the ... that a firm owns.

6.Liabilities are the firm's debts and ....

7.Owners' equity is the difference between a firm's ... and its liabilities.

8.A balance sheet is ... of a firm's assets, liabilities, and owners' equity accounts at a particular time.

9.A balance sheet must demonstrate that the accounting ... does indeed balance.

10.An income statement is a summary of a firm's revenues and... during a specific accounting period.

11.The information in these two financial statements becomes more important when it is ... with corresponding information for previous years or past ... periods.

2.Match the word with the right definition.

1.accounting

2.revenue

3.asset

4.stockholder

5.balance sheet

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a)the activity of keeping detailed record of the amounts of money a business receives and spends.

b)a written statement of the amount of money and property a company has.

c)the things the company own.

d)a person who owns shares in a company.

e)money that a company receives from people.

3. Refer the sentences into English

1.Бухгалтерский учет — это процесс систематического сбора и сообщения финансовой информации.

2.Балансовый отчет и отчет о доходах являются основой процесса бухучета.

3.Балансовый отчет (или отчет о финансовом положении)- это обобщенный отчет об активах фирмы, пассивах и собственном акционерном капитале.

4.Отчет о доходах — это обобщенный отчет о доходах и расходах за (during) конкретный отчетный период.

5.Основой процесса бухгалтерского учета является бухучетное уравнение.

6.Согласно (according to) бухучетному уравнению, активы равны пассивам (денежным обязательствам) плюс собственный акционерный капитал.

7.Собственный акционерный капитал — это разность между активами и пассивами.

8.Балансовый отчет должен показывать, что бухучетное уравнение балансируется.

9.Результаты (results) балансового отчета должны сравниваться (be compared) с результатами за (for) прошлый отчетный период.

10.Эта информация дает картину доходности фирмы, ее финансового положения и ее деятельности в области (area) дебиторской задолженности, товарных запасов и долгового финансирования.

FOLLOW UP

1. Speak about the role of accounting in business.

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UNIT 2. Foreign trade

LEAD IN

1. Discuss these questions.

1.What are some of the risks involved in trading internationally?

2.What payment methods do you know that are used when exporting or importing goods?

3.What is the role of the banks in international trade?

Open Account

The goods, and relevant documents, are sent by the exporter directly to the overseas buyer, who will have agreed to remit payment of the invoice back to the exporter upon arrival of the documents or within a certain period after the invoice date. The exporter loses all control of the goods, trusting that 5 payments will be made by the importer in accordance with the original sales contract.

Documentary Credit

Documentary Credit is often referred to as a Letter of Credit. This is an undertaking issued by an overseas bank to a UK exporter through a bank in the UK, to pay for the goods provided that the exporter complies fully with the conditions established by the Documentary Credit.

Additional security can be obtained by obtaining the 'confirmation' of a UK bank to the transaction, thereby transferring the responsibility from the importer's bank overseas to a more familiar bank in the country of the exporter.

Very few risks arise for the exporter because the potential problem areas of the buyer risk and country risk can be eliminated. However, the exporter must present the correct documents and comply fully with the terms and conditions of the credit. Failure to do so could result in the exporter losing the protection of the credit.

Bills for Collection

Trade collections are initiated when an exporter draws a bill of exchange on an overseas buyer. This is forwarded by the exporter's bank in the importer's country.

Such collections may be either “documentary” or “clean”. A documentary collection is one in which the commercial documents and, if appropriate, the documents of title to the goods are enclosed with the bill of exchange. These are sent by the exporter's bank to a bank in the importer's country together with instructions to release the documentation against either payment or acceptance of the bill.

The risks that the exporter has to face are that the importer fails to accept the bill of exchange or dishonours an accepted bill upon maturity. This means that the exporter may have to consider shipping the goods back to the UK, finding an alternative buyer or even abandoning the consignment, all of which could be expensive.

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In many areas of the world it is common practice to defer presentation4, payment or acceptance until arrival of the carrying vessel. Collection and remittance charges can also be relatively high.

If the exporter retains control over the goods by remitting a full set of Bills of Lading through the intermediary of the banking system, control of the goods will be handed over to the importer only against payment or acceptance of the bill by the importer. If the documents are released against the importer's acceptance of the bill, control of the goods is lost and the accepted bill of exchange may be dishonoured at maturity.

Advance Payment

Exporters receive payment from an overseas buyer in full, or in part, before the goods are dispatched. This means that the exporter has no risks associated with non-payment.

COMPREHENSION

1. Read the text about payment methods for exporters and write the four methods in the correct positions according to their risks for the exporter.

Least secure

Most secure

Payment method: 1. Open account .........

2.………………………

3.………………………

4.………………………

2.Mark these statements T (true) or F (false) according to the information in the text. Find the part of the text that gives the correct information.

Open account

1.The importer pays for the goods after receiving the documents. T

2.There is no contract involved.

3.The exporter must be able to trust the buyer.

Documentary credit

4.If a letter of credit is issued, the importer's bank agrees to pay for the goods without conditions.

5.If a letter of credit is confirmed, the exporter's bank takes responsibility for payment.

Bills for collection

6.Commercial documents and the document of title are always enclosed with a bill of exchange.

7.Importers may not accept the bill of exchange until the goods arrive.

8.Exporters can keep control of goods by sending bills of lading through the banking system.

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9.Exporters reduce risk if documents are released against acceptance of the bill rather than payment.

Advance payment

10.This means that the importer has to pay before any goods are dispatched.

LANGUAGE PRACTICE

1.Match the risks (a–g) with the payment methods.

1.Open account

2.Documentary credit

3.Bills for collection

4.Advance payment

a)Exporters must comply with the conditions of the credit documents.

b)Importers may delay payment.

c)Importers may not pay at all.

d)It takes a long time to process payment in some countries.

e)Importers may not accept the bill of exchange.

f)Bank charges may be high.

g)Exporters must take care to present the correct documents.

2.Match these terms with their definitions.

1.invoice

2.clean collection

3.documentary collection

4.bill of exchange

5.bill of lading

6.document of title

7.issuing bank

8.collecting bank

9.confirming bank

10.letter of credit

a)document that shows details of goods being transported; it entitles the receiver to collect the goods on arrival

b)list of goods sold as a request for payment

c)bank that issues a letter of credit (i.e. the importer's bank)

d)bank that receives payment of bills, etc. for their customer's account (i.e. the exporter's bank)

e)document allowing someone to claim ownership of goods

f)payment by bill of exchange to which documents are not attached

g)signed document that orders a person or organisation to pay a fixed sum of money on demand or on a specified date

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