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UNIT 4 Module I

UNIT FOUR
ACCOUNTING

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OBJECTIVES: After studying this chapter you should be able to: o o o o o o o o


be aware of the necessity of financial professional advice for company formation understand the difference between accounting and bookkeeping have a brief outline of the evolution of accounting become acquainted with the basic principles of accounting; the accounting cycle build up their accounting vocabulary know how to read and understand financial reports revise and practise reported speech distinguish and use words easily confused as well as British and American financial terms

MODULE I LEAD-IN
& Read the following text and see if you can find answers to the above questions:

COMPANY FORMATION
A person starting a new business must decide which type of organization is best. To some extent the answer depends on the person, the type of business, the money needed, and the kind of product or service to be provided. If you are going into the restaurant business, you may decide on a sole proprietorship or a partnership. Perhaps you want to become a part-owner of a corporation by buying shares in it. You may want to invest in a partnership by becoming a sleeping partner or you may want to look into franchise. There are more sole proprietorships than any other types of business in the United State economic system, but it is the giant corporation, especially the multinational one, that has become to many a symbol of the private American enterprise system. To money needed to start a business is called capital. If you do not have enough capital you may borrow some from the bank in the form of a loan or an overdraft. Before the bank will give a loan you must put up some security (such as your own house) in case you cannot pay back the money. Security is also called collateral. Capital which is borrowed is called loan capital. Capital obtained from investors/investment is called share capital or equity capital. If the business owned by yourself (a sole proprietor) runs into trouble, you are liable to pay all the debts to your creditors, even if you have to sell your private possessions. A sole proprietor is personally liable to his/her creditors. Sometimes two or more people own and run a business. This is called a partnership. People who invest money in a business are called investors or backers. The backers in a partnership are all partners and owners.

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Business Issues

Usually all the partners have personal unlimited liability for debts to creditors. A partner who invests money in a partnership but who does not run the business is called a sleeping partner. Sometimes a sleeping partners can have limited liability (her/his liability is limited to the amount of money s/he invests). A company or a corporation is a business that is legally regarded as a separate entity, in other words as something that exists independently. That means that, as far as the law is concerned, the corporation has a separate existence from the people who own it. It has a life of its own. As a consequence, owners in a corporation have limited liability. With limited liability, the owners are responsible for the debts of the business only to the extent of the amount they have invested. Even if the business fails, the owners cannot lose more than they have invested. Their personal savings and possessions cannot be taken to pay the corporations debts. Limited liability companies are economically very efficient. Although only about 6 percent of all business in the United States are corporations they earn about 79 percent of the countrys income. Investment in a limited company is in the form of shares. Everyone who buys shares in the company is a shareholder. The liability of each share is limited to the amount of ones investment. If you have shares in a company, you have stake or holding in the company. If you hold 20% of the shares, you have a 20% stakes. If a shareholder has more than 50% holding, that person is a majority shareholder and has a majority or controlling interest in the company. A public limited company is normally the largest form of business unit in the private sector; its share are often quoted on the stock exchange. Most present day public companies were once private, having at one stage gone public with the help of a bank. The big advantage of forming a public limited company is that advertisements may be placed in a financial newspapers inviting the public to apply for shares: a prospectus, as this advertisement is called, give details of the companys past trading record and estimates of future earnings, together with other information required by law. One of the main reasons for small business failure is not managerial incompetence, but inadequate financial planning. Therefore in order to ensure your success you have to learn something about the market you want to enter, the goods and services already existing and you have to understand some basic business and accounting principles. Most probably you will have to employ a skilled person to keep the exact records of your business and possibly to give you some professional advice as well. This means writing down credits and debits, and adding up columns of figures usually a bookkeepers duty, but also recording cash flow and the value of assets and liabilities, calculate profits and losses etc. which is what an accountant does. You will have to know and understand the meaning of some basic accounting jargon such as cash receipts, journal, check register, double entry, FIFO, trial balance. You need all this, as well as financial statements, budgets, cash-flow projections a.s.o., both to measure the success of your company and to help you make decisions about allocating your resources for future projects.

VOCABULARY
cash flow = flux de numerar cash receipts journal = jurnal de `ncas\ri `n numerar check register = registru de cecuri double entry = partid\ dubl\ FIFO (first in, first out) = metod\ folosit\ `n inventarierea stocurilor care presupune c\ cele mai vechi unit\]i (primele intrate) sunt primele v>ndute (ie[ite) loan = `mprumut overdraft = descoperire `n cont trial balance = balan]\ de verificare collateral = garan]ie suplimentar\ equity capital = capitalul ac]ionarilor (investi]iile proprietarilor `ntr-o companie: ac]iuni comune+profituri nedistribuite), capitalul nominal, capital `n ac]iuni cu dob>nd\ fix\ gearing = structura de capital; rata de `ndatorare liability = r\spundere, datorie backer = girant prospectus = prospect, versiune condensat\ a situa]iei de `nregistrare a unei companii care furnizeaz\ informa]ii asupra h>rtiilor de valoare

UNIT 4 Module I
COMPREHENSION I

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1.1. Answer the following questions: 1. You decided to set up your own business. What are the main requirements for such a venture? 2. What type of business organization are you going to set up? What are your options? 3. As a small business owner do you need to hire professional accounting services or can you manage by yourself? 4. Is it enough to have a professional accountant or do you have to know something about financial operations yourself? 1.2. Fill in the blanks in the following except. Do not refer to the text until you finish your task. The money needed to start a business is called (a) If you do not have enough (b) you may borrow some from the bank in the form of a (c) or an (d) Before the bank will give a loan you cannot pay back the money. This is also called (f) Capital which is borrowed is called (g) Capital obtained from investors/investments is called (h) or (i) The (j) between the loan capital and the equity capital determines whether a company has a (k) of a (l) 1.3. Match the following words with the definitions given below: a. board of directors i. public limited company b. multinational corporation j. assets c. partnership k. unlimited liability d. sole proprietorship l. stockholders e. corporation (US), company (UK) m. LIFO f. expenses n. liabilities g. sleeping partner o. journals h. stocks (US), shares (UK) p. FIFO 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. A unincorporated business organization with two or more owners who share responsibility. The owners of a corporation. The responsibility for debts, even if they are more than the assets of the business firm. A business association that is legally regarded as a separate person. Shares of ownership in a corporation. A business owned by one person. A person who only invests money in a business, sharing in the profits but not taking any active part in the management of the firm. A corporation that has offices and plants in more than one country. A group of individuals elected by the stockholders of a corporation to make major decisions for the company. A company whose members have normally no limitation of their right of transferring their shares to other persons. Amounts owed by the organization to others. Accounting technique for calculating cost of inventory based on last in, first out. Costs incurred in operating the business, such as rent, utilities and salaries. Recording devices used for the first recording of all transactions.

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15. 16.

Business Issues
Economic resources owned by a firm, such as land, building and machinery. Accounting technique for calculating cost of inventory based on first in first out.

PRACTICE I
2.1. Make sentences to point out the difference between the following words: a. borrow-lend e. bookkeeper-bookmaker b. owe-own f. found-find c. lose-loss-loose g. ensure-insure-assure d. advice-advise h. effective-efficient 2.2. Complete the following sentences by using the correct form of the words in brackets: 1. It a morning! We could go for a walk to the shop. (glory) 2. Why are you so of everything your assistant does? (critic) 3. I am waiting for a opportunity. (favour) 4. He is a very person. (influence) 5. Your assignment involved a lot of work, but try to show at least some . (origin) 6. All in all she has a pleasant personality. If only she would be more ! (predict) 7. Why does your office manager everything I do? (critic) 8. Ill pay cash, but only if you can give me a (receive) 9. She is extremely rich. Her is worth several million pounds. (inherit) 10. The job includes some duties as well. (manage) 2.3. Put the verbs in brackets into the corect form making any necessary changes: I (sit) in my office the other day when I (tell) that someone (want) (see) me. It was Ana Radu, an old friend of mine. My personal assistant (invite) het in and (ask) us what we (want) to drink. After she (bring) us coffee and water she (leave) us alone. When I (ask) Ana how she (be), she (tell) me a rather sad story. She told me that she (have) to close down her business because of financial difficulties and that she (look) for a job. She (add) that she (be) in such situation because she (not listen) to those who (advise) her to hire a good accountant. If she (not find) a job quickly, she (be) in serious trouble. She (ask) me whether I (can do) anything (help) her (find) something interesting. I (assure) her (do) my best and (ask) her (call) me in a few days.

UNIT 4 Module I
FOCUS ON LANGUAGE

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1. Reported statements When we use reported speech, we are usually talking about the past. So verbs are usually changed to the past and there are some other changes of pronouns and adverbs as well. Tense of verb of speaking in DIRECT SPEECH INDIRECT SPEECH present future present perfect present past present perfect will Examples: DIRECT SPEECH INDIRECT SPEECH I like doing business She said she liked doing business. Im writing a report She said she was writing a report. I saw the minutes of the meeting She said she had seen the minutes of the meeting I have finished the letter She said she had finished the letter. I was having a business meeting She said she had been having a business meeting. I will be in Rome next week She said she would be in Rome next week. Other changes are to the pronouns and the time adverbials. PRONOUNS DIRECT SPEECH I/you we/you me/you us/you INDIRECT SPEECH he/she they him/her them (no change) past past or past perfect past perfect would

TIME ADVERBIALS DIRECT SPEECH INDIRECT SPEECH yesterday the day before/the previous day today that day tomorrow the day after/the following day last the previous next the following this that

NOTE:
The tense of the words spoken does not change where the words spoken are still true: The spokesperson of the government said A statement will be made in the press. The spokeperson of the government said a statement will be made in next weeks paper.

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2. Reported commands, orders, requests or instructions He told us to go to the bank tomorrow. I told him not to shout at her. He demanded that the faulty goods be collected as soon as possible. He asked the manager to accept his resignation. 3. Reported questions: There are two types of direct questions: wh-questions, e.g. Where are you going?, the police officer asked us. yes/no questions, e.g. Does your company provide financial advice? In reported wh-questions we use the wh-question word: The police officer asked us where we were going. In reported yes/no questions we use if or whether: She asked if/whether your company provided financial advice.

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NOTE
The word order in reported questions is affirmative, as in statements. Are you presently employed? She asked me if I was presently employed. Do you have a drivers licence? She asked whether (if) I had a drivers licence. 4. Other reported forms: I dont think that increasing your prices by more than the annual rate of inflation is a wise decision, I told the board yesterday. Yesterday I warned them not to increase their prices by more than the annual rate of inflation. Youd better speak with a lawyer before making a statement, the auditors told him. They cautioned him not to make a statement before he had consulted his lawyer. She said: Damn! Its a virus! Switch off the computer and call maintenance! She exclaimed nervously that it was a virus and told her assistant to switch off the computer and call maintenance.

1. 2. 3.

PRACTICE II
4.1. Make a new sentence from these questions. Example: Where has the operator gone? Do you know .. where the operator has gone? Where is the CEOs office? Could you tell me ? What does this word mean? Do you know .? What time is it? I wonder ? Where did you leave your mobile? Cant you remember . .? Where can I change some money? Could you tell me ? What qualifications does Chris need? She wants to know. .?

1. 2. 3. 4. 5. 6.

UNIT 4 Module I

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4.2. Look at this extract from the minutes of an annual general meeting. Fill the spaces with an appropriate form of one of the verbs from the box. ask warn believe say remind

The General Manager (a) the audience that a few years ago things were very different. She (b) the time had come to face the situation and she (c) we had to choose between changing the company policy or getting out of business. She (d) that major problems would arise if we made the wrong decision and (e) if we wanted to be an isolated and regressive company. 4.3. Report the following conversation between the training and the human resource managers of a business company. Choose an appropriate verb of speaking to introduce each sentence. The first sentence has been done for you as an example. HRM: The CEO told me about the new English language training programme. When will it be introduced? TM: I dont know. But we have approached a number of outside trained organizations. HRM: Good. Could I see the list of suppliers? TM: Sure, Ill let you see the details. Ill send them to your office sometime tomorrow. HRM: O.K. Why dont we meet and make the final decision together? TM: We can meet, but I prefer to make the final decision myself. Example: The Human Resource Manager asked when the new training would be introduced. 4.4. Translate into English: Mi-a spus c\ este sigur\ c\ a f\cut bine la testul de englez\ financiar\. C>nd am `ntrebat-o de ce nu merge la teatru, mi-a spus c\ are at>t de mult de lucru, `nc>t va trebui s\ stea p>n\ la miezul nop]ii s\ termine. Ariadna m-a `ntrebat unde m\ duc `n vacan]\, spun>ndu-mi c\ ar dori s\ mearg\ cu mine dac\ ar fi posibil. Mi-am `ntrebat asistenta dac\ r\spunsese la e-mail [i mi-a spus c\ da. M-a rugat s\ revin dup\ 10 minute, ad\ug>nd c\ va fi gata de plecare de `ndat\ ce va termina ce are de f\cut. Diversitatea sistemelor contabile `n lume este un fapt u[or de constatat. Putem s\ ne g>ndim `n mod rezonabil c\ evolu]ia economic\ marcat\ de interna]ionalizarea pie]elor [i de activitatea `ntreprinderilor, [i mai ales de cre[terea investi]iei interna]ionale directe va determina tot mai mult na]iunile s\ `ncerce apropierea sistemelor contabile proprii. Aceast\ apropiere este solicitat\ `n mod insistent de investitorii str\ini care vor s\ compare, folosind criterii echivalente, oportunit\]ile plas\rii capitalului. Studiile comparative de specialitate au demonstrat c\ rezultatele aceleia[i `ntreprinderi sunt sensibil diferite `n func]ie de metodele contabile folosite de la o ]ar\ la alta. 4.5. Humor Money and activities related to it are an endless source for jokes in all cultures. Complete the following ones and use them when you need to entertain business people:

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a. b. c. d. e. g. i.

Business Issues

If you your bank a hundred pounds, you a problem. If you it a million pounds, it a problem! John Maynard Keynes. If you can actually your money, then you ar not really a rich man. John Paul Getty The purpose of studying economics is not to acquire a set of ready-made to economic questions, but to learn how to avoid being by economics. Joan Robinson Pan Am takes of you. Marks and Spencer you, Securicor cares. At Amstrad, we your money. Alan Sugar (founder of Amstrad) Do enjoy your work? I love my work. I could at it all day. How many people work here? About of them. When does my pay rise become effective? When do.

ANSWER KEY COMPREHENSION I


1.1. a) capital; b) loan; c) money; d) overdraft; e) security; f) collateral; g) loan capital; h) share capital; i) equity capital; j) ratio/proportion; k) high gearing; l) low gearing. 1.2. a-9; b-8; c-1; d-6; e-4; f-14; g-7; h-5; i-10; j-15; k-3; l-2; m-12; n-11; o-14; p-16.

PRACTICE I
a. b. c. d. e. f. g. h. 2.1. Suggested answers: I lost my ballpoint pen. Can I borrow yours? He never pays you back, so nobody is willing to lend him money. You saved my life! I owe you everything I have! He has done very well: he owns his house in town and bought himself a cottage in Sinaia. To lose such a good friend must be a great loss indeed! I cant find that phone number. I wrote it one a loose sheet of paper. Thats an interesting piece of advice. I cant advise you on this matter. I dont have all the necessary information. A bookkeeper has to record every purchase and sale that a business makes. A bookmaker accepts bets (on races) that were traditionally written down in a book. He wants to found a new company, but finds it difficult to rise the capital he needs. A good manager has to ensure the necessary working conditions for his employees. I want to assure you that you have to be careful when you insure your life. The new secretary filed all last terms letters isnt that efficient? I think the new logo looks very effective on the company stationery.

UNIT 4 Module I

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2.2. 1. glorious; 2. critical; 3. favourable; 4. influential; 5. originality; 6. predictable; 7. criticize; 8. receipt; 9. inheritance; 10. managerial. 2.3. Suggested answers: I was sitting in my office the other day when I was told that someone wanted to see me. It was Ana Radu, an old friend of mine. My personal assistant invited her in and asked us what we wanted to drink. After she had brought/brought us coffee and water she left us alone. When I asked Ana how she was, she told me a rather sad story. She told me that she had had to/had to close down her business because of financial difficulties and that she had been looking/was looking for a job. She added that she was in such a situation because she hadnt listened to those who had advised/advised her to hire a good accountant. If she didnt find a job quickly, she would be in a serious trouble. She asked me whether I could do anything to help her find something interesting. I assured her I would do my best and asked her to call me in a few days.

PRACTICE II
4.1. 1. 2. 3. 4. 5. 6. Could you tell me where the CEOs office is? Do you know what this word means? I wonder what time it is? Cant you remember where you left your mobile? Could you tell me where I can change some money? She wants to know what qualifications Chris needs?

4.2. a) reminded; b) said; c) believed; d) warned; e) asked. 4.3. The HRM asked when the new English language training would be introduced. The TM replied that she didnt know. But she added that they had approached a number of outside training organizations. The HRM asked if he could see the list of suppliers. The TM agreed to let him see the details. The HRM suggested a meeting and making the final decision together. The TM agreed with the meeting, but replied that she preferred to make the final decision herself. 4.4. Suggested answers: 1. She told me she was sure she had done well in the financial English test. 2. When I asked her why she wasnt going to the theatre, she said she had so much work to do that she would have to stay up till midnight to finish it. 3. Ariadna asked me where I was going for my holidays, saying she would like to go with me if it waw possible. 4. I asked my assistant whether she had answered the e-mail and she said that she had. 5. He asked me to come back in ten minutes, adding that he would be ready to leave as soon as he had finished what he was doing. 6. The diversity of accounting systems in the world is easy to notice. We can reasonably think that the economic evolution marked by the globalization of markets and the activity of enterprises, especially by the direct international investments, will determine nations to try to harmonize their accounting systems. This harmonization is increasingly asked for by foreign investors

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who want to compare the opportunities of capital investment by using equivalent criteria. Comparative specialized research demonstrated that the results of one and the same company are obviously different according to the accounting methods used by various countries.

4.5. a) owe, have, owe, has; b) count; c) answers, deceived; d) good care, love, want; e) look; f) half; g) you.

UNIT 4 Module II
UNIT FOUR
MODULE II LEAD-IN

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Are you a careful spender? How do you manage your weekly budget? They say that everyone should be a good accountant when managing their own money. Are you? Do you keep track of your debits and credits? Why do you think businesses should keep financial records? & Read the following text and see if you can find answers to the above questions:

ACCOUNTING AND BOOKKEEPING


Accounting is the process of systematically collecting, analysing and reporting financial information. Because of its great value, business owners have been concerned with financial information for hundreds of years: The first book of accounting principles was written in 1494, by an Italian monk named Paciolo. Modern accounting in the United States can be traced back to the establishment of the American Institute of Certified Public Accountants (AICPA) in 1887. By the early 1900s, accounting instruction was offered at many colleges and universities. Today, accounting courses are required for virtually every type of business degree. Many people confuse accounting with bookkeeping, but there are important differences between the two. Accounting deals with the entire system of providing accurate and up-to-date financial information from the design of the system through its operation to interpretation of the information that is obtained. To become an accountant, an individual must undergo years of training and accumulate a great deal of practical experience. On the other hand, bookkeepers are responsible for obtaining the financial data that the accounting system processes. An accounting system cannot operate without good, accurate bookkeeping, but a bookkeeper can generally be trained in a year or two. Classification of accountants Accountants are people who are trained and experienced in the methods and systems of accounting. They are generally classified as private accountants or public accountants. A private (or non-public) accountant is an accountant who is employed by a specific organization. A medium-sized or large firm may employ one or several private accountants to design its accounting system, manage its accounting department, prepare the variety of reports required by management or by law, and provide managers with advice and assistance. Private accountants provide their services only to their employers. Smaller and medium-sized firms that dont require full-time accountants can hire the service of public accountants. A public accountant is an accountant whose services may be hired on a fee basis by individuals

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or firms. Public accountants may be self-employed or they may work for accounting firms. Accounting firms range in size from one-person operations to huge international firms with hundreds of accounting partners and thousands of employees. Among the largest accounting firms we can mention Arthur Andersen & Co., Coopers and Lybrand, Deloitte and Touche, Ernst & Young, KPMG, Price Waterhouse etc. The double-entry bookkeeping system Double-entry bookkeeping is a system in which each financial transaction is recorded as two separate accounting entries to maintain the balance shown in the accounting equation. The basic principle of doubleentry bookkeeping is that every transaction has twofold effect: a value is received and a value is yielded or parted with. Both effects, which are equal in amount, must be entered completely in the bookkeeping records. One entry changes the left (assets) side of the equation, and the other entry changes the right (liabilitiesowners equity) side. The accounting cycle In the typical accounting system, raw data are transformed into financial statements in five steps. The first three analysis of the source documents (receipts, invoices, sales slips, etc.), journalising the transactions (every financial transaction is next recorded in a journal) and posting (the information recorded in the general journal or specialised journals is transferred to the general ledger, which is a book of account containing a separate section for each account) are performed on a continual basis throughout the accounting period. The last two preparation of the trial balance (which is a summary of the balances of all general ledger accounts) and the financial statements (which are prepared from the information contained in the trial balance) are performed at the end of the accounting period. Once these statements have been prepared and checked, the firms books are closed for the accounting period. A new accounting cycle is then begun for the next period.

VOCABULARY
accounting, n. = contabilitate accountant, n. = contabil public accountant, n. = contabil autorizat CPA (Certified Public Accountant), n. = contabil autorizat CA (Chartered Accountant), n. = expert contabil managerial accounting, n. = contabilitate de gestiune/managerial\ financial accounting, n. = contabilitate financiar\ bookkeeping, n. = contabilitate primar\ accounting system, n. = sistem contabil accurate, adj. = exact, corect up-tp-date, adj. = de ultim or\, la zi to undergo, underwent, undergone, v. = a trece prin, a suferi self-employed, adj. = liber profesionist on a fee basis = pe baz\ de comision accounting firms, n. = firme de contabilitate to hire, v. = a angaja journal, n. = registru, jurnal ledger, n. = carte mare audit, n. = audit, expertiz\ contabil\

UNIT 4 Module II
COMPREHENSION I
1. 2. 3. 4. 5. 6. 7. 8.

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1.1. Answer the following questions on the text: When was the first book on accounting principles written? What is the main difference between accounting and bookkeeping? What do accountants do? What do bookkeepers do? How are accountants generally classified? Can you name some of the largest American accounting firms? Are they represented in Romania? What is double-entry bookkeeping system? What are the five steps of the accounting cycle?

PRACTICE I
2.1. Match the following terms with the definitions listed below: Independent audit Accounting Managerial accounting CPA Financial accounting Auditing Creative Accounting 1. 2. 3. 4. 5. 6. Bookkeeping Cost Accounting Public accountant Accounting system Private Accountant Tax Accounting

7. 8. 9.

Working out the unit cost of products including materials, labour and all other expenses. Calculating an individuals or a companys liability for tax. Inspection and evaluation of accounts by a second set of accountants. Using all available accounting procedures and tricks to disguise the true financial position of a company. Concerned with measuring and reporting costs, budgeting, and decreasing tax liabilities. Accountants who conduct an independent audit. They may design an accounting system, prepare or do taxes, or provide other assistance. The methods used to record and summarise data, they may be computerised so as to enable a firm to get daily financial reports. Records, classifies, summarises and interprets financial events and transactions. Recording of transactions from original transaction documents into journals.

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10.

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These accountants must pass a series of exams, and have prestige among their peers and the business community. This person may pass an exam to become a CMA, but may not be a CPA. They work for a single business, government agency or non-profit organisation. The preparation and analysis of financial statements for outsides interests. This is an unbiased evaluation about the accuracy of company financial statements.

11. 12. 13. 2.2. Complete the text using these words:

trial balance; posted; credits; journals; debits; ledger; double-entry; transferred Bookkeepers record every purchase or sale of a business in (1) These temporary records are entered in or (2) to the relevant account book or (3) At the end of an accounting period, all the relevant totals are (4) to the profit and loss account. (5) bookkeeping records the dual effect of every transaction. Payments made or (6) are entered on the left-hand (debtor) side of an account, and payments received or (7) on the right-hand side. Bookkeepers will periodically do a (8) to test whether both sides of an account book match. 1. 2.3. Select the answer which best completes or explains the meaning of the sentences: Financial information is regularly transferred from the journal to a book containing all the accounts. This means that the figures are: a. entered in the journal; b. posted in the ledger; c. balanced; d. considered as assets. The best way to explain the difference between bookkeeping and accounting is: a. bookkeeping is done by a bookkeeper, but accounting must be done by an accountant; b. bookkeeping is the daily recording of financial information, but accounting is the design and maintenance of the bookkeeping system; c. bookkeeping is done in the journal, but accounting is done in the ledger; d. bookkeeping is more sophisticated than accounting. An accountant can interpret the information found in the ledger and use it to construct financial statements. This means an accountant can: a. make financial decisions for the company; b. allocate capital resources; c. prepare a balance sheet and income-expense statement after examining the accounts; d. analyse bookkeeping procedures. Management analyses the financial statements and uses them as a basis for allocating financial resources. This means:

2.

3.

4.

UNIT 4 Module II
a. b. c. d. all transactions and sales of securities must be considered; the statements help them decide how to invest their capital; the sale of securities can help finance expansion; all of the above.

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2.4. Fill in the blanks with the following words: report, accounting methods, accounting period, account day, accounting procedures, managerial accounting, debit, credit, defer payment 1. 2. 3. 4. 5. 6. 7. 8. 9. An amount entered by a bookkeeper in the left-hand side of an account is called a On the other hand, an amount entered in the right-hand side of an account is called a The role of is to provide figures and statements that will aid decision making. Auditors check companies accounts and write a Since we cannot afford it now, we are going to of this debt. The at the New York Stock Exchange usually lasts two weeks. The accounting period is followed by an Auditors are expected to ensure that companies follow their stated Companies can choose from a variety of , but they are not allowed to change them too often.

FOCUS ON LANGUAGE PRACTICE II


3.1. Look at the example and report what was said by using the words in brackets. Example: Liana said: Maria, would you give me your rubber, please? (ask) Liana asked Maria to give her her rubber. 1. I said to my personal assistant: Remember to send the letter. (remind) .. 2. You must finish your project, ladies, the tutor said. (tell) 3. Please, listen to the General Manager, Mrs. Inas, said the President. (try to persuade) 4. You should see a lawyer, the auditor said to Andrei. (advise) . 5. She said: Ladies and gentlemen, do not rush to buy those shares. (warn) . 6. Marilena, please let me use your credit card, said Petre. (ask) .

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3.2. Below is part of an interview with the spokesman of the Prime Minister. Complete the newspaper report which follows by adding an appropriate verb. rise Q: A: Q: A: Q: A: predict continue ask change say work

Has the present Government considered changing its economic policy? No, we are working towards increasing the quality of services and making the economy strong. What do you forecast as an average level of inflation for the next year? In our opinion inflation will continue at present levels which is about 2.5 percent. Is the government confident that economic growth will remain strong? Definitely. Economic growth is now at 2 percent and we believe it should rise to 4 percent over the coming year.

(a) if the policy or the government (b) , the spokesman of the Prime Minister (c) the government (d) towards increasing the quality of services and making the economy strong. He (e) that inflation (f) at present level around 2.5 percent and economic growth, now at 2 percent (g) to 4 percent. 3.3. Here is an extract from a telephone conversation between Jannine, a fashion designer, and Adrian, an off-the-peg clothes manufacturer. Janinne: Did you receive the photos Id sent? Adrian: Yes, they were very good. Everybody liked them a lot. I think we can have a really successful promotional campaign. Now, when are you coming to Bucharest? J: Im not sure yet, but I suppose next month maybe. Yeah, lets settle it now. Ill come at the beginning of March. A: Will you bring the designs of the new collection as well? J: You bet! And even better, Ill try to bring not only the designs, but the clothes too. Theyre almost made and you can see them when I come. A: I know Alina wants to see them. Ill let her know youre coming at the beginning of March. J: Thats all right. Oh, by he way, Alina still owes Frank some money, you know. She has probably forgotten about it. She said the money would be in his bank last week and nothing happened yet. A: All right, Ill tell her. Is there anything else? J: No, I dont think so. Can you ask Alina to call me? I have some other things to talk with her. Ill be in my office all day on Wednesday. A: Okay, Ill tell her. Bye-bye and have a good day.

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Write a brief letter to Alina telling her the details of this conversation. Use the model below as an outline.

^ MODA ZILEI ^
POB 42 99; Bucharest Phone: 40 (1) 356 78 88; Fax: 40 910 356 78 89 Ms. Alina Undress Calea Victoriei 143 74210 Bucure[ti Ref: AS/23/04 27 January 1999 Dear Alina, I spoke to Jannine yesterday. I told her (a) the photographs and (b) a successful promotional campaing. She said (c) to Bucharest at the beginning of March. She also said (d) the desings and the finished clothes. She (e) me to remind you that (f) She said you (g) the money (h) in his bank last week but (i) arrived. Finally, she (j) it you (k) call her. She said (l) all day on Wednesday. Best wishes,

Adrian
Adrian

1. 2. 3.

4. 5.

3.4. Translate into English: Era foarte nervos [i a vrut s\ [tie de ce l-am `ntrerupt in timp ce lucra. Ionu] a spus c\ noua ma[in\rie tocmai sosise [i m-a `ntrebat unde s-o pun\. I-am spus c\ pentru moment s-o lase unde era [i am ad\ugat c\ `i voi spune mai t>rziu ce s\ fac\ cu ea. Ne-a `ntrebat cine suntem [i cum am intrat `n cl\dire. I-am spus c\ suntem reporteri [i doream s\ afl\m c>te ceva despre spargerea care avusese loc noaptea trecut\. Ne-a spus c\ nu avem nici un drept s\ ne afl\m acolo [i a ad\ugat c\, dac\ nu plec\m imediat, va chema poli]ia. C>nd mi-a spus c\ nu-i plac locurile, i-am r\spuns s\ nu se mai pl>ng\, pentru c\ eram oricum noroco[i c\ avem locuri la un astfel de concert. Am `ntrebat-o pe recep]ioner\ dac\ pot s\ achit nota `n seara aceea, explic>ndu-i c\ urma s\ plec foarte devreme a doua zi. Ea a spus c\ va preg\ti nota de plat\ [i m-a `ntrebat la ce or\ vreau s\ fiu trezit.

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COMPREHENSION II

Business Issues

4.1. In order to present a true and fair view of a companys finances, there have been accepted a number of accounting principles or policies that accountants must follow in preparing accounting records and summarising them in financial statements. Match these accounting principles with their definitions: 1. The continuity or goining-concern principle. 2. The revenue or realisation principle. 3. The unit of measure assumption. 4. The time-period or accounting period assumption. 5. The separate entity or accounting entity assumption. 6. The principle of conservatorism or prudence. 7. The full-disclosure principle. 8. The objectivity principle. 9. The consistency principle. 10. The matching principle. 11. The historical cost principle. a. b. c. d. e. f. g. h. i. j. k. All data recorded should be verifiable and free from bias. Financial reporting must include all significant information. The revenues generated in an accounting period are identified with related costs whenever they were incurred. The same methods (of inventory valuation, depreciation etc.) must be used from one period to the next. Where alternative accounting methods are possible, one understates rather than overstates profits. All transaction and other items to be accounted for must be in a single monetary unit. An enterprise is an accounting unit separate from its owners, creditors etc. Financial data must be reported for particular periods which make accrual and deferral necessary. Revenue is realised at the moment when goods are sold or when services are rendered. The business will continue indefinitely into the future. The initial price paid for the acquisition of assets is the one that is recorded in accounts. 4.2. Word partnerships All the words below can be combined with account, accounts or accounting in a two word partnership. Examples: bank account accounts payable tax accounting 1. methods 2. day 3. equation 4. payable 5. principles 6. period 7. receivable 8. book 9. Cost 10. Managerial 11. Profit and loss 12. Tax

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4.3. Humor Accountants are traditionally the target of a lot of jokes, but considering the fees they charge they usually have the last laugh. Match up the halves of the following jokes: 1. 2. 3. 4. 5. How can you tell if accountants are lying? What do you have if you have five accountants up to their necks in sand? Why dont auditors become accountants? What do you call a former accountant? How do you get an accountant down from a tree? a. b. c. d. e. Waiter! Cut the rope. They cant take the excitement. Not enough sand. Their lips are moving.

4.4. Translate into English: Contabilitatea este o tehnic\ ce permite, prin adunarea datelor numerice [i organizarea lor `ntr-un ansamblu coerent, `nf\]i[area activit\]ii [i rezultatelor unei `ntreprinderi sau, mai general, a unei organiza]ii. Documentele contabile produse de o organiza]ie se prezint\ sub forme diferite ce corespund, de fapt, unor nevoi de informare diferite. Nu se pot `n]elege cu adev\rat func]ionarea [i mai ales semnifica]ia conturilor, f\r\ cunoa[terea principiilor care au stat la baza elabor\rii lor [i condi]iile `n care au fost create.

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UNIT FOUR
MODULE II ANSWER KEY PRACTICE I

Business Issues

2.1. 1. cost accounting; 2. tax accounting; 3. auditing; 4. creative accounting; 5. managerial accounting; 6. Public Accountant; 7. Accounting system; 8. Accounting; 9. Bookkeeping; 10. CPA; 11. Private Accountant; 12. Financial accounting; 13. Independent audit. 2.2. 1. journals; 2. posted; 3. ledger; 4. transferred; 5. Double-entry; 6. debits; 7. credits; 8. trial balance. 2.3. 1. b; 2. b; 3. c; 4. b. 2.4. 1. debit; 2. credit; 3. managerial accounting; 4. report; 5. defer payment; 6. accounting period; 7. account day; 8. accounting procedures; 9. accounting methods.

PRACTICE II
3.1. 1. 2. 3. 4. 5. 6. I reminded my personal assistant to send the letter. The tutor told the students to finish their projects. The President tried to persuade Mr. Inas to listen to the General Manager. The auditor advised Andrei to see a lawyer. She warned the shareholders not to buy those shares. Petre asked Marilena to lend him her credit card.

3.2. a) asked; b) would change; c) said; d) was working; e) predicted; f) would continue; g) would rise. 3.3. a) we liked/had liked; b) we could have; c) she would come/was coming; d) she would bring; e) asked; f) you still owe Frank some money; g) promise/said; h) would be; i) hasnt/hadnt ; j) asked; k) would; l) she would be in. 3.4. Suggested answers: 1. He was very irritated and he wanted to know why I had intrerrupted him in the middle of his work. 2. Ionu] said that the new machine had just arrived and asked where he should put it. I told him leave it where it was for the time being, saying that I would tell him later what to do with it. 3. He asked us who we were and how we had got into the building. We told him we were reporters and that we wanted to know something about the robbery that had taken place the

UNIT 4 Module II

95

4. 5.

previous night. He said that we had no right to be there and added that if we didnt leave immediately, he would call the police. When she told me she didnt like the seats, I told her not to complain and added that we were lucky to have got seats at all for such a concert. I asked the receptionist whether I could pay my bill that night, explaining that I had to leave very early the following morning. She said she would prepare the account and asked what time I would like to be called.

COMPREHENSION II
4.1. 1. j; 2. i; 3. f; 4. h; 5. g; 6. e; 7. b; 8. a; 9. d; 10. c; 11. k. 4.2. 1. accounting; 2. account; 3. accounting; 4. accounts; 5. accounting; 6. accounting; 7. accounts; 8. account; 9. accounting; 10. accounting; 11. account; 12. accounting. 4.3. 1. e; 2. d; 3. c; 4. a; 5. b.

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UNIT FOUR
MODULE III LEAD-IN
1. 2. 3.

Business Issues

Where are business transactions first recorded? Do you know which are the basic financial statements? Does the balance sheet of a company tell you anything about the financial situation of that company? How? & Read the following text and see if you can find answers to the above questions:

THE BALANCE SHEET


The financial statements generally consist of the balance sheet, income statement, statement of changes in shareholders equity, statement of cash flow and footnotes. The annual financial statements are usually accompanied by an independent auditors report. An audit is a systematic examination of a companys financial statements; it is typically undertaken by a Certified Public Accountant (CPA) The auditors report attests to whether the financial reports are presented fairly in keeping with the Generally Accepted Accounting Principles, known as GAAP for short. The balance sheet is a financial statement which indicates the condition of a company on a specific date. It is called a balance sheet because it expresses the basic accounting formula: Assets = Liability + Owners Equity (Owners equity is sometimes referred to as net worth). The left side of the balance sheet itemizes the firms assets. Assets are anything of value to a company. On a balance sheet the value is always expressed in terms of money. Companies have different types of assets. They are usually divided into two groups: current assets and fixed assets. Current assets are either cash or items which will be turned into cash during the current business period, such as merchandise to be sold and payments to be received. In addition to cash, inventories, and receivables companies, sometime, have stocks and bonds. These are referred to as securities. All of these assets, such as cash and those readily turned into cash, are known as liquid assets. If a company needs to have more cash for one reason or another, it can liquidate some of its stocks and bonds. On the other hand, merchandise which is not selling quickly because there is not much demand is not very liquid, even though it is considered as current assets. Fixed assets are those that will be kept and used for a long time. Fixed assets are usually itemized according to their use to the firm. They generally include land, buildings and equipment. New machinery and production equipment are valued at their cost. As the equipment is used, its value decreases. This decreases in value is called depreciation. Used equipment is therefore carried on the books at original cost less depreciation. Depreciation is usually calculated on a yearly basis by dividing the total cost of the equipment by the number of years of useful life. For example, a taxicab may cost $12,000 when new. The taxicab owner may use it for three years and then he will have to purchase a new one. The depreciation on the taxicab is $ 4,000 per year. Therefore, after one year the value of the taxicab on the balance sheet would be $ 12,000 - $ 4,000 = $ 8,000. After two years it would be $ 12,000 - $ 8,000 = $ 4,000. There are various formulae and methods used for calculating depreciation.

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Intangible assets are assets that do not exists physically but have a value based on legal rights and advantages that they confer on a firm. They include patents, copyrights, trademarks, and goodwill. By their nature, intangible assets are long-term assets. They are of value to the firm for a number of years. Goodwill is the value of a firms reputation, location, earning capacity, and other intangibles that make the business a profitable concern. Goodwill is not normally listed on a balance sheet unless the firm has been purchased from previous owners. In this case, the purchasers have actually paid an additional amount (over and above the value of the previous owners equity) for this intangible asset. The opposite side of the balance sheet shows the liabilities. These are amounts which the company owes. Companies owe money to banks that supply credit, to employees whom they havent yet paid, to governments for taxes, and to other companies that have sold them goods which they havent yet paid for. Liabilities, like assets, are divided into two groups. Current liabilities are debts which must be paid during the current business cycle. They would include accounts payable, taxes payable, accrued wages payable, and interest on borrowed money. Companies also have long term liabilities. These are debts which do not have to be repaid for many years. Companies usually have to pay interest on long term debts. The debts may be in the form of bonds, which are securities sold to banks or other investors, or a mortgage, which is money borrowed from banks for the purpose of purchasing property or equipment. The payment of bonds is usually guaranteed by the reputation of the company. Mortgages, on the other hand, are guaranteed by the value of the mortgage property. After a company subtracts its debts from its assets, the figure arrived at is the net worth of the company or its owners equity. Depending upon the type of company, there are different types of owners. A corporation is owned by stockholders, and so equity will be shown as the value of the stock. This value is the book value. It may or may not be equal to the value of the stock exchange or market value. Companies whose stock is selling at prices considerably below book value are likely to be taken over by other companies. The owners equity of a partnership is allocated according to the articles of copartnership. For a sole proprietor, there is only one owner and the owners equity is the value of the business to him. Here is an example of balance sheet for a privately held corporation:

NICHOLAS TIMBER COMPANY


Statement of Financial Condition as of December, 31, 1998

ASSETS
Curent assets Cash: Cash on hand City Bank Notes Receivable Inventory Prepaid Insurance Prepaid Expense

944.96 4,915.82 18,576.59 45,683.71 1,068.29 7.50 Total Current Assets $ 72,524.07

98
Fixed Assets Machinery & Equipment Less: Accumulated Depreciation Truck & Automobile Less: Accumulated Depreciation Furniture & Fixtures Less: Accumulated Depreciation

Business Issues

$ $

Total Fixed Assets Other Assets Incorporation Expense Total Assets

$ $

7,789.47 2,900.86 4,888.61 7,934.91 5,784.16 2,150.75 1,382.85 697.10 685.75 7,725.11

225.00 80,474.18

LIABILITIES & CAPITAL


Current Liabilities Account Payable Accrued Wages Accrued Sales Tax Accrued Expenses Accrued Transportation Tax Accrued Rent Customers Deposits Total Current Liabilities Long Term Liabilities Notes Payable Total Liabilities Capital/Owners Equity Capital Stock Authorized & Issued Retained Earnings Less: Distributions Net Profit for Year Ending December 31, 1998 Retained Earnings Total Capital TOTAL LIABILITIES & CAPITAL $ 9,608.97 73.26 1,218.36 851.83 2.07 1,144.51 20.00 12,919.00

$ $

28,573.61 41,492.61

$ $

5,000.00 24,519.75 1,983.23 22,536.52 11,445.05 33,981.57 38,981.57 80,474.18

UNIT 4 Module III


VOCABULARY
to itemize, v. = a specifica, a detalia asset, n. = activ; bunuri patrimoniale assets and liabilities = activ [i pasiv; active curente current asset = mijloace circulante; active curente fixed asset mijloace fixe to undertake, undertook, undertaken, v. = a efectua, a prelua

99

merchandise, n. = inventar; marf\, m\rfuri depreciation, n. = amortizare goodwill, n. = renume, vad comercial accrued = acumulate mortgage, n. = ipotec\ receivables = (sume) de primit

COMPREHENSION I
1.1. Answer the following questions: 1. What are the annual financial statements accompanied by? 2. Who undertakes the audit of the companys financial statements? 3. What does the auditors report attest? 4. Why do managers need financial statements? 5. What does the balance sheet indicate? 6. Why is it called a balance sheet? 7. Where are the assets itemized? 8. What is another word for owners equity? 9. What are the two kinds of assets? 10. How are current assets defined? 11. What is the value of all things that Nicholas Timber Company owns? 12. What is the total value of debts?

PRACTICE I
2.1. There are five major accounts used to prepare financial statements: Assets (current, fixed, intangible) Liabilities Owners equity Revenues Expenses Match the type of account to the following 1. .............................................................. 2. .............................................................. 3. .............................................................. 4. .............................................................. 5. .............................................................. 6. .............................................................. 7. .............................................................. 8. .............................................................. 9. .............................................................. (if an asset, indicate current, fixed or intangible): cash retained earnings accounts payable/creditors interest rent land commission revenue gross sales capital stock

100
10. ............................................................ 11. ............................................................ 12. ............................................................ 13. ............................................................ 14. ............................................................ 15. ............................................................ 16. ............................................................ 17. ............................................................

Business Issues
copyright notes payable accounts receivable/debtors equipment advertising wages retained earnings accrued expenses

2.2. For each of the preceding 17 accounts tick the one you would find on a balance sheet. 2.3. Fill in with missing prepositions in the following text: Provisions (1) doubtful debts increased (2) eight million pounds. Depreciation (3) leased assets and (4) premises and equipment, calculated (5) a straight line basis amounted (6) fifteen million pounds. Other expenses increased (7) a little (8) seventeen (9) cent, (10) twenty-four million (11) twenty-eight million pounds; this illustrated our determination (12) keep costs (13) control. Dividends remaind unchanged (14) the previous years (15) five millions pounds as the major part (16) the years profit (17) expand our consolidated capital base. Our balance sheet footings have been growing steadily (18) recent years and this was (19) fact first year (20) which they passed the three billion pounds mark. 2.4. Rephrase the underlined words and expressions in bold with balance sheet vocabulary Example: The value of the company is equal to the amount of money it owes to creditors and the amount it owes to its owners. The assets of the company are equal to the liabilities and owners equity. 1. 2. 3. 4. 5. On the right side of the page are listed the debts and the net worth. Certain items of value to the company are bought and sold on a regular basis; other items are held by the company for a long time. Merchandise and money owed the company are considered current assets. The value of machinery is determined by subtracting its decline in value due to use from its original cost to the company. Debts are divided into two groups: debts to be paid during the present business year and debts to be paid over many years.

UNIT 4 Module III


FOCUS ON LANGUAGE PRACTICE II
a. b. c. d. e. f. 1. 2. 3. 4. 5. 6.

101

3.1. Put the verbs in brackets into their correct tense making any other changes if necessary: When I (arrive) at the railway station half hour late, I (find) that the train already (leave). I (be told) that I (have) to wait an hour for the next one. While I (wait) in the restaurant I (see) a friend of mine. It turned out that he, too, (go) to Bra[ov. He said he (go) on business and (be) there about a week. I (be) glad that I (miss) the train; for if I (catch) it, I (not see) my friend. 3.2. Put the following into Reported Speech: Are there any letters for me? said the sales manager when she returned from her business trip. Im broke, said our accountant. Shall I lend you some money? said the financial manager. I often see lights late at night, after working hours, in the office building across the road, said our security man. Do you think I should report it? Could you please ring back in half an hour? said the secretary. Go on apply for the job, said my fiancee. It would just suit you. Youd better not keep your money in the drawer, said one of my friends. Why dont you open a bank account? said another. 3.3. Translate into English: Mi-a spus [eful s\ nu fumez `n biroul decanului dac\ nu vroiam s\ dau de necaz. {eful m-a `ntrebat de ce nu lucrez mai mult [i mi-a spus c\ voi regreta mai t>rziu. Prietena cumnatei mele spunea c\ niciodat\ nu putea s\-[i aminteasc\ unde `[i punea ochelarii [i asta o enerva cumplit. Primul Ministru a declarat c\ va merge la `nt>lnirea la nivel `nalt de la Bruxelles dac\ obliga]iile `i vor permite. Se `ntreba dac\ se vor mai `nt>lni vreodat\, dar ea l-a asigurat c\-l va ajuta dac\ va fi necesar.

1. 2. 3. 4. 5.

COMPREHENSION II
4.1. Read the following text about the income statement: An income statement is a summary of a firms revenues and expenses during a specified accounting period. The income statement is sometimes called the earnings statement or the statement of income and expenses. It may be prepared monthly, quarterly, or annually. An income statement covering the previous year must be included in a corporations annual report to its stockholders. While the balance sheet shows the fundamental soundness of a company by reflecting its financial position at a given date, the income statement may be of grater interest to investors for two reason: the income statement shows the record of the companys operating results for the whole year; it also serves as a valuable guide in anticipating how the company may do in the future. The income statement consists of four sections. The basic formula is: Revenue minus cost of goods sold = gross profit

102
Gross profit minus operating expenses = profit before taxes Profit before taxes minus taxes = net profit.

Business Issues

4.2. Go back to exercise 2.2 again and indicate whether you would find them on a balance sheet (BS), or an income statement (IS): 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

4.2. Construct an accurate income statement for Florio Inc., using the accounts listed below; insert them in the blank spaces of the model given:

FLORIO INC. INCOME STATEMENT


Year ending Dec. 31, 1998 1. 2. Rental Revenue 3. Total Sales 4. 5. Gross Profit 6. OPERATING EXPENSES 7. Selling Expenses 8. 9. 10. General Expenses 11. 12. 13. Depreciation Expenses 14. Total Operating Expenses 15. Net Income before Taxes 16. Less Income Tax Expenses 17. Net Income 77,800 3,700 81,500 33,500 $48,200

19,400 8,600 28,000 3,100 4,300 3,200 10,600 $38,600 $ 9,600 $ 2,400 $ 7,200

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4.4. In the following table we have listed some of the more obvious and important differences between British and American English widely used terms in the area of finance. Study them and try to give their Romanian Equivalent:
British Annual General Meeting (AGM) Articles of Association authorized share capital barometer stock base rate bonus/scrip/capitalization issue bridging loan building society cheque company creditors current account debtors gilts/gilt-edged stock labour Memorandum of Association merchant bank ordinary share overheads profit and loss account property quoted company retail price index (rpi) share share premium shareholder shareholders equity stock trade union unit trust visible trade American Annual Stockholders Meeting Bylaws authorized capital stock bellweather stock prime rate stock dividend/stock split bridge loan saving and loan association/thrift check corporation accounts payable checking account accounts receivable Treasury bonds labor Certificate of Incorporation investment bank common stock overhead income statement real estate listed company consumer price index (cpi) stock paid-in surplus stockholder stockholders equity inventory labor union mutual funds merchandise trade Romanian

4.5. Translate into English: Cele dou\ mari [coli de contabilitate cea anglo-saxon\ [i cea francez\ (numit\ [i continental\) `[i au, printre altele, originea [i `n diferen]e de natur\ cultural\ [i de civiliza]ie. Anglo-saxonii dau prioritate informa]iilor necesare lu\rii diciziilor de c\tre investitori conform principiilor liberalismului prin care se acord\ pu]in\ considera]ie pentru implica]iile asupra colectivit\]ii na]ionale. Concep]ia francez\ se vrea mai `mp\ciuitoare `ntre diferitele p\r]i interesate. Contabilitatea american\, cu o clasificare a cheltuielilor dup\ destina]ie, sa transformat foarte rapid `n gestionare, `n timp ce contabilitatea francez\ este `n continuare marcat\ de cunoa[terea valorii patrimoniului.

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UNIT FOUR
MODULE III ANSWER KEY
2.1. Current assets: 1, 12. Owners equity: 2, 9, 16. Liabilities: 3, 11. Expenses: 4, 5, 14, 15. Fixed assets: 6, 13. Revenue: 7, 8. Intangible Asset: 10. Accrued expenses: 17. 2.2. Balance sheet: 1, 2, 3, 6, 9, 10, 11, 12, 13, 16, 17.

Business Issues

2.3. 1. for; 2. to; 3. on; 4. on; 5. on; 6. to; 7. by; 8. under; 9. per; 10. from; 11. to; 12. to; 13. under; 14. over; 15. at; 16. of; 17. to; 18. over; 19. in; 20. in. 2.4. 1. 2. 3. 4. 5. 3.1. a. b. c. d. e. f.

balance sheet; liabilities; owners equity. current assets; fixed assets. inventories; receivables. depreciation. liabilities.

When I arrived at the railway station half hour late, I found that the train had already left. I was told that I had to wait an hour for the next one. While I was waiting in the restaurant I (saw) a friend of mine. It turned out that he, too, was going to Bra[ov. He said he was going on business and would/was going to be there about a week. I was glad that I had missed the train; for if I had caught it, I wouldnt have seen my friend.

3.2. Suggested answers: 1. When she returned from her business trip the sales manager asked if there were any letters for her. 2. Our accountant said he was broke. The financial manager offered to lend him some money. 3. Our security man said he often saw lights late at night, after working hours, in the office building across the road and asked if I thought he should report it.

UNIT 4 Module III


4. 5. 6.

105

The secretary asked him to ring back in half an hour. My fiance urged me to apply for the job as it would just suit me. One of my friends warned me not to keep my money in the drawer. Another one advised me to open a bank account. He told me not to smoke in the Deans office if I didnt want to get into trouble. The boss asked me why I didnt work harder, and said I would regret it later. My sister-in-laws friend told me she could never remember where she had her glasses and that was driving her crazy. The Prime Minister declared that he would go to the Brussels summit if his commitments allowed him. She wondered whether they would ever meet again, but she assured him that she would help him if it was necessary.

3.3. 1. 2. 3. 4. 5.

4.2. 1. BS 2. BS 3. BS 4. IS 5. IS 6. BS 7. IS 8. IS 9. BS 10. BS 11. BS 12. BS 13. BS 14. IS 15. IS 16. BS 17. BS

4.3. 1. Net Sales; 4; Cost of Goods Sold; 8. Sales Salaries; 9. Advertising; 11. Interest Expense; 12. Insurance. 4.4. Tentative answer:
British Annual General Meeting (AGM) Articles of Association authorized share capital barometer stock base rate bonus/scrip/capitalization issue bridging loan building society cheque American Annual Stockholders Meeting Bylaws authorized capital stock bellweather stock prime rate stock dividend/stock split bridge loan saving and loan association/thrift check Romanian adunarea general\ a ac]ionarilor (AGA) statutul societ\]ii capital social subscris ac]iune barometru/care conduce emisiunea rat\ de baz\ emisiune de capitalizare, dividende `n ac]iuni `mprumut punte, pe termen scurt societate financiar\ de investi]ii carnet de cecuri/cec

106
British company creditors current account debtors gilts/gilt-edged stock labour Memorandum of Association merchant bank ordinary share overheads profit and loss account property quoted company retail price index (rpi) share share premium shareholder shareholders equity stock trade union unit trust visible trade American corporation accounts payable checking account accounts receivable Treasury bonds labor Certificate of Incorporation investment bank common stock overhead income statement real estate listed company consumer price index (cpi) stock paid-in surplus stockholder stockholders equity inventory labor union mutual funds merchandise trade

Business Issues
Romanian firm\/societate/companie conturi creditoare cont curent conturi debitoare bonuri de tezaur munc\ fizic\; for]\ de munc\ contract de asociere banc\ de investi]ii ac]iuni obi[nuite, ordinare costuri administrative, de regie cont de venituri [I cheltuieli proprietate (cl\diri [i/sau terenuri) companie cotat\ la burs\ indicatorul pre]ului cu am\nuntul la consumator ac]iune prim\ de ac]iune, diferen]a dintre valoarea de pia]\ [I valoarea nominal\ ac]ionar capitalul ac]ionarilor obiecte de inventar sindicat fonduri mutuale comer] vizibil de m\rfuri

4.6. Suggested answer: The two major accountancy schools: the Anglo-Saxon one and the French (also called continental) one have their origin, among others, in difference of culture and civilization. The Anglo-Saxons value information necessary for the decision-making process of investors based on the principles of liberalism according to which little consideration is given to the consequences to the national community. The French conception wants to be more conciliatory among the interested parties. American accountancy, with a breakdown of costs according to their destination, has rapidly changed into accounting management, while French accountancy is still marked by knowing the value of patrimony.