PRACTICAL ENGLISH FOR STUDENTS OF ACCOUNTING ...

R. KHOSTIKYAN, G. AMATUNI

PRACTICAL ENGLISH FOR STUDENTS OF ACCOUNTING

AND AUDIT

Yerevan 2018

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UDC 811.111(07) Հրատարակվում է

ՀՊՏՀ գիտական խորհրդի որոշմամբ

Ռ. Խոստիկյանի ընդհանուր խմբագրությամբ

PRACTICAL ENGLISH FOR STUDENTS OF ACCOUNTING AND AUDIT / Ռ. Խոստիկյան, Գ. Ամատունի.- Եր.: Տնտեսագետ., 2018.-140 էջ:

«Գործնական անգլերենը հաշվապահական հաշվա-ռում և աուդիտ» մասնագիտության համար նախատեսված ուսումնական ձեռնարկը ընդգրկում է տվյալ ոլորտին առնչվող վեց թեմա, լրացուցիչ նյութեր, եզրույթների, բա-ռակապակցությունների և արտահայտությունների բառա-րաններ և հապավումների ցանկ:

Նախատեսված է ուսանողների, մագիստրանտների, ոլորտում աշխատող և անգլերենով հաղորդակցվող մաս-նագետների ու գործարարների համար: Ձեռնարկն ա-ռանձնանում է գործնական բնույթով բազմաթիվ զրույցնե-րի և կոմունիկատիվ վարժությունների շնորհիվ և կարող է նպաստել ուսանողների հաղորդակցական և լեզվական հմտությունների զարգացմանը:

ISBN 978-9939-61-178-5 © Tntesaget, 2018

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Հեղինակների կողմից

Սույն անգլերենի ձեռնարկը նախատեսված է հաշվա-պահական հաշվառում մասնագիտության ուսանողների և այդ ոլորտում աշխատող և անգլերենով հաղորդակցվող մասնագետների և գործարարների համար: Ձեռնարկի առա-վելություններից է նրա գործնական բնույթը:

Տվյալ աշխատանքը լրացնում է ոլորտում ունեցած սա-կավաթիվ ձեռնարկների քանակը և առանձնահատուկ կա-ռուցվածքի և բազմազան ու բազմաբնույթ վարժությունների շնորհիվ կարող է խթանել ուսանողի գիտելիքի ձեռքբերումը ուսումնառության ընթացքում:

Ձեռնարկը բաղկացած է 6 գլխից, որոնցից յուրաքանչ-յուրը առնչվում է առանձին ոլորտի հետ:

Բազմաթիվ են երկխոսությունները, բնագիր փաստա-թղթերից հատվածները, կոմունիկատիվ վարժությունները, որոնց շնորհիվ հնարավոր է ապահովել ուսանողների ան-հրաժեշտ հաղորդակցական հմտությունների զարգացումը ինչպես թեմայի շուրջ, այնպես էլ թեմայից դուրս: Հնչյունա-բանական վարժությունների նպատակն է՝ հղկել և զարգաց-նել լեզվաբանության մեջ հատուկ տեղ զբաղեցնող հնչյունա-բանական հմտությունները:

Ձեռնարկում խաչբառերի առկայությունը նույնպես կա-րող է խթանել ուսանողի հետաքրքրասիրության շրջանակը մասնագիտական անգլերենում և բառամթերքի ստուգման չափանիշ հանդիսանալ ուսումնական գործընթացում:

Հնարավորությունից օգտվելով, կցանկանայինք հայտ-նել, որ ցանկացած առաջարկություն կամ խորհուրդ սիրով կընդունվի և հաշվի կառնվի հետագա աշխատանքների կա-տարման ընթացքում:

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U N I T 1

INTRODUCTION TO ACCOUNTING Exercise 1. a) Find the following English equivalents to

Armenian ones: փորձնակ, բեք գրասենյակի (անմիջապես հաճախորդներին չսպա-սարկող) մենեջեր, հաշիվներ ստուգել, գրառումների մշակում

b) Look at some jobs and definitions. Fill in the definitions with words from the box below:

Trainee accountants Accountants who are _______________ for professional

examinations. Internal auditors Employees of a company responsible for _____________ . Financial officer Person in charge of a company’s ____________ . Private accountant Person working for a ____________ . Tax accountant An accountant ____________ in a company’s tax affairs. Back-office manager Person in charge of the staff responsible for____________

to the finance department.

specializing, studying, giving administrative support, inspecting its accounts, single employer, financial affairs, processing the records

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Bookkeepers Administrative staff responsible for ____________ of

financial activities of a business. Exercise 2. Part 1. Here is a conversation between

Michael Rogers, a CPA from the US, and a CFO of a Belgian company, Paul Marten’s secretary. Find the following English equivalents from the conversation below.

Բաց նախագծի տարածք, ընկերության գանձապետ, ինքնարժեքի գծով հաշվապահ

Secretary Mr. Marten will be with you in a moment. He’s just finishing a phone call. Michael Thank you. Secretary Would you like some coffee? Michael Yes, that would be great. Milk no sugar, please. Secretary Here you are. Michael Thank you. Is this the whole department? Secretary No no, not at all. On this floor we have the trainee

accountants and the bookkeepers. Michael Well, and does everyone work in the open-plan

area? Secretary No, some of the managers have individual offices.

The two big offices on the left are for the company treasurer and for our senior tax accountant. The offices on the right are for our cost accountant and for our budget manager.

Michael And the office in the corner of the open-plan area? Secretary That’s used by our back-office manager. Michael And you have offices downstairs as well?

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Secretary Yes, that’s correct. Downstairs are the internal auditors and at the moment we have a team of external auditors. They are in one of the conference rooms at the end of the corridor.

Michael I see. Answer the questions:

1. What do the abbreviations CPA, CFO, US, and CEO mean?

2. Which jobs mentioned in the conversation are not included in ex.1?

3. What is Michael most impressed by in this conversation?

Part 2. Here is another conversation between Paul and Michael. From the conversation find English equivalents to Armenian ones below, then read the conversation.

Ինքնակենսագրություն, տեղեկացնել ինչ-որ բանի մասին, պա-հանջներ, պաշտոն, մշակութային միքս Paul Hello, Michael. I’m Paul. It’s nice to meet you.

Sorry to keep you waiting. Please come in and take a seat. Did you have a nice flight?

Michael Yes, thanks, Paul. Finding the office was a little more difficult, though. I’m glad so many people in Brussels can speak English.

Paul Oh yes, we’re very international here now. But that’s not a bad thing, I must say.

Michael A little cultural mix is good, isn’t it? Paul You’re absolutely right. Would you like to start by

telling me a little about your experience, Michael? Your C.V. is very impressive. And then I’ll fill you

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in on our group, and the particular requirements we have for this position.

Michael Yes, that’s fine. I guess you know from my C.V. that I studied economics in New-York, …

Answer the questions:

1. What is the reason for the meeting? 2. What is Michael most impressed by? 3. What question can you ask your partner according to this

conversation? 4. Reproduce the conversation or make a similar one with a

partner. 5. Find a specimen of a CV and write your own one.

Compare the CV with a cover letter and express your opinion about which is more important.

6. Why is an employer more interested in reading a cover letter than a CV?

Exercise 3. Make a list of different types of job you know

in accounting

Jobs in accounting

bookkeeper auditor

accountant

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Exercise 4. Reorder the mixed-up phrases so that they make sense.

1. Would, about, to, me, you, tell, like, experience, your? 2. flight, have, a, nice, Did, you? 3. in, moment, Mr. Martens, with, you, a, be, will. 4. coffee, some, Would, you, like? 5. keep, Sorry, you, to, waiting. 6. call, finishing, He’s, just, a, phone.

Which of these phrases express hospitality and regret?

Exercise 5. Fill in the gaps with a suitable word from the

box. met ● absolutely ● bad ● very ● start ● fill ● very

1. You’re ____________ right. 2. Would you like to ____________ by telling me a little about

your experience? 3. Particular requirements for this position must be ______ . 4. And then I’ll ____________ you in on our group. 5. Your C.V. is ____________ impressive. 6. But that’s not a ____________ thing. 7. We’re ____________ international here now.

Exercise 6. Make two lists. In the first, write down topics

which would be safe to talk about with a foreign business partner. In the second, write down unsafe topics. Discuss one of them with a partner.

Safe topics Unsafe topics

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Exercise 7. Here are some mixed phrases to meet people and offer hospitality. Put them in appropriate columns below.

Hello, Mr/Ms … I’m … May I introduce you to … Can I get you a cup of tea/coffee? ... Please come in and take a seat. Can I take your coat? It’s nice to meet you. Would you like something to drink? I’d like to introduce you to … Yes, that would be great. Have you met …? Nice to meet you too. Meeting people Offering hospitality Read the article. What do the following abbreviations mean? GAAP IFRS IAS IASC Find the following English terms or phrases from the article.

Անընդհատության սկզբունք, հաշվենկատության սկզբունք, համադրելիության սկզբունք, հետևողականության սկզբունք, չիրացված օգուտներ, վերընթաց վերագնահատել, ֆինանսական հաշվետվություններ, համապատասխանեցում, հանրությանը սպա-սարկող ընկերություններ, եթե միայն

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International Accounting International companies can choose how they present

financial information to outside parties. The rules and regulations between countries vary significantly. Accountants worldwide are familiar with the words ‘Generally Accepted Accounting Principles’ (GAAP). Some of the basic principles are:

• the going-concern principle • the prudence principle • the matching principle • the consistency principle The development of these principles has greatly differed

between countries. For example, in most English-speaking countries it is often accepted practice to offset unrealized gains from unrealized losses, or to revalue long-term assets upwards provided sufficient proof of the current value can be shown. This means that accounts can have very different values, depending on whether the company chooses to follow local accounting standards, International Financial Reporting Standards (IFRS) – formerly the International Accounting Standards (IAS) – or U.S. GAAP. Whether the company can choose is governed by the laws of the country where it is registered. For example, the U.S.A. and Japan currently allow publicly-traded companies to prepare their financial statements using the standards of the International Accounting Standards Committee (IASC), but they must also include a reconciliation to domestic GAAP.

1. What other principles of GAAP or IFRS do you know? 2. Find out the meaning of the business entity concept.

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Exercise 8. Use words from each line to make word partnerships. Match them to the definitions below.

English-speaking ● accepted ● local accounting ● outside publicly-traded

company ● standards ● parties ● practice ● countries

1. The way that most people do something. 2. The rules which state how accountants operate in a

particular place. 3. People who are not involved in a company. 4. A firm that sells its shares to anyone who is willing to

buy. 5. For example, Australia and the UK.

Exercise 9. Four basic principles of accounting are

mentioned in the article “International Accounting“. Match them to the definitions below.

This principle is concerned with the timing of the recognition of transactions in accounts. Revenue is recognized when earned regardless of when received and expense is recognized when incurred regardless of when paid.

When preparing accounts we assume that the enterprise will still be viable in the years to come and will be able to repay debts and other obligations.

1.

2.

3.

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This principle requires a policy where revenues and assets are not overstated and expenses and liabilities are realistically valued.

The idea that accounts should be prepared based on the same principles from one year to the next. Exercise 10. Read and reproduce this email on creative

accounting. Decide if the statements below are true (√) or false (×). Find English equivalents to Armenian ones below from the text.

Բազային տեղեկատվություն, արտահաշվեկշռային հաշվապա-հական հաշվառում, ստեղծարար հաշվապահական հաշվառում, օրինականացված գործարք, հետևանք, վարձակալություն, մո-լորեցնող թվեր, ճկունություն, հաշվապահական հաշվեկշիռ

Subject: Creative accounting From: Rupert Greene <r. [email protected]> To: Javier Estrada [email protected]

Hi Javier At our meeting yesterday you asked me to send you some

background info on creative accounting and in particular off-balance-sheet accounting.

Basically there is quite a bit of flexibility in the way we can interpret the standards and principles of accounting. For example, we may want to report bigger profits so that we can attract investors on the capital markets. On the other hand, smaller profits may be better so that we pay less tax. The problem is that the line between truthful and misleading

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representation of figures is sometimes very thin, and this is where people get into trouble.

Off-balance-sheet accounting is seen by some as one type of creative accounting. The key point to remember is that the accounting treatment of legitimate business transactions can vary greatly. For example, many companies are involved in leasing for business reasons, and the question for the accountants is how to present the financial implications of such leases in the accounts. In theory, the idea is that leasing an asset (instead of buying it) allows the company to exclude the liability from its accounts.

Hope this helps—give me a call if you have more questions. Best wishes Rupert

1. Accountants agree that creative accounting is a good thing.

2. Off-balance-sheet accounting is one way of creative accounting – there are others.

3. Creative accounting is sometimes used to try and attract more investors.

4. Accountants are allowed some flexibility in the way they present accounts.

5. Leasing is actually illegal. 6. Big profits mean paying less tax. 7. When a company leases an asset, the accountant has to

include it in the accounts.

Exercise 11. Translate the conversation into English using the following terms.

Level of gearing (leverage), service a debt, come up with solutions, leasing the assets, exclude liabilities, disclose

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Չարլզ. Բաժնետերերը նյարդանանում են և մենք պետք է քննարկենք, թե ինչպես կարող ենք մարել երկարա-ժամկետ պարտքերը: Նոր ներդրումների ներգրավվու-մը ավելի է բարդանում: Քանի որ մենք բավականին ներդրումներ ենք արել Գերմանիայում նոր գործարանի կառուցման մեջ, և այն շատ կարևոր է մեզ համար, մենք կքննարկենք ակտիվներ վարձակալելու հարցը:

Սելի. Եթե մենք ակտիվներ վարձակալենք, հնարավո՞ր կլինի բացառել պարտավորությունները հաշվեկշռից:

Չարլզ. Անշուշտ: Սելի. Ես կարծում եմ, աուդիտորները ի մոտո մոտիկից կու-

սումնասիրեն այդ գործարքները և ֆինանսական վար-ձակալությունները կբացահայտվեն:

Answer the Questions:

1. What are the consequences of the debt problem? 2. Why do they need a solution to the problem soon? 3. How does Charles suggest they deal with it? 4. Does Sally agree with Charles’s suggestion?

Exercise 12. Match the words with the meanings: 1. liabilities a) someone who owns part of a company 2. transaction b) money that is owed 3. gearing c) the opposite of assets 4. lease d) a written agreement between two or more

parties 5. debt e) buying or selling something 6. contract f) the proportion of own capital to borrowed

funds

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7. shareholder g) an agreement where the owner of something allows someone else to use it for a specific time for a sum of money

Exercise 13. Complete the sentences using liability,

liabilities, debt or debts.

1. Look at the assets and ____________ on the balance sheet if you want to know how the company is doing.

2. Many developing countries are burdened by heavy____________ .

3. He’ll have paid his ____________ off by next year. 4. We have to look at the long-term ____________ before

we think about any major new purchases. 5. Current ____________ are usually paid off within a year. 6. The partnership has a limited ____________ status.

Exercise 14. Here are some ways to agree or disagree with someone. Put a tick (√) next to the ones which mean agreement, and a cross (×) next to those which mean disagreement. Use some prompts for your understanding.

Ոչ մի դեպքում, ձեր տեսակետը ճիշտ է, ընդունելի չէ, ընդունված է

1. You have got a point there. 5. It’ just not on. 2. I see what you mean. 6. Fair enough. 3. No way 7. Point taken. 4. Me neither

Exercise 15. Use the above expressions to respond to the following statements. Note that more than one answer is possible.

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1. “I think we should work fewer hours. I mean, almost everyone in this company now works 35-hour weeks, and look at us!” “____________ “.

2. “Can you come in next weekend?” “What again? ____________“.

3. “I’d like you to prepare the figures for next week’s presentation. But this time could you make sure that you put our current client’s name on the slides.“ “____________“.

4. “We need to finish this by next Wednesday. How about if we postpone the department party? There is no other way”. “____________“.

5. “Have you had a look at this? It’s a catastrophe!” “Hang on, it can’t be that bad. Ah, “____________“.

6. “Look, we really need to convince the boss that some of the transactions have been wrongly booked. I don’t want problems later”. “____________“.

7. “They want us to take a pay cut this year”. “Are you kidding? ____________ “.

Exercise 16. Continue the discussion with a partner using the phrases from ex.15 to agree or disagree.

Off-balance-sheet accounting should be made illegal. Creative accounting is a good thing. It’s time the world moved to the same accounting principles.

Find and reproduce English equivalents to Armenian ones below. Read the text, then answer the questions.

Դիմորդ, օրենքով սահմանված, հաշվապահության մասնագիտա-կան խորհուրդ, վկայագրում, հարկում, դիպլոմավոր հաշվապահ, առևտրային իրավունք, կենսապարբերաշրջան, հավաստագրյալ

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հանրային հաշվապահ, պահանջներ բավարարել, դիմել (հավակ-նել), վերապատրաստում

Becoming an accountant CPA The body which represents the interests of accountants in

the U.S. is the American Institute of Certified Public Accountants (AICPA). To become a CPA, the applicant must meet the requirements of the state where he/she wishes to practice, as estabilished by the law of that state and administered by the state boards of accountancy.

To qualify for certification, the applicant must: 1. Study accountancy at a college or university 2. Pass the CPA examination, which consists of four

sections: • Business Law and Professional Responsiblities • Auditing • Accounting and Reporting- Taxation, Managerial, and

Governmental and Not-for-Profit Organizations • Financial Accounting and Reporting - Business

Enterprises 3. Have professional work experience in public accountng. Most states reguire a qualified CPA to carry out regular

professional training.

Chartered Accountant The major accounting body in the U.K. is the Institute of

Chartered Accountants in England and Wales (ICAEW). To become a Chartered Accountant, the applicant must: 1. have sufficient school or university education 2. apply for a training contract with a recognized company,

which will give him/her three year's work experience

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3. pass the ICAEW's exams on: • Accounting • Audit and Assurance • Business Finance • Business Management • Financial Reporting • Taxation

4. as well as prove his/her knowledge on Commercial and company Law, and then with further exams on: • Business Environment • Business Life Cycle • Advanced Case Study

How is the process of becoming an accountant in your country compared to those described above?

Exercise 17. Cross out an incorrect sentence in each

group.

1. a) The American Institute of Certified Public Accountants is an official body representing the interests of accountants.

b) The American Institute of Certified public Accountants is an NGO ignoring the interests of accountants.

c) The American Institute of Certified Public Accountants is an official body and the largest professional organization in the USA.

2. a) International companies can choose how to present financial information.

b) International companies can decide how to present financial information.

c) International companies can only guess how to present financial information.

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3. a) Bookkeepers are responsible for processing the records of a company’s financial activities.

b) Bookkeepers are responsible for inspecting the company’s accounts.

c) Bookkeepers are not deeply specializing in accounting.

4. a) Matching principle recognizes revenue when it is earned. b) Matching principle admits revenue when earned. c) Matching principle takes revenue when it is earned.

5. a) A non-for-profit corporation is organized for altruistic purposes, such as charitable or research activities.

b) A non-for- profit corporation usually operates for charities or research purposes.

c) A non-for-profit corporation criticizes charities or research activities.

Exercise 18. Partner work

Read and make a dialogue with your partner

Partner A. Suppose you work in the finance department of your company. Today a new colleague from your overseas parent company is coming to the office for the first time. (He only speaks English). You have been asked to welcome the new colleague, show him around the office, and make him feel comfortable. At the end you should introduce your new colleague to the head of the department.

Partner B. It is your first day in your new job as a member of the finance department in one of your company’s European subsidiaries. You only speak English but hope to start learning the local language soon. One of your new colleagues will meet you and show you around the company. Make small talk and ask questions about the company. (How many people work there? Do they have a canteen? Do they arrange business trips and do

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they offer language classes?) Exercise 19. Translate from Armenian into English using

the following prompts.

tax returns, continuous, range of activities, flexibility

1. Հաշվապահները աշխատում են ֆինանսական, կառավար-չական և հարկային հաշվառման ոլորտներում:

2. Հարկային հաշվապահները զբաղվում են հարկային հայ-տարարագրերով:

3. Հավաստագրյալ հանրային հաշվապահ դառնալու համար անձը պետք է ունենա մասնագիտական կրթություն և աշ-խատանքային փորձ:

4. Փակվելու կամ լուծարվելու փոխարեն՝ անընդհատության սկզբունքը ապահովում է ձեռնարկության անդադար գոր-ծունեություն:

5. Ստեղծարար հաշվապահական հաշվառումը, համեմատած ավանդական հաշվապահական հաշվառման հետ, ունի գործունեության ավելի լայն տիրույթ և ճկունություն:

6. Բեք գրասենյակի կառավարչի օգնությունը վարչական բնույթի է:

Do you know? Who is a private accountant? How is a back-office manager different from suppose a

human resources manager? What is the responsibility of a bookkeeper? Why are CV and cover letter important in applying for a

job? Give your opinion. What is the essence of a prudence principle? Try to explain the meaning of creative accounting in a wide

sense.

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U N I T 2

Financial Statements and Ratios Exercise 1. Here are some Armenian accounting terms for

your consideration. Find their English equivalents from the tables below:

Ընթացիկ դեբիտորական պարտքեր, փոխառություններ, կրեդիտո-րական պարտքեր, տարեվճար նպաստներ, համախմբված ընկե-րություններ, հաշվեգրված ծախսեր, չբաշխված շահույթ, եկամտա-հարկերի պահուստային ֆոնդ, նոսրացված շահույթ, հաշվապա-հական հաշվեկշիռ, դրամական հոսքերի մասին հաշվետվություն, ֆինանսական վիճակի մասին հաշվետվություն, ծանոթագրություն-ներ, գործակից, ֆինանսական վճարներ

Here are two examples of financial statements. Which ones are you familiar with? In the U.K. one is called a Balance Sheet and the other is a Profit and Loss Statement.

Which definition corresponds to each of them in the U. S. To make your understanding clearer one shows the financial position of a business at a particular moment in time, the other shows the net profit or loss for a specific period of time.

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Financial statements and ratios

Here are two typical examples of the disclosures required under U.S. law. Which is which?

Statement of Financial Position At December 31 (In millions) 2016 2015 Assets Cash and equivalents $13.485 $ 18.278 Investment securities 67.833 61.890 Current receivables 7.290 6.870 Inventories 3.444 3.281 Financing receivables 121.189 113.871 Insurance receivables 2.560 2.187 Other receivables 985 1.009 Property, plant and equipment - net 46.005 44.875 Investments 18.320 18.320 Intangible assets 19.836 17.998 All other assets 65.871 62.755 Total assets $ 366,818 $ 351.334

Management Accounts, Investments, Statement

of Shareholders' Equity…

Balance Sheet, Statement of Cash Flows, Statement of

Earnings…

Statement of FinancialPosition, Notes, Annual

Report, Budget...

Market Capitalization,

Discounted Cash Flows...

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Liabilities and equity Short-term borrowings $ 95,531 92.736 Accounts payable 12,894 10,209 Progress collections 2,890 3.897 Dividends payable 1.155 1.102 All other current costs and expenses accrued 9.598 8.293 Long-term borrowings 75.728 70.354 Insurance liabilities, reserves and annuity benefits 85.389 84.283

All other liabilities 37,487 33.763 Deferred income taxes 12.736 14.198 Total Liabilities 333,408 318.835 Minority interest in equity of consolidated affiliates

2,374 2,179

Common stock 1,214 1,214 Accumulated gains/(losses) - net 2,189 2,427 Other capital 9,827 9,834 Retained earnings 30,545 29,772 Less common stock held in treasury (12,739) (12,927) Total share owners equity 31,036 30,320 Total liabilities and equity $ 366,818 $ 351,334

Statement of Earnings

For the years ended December 31 (In millions; per share amounts in dollars) 2016 2015 2014 Revenues Sales of goods $80,746 $78,847 $74,387 Sales of services 4,384 4,267 5,925 other income 1,212 1,434 1,228 Total revenues 86,342 84,548 81,54 Costs and expenses Cost of goods sold 28,659 27,498 25,728 Cost of services sold 4,112 4,255 5,601 Interest and financial charges 8,518 8,855 8,645

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Insurance losses and policyholder and annuity benefits 10,372 10,137 9,928 Provision for losses on financing receivables 4,374 4,561 4,612 Other costs and expenses 16,811 16,735 14,480

215 188 195 Minority interest in net earnings of consolidated affiliates Total costs and expenses 73,061 72,229 69,189 Earnings before income taxes and accounting changes 13,281 12,319 12,351 Provision for income taxes 3,547 3,188 3,441 Earnings before accounting changes 9,734 9,131 8,910 Cumulative effect of accounting changes 0 (212) 0 Net earnings $ 9,734 $ 8,919 $ 8,910 Per-share amounts Per-share amounts before accounting changes Diluted earnings per share $ 1.22 $ 1.16 $ 1.13 Basic earnings per share $ 1.23 $1.17 $ 1.14 Per-share amounts after accounting changes Diluted earnings per share $ 1.22 $ 1.13 $ 1.13 Basic earnings per share $ 1.23 $ 1.14 $ 1.14 Dividends declared per share $ 0.49 $ 0.46 $ 0.45

Exercise 2. Match the words with their partners.

1. retained 2. common 3. current 4. consolidated 5. intangible 6. total

liabilities affiliates

earnings receivables

assets stock

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Now match the word partners to their definitions. a) An asset which does not have a physical substance, such

as a patent or a brand. b) A holding company owns a minority interest (less than

50%), but the accounts are consolidated. c) Total legal obligations of a company to pay other parties. d) Ordinary shares held by the owners who are the last to

receive their money. e) Amounts collected in the normal course of business

within one year. f) Profit not paid out to shareholders in the form of

dividends but kept by the company to reinvest or pay off debts.

Exercise 3. The U. K. and the U. S. A. often use different terms for the same thing. Here are some examples. Can you think of others?

U.K. U.S.A. Your Language Balance Sheet Statement of Financial Position Profit and Loss Statement Statement of Earnings share stock stock inventory gearing leverage Exercise 4. Choose the best way to say these numbers

and equations. (Sometimes more than one way is possible.)

a. twenty-three comma fifty-six a. nineteen ninety-nine b. twenty-three point fifty-six b. nineteen hundred ninety-nine c. twenty-three point five six c. nineteen nine nine d. two three point five six d. one nine nine nine

23.56 1999

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a. one thousand and one a. two thousand three b. ten thousand one b. two double oh three c. ten thousand and one c. two thousand and three d. one triple oh one d. twenty oh three

a. sixty-three pound and thirty pence b. sixty-three pounds and thirty pence c. sixty-three pounds and thirteen pence d. sixty-three pounds thirty

a. five hundred thousand, four hundred, three hundred and forty-two

b. five million, four hundred thousand, three hundred and twenty-four

c. five million, four hundred thousand, three hundred and forty-two

d. five billion, four hundred thousand, three hundred and twenty-four

a. forty-five thousand, six hundred and thirty-eight euro b. forty-five thousand, six hundred and eighty-three euro c. forty-five thousand, six hundred and three eight euro d. forty-five, sixty-three, eight euro

DID YOU KNOW?

Saying numbers in English

Notice how we use the decimal point in English: 6.02 six point oh two 0.04 zero (or nought) point oh four 0.007 zero point double oh seven 56.345 fifty-six point three four five [NB: single numbers after

the decimal!]

€45,638

10.001 2003

£63.30

5,400,342

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Here commas - and not decimal Note the following points - are used:

12,076 twelve thousand and seventy-six 1.000.000 one million 2,534,210 two million, five hundred and 1.000.000.000 one billion

thirty-four thousand, two hundred and ten

Sums of money: €3.67 three euros sixty-seven OR

three euro sixty-seven $5 m five million dollars

Note how we say years: 1987 nineteen eighty-seven 2003 two thousand and three 2030 two thousand and thirty (or twenty thirty) Exercise 5. Look again at the Statement of Earnings in

exercise 1 and find the figures for the items below. Which sentences (a-h) can be used to describe the figures?

1. Net Earnings 2. Interest and financial charges 3. Earnings before income taxes and accounting changes 4. Total revenues 5. Dividends declared per share 6. Other costs and expenses 7. Sales of services

a) it’s better than last year

c) there’s quite a drop from 2015 to 2016

b) it’s gone down since last year

d) it’s not as low as two years ago

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Exercise 6. Read an accountant’s explanation on ratio analysis to some managers in her company below, then turn the conversation into the narrative.

Write definitions for the following terms. a) Working Capital b) Return on Assets c) Debt/Asset Ratio

Find from the conversation some English equivalents to Armenian ones below.

Շրջանառու կապիտալ, փոխառու ծախսումներ, հատույց ակ-տիվներից, տոկոսադրույքներ, գործակից, պարտք/ակտիվ հարա-բերություն, հասկացաք՞

Accountant OK. Norma has asked me to go over some of the ratios I used in my report and sent you last week. The first of these is working capital. Everyone got it? It is quite simple – it’s the current assets divided by current liabilities.

Man OK, and what’s it for? Accountant Well, it basically tells us whether we have

enough short-term assets to cover out short-term debts. If we don’t, we could be in trouble. OK? Good. Next is return on assets. This is net income plus interest expense divided by total assets. It allows us to evaluate the way we use our assets. It can help us decide whether or not we should start a new project,

f) a lot more this year

e) slightly more this year

g) it’s virtually the same

it’s exactly the same

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for example, by comparing the return expected against the normal borrowing costs. Is that clear?

Woman I have a question. What’s debt/asset ratio? Accountant I was just coming to that. It’s the total assets

divided by total liabilities. It tells us what proportion of the company’s assets are financed through the use of debt. If this ratio is high in a market with increasing interest rates creditors are going to be worried. The debt/asset ratio determines the funding leverage of the company. OK, if there are no questions, I’d like to…

Exercise 7. Here are some phrases the accountant used during the meeting. Can you fill in the missing words without looking into the conversation?

1. Norma has asked me to go _________ some of the ratios I used in the report.

2. Everyone ___________ it? 3. Is ___________ clear? 4. I was ___________ coming to that. 5. OK, if there are no___________ , I’dlike to…

Exercise 8. Some common ratio terms are given below.

Match them with the descriptions (a-g).

a) Gives the company’s pricing policy and mark-up margins. An adequate gross margin allows a company to pay its expenses, and then expand.

b) Determines an average interest rate at which a company borrows funds.

gross profit margin, earnings per-share, return on equity, average interest rate, debt/equity ratio, inventory turnover

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c) Indicates the return a company gets on the owners’ investment. Companies with high returns often do not require more debt investments.

d) Shows the turnover of inventory and can be compared against sales figures.

e) Shows what proportion of equity and debt a company uses to finance its assets.

f) calculates the profit made on a per-share basis. This is quoted by US publicly-held companies in their financial statements.

Now match some of the ratios with the following formulas.

1. 2. 3.

Exercise 9. Complete with the corresponding verb or noun. verb noun

to predict ……. to ……. calculation to expect ……. to ……. indication to ……. expansion to perform ……. to …… payment

Now use verbs and nouns from above to complete the sentences. You may change some of the forms.

a) The experts’ calculations are somewhat different to what we were ……

b) The problems in the overseas company have made it difficult to …… the next year’s turnover.

c) There may be some mistakes in the …… d) The fund …… much better last year.

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e) The …… into Western Europe looks good. f) We were convinced that our customers will ……us on

time.

Exercise 10. What these people say about financial statements. Guess the words, then fill in the letters.

Trader: I agree that the accounts of the companies have a lot of information, but it’s very hard to understand it all. In my job, I need to know the financ…_______ situa…._______4 of a company. People interested in the stock exchanges rel._______ _ o.__________5 experts like me. But there are also many other sour…___________6 of information. As for the accounting rules, they don’t interest me, or anyone else, at all. That’s stuff7 for the accountants.

Accountant: The financial statements of a company are the most important documents that a company produces. Investors, credit… ______1, banks, customers-everybody reads the statements. The accounts show what a company does with its money, how profit….___________2 it is, and also how risk-worthy it is. And you can see warning signs for the future. Our sto..______ exchan… ____3 depend on properly prepared accounts.

Investor: All those numbers, and I haven’t g.._________ a cl..________8 what they all mean. Pages and pages of them, and apparently they are often only ‘estimates’, or they can be interp…..___________9 in one of many ways. What’s the poi..____________10 when the accountants them……____________11 can’t agree on how to show the numbers? Most of us need a lot more information and knowledge about a company than what we get in the accounts.

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Which comments do you agree with? How would you respond to the people you don’t agree with?

Go into discussion with your group mates about different opinions. Exercise 11. Find the ending in the terms.

1. Ordinary shareholders are the last to receive their … 2. Liabilities are legal obligations of a company to pay

their … 3. The statement of earnings shows whether a business

earns a … 4. Intangible assets are of value to the owners but they

don’t have a physical … 5. The things owned by a business organization are known

as …

Layman: Is it all really that hard? Can’t we just look at the profit or loss of the company to fin. o..__________12 how it’s doing? I don’t see all the fuss13 . Accountants are there to tell us about the numbers, and I thought that’s what they do. They are train.. 14 to report these numbers, and it can’t be that hard to cou..___________ u.____________15 everything that’s happened.

Managing Director: This is exact..____________16 the problem. There are many ways to change the numbers to give a better pict…___________17. Some of my peers have been guilty of doing just that. The accountants and auditors have to ta..__________ responsi……___________18 for the way that numbers are reported. Accountants and their work are extremely important, they just need to make it all a little easier to understand.

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6. Accounting equation states that assets are equal to liabilities plus …

Exercise 12. Translate from Armenian into English.

1. Ամորտիզացիան ներկայացնում է որոշակի տարիների ընթացքում ոչ նյութական ակտիվների արժեքի զրոյացման գործընթաց:

2. Ոչ նյութական ակտիվներից են՝ արտոնագրերը, հեղինա-կային իրավունքները, առևտրանիշերը և այլն:

3. Համաձայն գործարար միավորի սկզբունքի՝ սեփականա-տիրոջ ակտիվները դիտվում են ձեռնարկության ակտիվ-ներից անջատ և անկախ:

4. Բոլոր տեսակի երկարաժամկետ ակտիվների համար ծախ-սերի հատկացումը հենվում է ինքնարժեքի սկզբունքի վրա:

5. Ակտիվները, պարտավորությունները, կապիտալ ներառող գործարքները հիմք են հանդիսանում ֆինանսական հաշ-վետվությունների նախապատրաստման համար:

6. Եկամտի հաշվետվությունը համեմատում է որոշակի ժա-մանակահատվածում ձեռք բերված եկամուտը միևնույն ժամանակահատվածում արված ծախսերի հետ:

7. Ընկերության հաշվապահական հաշվեկշիռը մանրամաս-նորեն թվարկում է ընկերության ակտիվները, պարտավո-րությունները և սեփական կապիտալը, ցույց է տալիս նրա ֆինանսական վիճակը այդ պահի դրությամբ:

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Exercise 13. Make sentences using one part from each column.

1. Every business transaction

2. When debit and credit columns

3. Business assets

4. The statement of capital shows

5. An account is

must be equal to the changes that take place

agree the trial balance is

must be first recorded

a record of each item

that businesses own and owe

in the journal

liabilities and capital

said to be in balance

in the owner’s capital Partner work

Partner A. Times are tough. Costs have to be reduced. But where? As the MD (managing director ) of a large international conglomerate, you have to reduce your budget for next year. Make some notes on how the finance department can save costs (e.g., less staff, more software), and be prepared to explain your position in a preliminary meeting with your Chief Financial Officer.

Partner B. Times are tough. Costs have to be reduced. But where? As the CFO (Chief Financial Officer) of a large international conglomerate, you have to defend your budget for next year. Make some notes on why the employees of your department are so important, and be prepared to defend your position in a preliminary meeting with your boss, the Managing Director.

Go into the dialogue trying to ground your position.

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U N I T 3

TAX ACCOUNTING Exercise 1. There are some types of tax with missing

letters. Complete the words.

Which taxes are you familiar with? Explain each one. What do foreign companies need to know about the taxation system in your country? Exercise 2. Read the conversation between an accountant

and a manager, then answer the questions. Look at Armenian equivalents below.

գծային մաշվածություն, հիմնական միջոց, մնացորդային ար-ժեք, նվազող մնացորդ, տարիների գումարային մեթոդ, օգտակար ծառայության ժամկետ

Manager Could you just go over depreciation again? Accountant Sure, I’ve prepared a quick list of different types

like you asked. Manager Great. Accountant OK, let’s see. Well, you know that normal

accounting treatment means that a fixed asset has to be written off over its useful life. Basically, we look at the cost of the item, and take away its estimated

c-rp –r-te

pr-p-rty

v-l---dd-d

s-l-s inh-rit-nc- -xc-s-

inc-m-

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scrap value. Then we use a depreciation method to write it off.

Manager Yes, of course. It’s five years for computers, I think. Accountant Well, as you say, there are different ways of doing

this. Er, let’s see, straight line, declining balance, sum-of-the-years- digits, unit of production, hours of use.

Manager I see, that’s very useful.

1. What happens to fixed assets? 2. How do accountants deal with it? 3. What are the five methods of depreciation the

accountant mentions. a) s __________l __________ . b) d __________ b __________ . c) s __________ of-the-y- __________-d __________ . d) u __________of p __________ . e) h __________ of u __________.

Exercise 3. Look at the list of definitions above. Can you

match them to the methods of depreciation mentioned in Exercise 2?

1. __________ The name given to this method reflects the fact that the same or an equal amount of depreciation is recognized each year for a given asset. The depreciaton expense for each year is calculated by first subtracting the salvage value from the acquisition cost, and then dividing the difference by the useful life of the asset.

2. __________ The depreciation is accelerated by this method so that the expense is greater in the first years than in its later life.

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3. __________ A depreciation method where the number of units produced each year is used to determine the annual depreciation expense or that the useful life of an asset is limited by the number of assets produced.

4. __________ This method is similar to a declining balance in that the annual depreciation of an asset declines steadily over the useful life because a successively smaller fraction is applied each year.

5. __________ The expected usage of the asset is taken into account in determining the rate of depreciation.

What depreciation method does your company or country

use? What are the alternatives in your country for depreciating

assets? Exercise 4. Match the questions on the left to the answers

on the right.

1. Will this also be checked? a) Yes, of course. Let me try to explain it differently.

2. How is the profit calculated? b) I am afraid that will be too late.

3. How much is your fee? c) 600 euro per hour. 4. Could you go over it again? d) Every three months. 5. How often do they check? e) It’s basically income

minus expenses. 6. How about if we send it f) It should be. I’ll ask Dave

next week? to make sure it’s done. 7. Who’ll handle the presentation? g) Susan.

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Exercise 5. Use the words in the box to complete the conversation. Reproduce it with a partner. Turn the conversation into the narrative.

Use the helpers below to completely understand the conversation.

եկամտահարկի պահուստ (պահուստային ֆոնդ), ժամանա-կավոր, հետաձգված եկամտահարկի մնացորդ Daniel It’s not easy, all this English. We didn’t do any of

this on my course. Kate How can I help? Daniel Well, maybe you could --- a couple of things. Let’s

see. Here we are. Provision for income taxes. What does that ---- ?

Kate OK. Provision means putting money aside so that we have something to pay with later ? So provision for income taxes is talking about the current year’s tax expense which will have to be paid in the future.

Daniel Like provisional? Kate Not ---- . Provisional just means temporary, you

know, not final. Like a provisional budget. It’s not the final version.

Daniel I see. And what about deferred income tax balances. What does deferred mean?

Kate ---- put off to another day. The income has been recognized in the accounts but the tax owing on that income will only be realized in the future.

Daniel OK. And how does that affect associated companies? Kate Well, it ---- . Associated companies and affiliates are

a special case. Deferred taxes are not usually

depends● so● clarify● mean● basically● exactly

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recognized on undistributed earnings, but only if the plan is to reinvest the profits.

Daniel ---- if we don’t invest the profits, we pay tax. Kate Exactly.

Now explain in your own words what “provision for income tax” and “ deferred income tax balances“ mean.

Exercise 6. Match the expressions with “tax” to their

definitions using the following prompts

շրջանցում հարկերից, հարկային սանդղակ, հարկային աքսորյալ, չհարկվող (գումար, եկամուտ), հարկային հայտարարագիր, փա-խուստ (խուսափում) հարկերից

1. tax avoidance a) someone who lives in another country for tax reasons

2. tax bracket b) to introduce a new tax on something 3. tax evasion c) a document of your personal income

about what amount of tax to pay 4. tax exempt d) when you don’t have to pay a tax on

income 5. tax exile e) to cancel a tax 6. to abolish tax f) tells you what amount of tax to pay

based on income 7. to impose tax g) trying not to or pay the minimum

amount of tax legally 8. 8. tax return h) trying not to pay tax illegally

Exercise 7. Use the words from the box to fill in the gaps.

abolish● bracket● breaks● exempt● exile● increase● property● return

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1. The government needs more money, so it is planning tօ __________ taxes.

2. He earns a lot of money, so he must be in the highest tax __________.

3. She has to live there because she is a tax __________ . 4. They are planning to ________ the tax on large company

cars, and replace it with a tax on all company cars. 5. She is a student, so she is a tax __________ . 6. The government is planning to introduce new tax

__________ for IT companies. 7. Don’t buy a house this year. The __________ taxes will

be abolished next year. 8. A tax __________ is the same as a tax declaration – it’s a

list of income and tax deductible expenditure for the tax authority.

Exercise 8. Match Armenian equivalents to the English

phrases.

1. մեկնաբանություն regulation 2. գրավոր ներկայացում to include as an asset (առաջարկ) 3. սահմանված կարգ an explanation of what something

means 4. կապիտալիզացնել a statement giving the exact meaning 5. սահմանում submission

Exercise 9. Read the conversation, then discuss it with

your group mates.

Uta These costs clearly relate to the repair and maintenance of our machines.

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IRS But in your financial statements, you argue that this expenditure was to upgrade and you have capitalized it all. At first glance, it appears clear that...

Uta Excuse me, but you know as well as I do that the accounting and tax regulations allow for different definitions of what we can capitalize, and what we must expense.

IRS Yes, but it’s easy to work out the type of costs you have from the descriptions in your accounts. And based on our interpretation of the laws, this seems to be capital expenditure, which you can of course depreciate.

Uta We’re going to take this further. I’m afraid I can’t agree with your comments.

IRS Look. I’m sorry, but this conversation is going nowhere. I suggest you make a submission and send it to our office. We can then consider your arguments in detail.

Uta Fine. I’ll do it today. Thanks for your time. IRS You’re welcome. Goodbye Uta Bye. Exercise 10. Use phrases from below to “soften” the

following statements.

Polite phrases

Excuse me, but… At first glance, it appears clear…I’m sorry, but…. This seems to be…. We have a slight problem…. I’m afraid that’s not quite right…. Could you please….

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Impolite statements 1. I can't agree with your comments. They don’t make

sense. 2. This conversation is going nowhere. call me back later. 3. I disagree. You are wrong. 4. You don’t have the necessary experience to do this job. 5. Your idea is rubbish. 6. Your calculations are full of mistakes.

Exercise 11. Make sentences using one part from each column.

1. Your company on how a finance department

with liabilities and capital of a business

2. You meet up needs to get a foothold

in expanding the European market

3. Arrange a meeting

with a representative from a conglomerate

can save costs

4. Total assets must be in agreement who seems interested in collaboration


1. Որոշ հարկային վերլուծաբաններ կարծում են, որ հար-կային կառուցվածքի պարզեցումը կթեթևացնի վարչական բեռը:

2. Եկամտահարկերը սովորաբար գանձվում են «վճարիր, որքան վաստակում ես» սկզբունքի հիման վրա:

3. Կորպորացիաները ենթարկվում են կրկնակի հարկման: Բաժնետերերը նույնպես հարկվում են իրենց ստացված շահաբաժիններից:

4. Վաճառքի հարկը իրականացվում է գնման պահին, ավե-լանալով ապրանքի գնին:

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5. Ակցիզային հարկը վերաբերում է հատուկ ապրանքների, ինչպիսիք են ոգելից խմիչքները, գարեջուրը, ծխախոտը, ավտոմեքենաները:

6. Ժառանգության հարկը ծնողի մահից հետո վճարում է շա-հառուն:

Exercise 13. Find the beginning or the end paying attention to the number of letters omitted.

1. Accoun…. is the art of organizing, recording and analyzing financial activities.

2. The statement of cash flows presents cash receipts and disbursements from operating, investing and financing activ….. .

3. What is received from the sales of a product or a service, from the assets of any kind is called re….. .

4. The excess of revenue after expenses is recognized as pro… .

5. Pat… is the right given by the government to an individual or a group to market or use a particular process or invention.

Exercise 14. Make word partners from each box, then

match them to the definitions below.

1. A tax determined by the amount of money that an

individual earns. 2. The value of a fixed asset at the end of its useful life. 3. A reduction of a sales price offered by a seller.

progressive, sales, unrealized, tax, to service, residual

value, debt, gain, tax, discount, return

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4. To pay the interest and capital repayment at the end of its useful life.

5. The increase in the value of an asset which has not been sold yet.

6. An official document used to calculate how much tax has to be paid.

Use the clues to complete the crossword.

Across: 1. suggestion, often in writing 5. a plan of how much you are going to spend 8. not permanent 11. the worth of an item which has finished its useful life (2 words-5,5) 12. opposite of loss 13. money you get for doing something

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Down: 2. you might get this when someone dies 3. to take away; opposite of add 4. wealth 6. excused from paying taxes: tax... 7. delayed 9. you pay this when you borrow money 10. putting money aside Read, translate and reproduce the text.

TAXATION PLANNING

The governments of some countries use the taxation system to promote investment. Taxation laws are enacted to encourage domestic and international corporations to either invest or raise capital, and tax breaks are given to specific

industries or to certain types of expenses to attract investors and consumers. As a result of these taxation measures, there is significant scope for taxation planning in some countries and companies would be well advised to use such opportunities to structure their business in the most tax effective manner. For effective taxation planning, companies rely on tax specialists who must have an excellent under-standing of both their clients’ business and the various taxation laws. Companies turn to their tax advisers for help on all the taxes for which they are liable, such as income tax, sales tax, property tax and payroll tax. These tax specialists are normally Chartered Accountants and CPAs

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who are not only involved in the preparation of tax returns, but who also give advice on a multinational company’s domestic and foreign operations (consulting). Furthermore, they represent their clients before the tax authorities.

1. Can you think of any tax breaks which the government of your or other country has introduced?

2. What tax advice would you give to an individual who comes to live and work in your country?

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U N I T 4

AUDITING

Exercise 1. Which of the following activities are normally done by an auditor internally and which are done externally?

An auditor spends time getting to know the business as well as the environment and the industry in which it operates

analyses the internal business and financial systems used to make and record transactions. ......................□ gathers evidence on the financial control systems and the figures in the financial statements........................□ gives advice on the business methods and transactions of the company .......................................................□ examines financial statements to determine whether they conform to generally accepted accounting principles...□ prepares the financial statements in accordance with the generally accepted accounting principles of the country where the enterprise operates ..................................□ examines the management report and determines whether it conforms to the financial statements ..........□ guarantees the correctness of the figures presented in the accounts........................................................□ provides consulting services .....................................□

presents a written report to the management of the company, describing whether the accounting records, financial statements and management reports conform to legal requirements...............................................□

1

2

3

4

5

6

7

8

9

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maintains confidentiality and independence............ □

Exercise 2. Fill in the gaps using the words given below.

Many corporations maintain a continuous… The independent auditor must also review … The presence of an auditor suggested that a company was

having … They implement …….. making sure that all irregularities

are corrected.

Financial difficulties, internal controls, internal audit, accounting records

Exercise 3. Find the following English equivalents from the conversation below.

Read, then turn the conversation into the narrative.

Հաշվապահական հաշվեկշիռ, նախնական հաշվետվություն, զգա-լի ներդրում, զանազան ապրանքներ, ծախսումներ, ծախսեր, ըն-թացիկ արդյունավետություն, ողջամիտ ներդրումներ, ետ չմնալ մրցակցությունից, պարտավորվածություն, բարեկարգում

Read the telephone conversation between Janet Hendley, a partner in an audit firm and Claude Bernand, the CFO of a French company.

Claude Claude Bernaud. Janet Hi Claude. It’s Janet. You wanted to chat? Claude Hi Janet. Great, you got my message. Thanks for

getting back to me so quickly. Janet You’re welcome. How can I help? Claude Well, it’s about your preliminary report.There

are a couple of things I think we need to discuss.

10

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Janet Yeah, sure. No problem. I have it in front of me. Claude Hang on. I’ll just find my notes. OK. The first

point is on page eleven, third paragraph. What do you mean, exactly?

Janet OK. Let’s have a look. Oh yes. Capitalization of costs in your factories. We think that these costs should be expenses in the P&L.

Claude But... no, sorry. I’m afraid I disagree. They were necessary for the upgrade of our plant. Surely you agree that we have to keep up with the competition?

Janet Yes, of course. But lots of the items we tested are clearly normal repair and maintenance expenses. You can’t really justify including such costs under machine upgrades.

Claude I see it differently. Our machines have been developed to produce a wider variety of products, to improve the running efficiency of the equipment, to keep us in business. This was a sizeable investment on our part. The figure we’re talking about shows the commitment we've made to the future. I mean, we're going to be getting benefits from these upgrades for years. Our balance sheet should show this.

Janet I’m sorry. These figures are too material for us to ignore. There are some expenses which...

Claude Companies do this all the time and, I might add, their auditors accept it. I suggest you consider this again. I’m sure you’ll find it’s reasonable when you think about how important these investments were to this company.

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Janet All right. We’ll look at these costs again. Let’s move on the next point.

Answer the questions: 1. What does Claude want to discuss with Janet about the

report? 2. Does Claude think that capitalization of costs should be

classed under plant and machine upgrades? 3. How, in Janet's opinion, capitalization of costs should be

presented and in what statement? 4. For what purpose should these costs be used in Claude's

opinion. 5. To what mutual agreement did Janet and Claude come?

Exercise 4. In the other conversation between the two

colleagues from an auditing firm, Heidi and Phillip, find English equivalents mentioned below.

PART 1 Heidi Have you seen the latest? Philip What's that? About Megacorp PLC Heidi Yeah. And it’s not the only one. Every week

there's a new scandal. It’s going to change how we do our job.

Philip How? Our role is only to give an opinion based on estimates. We can’t review every little thing in detail.

Heidi Oh. come on. Investors expect financial information to be correct. And I think it’s fair enough. If they find out that, I don’t know, that assets have been overstated by 50%, then they're going to be annoyed, I would be, too.

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Կարծիք, հիմնված հարշվարկների վրա, ֆինանսական տեղե-կատվություն, վերանայել յուրաքանչյուր մանրուք, չափազանցնել:

Answer the questions: 1. What is Heidi worried about? 2. What does Phillip think? 3. What is Heidi’s opinion about the job done properly?

Exercise 5. Put the letters into the correct order to

make words similar to the words on the right.

1. L-P-Y-E-R-R-l-I-M-A-N Preliminary______ initial 2. S-D-S-l-S-U-C _______________________ talk about 3. G-D-U-E-P-A-R ______________________ improvement 4. T-V-E-l-Y-R-A _______________________ range 5. B-E-S-l-A-Z-L-E ______________________ big 6. G-U-F-E-R-l _________________________ amount of money 7. S-C-0-D-l-N-R-E _____________________ think about 8. E-E-B-A-R-S-N-O-L-A _________________ sensible Exercise 6. Here are some useful phrases to practise

making a telephone call. Write telephone phrases in one column and making appointments in the second.

Could you come by the office next week? Could you put me through to …? Can you make Tuesday afternoon? May I speak to …, please? Yes, that sounds good. How/what about Monday at 9:30? Hello, this is … from … . -Janet (…) speaking.

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-No, I'm sorry. I'm busy then. Hello, Janet (…). It's Claude (…).

Work with a partner and make a dialogue, using the given phrases. Exercise 7. Make two lists using given phrases explaining

causes and results.

What could happen is … This happened because … It could lead to … Because of this, we’ll see … This is a result of … This (increase/decrease) is due to … Make some sentences with these phrases. Read an example of an independent audutor's report in the USA. Find the following words or phrases:

ուղեկից հաշվետվություն, դրամահոսք, համախմբված ընկերու-թյուններ, հաշվապահական սկզբունքներ, բաժնետիրական կապի-տալ, աուդիտ իրականացնել, համընդհանուր ընդունված, բացա-հայտում, վերոնշյալ, հավաստիացում

To Share Owners and Board of Directors of Megatrap Corp

We have audited the accompanying statement of financial position of Megatrap Corp and consolidated affiliates as of December 31, 2007 and 2006, and the statements of earnings, changes in share owners’ equity and cash flows for each of the years in the three-year period ended December 31,2007. These

54

consolidated financial statements are the responsibility of the Company’s management. We have to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Under these standards we have to plan and perform the audit to obtain reasonable assurance that the financial statements do not have any material misstatement. We examined on a test basis the evidence supporting the figures and disclosures in the financial statements. We also assessed the accounting principles used and significant estimates made by management, and we evaluated the presentation of the statements.

In our opinion, the aforementioned financial statements present fairly, in all material respects, the financial position of Megatrap Corp and consolidated affiliates at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

Answer the questions: What does an audit do according to the text? What documents do the auditors usually look at?

Exercise 8. Find the sentence on the right which is closest in meaning to the sentence on the left.

1. We have to keep up with the competition.

a) We can ignore the competition. b) We can’t ignore the competition.

2. You can’t really justify spending so much money on office equipment.

a) You can’t defend your actions. b) You can defend your actions.

3. This plan is designed to keep us in business.

a) This is a plan to start a business. b) This is a plan to get business.

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4. This was a sizeable investment on our part.

a) We spent very little money on this.

b) We spent a lot of money on this.5. These figures are too

material for us to ignore. a) These figures are very high. b) These figures are very low.

6. I suggest you consider this again.

a) Have another think about it. b) Forget it.

7. I’m sure you’ll find it’s reasonable

a) You think this is fair. b) I think this is fair.

Exercise 9. Read again the telephone conversation between Janet Hendly and Claude Bernand from Ex.3 and decide if the following statements are true (v) or false (x).

1. Janet wants to talk to Claude about a report. 2. Janet thinks that capitalization of costs should be

expenses in the P&L. 3. Claude agrees with Janet on this point. 4. Claude thinks capitalization of costs should be classed

under machine upgrades. 5. Claude’s reasoning is that the upgrades are really

investments in the future. 6. Janet agrees to reconsider her opinion.

Exercise 10. In the given conversation between Claude and Janet the sentences are in the wrong order. Rearrange them so that the conversation makes sense.

A Janet Glad to be of assistance. B Janet Good to hear.

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C Janet Tuesday? No, sorry, I’m afraid I'm busy on Tuesday. What about Wednesday morning? At, say, 9 a.m?

D Janet Hendley and Sanderson. Janet Hendley speaking.

E Janet Hi Claude. How’s it going?

F Janet Yes, you too. Bye. G Janet Yes, yes. Actually, we had a meeting this

morning. I was Just about to send you an email. You’ll be glad to hear that the partners have agreed with your proposal.

H Claude Yes, that sounds good, Wednesday at 9. So, Janet, I’ll see you then. Have a good weekend.

I Claude Bye. J Claude Erm. One other thing. There are some other

things I’d like to go over with you, but I’d prefer to do it in person, not over the phone. Could you come by the office next week sometime? Tuesday, say?

K Claude Hi Janet. It’s Claude. L Claude Listen, Janet. I’m just calling to find out if

you’ve had a chance to look at those capitalization of costs yet. You know - our machine upgrades?

M Claude Not too bad. Our latest sales figures are quite good so the boss is happy.

N Claude That's great. It'll really help.

Exercise 11. Translate into English with the help of the following terms.

legal mechanisms, to commit fraud, rely on, regulation,overstate.

1

2

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Ֆիլիպ. Մենք ոչինչ չենք չափազանցնում: Հեյդի. Մեր աշխատանքը ենթադրում է սխալների բացահայ-

տում, որի համար մեզ վճարում են: Ֆիլիպ. Մնացեք գծում: Մենք պետք է ստուգենք տեղեկատվու-

թյունը, որը տրամադրում է ղեկավարությունը: Մենք հա-վատում ենք նրանց ազնիվ աշխատանքին: Մենք ոստի-կաններ չենք:

Հեյդի. Բայց … Ֆիլիպ. Թույլ տվեք վերջացնեմ: Կա օրինական գործիքակազմ

(մեխանիզմ) խաբեբայությամբ զբաղվող մարդկանց դեմ պայքարելու համար: Աուդիտ մասնագիտությունը ունի սեփական կարգավորման գործիքակազմերը և ներդրող-ները վստահում են դրանց:

Հեյդի. Ես կարծում եմ, որ ներդրողները իրավունք ունեն վստա-հելու այն ֆինանսական տեղեկություններին, որոնց մա-սին կարդում են, և մեզ վճարում են այն ճշգրիտ կերպով ներկայացնելու համար: Ինքնակարգավորումը կարող է բավարար չլինել: Եվ տենդենցն (միտումը) այն է…

Ֆիլիպ. Ես համաձայն եմ, որ փոքր-ինչ տարօրինակ է, քանի որ մեզ վճարում են նույն մարդիկ, ում մենք հսկում ենք, բայց դա բնական է:

Answer the questions: 1. What responsibilities do auditors have in regard to their

clients? 2. Whose opinion do you agree with?

Exercise 12. Match the words with their meanings

1. affiliate a) The fixing of the amounts to be spent in the future. Also, the official statement showing these amounts

2. provision b) The things which a person or company owns and which are of value to the owner.

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3. inventory c) A person or company which is in some way connected to another.

4. merger d) A person or organization to whom money is owed.

5. budget e) The goods which a company produces, but which have not yet been sold.

6. creditor f) The inclusion in the accounts of amounts which may arise in the future.

7. assets g) When two organizations come together to create one new company (verb: to merge)

Exercise 13. Complete the sentences choosing the right

words or phrases given below:

1. Many corporations maintain a continuous internal … . 2. They report to … on the current state of the company’s … . 3. He is … for obtaining an appropriate amount of evidential

material from … papers. 4. In a small business … in the books of account can lead to a

business … . 5. His clients are the owners of the … or their … .

audit, management, affairs, responsible, local, failure, investors, mistakes, company Exercise 14. Auditors often have to write or present

reports on the financial information they have audited. Look at the following sentences and decide which graph goes best with the description.

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1. Figures have increased slightly. □

2. Figures have increased dramatically. □

3. Figures have increased steadily. □

4. This is a significant drop. □

5. This is a gradual drop. □

6. The situation is stable. □

7. There have been some fluctuations. □ 8. The situation was pretty bad, but is now improving slowly. □ 9. Profits have been falling since the fire. □ 10.We’re hovering at around 3%.□

Exercise 15. Choose the option which makes most sense.

“Have a look at this. Last year was really good. Profits fell/rose dramatically after we launched Glenogen. And here you can see how it affected the rest of the market. CFL remained stable/gradual, which was a bit of a surprise, but Junfil was hit quite badly-sales increased/decreased to almost non-existent. Now look here. This next graph shows what we think will happen next year. Good news again. Everything’s going up/down.

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1. Անկախ աուդիտորը պետք է ստուգի ընկերության հաշվետվությունները:

2. Բազմաթիվ ընկերություններ իրականացնում են մշտական ներքին աուդիտ:

3. Նրանք ստուգում են հաշվապահական գրառումները համոզվելու համար, որ բոլոր ապօրինությունները բացահայտված են:

4. Անցյալում աուդիտորի ներկայությունը ենթադրում էր, որ ընկերությունը ունեցել է ֆինանսական դժվարու-թյուններ:

5. Անկախ աուդիտորը հետևում է հաշվապահական չափորոշիչներին և սկզբունքներին:

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U N I T 5

MANAGEMENT ACCOUNTING What is management accounting? Which of the following

statements are true?

Exercise 1. A new commercial manager from the overseas parent company is having a meeting with the Chinese CFO. What information does he require? Read and complete the table below.

Վերլուծություն, վերադիր ծախսեր, տեղաբաշխում, պարզ անգլե-րենով

Manager I’m sorry, but the external accounts don’t help me much. Doesn’t matter if they’re in English or Chinese. I need information from you which will help me run this department.

CFO What exactly would you like? Manager Well, for example, I need something which tells me

about the profit we make on our customers, with

1. Management accountants prepare information which managers use to make decisions.

3. Management accountants may also analyze non-financial data.

4. Management accounts are normally for internal use only.

2. Management accountants sometimes suggest ways to improve financial performance.

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some sort of breakdown based on the size of the company. I want to compare the money we make to the size of the customer.

CFO Sure. We can do that. And how about the costs per customer?

Manager Exactly. How much we spend on each customer, compared to the size of their orders.

CFO That should be possible. Manager Great. Also, the profit made per employee. I would

like to know where we are profitable and with which employees we make our money.

CFO You realize that this is going to be a lot of work for my department.

Manager Yes, I know. But it’s very important for me. Can I also have a complete breakdown of our overhead expenses, and the allocation of them to each of the products that we sell?

CFO Ok. How would you like all this information to be presented?

Manager In plain English please. So that even I can understand it.

CUSTOMERS EMPLOYEES OVERHEADS • Profits we make • • on customers (with breakdown based on Company size) • •

What financial information do you need to do your job well?

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Exercise 2. Here you have a list of verbs. a) Give their forms corresponding to nouns and adjectives

to complete the table. VERB NOUN ADJECTIVE to allocate _____________1 ____________ to complete completion ____________2 to cost _____________3 costly to employ _______4/employer employable to inform _____________5 informative to produce _____________6 productive to profit profit________7 _______________ to sell _____________8 _______________

b) Now use the correct form of words from the table to complete the sentences.

a) We have far too much work - we need to _________ an assistant to help us.

b) Everything we do depends on having accurate ________. c) The company ____________ electrical goods like

photocopiers and scanners. d) We can’t have new laptops for everyone because It’s

simply too ____________ . e) The pre-tax __________ was over €12 bn. f) We’ve been __________ the conference room on the

ground floor. Let’s meet down there at 2 p.m. g) They hope to ____________ the report by Friday. h) We always have the highest ____________ at Christmas.

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Exercise 3. Look at the statement of Cash Flows.

Դրամական հոսքերի մասին հաշվետվություն, գործառնական գոր-ծունեություն, ներդրումային գործունեություն, ֆինանսական գոր-ծունեություն, ճշգրտումներ, կուտակային հետևանք, ձեռք բերում, ճշգրտումներ կանխիկին համապատասխանեցնելու համար:

Statement of Cash Flows For the years ended December 31 (In millions)

2017 2016 2015

$ 9.734

03.574

1.837

0

9651.274

(617)2.6474.490

1.964

4.966

$ 8.919

212

3.475

1.987

0

765 1.177

(847) 3.197 5.612

1.2999

689

$ 8.910

0

3.118

1.887

0

545 1.571

189

2.948 6.765

1.578

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Cash flows-operating activities Net earnings Adjustments to reconcile net earnings to cash provided from operating activities Cumulative effect of accounting changes Depreciation and amortization of property, plant and equipment Amortization of goodwill and other intangibles Earnings (before accounting changes) retained Deferred income taxes Decrease (increase) in current receivables Decrease (increase) in inventories Decrease (increase) in accounts payable Decrease (increase) in insurance liabilities and reserves Provision for losses on financing receivables All other operating activities Cash from operating activities 30.834 26.476 27.543

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(16.222)

5.609

(10.755)(8.618)

(1.388)

(12.388)

4.512

(8.287)(1.276)

(4.858)

(13.094)

5.436

(7.339)(6.376)

(4.286)

Cash flows-investing activities Additions to property, plant and equipment Dispositions of property, plant and equipment Net increase in financing receivables Payments for principal businesses purchased All other investing activities Cash used for investing activities (31.374) (22.297) (25.659)

18.594

18.866

(40.056)

1.732(3.655)

266

(3.590)

36.644

(32.918)

1.288(3.455)

655

1.844

30.667

(30.866)

(1.466)(3.298)

(7)

Cash flows- financing activities Net increase (decrease) in borrowings (maturities of 90 days or more) Newly issued debt (maturities longer than 90 days) Repayments and other reductions (maturities longer than 90 days) Net dispositions (purchases) Dividends paid All other financing activities Cash from (used for) financing activities

(4.253) (1.376) (2.728)

(4.793)

18,278

2.803

15,475

(844)

16,319

Increase (decrease) in cash and equivalents during year Cash and equivalents at beginning of yearCash and equivalents at end of year $ 13,485 $ 18,278 $ 15,475Supplemental disclosure of cash flows information Cash paid during the year for interest Cash recovered (paid) during the year for income taxes

(9,475)(1,288)

(10,366)(1,909)

(8,838)(1,678)

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Are the following statements true or false? 1. Amortization of goodwill and other intangibles

rose in 2017. 2. More dividends were paid in 2017 than in 2016. 3. Net earnings increased from 2015 to 2017. 4. Depreciation and amortization of property, plant

and equipment went up in 2016. 5. Inventories remained stable during the period

2015-2017. 6. There were no additions to property, plant and

equipment In 2017. 7. Deferred income taxes fell in 2017. 8. Cash from operating activities was more than cash

for investing activities in 2017

Exercise 4. Match the words from the statement of Cash Flows with their meanings.

1. dividend a money that is owed 2. cash b purchase price minus real value of assets 3.

plant c reduction in value due to wear and tear

4. amortization d money paid out to shareholders 5. goodwill e writing an intangible asset off over a

number of years 6. cumulative f increasing by successive additions 7. depreciation g coins, bank notes, or something that can

be easily exchanged for these 8. debt h building and equipment for

manufacturing

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Exercise 5. Read and reproduce an extract of the company director’s discussion. Make a similar discussion with your partner. Turn the conversation into the narrative.

Use the helpers Օրակարգ, շուկայի հետազոտություն, ամփոփում, առաջնորդել շու-կան, վստահելի, համախմբում, բացասական հեռանկար, հետազո-տությունների և մշակումների բաժին, ապրանք թողարկել, գաղա-փարներով հանդես գալ, ապակայունացնել շուկան: Beatrice So, we've agreed that Sally's team will produce

those figures by the end of the month. Got that? Good. OK, I’d like to move to the next item on the agenda, which is the budget for the upcoming year. Peter, would you please give a short overview of your research into the market, and your conclusions?

Peter Sure. As you all know, my department has been extensively researching the market and the economic conditions we'll be facing in the short term. It's quite clear that events of recent years have unsettled the market greatly. Both investors and consumers are convinced that it won't get better, probably for a long time. Investors are looking for solid companies, and consumers don’t just throw their cash around like they used to. We think that the situation will remain like it is in the middle term. This is a time for consolidation, not expansion.

Beatrice Simon, what does R&D think about this? Simon It's a pretty negative outlook. We’ve been working

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really hard to come up with some great ideas, and maybe now's the time to launch some of our new products.

Gavin And our investment programme has been ready to go for months. We can’t just wait and hope that things get better. Our strategy has always been to lead the market, not sit back and cruise along.

Who says the sentences below? Match the director to the sentences.

Exercise 6. Complete the gaps using the given words:

Confidence, service, forecasts, hard, cash, raise, tight, cutting back.

1. “Consumers simply don’t have the confidence to spend their money on fancy new products.”

2. “We’ve been working really hard to come up with some great ideas,…”

3. “Our investment programme has been ready to go for months.”

4. “Everybody’s forecasts seem to indicate hard times ahead.” 5. “I'd like to move to the next item on the agenda”

a Beatrice: Managing Director

b Peter: Marketing Director

c Simon: R &D

Director

d Gavin: Investment Director

e Sally: FinanceDir

ector

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Peter Ideas and investments don’t mean __________1 in the bank. Consumers simply don’t have the __________2 to spend their money on fancy new products. And as for expansion, I think the good old days are long gone. We should be _________3.

Beatrice Sally, how do you feel about all this? Sally We’re talking about budgets for the upcoming year.

Everybody’s _____________4 seem to indicate ______________5 times ahead. And we don’t even

have the money to spend. How are we going to _________6 more debt, or ____________7 more cash in the capital markets?

Beatrice So despite our great ideas and investment plans, it seems the reality is that our budgets for this year will have to be ________________8.

Exercise 7. Match the words with their partners.

� hard ● item � capital ● term � negative ● back � economic ● outlook � next ● plan � middle ● conditions � cut ● times � investment ● market

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Now match the word partners to their definitions. a) What will be discussed after this. b) The state of the economy. c) a program for getting money to grow. d) a bad view of the future. e) a reduction in something. f) Difficult situation. g) a period between soon and the distant future. h) a place where you can buy and sell debt or equity

securities.

Read the article. Find the following English terms or phrases from the article.

ավանդական տեսակետ, թղթերի կույտ, շահույթ ստանալ, խորհրդատու, փորձառություն, խորհրդական, թիմ ղեկավարել, հմտություններ զարգացնել, բարձրունքների ձգտող (փափագող) անձնավորություն, համրիչով աշխատող:

The Future of Accounting

The traditional view of accountants as merely “bean counters” is slowly becoming a thing of the past. For centuries, accountants have been employed to report on the numbers. They have sat there in their little corner, surrounded by stacks of paper and computer printouts, and have told us whether or not we have made a profit. But more and more, accountants are finding that management doesn’t need them to report on the numbers. With today’s technology, management already has access to software programs which do this work for them.

So what will the future accountant do? According to Mr Hamilton-Smythe, the Managing Director of KHZ Enterprises,

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the large international manufacturing company, accountants will be employed “to help companies change the numbers. Their expertise and knowledge of the business will be called upon to prepare strategies. They will become consultants and advisers. And their skills will need to change accordingly. They will be involved in international meetings, in giving pre-sentations, running international teams, writing reports, and making decisions.”

This is going to require a significant change in the general public’s opinion of accountants, who in turn will need to develop skills not traditionally associated with the job. The image of the guy in the corner with the stacks of paper will change to one of a high flyer, someone who is critical to the success of the organization.

What skills as you think will be needed to be successful in accounting profession? How will you prepare yourself for the future? What is contrasting in the image of an accountant in the past and in future?

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1. Ֆինանսական հաշվետվությունները տեղեկատվություն են տրամադրում ընկերության ֆինանսական վիճակի և փոփոխությունների մասին:

2. Սիրով կսպասեմ ձեր հարցերին և պատրաստակամորեն կքննարկեմ դրանք ձեզ հետ:

3. Հաշվետվության տրամադրման նոր մեթոդը կարող է ազ-դել ձեռնարկության ֆինանսական վիճակի ներկայացման վրա:

4. Հատուկ հաշվապահական մեթոդներ և ընթացակարգեր են պահանջվում եկամտահարկերը հաշվարկելու համար:

5. Կորպորատիվ կառուցվածքը ապահովում է ընկերության շարունակական գործունեությունը անկախ /irrespective of/ սեփականության և կառավարման փոփոխություններից:

Exercise 9. Make sentences using one part from each

column.

1. A large number of universities

in which the demand

for his raw materials

2. A price increase may require

in a series of developments

with modern methods

3. Accounting is also a field

a manufacturerto pay more

applied to business purposes

4. Computers are the most recent

were simple in comparison

for competent specialists exceeds the supply

5. Earlier accounting procedures

have business schools

that offer regular programs

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U N I T 6

INVESTMENT Exercise 1. Read the conversation between the members

of the management team discussing the investment. Turn the conversation into the narrative.

Look at Armenian equivalents below.

Կլանման կանոններ, մրցակցության կանոնադրություն, ներկա-յումս, ջանասիրություն, հաշվապահական հաշվառման օրենս-դրություն, ծախսարդյունավետ, պատշաճ: Anne Can we agree at least that it will be most cost

effective to invest in an existing business? That way, we will be able to utilize the local knowledge of the personnel currently running the business.

Luis Yeah, I think so. The question is how exactly. Do we buy the company or only the assets? There's a lot to think about. For instance, the due diligence process, although that won't affect the mechanics of our acquisition. What will we have to consider, Allen? You're the international lawyer.

Allen Lots of things, takeover rules, European Union regulation on competition and the accounting legislation. Dana, can you tell us something about that?

Dana Actually, the accounting regulations aren't such a big issue. More important will be the effect of our acquisition on our balance sheet. The goodwill component is huge and we have to be aware of the

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impact this is going to have. That'll be an interesting discussion with the auditors.

List the factors each speaker mentions.

ANNE 1. Better to invest in an existing business LUIS 2.__________________________________________ 3.__________________________________________ ALLEN 4.__________________________________________ 5.__________________________________________ 6.__________________________________________ DANA 7. Accounting regulations…____________________ 8.__________________________________________

9.__________________________________________ Choose from the given variants:

Takeover rules The accounting legislation Buy the company or only the assets The due diligence process European Union regulation The effect of an acquisition on the balance sheet The goodwill component.

Exercise 2. Use words from the conversation to complete the table

VERB NOUN VERB NOUN to acquire __________a to ________e investment

to _______b agreement to legislate __________

to _______c consideration to________g thought

to discuss __________d to ________h utilization

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Exercise 3. Use the correct form of the words from Exercise 2 and complete the email below

Hi guys I've been looking at the figures for the Scottish project. I

______________1 we need to find ways to make the ______________2 more profitable. One idea may be to ______________3 the plant in Perth, but this will need ______________4 from the local authorities. We could also ______________5 in the Dundee plant, but this may cause problems with the local plannig ____________6. Maybe we could ______________7 it at Friday's meeting. Any _____________ Sam8?

Exercise 4. The CFO of a British company is writing to the head of the Italian subsidiary.

Read the mail and decide what Rocco's job is.

Hello Marco Thanks for your email. As you know, before we can agree

to your investing in the new plant in Slovakia, we need to have a clear description of the project. I've listed the main points below. If you have any questions give me a call, but remember I'm away the first two weeks of December. I've copied this email to Rocco as I'm sure he will be responsible for producing much of the information.

1 audited financial statements of the plant's current owners 2 planned sources of supply 3 possible suppliers of capital goods and services 4 anticipated output 5 markets and distribution channels 6 competition 7 a summary of project costs Best wishes KJ

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Exercise 5. Are the following statements true (v) or false (x) 1. Rocco is senior to Marco in the company hierarchy. 2. The British company has already decided to invest in

the new plant. 3. KJ wants Marco to describe the project in more detail. 4. KJ wants financial information about how the plant has

performed in the past. 5. KJ wants to know about other similar plants in the

market. 6. KJ is very interested in how many people work in the

plant. 7. KJ needs to have the completed report by 7

December.

Exercise 6. The CFO of a European corporation is talking about differences in accounting practices in other countries.

a) Read the information. Find English equivalents.

Իրական արժեք, ինքնածին, միջին արժեք: If we are thinking about raising capital in overseas markets,

the reporting requirements of those markets are obviously important. I’ve summarized some of the major points on this slide - let's go through them briefly.

1. It may be possible to measure all of these at their fair value, which would allow the recognition of unrealized gains.

2. This may have been developed completely separately from the accounting systems, and may provide considerable opportunities for taxation planning.

3. Typical of these is the Profit and Loss Account.

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4. This can be acquired or self-generated - of course it may have to be recognized as an asset, if certain criteria are met.

5. Here we’re talking about things which we don’t actually own - they go back to their owners after a certain amount of time. They require different disclosure in the Balance Sheet, and the GAAP of different countries can require different classification, normally finance or operating.

6. The methods used to measure this can vary considerably. The normal ones are FIFO, which means “first in first out”, LIFO or “last in first out”, or average cost, which is somewhere between the two. All give a different value for what we hold.

b) Match each comment with a point from the list. • Taxation system

• Goodwill

• Leased products

• Inventory

• Financial instruments

• Income statements

Exercise 7. Put the words into the table below according to their stress pattern.

major • capital • requirements • disclosure • average • develop • different acquire • balance • profit • taxation • measure • require • value • actually

78

Exercise 8. Read the extracts from a presentation. Use the helpers to completely understand it.

Reproduce it and try to present your own on the topic you like. Նյութերի սպառիչ փաթեթ, օտարերկրյա շահեր, մոդայիկ խոսք, միաձուլումների փլուզում, միջմշակութային գործոն (միջավայր): Part l

Good morning, ladies and gentlemen. My name is Kathryn Smithson. I'd like to thank you first of all for giving me the opportunity to come here today and talk to you about the international issues facing enterprises with cross-border interests. Although I am not an accountant I hope to give you some information which will help you in your dealings abroad. If you don’t mind, I would prefer to answer any questions you may have at the end.

There’ll be three parts to my presentation. I’ll start with a short description of the general issues faced by managers today. Then we’ll look at some of the issues in more detail using some of the data I have collected. Finally we’ll look at how you can approach these problems and create successful international teams. There’ll be a comprehensive hand-out at the end, so there’s no need to take notes unless you really want to.

major

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Part 2 So, what can we conclude from all this? We all know that

globalization has been a buzzword for many years now. All of us have been involved in or seen companies expand across borders and we have seen some mergers collapse. I think that my research has shown that one of the main reasons for such collapses is that management has ignored the intercultural factors facing the members of teams working in an intercultural environment. I hope my presentation has made you aware of some of the factors which affect the ability of people from different cultures to work together.

Answer the questions to the first extract (part 1) 1. What do you think the speaker's job is? 2. What is she talking about? 3. How does she hope to help her audience? 4. Should people take notes?

Exercise 9. Look at part 2 and fill in the gaps in the

extracts from the presentation.

1 '_______________________1 has been a ______________________2 for many years now.'

2 ' All of us have been involved in, or seen, companies ____________________3 across ________________4 and we have seen some ______________________5 collapse.'

3 ' I think that my research has shown that one of the main reasons for such collapses is that ________________ 6 has ignored the _________________7 factors facing the members of teams working in an international ________________8.'

4 ' I hope my presentation has made you aware of some of the factors which ________________9 the ability of people from different _________________________10 to work together.'

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Exercise 10. Match the parts of phrases so that they make sense.

1. If you don’t mind, happy to take really want to. I would prefer to 2. I will now be some of the issues in you can create successful

international teams. 3. There’ll be take notes unless you at the end. 4. I’ll start with answer any questions my presentation. you may have 5. Then we’ll look at look at how any questions. 6. Finally we’ll a short description of the general issues. 7. There’s no need to three parts to more detail. DID YOU KNOW?

Planning a talk No matter what language it is in, a good talk has a very

clear structure. Introduction Explain who you are, and how your talk will benefit the audience. :Give a brief outline of what you plan to say. Main body Go into detail about your different topics. Summary Briefly remind your audience what you have covered, and

repeat your main points. Conclusion Stress your main message, and make sure the audience

knows how they can use this massage.

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Exercise 11. Translate from Armenian into English 1. Աճող (պրոգրեսիվ) եկամտահարկը սահմանում է ավելի

բարձր հարկային դրույքաչափեր ավելի բարձր աշխատա-վարձի դիմաց:

2. Ներդրումների ներգրավվումը պահանջում է արդար և կա-յուն օրենսդիր դաշտ:

3. Ծրագրավորման ոլորտում աշխատող արհեստավարժ հաշվապահներն ունեն առավելություն:

4. Բյուջեն կարող է արտացոլել երկարաժամկետում նախա-գծված ծրագրի մի մասը:

5. Ընկերության գլխավոր նպատակներից է՝ որոշել արտադ-րանքի ինքնարժեքը և գինը:

6. Պետական հաշվապահների ծառայությունները մեծապես հասանելի են հանրությանը:

Exercise 12. Complete the puzzle to find the hidden word.

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1. the difference between the amount actually paid for a company and its book value

2. the ways that goods are delivered to the customer: distribution…

3. taking control of a company by buying most of its shares: a…

4. another word for abroad 5. a company, piece and land, etc. bought by a company:

an… 6. a company’s raw material and finished or unfinished

products that haven’t been sold yet Exercise 13. Find the ending in the terms:

1. The budget fixes the amounts to be spent in the …. . 2. The things which a person or a company owns are … . 3. Goodwill is the total value of a company minus the net

value of the …. assets. 4. The company which owns the shares in all other

companies in a group is called… … . 5. A set of standards created to unify accounting practice

in the world is … … … … .

Globalization and the Role of Accountants Accountants are responsible for

reporting on the future profitability of an international merger or takeover. It is the accountants who produce financial information so they are best equipped to analyze the numbers of a potential

partner or target. The accountants should see the opportunities for growth.

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Accountants are only responsible for checking the figures provided by the company or organization. They have no skill in seeing opportunities for companies to expand.

Accountants have no people skills. They are not trained in the finer art of communication. They should therefore be left in their offices to punch the numbers. They can't be let loose with representatives from the potential partner!

Accountants nowadays have ever-increasing responsibilities. They are on the boards of directors of companies all over the world. They are involved in negotiations and meetings every day. They are no longer machines dressed up in suits. They have had to improve their communication and interpersonal skills.

Accounting rules are basically the same all over. Maybe we'll have to learn a few more things, but our job will be basically the same.

Accounting regulations are different in every country. Globalization will lead to accountants having to be up to date on the latest developments, and not only those of the country they work in.

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Answer the questions: 1. Which opinion do you agree with? 2. How has globalization affected (or will affect) you? 3. How will the jobs of the next generation of accountants

be different?

Test yourself! See how much accounting vocabulary you’ve learned. Use the clues to complete the crossword puzzle. Across 3. the process to reduce the value of an intangible asset

to zero, over a specified number of years 5. describes how the value of a asset goes down over

time 7. happening before something else: a... report or a...

meeting 9. another word for land or buildings 11. the list of people employed and paid by a company 13. the person who examines the business and financial

records of a company or organization 15. debts of a business 19. the money that a company or organization receives from

its business 20. the latest version of an item which, due to new

technology or processes, replaces the older version

22. statement of the financial position of a company at a specific time:... sheet

23. cannot be seen or touched; often used with the word assets

26. the amount of money that a company is owed

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Down 1. the process of including the figures of subsidiaries

and affiliates in the accounts of a holding company 2. American English word for stock on hand 4. the expenses of a company which can’t be

charged to a particular product, department, etc:... expenses

6. a person who lives outside the country for tax reasons (two words)

8. profits paid to shareholders of a company 10. adapting a company’s figures to give the best possible

picture:... accounting 12. another word for the purchase of something, such

as another company or a piece of land 14. a piece of business that is done between two parties,

such as buying or selling 16. a person or company that is owed money 17. the money you pay when you buy something:... price 18. a company which is owned by another (parent) company 21. the monetary value, which is more than the fair value of

the tangible assets 24. a written contract to rent a piece of equipment or a

building for a period of time 25. things of value which belong to a company or person

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ADDITIONAL MATERIAL FOR EXAMINATION What Are Financial Statements?

Accounting is the art of organizing, maintaining, recording and analyzing financial activities and is generally known as the “ language of business”. We know that one of the functions of the accountant is to keep track of accounting information. The accountant is also called upon to prepare various reports from

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the accounting information. There are four basic reports that the business organization uses on a regular basis:

● Income statement ● Statement of capital ● Balance sheet ● Statement of cash flows These financial statements present the accounting

information in formal reports that tell managers, creditors, prospective investors and other interested groups how the business is doing. These reports are prepared from the information obtained from the various business transactions. Thus, transactions involving assets, liabilities, and permanent and temporary capital become the data used in the preparation of the financial statements.

Financial statements are prepared at least once a year. This is known as the accounting period. An accounting period may follow the calendar, in which case it begins on January 1 and ends on December 31 of the same year. The business is then said to have a calendar-year accounting period. Any business that has an accounting period consisting of 12 months other than a calendar year is generally known as a fiscal-year accounting period.

Organizations may prepare financial statements for periods of time that are less than the accounting period; such statements are known as interim statements. Examples of interim statements are statements prepared for 6-month, 3 month, or even monthly periods. Regardless of the periods of time covered by the individual financial statements the kinds of information presented by the various statements do not change.

The Income Statement The income statement is a report that presents revenue,

expenses, and net income or net loss

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for a business for a period of time. The income statement is divided into two parts. The first part is known as the “ heading”, and the second part as the “ body” of the report. The heading of the report asks three questions:

Whose business is it? What statement is being prepared? When is it prepared? The body of the income statement lists revenue and

expenses. A comparison of these two items will show either net income or net loss. When total revenue exceeds total expenses, the expense represents the net income. When total expenses exceed total revenue, the difference represents a net loss. Example: The income Statement Notice that the date assigned to the income statement covers a period of time. This is true for all income statements regardless of whether they are prepared for an accounting period or on an interim basis.

Adams Limousine Service Income statement for the year ended December 31, 20

Revenue: Limousine rental $124,000

Expenses: Repairs Expense $2,350 Salaries Expense 64,500 Insurance Expense 4,000 Total Expenses $70,850 Net Income $53,150

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Referring to the Adams Limousine Service income statement, answer the following questions:

a) What is the period of time covered by the income statement?

b) What is the source of the revenue? c) What is the total revenue? d) What are the total expenses? e) Why is there a resulting net income? f) Who does the net income belong to? g) If total revenue exceeds total expenses what is the

difference called? Computational Problem for Solution

Cynthia Lopez owns the New Wave Beauty Parlor. From the information below, prepare an income statement for the month ending January 31, 2015.

Revenue from sales $3, 750 Rent expense $875 Service revenue 4, 580 Supplies expense 300 Salaries expense 500 Advertising expense 850

The Statement of Capital It is known that the proprietor’s capital account represents

his or her ownership in the assets of the business. Whatever net income the business earns also belongs to the owner. The owner has the right either to withdraw the profits that the business earns or to reinvest the income in the business. If the latter approach is chosen the profits are added to the proprietor’s capital record. If the proprietor withdraws from the business more than the business earns, the result is a decrease in the proprietor’s capital. Whichever approach is taken it must be reflected in the record of the proprietor’s ownership. The

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statement of capital shows the changes that take place in the proprietor’s capital usually over an accounting period.

As the information used in the statement of capital comes from the income statement, the statement of capital is prepared after the income statement. The statement of capital like the income statement consists of two parts: the heading and the body of the statement. The heading answers the same three questions as does the income statement heading.

Example: The Statement of Capital The body of the statement of capital shows what happened

to the proprietor’s record of ownership in the business during the year. If the proprietor had made an additional investment in the business this would have appeared as an additional increase in a fashion similar to showing the income for the year. Changes in the proprietor’s capital from the beginning to the end of that period will occur as a result of the following situations:

1. A permanent increase in the proprietor’s investment in the business.

2. A permanent decrease in the proprietor’s investment in the business.

Adams Limousine Service Statement of Capital for the Year ended December 31, 20---- Randolph Adams, (Beginning) Capital, January 1, 20 --- $23,200 Plus: Net Income for the Year $50,150 Less: Randolph Adams, Drawing $45,000 Net increase in Capital $5,150 Randolph Adams, (Ending) Capital, December 31, 20--- $28,350

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3. The proprietor’s withdrawal of assets from the business, usually in anticipation of profits

4. The recognition of a net income for the period. 5. The recognition of a net loss for the period.

In the above mentioned statement of capital, if the subtraction from capital had exceeded the addition to capital, the result would have been a net decrease in capital which would have been subtracted from the original capital to arrive at the new capital balance. Answer the questions:

a) What accounting report shows the change that may take place in proprietorship during the accounting period?

b) What are the two primary items that bring about a change in a proprietorship?

Computational Problem:

Prepare a statement of capital for the New Wave Beauty Parlor for the month ending January 31, 2015. The proprietor, Cynthia Lopez, had a beginning capital balance of $14,500. During the month, she withdrew $1,600 in anticipation of profits. The net income earned for the month amounted to $5,805.

The Balance Sheet

The balance sheet shows the financial position of a business on a specific date. It represents a detailed presentation of the accounting equation. The final form of this equation is given as: Assets = Liabilities + Capital

A balance sheet provides a detailed listing of the various assets that a business owns, the liabilities that are owed to

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creditors and other parties, and the proprietor’s equity interest. It is known as a balance sheet because, upon its completion, it must be in balance. In other words, the total value of the business’s assets must be in agreement with the total value of the liabilities and capital of the business. The balance sheet is cumulative in its nature in that it reports the results of all the financial activities of the business since its formation.

As pointed out previously, the statement of capital is prepared after the income statement. The balance sheet may be prepared at any moment in time. However, it is usually prepared after the income statement and the statement of capital. This is due to the fact that the information obtained from the statement of capital is essential for proper and complete preparation of the balance sheet. The capital balance found on the balance sheet is obtained from the new capital found on the last line of the statement of capital.

Although the heading of the balance sheet is basically the same as that of the other two financial statements, it does differ in one important respect: the date does not cover a period of time but rather represents a moment in time. If we were to prepare a balance sheet on January 31, 20--, it would reflect the financial position of the business at that time. This balance sheet would be different from the one prepared on the previous or the following day.

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CLASSIFYING ASSETS AND LIABILITIES

What are assets? Assets are all the things owned by any business organization. An item must meet two requirements to be considered an asset. First, it must be owned by the organization, and second, it must have monetary value. Monetary value exists if a buyer is willing to pay a sum of money to a seller for the property.

Assets may be grouped according to the degree of liquidity or the expected conversion into cash or the time it takes to use up the asset. Assets are classified as follows:

Current assets are cash and other assets that can reasonably be expected to be converted to cash, used up or sold within one year or less. Thus, on the classified balance sheet, current assets are listed first, based on their relative degrees of liquidity. Examples of current assets include cash, supplies, insurance and accounts receivable.

Investments may be either short- or long-term assets depending on the nature of investments. Generally, bonds are considered long-term investments, whereas stocks may be either long- or short-term investments. Investments generally appear immediately following current assets on the classified balance sheet.

Property, Plant and Equipment are tangible, long-term assets; they are used in the continuing operations of the business and are expected to have useful lives of more than a year. They are also known as plant assets or fixed assets. Examples of these assets are land, buildings, machinery and equipment.

Intangible assets are usually long-term in nature and are traditionally shown on the classified balance sheet after plant assets. They lack physical substance and in some cases

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represent a right granted by a government (patent), or another company (license, franchise). Other examples are brands, trademarks, know-hows or company software.

Liabilities are classified in a similar manner: Liabilities are considered to be current liabilities if the

obligation is to be settled within a year or within the current accounting period. These debts are usually settled with the payment of current assets. Examples of current liabilities are accounts payable, taxes payable, salaries payable and notes payable.

Following current liabilities on the balance sheet are long-term liabilities, which are payable in more than a year. Examples of long-term liabilities include bonds payable and mortgages payable. In the year when a long-term liability becomes payable it is usually converted into a current liability.

Computational Problem:

The New Wave Beauty Parlor had the following assets, liabilities and the proprietor’s capital as of January 31, 2013: Cash, $ 2,380; Accounts Receivable, $ 1,400; Beauty Supplies, $ 800; Beauty Equipment, $ 15,000; Notes Payable, $ 2,275; Accounts Payable, $ 300; Cynthia Lopez, Capital, …? Prepare an account form balance sheet for the New Wave Beauty Parlor. The accounting equation will enable you to determine the capital balance.

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THE STATEMENT OF CASH FLOWS The statement of cash flows is a detailed explanation of the

balance of the cash account as reported in the balance sheet of the business organization. It is a summary of the receipts and disbursements of cash for a period of time such as represented by the income statement and the statement of capital. Many people use financial statements. Current and future investors are interested in how the business is doing. Creditors are concerned about being paid. The statement is also useful to managers who need to evaluate past performance, and make decisions as to future actions. The statement of cash flows reports the following three types of activities:

● Cash flows from operating activities ● Cash flows from investing activities ● Cash flows from financing activities Cash flows from operating activities are transactions that

affect net income (loss). The direct method takes the cash received from customers and offsets it by subtracting payments to creditors and payment of expenses to arrive at net cash flows from operating activities.

Cash flows from investing activities result from the payment for long-life assets, investments, or intangible assets, decreasing cash flows. Cash flows increase from investing activities with the sale of the preceding items. The resulting net inflow of cash from investment activities is usually stated as net cash flow provided by investing activities.

Cash flows from financing activities usually arise from issuing securities or stocks resulting in net cash flow provided by financing activities. The redemption of securities or

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repayment of debt results in net cash flow used for financial activities.

The statement of cash flows results in the net cash flow at the end of the period which corresponds to the cash balance in the balance sheet of the organization. The following is an illustration of the statement of cash flows.

Accurate Tax Service Statement of Cash Flows For the Year Ended April 30, 2015

Cash flows from operating activities: Cash received from customers $83,200 Deduct cash payments for expense and payments to creditors $26,500 Net cash flows from operating activities $56,700 Cash flows from investing activities: Cash payment for the purchase of automobile 9,500 Cash flows from financing activities: Cash received from the owner’s investment $33,900 Deduct cash withdrawal by owner 18,600 Net cash flow provided from financing activities 15,300 Net cash flow on April 30, 2015 cash balance $62,500

Prepare an imaginary statement of cash flows and present it to your group mates.

1. SELLING GOODS AND SERVICES Goods and services may be sold by a business organization

for cash or on credit. Most organizations, if given a choice, would probably prefer to sell their products or services for cash. Because of competition and other factors, however, many

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businesses, out of necessity, must offer their products and/or services to customers on credit. When a sale is made to a customer on credit, the effect of the transaction is to establish an accounts receivable account on the books in the name of the customer. This account is classified as an asset. When the customer pays the obligation to the seller, the customer’s account is credited and the cash account is debited as a result of the receipt of cash.

No business organization prefers to sell on credit, especially since the customer may prove to be unwilling or unable to pay his or her obligation when it becomes due. Most large businesses utilize a credit department or credit service to ascertain the creditworthiness of a new customer. The credit department investigates the debt-paying ability of each such customer and determines the maximum amount of credit to extend. A credit service such as Dun & Bradstreet, Inc., furnishes credit reports on prospective customers. Whether the customer is an individual or a business, some form of credit information is obtained before extending credit to the customer.

The amount of credit extended depends on a number of factors. The credit terms offered by the seller may be modified for a new customer until the debt-paying ability of the customer can be determined firsthand. A seller who normally offers credit terms of n/30 may decide to offer terms initially of only n/10 to a new customer. Many sellers who have previously sold to a buyer for cash may use such shorter terms as a means of extending credit to the customer. In smaller organizations, where competition is great, credit checks may not be made at all. A “seat of the pants” or a “gut feeling’’ approach may be used by these organizations.

Businesses that sell their products to the final consumer in a “brick and mortar” store or on the Internet usually do not

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have the task of determining the creditworthiness of the customer. A customer buying from a local retailer has the option of paying for the purchase in cash, or making use of a credit card if offered by the retailer. Internet sales are typically paid for using a credit card. The risk of potential loss is eliminated since that risk is taken over by the credit card company.

Situations in which the retailer is buying a large quantity of products from either the manufacturer or the wholesaler will require the extension of credit to the buyer. Here the seller must ascertain the creditworthiness, of the buyer.

Words and terms: Creditworthiness - վճարունակություն Gut feeling - ենթագիտակցություն, ներզգացողություն Brick and mortar - շինանյութ Seat of the pant – տես` gut feeling

2. RECOGNIZING BAD DEBTS When sales are made without the immediate receipt of

cash, a small portion of the outstanding accounts receivable may prove to be uncollectible regardless of a credit department’s efforts or the credit service used. When this happens, a provision must be made to match expenses and revenue by recognizing a bad debt. A bad debt is an expense that was caused by a customer’s failure to pay an obligation arising out of a prior credit sale. The recognition of this uncollectible account receivable is handled in different ways depending on the nature of the business.

Three methods are used to recognize customer obligations that have proved to be uncollectible, but we will focus on the first one.

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1. Direct write-off method. 2. Net sales method. 3. Aging of accounts receivable method The direct write-off method is used by businesses when it

is possible to determine that an account will prove to be uncollectible within the same accounting period as the original sale took place. When a business sells most of its products or services for cash, the direct write-off method may be appropriate, since the amount of credit sales will be very low. Since the credit period offered by the seller is probably rather short, any uncollectible accounts can be ascertained quickly, probably within the same accounting period. Given this information, the bad debt recognition is made when the debt proves to be uncollectible.

Example: The Direct Write-off Method On August 10, 2012, a credit sale was made to John Reston

for $300; terms: n/30. On December 31, 2012, it was determined that Mr. Reston would not pay his obligation, which at that point was over 4 months past due. A decision was made to write off Mr. Reston’s account as uncollectible.

300

300

300

300

To write off the uncollectible account

Sales

Terms: n/30

2012

Dec.31 Bad Debts Expense

John Reston Accounts Receivable

2012

Aug.10 John Reston Accounts Receivable

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The entry on August 10 represents the credit sale made to Mr. Reston. The December 31 entry recognizes that the customer will not pay his obligation. The second entry recognizes the expense and eliminates the obligation that Mr. Reston has to the seller. The direct write-off of December 31 could have taken place at any time after the 30-day terms had expired. By writing off the account as uncollectible, by December 31-the end of the accounting period-the accountant is able to match cost with revenue more accurately. The effect on the debit to bad debts expense directly offsets the revenue recognized in the credit sale of August 10.

If the account proved to be uncollectible in the next accounting period, it would be written off then. However, the matching concept would not be followed. For a business where debts may not be determined as uncollectible for many months after the sale, the direct write-off method is not appropriate.

Words and terms: Bad debt − անհուսալի պարտք Direct write off method − դուրսգրման ուղղակի մեթոդ Credit terms of n/30 − երեսուն օր ժամկետով վարկային

պայմաններ Outstanding − չվճարված EXTENDING CREDIT The extension of credit to customers is an important aspect

of any business’s operation. When credit is given, a receivable is set up on the books of the seller. As we have learned, this receivable is usually in the form of an “oral promise,” known as an accounts receivable. A receivable represents a claim against an individual, a business organization, or another debtor that will eventually be settled by the receipt of cash or any other

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asset accepted by the creditor. When the creditworthiness or reliability of a customer is in doubt, the seller may decide to sell to the customer on credit with certain additional requirements. The seller may require the buyer to prepare a promissory note as evidence of the buyer’s obligation to the seller.

• PROMISSORY NOTES A promissory note is an unconditional written promise to

pay a stated sum of money upon demand or at a future determinable date. This written promise is usually prepared by the debtor as a result of a request or requirement made by the creditor. The terms of a credit sale may read: 30-day, non- interest-bearing promissory note. Upon receipt of the invoice by the buyer, it is his or her obligation to prepare and deliver to the seller the promissory note within a reasonable time. The “maker” of the note (debtor) records the note in an account entitled “Notes Payable.” If the original purchase caused a credit to be recorded to the accounts payable control account and the individual creditor’s account, then the issuance of the note would represent the payment of the oral promise with a corresponding credit to the notes payable account.

Example: Promissory Note On April 23, 2013, Reliable Equipment Co. received an

invoice from the ՜ Fireside Tire Co. for $650; terms: 30-day, non-interest-bearing promissory note. The following entries were recorded in general journal form:

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Since the notes payable account lists all the promissory

notes that a company issues, it is necessary to indicate the organization or person to whom the note is payable, the terms, and, where appropriate, the due date of the note.

650

650

2013Apr. 23 Trucking Supplies

Fireside Tire Co.Accounts Payable

Terms: 30- day

24 Fireside Tire Co.Accounts Payable

As a result of posting to the notes payable account, the following information appears in the acount:

650

Notes

Issued 30-day note to Fireside tireCo. Form April 23 invoice

Notes Payable

Apr. 24 Fireside Tire Co. 30-day non-interest- bearing note due May 23 650

2013

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INTEREST-BEARING PROMISSORY NOTES An interest-bearing promissory note is a written promise

to pay a certain sum at a fixed and determinable future date, along with an additional sum known as interest. This interest is calculated based on the holding period of the note, which is usually expressed in days, and the payment of a specific, stated rate of interest, which is calculated on the face amount of the note. Interest-bearing notes in the hands of the maker are known as notes payable. The same interest-bearing notes in the hands of the creditor are known as notes receivable.

DETERMINING INTEREST

As stated earlier, calculation of the interest assigned to the promissory note is usually based on three factors:

1. The face value of the note, known as the principal. 2. The amount of time the note is in the hands of the

creditor before payment is made, known as the time. 3. The rate of interest being charged on the note,

commonly referred to as the rate. The basic formula for calculating interest is:

Principal (P) x Rate (R) x Time (T) = Interest (I)

In using this formula, certain assumptions are made. In

most cases the period of time for which money is borrowed, as shown by a note, is usually less than 1 year. In fact, it is not unusual for the terms of a note to call for payment within 30, 60, 90, or 120 days. Since this is the rule rather than the exception, an assumption is made that a year consists of 360 days. This is known as a “banking year.” Note the calculation of the interest, using this rule, on the following promissory note.

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Example: Calculating Interest A note for $1,000 bears a rate of interest of 696 for a

period of 90 days. Using the formula P x R x T = I, find the amount of interest on the note.

Principal x Rate x Time = Interest $1,000 x .06 x 90/360 = $1,000 x .06 x ¼ = $15

SHORTCUT FOR DETERMINING INTEREST Since we have assumed that a year consists of 360 days

(banking year), and that most promissory notes will be due and payable in 30, 60, 90, or 120 days, a shortcut method is available for computing interest, known as the 60-day method of determining interest. This 60-day method is based on the fact that the interest on an amount of money borrowed at 696 interest for a period of 60 days will always equal 196 of the money borrowed. Thus, an interest-bearing note for $1,000 due in 60 days and carrying a 696 rate of interest will accrue interest of $10.

The following chart will assist in the analysis and solution of the preceding problem:

Problem Principal Rate Time $1,000 .06 60 days 10

Words and terms: Promissory note – սովորական մուրհակ Note receivable – ստացվելիք մուրհակ Holding perod – տիրապետման ժամանակահատված Face value – անվանական արժեք Principal – հիմնագումար Rate of interest – տոկոսադրույք Shortcut – ամենակարճ ուղին

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ADVANTAGES OF NOTES If a seller of goods and/or services is given an option to sell

for cash or on credit, the obvious preference is to receive cash at the time of the sale. As we have previously indicated, this choice is not usually available to the seller because of the dictates of the industry or trade. However, in selling on credit, the seller has the choice of accepting an oral or a written promise.

When a particular customer has been dealt with on an ongoing basis, an oral promise from the customer may be adequate. When, on the other hand, the seller’s experience with a customer is limited, the seller may request a written promise when initially selling to the customer on credit. Should a dispute between the customer and the seller develop at a later date, the existence of a promissory note will assist the seller in having the dispute adjudicated in his or her favor. The courts will accept written evidence over oral testimony in litigation. If, when the original sale is to be consummated, the seller anticipates problems in collecting from the customer, the seller should probably not sell to the customer on credit, even with a promissory note as evidence of the transaction.

Aside from its value in litigation, the primary benefit that a promissory note has over an oral promise is its negotiability. This is the ability to transfer the note in exchange for cash or other assets. Negotiability is not possible with an oral promise because of its lack of substance; however, it is quite common to transfer a promissory note.

TRANSFERRING NOTES The receipt of a promissory note from a customer enables

the business to sell that note before maturity for cash rather than to hold it until the due date. In this process, known as discounting a note, the promissory note is sold to a bank or

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finance company. The note is endorsed by the seller, in a fashion similar to that for a check, and delivered to the bank. The bank deducts from the maturity value of the note (face value of the note plus interest) its discounting charges and provides the seller with the net proceeds (maturity value less discount).

When the note becomes due, the lending institution that discounted the note expects to receive the maturity value of the note from its maker. The fact that the note has been discounted and turned over to the lending institution does not eliminate the seller’s involvement with the note. The endorsement of the note expedites and makes possible the negotiation of the note, but at the same time it represents a guarantee on the part of the endorser that, if the maker of the note fails to pay the bank, the seller will do so.

Although this situation does not represent an actual liability, a contingent liability has developed. A contingent liability is the commitment of the endorser to pay the discounter the maturity value of the note in the event that the maker of the note defaults. The discounting of the note creates the contingent liability, which continues in effect until the due date of the note. If the maker pays the appropriate amount at maturity, the contingent liability is eliminated without any action taken by the endorser. If the maker defaults, then the contingent liability becomes an actual liability. Note that the elimination of the contingent liability takes place on the due date regardless of the action or lack of action taken by the maker of the note.

Words and terms: Adjudicated – որոշված Litigation - դատական վեճ, (գործ.) Negotiability- փոխանցելիություն Consummate –ավարտ(վ)ել

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Discount a note – զեղչել մուրհակը Endorse – փոխանցագրել Proceeds – դրամական մուտքեր Expedite –արագացնել, նպաստել. ուղարկել Contingent liability – պայմանական պարտավորություն

6. LONG-LIFE ASSETS We have previously defined an asset as anything owned

that has money value. Assets were further classified in terms of their useful life. An asset that can readily be expected to be consumed or converted to cash within a year or less is considered to be a current asset. Any asset that has a useful life of more than 1 year is usually considered to be a long-life asset. Other terms used to describe a long-life asset include fixed asset and property, plant, and equipment.

Long-life assets are acquired through purchase for use in the operation of the business and are not usually intended for resale. Assets included in this category are equipment, tools, furniture, machinery, automotive equipment, buildings, and land. In order for the already mentioned items to be classified as plant assets, they must be used in the business, though not necessarily continuously, and must have a minimum useful life of at least 1 year.

The function of long-life assets is to assist in the generation of revenue, which is the primary activity of most business organizations. A fixed asset such as a delivery truck enables a firm to transport goods that have been sold to the organization’s various customers. Thus, this long-life asset is an integral part of the consummation of the sale. Without this fixed asset the firm would have to incur the expense of hiring a delivery service to complete the transaction. The cost of hiring a delivery service is an obvious expense, but the use of the firm’s

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delivery truck is also an expense, although not so apparent, that must be recognized over the assigned useful life of the truck.

• DETERMINING PLANT AND EQUIPMENT COSTS The cost of plant and equipment includes all expenditures

necessary to acquire and place the asset in use by the organization. Costs include the purchase price of the asset, plus any applicable sales taxes, the cost of transporting the equipment to its place of use, the installation costs, and any other incidental costs necessary to make the asset operational for the organization. The justification for including all the costs indicated, rather than recording some as expenses, is that every one of these costs is an integral part of making the asset usable by the organization. The benefits derived from the cost assigned will be recognized over the useful life of the asset. The cost principle states that every asset is set up on the books at its actual cost. This cost includes any specific or incidental costs necessary to place the asset in use by the firm. This principle is an integral part of the concept of matching costs and revenue.

Example: The Cost Principle A business wishes to acquire a machine that has a list price

of $5,000. The seller offers a trade discount of 20%. There is a delivery charge of $175, and applicable sales taxes on the net purchase price amounting to 8%. Also, in order to make the machine operational, a special cement pad must be constructed at a cost of $500. The installation charge amounts to $250. The following represents the determination of the total cost of the machine as it will appear on the buyer’s books should the organization decide to acquire the asset:

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List Price of Machine $5,000

Less: Trade Discount (20%) (1,000)Net Purchase Price 4,000

Add: Sales Tax (8%) 320Delivery Charge 175

Cement Pad 500Installation Charge 25 0

Total Cost of Machine $5,245

Words and terms: Incidental costs – լրացուցիչ ծախսումներ Installation cost – տեղադրման ծախս Delivery charge – առաքման վճար

7. ALLOCATING PLANT AND EQUIPMENT COSTS

A short-life (current) asset, such as supplies, is adjusted annually to reflect the fact that it has been used up. This conversion from an asset to an expense is accomplished by recording an adjusting entry. At the end of the accounting period, an inventory is taken of the actual supplies that are on hand. The difference between the book value of the supplies and the inventory tells the accountant the value of the supplies used up, and becomes the basis for the adjusting entry.

Plant and equipment cannot be treated in the same fashion because there is no apparent change in the value of the asset that can be readily measured. However, the approximate useful life of a plant asset can be determined. This useful life, expressed in years or usage, becomes the basis for assigning a cost or expense for the asset periodically. The term used to describe the recognition of an annual expense for a plant asset is depreciation.

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Depreciation is the recognition of a loss in value of a plant asset due to wear and tear over time. Thus, the recognition of depreciation causes a portion of the asset value to be converted to an expense in the same way that the asset supplies was converted. In recognizing this annual expense, the accountant must still follow the dictates of the cost principle. The value assigned to the fixed asset on the books must remain the same unless the asset is sold or changed as a result of a capital improvement.

DEPRECIATION The entry to record depreciation is an adjusting entry and

is usually recorded at least once a year. Some organizations may choose to record depreciation monthly, quarterly, or semiannually. Regardless of when it is recorded, it still represents an adjusting entry similar to the conversion of the asset supplies to an expense. It is necessary to retain the original balance in the account for a plant asset; therefore, the adjusting entry first recognizes the expense by debiting an account entitled “Depreciation Expense.” The corresponding credit is made, not directly to the asset account, but rather to an account that is classified as a contra-asset.

Depreciation may result from one of two major causes. One is physical deterioration due to the plant asset being used. Some assets are depreciated based on the somewhat arbitrary useful lives (in years) assigned to them, and other assets are depreciated based on their capacity to complete a number of specific functions. For example, a machine may be depreciated on the basis of its ability to stamp out a specified number of items; the machine’s output is used to determine the depreciation expense. Another cause of depreciation is obsolescence; that is, the process of becoming obsolete or out of date. A microcomputer designed a mere 2 years ago may be

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considered obsolete today, even though it is operational, because a more sophisticated computer has been developed. Obsolescence may also occur when a plant asset cannot meet the needs of a rapidly growing business. Inadequacy of a plant asset may necessitate replacement with a larger capacity unit, even though the original asset is in good physical condition and is not obsolete.

Words and terms: Contra-asset account – կոնտրակտիկային հաշիվ Obsolescence – հնացում Deterioration – վատացում, վատթարացում Sophisticated – կատարելագործված 8. THE STRAIGHT-LINE METHOD A business organization utilizes as many methods of

recognizing depreciation as are suitable for the assets being depreciated. The four methods most commonly used to recognize depreciation are straight-line, units of production, double-declining balance, and sum of the years’ digits.

The straight-line method is the simplest and most widely used method of recognizing depreciation. This method provides for the annual recognition of depreciation in equal amounts over the useful life of the asset. If the asset being depreciated is expected to lose value in a uniform manner year after year, then this method will probably be appropriate.

The amount of the asset that is subject to depreciation is known as the depreciable value. The depreciable value is determined by subtracting from the total cost of the asset the salvage or scrap or residual value of the asset. This residual value, which is usually an estimate, represents the value of the asset after it has been fully depreciated and also the minimum

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amount that can be obtained for the asset when it is no longer of use to its owner. If a plant asset has a total cost of $10,000 and a residual value of $500, then the depreciable value would be determined as follows:

Cost – Residual value = Depreciable value $10,000 – $500 = $9,500 The useful life, usually expressed in years, is divided into

the depreciable value to determine the annual depreciation expense to be recognized.

If the plant asset with a depreciable value of $9,500 had a

useful life of 10 years, then the annual depreciation would be calculated as follows:

The annual depreciation can also be expressed as a rate.

The first step is to develop a fraction with 1 as the numerator and the number of years of useful life as the denominator. Thus, in this situation, a useful life of 10 years would be expressed as the fraction 1/10 which converted to a percentage would represent annual depreciation of 10% under the straight-line method.

This calculation would take the depreciable value ($9,500) and multiply it by the straight-line rate of 10%. $9,500 x .10 = $950

THE UNITS OF PRODUCTION METHOD The units of production method allocates the cost of a plant

asset to the various accounting periods on the basis of the actual output by the asset. Thus, the useful life of the asset may be unlimited in terms of time, but limited as to the number of

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items that can be produced using the asset. In this method, as in the straight-line method, the portion of the cost of the asset subject -to depreciation is known as the depreciable value. By dividing the depreciable value by the estimated productive capacity, the accountant can ascertain the depreciation expense to be charged against each unit produced by the machine.

Depreciable value__ = Per-unit depreciation Productive capacity

If the number of units produced for the accounting period is then multiplied by the per-unit depreciation, the total adjusting entry for depreciation expense can be determined.

A lathe acquired at a total cost of $20,750, with a salvage value of $750, is to be depreciated using the units of production method. The estimated productive capacity of the lathe is 40,000 hours. The per-hour depreciation is determined as follows:

If the lathe was used for 1,500 hours during an accounting period, the number of hours multiplied by the $0.50 rate of depreciation would mean a depreciation expense of $750 for the year.

When the amount of usage of a plant asset varies greatly from year to year, the units of production method is more appropriate than the straight-line method. Certainly costs are more appropriately charged against revenue for the specific accounting period, as dictated by the matching of costs and rev-enue principle.

The Double-Declining Balance Method. This method is appropriate when the asset subject to

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depreciation contributes to the production of earnings to a greater extent in its early years of use than in its later life. This method modifies the straight-line method in that depreciation is taken at “double” the straight-line rate. Thus, an asset with a useful life of 10 years is depreciated under the straight-line method at a rate of 10% per year. With the double-declining balance method, the same asset is depreciated at a rate of 20% per year on the remaining balance or book value of the asset. When this method is used, the residual value is not a part of the calculation. The formula used to calculate first-year deprecia-tion under this method is:

Cost x Double-declining balance rate = First-year depreciation

The plant asset costing $10,000, with a useful life of 10 years and a salvage value of $500, would be depreciated under the double-declining balance method as follows:

$10,000 x .20 = $2,000 Note that the salvage value is ignored in this calculation.

The depreciation recognition in subsequent years is based on the book value of the asset multiplied by the double-declining balance rate.

The depreciation of the plant asset over its useful life would be calculated as follows:

Equipment Cost—$10,000; Salvage Value—$500 (ignored) Useful Life—10 years; Straight-Line Rate—10% (1/10) Double-Declining Balance Rate—20% (2/10)

9. INTANGIBLE ASSETS We learned that an intangible asset is something that

cannot readily be seen or touched; it has no physical substance. Examples of intangible assets include leaseholds, copyrights, franchises, licenses, trademarks, and goodwill. In order for

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these items to qualify as assets, they must be owned) and they must have money value.

A leasehold is the right of a tenant to use and occupy real property under a lease. A copyright is the exclusive right, applied for to the federal government and granted to an individual or organization, to use and control a literary or artistic work. This right currently extends for 70 years beyond the life of the creator. A franchise and a license (patent) are rights given by a company or governmental unit to conduct a certain type of business in a specific area. These rights are purchased. A trademark is a symbol or design used to distinguish a firm’s product or service. Trademarks are issued by the United States Patent Office. The golden arches of McDonald’s restaurants are an example of a trademark. Goodwill is usually said to represent the reputation and managerial skill of a business. It represents the excess earnings of a particular business organization over the normal rate of return of other businesses in the same industry. Goodwill is usually recognized by the buyer of a business as the excess paid for the business above the value of the tangible assets acquired.

• AMORTIZATION Unlike depreciation and depletion, which can be readily

measured, the expense of intangible assets is determined in a somewhat arbitrary fashion. The systematic write-off of the cost of an intangible asset over the period of its economic life is known as amortization. The entry to record amortization of an intangible asset is a debit to amortization expense and a credit directly to the intangible asset account. The period of time for which a particular intangible asset is to be written off depends on the asset but should never exceed 40 years. Goodwill should not be written off for a period of less than 60 months, and usually not more than 40 years. A copyright, as stated above, is

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granted for 70 years beyond the life of its creator; however, this period may be impractical from the standpoint of recognizing amorti-zation. If the specific work covered by the copyright is expected to have a useful life of 25 years, then this would be an appropriate period over which to recognize amortization.

Other intangible assets may also be subject to amortization, such as organizational costs and research and development costs. Determining the useful life of these assets is usually left to the discretion of the accountant. A general guide is that they should not be “amortized over less than 5 years unless it can be substantiated that their benefits will be for a lesser period of time. The fact that a useful life has been assigned to an intangible asset does not mean that it cannot be adjusted at a later date. If the holder of a franchise that has a useful life of 10 years finds that the benefits of the franchise, will not extend beyond the eighth year, an adjustment in amortization would be appropriate.

When an intangible asset is deemed worthless, it should immediately be written off as a nonrecurring loss.

Words and terms: Arbitrary fashion – կամայական եղանակ tenant-վարձակալ, տնվոր depletion – սպառում left to the discretion – հայեցողության թողնված substantiate – հիմնավորել deemed worthless – անարժեք համարվող

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KNOW THE CONCEPTS

Test your knowledge of this chapter by classifying each of the following as True or False.

1. A leasehold is an example of a long-life asset. 2. Depreciation expense is usually recorded at least once a

year. 3. The units of production method is the most widely used

method of recognizing depreciation. 4. Two methods of recognizing accelerated depreciation

are the straight- line and the double-declining balance method.

5. The form of depreciation that applies to land use is known as depletion.

6. Amortization is the conversion of the cost of an intangible asset to an expense.

7. Research and development costs represent an intangible asset.

PRACTICAL APPLICATION A building with an assessed value of $70,000 for property

tax purposes is offered for sale at $95,000. The building is acquired by a business firm for $32,000 cash and the balance in the form of a 2-year non-interest- bearing note. The real estate brokerage fee is 5% of the selling price. Legal fees for the contract and closing are $2,500. Determine the cost of the building to be recorded on the books of the purchaser.

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Glossary of Financial and Accounting Terms accompanying statement ուղեկից հաշվետվություն account հաշիվ. հաշվետվություն accountancy հաշվապահություն

(մասնագիտություն) accountant հաշվապահ. tax հարկային~,

cost~ ինքնարժեքի գծով~, certified~հավաստագրյալ~

accounting period հաշվետու ժամանակաշրջան accounting հաշվապահական հաշվառում acquisition cost ձեռքբերման արժեք adjustment ճշգրտում, շտկում, ուղղում administer ղեկավարել adviser խորհրդատու affiliate մասնաճյուղ agenda օրակարգ amortization ամորտիզացիա annuity benefit տարեվճար նպաստ anticipate կանխատեսել applicant դիմորդ. դիմումատու art of communication հաղորդակցության արվեստ asset ունեցվածք. ~s ակտիվներ

intangible ~ ոչ նյութական անշոշափելի ակտիվներ

assets and liabilities ակտիվներ և պարտավորություններ

authority իշխանություն. հեղինակություն

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background info բազային ելակետային տեղեկա-տվություն

back-office manager բեք գրասենյակի մենեջեր bad debt անհուսալի պարտք balance sheet հաշվապահական հաշվեկշիռ beneficiary շահառու. ժառանգորդ, օգտառու benefit օգուտ, շահ board of accountancy հաշվապահության

մասնագիտական խորհուրդ board of directors տնօրենների խորհուրդ bond պարտատոմս book value ~ հաշվեկշռագրի արժեք. syn.

carrying value book գրանցել, հաշվապահական

գրառումներ կատարել bookkeeper հաշվետար borrowing փոխառություն borrowing costs փոխառու ծախսումներ brand բրենդ, մակնիշ breakdown վերլուծություն. ձախողում,

փլուզում, անհաջողություն budget manager նախահաշվի (բյուջեի գծով)

կառավարիչ buzzword մոդայիկ խոսք capitalization կապիտալիզացիա cash flow դրամական հոսքեր certificate վկայագիր, հավաստագիր certification վկայագրում

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charge պատասծանատվություն, in ~ of պատասծանատու, հրահանգող, ղեկավարող

charity բարեգործություն. charities բարե-գործական կազմակերպու-թյուն(ներ)

collaboration համագործակցություն collapse փլուզում, տապալում commitment պարտավորվածություն, հանձնա-

ռություն comprehensive համապարփակ, համընդգրկուն conduct (an audit) աուդիտ իրականացնել conform (with) hամապատասխան(եց)նել, հար-

մարեցնել conglomerate խառնուրդ ընկերություն, կոնգլո-

մերատ consistency principle հետևողականության սկզբունք consolidated company համախմբված ընկերություն consolidated statement ~ հաշվետվություն consolidation միավորում, համախմբում consultant խորհրդական consulting խորհրդատվություն. խորհրդա-

տվական գործ contribution ներդրում,ավանդ controlling interest վերահսկող փաթեթ

(բաժնետոմսերի) conversion փոխարկում cost արժեք, ինքնարժեք costs ծախսումներ, ծախքեր

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creative accounting ստեղծարար հաշվապահական հաշվառում

cross-border interests օտարերկրյա շահեր cross-cultural միջմշակութային cultural mix մշակութային միքս cumulative կուտակային,աճողական, միաս-

նական cumulative effect կուտակային հետևանք, արդյունք debt պարտք (դրամական) debt/asset ratio պարտք/ունեցվածք գործակից

հարաբերություն declining balance նվազող մնացորդ deductible expenditure նվազեցող ծախսեր deferred income tax balance հետաձգված եկամտահարկի

մնացորդ deferred հետաձգված depreciation ~ method մաշվածություն, մաշվածության

մեթոդ diluted earning նոսրացված շահույթ (in)direct tax (ան)ուղղակի հարկ disposition տեղաբաշխում, տնօրինում, ձեռք-

բերում, գնում dissolve լուծարել, արձակել dividend շահաբաժին, շահութաբաժին domestic հայրենական, ներքին due պատշաճ, վայել. վճարելի duty պարտք (ոչ ֆինանսական), պար-

տականություն (ծառայողական), պարտավորություն (բարոյական)

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effective էֆեկտիվ. տպավորիչ, ազդեցիկ, գրավիչ

efficient արդյունավետ employee աշխատակից, ծառայող, ծառա-

յակից enact կիրառել, իրագործել. սահմանել environment միջավայր equation հավասարություն. accounting~

հաշվապահական հավասա-րություն

equipment սարքավորում equity capital կապիտալ, սեփական կապիտալ equity անաչառություն, արդարություն establish սահմանել, հաստատել. հիմնա-

դրել, հիմնել event միջոցառում, իրադարձություն evidence ապացույց, վկայություն excise tax ակցիզային հարկ exclude (liabilities) բացառել

(պարտավորությունները) expand ընդլայնել, ընդարձակել expense ծախս. incur ~ ծախսեր անել expense accrued հաշվեգրված ծախս expertise փորձաքննություն, փորձառու-

թյուն, փորձագիտություն failure ձախողում, անհաջողություն fill smb. in on (smth.) տեղեկացնել մեկին (ինչ-որ)բանի

մասին financial activities ֆինանսական գործունեություն

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financial charges ֆինանսական վճարներ fixed assets հիմնական միջոցներ flow հոսք, հոսում fluctuation տատանում gain ձեռք բերել, շահել, օգուտ

ստանալ gearing (Br.), leverage (Am.) լծակավորում. (պարտք/սեփա-

կան կապիտալ հարաբերությունը) going-concern principle անընդհատության սկզբունք goodwill գուդվիլ (ձեռնարկության արժեքի

և զուտ նյութական ակտիվների արժեքի տարբերությունը)

grant դրամաշնորհ. ~ շնորհել gross profit համախառն շահույթ hierarchy հիերարխիա,

աստիճանակարգություն income statement եկամտի մասին հաշվետվություն holding company մայր (հոլդինգային) ընկերություն incur losses վնասներ կրել inflow ներհոսք (դրամական) inheritance tax ժառանգության հարկ inspect (accounts ) (հաշիվներ) ստուգել inspect զննել. քննել, ստուգել intangible ոչ նյութական, անշոշափելի interim statement միջանկյալ հաշվետվություն interpersonal communication միջանձնային

հաղորդակցություն inventory պաշարներ. ~ turnover պաշար-

ների շրջանառւթյուն, գույքագրում

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investment activities ներդրումային գործունեություն issue թողարկում, խնդիր (բարդ) launch a product war ապրանք թողարկել,

պատերազմ սկսել leasing վարձակալում, վարձակալություն legislation օրենսդրություն legitimate օրինականացված, օրինական let loose (be let loose) ազատել, ազատություն տալ ցան-

կացած գործողության liability պատասխանատվություն (իրա-

վական, օրենքի ուժով) pl. պար-տավորություններ

life-cycle կենսապարբերաշրջան liquid հեշտ իրացվելի liquidate լուծարել, վերացնել loan վարկ, փոխառություն. փոխա-

տվություն loss կորուստ margin մարժա mark-up margin վրադիր մարժա matching principle համադրելիության սկզբունք maturity հասունություն, մարում, մարման

ժամկետ, cp. repayment meet բավարարել (պահանջ, կարիք) meet criteria բավարարել չափանիշներին merge միաձուլ(վ)ել merger միաձուլում minority interest չվերահսկող փաթեթ (բաժնետոմ-

սերի)

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misstatement խեղաթյուրում, կեղծ վկայություն պնդում

mortgage գրավ (անշարժ գույքի), հիպոտեկ negotiation բանակցություններ net earnings զուտ շահույթ non - for - profit (nonprofit, շահույթ չհետապնդող non-profit making, nonprofit seeking) notes ծանոթագրություններ. մուրհակ-

ներ (հասարակ) obligation պարտավորություն off-balance-sheet accounting արտահաշվեկշռային հաշվա-

պահական հաշվառում offset փոխհատուցել, հակակշռել open-plan area բաց նախագծի տարածք operating activities գործառնական

գործությունեություն outflow արտահոսք overhead վերադիր ծախս overseas արտերկրում. արտասահմանյան overstate գերազանցել. չափազանցնել overvalue գերագնահատել, գերարժեվորել owe (to) պարտք, (պարտական) լինել

մեկին owe պարտքով վերցնել, պարտական

(պարտք) լինել patent արտոնագիր payables կրեդիտորական պարտքեր. cp.

accounts payable

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per share յուրաքանչյուր բաժնետոմսին ընկած

policyholder ապահովադիր position դիրք. վիճակ. պաշտոն postpone հետաձգել, ժամկետ երկարացնել practise գօրծել, գործունեություն ծավալել.

հմտանալ preliminary (report) նախնական հաշվետվություն price drop գների անկում, իջեցում, նվազում procedure ընթացակարգ process (records) գրառումներ մշակել, ing մշակում profit and loss statement շահույթի և վնասի մասին

հաշվետվություն profitable շահավետ, շահութաբեր project նախագիծ, ծրագիր progressive tax աճող հարկ property tax գույքահարկ property գույք, սեփականություն proprietor cp. owner սեփականատեր provision for income taxes եկամտահարկի պահուստ provision պայման, կետ, դրույթ

(պայմանագրի). պահուստ provisional ժամանակավոր. պայմանական prudence խելամտություն,

շրջահայացություն prudence principle հաշվենկատության սկզբունք publicly-traded company (Br.) հանրությանը սպասարկող (բաց

բաժնետիրական)

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ընկերություն=US-publicly held company

qualify (for) հավակնել, դիմել quote գնանշել raise capital կապիտալ հայթայթել range of activities գործունեության տիրույթ, սահման ratio հարաբերություն, հարաբերակ-

ցություն. գործակից receipts and disbursements մուտքեր և վճարումներ receivables դեբիտորական պարտքեր. cp.

accounts receivable reconcile համապատասխանեցնել reconciliation (to) համապատասխանեցում redemption վճարում, մարում reduction կրճատում, նվազում, իջեցում regulation կանոնադրություն reporting հաշվետվության ներկայացում requirement պահանջ reserve պահուստ, ռեզերվ residual value մնացորդային արժեք retained earning չբաշխված շահույթ return on assets հատույց ակտիվներից return on equity հատույց կապիտալից revalue վերագնահատել. վերարժեվորել revenue հասույթ review ամփոփում, ակնարկ, վերանա-

յում. տեսություն

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salvage value մնացորդային արժեք cp. scrap value, residual value (արժեք, որով հնարավոր է վաճառել հիմնական միջոցները օգտակար ծառայու-թյան ժամկետի վերջում)

scope of activities գործունեության ասպարեզ, տիրույթ, սահման

security(ies) արժեթուղթ (արժեթղթեր) service a debt տոկոսներ վճարել փոխառության

(պարտքերը մարելու) դիմաց settle a debt (obligation) մարել, վճարել (պարտք, պարտա-

վորություն) shareholder’s equity բաժնետիրական կապիտալ staff cp. personnel աշխատակազմ, անձնակազմ.

administrative ~ վարչակազմ statement հաշվետվություն. syn. report.

հաստատում, պնդում statement of cash flows դրամական հոսքերի մասին

հաշվետվություն statement of earnings ֆինանսական արդյունքների

մասին հաշվետվություն. շահույթի հաշվետվություն

statement of financial position ֆինանսական վիճակի մասին հաշվետվություն

stock պաշար. բաժնետոմս. արժեթուղթ stock exchange ֆոնդային բորսա straight line մաշվածության գծային մեթոդ submission պաշտոնական առաջարկ,

ներկայացում subsidiary դուստր ձեռնարկություն

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substance նյութ, մատերիա. բովանդակություն

sum-of-the-years digit տարիների գումարային մեթոդ takeover կլանում, ստանձնում tangible շոշափելի target նշանակետ, նպատակակետ tax authorities հարկային մարմիններ tax avoidance (legal) շրջանցում, խուսափում

հարկերից tax bracket հարկային սանդղակ tax break հարկային արձակուրդ դադար

cp. tax holiday tax evasion (illegal) փախուստ հարկերից tax exempt չհարկվող (եկամուտ, գումար) tax exile հարկային աքսորյալ tax return հարկային հայտարարագիր taxation measures հարկման միջոցառումներ taxation rate հարկման դրույքաչափ taxation հարկում, հարկերի սահմանում total liabilities ընդհանուր

պարտավորություններ trademark ապրանքանիշ trainee փորձնակ, ստաժոր trainer մարզիչ, վերապատրաստող,

հրահանգիչ training վերա (պատրաստում),

վարժեցում transaction գործարք treasurer գանձապետ. գանձապահ

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treatment վարվելակերպ, վերաբերմունք. մեկնաբանություն

trial balance շրջանառության տեղեկագիր undervalue թերարժեվորել, թերագնահատել unrealized gains չիրացված օգուտներ unsettle the market ապակայունացնել շուկան useful life օգտակար ծառայության ժամկետ value արժեք. current ~ ընթացիկ

արժեք. fair ~ իրական արժեք value-added tax (VAT) ավելացված արժեքի հարկ viable կենսունակ. գօրծող, աշխատող working capital շրջանառու կապիտալ write off դուրս գրել

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Words and Phrases

altruistic այլասիրական assume ընդունել, ենթադրել accident պատահար accordingly համապատասխանաբար accurate ճշգրիտ, ստույգ, հավաստի acquire ձեռք բերել, ստանալ adapt հարմարվել aforementioned վերոհիշյալ, վերոնշյալ allocation տեղաբաշխում annoy նյարդայնացնել, բարկացնել apply(to) կիրառել, ~for դիմել appointment Նշանակում (պաշտոնի).

ժամադրություն assess գնահատել assurance հավաստիացում, երաշխիք

վստահություն be concerned (with)

առնչվել որևէ բանի հետ, ~(about) մտահոգվել, անհանգստանալ

bean counter համրիչով աշխատող break down կոտրել, մանրամասն վերլուծել call upon smb. պահանջել, անհապաղ պահանջելclue բանալի (մտքի) cruise (along) նավարկել, նավով ճամփորդել convince համոզել current ընթացիկ, այժմ, ներկա currently ներկայումս, այժմ competent իրավասու, իրազեկ,գիտակ confidence վստահություն confidential գաղտնի conservative պահպանողական

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to convince համոզել correctness ճշգրտություն, կոռեկտություն criteria չափանիշներ credentials հատկանիշներ, որակավորում.

լիազորություն critical քննադատական, վճռական,

վճռորոշ, բեկումնային customer հաճախորդ decimal տասնորդական defer հետաձգել, երկարաձգել denominator հայտարար disclose բացահայտել, հայտնաբերել deadline վերջնաժամկետ to defend պաշտպանել despite չնայած, չնայած դրան diligence ջանասիրություն,

աշխատասիրություն. ուշադրություն

disclosure բացահայտում, հայտնաբերում dramatically կտրուկ equip (with) knowledge զինել գիտելիքով exactly ճիշտ այդպես experience կենսափորձ cp . experiment

գիտափորձ equivalent համարժեք to estimate գնահատել, նախահաշվել exile աքսոր(յալ) extract քաղվածք, հատված(գրքից) familiar (with) ծանոթ fashion ձև, եղանակ flexibility ճկունություն fuss աղմուկ, իրարանցում, նյարդային

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վիճակ fair արդար fancy նրբագեղություն.դիմակահանդես forecast կանխատեսում fraud խարդախություն,

խաբեբայություն get into trouble փորձանքի մեջ ընկնել go nowhere մտնել, (տանել) փակուղի go over նորից կրկնել, վերանայել gradual աստիճանաբար,

աստիճանական graph գրաֆիկ, գծագիր guarantee երաշխիք handle վարել, անցկացնել (պրեզետա-

ցիա անցկացնել). մեկնաբանել. զբաղվել, լուծել, հաղթահարել

handout նյութերի փաթեթ, տպված նյութ hospitality հյուրընկալություն.

հյուրասիրություն hover սավառնել ignore անտեսել, արհամարհել implication հետևանք, եզրակացություն.

ենթատեքստ in (one) respect մեկ տեսակետից, մի իմաստով inspect զննել. քննել, ստուգել impair վնասել, թուլացնել, անկարող

դարձնել inclusion ներառում indicate նշել, մատնանշել, ցույց տալ initial նախնական, սկզբնական irregularity անկանոնություն, անհավասա-

րաչափություն, ապօրինություն

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item կետ. իր, առարկա to justify արդարացնել kid կատակել. ծաղրել layman ոչ մասնագետ անձ lawyer իրավաբան, փաստաբան legal իրավական, իրավաբանական misleading մոլորեցնող, շեղող maintenance սպասարկում, պահպանում matter հարց, գործ, խնդիր, նյութ mechanics մեխանիկա numerator համարիչ overstate չափազանցնել. գերագնահատել obviously ակնհայտորեն, ակնհայտ occur տեղի ունենալ, պատահել outlook հեռանկար, ապագայի ակնկա-

լիք, աշխարհահայացք payroll հաստիքացուցակ, վճարացուցակ peer հասակակից. հավասարակից point իմաստ, միտք. էություն (գործի).

նյութ (խոսակցության) postpone հետաձգել, ժամկետ երկարացնել preceding նախորդող prompt հուշում, օգնություն provided եթե միայն, եթե pattern օրինակ, նմուշ, ~ of life կյանքի

մոդել personnel անձնակազմ preliminary նախնական presentation ներկայացում printout տպագիր թերթիկ proportion համամասնություն, հարաբերակ-

ցություն

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proposal առաջարկ punch դակել, դրոշմել recognition ճանաչում regardless of անկախ, հաշվի չառնելով result (in) հանգեցնել, հետևանք լինել result (from) առաջանալ, ծագել rubbish աղբ. հիմարություն, անմտություն random պատահական range շարք, տիրույթ, սահման reasonable ողջամիտ, խելամիտ recognition ճանաչում reconsider վերանայել recover վերականգնել. ետ բերել.

առողջանալ regular պարբերաբար, կանոնավոր relationship հարաբերություն. կապ relevent համապատասխան, տեղին,

գործին վերաբերող rent վարձակալություն, վարձավճար to repair վերանորոգել, նորոգել representative ներկայացուցիչ,

ներկայացուցչական responsibility պատասխանատվություն retain պահպանել, պահել running ընթացիկ slightly թեթևակիորեն, անէականորեն staff cp. personnel աշխատակազմ, անձնակազմ.

administrative ~ վարչակազմ submission գրավոր առաջարկ, ներկայացում

(փաստաթղթերի) sufficient բավարար support աջակցություն, զորակցություն,

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օժանդակություն. give a ~ օգնել, օժանդակել. զորակցել, աջակցել

sample նմուշ self-generated ինքնածին sensible խելամիտ, ողջամիտ, խելահայաց sizeable չափավոր, մեծածավալ solid (vompany) վստահելի, լուրջ ընկերություն.

ամուր, պինդ specify նշել, հատկորոշել, մատնանշել,

հատուկ նշել stable կայուն stack բլոկ, բուրգ, կույտ starter սկիզբ, ստարտեր successive հաջորդող, հաջորդական supplemental լրացուցիչ train վարժեցնել, պատրաստել. վերա-

պատրաստել trouble անախորժություն, փորձանք tear պատռել, ճղել, պատառոտել tight (budget) սեղմ, աղքատիկ բյուջե.

ամուր, պինդ, ձիգ upwards վերընթաց upcoming առաջիկա up to date արդիական, վերջին պահանջ-

ներին համապատասխան upgrade բարելավում, բարեկարգում utilize օգտագործել, կիրառել very զուտ. իսկապես. հենց. virtually փաստորեն, փաստացի variety զանազանություն version տարբերակ wear and tear մաշվածք

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List of Abbreviations Frequently Used in Accounting AICPA American institute of certified public accountants C.V. curriculum vitae CEO chief executive officer CFO chief financial officer CPA certified public accountant Cr. credit Dr. debit E&O errors and omissions FIFO first in, first out GAAP generally accepted accounting principles GAAS generally accepted auditing standards IAS international accounting standards IASC international accounting standards committee ICAEW Institute of chartered accountants in England and Wales IFRS international financial reporting standards IT information technology LIFO last in, first out LTD private limited company MD managing director NGO non-governmental organization P&L profit and loss PLC public limited company PR post reference. public relations (marketing). press release R&D research and development SBA state board of accountancy A/R accounts receivable A/P accounts payable VAT value-added tax

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CONTENT

Հեղինակների կողմից................................................. 3

U N I T 1 Introduction to Accounting........................................... 5 U N I T 2 Financial Statements and Ratios .................................. 22 U N I T 3 tax Accounting .............................................................. 36 U N I T 4 Auditing ....................................................................... 48 U N I T 5 Management Accounting............................................... 61 U N I T 6 Investment .................................................................... 73 Additional Material for Examination ............................ 86 Glossary of Financial and Accounting Terms................ 118 Words and Phrases ...................................................... 131 List of Abbreviations Frequently Used in Accounting................................................................ 137

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R. Khostikyan, G. Amatuni

PRACTICAL ENGLISH FOR STUDENTS OF ACCOUNTING AND AUDIT

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