Text 1. Part B. Basic concepts of accounting

The basic concepts of accounting as we understand them today were first published in Italy in 1494 by Luca Pacioli¹ (1445 - 1517). He described them in a section of his book on applied mathematics. Pacioli was a Franciscan monk whose life and work was dedicated to the glory of God.

Accounting is the process of measuring and recording the financial value of the assets and liabilities of a business and monitoring these values as they change with the passage of time. Accounting records are kept for individual persons² or legal entities³ - a company or a non-profit organization (for example, a church, a club, etc.).

The assets⁴ of a business are those things that belong to the business and can be sold in exchange for money. Assets may include land, buildings, vehicles, stock, equipment, precious metals, bank accounts with positive balances and money owed to the business by its debtors. Accounting was always an attempt to record a relevant capital assets⁵ or production capacity.

The liabilities⁶ of a business are things that will require payment of money in the future: unpaid bills, unpaid taxes, unpaid wages, overdrawn bank accounts and money due to creditors.

The equity⁷ is defined as the own capital of a business: the assets minus the liabilities. The equity is the amount of money that would be released if the business was wound up.

Assets, liabilities and equity are financial indicators to describe financial condition of a company. They are included in the balance sheet⁸. The balance sheet is a financial statement of the assets, liabilities and equity of a business as they exist at a particular point in time.

The income⁹ of a business is the sum of those things that increase the value of the assets. Examples include revenue from the sale of goods, supplied equipment or rendered services, rent or investment by the owners.

The expenses¹⁰ of a business are those things that reduce the value of the assets: cost of raw materials, paid rent or interest, electricity and telephone bills, wages, taxes, dividends, depreciation and donations to charity. The financial statement that is used to present this information is known as the Profit and Loss Statement (or income statement)¹¹.

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VOCABULARY

1. Luca Pacioli - Лука Пачоли, итальянский математик, в 1494 г. опубликовал трактат "Сумма арифметики, геометрии, учения о пропорциях и отношениях", считающийся первой книгой, в которой была описана система двойной бухгалтерии;

2. an individual person – физическое лицо

3. a legal entity – юридическое лицо

4. assets  - имущество, средства, ресурсы, активы (все материальные и нематериальные объекты собственности, которыми владеет то или иное физическое или юридическое лицо)

5. capital assets -основные средства [фонды], материальные внеоборотные [долгосрочные] активы);

6. liabilities - долги, денежные обязательства, задолженность;

7. equity – собственный капитал, собственные средства (разница между активами и обязательствами, активы минус текущие и долгосрочные долговые обязательства);

8. balance sheet - бухгалтерский баланс, балансовый отчет [лист] (финансовый отчет, в котором отражаются активы и пассивы компании по состоянию на определенную дату; обычно представляет собой таблицу, на левой стороне которой указываются активы, на правой — собственный капитал и обязательства);

9. income – доходы;

10. expenses – расходы;

11. Profit and Loss Statement, income statement – отчет о прибылях и убытках.

Задание 1. Ответьте на вопросы по тексту.

1.    Who invented the basic concepts of modern accounting?

2.    Whom are accounting records kept for?

3.    What does the assets mean?

4.    What are the liabilities of a business?

5.    What is the equity?

6.    What is a balance sheet?

7.    What is the income of a business?

8.    What are the expenses of a business?

9.    What is the income statement?

 

Задание 2. Выпишите в тетрадь определения терминов, выделенных жирным шрифтом, и выучите их.