Accounting: Changes and Prospects

Significant changes are known to have taken place in accounting in recent years. The accountancy profession has gained a very high status. The modern accountant has begun to play an important role in business activity. As a result he is expected to perform various duties today, one of the major duties being provision of information to the management. By providing information to managers the accountant enables them to assess their own performance, to make economic decisions and to devise ways to improve their efficiency. Equally important is the task of designing accounting systems.

In spite of the centuries of evolution the double-entry principle has remained the backbone of any accounting system. At the same time, however, one can’t deny the fact that the development of human society influences accounting and makes designing accounting systems for new fields like “social accounting”, “green accounting”, “tax accounting” etc. a challenging task.

Another responsibility of accountants is to prepare financial statements, the four basic financial statements being the income statement, balance sheet, capital statement and the statement of cash flow.

One of the biggest problems facing the accounting profession is the necessity of rapid adaptation to the changes connected with the enormous growth of industry, the world globalization process and development of information technology. In this context there is a general opinion in the profession about the need to improve the quality of accounting, professional competence and accounting education. Maintaining high ethical standards, compliance with relevant laws, as well as accounting and auditing standards are also on the agenda.

 

Text 2. Accounting and Bookkeeping

Task 1. Read and translate the text.

 

What is accounting and bookkeeping?

Accounting and Bookkeeping is the process of identifying, measuring, recording and communicating economic information about an organization or other entity. Bookkeeping is the record-keeping aspect of accounting. Accounting principles are applied in the preparation of financial statements and other financial information.

Personal record keeping often uses a simple-entry bookkeeping, in which amounts re recorded in column form. Such entries include the date of the transaction, its nature and the amount of money.

Record keeping of organizations is based on a double-entry system. Each transaction is recorded on the basis of its influence on the organization’s financial position or operating results. Information about financial position of an enterprise is presented in a balance sheet, while operating results are displayed in an income statement account. Data relating to an organization’s liquidity and changes in its financial structure are shown in a financial statement. Such financial statements are prepared to provide information about past performance, which in turn becomes a basis for readers to try to project what might happen in the future.

 

Accounting information

 

Accounting information can be classified into two categories: financial accounting or public information and managerial accounting or private information.

Financial accounting includes information distributed to stockholders, creditors, customers, suppliers, financial analysts and trade associations. This information is also of interest to the company’s officers and managers. Such information relates to the financial position, liquidity (that is ability to convert to cash) and profitability of an enterprise.

Managerial accounting deals with cost-profit-volume relationships, efficiency and productivity, planning and control, pricing decisions, capital budgeting and similar matters. This information is not generally distributed outside the company. Managerial accounting provides a wide variety of specialized reports for division managers, department heads, project directors, section supervisors and other managers.

 

Specialized Accounting

 

Of the various specialized areas of accounting that exist, the three most important are auditing, income taxation and accounting for non-business organizations.

Auditing is the examination by an independent accountant of the financial data, accounting records, business documents and other documents of an organization in order to attest to the accuracy of its financial statements. Large private and public enterprises sometimes also maintain an internal audit staff to conduct examinations concerned with operating efficiency and managerial effectiveness.

Income taxation is the second specialized area of accounting. Preparing an income tax form consists of collecting information and presenting data in a certain order; therefore both individuals and business frequently hire accountants to determine their taxes.

Accounting for non-business organizations such as universities, hospitals, churches, trade and professional associations is the third area of specialization. These organizations differ from business enterprises in that they do not have a profit orientation and they have no defined ownership interests. As a result these organizations have differences in record keeping, in accounting measurements and in the format of their financial statements.

 

Essential Vocabulary

income statement account – счет прибылей и убытков

accounting information – данные учета

financial accounting – финансовый учет

managerial accounting – управленческий учет

stockholder – акционер

financial analyst – финансовый аналитик

trade association – ассоциация производителей и дилеров одной отрасли

capital budgeting – составление смет капитальных вложений

accounting records – материалы бухгалтерского учета

internal audit – внутренняя ревизия, внутренний аудитор

income tax form – бланк декларации на подоходный налог