Double-entry accounting system

 

    The double-entry accounting system — in which for every ‘ debet dare’ there is a ‘debet habere’ – has evolved to the point where it is very much like the present day system. Debet dare and debet habere are Latin terms meaning ‘should give’ and ‘should have’ respectively.

    The double-entry system of bookkeeping enables a business to know at any time the value of each item that is owned, how much of this value is owed to creditors and how much belongs to the business clear of debt. It also indicates the portion of this debt-free ownership that is the result of the original investment in the company and the portion accruing from profits. One advantage of the double-entry system is that its information is so nearly complete that it can be used as the basis for making business decisions. Another advantage is that errors are readily detected since the system is based on two equations that must always balance. The term asset means anything of value that is owned. Assets may be tangible, as are furniture and property, or intangible, as are stocks and goodwill. Assets belong to their owner, regardless of who possesses them and regardless of whether they were purchased with borrowed money. All of company’s assets are either owed to someone else or are owned clear of debt.

   Liability is the amount that a business owes to another firm, to an individual, or to the government. The amount that is not owed to anyone else but is owned free of debts is called the owner’s equity in the firm. Since everything that is owned is either owed or is free of debt, assets equal liabilities plus equity. This is called the accounting equation. 

   Each of the assets and the liabilities and the equity is shown on a company’s books and is called an account. An account has two sides: the left side (debit) and the right side (credit). One is the increase side and the other is the decrease side.

   Every transaction affects two or more accounts, which will result in a debit and a credit of the same total amount. The same amount is always debited to one account and credited to another account. Thus, when the balances remaining in each of the accounts are added together, total debits will equal total credits.

 

3.Answer the following questions:

1. What is debit?
2. What is credit?
3. What is accounting equation?
4. What is liability?
5. What is asset?
6. What are total debits equal to?
7. What does double-entry system enable to?
8. What are the advantages of double-entry system?

4.Find in the text the words with opposite meaning:

 

Debit                            disadvantage

Credit                           right side

Tangible                       increase

Take                             owed

Profit

 

5.Fill in the pair conjunctions both...and, either...or, neither...nor:

1. Assets are ______ owed to someone else _____ are owned clear of debts.

2. Company would ____discuss details ____ comment on the outcome of negotiations.

3. The output of the factory can refer to _____ the types _____ quantity of things it produces.

4. Goods are products that people _____ need _____ want.

5. These jobs exist in ____ small _____ large companies.

6. Organizations can be____ public_____ private.

7. Everything that is owned is _____ owed _____ is free of debts.

8. Assets may be ____tangible ____intangible.

 

UNIT 6

 

1.Memorize the following words and word combinations:

 

external          - внешний, зовнішній   

applicable     - применимый, застосований

to view         - рассматривать, розглядати        

resolving      - разрешение, розв’язання   

access          - доступ, доступ       

capacity       - способность, можливість            

to attempt     - пытаться, намагатися

reconcile      - улаживать, приводити у відповідність

reliability      - надежность, надійність

uniformity     - единообразие, одноманітність

to ensure       - обеспечивать, забезпечувати

comparability - сопоставимость, зіставлення

judgement     - оценка, судження

regulation     - правило, правило          

 

2. Read and translate the text:

 

ACCOUNTING STANDARDS

 

     Accounting standards may be defined as «... uniform rules for exter­nal financial reporting applicable either to all or to a certain class of entity». Accounting standards may be viewed as a method of resolving po­tential conflicts of interests between the various user groups which have access to company accounts. The various groups have different objec­tives, information needs, and capacities for the generation and interpreta­tion of information and, therefore conflicts may arise between groups outside the entity. It is a role of accounting standards to attempt to recon­cile the conflicts. A number of important issues for the accounting profes­sion should be mentioned here. These issues are as follows:

 

1. Reliability. Accounting information should be reliable in use.

2. Uniformity. The pressure for the standardization of accounting practices is to ensure a uniformity of treatment of data and hence an identity of the meaning of information.

3. Comparability. Reliability and uniformity are integrated in the notion of comparability.

4. Judgment. Accountants say that they should be allowed to exer­cise some judgment in interpreting data. This implies that some variety should be allowed for in the procedures available for transforming data into information.

Accounting practice and financial reporting regulation have shown great variety internationally. In recent years there has been growing inter­est in the harmonization of international accounting. Factors which have stimulated the movement towards harmonization have included the in­creasing internationalization of business, the importance of multinational companies in the world economy, and the development of international capital markets. In 1973 the International Accounting Standards Commit­tee (IASC) was established in an attempt to coordinate the development of accounting standards internationally.

 

3.Give equivalents to the following word-combinations:

 

Accounting standards, financial reporting, potential conflicts of interests, company accounts, information needs, accounting practice, reporting regulations, capital market.

 

4.Make up questions to which the following are answers:

 

1. It may be defined as uniform rules for financial reporting.
2. There has been growing interest in the harmonization.
3. There are four most important issues for the accounting profession.
4. Accounting practice has shown great variety.
5. The increasing internationalization of business.
6. In1973.

 

5.Say whether the following is true or false. Use the phrases: One can’t deny...; I don’t think...; I am sure...; It is not quite so...:

1. Accounting standards are uniform rules for internal financial reports.
2. Accounting standards may be viewed as a method of resolving potential conflicts of interests.
3. Accounting information should be reliable in use.
4. Some variety should be allowed for transforming data into information.
5. The IASC was established to control the work of accountants.

 

6.Fill in the blanks with proper prepositions or adverbs where necessary:

1. Accounting is often characterized ____ “the language ____ business”.
2. Accounting is concerned _____ recording, sorting, and summarizing data related _____business transactions.
3. The objective of financial statements is to communicate information _____ investors, creditors, and other users.
4. Bookkeeping is a part_____ accounting.
5. Computers are used _____many tasks.

 

 

UNIT 7

1. Memorize the following words and word-combinations:

 

raw data                  - исходные данные, вихідні дані

money measurements - денежное измерение, грошовий вимір

to set up                  - открывать, відкривати

item                         - единица, статья, одиниця, стаття у балансі         

account title            - название счета, назва рахунку

accounting records - бухгалтерские отчеты, бухгалтерські звіти

to take on                - принимать, приобретать, набувати       

entry                       - бухгалтерская запись, проводка, бухгалтерське

                                   проведення, занесення у бухгалтерську книгу

to encode                - кодировать, кодувати

to provide for       - предоставлять, надавати      

to establish             - открывать, відкривати

balance                   - баланс, баланс

2. Read and translate the text:

 

THE ACCOUNT

 

The raw data of accounting are the business transactions. A business may be engaged in thousands of transactions during a period of time. The data in these transactions must be classified and summarized before be­coming useful information. Making the accountant's task somewhat eas­ier is the fact that most business transactions are repetitive in nature and can be classified into groups having common characteristics.

An account is an element in an accounting system that is used to classify and summarize money measurements of business activities of a similar nature.An account is set up whenever it is necessary to provide useful information about a particular business item. The number of ac­counts in a company's accounting system depends on the information needed by those interested in the business.

Accountants may differ on the account title (or name) they give for the same item. The account title should be logical to help the ac­countant group similar transactions into the same account. Once an account is given a title, that same title must be used throughout the accounting records.

Accounts may take on a variety of formats. Some accounts are print­ed, and entries are written in by hand; others are on magnetic tape, and "invisible'' entries are encoded by a computer. Every account format must provide for increases and decreases in the item for which the account was established. Once a business event is recognized as a business transac­tion, it is analyzed to determine its increase or decrease effect on the assets, liabilities, owner's equity, revenues, or expenses of the business. These increase or decrease effects are then translated into debits and credits. Then the account balance (the difference between the increases and decreases) can be determined.

3.Answer the following questions:

 

1. What are raw data of accounting?

2. What makes the accountant’s task easier?

3. What is an account?

4. When is an account set up?

5. What does a number of accountants depend on?

6. In what may accountants differ?

7. What is translated into debits and credits?

 

4.Say if the following is true or false. Use the phrases: I have no doubt that...; I greatly doubt that...; It is a common knowledge that...:

 

1. A business may engage only one transaction during a period of time.

2. An account is used to classify money measurements of business activities of a similar nature.

3. The number of accounts depends on the information needed by those interested in the business.

4. Different titles should be used throughout the accounting records.

5. Accounts always take on only one format.

6. Increases and decreases effects are translated into debits and credits.

5.Fill in the gaps with the words: