Ex 7. Work on vocabulary and grammar.

a) Study the key words of the unit in the dictionary at the back of this book:

balance sheet, account, depreciation, cost, expenses, assets, loss;

b) Think of the English synonyms to these Russian verbs:

относить (на), отражать (в учете), учитывать;

c) Think of the words describing characteristics that make information useful;

d) Think of the nouns that are most often used with the following verbs:

to measure, to ensure, to communicate, to prepare, to debit, 'to credit, to draw up, to disclose, to report;

e) Match the verbs from (a) with the nouns from (b) below:

 

a) to meet b) needs

to ensure provision of information

to harmonize standards

to develop performance

to assess service

to provide a boost

to give license

to enhance accounting standards

to grant targets

to achieve credibility

Ex. 8. a) Supply the articles where necessary.

b) Write down 3-5 questions about the text.

c) Explain what information must be disclosed in accounting records. Say what you have learned from the text about the UK rules for the preparation of accounting records.

Accounting Records

 

Every company must keep accounting records sufficient:

• to show and explain... company's transactions;

• to disclose... financial position of the company at any time with reasonable accuracy; and

• to enable the directors to ensure that... annual accounts comply with... statutory requirements.

The records must contain entries of daily receipts and payments,... record of assets and liabilities and, where the business involves dealing in goods, stocktaking records and details of goods bought and sold.

The directors of every company have a duty to prepare annual accounts. The accounts must be made up to... company's accounting date (its financial year-end) and in accordance with the specified accounting principles. In... UK, for example, they include... following:

• The company is presumed to be...going concern.

• Accounting policies are applied consistently from... year to year.

• The amount of any item is determined on... prudent basis.

• The accounts are prepared on... accrual basis.

Details of any departure from these principles, the reasons for it, and its effect must be explained in... note to the accounts.

In the United Kingdom company accounts are almost invariably prepared using the historical cost accounting convention, with or without modification to reflect changes in... value of certain assets. However,... Company Act 1985 does provide alternative accounting rules which permit companies to recognise... full impact of inflation and changing prices in their accounts.

Along with... rules applying to the preparation of accounts, there is... overriding requirement that the balance sheet must give... "true and fair" view of the state of affairs of the company and that... profit and loss account must give... "true and fair" view of the company's profit or loss.

Until 1992, cash basis accounting was... only method recognized in... Russia. Although the new accounting regulation permits the administration to select... method of recognizing revenue and expenses,... traditional method is still dominant.

Words you may need:

accounting records бухгалтерские счета, бухгалтерская отчетность

stocktaking records книга учета запасов

accounting date отчетная дата

accrual basis принцип начислений

departure n (зд.) отклонение

Companies Act Закон о компаниях

overriding adj первостепенный

Ex. 9. a) Supply the prepositions where necessary.

b) Explain the objective of Financial Statements and say what ensures usefulness of information disclosed in them to the users.

 

The objective of financial statements is to provide useful information... users. Among the users are present and potential investors, lenders, suppliers and customers, employees, governments... home and host countries, the public at large, and also those who act... behalf of users.

The objectives of financial statements are defined... the needs of users. In general, information must be provided about the financial position, performance and changes... financial position of an enterprise.

Such information is useful to a wide range... users in making decisions and is necessary to keep management accountable... the resources entrusted... it. Financial statements can also provide useful information to governments for making policy decisions, although governments often require special-purpose reports as well. More specifically, a variety of users need to be able to assess the performance of an enterprise and thus are interested, among other things,... the cash flow of the enterprise. For example, investors must know if they will receive dividends and when they should buy, hold and sell stock. Lenders are interested in determining whether interest and principal... loans will be paid when due. Suppliers, other creditors and customers must determine whether they will be paid... time or will continue to receive a product or service on which they might depend. Employees are interested in the continuation of their employment and, therefore, in the stability and profitability... their employment. Members of the public are also interested in the impact of the activities of the enterprise... the general welfare.

The usefulness of information can be determined... its relevance to the needs of the users and the extent... which users can rely... such information. Other important characteristics of useful information include comparability and understandability. Besides, users benefit more... information that is available at the time it is required, information provided long after it is needed is... little relevance.

Financial statements should disclose all items that are material enough to affect evaluations or decisions.

The information published... reporting enterprises must assist users... predicting future prospects of the enterprise.

Transactions and events that form the basis of financial statements are sometimes open... different interpretations. They can be viewed according to their legal form or their economic reality. Enterprises should emphasize the economic substance of transactions and events.

Information must be free... bias with respect... various users, it should assist in decision-making but should not influence decisions in a predetermined direction.

Financial statements should be prepared in a comparable way so that the performance of different enterprises, or of the same enterprise over time, can be examined. The comparability of financial statements is enhanced... the relative stability of accounting policies, which specify the methods by which a reporting enterprise measures, accumulates and summarizes the economic events and data... its records. Stability means that no change in accounting policies will be made unless it is clearly necessary.

Comparability across enterprises requires that a consistent set of definitions, units of measurement, assumptions, measurement techniques and reporting intervals be applied. If financial statements from enterprises in different countries are to be compared, the users must be aware... the relative differences among national accounting policies.

Comparability can be enhanced by the harmonization of national standards or the adoption of international standards.

Based on: Objectives and concepts

Underlying Financial

Statements, ISAR, 1989

Words you may need:

the public at large широкая публика

understandability n понимаемость; (зд.) читаемость

disclose v раскрывать (информацию)

reporting enterprise предприятие, подающее свою отчетность

bias n необъективность, предвзятость

predetermined adj предопределенный, заранее решенный

to be aware of знать, быть осведомленным (о чём-л.)

Ex. 10. a) Open the brackets putting the verbs in the correct form.

b) Say what is a Chart of Accounts in Russia and what it provides for.

 

In the West each company (to have) a certain freedom in the design of its own set of accounts so as to reflect the nature of its business and the needs of its management in directing that business. In Russia this process (to regulate) centrally, there (to be) a tradition of using a uniform Chart of Accounts.

The first uniform Chart of Accounts (to appear) in Russia in the 1920s. It (to intend) for industries only and was revised periodically. In 1961 the first national uniform Chart of Accounts (to create) and put into operation. With only insignificant changes, this chart (to use) in accounting practice until 1992. In 1992 transition to a new chart (to make). The current Chart of Accounts (to consist) of about 100 accounts and 60 subaccounts grouped into 10 main sections. All accounts included in this uniform chart (to call) "synthetic" (main or summary) accounts. On the basis of this chart, each enterprise also may create a set of "analytic" (supporting) accounts if needed to supplement the synthetic accounts. The Chart of Accounts can be considered the most important element of the accounting system in Russia because it (to determine) the accounting practice and other elements of the system.

The Chart (to provide) for the following: an interrelated classification, grouping, and generalization of information about business activities of enterprises, a unified methodological basis for the organization of accounting in the whole national economy, an effective system of control of indicators for business activities, comparability of accounting procedures used and information generated in the accounting systems of different enterprises, etc.

Words you may need:

set of accounts перечень счетов

synthetic account синтетический счет

analytic account аналитический счет

interrelated classification взаимосвязанная классификация

grouping n группировка

methodological basis методологическая база

indicator n показатель

Ex. 11. a) Fill each gap with a suitable word from the box.

b) Sum up the text in 5-7 sentences and present your summary in class.

c) Name the most important events in the development of the accountancy profession in the world.

 

accountants principles organized members

back profession creation throughout

number role organizations functions

Accountancy Profession

 

The organization of the accountancy profession dates_______to January 1853 when eight accountants in Edinburgh, Scotland met for the purpose of seeking recognition of their_______as a separate and distinct profession. Their discussion of their professional situation resulted in the________of the Institute of Chartered Accountants of Edinburgh. Since that time numerous professional accountancy organizations have been established _________ the world. The process is going on.

In 1977 the International Federation of Accountants (IFAC) was established. Its initial membership was 63 organizations representing 49 countries, but within a decade, the ________ grew to 105 organizations from 79 countries. The establishment of the IFAC recognized the need for international coordination of the objectives of professional accountancy organizations and means of achieving those objectives. Accountancy is an international profession. Under the conditions of global interdependence of countries through trade, finance, and crossborder investments, the_________of the IFAC is becoming more important.

The size and principles of accountancy_________vary. Some organizations comprise accountants working in commerce, industry, and government organizations, as well as in public practice (auditing), others consist solely of members in public practice.

The main _________ of the accountancy profession may be summarized as follows:

• to protect the public by ensuring the observance by its members of the highest________of professional and ethical conduct;

• to promote and increase the knowledge, skills, and proficiency of members of the organization and students;

• to preserve the professional independence of _______ in whatever capacities they may be serving;

• to maintain the legitimate rights of its________.

IFAC was _________ in recognition of the growing changes towards internationalization of the world economy, business and trade.

Words you may need:

Institute of Chartered Accountants Институт дипломированных бухгалтеров

observance n соблюдение

conduct n поведение

proficiency n (зд.) опыт

preserve v сохранять

DISCUSSION

Ex. 12. a) Read the texts and single out the main facts.

b) Present them in a short review and compare the information and viewpoints in Text (a) and Text (b).

a) For many years the accounting system in Russia was criticized by Western academicians for its failure to adhere to Western accounting principles. Such criticism is no longer valid. Since the early 1990s, accounting in the Russian Federation has changed significantly.

The year 1991 was crucial in accounting development in Russia due to the following three events:

a) Publication of the new Chart of Accounts;

b) Production of a new set of financial statements similar to those used in Western accounting;

c) Beginning of preparations for radical change in accounting and auditing regulation.

In 1992, Regulation on Accounting and Reporting in the Russian Federation was approved by decree of the Government of Russia. The document diminished the control function of accounting and declared the following equal objectives of accounting:

1) Maintenance of control over the availability, movement, and use of material, manpower and monetary resources according to approved norms and estimates;

2) Provision of full and reliable information about the performance and financial results of an enterprise, which is indispensible for operational management as well as for investors, suppliers, customers and creditors, tax, financial, and bank authorities, and others interested in the financial and business activity of the enterprise.

It would not be an exaggeration to say that an essentially new Russian accounting system has come into being with the introduction of the new Chart of Accounts which includes greater cohesion to international accounting norms.

The essential elements of accounting methodology are as follows:

• Documents form the legal foundation for recording transactions according to the approved rules of bookkeeping. No entry should be made unless the bookkeeper has the primary document.

• Taking inventory is the sole means of controlling the physical safety of assets and their valuation. It is the main method of supervising persons who are financially responsible for assets. The safeguarding of assets is always entrusted to a financially responsible person.

• The uniform Chart of Accounts, which provides the nomenclature of accounts and correspondence among them, must be used by all types of enterprises.

• Double entry is a traditional accounting concept that is accepted in Russia as it is in all developed countries.

• Internal reporting includes the general ledger, summary (principal) account registers, primary documents, inventory data, etc. External reporting includes the Balance Sheet, Statement of Financial Results and Their Uses, and supplemental forms that are uniform and obligatory for all types of enterprises. Nonprofit organizations and banks have their own uniform charts of accounts and financial reporting forms. Reporting is carried out according to the statutory regulation and presented within strictly prescribed time limits.

• Information generated by the accounting system must be timely, reliable, full, accurate, and objective.

• Historical cost accounting is the only method of internal and external reporting permitted.

Words you may need:

adhere v придерживаться, оставаться верным принципам

accounting principles принципы бухучета

valid adj имеющий силу, юридически действительный

indispensible adj необходимый, незаменимый

cohesion n связь

primary document первичный документ

taking inventory инвентаризация

sole adj единственный

financially responsible person материально-ответственное лицо

nomenclature n номенклатура (перечень наименований)

correspondence n корреспонденция (счетов)

internal reporting внутренняя отчетность

general ledger главная бухгалтерская книга

summary account register сводный журнал

inventory data инвентарные данные

external reporting внешняя отчетность

Statement of Financial Results and Their Uses Отчет о финансовых результатах и их использовании

financial reporting form бланк финансовой отчетности

historical cost accounting учет на основе стоимости приобретения

b) From an international perspective, it is important to remember that while based on similar principles, Russian accounting does not fully meet international accounting standards (IAS). The main differences are as follows:

• Sales are usually recorded on a cash basis. The cost of goods/services delivered but not yet paid for remains on the balance sheet until payment is received. Most Russian taxes are sales-based. As a result, companies try to minimize sales in their accounts. When sales are recorded on a cash basis, allowances are not made for bad debt, in spite of the fact that bad debts may represent a considerable share of accounts receivable. Sales figures for Russian companies tend to be understated compared with the accrual sales of Western companies.

• Cost of goods sold. Russian companies report the full cost of goods sold, which includes production costs, transportation, depreciation, marketing, and financial expenses. No cost items are disclosed separately. Social costs are not included in the cost of goods sold.

• Depreciation: Only a straight-line depreciation method is allowed. The depreciation rates are fixed by the government and are as a rule significantly lower than in the West. Accelerated straight-line depreciation has been permitted since January 1, 1995 but is still rarely used.

• Fixed assets: Fixed assets pose the most serious problem. Fixed assets are accounted for at historical cost and cover property, plant and equipment. Land is not treated as a fixed asset and does not appear on the balance sheet at all. Even if depreciation rates are lower than in the West, fixed assets are generally undervalued compared with Western practice.

• Accounts receivable: Since most Russian companies record sales when they receive payment, the sales margin is not accrued until that time. Therefore accounts receivable are understated given that the sales margin is not reflected. Overdue accounts receivable are not disclosed separately.

• Consolidation of accounts. Russian companies, including holding companies, are not required to submit consolidated reports. No consolidation standards have been established yet. Some of the holding companies prepare aggregated reports, summing up 100% of all subsidiaries and associates without accounting for intragroup transactions and minorities. Consequently, the reported results of Russian holding companies are usually significantly overstated.

All other aspects of Russian accounting are basically in line with IAS. The Russian government is taking measures to eliminate the most serious divergences.

Words you may need:

bad debts безнадежные долги

accounts receivable дебиторская задолженность

straight-line depreciation method метод равномерного начисления износа

accelerated straight-line depreciation method метод ускоренного начисления износа

sales margin доход от продаж

overdue adj просроченный

consolidation of accounts консолидация счетов