TASK 3. Read the passage about sources of finance. Translate it and give the definitions to the terms: 'fixed assets', 'current assets', and 'long-term liabilities'.

The sources of finance are grouped under three headings in the balance sheet: shareholders' capital, long-term liabilities, and current liabilities. The last two categories represent finance made available on condition that it will be paid off at some time in the future. The assets are divided into groups under headings: current assets, fixed assets and other assets.

Fixed assets are those resources, which have been acquired with the intention that they will be kept and used by the business. As they wear out or obsolete they are depreciated. Their net book value is the difference between their cost or valuation and the accumulated depreciation to date. They include

 

items such as land and buildings, plant and equipment, and vehicles used by the business.

Current assets consist of cash and items which are to be turned into cash as part of the normal operation of the business. Cash will be used, among other things, to buy stocks. Stocks will eventually be sold to customers who become the company's debtors. The debtors' liabilities are converted into cash on settlement of the accounts. Some cash will be used to buy more stocks and the cycle of conversion will repeat continually. The fixed assets are used as a means by which this conversion may be carried out. Finance has been obtained from shareholders in the form of share capital and by retaining some of the profits belonging to the shareholders. In addition, long-term liabilities represent finance obtained on terms, which include repayment more than twelve months after the balance sheet date. They include such items as bank overdraft, creditors (representing unpaid suppliers' accounts), unpaid tax, and unpaid dividends.

 

TASK 4. Make up questions to which these sentences are the answers.

1. Shareholders own company's assets while lenders and creditors provide finances to the company on condition of their later repayment.

2. They are known to be divided into fixed and current.

3. Besides assets it contains two headings which relate to the sources of finance.

4. They differ in the term of paying off.

5. No, it isn't. It is the difference between the cost of a fixed asset and its depreciation up-to-date.

6. They include repayment more than a year after the balance sheet date.

7. European presentation is sure to be the most common in Russia but UK companies usually use a vertical layout.

8. Yes, besides they contain some changes in the terms used.

9. I can name such items as creditors unpaid accounts, overdraft, retained profit.

 

 

TASK 5. A. Learn a vertical presentation of Expended Balance Sheet of a typical manufacturing company.

Assets
Current assets:
Cash		$40,000
Accounts receivable	$90,000
Less allowance for doubtful accounts	10.000	80,000
Inventories:
Finished product	75,000
Work in process	75,000
Raw materials	20,000
Supplies	10.000	180,000
Prepaid expenses		10.000
Total current assets		$310,000
Fixed assets:
Furniture and fixtures	$10,000
Less allowance for depreciation	5,000	$5,000
Machinery and equipment	$30,000
Less allowance for depreciation	16,000	14,000
Buildings	$45,000
Less allowance for depreciation	9,000	36,000
Land		15,000
Total fixed assets		70,000
Investments		20,000
Total assets		$400,000
Liabilities and Equity
Current liabilities:
Accounts payable		$40,000
Notes payable		80,000
Accrued liabilities:
Wages and salaries payable	$4,000
Interest payable	1.000	5,000
Allowance for taxes:
Income tax	$16,000
State taxes	4.000	20,000
Total current liabilities		$145,000
Equity:
Capital stock		200,000
Surplus		55,000
Total equity		255,000
Total liabilities and equity		$400,000

 

B. Answer the following questions taking in account the data above.

1. What does the exhibit represent?

2. Does the balance sheet balance?

3. How are assets grouped?

4. What current assets does the company possess?

5. What items are related to the fixed assets?

6. The company doesn't have long-term liabilities, does it?

7. What items does equity include?

 

TASK 6. Write down the bookkeeping equation on which the balance sheet is based.

TASK 7. Explain what happens to the items in the bookkeeping equation when $300 worth of unfashionable stock is reduced and sold for $150 cash.

TASK 8. Look back at the balance sheet in TASK 12 and rewrite it in the traditional style of a horizontal presentation.

TASK 9. Translate into English.

Если компания имеет более 50% обыкновенных акций другой компании, то первая (the former) называется материнской (холдинговой) компанией, а последняя (the latter) - дочерней. В этом случае составляются консолидированные (consolidated) балансовые отчеты и отчеты о прибылях

и убытках. По сути (in essence), они суммируют внешний объем продаж и расходы, при чем активы и обязательства компании берутся вместе, исключая цифры, которые полностью относятся к внутренним инвестициям и торговле.

Там, где компания владеет более 50%, но менее 100% обыкновенных акций другой компании, консолидированная отчетность содержит статьи, относящиеся к меньшинству держателей акций в дочерних компаниях. Количество прибыли в дочерней компании, на которое имеет право (to be entitled) меньшинство держателей акций, появляется в консолидированном отчете о прибылях и убытках.

Количество акционерного капитала дочерней компании, которое предоставлено меньшинством акционеров, появляется соответственно в консолидированном балансовом отчете. Группа компаний часто состоит из холдинговой и нескольких дочерних компаний.

 

TASK 10. Discuss with your partner the use of the balance sheet.

TASK 11. Speak about the balance sheet statement.

LISTENING

TASK 1. Listen to the dialogue and say what troubles the Managing Director of Proteus Group PLC which produces electrical equipment for street lightning, public buildings and sports studiums. (F.Radice, J. Elliott. English for Accountancy. Unit I.

 

Before listening to the dialogue pay attention to the words and expressions given.

turnover оборот

despite smth. несмотря на что-либо

recession спад

gross margin валовая прибыль, выручка

to maintain сохранять,удерживать, поддерживать

public company (PC) открытая акционерная компания

 

subsidiary дочерняя компания

to generate a profit получать прибыль

to absorb поглощать

to quote назначать цену, давать расценку

PLC (public limited company) открытая акционерная компания с ограниченной ответственностью

Stock Exchange фондовая биржа

 

TASK 2. Listen to the conversation between the managing director of Proteus explaining the situation to the new accountant and fill in the table (the points discussed about the financial picture of the company between the managing director and the accountant).

name	location	quoted on	turnover	net profit	gross margin

 

 

TASK 3. Listen to the conversation again and then complete the script.

Acc So you are a____of the Proteus____which is based in____?

MD That's right. We are a_and our shares are quoted on the____.

Acc You must be doing well. I see the ____ ___show a -___ in turnover!

MD That's true but we also had a____in our____ ___.

Acc Oh, I see. Can you explain how that happened?

MD I'm not sure. You see despite the recession our_____to Eastern

Europe____

Acc So income from sales should have risen.

MD Yes, but we only increased____by____the price of our main

product. So our_fell from 31 % to 14% per cent of sales.

Acc So your_____from sales increased but your_decreased!

MD I know. We hoped to make them rise by____sales of other ____and

maintaining our overall gross margin. But we had to absorb a price

____by one of our_____and this reduced our____ ____on our

other products by 2 per cent. Now our____profit has____...

 

TASK 4. Answer the following comprehension questions on the dialogue.

a. What does Proteus do?

b. Where it is based?

c. What does it make?

d. What happened recently?

e. What is a public limited company?

f. What is a managing director?

g. What is the London Stock Exchange?

h. What is the net profit?

i. What is the gross margin? j. What is turnover?

k. What are management accounts?

 

TASK 5. Agree or disagree.

1. It is impossible to have an increase in turnover when profits usually rise.

2. Subsidiary is money paid by the government to help a company or industry.

3. Overall gross profit is the income of a business after the deduction of all the production costs (e.g. raw materials, fuel, finished and unfinished goods in store, overheads, factory and direct labour costs).

4. The Managing Director noticed with alarm that his gross margin has fallen.

5. He was pleased with the quality of his main product.

6. He has increased turnover despite increasing the price of his main product.

7. His overall gross profit has increased to 29%.