Opening inventory

a) the value of raw materials, components, spare parts, work in progress and fuel at the beginning of an accounting period;

b) all the supplies, goods and raw materials that are used to set up a business;

c) unsold goods left over from previous financial years;

d) the value of raw materials, components, spare parts, finished products, work in progress and ftiel at the beginning of an accounting period.

Factory overheads

a) cost of fuel, raw materials and components;

b) other costs not directly connected with production;

c) costs of water, electricity and fuel used in factory buildings;

d) depreciation on all machinery, equipment and stock;

e) a)+c)

f) costs of transport from the factory;

g) b)+c)+d)

Interest costs

costs of

a) marketing;

b) sales;

c) advertising;

d) borrowing.

Cost of sales

a) cost of making a product;

b) business costs, which do not rise with the quantity of the product made;

c) cost of hourly paid worker employed to make a product;

d) all the costs of the product sold, including manufacturing costs and the staff costs of the production department.

TASK 7. Build new words with the help of the prefix `re-`.Give their Russian translation. Make up sentences of your own with the English words.

payment present

adjust

mark

value

arrange

act

build

call

conceal

consider

cover

cord

creation

fine

comment

TASK 8. Match antonyms.

a) outstanding payments

b) wealth

c) fixed assets

d) appear

e) intangible assets

f) retain

a) tangible assets

b) current assets

c) distribute

d) poverty

e) disappear

f) paid off

TASK 9. Write down the expressions with the terms" assets”, "account", "liabilities. Find new ones using a dictionary. Translate them and use in sentences.

Cash receivables

Assets LIADILITIES

TASK 10. Find the correct definition in the right-hand column of the words on the left.

1) credits a) capital and reserves;

b) amounts falling due within or after more than one year;

c) long-term liabilities;

d) short-term liabilities

2) a) a companies capital which is invested by owners of the shareholder company;

b) the capital and reserves of a company

c) group of shares in a company owned by one person;

d) person who owns shares in a company

3) assets a) calculation of value;

b) things which belong to a company or to a person and which have a value;

c) a legal transfer of a property;

d) method of selling stocks

4) fixed assets a) money, investments and services owed to a company;

b) goods, goodwill, capital, land, buildings, vehicles and machinery which a company owes to others;

c) goods, goodwill, capital, land, buildings, vehicles AND machinery which a company owns;

d) a) + b);

e) a) + c)

5) debtors a) people who owe the company money;

b) people who look after the company's activity;

c) people to whom the company owes money;

d) people who manage the company

6) shareholder' s a) money distributed to the workers as a bonus;

equity b) the money invested in the business by the owners;

c) capital contributed by investors in the Stock Exchange;

d) Surplus wealth generated by the business

7) net asset f) property or machinery which a company owns;

g) assets used by a company in its ordinary work;

h) assets which can`t be sold because someone has a claim against them;

i) the sum of fixed assets and working capital

8) balance a) report of the financial position of a company at a particular time;

b) statement which shows cash sales and purchases;

c) account for a company with expenditure and income over a period of time showing a final income;

d) report of money resources for something

9) creditors a) person who own the company;

b) people who owe money to the business;

c) amounts falling due within a year

d) persons who write checks or bills asking the bank to pay money for a payee

TASK 11. Use the right words from the box to complete the sentences. Translate them into Russian.

1. Fixed assets are_1_for long-term use in the business. They include land, buildings, plant, _ 2 _, equipment, _3_, fixtures and so on. These assets are typically not for_4_, and they are recorded on the balance sheet at their cost to the business, less_5_.

A fixed asset is 6 as a long-term cost. Its cost is allocated as depreciation over the_7_of the assets. Thus,_8_of a fixed asset shown on the balance sheet is not necessarily the same as the resale value of the asset.

'Other assets' include patents, trade investments, goodwill and so on.

Goodwill is recorded on_9_only to the extend that it has actually been purchase.

Assets are also sometimes _10_ as tangible or intangible. Tangible means 'able to be physically touched'. Current and_11_are normally tangible, other assets are typically intangible.

2. The balance sheet of a small_12_typically shows three types of inventories. The materials and supplies inventory consists of materials to be used_13_, together with supplies used in connection with_14_. Work in process consists of goods in the process of manufacture but not_15_yet. Finished goods are merchandise completed and ready for sale. Finished goods and supplies are usually the only inventory items shown on the balance sheet by small_16_and wholesalers.

a) resale	b) the value	c) acquired	d) depreciation
e) in production	f) retailers	g) completed	h) the processing
i) machinery	j) fixed assets	k) working life	I) furniture
m) manufacturer	n) treated	o) classified	p) the balance
			sheet

TASK 1. Read the text and write out the names of items of the balance sheet mentioned in it. Try to answer the question: Where are the sources of finance located in the balance sheet?

A business can exist if it possesses resources for use in the future provided that groups of people, or institutions, outside the business, are willing to make an equivalent amount of finance available to the business.

In a limited company three groups of financiers are: the shareholders, the lenders and the creditors, the latter being people or organizations willing to supply the resources required and if they won't ask for immediate payment. The accounting representation of this aspect of business reality is the balance sheet.

The horizontal method of its presentation emphasizes the relationship between assets and their sources of finance. This layout of the balance sheet has two main sections. The first section (the left side) shows the assets. The second (or right hand) section shows the liabilities (or debts) and the owner's equity (capital), which together represent the claims against the assets. The total assets always equal the combined total of the liabilities and the owner's equity - that is why this financial statement is called a balance sheet. This is known as the bookkeeping equation: assets = capital + liabilities. When the different values are added, the totals for the left and right sides balance. If we know the value of two items in this equation it is always possible to calculate the third. The calculation can be turned round to read:

assets less liabilities equals capital

or assets less capital equals liabilities.

In essence, it is a statement of the wealth that has been invested in resources for use in the future. They are shown as assets. How much finance has

come from each source is shown as sources of finance. It shows the position at a particular point in time, as opposed to the profit and loss statement, which relates to a particular period of time.

Balance sheet at December 31,2000		What is measured
	$,000
Assets	X	Wealth invested in resources for use in the future
	$,000
Sources of finance	X	How much finance has come from each source

Several alternative layouts of balance sheets are found in practice. Continental European balance sheets may have the assets listed on the left-hand side and the finance on the right. American balance sheets may also adopt this layout and, in addition, list the items in the inverse order so that, for example, the list of assets may start with cash and end with land and buildings.

Another form of balance sheet is a vertical presentation in summary form, in which the longer-term investment and finance in the business is highlighted. Using only the main headings the items the balance sheet would appear as follows:

$,000 $,000

Fixed assets

Current assets x

- Current liabilities x

Working capital

Net assets x

Shareholders' capital x

Long-term liabilities x

Capital employed x

In this form of presentation the current liabilities are deducted from the current assets to show the working capital of the business. Working capital is the amount of the longer-term finance, which is needed to support the current assets.

Finance will have to be obtained from shareholders or by means of long-term liabilities, as current assets (stock, debtors and cash) cannot be financed by creditors and other current liabilities. The sum of the fixed assets and the working capital is generally called 'net assets', and the sum of the shareholders' capital and the long-term liabilities is generally called 'capital employed'.

Another form of balance sheet, which is commonly used by UK companies in their published accounts, is a vertical presentation, which culminates in the figure of shareholders' capital. It is usually the case that such accounts contain some changes in terminology to accord with the UK Companies Act, which governs these accounts.

$,000 $,000

Fixed assets X

Current assets X

- Creditors: amounts falling due within one year X

Net current assets X

Total assets less Current liabilities X

- Creditors: amounts falling due after more than X

one year

Capital and reserves X

Note: 'Creditors: Amounts falling due means ‘Current liabilities'

within one year¹

'Net current assets' 'Working capital'

'Creditors: Amounts falling due 'Long-term liabilities'

after more than one year'

'Capital and reserves ''Shareholders' capital'

TASK I. Make sure you understand the balance sheet equation. Complete the table below by filling in the missing figure for each of the four separate businesses.

Business

1. Red and Co

2. Black and Co

3. Green and Co

4. Blue and Co

Capital $

10,000

12,000

Liabilities $

5,000

16,000

60,000

Assets $

30,000

37,000

50,000

The fourth calculation is sure to present a problem and requires a little more thought. The business concerned has been so unsuccessful that its assets are not sufficient to pay off all its liabilities. Thus if the assets were sold for $50,000 some of the creditors of the business would not receive the money that was due to them. $10,000 would be left unpaid and the owner of the business would be responsible for meeting these extra debts himself. The 'negative' capital is called a deficiency of capital. A firm which has liabilities greater than its assets is said to be insolvent. Naturally this sort of position would not be allowed to continue for very long. The firm becomes bankrupt.

TASK 2. Read the statements and say if they are true or false.

1. A business can exist even if financiers outside the business don't give finance to it.

2. Shareholders are the financiers as well as lenders and creditors.

3. The balance sheet shows what resources the business possesses and its sources.

4. The balance sheet shows how efficiently a company manages its assets.

5. Generally accepted accounting methods show current assets to have

a reducing value every year.

6. Fixed assets are items used in the business that wear out and depreciate in value over time.

7. Only the addition of newly purchased assets will cause fixed assets to increase.

8. On the left side total liabilities are added to a net worth.

9. Owner's equity is the difference between things a business owns and things owed by business.

10. European and American balance sheets have generally a vertical layout.

11. American balance sheets have converse order in contents compared with European ones.

12. Working capital is the sum of the long-term liabilities and the net worth.

13. UK balance sheets contain some differences in terms used.