Income Statement

for the Month Ended October 31, 2005

Revenue: Rent Income		200000
Expenses: Advertising Expense Salary Expense	15000 40000
Total Expenses		55000
Net Income		145000

If expenses are greater than revenue, the difference (revenue subtracted from expenses) is identified as a net loss. Note that the first money column is used to list more than one item; the second money column is for totals (or a single item) and the results or the business operations for the fiscal period – net income or net loss. Double lines are ruled through both money columns to show a completed statement.

Capital Statement

The next financial statement to be prepared is a capital statement. This shows how owner’s equity has changed during a fiscal period. It starts with the beginning capital account balance. Any changes that occur are then listed. Possible changes in owner’s equity are:

Increases		Decreases
additional investments net income for period		withdrawals net loss for period

De Van Loc’s capital statement is a simple one; only two items are involved.

De Van Loc Company

Capital Statement

for the Month Ended October 31, 2005

Beginning Balance, Oct. 1, 2005		515 000
Plus: Net Income		145 000
Ending Balance, Oct. 31, 2005		660 000

Following are illustrations of capital statements with more changes (headings are omitted here):

Beginning Balance, Sept. 1, 2005		750000
Plus: Additional Investment	100000
Net Income	250000
	350000
Less: Withdrawals	150 000
Net Increase in Capital		200 000
Ending Balance, Sept. 30, 2005		450 000

Another tool for understanding a company's activity is to look at its cash flow. This measures the actual flow of funds - real money – flowing into and out of a company during a given period of time. A company's cash flow factors out all of the accounting tricks and looks at what a company really earned, because it excludes accounting tools such as depreciation.

Task: Prepare a balance sheet for Maria’s Beauty Salon, use the following data:

Assets: Cash $ 1,750

Furniture and Fixures 8,900

Beauty Supplies 600

Liabilities: Regal Laundry 275

Mavelle Corp. 2,500

TRANSLATION

A. Translate the text into Russian.

Bookkeeping

Bookkeeping is writing down all the transactions arising from business activities which can be expressed in money. To run your business well you must know what money you have received, how much money you have spent and, most important of all, how you spent it. A bookkeeping system can provide you with that information. The books used for keeping records consist of a ledger and subsidiary books.

The ledger is the general book in which you enter almost all the figures arising from your business activities. A ledger consists of a number of accounts. A chart of accounts serves as an index to the ledger, and each account is numbered to facilitate the frequent references that are made to it. An account is a column in the ledger that has been given a specific name, e.g. Cash, Bank, Sales and etc.

The invoice book helps you to remember who owes the business money for goods and services you have sold but have not been paid for. When you have delivered a commodity or provided a service you send an invoice to the customer. You keep a copy of the invoice in the invoice book.

The purchase journal is used to write down details of goods and services bought on credit which are not yet paid for. The invoice you receive from the supplier is kept in the purchase journal until it is fully paid.

The wages book. In this book you make notes about your employee names, wages, advance payments and so on.

B. Translate the abstract from Russian into English.

1. В бухгалтерском учете заинтересованы собственники, руководство предприятия, налоговая служба. 2. Бухгалтерский учет обеспечивает информацию о платежах за определенный период. 3. Каждый предприниматель обязан вести книги и заносить в них торговые операции. 4. Каждая компания стремиться оставаться платежеспособной. 5. Бухгалтерский учет является основой для принятия деловых решений. 6. Одной из функций бухучета является выявление размера прибыли. 7. Инвесторы, которые вкладывают деньги в бизнес, заинтересованы в получении надежной информации.

LISTENING

You will hear Sarah Brandston, an accountant in New York, talking about bookkeeping and tax accounting. Read the following questions, and then listen to the interview.

1. In which fields do most of Sarah Brandston's clients work?

2. Why do they need an accountant?

3. What does Sarah Brandston describe as 'the basic rule for accounting'?

4. An individual can do business as a self-proprietorship. Sarah Brandston mentions two other types of business. What are they?

5. Sarah Brandston says 'bookkeeping is really a common sense way of keeping track of the income and expenses. What does she mean by common sense in relation to recording expenses?

SPEAKING

A.

You are the Executive Manager. Discuss with your accountant the current state of your company. You may use the following dialogue as a model.

Rick has good news for his partner, Dan.

Rick:	I just looked at the books today and we’re finally in the black! We should be making money continuously in no time. And you thought this company was going to bankrupt!
Dan:	Well, you have to admit we’ve been spending a lot of money for the past eight months. Even our new computer system cost a fortune. I don’t mean to sound like a penny pincher (скряга) but frankly, I still think we were wasting our money. You can bet your bottom dollar (all your money) that computer salesman is getting some kickback (reward) for that sale, too.
Rick:	I don’t know why you’re always so worried we’re going to ruin our business financially. Look, the bottom line is that the company’s finally turning a profit even though it had a few lean years. I think we should go celebrate over lunch and since I know you’re short on cash, I’ll even pick up the check (pay for your meal).
Dan:	Well, if you’re going to do it I’m, accepting! Besides, I’m flat broke (completely without money)today.

B.