Income Statement

For the Year Ended December 31, 200…

Revenues Gross sales Less: Returns and allowances Less: Discounts NET SALES Cost of Goods Sold Beginning inventory Purchases for the year Less: Purchase discounts Net purchases Cost of goods available for sale Less: Ending inventory COST OF GOODS SOLD Gross Profit Operating Expenses Selling expenses Wages Advertising Store supplies Payroll taxes Rent Repairs and maintenance Auto and truck Insurance Utilities Depreciation and amortization Miscellaneous TOTAL SELLING EXPENSES General expenses Professional services Office supplies Miscellaneous TOTAL GENERAL EXPENSES TOTAL OPERATING EXPENSES OPERATING INCOME Other Income and Expenses Interest expense Interest income TOTAL INCOME AND EXPENSES INCOME BEFORE TAXES INCOME TAXES NET INCOME

$198,267 ___5,300 $101,700 18,075 24,016 10,170 31,142 7,418 11,697 4,068 8,700 13,245 ____400 $ 3,916 1,354 ____300

$478,293 3,079 ___1,200 $ 10,473 192,967 $203,440 __12,685 $230,631 ___5,570 $ 4750 ___(986)

$474,014 _190,755 $283,259 236,201 $ 47,058 ___3,764 $ 43,294 ___6,494 $ 36,800

2. Answer the following questions on the text and figures.

1. Whose duty is it to prepare financial statements?

2. What statements are the most important?

3. Why is the balance sheet referred to as “a snapshot” of a company’s financial position?

4. Why is this statement called ‘a balance’?

5. How often is the balance sheet commonly prepared?

6. Study Figure 1 and say:

   1. What are the main sections on a balance sheet?

   2. What do current assets include?

   3. What entries are listed under “intangible assets”?

   4. What belongs to “current liabilities”?

7. Why is the income statement known as “a movie”?

8. What indicators are summarized in the income statement?

9. Examine Figure 2 and say:

   1. What do operating expenses include?

   2. What did total selling expenses amount to?

   3. What does the bottom line on this statement show?

Text 4

1. Before you read the text discuss with your partner what you know about auditing and try to guess why this activity is named “auditing”.

2. Read the text and check if your guess was correct.

What Is Auditing

Auditing is a very ancient activity. "Audit" is a Latin word that meant "he hears". In ancient times auditing was the process whereby the owner heard the account given by his steward of the use of the owner's resources. The origin of stewardship goes far back into the Middle Ages. It was the original purpose of accounting and was also called 'accountability'. Kings or lords who were away at war or for other purposes usually left their estates in the hands of a steward. The steward kept as an account to the owner, who might be illiterate and had to hear it (Latin audit – "he hears").

In the early days of auditing the prime qualifications for the position of an auditor was reputation. A man known for his integrity and independence of mind took this honoured position, the matter of technical ability being entirely secondary. In those days, the function of auditor was never confused with that of accountant. However, as accounting gradually became more complex, auditors became increasingly dependent on the expertise provided by accountants. Eventually, the audit function itself became totally dominated by the accountancy profession. By the 19^th century, many owners of businesses appointed one of their members to be an auditor of the financial statements prepared by the directors of a company. This was partly because the process of auditing had become more complicated as business itself became more complicated.

In its modern sense, an audit is a process (carried out by suitable qualified auditors) whereby the accounts of business entities including limited companies, trusts, etc., are subjected to scrutiny in such detail as will enable the auditors to form an opinions to their truth and fairness. To put it differently, its main aim is to give an opinion on whether the financial statements drawn up by the directors of a company give a fair presentation. This opinion is then embodied in an "audit report". In order to do this, an auditor needs to check the physical existence of internal control to ensure that transactions are likely to have been recorded correctly. If internal control is poor, he will ask for it to be improved and he will increase the amount of checking dome on sample transactions. It the control systems look good, relatively small samples of carious types of transactions may be checked.

Auditors would generally be expected to circularize a sample of the debtors to confirm that they exist. He would normally attend the count of the inventory. The rules for auditing are usually set out in auditing standards.

The qualifications that auditors must have are set down: membership of a CPA body in the US, or in the UK membership of one of four of the bodies of the consultative committee of the accountancy bodies. Auditing is carried out by individuals or forms which vary greatly in size. Some firms have hundreds of partners and thousands of stuff.

3. Read the text again and draw up an outline of it by identifying key sentences in each paragraph.

4. Describe the main aim of auditing.

5. Give a list of the main functions of auditors.

6. What qualifications are auditors required to have in the USA?

7. What do you know about auditing profession in the Republic of Belarus?

Text 5

1. Before you read the text, brainstorm the following issues in small groups:

• Why do the issues of business ethics draw so much attention nowadays?

• What can organizations do to enhance ethical behaviour?

Then read the text and compare your ideas with those of the author.