2. THE BASIS FOR THE ACCOUNTING PROCESS
The basis for the accounting process is the accounting equation. It shows the relationship among the firm's assets, liabilities, and owner's equity.
Assets are the items of value that a firm owns —'cash, inventories, land, equipment, buildings, patents, and the like.
Liabilities are the firm's debts and obligations — what it owes to others.
Owner's equity is the difference between a firm's assets and its liabilities — what would be left over for the firm's owners if its assets were used to pay off its liabilities.
The relationship among these three terms is the following:
Owners' equity = assets - liabilities
(The owners' equity is equal to the assets minus the liabilities)
For a sole proprietorship or partnership, the owners' equity is shown as the difference between assets and liabilities. In a partnership, each partner's share of the ownership is reported separately by each owner's name. For a corporation, the owners' equity is usually referred to as stockholders ' equity or shareholders ' equity. It is shown as the total value of its stock, plus retained earnings that have accumulated to date.
By moving the above three terms algebraically, we obtain the standard form of the accounting equation:
Assets = liabilities + owners' equity
(The assets are equal to the liabilities plus the owners' equity)
3. A BALANCE SHEET
A balance sheet (or statement of financial position), is a summary of a firm's assets, liabilities, and owners' equity accounts at a particular time, showing the various money amounts that enter into the accounting equation. The balance sheet must demonstrate that the accounting equation does indeed balance. That is, it must show that the firm's assets are equal to its liabilities plus its owners' equity. The balance sheet is prepared at least once a year. Most firms also have balance sheets prepared semi-annually, quarterly, or monthly.
4. AN INCOME STATEMENT
An income statement is a summary of a firm's revenues and expenses during a specified accounting period. The income statement is sometimes called the statement of income and expenses. It may be prepared monthly, quarterly, semiannually, or annually. An income statement covering the previous year must be included in a corporation's annual report to its stockholders.
5. THE IMPORTANCE OF THE ABOVE TWO STATEMENTS
The information contained in these two financial statements becomes more important when it is compared with corresponding information for previous years, for competitors, and for the industry in which the firm operates. A number of financial ratios can also be computed from this information. These ratios provide a picture of the firm's profitability, its short-term financial position, its activity in the area of accounts receivables and inventory, and its long-term debt financing. Like the information on the firm's financial statements, the ratios can and should be compared with those of past accounting periods, those of competitors, and those representing the average of the industry as a whole.
Vocabulary
1. General Definition of Accounting
| general accounting account impossible manage without accurate lender stockholder agency rely (on) statement report balance sheet income statement summary specific represent perhaps transaction occur accounting period report needed client confuse bookkeeping responsible record data process user provide deal (with) revenue accounts (debt) receivables amount borrow owe profit investment return on investment and the like compile sales territory store | общий счет (бухгалтерский) учет ведение счетов невозможный зд. руководить, управлять без точный кредитор, заимодавец акционер зд. ведомство, орган полагаться (на) зд. отчет отчет балансовый отчет, баланс отчет о доходах обобщенный отчет, итоги конкретный представлять возможно сделка, деловая операция зд. происходить, иметь место отчетный период сообщать нужный клиент смешивать (в уме), путать счетоводство, ведение бухгалтерских книг, бухгалтерия ответственный записывать, вести учет данные обрабатывать пользователь обеспечивать зд. иметь отношение (к) доход дебиторская задолженность (долг, который следует получить компании, счета дебиторов, счета к получению сумма занимать, брать взаймы быть должным выгода, прибыль инвестиция, инвестирование прибыль на инвестированный капитал и тому подобное собирать территория продажи магазин |
| individual salesperson | отдельный продавец |
| division | зд. сектор |
| department | отдел |
| generally | вообще |
| in any way | зд. в любой форме |
| set goals | ставить цели |
| control | контролировать, управлять |
| evaluate | оценивать |
| potential investor | потенциальный инвестор |
| soundness | надежность |
| confirm | подтвердить |
| tax | налог |
| liability | зд. пассив; задолженность |
| payroll | платежная ведомость (по зарплате) |
| deduction | удержание, вычеты |
| approve | зд. утверждать, одобрять |
| issue | выпуск |
| stock | амер. акции, англ. ценные бумаги |
| bond | облигация |
| be able | быть способным |
| provide | предоставлять |
| in the required form | в требуемом виде |
2. The Basis for the Accounting Process
| basis | основа |
| accounting equation | бухгалтерская сбалансированность (дебет и кредит) |
| relationship | соотношение |
| assets | активы, авуары, зд. актив баланса |
| own | владеть |
| item of value | материальные ценности |
| owner | владелец, собственник |
| debt obligation | долг обязанность, обязательство |
| owner's equity | собственный (уставной) акционерный капитал |
| pay off | расплачиваться (с) |
| term | зд. понятие, значение |
| sole proprietorship partnership | единоличный право собственности партнерство, товарищество |
| share | доля |
| report | сообщать |
| is referred (to) | зд. называться |
| stockholder's equity | доля акционера |
| retained earning | нераспределенная прибыль |
| accumulate | накапливаться |
| to date | зд. к определенному времени |
| move | зд. переставлять |
| above | вышеуказанный |
| algebraically | алгебраически |
| obtain | получать |
3. A Balance Sheet
| statement | зд. отчет |
| summary | сводка, краткое изложение |
| particular | конкретный |
| various | различный |
| enter demonstrate | входить показывать |
| indeed | действительно |
| balance | уравновешиваться |
| that is | то есть |
| prepare | готовить |
| at least | по крайней мере |
| once | один раз 1 |
| semiannually | раз в полгода |
| quarterly | ежеквартально |
4. An Income Statement
| income statement | отчет, счет прибылей (и убытков) |
| summary | сводка |
| cover | охватывать, учитывать |
| previous | предыдущий |
| annual report | годовой отчет |
5. The Importance of the above two Statements
| importance | важность |
| compare | сравнивать |
| competitor a number (of) ratio | конкурент ряд соотношение, коэффициент |
| provide profitability account receivable | зд. давать доходность сумма, причитающаяся к получению, дебиторская задолженность |
| long-term | долгосрочный |
| debt financing | долговое финансирование (т.е. путем получения займов) |
| like | как |
| those | зд. заменяет слово «отчеты» |
| accounting period | отчетный период |
| average | средняя величина |
| as a whole | в целом |