9.Accounting

Accounting is recording, classifying, summarizing and interpreting financial transactions to provide management and other interested parties with information they need to make correct financial decisions. Accounting process consists of two parts: bookkeeping, that is, mechanical process of recording, classifying and posting financial entries into the ledger, and accounting itself, that is, interpreting of financial data, making financial statements, designing accounting information system within a business and advising management on financial matters.

Assets are everything that a business owns. Buildings, equipment, machinery, land are fixed assets; money, cash, accounts receivable are current assets.

Liabilities are obligations, debts of a business, what it owes to creditors, banks, suppliers, investors, customers and so on.

Owner’s equity is the capital which the owner will receive if he sells all assets and pays all his liabilities. Owner’s equity is assets minus liabilities.

Revenues are incoming money or gross income or profit before taxes.

The system of bookkeeping is based on the principle of the double entry, which means that each transaction is entered twice, as a credit in one account and as a debit in another account.

Accounting is done by accountants. Highly qualified accountants (in the USA certified public accountant- CPA, in Great Britain chartered accountant- CA) can perform audit.

10.Auditing

Auditing is an accounting function that involves the review and evaluation of financial records and financial position of a company. Audits are performed by highly qualified accountants (auditors) ordered by the management of the company or by some state authorities (revision and control).

There are two types of auditing: internal and independent.

Internal audit is a system of internal control against errors and misappropriations. Many companies employ their own accountants to maintain an internal audit. They review operating procedures and financial records and report to management on the current state of the company’s fiscal affairs.

Independent auditors review the business’ operating activities; they examine financial statements, the accounting records and other business papers to determine the accuracy and completeness of the records.

The accountant’s judgment or opinion on the fairness of the records is written in a document sent to the client upon completion of the audit. It consists of a letter addressed to the client that includes a scope paragraph (list of documents that he has examined and the standards that have been used for the audit), and the opinion paragraph (the auditor’s conclusions).

Auditors can help the business to set up a reliable accounting system; they can also discover whether non-existent transactions have been entered into the books.

11. International Business

Business can take many different forms and can be conducted at different levels. Based on the level of business activity business may be defined as either domestic, international or multinational. If business acquires all its resources and sells all its products within a single country it is considered a domestic business. Although international business is also based in a single country it acquires a meaningful share of its resources and revenues from other countries. A multinational business operates on the world-wide scale regardless of national borders.

More and more domestic businesses decide to enter international markets and become international, while international companies expand and become multinational (transnational). This phenomenon is called globalization – the evolution of economy that comprises interrelated markets.

There are three primary motivations for firms to engage in international business: 1) to expand sales; 2) to acquire resources; 3) to diversify sources of sales and supplies.

The economic factor that influences the decision to engage in business beyond national borders includes the level of economic development in various countries, the presence of adequate infrastructure, a country’s balance of payments and monetary exchange rates.