Text 3 the role of accounts

Exercise 3.1

Study the vocabulary:

1	assets	1	активи
2	to come under criticism	2	піддаватися критиці
3	to compute	3	розраховувати
4	design	4	складати
5	to earn the same amount of money	5	заробити ту ж саму кількість грошей
6	equity	6	капітал
7	to fail to do smth.	7	не бути в змозі
8	historical data	8	дані за минулий період
9	liabilities	9	пасиви
10	in monetary terms	10	в грошовому виразі
11	inherently	11	властиве
12	to see the data as а piece of information	12	розглядати дані як одиницю інформації
13	specific	13	особливий
14	to store	14	зберігати
15	storage	15	зберігання
16	relevant	16	значущий
17	whereas	17	тоді як

Exercise 3.2

Read and translate the text:

An account can be defined as the basic storage unit for data in accounting. All the transactions that occur in a business are sorted out classified through the use of accounts. An accounting system has separate accounts for each asset, each liability, and each component of owner's equity. But each business must design its accounts in a way that may reflect its nature and the needs of its management. So, different businesses may keep a different number of accounts. For example, a very small company may need only a few accounts whereas a multinational corporation can keep thousands of them. The specific accounts used by a business depend on its nature.

As a rule, accounts are usually kept in books of accounts. Books of accounts reflect all kinds of business transactions – sales, payment, profits losses etc. They also show the effect of different transactions on the financial position of a firm or a person doing business. In general, accounts are prepared to perform three main functions: first, to show the financial position of a business; second, to enable the income tax computations to be prepared; third, to provide management with necessary information to control the activity of a business.

Very often accounts fail to present a real picture of affairs. This is why the systems of accounts and the main methods of their classification came under criticism in many countries of late. The accounts are believed to be inherently narrow even if they comprehensively present every relevant fact about business activity. They are also said to have certain limitations. First of all, financial accounts report only events which can be expressed in monetary terms. Another limitation is that financial statements report events that have already happened, and they do not show what might have accrued, or what might occur in the future. For example, the fact that a business earned 10 billion hrivnas last year does not necessarily indicate that it will earn the same amount next year. Meanwhile businesses are most interested in what will happen in the future. Historical data is of little use to management who should consider the future when making decisions. Usually managers see the data reflected on the accounts as only one piece of a large body of information to be examined before making decisions.

Exercise 3.3

Read the text again and choose the best variant:

1. An account can be defined as…

a) the secondary storage unit for data in accounting

b) the aggregate storage unit for data in bookkeeping

c) the basic storage unit for data in accounting

2. An accounting system has…

a) general accounts for each asset

b) separate accounts for each asset, each liability and each component of owner’s equity

3. Each business must design its accounts in a way…

a) that may not reflect its nature and needs of its management

b) that reflect its nature and needs of its management

4. Accounts are usually kept in…

a) bookkeeping magazines

b) in books of accounts

5. Books of accounts reflect…

a) profit losses

b) tax revenues and expenditures

c) all kinds of business transactions

6. Accounts are prepared to perform such function…

1. they show the financial position of a business

2. they provide management to control the activity of a business and enable the income tax computations

3. in general accounts perform three main functions

Exercise 3.4

Fill in the gaps from the table. Then read and translate:

Storage company accounts multinational separate nature equity transactions specific component

An account can be defined as the basic …1… unit for data in accounting. All the …2…that occur in a business are sorted out classified through the use of …3…. An accounting system has …4…accounts for each asset, each liability, and each …5…of owner's …6…. But each business must design its accounts in a way that may reflect its nature and the needs of its management. So, different businesses may keep a different number of accounts. For example, a very small …7… may need only a few accounts whereas a …8…corporation can keep thousands of them. The …9…accounts used by a business depend on its …10….

Exercise 3.5

Read the whole text again and choose the best answer:

1. How can an account be defined?

1. account is an aggregate storage unit for data in bookkeeping

2. account is the basic storage unit for data in accounting

2. What sort of accounts has an accounting system?

1. only one kind of accounts

2. has separate accounts for each asset etc

3. How many accounts does a business need?

1. two accounts

2. a few accounts

3. the number of accounts used by a business depend on its nature

4. What do books of accounts reflect?

1. tax revenues and expenditures

2. all kinds of business transactions

5. What is the use of historical data to management?

1. historical data is of little use to management

2. historical data is of wide use to management historical data is of no use to management