Text 6 financial statements

Exercise 6.1

Study the vocabulary:

1	financial statement	1	фінансовий звіт (компанії)
2	financial performance	2	фінансова діяльність (компанії)
3	to compile	3	укладати, збирати (матеріали тощо)
4	auditor	4	аудитор, ревізор
5	annual report	5	річний звіт
6	profit and loss account	6	звіт про прибутки та збитки
7	(P&L)/income statement	7	рахунок прибутків і збитків
8	revenue	8	дохід, надходження., прибуток
9	expenditure	9	витрати, витрачання, видаток
10	turnover	10	оборот
11	balance sheet	11	баланс, балансовий звіт
12	mortgage	12	іпотека, застава, заставна
13	cash flow statement	13	баланс оборотних коштів (активів)
14	to accuse of	14	звинувачувати у чомусь
15	window drawing	15	«прикраса вітрини», «причісування балансу»
16	creative accounting	16	«творчий бухоблік»

Exercise 6.2 Match the words with their meanings:

1. financial statement	a) «творчий бухоблік»
2. financial performance	b) баланс оборотних коштів (активів)
3. to compile	c) іпотека, застава, заставна
4. annual report	d) дохід, надходження, прибуток
5. profit and loss account	e) звіт про прибутки та збитки
6. revenue	f) річний звіт
7. expenditure	g) витрати, витрачання, видаток
8. mortgage	h) укладати, збирати (матеріали тощо)
9. cash flow statement	i) фінансова діяльність (компанії)
10. creative accounting	j) фінансовий звіт (компанії)

Exercise 6.3 Read and translate the text:

A company and its shareholders need to know information about the company’s financial performance. This information is compiled by the company accountants and checked by independent auditors. The company’s annual report consists of three financial statements:

- profit and loss account/P&L (BrE) or income statement (AmE). This account shows the revenue (money coming into the business) and expenditure (money going out). It also shows the company’s turnover (total sales), costs and overheads.

- balance sheet This account shows the financial situation of the company on a particular date, usually the end of the financial year. It consists of a list of assets (cash investments, property and debtors – money owed by customers) and liabilities (all the money that the company will have to pay out, such as taxes, mortgage and money owed to suppliers). Firms in a good situation are said to have a strong balance sheet and those that are not, a weak one.

- cash flow statement This document shows the flow of cash in and out of the business. It includes sale of assets, issuing of shares, payment of dividends, trading profits and many other activities.

When company’s accounts are presented in a way that makes performance look better than it really is, the company may be accused of window dressing or creative accounting.

Exercise 6.4

Read the text again to find out which of the following statements are correct:

1. A company and its shareholders need to know information about the company’s financial performance.

2. The company’s annual report consists of four financial statements.

3. The Profit and Loss Account (P&L) (BrE) or income statement (AmE) shows the revenue and expenditure.

4. The Profit and Loss Account (P&L) also shows the company’s turnover, costs and overheads.

5. The Balance Sheet shows the flow of cash in and out of the business.

6. The balance Sheet shows the financial situation of the company on a particular date, usually the end of the financial year.

7. Firms in a good situation are said to have a strong balance and those that are not, a weak one.

8. Cash flow statement includes sale of assets, issuing of shares, payment of dividends, trading profits and many other activities.

9. Cash flow statement shows the revenue and expenditure.

10. Cash flow statement shows the flow of cash in and out of the business.

Exercise 6.5

Match words from list A with words from list B that have a similar meaning:

A	B
1. account	a) expenditure
2. check	b) gain
3. revenue	c) blame
4. window dressing	d) report
5. accuse	e) income
6. profit	f) verify
7. expenses	g) creative accounting

Exercise 6.6

Match words from list A with words from list B that have an opposite meaning:

A	B
1. profit	a) to accuse
2. assets	b) to look worse
3. a strong balance sheet	c) loss
4. to look better	d) liabilities
5. to absolve	e) a weak balance sheet

Exercise 6.7

Match words with the correct definition:

1. accountant	a) a person who examines the accounts of an organization to check they are true and correct
2. auditor	b) a person who keeps records and provides information about a company’s or person’s money
3. annual report	c) a summary list of income and expenses for a business
4. profit and loss account	d) a report, containing financial results, presented each year by the directors to the members and shareholders of a company
5. revenue	e) an amount of money spent
6. expenditure	f) money received from the sale of goods or services
7. turnover	g) a long-term loan from a bank for buying property, which is used as security
8. mortgage	h) the total business done by an organization in a given period
9. creative accounting	i) statement of what a company owns, or assets, and owes or liabilities
10. balance sheet	j) accounting which follows the literal rules of legislation and accounting standards but succeeds nevertheless in presenting an unduly favorable picture of a company’s position or progress

Exercise 6.8

Fill in the gaps with the appropriate word or phrase:

accountant performance revenue expenditure auditors performance cash flow revenue mortgage expenditures turnover balance sheet

1. My … prepares my tax returns every year.

2. The … were called to inspect the accounts.

3. The government has a huge need for tax … .

4. The company has made several big … on new equipment.

5. That company has a $10 million a year ….

6. The flat was bought with a $ 100,000 … .

7. The majority of the government’s … comes from taxes.

8. The company won’t be able to increase … on technology in the coming year.

9. Financial accounts give information about financial … of a company.

10. Analysis of our … during the last year shows that approximately one third of our revenue came from the Asian markets.

11. The accountant prepared the company’s … for the year.

12. The … in our company is good because we take in much more money than we spend.

Exercise 6.9

Fill in the missing prepositions:

for from by in to to in of of about

An annual report is prepared … the management … a company whose stock is traded publicly. It contains written and financial statements … the progress … the company in the previous financial year. An annual report performs a useful function … a free market system, transmitting information … the company … its shareholders and investing public. Although the report is addressed … shareholders, other people who have a stake … the business - stakeholders such as employees, suppliers, customers, and lenders - will find it informative. Such a report acts as good public relations … the company.

Exercise 6.10 The Profit and Loss Account and Balance Sheet are two important documents used in preparing financial statements. Which of the following is a definition of a

– Profit and Loss Account?

– Which defines a Balance Sheet?

1. Statement showing income and expenses resulting from trading over a period of time.

2. Statement of financial position at a specific point of time.