Text 10 the balance sheet

Exercise 10.1

Study the vocabulary:

	assets		активи
	liabilities		пасиви
	equity, owner’s equity		власний капітал
	current assets		поточні активи, оборотний капітал, основні фонди
	fixed assets		основний капітал, основні фонди
	mortgage		іпотека, заставна (на нерухоме майно
	bond		облігація до виплати, боргове зобов’язання
	bonds payable		облігації до виплати
	employee pensions		пенсія працівника
	long-term and current obligations		довгострокові та поточні зобов’язання
	accounts and notes receivable		рахунки та векселі до отримання
	inventory		запаси, резерв; інвентарна відомість
	overdraft		овердрафт, перевищення кредиту (у банку)
	a sole proprietorship		одноосібна власність
	a partnership		товариство
	stockholders' equity		акціонерний (власний) капітал
	a stockholder		акціонер

Exercise 10.2

Read and translate the text:

The balance sheet shows what a company owns (its assets) and the sources of financing these assets and operating activities by shareholders (equity) and by borrowing (liabilities). It is a «snapshot» of the company's financial position at a specified time. As a rule, the balance sheet consists of three major sections: assets, liabilities and owner’s equity.

It should be said that these three sections are arranged differently from country to country. In the USA and many European countries, the assets appear on the left-hand side of the page and the liabilities on the right. In Britain these sections are arranged vertically.

Assets. The assets of a company are often divided into two categories: current assets and non-current (fixed) assets. These categories are listed in the order of their liquidity (the ease with which an asset can be converted into cash). Current assets are more liquid than non-current assets.

Current assets can be defined in the following way: cash or other assets that are reasonably expected to be realised in cash or sold during a normal operating cycle of a business or within one year if the operating cycle is shorter than one year. Cash is obviously a current asset. Temporary investments, accounts and notes receivable, and inventory are also current assets because they may be converted to cash within the next year or during the normal operating cycle of most firms. Prepaid expenses such as rent and insurance paid for in advance, and inventories of various supplies bought for use rather than for sale should be classified as current assets. To make a long story short, current assets are a list of all the assets owned by the business which have a life expectancy of less than one year. For example, inventories (stock of goods), trade and other receivables, prepayments, cash etc. are also current assets.

Non-current assets include: property, plant and equipment, fixed assets normally stated at net book value (cost of purchase less accumulated depreciation). The assets which are expected to remain in the balance sheet more than one year fall into non-current assets category too.

Liabilities are made up of mortgages, payable long-term notes, bonds payable, employee pensions, long-term and current obligations. They are also split into current and non-current (long-term) liabilities. Current liabilities usually consist of overdrafts, taxes due, but not yet paid, and goods supplied on credit. Non-current or long-term liabilities comprise debts of a business that fall due more than one year ahead, beyond the normal operating cycle, or are to be paid out of non-current assets.

Owner's equity can be defined as the resources invested by the business. To put it differently, «owner's equity = assets – liabilities». It should be noted that the owner's equity section of the balance sheet will be different depending on whether the business is a sole proprietorship, a partnership, or a corporation. The owner's equity section of a corporation is called stockholders' equity and has two parts: contributed or paid-in capital and earned capital or retained earnings.

Exercise 10.3

Read the text again and choose the best variant:

1. The balance sheet is a «snapshot» of the company's financial position at a …

a) short period of time

b) specified time

c) indicated time

2. It should be said that assets, liabilities and owner’s equity are arranged … from country to country.

a) in different way

b) in the same way

c) spontaneously

3. Cash or other assets that are reasonably expected to be realized in cash or sold during a normal operating cycle of a business or within one year if the operating cycle is shorter than one year is called …

a) liabilities

b) non-current assets

c) current assets

4. … paid for in advance should be classified as current assets.

a) insurance

b) plant and equipment

c) property

5. Non-current … include debts of a business that fall due more than one year ahead, beyond the normal operating cycle, or are to be paid out of non-current assets.

a) assets

b) accounts

c) liabilities

Exercise 10.4

Read the last two paragraphs of the text again and fill in the gaps. Then read and translate:

proprietorship; assets; section; resources; paid-in capital; debts; credit; liabilities; pensions; mortgages;

Liabilities are made up of …1…, payable long-term notes, bonds payable, employee …2…, long-term and current obligations. They are also split into current and non-current (long-term) liabilities. Current …3… usually consist of overdrafts, taxes due, but not yet paid, and goods supplied on …4…. Non-current or long-term liabilities comprise …5… of a business that fall due more than one year ahead, beyond the normal operating cycle, or are to be paid out of non-current …6….

Owner's equity can be defined as the …7… invested by the business. To put it differently, «owner's equity = assets – liabilities». It should be noted that the owner's equity …8… of the balance sheet will be different depending on whether the business is a sole …9… , a partnership, or a corporation. The owner's equity section of a corporation is called stockholders' equity and has two parts: contributed or …10… and earned capital or retained earnings.

Exercise 10.5

Read the whole text again and choose the best answer:

1. What is balance sheet?

a) It’s a document which shows a company’s assets and the sources of their financing.

b) It’s a document which shows the company's financial position for the last four years.

2. What belongs to current assets?

а) equipment.

b) cash.

3. Which assets fall into non-current assets category?

а) which are expected to remain in the balance sheet for less than one year.

b) which are expected to be in the balance sheet for more than one year '.

4. What do current liabilities usually consist of?

а) debts of a business that fall due more than one year ahead, beyond the normal operating cycle, or are to be paid out of non-current assets.

b) overdrafts, taxes due, but not yet paid, and goods supplied on credit

5. What is the name of owner's equity section of a corporation?

a) stockholders' equity.

b) shareholders’ equiry.