The Profession of Accounting in the USA
МИНИСТЕРСТВО ОБРАЗОВАНИЯ РЕСПУБЛИКИ БЕЛАРУСЬ
УО «Белорусский государственный экономический университет»
Т.Ф. Солонович
ACCOUNTING AS MY MAJOR =
МОЯ СПЕЦИАЛЬНОСТЬ – БУХГАЛТЕРСКИЙ УЧЕТ
Минск 2009
Рецензент: кандидат филологических наук, доцент кафедры теории и практики английской речи Л.П. Левченко
Рекомендовано кафедрой теории и практики английской речи БГЭУ
Солонович Т.Ф.
Моя специальность – бухгалтерский учет = Accounting as my Major: Учеб.-метод. пособие. / Т.Ф. Солонович. – Минск: БГЭУ, 2009. – 36 c. (1,4 усл. печ. л.)
Пособие содержит учебно-методический комплекс по тематическому модулю дисциплины «Иностранный язык (английский)» «Моя специальность – бухгалтерский учет» и включает тексты и задания для чтения, активный словарь и лексические упражнения для его усвоения, задания для совершенствования речевых навыков по данной теме.
Предназначено для студентов БГЭУ специальности «Бухгалтерский учет, анализ и аудит» .
Accounting as my Major
LEAD-IN
What do you think of accountants and their job?
Choose the description that is closest to your idea of accountants.
1) Accountants are dull functionaries toiling in a back room, endlessly adding up numbers.
2) Accountants are creative people on whom a company's prosperity largely depends.
3) if other, specify.
READING
Text 1
1. Read the text and single out the definitions of the following notions:
● accounting
● financial accounting
● management accounting.
The Nature of Accounting
Accounting is the system a business uses to measure its financial performance by recording and classifying sales, purchases, and other transactions. Accounting also provides ways to present this information that make it possible to evaluate a company's past performance, present condition, and future prospects.
Accounting is important to business for two reasons: it helps managers plan and control a company's operations, and it helps outsiders evaluate the business. Because these two audiences use accounting information in different ways, accounting has two distinct facets. Financial accounting is concerned with preparing information for the outside world; management accounting is concerned with preparing information for internal use.
Financial accounting
The outsiders who use accounting information have a variety of interests. Suppliers, banks, and other lenders want to know whether the business is creditworthy; investors and shareholders are concerned with the company's profit potential; government agencies are mainly interested in regulating the business and collecting taxes. These users need information that is objective, consistent over time, and comparable to information supplied by other companies. Thus financial accounting statements adhere to certain standard formats and are prepared according to generally accepted accounting principles (GAAP) that have been established and agreed on by the accounting profession over many years.
Management accounting
Management accounting, in contrast, is tailored to the needs of managers in a particular company. Its overall purpose is to help the managers evaluate results and make informed decisions. In a typical company, the management accounting system covers a wide range of financial activities, from recording sales and sending out invoices to helping top management evaluate expenditures on buildings, equipment, and labor.
Thus, of the several available definitions of accounting, the one developed by an American Accounting Association committee is perhaps the best because of its focus on accounting as an aid to decision making. This committee defined accounting as "the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by users of the information."
2. Read the text again and say if the following statements are true or false according to the information in the text; correct the wrong ones.
1. Accounting information can help managers evaluate a company's prospects.
2. It is management accounting that is concerned with preparing information for the outside world.
2. Financial accounting prepares information for internal use.
4. The outsiders that need a company's accounting information are banks, suppliers, investors, government agencies.
5. Financial accounting statements are prepared in accordance with generally accepted accounting principles.
6. Management accounting helps the managers to evaluate a company's performance and make informed decisions.
7. Accounting is the process of identifying, measuring, and communicating economic information.
3. Complete the following sentences on the basis of the information in the text.
1. Accounting is the system of measuring … .
2. Accounting helps managers plan … .
3. Accounting helps outsiders … .
4. Lenders want to know if the business … .
5. Government agencies are interested in … .
6. Financial accounting statements are prepared according to … .
7. Managements accounting is tailored to …. .
8. Management accounting activities include… .
4. Summarize the contents of the text in 5-7 sentences.
Text 2
1.Scan the text below and pick out the terms that are used to name accounting titles and jobs in the USA.
The Profession of Accounting in the USA
In most organizations the accounting group is the largest staff unit, that is, the largest group other than the "line" activities of production and marketing. The accounting group consists essentially of two types of people: (1) bookkeepers and other data-entry employees who maintain the detailed operating records and (2) professional accountants who decide how items should be reported, prepare the reports, interpret these reports, prepare special analyses, design and operate the systems through which information flows, and ensure that the information is accurate.
In 1992 there were 1,365,000 accountants and 1,841,000 bookkeepers and accounting clerks in the United States.
All publicly owned companies and many other organizations have their accounting reports audited by a public accounting firm. These firms also perform other services for clients. Some of these firms are very large: the six largest (colloquially called the Big Six) each have tens of thousands of employees and hundreds of offices around the world, with annual revenues totaling billions of dollars. They are far larger than any law firm, medical group practice, or other professional firm. At the other extreme, thousands of public accountants practice as individuals. All told, in 1991 a total of 68,000 accounting and auditing firms employed about 525,000 people and generated $34 billion of revenues.
Most public accountants are licensed by their state and are designated as Certified Public Accountants (CPAs). The professional organization of CPAs is the American Institute of Certified Public Accountants (AICPA). Many accountants employed by industry belong to the Institute of Management Accountants (IMA). Many college and university accounting faculty members belong to the American Accounting Association (AAA).
Although accounting is a staff function performed by accounting professionals within an organization the ultimate responsibility for the generation of accounting information rests with management. Management's responsibility for accounting is the reason that one of the top officers of many businesses is the controller. Within the division of top management's duties, the controller is the person responsible for satisfying other manager's needs for management accounting information and for complying with the requirements of financial reporting. To these ends the controller's office employees accounting professionals in both management and financial accounting. These accountants design, install, and operate the information systems required to generate financial and managerial reports.
2. Sort out the functions listed below into two categories:
(1) those performed by bookkeepers (2) those performed by accountants
a. payment of invoices;
b. calculation of all incoming and outgoing transactions;
c. setting up and monitoring the procedures for dealing with the figures;
d. the issuing of invoices for sales of the company’s products or services;
e. dealing with non-routine situations where decisions have to be made about how and where to record special kinds of income or expenditure;
f. providing information on cash flow;
g. looking for ways to present company's figures in the most advantageous light with regard to tax liability;
h. producing monthly and annual financial reports.
3. Give an overview of the system of jobs in the accounting profession in the Republic of Belarus. Do additional research into the issue if necessary.
Text 3
1.Read the text below and take notes of its contents.
Financial Statements
After a few months, the transactions recorded by a bookkeeper will accumulate, making it difficult for management to sort out what is going on. To simplify the picture, accountants prepare financial statements that summarize the transactions. Three of the most important are the balance sheet, the income statement, and the statement of cash flow.
The Balance Sheet
A balance sheet, also known as a statement of financial position, is a kind of "snapshot" of where a company is, financially speaking, at one moment in time. It includes all the elements in the accounting equation, showing the balance between assets on the one hand and liabilities and owner's equity on the other. Figure 1 is a balance sheet for Sweet Dreams Ice Cream, Inc., a small corporation that makes ice cream and sells it through its own shop.
But no business can stand still while its financial condition is being examined. A business may make hundreds of transactions of various kinds every working day. Even during a holiday, office fixtures grow older and decrease in value, and interest on savings accounts accumulates. Yet the accountant must set up a balance sheet so that managers and other interested parties can evaluate the business's financial position as if it were static.
Accordingly, every company prepares a balance sheet at least once a year, most often at the end of the calendar year, covering from January 1 to December 1. However, many business and government bodies use a fiscal year, which may be any 12 consecutive months. For example, a business may choose a fiscal year that runs from June 1 to May 31 because its peak selling season ends in May. Some companies prepare a balance sheet more often than once a year, perhaps at the end of each month or quarter.
The Income Statement
The income statement reflects the results of operations over a period of time, typically one year. If the balance sheet is a "snapshot," the income statement is a "movie". It summarizes all revenues (or sales), the amounts that have been or are to be received from customers for goods or services delivered to them, and all expenses, the costs that have arisen in generating revenues. It then subtracts expenses from revenues to show the actual profit or loss of a company, a figure known as net income – profit or the "bottom line." Figure 2 is an income statement for Sweet Dreams Ice Cream, Inc.
Figure 1
Sweet Dreams Ice Cream, Inc.
Balance Sheet
December 31, 200…
| ASSETS Current Assets Cash Marketable securities Accounts receivable Less: Allowances for uncollectible accounts Notes receivable Merchandise inventory Prepaid expenses TOTAL CURRENT ASSETS Fixed Assets Factory equipment Less: Accumulated amortization Leasehold improvements Less: Accumulated amortization TOTAL FIXED ASSETS Intangible Assets Organization costs Trademark Goodwill TOTAL INTANGIBLE ASSETS TOTAL ASSETS LIABILITIES AND SHAREHOLDERS EQUITY Current Liabilities Accounts payable Note payable (short-term) Salaries payable Taxes payable TOTAL CURRENT LIABILITIES Long-Term Liabilities Long-term note payable @ 12% TOTAL LIABILITIES Shareholders' Equity Common stock, 10,000 shares Retained earnings Beginning of the year Current year TOTAL SHAREHOLDERS' EQUITY TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $19,780 ____430 $64,919 __11,706 $77,030 __14,308 $26,460 _36,800 | $22,790 4,200 19,350 21,500 12,685 ___4,400 $53,213 _62,722 $ 420 6,405 __5,000 $23,790 15,115 7,452 __6,318 $43,000 _63,260 | $84,925 115,935 __11,825 $212,685 $52,675 _53,750 $106,425 $106,260 $212,685 |
Figure 2
Sweet Dreams Ice Cream, Inc.
Income Statement
For the Year Ended December 31, 200…
| Revenues Gross sales Less: Returns and allowances Less: Discounts NET SALES Cost of Goods Sold Beginning inventory Purchases for the year Less: Purchase discounts Net purchases Cost of goods available for sale Less: Ending inventory COST OF GOODS SOLD Gross Profit Operating Expenses Selling expenses Wages Advertising Store supplies Payroll taxes Rent Repairs and maintenance Auto and truck Insurance Utilities Depreciation and amortization Miscellaneous TOTAL SELLING EXPENSES General expenses Professional services Office supplies Miscellaneous TOTAL GENERAL EXPENSES TOTAL OPERATING EXPENSES OPERATING INCOME Other Income and Expenses Interest expense Interest income TOTAL INCOME AND EXPENSES INCOME BEFORE TAXES INCOME TAXES NET INCOME | $198,267 ___5,300 $101,700 18,075 24,016 10,170 31,142 7,418 11,697 4,068 8,700 13,245 ____400 $ 3,916 1,354 ____300 | $478,293 3,079 ___1,200 $ 10,473 192,967 $203,440 __12,685 $230,631 ___5,570 $ 4750 ___(986) | $474,014 _190,755 $283,259 236,201 $ 47,058 ___3,764 $ 43,294 ___6,494 $ 36,800 |
2. Answer the following questions on the text and figures.
1. Whose duty is it to prepare financial statements?
2. What statements are the most important?
3. Why is the balance sheet referred to as “a snapshot” of a company’s financial position?
4. Why is this statement called ‘a balance’?
5. How often is the balance sheet commonly prepared?
6. Study Figure 1 and say:
6.1. What are the main sections on a balance sheet?
6.2. What do current assets include?
6.3. What entries are listed under “intangible assets”?
6.4. What belongs to “current liabilities”?
7. Why is the income statement known as “a movie”?
8. What indicators are summarized in the income statement?
9. Examine Figure 2 and say:
9.1. What do operating expenses include?
9.2. What did total selling expenses amount to?
9.3. What does the bottom line on this statement show?
Text 4
1.Before you read the text discuss with your partner what you know about auditing and try to guess why this activity is named “auditing”.
2. Read the text and check if your guess was correct.
What Is Auditing
Auditing is a very ancient activity. "Audit" is a Latin word that meant "he hears". In ancient times auditing was the process whereby the owner heard the account given by his steward of the use of the owner's resources. The origin of stewardship goes far back into the Middle Ages. It was the original purpose of accounting and was also called 'accountability'. Kings or lords who were away at war or for other purposes usually left their estates in the hands of a steward. The steward kept as an account to the owner, who might be illiterate and had to hear it (Latin audit – "he hears").
In the early days of auditing the prime qualifications for the position of an auditor was reputation. A man known for his integrity and independence of mind took this honoured position, the matter of technical ability being entirely secondary. In those days, the function of auditor was never confused with that of accountant. However, as accounting gradually became more complex, auditors became increasingly dependent on the expertise provided by accountants. Eventually, the audit function itself became totally dominated by the accountancy profession. By the 19th century, many owners of businesses appointed one of their members to be an auditor of the financial statements prepared by the directors of a company. This was partly because the process of auditing had become more complicated as business itself became more complicated.
In its modern sense, an audit is a process (carried out by suitable qualified auditors) whereby the accounts of business entities including limited companies, trusts, etc., are subjected to scrutiny in such detail as will enable the auditors to form an opinions to their truth and fairness. To put it differently, its main aim is to give an opinion on whether the financial statements drawn up by the directors of a company give a fair presentation. This opinion is then embodied in an "audit report". In order to do this, an auditor needs to check the physical existence of internal control to ensure that transactions are likely to have been recorded correctly. If internal control is poor, he will ask for it to be improved and he will increase the amount of checking dome on sample transactions. It the control systems look good, relatively small samples of carious types of transactions may be checked.
Auditors would generally be expected to circularize a sample of the debtors to confirm that they exist. He would normally attend the count of the inventory. The rules for auditing are usually set out in auditing standards.
The qualifications that auditors must have are set down: membership of a CPA body in the US, or in the UK membership of one of four of the bodies of the consultative committee of the accountancy bodies. Auditing is carried out by individuals or forms which vary greatly in size. Some firms have hundreds of partners and thousands of stuff.
3. Read the text again and draw up an outline of it by identifying key sentences in each paragraph.
4. Describe the main aim of auditing.
5. Give a list of the main functions of auditors.
6. What qualifications are auditors required to have in the USA?
7. What do you know about auditing profession in the Republic of Belarus?
Text 5
1. Before you read the text, brainstorm the following issues in small groups:
- Why do the issues of business ethics draw so much attention nowadays?
- What can organizations do to enhance ethical behaviour?
Then read the text and compare your ideas with those of the author.