Financial statements

Financial statements

Key Words and Phrases:

income statement	Ò	отчет о прибылях и убытках
statement of owner’s equity	Ò	отчет о собственном акционерном капитал
balance sheet	Ò	балансовый отчет
statement of cash flow	Ò	отчет о движении движение денежных средств
profit and loss account	Ò	счет прибылей и убытков
net worth	Ò	собственный капитал
bottom line	Ò	итог; результат; конечный итог; баланс
gains, pl.	Ò	доходы
profitability	Ò	доходность, рентабельность
cash receipts	Ò	поступления имеющихся средств от реализации; прибыль; кассовая прибыль
cash disbursements	Ò	денежные расходы
body	Ò	основная часть (отчета)
heading	Ò	заголовок
accounting period	Ò	отчетный период
to incur expenses	Ò	понести расходы
measurement	Ò	измерение
performance	Ò	здесь: результаты деятельности; показатели деятельности; достигнутые результаты

Financial statements are the final product of the accounting process. Financial statements are means of communicating important accounting information to users. They show the business in financial terms.

Four main financial statements are used to communicate accounting information about a business: theIncome Statement, theStatement of Owner’s Equity, theBalance Sheet and the Statement of Cash Flow. The Income Statement, theStatementofOwner’s Equity and theStatementof Cash Flow give the time period (month, quarter, year), but the Balance Sheet gives the specific date to which it applies, e.g. December 31. The main are the Income Statement (in Great Britain – profit and loss account) and the Balance Sheet.

TheIncome Statement shows financial position of a business over a definite period of time. It summarizes the revenues and expenses of a business over a definite period of time. The Income Statement or Profit and Loss Statement shows revenues, expenses, gains, and losses. The Income Statement does not show cash receipts and cash disbursements. The Income Statement is important because it shows the profitability of a company during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary. It is also known as the "profit and loss statement" or "statement of revenue and expense".

The heading of an Income Statement consists of the following:

1. The name of the business.

2. The title of the statement.

3. The period of time covered by the statement.

The body of an income statement consists of a list of the sources and amounts of revenue received during the period, and a list of the various expenses incurred during the period.

TheBalance Sheet shows the financial position of a business on a certain date, usually the end of the month or year. The purpose of the Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first lists what the company owns (assets) on the left. The second shows what the company owes (liabilities and net worth) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always "balance." In other words, the total assets are equal to the total liabilities plus the net worth.

The heading of the Balance Sheet contains the following:

1. The name of the business.

2. The title of the statement.

3. The date of the statement as of the close of business on that day.

The body of the Balance Sheet consists of a list of the assets, the liabilities, and the owner’s equity after all earnings and other activities have been recorded according to generally accepted accounting principles. It is a standard account with the assets listed on the left side and the liabilities and the owner’s equity listed on the right side.

In addition, the balance sheet at the end of a period is the base with which the entity starts the next accounting period.

TheCash-flow Statement provides a look at the movement of cash in and out of a company. This financial statement includes information from operating, investing, and financing activities. The Cash-flow Statement can be important in determining whether or not a company has enough cash to pay its bills, handle expenses, and acquire assets.

The StatementofOwner's Equity details the changes to the owner's equity account during the accounting period as the organization issues dividend payments and retains money for use within the organization for investment.

There are two main purposes of financial statements:

(1) To report on the financial position of an entity (e.g. a business, an organisation);

(2) To show how the entity has performed (financially) over a particularly period of time (an "accounting period").

The most common measurement of "performance" is profit. It is important to understand that financial statements can be historical or relate to the future.

QUESTIONS:

1. What are the final products of accounting process?

2. What do financial statements show?

3. What are the main financial statements?

4. What does the Income Statement show?

5. What does the heading of an Income Statement consist of?

6. What does the bodyof an Income Statement consist of?

7. Why is theIncome Statement important?

8. What does the Balance Sheet show? Why is it called so?

9. What does the heading of the Balance Sheet contain?

10. What is the Income Statement?

11. What does the body of the Income Statement consist of?

12. What is the Balance Sheet?

13. What is the purpose of the Balance Sheet?

14. What does the Cash-flow Statement provide?

15. What does the Statement of Owner's Equity show?

16. What are the main purposes of financial statements?

EXERCISES:

I. Translate the following words and phrases into Russian:

an income statement; a statement of cash flow; the balance sheet; a statement of owner’s equity; the final product of the accounting process; a financial statement; means of communicating important accounting information; revenues; expenses; over a definite period of time; measurement; on a certain date; profit and loss account; bottom line; cash receipts; cash disbursements; net worth;body;heading; accounting period; the total.

II. Translate into English:

звітний період; балансовий звіт; звіт про прибутки та витрати; звіт про рух грошових коштів; рахунок прибутків і збитків; звіт про власний акціонерний капітал; прибуток; підготовка фінансових звітів; прибутковість, рентабельність; надходження наявних коштів від реалізації; понести витрати; заголовок; вимірювання; основна частина (звіту).

III. Use the appropriate term or term from the text to complete each of the following statements:

1. _____ _____ are means of communicating important accounting information to users.

2. Four major financial statements _____ _____ are used to communicate accounting information about a business.

3. The _____ _____ _____ details the changes to the owner's equity account during the accounting period.

4. The_____ _____ summarizes the revenues and expenses of a business over a definite period of time.

5. The_____ _____ shows the financial position of a business on a certain date.

6. The_____ _____ includes information from operating, investing, and financing activities.

7. The body of an_____ _____ consists of a list of the sources and amounts of revenue received during the period, and a list of the various expenses incurred during the period.

8. The_____of an Income Statement consists of the name of the business, the title of the statement, and the period of time covered by the statement.

9. The heading of the_____ _____ contains the name of the business, the title of the statement, and the date of the statement as of the close of business on that day.

4. Make up your own sentences using the following words and word expressions:

on a certain date; cash receipts; a title; the balance sheet; financing activities; a financial statement; over a definite period of time; revenues and expenses; means of communicating important accounting information; users; to communicate; earnings; measurement; an income statement;profitability.