UNIT TWO
READING
INTRODUCING ACCOUNTING
Accounting provides a financial
picture a business firm. An accounting department records measures the activity
of a business and reports on the effects of these transactions on the firm’s
financial condition. Accounting records and reports provided data that are used
by management, stockholders, creditors, independent analysts, banks and
government.
The income statement and balance
sheet are the two types of records that most business prepare regularly. By reading
these statement, once can identify how money was received and spent by a
company. By analyzing these records, one can determine whether or not the
activities of the company have been good for it.
One major tool for the analysts of
accounting records is ration analysis. A ration analysis is the relationship of
two figures. There three main categories of ration in finance. One such ratio
deals with profitability. The main example of this is the Return on Investment
Ration, which is the most widely used single measure of a firm’s operating
efficiency.
A second set of rations helps a
company evaluate its current financial position. These rations deal with assets
and liabilities. A third set of rations deans with the overall financial
structure of the company, primarily analyzing the values of the ownership of
the firm.
A.
Answer
the following questions
1.
In
general terms, what is the purpose of accounting?
The purpose
of accounting is to records measures the activity of a
business and reports on the effects of these transactions on the firm’s
financial condition.
2.
Who
uses the data which is provided by accounting records?
Accounting records and reports provided data that are
used by management, stockholders, creditors, independent analysts, banks and
government.
3.
What
are the two types of record that are prepared by most business?
The income statement and balance sheet
4.
What
can one learn by analyzing the income statement and balance sheet of a company?
By reading these statement, once can identify how
money was received and spent by a company. By analyzing these records, one can
determine whether or not the activities of the company have been good for it.
5.
What
is ratio analysis used for?
It is used for evaluating a company’s current
financial position.
B.
Choose
the correct word available to complete the following sentences.
·
Record
(N)
·
Record
(V)
·
Report
(N)
·
Report
(V)
·
Profit
(N)
·
Profit
(V)
1.
Accounting
is needed to (Record)
all business transactions
2.
He
keeps very neat (Report)
3.
Our
firm’s current (Profit)
are very high
4.
They
(Report)
from their association with that company
5.
Our
(Record) of
accountant receivable show that $5.000 is owed to us
6.
The
activity is (Record)
on income statements and balance sheets
7.
Secretary
had finished typing the (Report) before the manager arrived at the office
8.
How
much does the company make (Profit) this year?
Dialogue
Accounting
(David
and Mary both work in a large company. They are mow having lunch in the company
cafeteria)
David : I’m glad you could meet me for lunch. You
looked so busy this morning. Surrounded by so many statements and your
calculator, of course.
Mary : Of course! My calculator is my right hand!
David : I never noticed
Mary : seriously, David. You know, the accounting
department is very busy
David : I know, we’re all busy, totaling accounts.
But I’ve already turned on the report on my department
Mary : Then I guess my department should receive
your statement soon
David : You already have it
Mary
: Good
David : So, how is business?
Mary : How would I know? I only work on some
records and statements. I don’t have the whole picture. I’m not the auditor.
But I guess the company’s doing well
David : I certainly hope so. We have to keep the
investors happy, creditors, labor union and really, every one
Mary : Well, the balance sheet and profit and loss
statement for this fiscal year should be ready soon. So any one can check out
of the company in the financial statements
David : Speaking of finances, are you the one who
works on the paychecks?
Mary : Why do you ask about it?
David : I thought you might explain to me the
difference between my gross day and my net take-home pay?
Mary : The explanation takes one word, taxes.
Actually. The salaries are gone through the computer
David : Really?
Mary : Sure. How could we handle any volume in a
large company, billings, sales, salaries, without computer?
David : You’re right. Mary, you can credit my
account and day
Mary
: David, don’t be dilly. Let’s get some
dessert
C.
Complete
the following words
1.
This
is the name for buildings machinery, money in the bank and money owned by
customers (Assets)
2.
The
loss of value of the things in number one. (1) (Depreciation)
3.
Money
which is borrowed (Loan)
4.
The
extra money a company or person pays for borrowing money (Interest)
5.
The
total sum of money which is supplied by the owners of a company to set it up (Capital)
6.
Cash
or goods which the owner takes from the company for his own private use
7.
These
are bought by people wishing to invest in the company (Shares)
8.
The
extra amount which is paid for a company above the value of its assets (Goodwill)
9.
The
purchase of another company (Acquisition)
10. An official examination of the accounts (Audit)
11. A financial plan for the future (Budget)
12. A statement of the financial position the company (Balance sheet)
13. The official books for keeping accounts (Ledgers)
14. A reduction in the price which is offered to customers
(Discount)
15. This company has supplied goods but has not received
any money for them yet (Creditor)
16. Goods which has the company has available to sell (Stock)
17. Customers who have received goods but not paid for
them yet (Debtors)
18. This is the name of the difference between the credit
and debit side of a account (Balance)
19. Companies make this when they sell their goods for
more than it costs (Profit)
20. Companies make this when they sell their goods for
less than it costs (Loss)
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