The Accounting Profession

Accounting is an old profession. Records of business transactions have been prepared for centuries. However, only during the last half-century accounting has been accepted as a profession with the same importance as the medical or legal profession. Positions in the field of accounting may be divided into several areas. Two general classifications are public accounting and private accounting. Public accountants are those who serve the general public and collect professional fees for their work, much as doctors and lawyers do. Their work includes auditing, income tax planning and preparation, and management consulting. Public accountants are a small fraction (about 10 percent) of all accountants. Those public accountants who have met certain professional requirements are designated as Certified Public Accountants (CPAs).

Private accountants work for a single business, such as a local department store, the McDonald's restaurant chain, or the Eastman Kodak Company. Charitable organizations, educational institutions, and government agencies also employ private accountants. The chief accounting officer usually has the title of controller, treasurer, or chief financial officer. Whatever the title, this person usually carries the status of vice-president.

Some public accountants pool their talents and work together within a single firm. Most public accounting firms are also called CPA firms because most of their professional employees are CPAs. CPA firms vary greatly in size. Some are small businesses, and others are medium-sized partnerships. The largest CPA firms are worldwide partnerships with over 2,000 partners. Such huge firms are necessary because some of their clients are so large and their operations are so complex.

In contrast to public accountants who provide accounting services for many clients, management accountants provide accounting services for a single business. In a company with many management accountants, the executive officer in charge of the accounting activity is often called a controller.

The primary function of the Chief Accountant is to ensure that adequate funds are available for such capital expenditure on new plant and equipment as is required in the Corporate Plan. Adequate working capital will also be required to meet revenue expenditure such as wages and salaries, purchases of raw materials and the inevitable administration expenses. Whenever purchases or sales are made records will need to be kept. In many ways the accounts are like а storybook telling you what has happened since the business commenced. On 3rd April we purchased a new mainframe computer for £750,000. On 11th May we spent £15,000 on a new motor van, and so on. The data tells management what assets are at their disposal and what commitments they have to be prepared to meet. By examining the accounts managers can see how much cash is available, how much they owe to their creditors, and how much they are owed by their debtors. They must always be in a position to meet their commitments if insolvency is to be avoided. The accounts make a vital contribution to the decision-making process. Once problems have been identified, alternative solutions have to be considered and evaluated. The evaluation will very often be centred on statistical data provided by the accounting departments. If we chose Option A how much would it cost? What would be the net revenue (after deduction of the expenses)? How much would labour costs amount to? Would it be cheaper to use more capital, intensive methods of production? It is this type of question which can be answered by the accountants.

When the decision is implemented there will be a need for feedback. Control mechanism will be necessary to ensure that any deviations are speedily noticed so that corrective action can be taken. The continuous flow of accounting information will be the means by which the deviations are spotted. The use of computers will make it possible to improve the feedback both in terms of accuracy and speed.

Several accounting organizations have formulated codes of ethics that govern the behaviour of their members. “Code of Professional Conduct” adopted by the American Institute of Certified Public Accountants reads:

“Membership in the American Institute of Certified Public Accountants is voluntary. By accepting membership, a certified public accountant assumes an obligation of self-discipline above and beyond the requirements of laws and regulations...”

...In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.

...Members should accept the obligation to act in a way that will serve the public interest, honour the public trust, and demonstrate commitment to professionalism.

...A member should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member's ability.

...To maintain and broaden public confidence, members should perform all professional responsibilities with the highest sense of integrity.

...A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

Some business firms have also developed codes of ethics for their employees to follow. But there is something more than merely making sure you are not violating a code of ethics. Most of us sense what is right and wrong. An accountant's most valuable asset is his or her reputation.

WRITING

Analyze the business documents and do the task that follows:

Business Documents

Accounting data is classified and summarised in the form of statements. The primary financial statements are the (1) balance sheet (2) income statement, (3) statement of owner's equity, and (4) statement of cash flow.

The Balance Sheet

A balance sheet is a financial statement or business form that lists, as of a certain date, all assets owned and all claims against these assets. These claims are held by creditors, to whom money is owed, and the owners themselves, in the form of their owner’s equity. When arranged in this way, it is easy to see that the fundamental bookkeeping equation holds true:

A = L + OE

Let us analyze the balance sheet for Thomas Morales’s business on September 30 of the current year.

Evergreen Landscaping Service

Balance Sheet

September 30, 2005

Assets		Liabilities
Cash	785 000	Gardners Supply Co.	34 500
Truck	1 100 000	Equipment Mlg. Corp.	100 000
Trailer	150 000	Island National Bank	770 000
Accounts Receivable	360 000	Total Liabilities	904 500
Equipment	332 000
Office furniture	75 000	Owner’s Equity Thomas Morales, Capital	1 972 000
Supplies (paper, pens, etc)	74 500
Total Assets	2 876 500	Total Liabilities & Owner’s Equity	2 876 500

This balance sheet shows the financial condition of Morales’s business on the specified date. When this form is arranged with two sides- - assets on the left, liabilities and owner’s equity on the right – it is called an account form balance sheet.

Note the following details carefully:

1. The heading consists of “answers” to the questions who, what, and when.

2. The account form lists assets on the left side, liabilities and owner’s equity on the right side.

3. The sum of all assets is listed below the last one and identified as “Total Assets.”

4. The sum of all liabilities is listed below the last one and identified as “Total Liabilities.”

5. The sum of total liabilities and capital is listed on the same line level as the total assets and identified as “Total Liabilities and Owner’s Equity” or with acceptable abbreviations.

6. The final total amounts on both sides are double ruled.

7. The dollar symbol, comma, and decimal point are not used in any bookkeeping form or statement.

(Single ruled lines indicate an addition or subtraction. Double ruled lines indicate the end of the work.)

Income Statement – Form and Content

An income statement is prepared first, using the information in the Income Statement columns of the work sheet. The heading will answer the questions who, what, and when. All revenue is listed first, and totaled. Expenses are then listed, totaled, and subtracted from total revenue. The difference is the net income (or net loss).

Revenue – Expenses = Net Income or Net Loss

Follow this illustration:

De Van Loc Company

Income Statement

for the Month Ended October 31, 2005

Revenue: Rent Income
Expenses: Advertising Expense Salary Expense	40000
Total Expenses		55000
Net Income

If expenses are greater than revenue, the difference (revenue subtracted from expenses) is identified as a net loss. Note that the first money column is used to list more than one item; the second money column is for totals (or a single item) and the results or the business operations for the fiscal period – net income or net loss. Double lines are ruled through both money columns to show a completed statement.

Capital Statement

The next financial statement to be prepared is a capital statement. This shows how owner’s equity has changed during a fiscal period. It starts with the beginning capital account balance. Any changes that occur are then listed. Possible changes in owner’s equity are:

De Van Loc’s capital statement is a simple one; only two items are involved.

De Van Loc Company

Capital Statement

for the Month Ended October 31, 2005

Beginning Balance, Oct. 1, 2005		515 000
Plus: Net Income		145 000
Ending Balance, Oct. 31, 2005		660 000

Following are illustrations of capital statements with more changes (headings are omitted here):

Beginning Balance, Sept. 1, 2005
Plus: Additional Investment
Net Income	250000
Less: Withdrawals	150 000
Net Increase in Capital		200 000
Ending Balance, Sept. 30, 2005		450 000

Another tool for understanding a company's activity is to look at its cash flow. This measures the actual flow of funds - real money – flowing into and out of a company during a given period of time. A company's cash flow factors out all of the accounting tricks and looks at what a company really earned, because it excludes accounting tools such as depreciation.

Task: Prepare a balance sheet for Maria’s Beauty Salon, use the following data:

Assets: Cash $ 1,750

Furniture and Fixures 8,900

Beauty Supplies 600

Liabilities: Regal Laundry 275

Mavelle Corp. 2,500

TRANSLATION

A. Translate the text into Russian.

Bookkeeping

Bookkeeping is writing down all the transactions arising from business activities which can be expressed in money. To run your business well you must know what money you have received, how much money you have spent and, most important of all, how you spent it. A bookkeeping system can provide you with that information. The books used for keeping records consist of a ledger and subsidiary books.

The ledger is the general book in which you enter almost all the figures arising from your business activities. A ledger consists of a number of accounts. A chart of accounts serves as an index to the ledger, and each account is numbered to facilitate the frequent references that are made to it. An account is a column in the ledger that has been given a specific name, e.g. Cash, Bank, Sales and etc.

The invoice book helps you to remember who owes the business money for goods and services you have sold but have not been paid for. When you have delivered a commodity or provided a service you send an invoice to the customer. You keep a copy of the invoice in the invoice book.

The purchase journal is used to write down details of goods and services bought on credit which are not yet paid for. The invoice you receive from the supplier is kept in the purchase journal until it is fully paid.

The wages book. In this book you make notes about your employee names, wages, advance payments and so on.

B. Translate the abstract from Russian into English.

1. В бухгалтерском учете заинтересованы собственники, руководство предприятия, налоговая служба. 2. Бухгалтерский учет обеспечивает информацию о платежах за определенный период. 3. Каждый предприниматель обязан вести книги и заносить в них торговые операции. 4. Каждая компания стремиться оставаться платежеспособной. 5. Бухгалтерский учет является основой для принятия деловых решений. 6. Одной из функций бухучета является выявление размера прибыли. 7. Инвесторы, которые вкладывают деньги в бизнес, заинтересованы в получении надежной информации.

LISTENING

You will hear Sarah Brandston, an accountant in New York, talking about bookkeeping and tax accounting. Read the following questions, and then listen to the interview.

1. In which fields do most of Sarah Brandston's clients work?

2. Why do they need an accountant?

3. What does Sarah Brandston describe as 'the basic rule for accounting'?

4. An individual can do business as a self-proprietorship. Sarah Brandston mentions two other types of business. What are they?

5. Sarah Brandston says 'bookkeeping is really a common sense way of keeping track of the income and expenses. What does she mean by common sense in relation to recording expenses?

SPEAKING

A.

You are the Executive Manager. Discuss with your accountant the current state of your company. You may use the following dialogue as a model.

Rick has good news for his partner, Dan.

B.

Role Play

Conduct this one-to-one negotiation with your partner.

Student A

You are the Purchasing Manager at a pharmaceutical company in Oslo. You’re negotiating a deal with an engineering company in Budapest. You desperately want to buy some equipment from them that will enable you to package your products. The terms of the negotiation are listed below. Your task is to get twelve stars or more. You begin the negotiation.

Student B

You are the Marketing Manager at an engineering company in Budapest. You are negotiating a deal with a pharmaceutical company in Oslo. You have a cash flow problem and very much need to sell some packaging equipment you have produced that will enable the pharmaceutical company to package their products. The terms of the negotiation are listed below. Your task is to get twelve stars or more.

Student A

PROJECT X

Schedule for Phase 1: January 10 – March 31

Student B

C.

VOCABULARY

account (s) n – счет (а); отчетность

~ payable – счета кредиторов; статья пассивов; кредиторская задолженность

~ receivable – счета дебиторов; дебиторская задолженность; статья активов

profit and loss ~ – счет прибыли и убытков

accountant n – бухгалтер

accountability n – подотчетность

accounting n – бухгалтерский учет

cost ~ – калькуляция затрат (учет издержек экономической деятельности)

managerial ~ – управленческий учет (сбор и обработка информации, полезной для текущего управления фирмой)

tax ~ – налоговый учет

creative ~ – “изобретательный” бухгалтерский учет (с целью уклонения от контроля над экономической деятельностью)

~ period – отчетный период

audit n – аудит; аудиторская проверка

auditor n – аудитор; ревизор

balance n – баланс, сальдо

~ sheet – балансовый отчет

break-evenn – безубыточность

capital n – капитал

~ stock – основной капитал

working ~ – оборотный капитал; текущие активы

venture ~ – венчурный капитал

double entryn – бухгалтерский учет методом двойной записи

entity n – экономический субъект

equity n – стоимость капитала за вычетом обязательств; чистые активы (компании)

goodwill n – “гудвил”; условная стоимость нематериальных активов фирмы

ledger n – главная бухгалтерская книга

liquidity n – ликвидность

solvency n – платежеспособность

GLOSSARY

· Account – a detailed record of all the money that a person receives and spends.

· Accounts payable is all the money a company owes to other companies for goods or services received.

· Accounts receivable is all the money a company is owed by other companies for good or services it had supplied.

· Accountant – a person whose job is to inspect or keep accounts.

· Accounting – the system that measures business activities, processes that information into reports, and communicates these findings to decision makers.

· Audit– the inspection of an organization's annual accounts.

· Auditor – a person who carries out an audit.

· A balance sheet is a written statement of the amount of money & property that a company or person has, including amounts of money that are owed or are owing.

· A company costs are total amount of money involved in operating the business.

· An invoiceis a document that lists goods that have been supplied or services that have been done, and says how much money you owe for them.

· A company’s profit and loss accountsis a financial record, published at the end of each financial year, that shows whether it has made a profit or a loss. (P&L).

· Break-even – when sales reach a level where revenue match costs, a company or product breaks even.

· Capital stock(syn. capital; stock) – the total value of the money, equipments buildings, etc. of a business company.

· Double entry – a method of showing that every business transaction has two aspects, i. e. materials or goods purchased on credit are a liability on the firm to pay the supplier later, but at the same time they are an asset, as at some time the materials will be used for manufacture and then sold, or the goods purchased will be resolved.

· Equityis the money a company gets from selling the shares it owns.

· Goodwill – the good reputation of an established business

· Ledger– the most important accountant book

· Principal – an amount of money lent or invested on which interest is paid.

· Revenueis money that a company, organization or government receives from people.

MARKETING

DISCOVERING CONNECTIONS

1. What is marketing?

2. What does marketing include?

3. Can you tell the difference between marketing and promotion?

4. Is marketing a theoretical or an applied discipline?

5. What is your opinion: are high marketing costs worth the efforts and expenditures?

READING

Text 1

Scan the text for subheadings. What do they tell you about the topic of the text? What do you want to learn about the topic?

Concept of Marketing

What does the term of “marketing” mean? Many people think of marketing as selling and promotion. In fact selling is only the tip of the marketing iceberg. It is but one of several marketing functions – and often not the most important one. If the marketer does a good job of identifying consumer needs, developing good products, and pricing, distributing, and promoting them effectively, these goods will sell easily.

Most businesses now are dominated by an orientation toward marketing, not toward production. Marketing has become a key factor in business success. Today’s companies face increasingly stiff competition, and the rewards will go to those who can best identify customer needs and deliver the greatest value to their target customer. Marketing activities are an expensive undertaking, and their costs are built into the prices of products. It is estimated that at least half of the cost consumer pays for a product is accounted for by marketing expenditures.

Since no organization can satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential customers. This is the target market. One of the advantages of target marketing is the possibility of becoming the leader in a specific market segment. Market segmentation involves aggregating prospective buyers into groups that 1) have common needs and 2) will respond similarly to a marketing action.

Modern marketingis most simply defined as the process of directing the flow of goods from producers to customers. It encompasses a broad range of activities including product planning, new-product development, organizing the channels by which the product reaches the customer, the actual distribution of products, wholesaling, price setting, advertising and promotion, public relations, retailing, product warranties, financing, and more.

Market research estimates the demand for specific products and services, describes the characteristics of probable customers, and measures potential sales.Marketing research studies people as buyers and sellers, examining their habits, attitudes, preferences, dislikes, and purchasing power and almost every aspect of the seller-buyer relationship. It also investigates distribution systems, pricing, promotion, product design, packaging, brand names, etc.

A marketing strategy is a means by which a marketing goal is to be achieved, characterized by 1) a specific target market and 2) a marketing program to reach it. A marketing program is a plan that integrates the marketing mix to provide a good, or service to prospective customers. The elements of the marketing mix, usually called the 4 Ps, are as follows:

– Product: a good, a service, or an idea to satisfy the consumer’s needs;

– Price: what is exchanged for the product;

– Promotion: a means of communication between the seller and buyer;

– Place : a means of getting the product into the consumer’s hands.

To implement a marketing program successfully, hundreds of detailed decisions are often required, such as writing an advertising copy or selecting the amount for temporary price reductions. These decisions, called marketing tactics, are detailed day-to-day operational decisions that must be taken right away.

Within the field of economics, two types of marketing are defined: micromarketing and macromarketing. The former describes the activities of individual firms, beginning with originating and producing products and ending when the products reach the final user, the customer. Macromarketing, by contrast, describes how the whole system of production and distribution works in a society. Marketing is not confined to profit-making companies that manufacture products. Doctors, lawyers, hospitals, colleges, museums, and other service enterprises also engage in marketing.

Vocabulary Focus

Ex. 1. Fill in the gaps using the words given below. Some words are to be used twice:

1. Marketing is concerned with getting the right … to the right … at the right …

2. Marketing is about meeting customer … at a … .

3. Marketing makes it easier for … to do business with you.

Words for reference: customers; needs; place; price; product; profit.

Ex. 2.

A. Study the meaning of the following words:

1. appraise (v) – fix a price for sth, say what sth is worth;

2. appreciate (v) – judge rightly the value of sth; put a high value of sth;

3. calculate (v) – find out by working with numbers;

4. estimate (v) – form a judgement about, calculate;

5. evaluate (v) – find out, decide, the amount or value of sth.

B. Choose the right word in italics:

1. Astronomers can calculate / estimate when there will be eclipses of the sun and moon.

2. I really appreciate/estimate your efforts.

3. He was evaluated / appraised as unfit for military service.

4. The clerk appraises / calculates property for taxation.

5. I estimate / evaluate his income at $300.

6. You can’t appreciate / evaluate English poetry unless you understand its rhythm.

Ex. 3. Match the following collocations in column A with their English equivalents in column B:

Ex. 4. Express in one word:

– someone whose job is to persuade customers to buy a certain product or service;

– the breakdown of a market into separate and identifiable elements;

– the ultimate user of a product;

– a means of communication between the seller and buyer;

– the art of making people do what you want them to do.

Words for reference: consumer, salesperson, segmentation, promotion, persuasion.

Ex. 5. Match the words in column A with their synonyms in column B:

Ex. 6. Fill in the gaps using the words given below. Some words are to be used twice:

1. Marketing has become a … factor in business success.

2. One of the advantages of … marketing is the possibility of becoming the leader in a specific market … .

3. Modern marketing is most simply defined as the process of … the flow of … from … to … .

4. Today’s companies … increasingly stiff … , and the rewards will go to those who can best … customer.

Words for reference: segment, customer, competition, key, identify, producer, face, directing, goods, needs, target.

Comprehension

Ex. 1. Complete the sentences using information from the text:

1. A market is the place where the seller meets buyer to exchange … … … .

2. Market research estimates …… , describes ………., and measures …….

3. Marketing encompasses a broad range of activities including………

4. One of the advantages of target marketing is the possibility of ….

Ex. 2. Find information in the text to answer the following questions.

1. What factors are required for marketing to occur?

2. What kind of decisions is required to implement a marketing strategy?

3. What is the “marketing mix”?

4. Why are firms becoming more custom-oriented?

5. What does a firm usually carry out before it introduces a product onto the market?

6. What kind of relationship does a marketing research study?

7. What is the difference between macro- and micromarketing?

Text 2

As you read the text underline the main ideas and supporting information and explain how to build and achieve a strong brand.

Building a Brand

The term brand derives from the mark made on cattle to signify identification and ownership. At its simplest, a brand is a proper noun and that noun could relate, for example, to a product, service, company, country or other destination, political party, person or sports team. A more complex view of a brand is that it consists of a set of values, some functional and emotional benefits and even the type of customers to whom the brand appeals. Sometimes the essence of the brand can be captured in a slogan. Examples include BMW’s ‘the ultimate driving machine’, and the BBC Horizon programme’s, ‘pure science, sheer drama’. Building strong brands is a key task for marketers. How this is achieved is likely to vary from case to case but there are some general principles.

The brand name

Firstly and, according to some marketers, most importantly of all, is the brand name itself. Brand names can sometimes be abstract, like Kodak, or redolent of the product, such as Swatch, or simply based on the name of the brand owner e.g. Ford.

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