Complete the table with words from the text and related forms. Put a stress mark in front of the stressed syllable.

Verb	Concrete and abstract noun	Nouns for people and organizations	Adjectives	Negative adjectives
Account (for)	Accounts Accounting Accountancy accountability	Accountant	accountable	Unaccountable
-	consistency	-	consistent	inconsistent
invest	investment	investor	Invested p.p.	- divested(opposite)
Measure	Measure Measurement measurer	-	Measurable Measured p.p.	Measureless Unmeasured
organize	organization	organizer	Organized p.p.	disorganized
manage	management	manager	Manageable managerial	unmanageable
control	control	controller	Controlling\ed	uncontrolled
profit	profit	profiteer	profitable	unprofitable

A. Read the text, ignoring the missing parts.

 Accounting assumptions and principles

Accounting principles are built on a foundation of a number of basic concepts. One of them is known as the consistency principle. Companies can choose their accounting policies – 1. (G) their way of doing their accounts. But in choosing accounting policies they have to be consistent – which means using the same methods every year, unless there is a good reason to change a policy. The policies have to be disclosed to the shareholders in the “Statement of Accounting Policies” included in the Annual Report.

The historical cost principle states that companies 2. (E) record the original purchase price of assets and not their (estimated) current selling price or replacement cost. The current price is not important if the business is a going concern – a successful company that will continue to do business – as its assets are not going to be sold, or 3. (C) do not currently need to be replaced. However some countries with regular high inflation use replacement cost accounting, which values all assets at their current replacement cost – the amount that would have to be paid to replace them now.

Other accounting principles are as follows. The full-disclosure principle states that 4. (B) financial reporting must include all significant information. The principle of materiality says that very small and unimportant amounts do not need to be shown. The principle of conservatism is that 5. (D) where different accounting methods are possible, you choose the one that is least likely to overstate or over-estimate assets or income. The objectivity principle says that accounts should be based on facts and not on personal opinions or feelings. The revenue recognition principle is that revenue is recognized in the accounting period in which it is earned. This means the revenue is recorded 6. (F) when a service is provided or goods delivered, not when they are paid for. The matching principle states that each cost or expense related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn.

B. Fit the missing parts A-H in the gaps. There is one extra.

1	2	3	4	5	6
G	E	C	B	D	F

C. When writing accounts and financial statements, accountants have to follow a number of assumptions, principles and conventions. The following are the main assumptions used by accountants. Match them with their definitions.

1.	Separate (business) entity	a.	a business is an accounting unit separate from its owners, creditors, managers and their assets
2.	Time-period	b.	the economic life of the business can be divided into (artificial) time periods such as the financial year, or a quarter of it
3.	Continuity or going concern	c.	a business will continue into the future
4.	Unit-of-measure	d.	all financial transactions are in a single monetary unit or currency

1	2	3	4
C	D	A	B

D. Find words or word combinations in the text that mean the following.

Accounting principle	a rule or an idea used for preparing accounts in a particular country or place
Consistency	when a company uses the same accounting methods each year when it reports its results
Historic(al) cost	the price paid for an asset when it was bought, rather than what it is worth now
Replacement cost	cost of buying an asset rather than the price that was paid for it in the past
Going concern	a business that is making a profit
High inflation	a rapid rise in prices that damages a country’s economy
Disclosure	the duty of someone in a professional position to inform customers, shareholders etc. about the facts that will influence their decisions

Skills Focus

Financial Statements

3.5.2 a. Fill in the gaps with the suitable expressions from the box:

A) accruals principle	B) balance sheet	C) reserves
D) bottom line	E) sales revenue	F) bank loans
G) gross profit	H) share prices	I) pre-tax profit

Each year a company produces an annual report with three key sets of figures: profit and loss account, ___ (1) B ___ and cashflow statement. These are three key financial statements in financial reporting. They give the basic information about a company’s financial results. The results a company publishes can affect____(2) H___: good results cause prices to rise, if the market believes the company is undervalued. However, poor results often cause a drop in share price, as investors feel the company is overvalued.

The profit and loss (P&L) account (the income statement in theUSA) records the money a company makes or loses during a particular reporting period, using the accruals principle. The ____(3) A ______ means that events in a particular reporting period, for example sales of goods or purchases of supplies, are recorded in that period, rather that when money is actually received or paid out: this may happen in a later period. Accounts record money received from sales (____(4) E _____, referred to as turnover in BrE), minus the labour and cost of materials used to produce them, which is called the cost of goods sold (COGS). The difference between the sales revenue and the cost of sales is ___(5) G ______.

Then selling and general expenses – the cost related to making these sales – employees’ salaries, rent for buildings, etc. - are taken away. These other costs and expenses are often grouped together as selling, general and administrative expenses (SG&A). There is also cost of depreciation – this is not an actual sum of money paid out, but is shown in the account to allow for the way that machinery wears out and declines in value over time and will have to be replaced. This leaves a company with its operating profit.

Then we subtract the interest payable on money borrowed in the form of bonds and ___(6) F_____. This gives the profit before tax or ____(7) I _____. Sometimes there are exceptional items to report, for example the cost of closing a particular operation. A company pays tax on its profit, which in the UK is called corporation tax (corporate income tax in the USA). So, the statement also shows EBITDA (earnings before interest, tax, depreciation and amortization) and EBIT (earnings before interest and tax). After all the expenses and deductions there is the net profit, often called the ___(8) D ______.

Dividends to shareholders (dividends per share) are usually paid to shareholders from profit after tax, also referred to as earnings. However dividends may be omitted, passed or skipped when business is bad. Not all profit is paid out in dividends. Some is kept to invest in future activities - these are retained earnings, or __(9) C _______.

Non-profit organizations such as charities, public universities and museums produce an income and expenditure account. If they have more income than expenditure this is called a surplus rather than a profit. 

1	2	3	4	5	6	7	8	9
B	H	A	E	G	F	I	D	C

c. Give the English equivalents for the following:

принцип начисления - Accruals principle/basis

выручка от продаж - Sales revenue/turnover

себестоимость проданных товаров - cost of goods sold COGS

валовая прибыль - gross profit

коммерческие, общехозяйственные и административные расходы - selling, general and administrative expenses (SG&A)

операционная прибыль - operating profit

стоимость прекращения определенного вида деятельности - the cost of closing a particular operation

износ оборудования и амортизация основных фондов - depreciation and amortization

прибыль до вычета процентов, налогов и амортизационных отчислений - EBITDA (earnings before interest, tax, depreciation and amortization)

· стоимость реализованной продукции – cost of sales