Text 3. What Is Accounting?

Accounting contains elements both of science and art. The important thing is that it is not merely a collection of arithmetical techniques but a set of complex processes depending on and prepared for people. The human aspect, which many people, especially accountants, forget, arises because:

1. Most accounting reports of any significance depend, to a greater or lesser extent, on people's opinions and estimates.

2. Accounting reports are prepared in order to help people make decisions.

3. Accounting reports are based on activities which have been carried out by people.

 But what specifically is accounting? It is very difficult to find a pithy definition that is all-inclusive but we can say that accounting is concerned with:

The provision of information in financial terms that will help in decisions concerning resource allocation, and the preparation of reports in financial terms describing the effects of past resource allocation decisions.    

Examples of resource allocation decisions are:

Should an investor buy or sell shares? Should a bank manager lend money to a firm?

How much tax should a company pay?

Which collective farm should get the extra tractor?  

As you can see, accounting is needed in any society requiring resource allocation and its usefulness is not confined to 'capitalist' or 'mixed' economies.

An accountant is concerned with the provision and interpretation of financial information. He does not, as an accountant, make decisions. Many accountants do of course get directly involved in decision making but when they do they are performing a different function.

Accounting is also concerned with reporting on the effects of past decisions. But one should consider whether this is done for its own sake or whether it is done in order to provide information which it is hoped will prove helpful in current and future decisions. We contend that knowledge of the past is relevant only if it can be used to help in making current and future decisions, for we can hope that we shall be able to influence the future by making appro­priate decisions but we cannot redo the past. Thus the measurement of past results is a subsidiary role, but because of the historical development of accounting and, perhaps, because of the limitations of the present state of the art, 'backward looking' accounting sometimes appears to be an end in itself and not as a means that will help in achieving a more fundamental objective.

 

Exercise 18. Translate into Ukrainian.

A collection of arithmetical techniques, a set of complex         processes, accounting reports, to a greater or lesser extent, people’s opinions and estimates, to carry out activities, a pithy definition, all-inclusive definition, the provision of information in financial terms, the effects of past resource allocation decisions, to buy or sell shares, to lend money to a firm, to pay taxes, interpretation of financial information, to get involved in decision making, to perform a different function, for somebody’s own sake, to prove helpful, to make appropriate decisions, to be a subsidiary role, to achieve a more fundamental objective, “backward looking” accounting.

 

Exercise 19 . For each of the words below, choose the meaning which best shows how it is used in the text. Look at each word’ s use in the text before you answer.

The word 'complex' means:

a) different;

b) confusing;

c) complicated;

d) unusual.

The word 'pithy' means:

a) accurate;

b) short;

c) understandable;

d) comprehensive.

The word 'provision' means:

a) providing;

b) researching;

c) producing;

d) organization. 

The word combination ‘for its own sake’ means:

a) to provide work;

b) for one person / company only;

c) to solve problems;

 d) for no other purpose.

The word ‘subsidiary’ means:

a) less important;

b) different;

c) vital;

d) equally important.

The word combination ‘state of the art’ means:

a) technology;

b) government controls;

c) knowledge and techniques;

 d) understanding.

Exercise 20 . The statements below express the main ideas of the last paragraph. Number these statements so that they are in the same order as the ideas in the text. The first one is given for you.

Statement

Order

a) Financial information about the past is only useful if it helps future decisions. b) The history of accountancy has made it appear to concentrate on the past. c) Accounting can indicate the results of past actions. d) Showing the financial results of past actions can be an aid to decision-making. e) Showing the financial results of past actions can be just to record what happened. f) Describing the past is a less important role of accountancy. g) We can affect the future but we cannot change the past.

1

Exercise 21 . Choose the correct answers to the questions.

1. How many reasons does the author give to support the idea that accounting involves a human element?

a) one;

b) two;

c) three;

d) four.

2. Which of the following reasons does the author give as showing human influence on accounting?

a) accounting summaries describe human action;

b) accounting systems are artificial creations;

c) accounting is affected negatively by human judgment;

d) accountancy is based on the subjective ideas of individuals.

3. In the definitions of accounting given in the text, which of them are said to be its two main functions?

a) providing general information to aid immediate decision-making;

b) providing financial information to help with the future division of resources;

c) providing financial information that will ensure that decisions made are correct;

d) providing financial information to show the results of past use of resources.

Exercise 22 . Discuss the following items concerning accounting process.

1. What do you think are the main purposes of accounting?          2. Does accountancy o nly describe the past or is it useful in dealing with the future? 3. Is accounting completely objective or does it involve subjective judgments? 4. Is accountancy equally important for all types of economic systems? 5. If true, does this mean that only one type of accounting system is correct or that the same system of accounting should be used in all economic systems and countries?

Exercise 23. Learn the following words and word combinations.

bookkeeping	– бухгалтерія, ведення фінансової документації
double-entry bookkeeping	– система бухгалтерського обліку з подвійним записом
receipts	– грошові надходження, виручка, доходи
record	– n.['reko:d] запис, реєстрація – v.[ri'ko:d] записувати, реєструвати
record-keeping	– ведення обліку, облік
statement	– звіт, відомість, кошторис
financial statement	– фінансовий звіт
journal	– бухгалтерський журнал, реєстр, відомість
ledger	– бухгалтерська книга, бухгалтерський реєстр
general ledger	– загальна бухгалтерська книга
balance the ledger	– збалансувати бухгалтерські книги
posting	– перенесення в бухгалтерську книгу
post the journal into the ledger	– переносити журнальні записи в головну книгу
ledger-posting	– запис в головну бухгалтерську книгу
draw up a balance	– зводити (підбивати) баланс
trial-balance	– попередній бухгалтерський баланс
debit	– дебет (розхід, витрати)
debit account	– дебетовий рахунок (запис у лівій частині рахунку, який показує заборгованість організації)
debit of an account	– дебет рахунку (списання коштів з рахунку)
debit balance	– дебетове сальдо, дебетовий баланс, позитивне сальдо
debit (to an account)	– дебетувати, записувати, заносити в дебет
credit	– кредит (сума, яку записують на приход в праву частину рахунку)
credit account	– кредитовий рахунок (запис в правій частині рахунку, яка показує приход активу)
credit balance	– кредитове сальдо, кредитовий баланс, негативне сальдо
credit (to an account)	– кредитувати рахунок (записувати суму в кредит рахунку)
dual impact	– подвійний вплив
interrelated aspects	– взаємопов’язані аспекти

 

Exercise 24. Read, translate and give the gist of text 4.

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