Text 7. Assets and Liabilities

The term "asset" means anything of value that is owned by a company and can be expressed in terms of money. Economic resources that provide a poten­tial future service to the organization are called assets in accounting. A com­pany's total assets include such items as cash, buildings, equipment, any oth­er property and accounts receivable, that is, money owned by its customers.

Assets are usually classified as current and long-term, both types consist­ing of tangible as well as of intangible items. Current tangible assets including cash, accounts receivable, stock-in-trade are usually converted into cash within one year and sometimes can be used as a means of payment. On the other hand, current intangible assets consist of short-term investments in stocks and bonds.

Long-term intangible assets are not really visible and include such items as goodwill, patents, trademarks, copyrights, these assets often being the most important factor for obtaining future incomes. For example, goodwill means an intangible asset which takes into account the value added to a business as a result of its reputation which cannot be really calculated. In contrast, the real estate (such as farm land, machinery, buildings and other physical ob­jects) belongs to long-term tangible assets.

Liabilities are obligations that a company owes to another organization, to an individual (such as creditors and employees) or to the government. Like assets, liabilities are divided into current and long-term ones. Current liabilities are usually amounts that are paid within one year, including accounts payable, taxes on income and property, short-term loans, salaries and wages, and amounts of money owed to suppliers of goods and services. Concurrent liabilities often called long-term are usually debts, such as bonds and long-term loans.

The amount by which the total assets exceed total liabilities is known as the net worth which is usually called the equity for companies. When the company is a corporation, the equity means the investment interest of the owners (that is, the stockholders) in the organization's assets. The owners' equity can be increased either by investing more money in the company or by earning a profit and can be decreased because of the com­pany's losses.

All companies keep proper accounting system in order to know whether or not they are operating profitably.

Exercise 48 . Translate into Ukrainian.

To be expressed in terms of money, to provide a future service, to pay in cash, accounts receivable, money owned by customers, accounts payable, to receive high investment interests, current tangible assets, to convert into cash, investment in stock, long-term assets, short-term loans, non-current liabilities, to operate profitably, high taxes, to sell personal real estate for the debts, the company’s equity, to calculate the net worth.

 

Exercise 49 . Match proper definitions to the following words: a stock (a share), stock-in-trade, a bond, goodwill, a trademark, a copyright, а loan, a patent

1. A document showing a fixed unit of a company's share capital that pro­vides a profit (dividend) related to the total profits of the company. Owners of this document also have voting rights. 2. An exclusive legal right, for a certain number of years, to print, publish, record, perform, sell an original text, work of art or design or part of it. 3. This term means such items as knowledge, contracts or reputation that can have a financial effect on a business and are measured in financial terms. 4. A document from a government or a company that states that money borrowed from an investor will be repaid. 5. A name or symbol that is used on the products of a particular company. 6. The goods or services that a business has for sale at a given time. 7. An official document that gives the holder the sole right to make, use or sell an invention and prevents others from copying it, usually for a fixed period. 8. Something lent, usually money, on condition it will be paid back after a definite period with interest.

Exercise 50. Match each sentence part on the left with its appropriate part on the right.

1. To be clear of debt	a) is usually calculated at the end of a fiscal year.
2. If current assets are less than cur­rent liabilities,	b) such as assets, liabilities and equi­ty are likely to be arranged verti­cally.
3. The money obtained from selling a company's current tangible assets	c) a stock, a plot (ділянка) of land, a building or a machine.
4. Although accounting appeared in the 16th century,	d) created the legal foundation pro­tecting the work of many indus­tries, for example music record­ing.
5. Both a person and a company can own such items of value as	e) the company should repay all its debts to investors.
6. In England the three major sec­tions of the balance sheet,	f) the management of financial     re­sources.
7. In order to operate the business successfully	g) it took much time to find satisfac­tory general methods of keeping fi­nance records.
8. Accountants are supposed to deal with	h) one should process accounting in­formation properly.
9. The amount of the owner's invest­ment interest	i) is unlikely to cover the company's debts.
10. The Copyright Act adopted by the US Congress in 1976	j) the stockholders can't expect any dividends.

 

Exercise 51 . Put each word into one of the sentences below: a stock (a share), stock-in-trade, a bond, goodwill, a trademark, a copyright, a loan, a patent.

1. The author of the original work may keep the ... or sell it to someone else. 2. Government... are usually considered to be a safe investment. 3. The total dividend per... was 10 pounds. 4. To protect his invention such as a new machine, a medicine or a pro­cess a scientist must obtain a ... . 5. This company is very proud of its reputation among the partners and cannot afford (дозволити собі) to lose its ... . 6. For the company to expand, its owners often ask banks for a ... and agree to pay interest after a definite period of time. 7. ... of the leading car producers such as Mercedes, Lincoln, BMW, Toy­ota, etc. are known all over the world. 8. The ... is shown as an asset on the balance sheet.

Exercise 52 . Choose the appropriate word from the variants given in brackets.

1. Knowing the company's (stocks / goodwill) value, creditors are ready to invest more money as they expect high (investment interest / salaries) at the end of the year. 2. Both farm equipment and farm buildings make up (short-term / long-term) (intangible / tangible) assets in agrobusiness. 3. (Accountants/Stockholders) prepare reports in financial (items/terms) describing the results of past resources allocation decisions. 4. Any company is responsible for paying salaries of (employers / employ­ees) and (wages / salaries) of workers belonging to company current (li­abilities/assets) regularly, usually monthly or weekly. 5. The amount of goods and services known as company (stock-in-trade / real estate) is available for sale at a given time and it is shown as an asset on the (accounts receivable / balance sheet). 6. (To calculate / To operate) properly the company's manager should rely on information obtained from public survey. 7. The greater is the difference between total assets and total liabilities, the greater is the company's (net loss / net worth) often known as the (equity / debt) for a corporation. 8. The fundamental accounting (equation / equilibrium) can be written in different forms, for example: assets - liabilities = equity. 9. The company's obligations are known to be classified as current and noncurrent ones, the former being also called (long-term / short-term) (liabilities / assets). 10. One should take into account that (accounts payable/goodwill) unlike the real estate belongs to intangible assets, but it can be sold like any other property.

Exercise 53 . Translate the sentences in brackets into English using Gerund.

1. The main task of a financial accountant is to concentrate his attention on ( правильному управлінні грошима компанії і підготовці звітів у відповідний час ). 2. Any owner of a business is interested in ( управлінні компанією ) as efficiently as possible. 3. An increase in stockholders' dividends greatly depends on ( зростання загальних доходів компанії ). 4. The company had to compensate for ( пошкодження товару ) due to ( неправильної упаковки ). 5. Although stockholders have the right to vote at the general meetings, they are not involved in ( щоденне управління компанією ). 6. The company manager and the board of directors are responsible for ( проведення загальної політики компанії ). 7. The high corporation equity was due to (скорочення виробничих витрат і правильного управління капітальними активами). 8. Programmers of many countries are still thinking of (покращення комп’ютерних програм для обробки бухгалтерської інформації). 9. Both the bank and the company gained from ( підписання угод про позику ). 10. The company being unable to pay its debts to the creditors, it was use­less to protest against ( продажі нерухомості компанії ).

 

Exercise 54 . Translate into English.

1. Виробництво може бути рентабельним, якщо, як матеріальні так і нематеріальні активи знаходяться в правильному співвідношенні. 2. До довгострокових нематеріальних активів належать такі речі як земля, нерухомість і обладнання, так як вони беруть участь у процесі виробництва протягом тривалого часу.   3. Можна використовувати поточні матеріальні активи, наприклад рахунки дебіторів, як засіб платежу. 4. Як відомо, «гудвіл» належить до нематеріальних активів компанії, проте репутація компанії може значно підвищити її доходи. 5. Вивчення поточних і довгострокових пасивів компанії є дуже важливим при проведенні аналізу діяльності компанії. 6. Різниця між активами і пасивами – це чиста вартість компанії, яка для корпорації може бути представлена у вигляді акцій.

Exercise 55 . Answer the questions.

1. What does the term “asset” mean? 2. How can the company’s assets be classified? 3. How can “goodwill” increase the company’s profits? 4. What liabilities does the company usually have? How are they classified? 5. How is the net worth calculated? 6. What accounts should be kept by the company?

 

Exercise 56. Learn the following words and word combinations.

equation	– рівняння
accounting equation	– балансове рівняння, збалансованість
get to grips	– почати займатись / мати справу з
refinement	– удосконалення, витонченість
tax collector	– збирач податків, податковий інспектор
stagger	– приголомшувати, шокувати
keep a record	– вести реєстр / облік
common sense	– здоровий сенс
in some respects	– у деяких відношеннях
contents	– зміст, вміст
by virtue	– завдяки чомусь
a claim	– право, претензія, домагання
equal	– рівнятися, прирівнюватись, доходити
amount	– складати, бути рівним
succinct	– короткий, стислий
restate	– знову заявити

Exercise 57. Read, translate and answer the questions.

1. Was progress in accountancy quick or slow in the past?

2. What does a balance sheet represent?

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