Finance
Financial English and Investment terms------------------------------------------>http://www.investorwords.com/
Vocabulary
Match up the terms on the left with the definitions on the right.
1. bookkeeping | calculating an individual's or a company's liability for tax |
2. accounting | writing down the details of transactions (debits and credits) |
3. managerial accounting | keeping financial records, recording income and expenditure, valuing assets and liabilities, and so on. |
4. cost accounting | preparing budgets and other financial reports necessary for management. |
5. tax accounting | inspection and evaluation of accounts by a second set of accountants. |
6. auditing | using all available accounting procedures and tricks to disguise the true financial position of a company. |
7 'creative accounting' | working out the unit costs of products, including materials, labour and all other expenses. |
Accounting Principles
1. The separate-entity or accounting entity assumption
2. The continuity or going-concern assumption
3. The unit-of-measure assumption
4.The time-period or accounting period assumption
5. The historical cost principle
6. The revenue or realization principle
a. All transactions and other items to be accounted for must be in a single, supposedly stable
monetary unit.
b. An enterprise is an accounting unit separate from its owners, creditors, etc.
c. Financial data must be reported for particular (short) periods, which makes accrual and deferral necessary.
d. Revenue is realized at the moment when goods are sold (or change hands) or when services are rendered.
e. The business will continue indefinitely into the future.
f. The initial price paid for the acquisition of assets is the one that is recorded in accounts.
Which principles do these sentences refer to?
1. This accords with a company's legal status as an artificial person.
2. This implies that the current market value of fixed assets is irrelevant, as they are not for sale.
3. This makes it unnecessary to estimate current market values every year.
4. This means that each company has its own financial year (US: fiscal year).
5. This requires multinational companies to convert their consolidated statements into a single currency.
6. This is why balance sheets often contain an entry for debtors: goods that have been sold, but are not yet paid for.
Match up these five accounting principles with the definitions below:
1. The matching principle
2. The objectivity principle
3. The consistency principle
4. The full-disclosure principle
5. The principle of conservatism (or prudence)
a. All data recorded should be verifiable and free from bias.
b. Financial reporting must include all significant information.
c. The revenues generated in an accounting period are identified with related costs whenever they were incurred.
d. The same methods (of inventory valuation, depreciation, etc.) must be used from one period to the next.
e. Where alternative accounting methods are possible, one understates rather than overstates profits.
Which principles do these sentences refer to?
1. This is the contrary of recording "below-the-line" items.
2. This is one of the justifications for historical cost accounting, which requires no subjective assessments of replacement values.
3. This leads to the accrual (accumulation) and deferral (postponement) of costs.
4. This means that insignificant trivial expenses, like each pencil or typewriter ribbon, need not be accounted for separately, but are exempted by the principle of materiality.
5. This prevents companies selecting methods according to the inflation rate, etc.
There are various possible ways of recording debits and credits, valuing assets and liabilities, calculating profits and losses, etc. But there are about a dozen generally accepted “accounting principles” that accountants must follow in order to present "a true and fair view" of a company's finances.Match up these six accounting principles with the definitions below: