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Flow of Information through Accounting System

ВИДИ ГОСПОДАРСЬКИХ ОПЕРАЦІЙ

TOPIC: TRANSACTION.

TYPES OF TRANSACTIONS

Task 1: Read the text and say the most important items.

Flow of Information through Accounting System

Day-to-day events make up the history of every business. For example, goods and services are purchased and sold, credit is extended to customers, debts are incurred, and cash is receives and paid out. These are typical business transactions.

A transaction is a business event which can be expressed in money and must be recorded in the accounting records. Some more common examples of transactions are: the payment or collection of cash, a purchase or sale on credit, and the withdrawal of assets by the owner of a business. Note that a transaction has an accounting value and has an influence on the financial statement. Events such as an opening of a competing business or the retirement of an employee, although can be important to the business, are not entered in the accounts and are not considered to be transactions.

Business transactions are evidenced by business documents such as a cheque, a sales ticket, or a cash register tape. These business documents (or original papers) are the starting point for the flow of accounting information through the accounting system into the financial statements. Although transactions could be entered directly in ledger accounts, it is much more convenient and efficient in a manual accounting system to record the information shown on business documents first in a journal and late to transfer the debits and credits to ledger accounts.

The recording process may be performed in many ways: that is, by writing with a pen or pencil or by printing with mechanical or electronic equipment.

To create accounting information is a form which will be useful to the many people who use this information, three major steps are performed. First, accountants record business events as they occur; second, accountants classify these events into groups so that the mass of detailed information will be in compact useable form; and third, accountants summarize the classified information into financial reports or financial statements. These financial statements are concise;perhaps, only two or three pages for a large business. They summarize the business transactions of a specific time period such as a month or a year. Financial statements show the financial position of the business at the time of the report, and the operating results by which it arrived at this position.

Three steps described – recording, classifying, and summarizing – are the means of creating accounting information.

Task 2: Read the text and do the tasks below.

The study of accounting begins with the understanding of the way in which accountants see the business enterprise. Accountants frequently refer to a business organisation as an accounting entity or a business entity. A business entity is any business organisation such as a hardware store or grocery store that exists as an economic unit. As an economic unit, the business enterprise acquires, organizes and transforms factors of production in its activity of producing goods and services. This activity may be presented as the following.

The accounting interpretation is an abstraction of the reality potrayed above. The business enterprise is viewed as a system of monetary flow, instead of a system of physical flows. In accounting, business activities are associated with transactions and, indeed, are limited to transactions. Thus, unless there is no transaction there is no observable business activity.

A transaction occurs whenever the firm enters into a legal contract for the acquisition of means of production or the sale of goods and services. Business activities which do not lead to transactions remain unrecognized in accounting. Transactions involving the acquisition of factors of production lead either to an outflow of money immediately or an obligation to pay money at a later date. Transaction by which the firm sells goods and services lead to an inflow of money or the right to receive money at a future date. The accounting interpretation of business activity leads to further analysis of these transactions.

First, transactions between the firm and its markets – both its supply markets and its selling markets – are defined as “ external transactions ”.

Second, transactions within the firm, consisting of the exchanges which occur between the various departments are defined as “ internal transactions ”.

“External Transactions” and Financial Accounting

Transactions between the firm and its markets – both its supply markets and its selling markets – are defined as “ external transactions ”. The totality of “external transactions” forms the subject matter of financial accounting. Generalpurposeof financial statements (reports) is to provide most of the information needed by external users of financial accounting. These financial statements are formal reports providing information on a business entity’s financial position (solvency), cash inflows and outflows, and the results of operations (profitability). Financial accounting information is historical in nature, reporting on what has happened in the past. Hence, the external users rely on relevant and reliable financial statements to make present decisions about future events.

“Internal Transactions” and Managerial Accounting

Transactions within the firm, consisting of the exchanges which occur between the various departments are defined as “ internal transactions ”. The totality of “internal transactions” forms the subject matter of cost or managerial accounting. Managerial accounting information provides special information for the managers of a business entity. The kind of information for the managers may range from very broad, long-range planning data to detailed explanation of why actual costs varied from costs estimates. The purpose of managerial accounting is to generate information that a manager can use to make sound internal decisions.

Vocabulary

business enterprise – ділове підприємство, торговельно-промислове підприємство
to refer to - стосуватися, посилатися на (to)
an accounting entity - об'єкт обліку
business entity – одиниця господарювання; суб'єкт господарювання
hardware store - магазин металевих виробів
grocery store - бакалея
to acquire - набувати, здобувати
inputs - виробничі фактори; фактори виробництва; задіювані ресурси
output - продукція, продукт вироблення; випуск
observable - помітний, видимий
to occur – відбуватися
acquisition – надбання, придбання
means of production - засоби виробництва
Business activities - господарська діяльність; підприємницька діяльність
unrecognized – невизнаний
to receive money - отримувати гроші
external - зовнішній
internal – внутрішній
subject matter – предмет обговорення, тема
solvency – платоспроможність
profitability –прибутковість, рентабельність
hence – 1) звідси 2) відтепер 3) отже
relevant - доречний; що стосується справи (to)
range - коливатися
actual costs – фактичні витрати
actual cost – фактична собівартість
costs estimate – кошторис витрат

Task 3: Answer the questions.

1. What does the study of accounting begin with?

2. What is a business entity?

3. What way may the activity of an organization be presented in?

4. What is business activity associated with in accounting?

5. When does a transaction occur?

6. What business activities are recognized in accounting?

7. What transactions lead to an outflow of money? to an inflow of money?

8. How can transactions be classified?

9. What is financial accounting?

10. What is managerial accounting?

Task 4: Insert the prepositions and translate the sentences into Ukrainian.

within

into

for

1. Accountants frequently refer ….. a business organization as an accounting entity.

2. Business activity are limited ….. transactions.

3. First of all the firm must enter ….. a legal contract ….. the acquisition of means of production.

4. It means an obligation to pay money ….. a later date.

5. Transactions ….. the firm occur between various departments.

6. The input factors are transferred ….. goods and services.

7. Transactions lead ….. an outflow of money.

8. Accountants provide most of the information needed ….. external users of financial accounting.

9. Financial statements are formal reports providing information ….. a business’ financial position.

10. The external users rely ….. relevant and reliable financial statements.

11. They provide detailed explanations ….. why actual costs carried ….. cost estimated.

12. Managers are interested ….. different kind of information.

Task 5: Work with synonyms. Match the synonyms from two columns.

1.	accountant	a.	costs
2.	expenses	b.	revenue
3.	wages	c.	bookkeeper
4.	to buy	d.	to demand
5.	income	e.	often
6.	purpose	f.	accounting entity
7.	P&L	g.	salary
8.	to require	h.	to employ
9.	business entity	i.	obligations
10.	liabilities	j.	information
11.	frequently	k.	to purchase
12.	data	l.	to provide with
13.	to hire	m.	aim
14.	to supply	n.	income statement

Task 6: Form, write down and translate into Ukrainian complete sentences by combining the parts from the column A, B, C.

1a	A transaction occurs	1b	The input factors	1c	Some business firms have developed
2a	business activities	2b	Accountants frequently refer to	2c	include land, buildings, equipment,
3a	material, labour	3b	whenever the firm	3c	are associated with transactions
4a	codes of ethics	4b	for their employees to follow	4c	enters into a legal contract
5a	as an accounting entity	5b	In accounting	5c	a business organization

1. _____________________________________________________________

2. _____________________________________________________________

3. _____________________________________________________________

4. _____________________________________________________________

5. _____________________________________________________________

Task 7: More synonyms. Match the synonyms from two columns.

1.	responsible	a.	expenditures
2.	expenses	b.	income
3.	public	c.	in charge of
4.	to buy	d.	to demand
5.	earnings	e.	obtain
6.	purpose	f.	impact
7.	P&L	g.	state-owned
8.	to require	h.	aim
9.	acquire	i.	obligations
10.	liabilities	j.	enterprise
11.	influence	k.	to purchase
12.	business entity	l.	income statement
13.	entry	m.	under no circumstances
14.	by no means	n.	transaction

Task 8: Comment on the following.

A) B)

Sentences in task 6: