Ox english for accounting

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0 / W-wa u l Sw Fra nc i s zka S aleze ci o 6OXFORD

UNTVERSTTY PRESS

~~j/oi:z tel.(022)8397908

-www a dva n tls ol

O XF ORD

UNIVERS I TY PRESS

Great C l are nd o n S tr eet, O xford oxz

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OXFORD a d OXFO R D ENGL I SH are

Oxfor d U ni vers i ty P ress in th e UK a

© Oxfor d U n ive r i ty Pre ss 2007

Adapte d fro m English for Accounting

© Corne l se n Ve rl ag G mBH & Co O

Th e m ora l rig h ts of th e author s h

Data b ase r i g ht Oxfo rd Univ er si ty P

express l y pe rmi tte d by J aw, o r und e

reprograp h ics r i g ht s o r ga ni zat ion

outside the sco p e of the ab ov e s h u l

ELT Rig h ts Departme n t, O xfo rd U n

Yo u m u st n t ci r c ul ate thi s boo k i n

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their addresses are p rovi d d b y O

Photographycourtesy of istock p h oto

Cover images courtesy of P nch s to c k

D i g i tal V i s i o n; t o p J e ft {B r an d X Pi

M•A MultiROM

English for Accounting i

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and commun i cation th

Listening extracts Th

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that you can print out a .

If you have any prob l e ,

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PAGE UNITTITLE TOPICS

5 Introduction to Jobs in accounting Meeting people

CPA & Chartered Accountant

Profit and Loss Statement Saying numbers in English

Financial

statements BalanceSheet Saying formulas/equations

and ratios Explaining accounts Making comparison

Ratio analysis

22 Taxaccounting Tax systems Clarifying information

Taxation planning

Role of auditors Telephone phrases

42 Investment Cross-border investments Presentation phrasesDifferent accounting practices Organizing a presentation

lntercultural issues Globalization and the role of accountants

PAGE APPENDIX

48 Test yourself!

50 Partner Files Partner A

52 Partner Files Partner B

About the book

English for Accounting has been specifical in accounting and finance who need English situations

English for Accounting consists of six unit area of accounting Every unit begins with a

short exercise, brainstorming, or a quiz Th

and authentic documents along with a vari

information gap exercises in the form of role

opportunity to practise the target language

situations

the topic of the unit and provides opportuni

accounting and general working life in Engl

have finished this course, you have the opp

the vocabulary from the units with the cros

you can refer to check your answers There

terms and Transcripts of all the listening e

The MultiROM contains all the Listening e

be played through the audio player on your

doing extra activities on your computer; this

you are using the book for self-study As w

and vocabulary there is also an A-Z wordli

space for you to write the translations of the

ly developed for people working

to communicate in a variety oftners In this short course, you

as well as ways to achieve yourtelephone, or when making

s, each dealing with a different

Starter which consists of a

is is followed by dialogues, texts, ety of exercises that enable you tosions in context There are alsoback of the book These provide

with a partner in realistic

ctivity, which is connected withties for discussion Throughout

at give extra information aboutish-speaking countries When youortunity to test your knowledge of

xtracts

xtracts from the book These cancomputer, or through a

urself extra listening practice, listen

et you review your learning bywill be particularly valuable if

udes a column of phonetics and awords in your own language

I s

Introductionto accounting

-

STARTER Make a list of all the different types of job you know about in ac c ounting.

a c c o u n t a n t

, - - - -

bookkeeper

6 I UNIT 1 Introduction to accounting

2 have Did you a flight nice?

3 coffee Would some you like?

4 keep Sorry you to waiting

6 call finishing He's just phone a

7 to nice you meet It's

Now fill in the gaps with a suitable word from the box.

bad • absolutely • very • know • start • fill • fairly

1 You're right

2 Would you like to -~ - by telling me a little about your experience?

3 I guess you that I studied economics in New York

4 And then I'll you in on our group

5 Your C.V is impressive

6 But that's not a thing

7 We're international here now

Listen again to the meeting and check your answers.

5 Make two lists In the first, write down topics which would be safe to talk about with a foreign business partner In the second, write down unsafe topics Compare with a partner.

Saf

e top ics

Unsafe to

\

pics

UNIT 1 I ntrodu c t i on to acc ount i ng I i

in the box before you go to the Partner Files

P a n er A p a ge 5 0

IPJ;ii:1#;1#11% Partner B page 52

USEFUL PHRASES Meeting people

Hello, Mr/Ms I'm It's nice to meet you.

- (It's) Nice to meet you, too May I introduce y u to ? I'd like to introd ce you to .

Have you met ?

Offering hospitality

Can I take your coat?

take a seat Can I get

y u a cup of coffee/tea? Would you like something to drink?

- Yes, please / Yes, that wo ld be great.

- No, thank you I No, thanks.

tions between countries vary significantly A ccountants worldwide are familiar with th e words 'Generally Accepted Accounting Principles (GAAP)' Some of the basic principles are:

• the going concern principle

• the 12_rudence principle

• the matching principle

• the consistency principle

The development of these principles has greatly diff e red between countries For example, in most English-speaking countries it is often a c epted practice to offset unrealized gains

I

from unrealized losses , or to

re-value long term assets upwards,

provided sufficient proof of

the current value can be

shown This means that

accounts can have very

different values , depending on

whether the company chooses

to follow local accounting

standards , Inter• national

Financial Reporting Standards

(IFRS)

- formerly the

International Accounting

Standards (IAS)- or U.S

GAAP.Whether the company can choose is governed by the laws of the country where it is registered For example, the U S.A and Japan currently allow publicly• traded companies to prepare their financial statements using the standards of the Inter• national Accounting Standards Committee (IASC), but they must also include a reconciliation to dome s tic GAAP.

B I UNIT 1

Introduction to

accounting

the definitions below.

publicly-traded

company • practice • standards • parties • countries

2 For example, Australia, the U.K., and the U.S.A

4 The rules and regulations which state how accountants operate in a

definitions below.

Then check your answers in the glossary (page 58).

a

This principle is concerned with the timing of the recognition of transactions

a

n

Accounts should be produced using the same principles from one year to the next Deviations from

between countries?

What should a visitingaccountant know about the

principles in your country? Make notes, and prepare to

brief someone else in the class.

UNIT 1 Introduction to a ccounting I 9

Subject: Creative accounting

From: Rupert Greene <r.greene@inte p de >

To: Javier Estrada < j.estrada@intep.es >

Hi Javier

At our meeting yesterday you asked me to send you some

background info on creative accounting, and in particular off

-balance-sheet accounting.

Basically there's quite a bit of fle x ibility in the way we can interpret

the standards and pr i nciples of accounting For example , we may want

to report bigger profits so that we can attract investors on the capital

markets On the other hand , smaller profits may be better so that we

pay less tax The problem is that the line between truthful and

misleading representation of figures is somet i mes very thin, and this

is where people get into trouble.

Off-balance-sheet accounting is seen by some as one type of creati v e

accounting (People have been arguing about it for years, though!) The

key point to remem b er is that the accounting treatment of legitimate

business transactions c an vary greatly For example , many companies

are involved in leasing for business reasons , and the quest i on fo r the

accountants i s how to present the financial i mplications of such

leases i n the accounts In theory, the i dea i s that leasing an asset

(instead of buying i t ) allows the company to e x clude the liabil i ty from

i ts accounts

Hope this helps - give me a call i f you have

any mo r e quest i ons Best w i shes

Rupert

2 Off-balance - sheet accounting is one way of creative accounting- there are others

3 Creative accounting is sometimes used to try and attract more investors

LO I UNIT1 Introduction to accounting

their company has a debt problem?

3 Why do they need a solution to the problem soon?

4 How does Charles suggest they deal with it?

C harles The shareholders are getting nervous, and the markets don't like ourlevel of

about whether we can s our ct

2 , in the l _

t 3

to you about what we

need to c

S all y You'rethinking that if we l the a

6, we can exclude these l 7 from the

C ha r l e s Exactly

S ll y You know that the auditors will look very closely at these

that finance leases must be

ct 9 If we are effectively the owner of these assets, then we're not

going to have a c 10

Now listen again and check your answers.

14 Match these words with

complete the sentences below.

and

on the balance sheet

if you want to know

doing

3 Many developing

countries are burdened by heavy_

4 We need to look at the long-term

before we think about any major

6 Current are those which are paid off within a year

L2 I UNIT 1 I ntroduction to accounting

other ways to agree or disagree with someone Put a tick (v) next to the

next to those which mean disagreement.

1 You've got a point there O 5 It's just not on O

2 I see what you mean 0 6 Fair enough 0

3 Me neither O 7 Point taken O

Note that more than one answer is possible.

company now works

35-hour weeks, and look at us!' ' _

2 'Can you come in next weekend?' 'What again? _

on the slides.' ' _

department party?

There's no other way.' ' _

Ah, _

' _

_

disagree and continue the discussion with a partner.

UNIT 1 Introduction to accounting 13

OUTP

CPA

The body which represents the interests of accountants in

meet the requirements of the state where he/she wishes to

administered by the state boards of accountancy.

To qualify for certification, the applicant must:

1 study accountancy at a college or university

2 pass the CPA examination, which consists of four sections:

• Business Law and Professional Responsibilities

• Auditing

for-Profit Organi zations

~ -

3 have professional work experience in

England and Wales (ICAEW).

To become a CharteredAccountant, the applicant must:

1 have sufficient school or university education

recognized company, which will give him/her three years' work experience

3 pass the ICAEW's exams on:

• Business Environment

• Business Life Cycle

• Advanced Case Study

- - ·

(

#

OVER TO YOU

How does the process of becoming an accountant in your country compare to those described above?

What standards are used to prepare financial information? How is balance-sheet accounting treated in your country? How is leasing reported in accounts?

F l o w s ,

S t

o f

E a r n i n g s

Management Accounts, Investments, Statement of Shareholders '

Equity

The man in the picture is

thinking about different types

of financial statements Which

ones are you familiar with?

Can you explain what they are

used for?

Statement of Financial

.

Market apitalization , scounted Cash Flows

Position , No t es, Annual Report , Budget

atement atement

C Di

In the U.K one would be called a Balance Sheet, and the other a Profit and Loss Statement.

In the U.S they have other names Which is which?

Statement of Financial Position

At December 31 (In millions)

Assets

Cash and equ i valents

I nvestment secur i ties

Liabilities and equity

Short - term borrowings

Accounts payable

Progress collections

Div i dends payable

All other current costs and expenses accrued

UNIT2 Fin a ci al state m e nts a nd

Less common stock held in treasury

T tal shar e o wners equity

Total liab i liti e s a n d equity

Statement of Earnings

For the years ended December 31

( In mi lli ons; per share amounts i n

,

8 3 4 2

9 ,

77

2 (1

2 ,

92 7) 3

0 ,

3 2 0

$

351 , 3 34

2005 2004

$ 7 , 847 $

7 , 387

4 , 267

5 , 925 1,434 1,228

84 , 548

81 , 540 Costs and

expenses Cost

of goods sold

Cost of

services sold

Inte r est and financial charges

Insurance losses and policyholder and annuity

benefits

Provision for losses on financing receivables

Other costs and expen ses

P r ovision for i ncome taxes Earnings before accounting changes

Cumulative effect of accounting changes

Net earnings

Per-share am o unts

Pe r- share amounts before accounting changes

Diluted earnings per

share

Basic earn i ngs per

share

Per - sha r e amounts after accounting changes

D i luted earn i ngs per

2 Match the words with their partners, and then look at the statements again to check.

a An asset which does not have a physical nature (such as a trademark or a patent).

nevertheless consolidated.

c T e total legal obligations of a company to pay other parties.

d The ordinary shares held by the owners, who therefore are the last to receive their money back in the event of liquidation.

e Amounts that will be collected in the normal course of business within one year.

f Profit which is not paid out to shareholders in the form of dividends, but instead is kept by the company to reinvest or pay off debts.

company (e.g currency translation adjustments).

DID YOU KNOW?

-·

Can you think of any others?

inventory leverage

1 consolidated

t~t liabilities

~

-~ -UNIT 2 Financial statements and ratios I 1i

(Sometimes more than one way is possible.)

23.59 a twenty-three comma fifty-six 1~99 a nineteen

-~·.::~

;, 200.3 ·\, a two thousand three

b ten thousand one b two double

£63.30 a sixty-three pound and thirty pence

b sixty-three pounds and thirty pence

three hundred and twenty-four c five million, four hundred thousand, three hundred and forty-two

d five billion, four hundred thousand, three hundred and twenty-four

€45,638 · a forty - five thousand, si x hundred and thirty-eight euro

-· Saying numbers in English

Notice how we use the decimal point in English:

po i nt oh four z ero point double

oh seven fifty-si x point three four five [NB: single numbers after the decimal!]

-·~· -1

Here commas - and not decimal points

- are used:

12,076 twelve thousand and

seventy-si x

, 2,534 , 210 two m il lion, five hundred

and thirty-four thousand, two hund r ed a nd ten

Sums of money:

€3.67 three euros si x ty-seven

OR

three euro sixty -

seven

$5 m five million dollars

Note the following:

1 , 000 , 000 one million

1 , 000,000 , 000 one billio n

Note how we say years:

198 7 nineteen eighty-seven

2 003 two thousand and three

2030 two thousand and thirty (or twenty thirty)

your Partner File to make a phone call.

l:l;!;ii:l#;lil!f

PartParn er A nr B page page 525

18 UNIT 2 Financial statements and ratios

statements Look again at the

Statement of Earnings on page 15 and find the figures for the items below Which sentences (a-h)

can be used to describe and compare the figures?

2 Interest and financial charges

3 Basic earnings per share (2005 and

7 Other costs and expenses

8 Sales of services

a It's better

than last year.

c There's quite a drop from

I

d It's not as low as two years ago.

b It's gone down since last year

I

f A-lo _ t_ e.m_t~_oh-, _ r ·s_y )e_ar._ e ~lightly

more t~i~ year )

-g It's virtually the same.

c Debt/Asset

Ratio

ax b = c a times (or multiplied by) b equals c

by (or over) c c

total assets total assets divided by total total liabilities liabilities

gross profit margin • earnings per share • return on

equity • average interest rate • debt/equity ratio •

inventory turnover • price/earnings ratio

1 interest expenses 5 revenue - cost of goods soldliabilities - accounts payable

preferred stock average shares

revenue

6 cost of goods sold average inventory

b Determines the average interest rate at which a company borrows funds.

c Comparesthe current market price with earnings to calculate if a stock is over or under valued

e Shows the turnover of inventory, and can be compared against sales figures, to

stringent test is to use just the long-term debt

9 Use wor d s from the descr i ptions above to complete the table The first one is done for you.

the missing words?

questions • just • that • got • over • ask

some of the ratios I used in the report

6 OK, if there are no , I'd like to

A I O

~ Now liste n to c h e k your a n s w ers.

8

your p a rtner w hether you h ave enough informa ti on to calculate the working capital and

inventory turnover ra tios If you need more details, write an email to y our contact in the

company and request the informa ti o n y o u nee d.

UNI T 2 Financia l st a teme n ts and rat i os I 2j

:~ ~ ,,- .-i~ ~ R'\·"'

-~ -· -· ~ ~ "."""

Managing Dit~ctor:This is e ' 16 the

problem There.are ~ariV;ays

and' auditors have tot '\.) •

'way.th~t n~~bers a~e repcirte.cl

• ' Layman: lsit alt reaqi,:that hard? Carff we just look ~ t the profit or loss of

the):owpa~ytof '/'I •, o~~_.·/ · 12lio~ ifsdci"i;fiidon't

~·~ -~"".;'.>,f"'=":-'' _·:? -· :; ~ :-:/i( _ " ,· - " : :'.\ 1l _,,:;

see alt tne f ,; , ·• 1 ~: Accountants are there to tell us aboi.Jfthe

• ~um b~ ;;'~, rid' ttfou bt that's:·what th'ifdo They are t ec· •

repo~ th_ese n ~'1J b;rs;~nd it c~ ;tb~ ~fi~t hard to C-' · - ·

, ·~ -~

-7

W h ic h com ments do y ou ag r e e w i t h? How would you respond to the people

OVER TO YOU

.;•, _ < · , ~·:r'' '

the taxation system in your country?

A IO

~ 1 A manager has asked his accountant to e plain depreciation Listen and

1 0

3 What are the five methods of depreciation the accountant mentions?

a s

b d b

c s - of-the-y -d d u of p

e h of u

J

I i

DI D YOU K NOW ?

· - In the U.S and Britain accounting methods for

This means that there can be large differences between the profit

depreciation she mentioned in exercise1?

subtracting the salvage value from the acquisition cost, and then dividing the difference by the

useful life of the asset

calculated

by first subtracting the salvage value from the acquisition cost

The difference is multiplied by a

fractional amount, where the

denominator and numerator are

based on the addition

of the figures in the asset's useful life

'accelerated' by

this method, so that the expense isgreater in the first years The salvage value is ignored in the calculation, but the asset will

value

sset is ciation

asset isciation

4 :The expected usage of the a taken into account

in determining the rate

of depre

taken into account in determining the rate of depre

3 :repare a shortpresentation on depreciation methods First

read the questions below and t own youranswers.Then organize yournotes and give yourpresentation

no e

• What depreciation method does your company/client use on its assets?

• Why has your company/client chosen that method?

• What are the alternatives in your country for depreciating assets?

a How does the accountant calculate the profit before tax figure?

b Why is the taxation amount only an estimate?

c Do they file the interim tax return?

Now listen again and complete the CEO'snotes

I

Taxation ex ense is calculated b subtractin

2

1 from Thie e_ives us an estimate, which we use to

3 4

tax and the

Kathy Javier Kathy Javier

Kathy

Javier Kathy Javier

y, all this English We didn't do any of this on

my course Can I help?

Well, maybe you could 1 a couple of things Let's see Ah, here we are Provision for income taxes What does that 2?

pay with later

So provision for income taxes is talking about the current year's tax expense which will have to be paid in the future

Like provisional?

Not 3 Provis i onal just means

temporary, you know, not final Like a provisional budget

It's not the final version

I see And what about deferred income tax balances What does deferred

plan is to re-invest the profits

information Each of you should explain a standard procedure from your

workplace, and the other asks questions about it Then

swap partners and explain the procedure you have just heard to another

In my office the procedure for claiming travel expeneee ie The way private people pay income tax in my country le normally to

What do these figures mean again?

Can we just go over that

one more time? Could

you repeat

t hat, please?

l