7 •

Accounting
Tolearn about: types of accounting; financial statements; key vocabulary
of financial statements and accounting
Tolearn how to: say figures in English; talk about financial statements
Topractise: presenting financial results

Ahold pays $l.lbn Accounting scandal: Apple BP accused of

to settle accounting may have to restate profits 'world -class
scandal accounting scandal

EMI shares
Parmalat goes dive after WorldCom: yet
bankrupt after accounting another American
accounting scandal scandal auditing scandal
Lead in
• What is accounting? Why is it necessary for companies and organizations?
• Is there is one way of doing a business's accounts, or lots of different possible ways?
• What is auditing and why is it necessary?

Vocabulary 1
You are going to listen to Eric Sharp, a financial director, talking about accounting. Before you
listen, check your understanding of the words and phrases in the box by matching them with
their definitions (1-10).

assets cost accounting mcome tax accounting financial accounting

expenditure liabilities bookkeeping management accounting auditing

1 anything owned by a company - cash, buildings, machines, etc.

2 calculating how much tax an individual or a company should pay - or trying to reduce
this figure
3 checking and evaluating financial records
4 determining the unit cost of a manufactured product, including indirect costs
5 keeping financial records and preparing financial statements
6 money that a company will have to pay to someone else - bills, debts, interest, taxes,
etc.
7 recording transactions (purchases and sales] in ledgers
8 the money that a company receives from supplying goods or services
9 the money that a company spends
10 the use of a company's accounting data by its managers for planning and control

36 "( Accounting
Listening 1: Types of accounting
1 Listen to Eric Sharp talking about the different branches of the accounting
profession. What t~ree roles or areas of work does he mention?

2 Now listen again and match the two parts of the sentences below.

1 Bookkeepers
2 Management accountants
3 Senior accountants at financial controller and director level
4 Internal auditing
5 External auditors

a is about making sure that the management has sufficient control over what is going on
in the company.
b do the boring work - recording transactions in purchase ledgers and sales ledgers.
c have to verify that a company's published financial statements give a true and fairview
of its profit, its assets and its liabilities.
d interpret the transactions recorded by bookkeepers.
e use accounting data to make decisions about how the business should proceed.

3 Which branches of accounting defined in Vocabulary 1 are not mentioned by Eric Sharp?
Would you be interested in working in these areas of accounting?

Listening 2: Financial statements

Listen to Eric Sharp talking about financial statements, and complete the text. 7.2
Eric Sharp: There are three or four different statements that companies include in their
Annual Reports, which (1) can legally expect to see. The key documents are
the profit and loss account, the balance sheet, and a funds flow statement of some kind. In
the USA,and under International Financial Reporting Standards, the profit and loss account
is called an income statement. This document is fairly self-explanatory: it's (2) _
___________ . The balance sheet is a statement showing what the company
has, and (3) at the end of the year, while the funds
flow statement attempts to show whether the company is (4) _
_____ cash. The tax authorities require more detail than is given in these documents;
(5) is not the same as accounting profit, so they will expect to see
reconciliations between the two.

Vocabulary 2
1 Investors and many people working in finance need to understand the basic terms in
financial statements. Decide which of the alternatives (a-c) each definition describes.

1 A charge for arranging a transaction (e.g. buying or selling securities)

a commission b fee c tax
2 A charge for a service performed by a bank
a commission b fee c tax
3 Payments for an insurance policy
a commissions b premiums c tariffs
4 A reduction in the value of an asset, charged against profits
a amortization b loss c waste

Unit 7 Accounting 37
 5 Adjective meaning after all deductions have been made
a gross b net c zero
6 tAdjective meaning for a whole group of companies
a consolidated b corporate c mutual
7 Adjective meaning one year or less in financial statements
a annual b long-term c short-term
8 Part-ownership (less than 50%) of other companies
a conglomeration b liabilities c minority interests
_9 Things of value that cannot be physically touched, such as reputation (goodwill], brand
names and trademarks
a intangible assets b liabilities c tangible assets
10 The net worth of a company - the amount by which assets exceed liabilities
a dividends b profit c shareholders' equity

2 Now look at the income statement from Barclays Bank, and complete it using answers
from Vocabulary 1. Some words can be used more than once.

Barclays PLC
(1) income statement - IFRS
For the year ended 31st December
2005 2004
£m £m

Continuing operations
Interest income 17,232 13,880
Interest expense (9,157) (7,047)
Net interest income 8,075 6,833
Fee and commission income 6,430 5,509
Fee and commission expense (725) (662)
Net (2) and (3) income 5,705 4,847
Net trading income 2,321 1,487
Net investment income 858 1,027
Principal transactions 3,179 2,514
Net (4) from insurance contracts 872 1,042
Other income 147 131
Total income 17,978 15,367
Net claims and benefits paid on insurance contracts (645) (1,259)
Total income (5) of insurance claims 17,333 14,108
Impairment charge and other credit provisions (1,571 ) (1,093)
Net income 15,762 13,015
Operating expenses excluding amortisation of (6) (7) _ (10,448) (8,514)
Amortisation of (8) (9) (79) (22)
Operating expenses (10,527) (8,536)
Share of post-tax results of associates and joint ventures 45 56
Profit on disposal of associates and joint ventures 45
Profit before tax 5,280 4,580
(10) (1,439) (1,279)
Net profit for the year 3,841 3,301

IFR5 = International Financial Reporting 5tandards

Talking about figures 1
In British English, and is used after hundred when saying figures; in American
English it is not.
Example: 1,234,567,890
(British English) one billion, two hundred and thirty-four million, five hundred and sixty-
seven thousand, eight hundred and ninety
(American English) one billion, two hundred thirty-four million, five hundred sixty-seven
thousand, eight hundred ninety
Barclays' consolidated statements are expressed in millions of pounds sterling; to get
the total figure you need to add six zeros. For example, their operating expenses were
£10,527,000,000: ten billion, five hundred (and) twenty-seven million pounds. These
large figures can also be said as decimals: ten point five two seven billion pounds.
See Unit 9 for more on saying decimal numbers.

1 Work in pairs and take turns to test your partner. One person finds one of the following
figures from the income statement, and reads it out. The other person says which figure
(1-6) it is. Use a calculator if you need to.

1 the largest figure

2 the largest negative figure (in brackets)
3 total income over the two years
4 total net profit over the two years
5 total tax paid over the two years
6 the increase in operating expenses since the previous year

2 Work in pairs. Ask your partner how much time, in hours or minutes, they think they
spend in an average week doing the following things:

1 working
2 working in English
3 using a computer
4 eating
5 sleeping
6 watching television
7 waiting at red traffic lights.

Calculate how many seconds they spend on each activity per year. Read out the figures
while your partner writes them down, and then check that you both have the same
figures.

Umt 7 Accounting 39