Eniglish for finance and accounting

UNIT EIGHT ACCOUNTING

- accounting

- transactions

- ledger

- tax accounting

- managerial accounting

- AICPA

- double-entry

- bookkeeping

The Field of Accounting

Accountancy or accounting is the system of recording, verifying, and reporting of the value of assets, liabilities, income, and expenses in the books of account (ledger) to which debit and credit entries (recognizing transactions) are chronologically posted to record changes in value. Such financial information is primarily used by lenders, managers, investors and tax authorities and other decision makers to make resource allocation decisions between and within companies, organizations, and public agencies. Accounting has been defined by AICPA as “The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof.”

Financial accounting is “a major branch of accounting involving the collection, recording and extraction of financial information, and the summary of it in the form of a periodic profit and loss account, a balance sheet and a cash flow statement in accordance with legal, professional, and capital market requirements". By contrast management accounting information is used within an organization and is usually confidential and accessible only to a small group, mostly decision-makers. Tax Accounting is the accounting needed to comply with jurisdictional tax regulations.

Financial accountancy

Financial accountancy (or financial accounting) is the field of accountancy concerned with the preparation of financial statements for decision makers, such as stockholders, suppliers, banks, employees, government agencies, owners, and other stakeholders. The fundamental need for financial accounting is to reduce principal-agent problem by measuring and monitoring agents' performance and reporting the results to interested users.

Financial accountancy is used to prepare accounting information for people outside the organization or not involved in the day to day running of the company. Managerial accounting provides accounting information to help managers make decisions to manage the business.

In short, Financial Accounting is the process of summarizing financial data taken from an organization's accounting records and publishing in the form of annual (or more frequent) reports for the benefit of people outside the organization. Financial accountancy is governed by both local and international accounting standards.

Financial accounting serves following purposes:

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  producing general purpose financial statements,
  
• 
  provision of information used by management of a business entity for decision making, planning and performance evaluation,
  
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  for meeting regulatory requirements.
  

Management accounting is concerned with the provisions and the use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.

In contrast to financial accountancy information, management accounting information is:

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  usually confidential and used by management, instead of publicly reported;
  
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  forward-looking, instead of historical;
  
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  pragmatically computed using extensive management information systems and internal controls, instead of complying with accounting standards.
  

According to the Chartered Institute of Management Accountants (CIMA), Management Accounting is "the process of identification, measurement, accumulation, analysis, preparation, interpretation and communication of information used by management to plan, evaluate and control within an entity and to assure appropriate use of and accountability for its resources. Management accounting also comprises the preparation of financial reports for non management groups such as shareholder's, creditor's, regulatory agencies and tax authorities". The American Institute of Certified Public Accountants(AICPA) states that management accounting as practice extends to the following three areas:

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  Strategic Management – Advancing the role of the management accountant as a strategic partner in the organization.
  
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  Performance Management – Developing the practice of business decision-making and managing the performance of the organization.
  
• 
  Risk Management – Contributing to frameworks and practices for identifying, measuring, managing and reporting risks to the achievement of the objectives of the organization.
  

1. How has accounting defined by the AICPA?

2. Who use financial information? And for what purposes?

3. What are three main types of accounting?

4. What is major difference between financial accounting and management accounting?

5. What purposes does the financial accounting serve?

6. What are the purposes of management accounting?

7. What type of accounting is more important to the company’s management?

Read the text below and find the right word or phrase from the box to fill each of the gaps.

balance credit ledgers entry outgoings transaction

profit debit entries income sources

Double (1)……… bookkeeping is a system which enables the business manager to record all the money coming in (2)……… and all money going out ((3)……… ),and to work out the company’s progress and present position. For every (4)……. ,there are two (5)………. in the ledgers. In one ledger, it is shown on the (6)……….. site, and in the other, as a (7)……. . Each ledger records transaction of a particular type. By adding the transactions for a period of time, you find the amount needed to balance the account. All the balances from the different (8)……….. are added together in the trial balance. If everything has been entered correctly, their total must (9)………. – that is, they must be equal. The bookkeeper can go on to prepare the (10)……… and loss account and finally the balance sheet, which shows the state of the business on the date it was drawn up. You can see at the glance the (11)……….. and use the funds.

Translation

Translate the following text into English paying special attention to standard use of terms and clarify of expression.

Một sự kiện kinh doanh được ghi lại bằng giá tiền trong sổ gọi là một nghiệp vụ kinh tế. Kế toán là nghệ thuật giải thích, đo lường, và diễn đạt các hoạt động kinh tế bằng hệ thống kế toán gồm phương pháp, thủ tục, phương tiện (chứng từ, sổ sách, máy vi tính…) để theo dõi các nghiệp vụ kinh tế. Kế toán tạo ra thông tin tài chính từng kỳ về một thực thể kinh tế.

Các thủ tục của một ch kỳ kết toán gồm:

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  Việc ghi sổ: ghi các nghiệp vụ phát sinh vào sổ nhật ký theo thứ tự thời gian.
  
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  Việc định khoản: sang sổ các bút toán từ sổ nhật ký vào từng tài khoản riêng biệt (gọi là sổ cái). Hình thức đơn giản nhất là tài khoản chữ T có: Tên tài khoản, bên trái (bên Nợ),bên phải (bên Có). Cân đối các khoản có và nợ trong sổ cái để chuẩn bị công tác tổng hợp kế toán
  

- Việc lập sổ nhật ký và kết chuyển các bút toán khóa sổ: chuẩn bị ghi chép các phát sinh cho kỳ kế toán sau.

Thông tin tài chính cần cho hệ thống kiểm soát nội bộ (phục vụ ban giám đốc khi kế toán quản trị được áp dụng đúng theo yêu cầu đặc biệt của ban giám đốc.) và cần cho người ngoài doanh nghiệp (chủ nợ, cổ đông, chính quyền… khi đó kế toán tài chính được áp dụng, thực hiện đúng theo quan điểm và chuẩn mực kế toán chung).