ACCOUNTING AND
FINANCIAL
STATEMENTS
BOOKKEEPING
 recording of transactions (money received
/paid out)
 keeping track of the income and expenses
 to do bookkeeping
 single-entry bookkeeping (one entry)
 double-entry bookkeeping (debit and credit
entries)
 ledger (purchase/sales ledger)
ACCOUNTING
 checking accounts
 calculating of costs and expenses
 analysing financial records
 preparation of financial statements
and tax returns
 Inland Revenue (IR) - GB
 Internal Revenue Service (IRS) USA
FINANCIAL STATEMENTS
1. PROFIT AND LOSS ACCOUNT - GB
(INCOME STATEMENT – US))
2. BALANCE SHEET
3. CASH FLOW STATEMENT
THE PROFIT AND LOSS
ACCOUNT (P&L)

revenues
(turnover – sales revenue)
expenses (costs of sales (COGS) – raw
materials, labour, factory
expenses
_________________________________
profit
(tax, dividends, retained
profit)

gross profit = turnover – expenses
gross profit – selling, general &
administrative expenses (SG&A)
net profit = bottom line (dividends)
THE BALANCE SHEET
1. ASSETS
2. LIABILITIES
3. SHAREHOLDERS’ EQUITY
Two halves: the totals of both balance
Assets = liabilities + capital
ASSETS
 fixed assets (investments: land, buildings,
equipment)
 current assets ( cash, debtors,
work-in-progress)
 intangible assets (brand names, goodwill,
patents, copyrights, trade
marks)
LIABILITIES
 current (creditors, dividends, accrued
expenses – taxes and utility bills)
 long-term (loans, bonds)
OWNERS’ EQUITY
(Shareholders’ equity)
 Share capital
 share premium (paid-in surplus)
 retained profit (not distributed)
 company’s reserves (funds set aside)
Shareholders’ equity = net assets
= assets - liabilities
CASH FLOW
STATEMENT
 sources of funds – money coming into the
business:
(trading profits, depreciation provisions,
sales of assets, borrowing, issuing of
shares)
 applications of funds – money leaving the
business
(purchases of assets, payment of dividends,
repayment of loans, trading losses)
CONSOLIDATED ACCOUNTS
Financial statements of the parent
company and its subsidiaries
What terms do the following definitions illustrate?
ACCOUNTING
•
Keeping financial records, recording income and expenditure, valuing assets and liabilities, giving
financial forecasts. ___________________
•
Writing down the details of transactions, debits and credits..__________________
•
An official inspection of business and financial records. ____________________
•
All the money that a company will have to pay to someone else in the
future._______________________
•
Anything owned by a business .__________________
•
Sums of money owed by customers for goods or services purchased on
credit.______________________
•
Sums of money owed to suppliers for purchases made on credit._____________
•
Raw materials, work in progress, and finished goods stored ready for sale. ________________
•
Regular costs such as rent, electricity, wages, etc.__________________
•
The reduction in value of a fixed asset during the years it is in use. ______________
•
Another name for ordinary shares. ___________________
•
Money received from the sale of goods or services. ________________
•
The total amount, without anything taken away. _______________
•
An amount after all deductions have been made. ____________
•
Payment to shareholders when a company has made profit. ______________
What kind of asset is each of the following?
(Some are not assets)
1.
2.
3.
4.
5.
6.
Money which a bankrupt customer owes, that will
certainly never be paid. ___________________
Vans which a delivery company owns and uses to deliver
goods. _____________________
Money which customers owe, that will definitely be paid in
the next 6o days. ___________________
Cars for sale in a showroom. _________________
A showroom owned by a company that sells cars.
___________________
A showroom rented by a company that sells cars.
___________________
Find opposites
Assets - ______________
Creditors - ____________
Revenue - _____________
What are the activities done in running
a company’s accounts?
A - ________________
B - ________________
C - ________________
Match the terms:
1.
2.
3.
4.
5.
6.
loan
credit
interest
instalment
mortgage
debentures
1.
2.
3.
leasing
grant
subsidy
a) rata, obrok kredita
b) zajam
c) hipoteka
d) potpora, državni poticaj
e) lizing, najam, zakup
f) subvencija, potpora koja utječe na
cijenu
g) kamata
10) kredit, odgoda plaćanja
11) zadužnica, dužnički vrijednosni papir
Many businesses, especially sole proprietors,
often do not have sufficient capital for
business operations. How can they be helped?
They can buy materials on ___________
They can get cash from __________
They can go to their bank and take out a _____________
Match the two halves of these
sentences:
1.
2.
3.
4.
5.
When a trader buys goods on credit
The purpose of keeping accounts is
The Inland Revenue authorities want to know
By giving customers two months to pay for the goods they buy
A firm can encourage their customers to pay more promptly
a)
b)
how much profit a business has made in order to calculate any liability for tax.
the manufacturer gives them time to sell the goods before they have to pay for
them.
by increasing cash discounts.
he does not have to pay for them immediately.
to determine whether the business has made a profit or a loss.
c)
d)
e)