TASK 2. Tell your friend about American balance sheets compared with European ones.

TASK 3. Read the passage about sources of finance. Translate it and give the definitions to the terms: 'fixed assets', 'current assets', and 'long-term liabilities'.

The sources of finance are grouped under three headings in the balance sheet: shareholders' capital, long-term liabilities, and current liabilities. The last two categories represent finance made available on condition that it will be paid off at some time in the future. The assets are divided into groups under headings: current assets, fixed assets and other assets.

Fixed assets are those resources, which have been acquired with the intention that they will be kept and used by the business. As they wear out or obsolete they are depreciated. Their net book value is the difference between their cost or valuation and the accumulated depreciation to date. They include items such as land and buildings, plant and equipment, and vehicles used by the business.

Current assets consist of cash and items which are to be turned into cash as part of the normal operation of the business. Cash will be used, among other things, to buy stocks. Stocks will eventually be sold to customers who become the company's debtors. The debtors' liabilities are converted into cash on settlement of the accounts. Some cash will be used to buy more stocks and the cycle of conversion will repeat continually. The fixed assets are used as a means by which this conversion may be carried out. Finance has been obtained from shareholders in the form of share capital and by retaining some of the profits belonging to the shareholders. In addition, long-term liabilities represent finance obtained on terms, which include repayment more than twelve months after the balance sheet date. They include such items as bank overdraft, creditors (representing unpaid suppliers' accounts), unpaid tax, and unpaid dividends.

TASK 4. Make up questions to which these sentences are the answers.

· Shareholders own company's assets while lenders and creditors provide finances to the company on condition of their later repayment.

· They are known to be divided into fixed and current.

· Besides assets it contains two headings which relate to the sources of finance.

· They differ in the term of paying off.

· No, it isn't. It is the difference between the cost of a fixed asset and its depreciation up-to-date.

· They include repayment more than a year after the balance sheet date.

· European presentation is sure to be the most common in Russia but UK companies usually use a vertical layout.

· Yes, besides they contain some changes in the terms used.

· I can name such items as creditors unpaid accounts, overdraft, retained profit.

TASK 5. A. Learn a vertical presentation of Expended Balance Sheet of a typical manufacturing company.

Assets
Current assets:
Cash		$40,000
Accounts receivable	$90,000
Less allowance for doubtful accounts	10.000	80,000
Inventories:
Finished product	75,000
Work in process	75,000
Raw materials	20,000
Supplies	10.000	180,000
Prepaid expenses		10.000
Total current assets		$310,000
Fixed assets:
Furniture and fixtures	$10,000
Less allowance for depreciation	5,000	$5,000
Machinery and equipment	$30,000
Less allowance for depreciation	16,000	14,000
Buildings	$45,000
Less allowance for depreciation	9,000	36,000
Land		15,000
Total fixed assets		70,000
Investments		20,000
Total assets		$400,000
Liabilities and Equity
Current liabilities:
Accounts payable		$40,000
Notes payable		80,000
Accrued liabilities:
Wages and salaries payable	$4,000
Interest payable	1.000	5,000
Allowance for taxes:
Income tax	$16,000
State taxes	4.000	20,000
Total current liabilities		$145,000
Equity:
Capital stock		200,000
Surplus		55,000
Total equity		255,000
Total liabilities and equity		$400,000

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