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Business English Reading

实用商务英语导读教案

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Chapter 3 Accounting & Financial Statements

3.1 Accounting—the Language of Business3.2 Basic Elements of Financial Position and

the Accounting Equation 3.3 Generally Accepted Accounting Principles3.4 Double-Entry System3.5 Financial Statements

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3.1 Accounting—the Language of Business

Accounting is the language of business.

Managers, investors, creditors and consumers are all decision-makers.

Accounting information is composed primarily of financial data about business transactions, expressed in terms of money.

3.1 Accounting—the Language of Business

Relationship of Accounting to Other Fields：FinanceProductionMarketingPersonnelGeneral

management

3.2 Basic Elements of Financial Position and the Accounting Equation

accounting equation Assets = Liabilities + Owner’s Equity

Assets ： economic resources owned by a business and expected to benefit future operations

Liabilities ： formal expression for debts in accounting

Owners’ Equity ： the interest of the owners in an enterprise

3.2 Basic Elements of Financial Position and the Accounting Equation

AssetsAssets LiabilitiesLiabilities Owner’s Equity

Owner’s Equity

Current assets Plant and

equipment Other assets

Short-term liabilities

Long-term liabilities

= +

Paid-in capital

Retained earnings

3.3 Generally Accepted Accounting Principles

GAAP ： the ground rules for any financial activities, from journalizing to posting, from the preparation of financial statements to the preparation of financial reporting.

3.3 Generally Accepted Accounting Principles

They originate from a combination of tradition, experience, and official declarations or statements.

They require authoritative (official or unofficial) support and some means of enforcement.

They are sometimes arbitrary. They may change more or less over time as gaps or

shortcomings in the existing rules come to light. They must clearly understood and observed by all

the people concerned.

3.3 Generally Accepted Accounting Principles

Accounting Entity AssumptionAccounting Entity Assumption

Going-Concern AssumptionGoing-Concern Assumption

Time Period AssumptionTime Period Assumption

Stable-Dollar Assumption Stable-Dollar Assumption

Generally Accepted

Accounting Principles

3.4 Double-Entry System

Double entry provides for recording both aspects of a transaction so as to establish a balance.

Entry ： the act or result of writing something down on a list, as in an account of money

3.4 Double-Entry System

The simplest form of an account has three parts:

① a title—the name of the item recorded in the account;

② a space for recording increases in the amount of the item in terms of money;

③ a space for recording decreases in the amount of the item, also in monetary terms.

3.4 Double-Entry System

3.5 Financial Statements

Financial statements assist the management in a business and all the people concerned outside the business to have a concise picture of the profitability and financial position of the business.

The three most widely used financial statements are the balance sheet, the income statement, and the statements of cash flows.

3.5 Financial Statements

Income Statement ： a summary of the revenue (income), expenses, and net income of a business entity for a specific period of time.Revenue from sales Cost of Goods Sold Gross profit Operating expenses

3.5 Financial Statements

3.5 Financial Statements

Balance SheetA statement showing the assets, liabilities,

and owner’s equity of a business entity at a specific date

A balance sheet consists of a listing of the assets, liabilities, and owner’s equity of a business

3.5 Financial Statements

3.5 Financial Statements

Statement of Cash FlowThe Financial Accounting Standards Board

(FASB) in the US requires all profit-oriented enterprises to present a statement of cash flow (SCF) when an income statement and balance sheet are presented in financial reports.

3.5 Financial Statements

The SCF is intended to help users to assess: ① a business entity’s ability to generate future

positive net cash inflows;

② its ability to pay its debts, dividends, and interest;

③ the reasons for differences between income and cash flows; and

④ the effects of cash and non-cash transactions on the entity’s financial position.

3.5 Financial Statements

3.5 Financial Statements

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