1. Accounting English Lu_Xiufen E-mail: xiufenlu@126.com 13707884146xiufenlu@126.com

2. Lesson one Lesson Three

3. Accounting English Lesson Three L & Equity Section Balance sheet Assets Liabilities Owners’ Equity

4. Accounting English Lesson Three L & Equity Section Creditor Shareholder Invested Capital DebtDebt StockStock Creditors’ Equity (claim on assets) Owner’s Equity (Residual claim) Equity

5. Accounting English Lesson Three L & Equity Section Text Liabilities Current L. Long-term L. Text Accounts payable Accrued wages & Salaries payable Sales & excise taxes payable Income or property taxes payable short-term notes payable Dividends payable Estimated or accrued liabilities … … Long-term notes, Mortgages Bonds payable

6. Accounting English Liabilities Owners’ equity Assets Owners’ equity is also called net assets or net worth. Lesson Three L & Equity Section

7. Accounting English Lesson Three L & Equity Section Balance sheet Assets Liabilities Owners’ Equity Principal differences for different forms of business organization

8. Accounting English different forms of business organization

9. Accounting English Principal difference in the owners’ equity partnership Single proprietorship Corporation Do not have to distinguish between amounts invested by owners and undistributed earnings Segregate the capital stock and any retain earnings

10. Accounting English Lesson Three L & Equity Section Any amounts paid to its proprietor are treated as appropriations of profit and not as expenses incurred. Assets Owners’Equity Withdrawal are amounts of money taken out of the business by its owner.

11. Accounting English Lesson Three L & Equity Section Declaration of Dividends Dividends Payable Retain Earnings

12. Accounting English Lesson Three L & Equity Section Dividends payable Assets Payment of Dividends

13. Accounting English Questions liabilities?What are the liabilities? ?What are the owners’ equity? When the owners of a business withdraw cash, do the withdrawals appear as expenses on the income statement? Explain. liabilities liabilitiesList some examples of current liabilities and long-term liabilities.

14. Accounting English L iabilities, or creditors’ equity,are the obligations,or debts, that the firm must pay in money or services at some time in the future. Lesson Three — Exercise a liabilities?What are the liabilities?

15. Accounting English Owners’ equity is defined as the differences between the assets and the liabilities, and is often referred to as a residual claim ——a claim to the assets remaining after the debt to creditors has been discharged. Lesson Three — Exercise b ? What are the owners’ equity?

16. Accounting English No. These withdrawals do not appear as expenses in the income statement because they are made for the owners’ personal use or to engage in other business activities ． Such withdrawals will reduce both the assets and the owners’ equity Of the business at the same time ． Lesson Three — Exercise c When the owners of a business withdraw cash, do the withdrawals appear as expenses on the income statement? Explain.

17. Accounting English current l ll liabilities : Accounts payable Accrued wages & Salaries payable Sales & excise taxes payable Income or property taxes payable short-term notes payable Dividends payable … … Lesson Three — Exercise d. liabilitiesliabilities List some examples of current liabilities and long-term liabilities. long-term l ll liabilities: Long-term notes Mortgages Bonds payable

18. Accounting English The declaration of a dividend reduces the retained earnings portion of the owners’ equity and creates a liability called dividends payable on a corporation’s balance sheet. Lesson Three — Exercise e State the effect on the corporation’s balance sheet of the declaration of a dividend.

19. Accounting English The payment of a dividend eliminates the liability and reduces assets (usually cash). Lesson Three — Exercise f State the effect on a corporation’s balance sheet of the payment of a dividend.

20. Accounting English Lesson Three — Exercise g. Prepare a statement of owners’ equity for Advertising Service using the data given below: K. Menton, Capital (Jan. 1, 2006) USD 350 000 Additional Investments during the Year 50 000 Withdrawals during the Year 80 000 Net Income for the Year 220 000

21. Accounting English Lesson Three — Exercise g. Advertising Service Company statement of owners’ equity For the Year Ended Dec.31,2006 K. Menton, Capital (Jan. 1, 2006) USD 350 000 Add: Additional Investments during the Year 50 000 Net Income for the Year 220 000 270 000 USD 620 000 Less: Capital Withdrawals during the Year 80 000 K. Menton, Capital (Dec. 31, 2006) USD 540 000

23. Accounting English Test Translation: Information system ; managerial accounting; balance sheet; income statement ; accounts payable; retained earning ； capital stock ； liquidity 纳税申报单；财务会计；现金流量表；应付股利； 累计折旧；资产＝负债＋所有者权益；账面价值

24. Lesson one Lesson Four

25. Accounting English Lesson Four Income Statement Income statement is designed to portray the operating results for a period of time.

26. Accounting English Lesson Four Income Statement

27. Accounting English Lesson Four Income Statement Gross Profit Net Profit Net Sales Gross Sales — Sales Returns and Allowances — Sales Discount Net Sales — Cost of Goods Sold Gross Profit — Operating Expenses

28. Accounting English Lesson Four Income Statement Sales Sales Returns &Allowances Net Sales - =

29. Accounting English Lesson Four Income Statement Text Cost of goods sold Net Purchases Beginning inventory + Ending inventory - Transportation In (Purchases Discounts) (Purchases Returns & Allowance) Purchases

30. Accounting English Lesson Four Income Statement Net Sales Gross Profit on Sales Net Income for the period Less: cost of goods sold Less: Operating expenses

31. Accounting English Lesson Four Income Statement Expenses OperatingExpenses SellingExpensesAdministrationExpenses OtherExpenses InterestExpenses ExtraordinaryItem

32. Accounting English Lesson Four Income Statement Do u know the relationship between the IS & BS? The net profit is transferred to the balance sheet of the business as part of the proprietor’s capital. … …. I see.

33. Accounting English Lesson Four Income Statement Profit and loss account for the year ended… £m Turnover X Cost of sales (X) Gross profit X Distribution costs (X) Administrative expenses (X) Operating profit X Interest payable (X) Investment income X Profit on ordinary activities before taxation X Taxation (X) Profit on ordinary activities after taxation X Extraordinary items (X) Profit for the financial year X Dividends paid and proposed (X) Retained profit for the financial year X

34. Accounting English Lesson Four Income Statement Income statement for the year ended... $m Revenue X Cost of sales (X) Gross profit X Distribution costs (X) Administrative expenses (X) Profit from operations X Finance cost (X) Investment income X Profit before tax X Income tax expense (X) Net profit from ordinary activities X Extraordinary items (X) Net profit for the year X

35. Accounting English ii iii i Gross profit* *Gross profit = sales less cost of sales Plus any other income from sources other than the sales of goods Minus other expenses of the business, not included in the cost of goods sold Net profit is: Lesson Four Income Statement

36. Accounting English Income statement is prepared to present the operating results of an organization for a particular period. Lesson Four — Exercise a What are the purpose of an income statement?

37. Accounting English They are revenue, cost of goods sold and operating expenses. Lesson Four — Exercise b. What are the major categories of the income statement for a merchandising company?

38. Accounting English Gross sales =quantities × selling price per unit Lesson Four — Exercise Net sales =gross sales － sales returns and allowances － sales discounts c. Differentiate the gross sales and net sales.

39. Accounting English Cost of goods available for sale = beginning inventory +net purchases + transportation in Lesson Four — Exercise d. Differentiate the cost of goods available for sales and cost of goods sold. Cost of goods sold = Cost of goods available for sale – ending inventory

40. Accounting English transportation in list under the item “cost of goods sold” Lesson Four — Exercise e. Explain the appropriate treatment of the items “transportation in” and “transportation out” in the income statement. transportation out list under the item “selling Expenses”

41. Accounting English A company’s short-term liquidity refers to its ability to meet short-term obligations. It can be measured in terms of following ratios: current ratio and quick ratio. Lesson Four — Exercise f What is the “short-term liquidity”? And how to measure it?

42. Accounting English Lesson Four — Exercise (g) g. Identify the following as selling or administrative expense items. 1) Sales salaries expense 2) Office salaries expense 3) Depreciation for delivery equipment 4) Depreciation for office equipment 5) Advertising expense 6) Utilities expense 7) Supplies expense 8) Transportation out 9) Rent expense

43. Accounting English Lesson Four — Exercise g. Selling Expense 1) Sales salaries expense 3) Depreciation for delivery equipment 5) Advertising expense 8) Transportation out Administrative Expense 2) Office salaries expense 4) Depreciation for office equipment 6) Utilities expense 7) Supplies expense 9) Rent expense

44. Accounting English (a) He rented the van at a cost of $1,000 for three month. Running expenses for the van averaged $300 per month. (b) He hired a par time helper at a cost of $100 per month. (c) He borrowed $2,000from his bank, and the interest cost of the loan was $25 per month. (d) His main business was to sell ice cream to customers in the street, but he also did some special catering for business customers, supplying ice creams for office parties. Sales to these customers were usually on credit. (e) for the three months to 31 August 20X8, his total sales were as follows: (i) cash sales $8,900 (ii) credit sales $1,100 On 1 June 20X8, Jock Heiss commenced trading as an ice cream salesman, using a van which he drove around the streets of his town. Lesson Four— Exercise (h)

45. Accounting English (f) He purchased his ice cream from a local manufacturer, Floors Co. The cost of purchases in the three months to 31 August 20X8 was $6,200, and at 31 August he had sold every item. He still owed $700 to Floors Co for unpaid purchases on credit. (g) One of his credit sale customers has gone bankrupt, owing Jock $250. Jock has decided to write off the debt in full, with no prospect of getting any of the one owed. (h) He used his own home for his office work. Telephone and postage expenses for the three months to 31 August were $150. (i) During the period he paid himself $300 per month. On 1 June 20X8, Jock Heiss commenced trading as an ice cream salesman, using a van which he drove around the streets of his town. Required Prepare an income statement for the three month 1 June to 31 August 20X8. Lesson Four— Exercise (h)

46. Accounting English (a) He rented the van at a cost of $1,000 for three month. Running expenses for the van averaged $300 per month. (b) He hired a par time helper at a cost of $100 per month. (c) He borrowed $2,000from his bank, and the interest cost of the loan was $25 per month. On 1 June 20X8, Jock Heiss commenced trading as an ice cream salesman, using a van which he drove around the streets of his town. Van rental Van expenses 3×300 Wages 3×100 Interest charges 25×3 Lesson Four Income Statement — Exercise 1 (4)

47. Accounting English (d) His main business was to sell ice cream to customers in the street, but he also did some special catering for business customers, supplying ice creams for office parties. Sales to these customers were usually on credit. (e) For the three months to 31 August 20X8, his total sales were as follows: (i) cash sales $8,900 (ii) credit sales $1,100 On 1 June 20X8, Jock Heiss commenced trading as an ice cream salesman, using a van which he drove around the streets of his town. Sales 8,900+1,100 Lesson Four Income Statement — Exercise 1 (5)

48. Accounting English (f) He purchased his ice cream from a local manufacturer, Floors Co. The cost of purchases in the three months to 31 August 20X8 was $6,200, and at 31 August he had sold every item. He still owed $700 to Floors Co for unpaid purchases on credit. (g) One of his credit sale customers has gone bankrupt, owing Jock $250. Jock has decided to write off the debt in full, with no prospect of getting any of the one owed. On 1 June 20X8, Jock Heiss commenced trading as an ice cream salesman, using a van which he drove around the streets of his town. Cost of sales Bad debt written off Lesson Four Income Statement — Exercise 1 (6)

49. Accounting English (h) He used his own home for his office work. Telephone and postage expenses for the three months to 31 August were $150. (i) During the period he paid himself $300 per month. On 1 June 20X8, Jock Heiss commenced trading as an ice cream salesman, using a van which he drove around the streets of his town. Required Prepare an income statement for the three month 1 June to 31 August 20X8. Telephone and postage ? Wages? Drawings Lesson Four Income Statement — Exercise 1 (7)