Unit 2 Setting up Accounts ＆ Adjusting the Books
Lead-in
Identify the blanks in the picture below.Match the blanks with the words in the box.
Section A
Dialogue 1
Mr.Gao was just admitted by a company as an accountant.Mrs.Huang has been a senior accountant in this company for five years.Mrs.Huang is introducing the commonly used accounts and the three-digit system to Mr.Gao.
H=Mrs.Huang G=Mr.Gao
H: Hello, Mr.Gao.I am Mrs.Huang, the senior accountant of this company.Nice to meet you.
G: Nice to meet you too.
H: Since you are new here, I will introduce the commonly used accounts and the three-digit system to you.
G: Thank you very much.
H: As you know, an account is the basic unit to store accounting data.We, a large international corporation, have thousands of accounts.To be able to easily find an account, we number different accounts with a three-digit system.
G: I know that in the three-digit system, the first digit refers to the major financial statement classifications.
H: Yes, you are right.In our company, 1 stands for assets; 2 for liabilities; 3 for owner’s equity; 4 for revenues; 5 for expenses.Therefore, asset accounts may be 1,000 to 1,999, and liability accounts may be 2,000 to 2,999.The rest can be done in the same manner.
G: Okay.
H: What’s more, asset accounts contain Current Assets, Cash, Notes Receivable, Accounts Receivable, Prepaid Expenses, and Long-term Assets and so on.Long-term Assets include Land, Buildings, Equipment, Vehicles and Intangible Assets.Liability Accounts include Current Liabilities and Long-term Liabilities.Owner’s equity accounts consist of Capital Accounts, Withdrawal Accounts, Revenues Accounts and Expenses Accounts.
G: Thanks again for your concrete introduction and great patience.
New Words
Phrases and Expressions
owner’s equity 所有者权益
notes receivable 应收票据
accounts receivable 应收账款
Dialogue 2
Mrs.Huang is introducing how to adjust the books to Mr.Gao.
H=Mrs.Huang G=Mr.Gao
H: Good Morning, Mr.Gao.
G: Good morning, Mrs.Huang.
H: Mr.Gao, I introduced how to set up accounts to you last time.Today I will introduce how to adjust the books to you.
G: Sorry to bother you.
H: It’s my pleasure.Without further ado, we need adjusting entries when deferrals or accruals exist.
G: Okay.
H: Adjusting entries are journal entries that are made at the end of the accounting period.Adjusting entries are applied to allocate revenues and expenses to the period in which they actually belong.
H: Now, I will first introduce how to adjust deferrals.
G: What are deferrals?
H: Deferrals are the postponement of the expenses and revenues that have been paid or received before.
G: Can you be more specific?
H: Our payments often span more than one accounting period.At first, the payments are debited to one asset account.However, at the end of one accounting period, we need to transfer the expired amounts from the asset account to the expense account.Prepaid expenses, unearned revenues and depreciation of assets may involve deferrals.
G: I am still a little confused.Can you give me an example to explain how to adjust deferrals?
H: Of course, such as unearned revenues.Revenues may be received before services are provided.Unearned revenues should be liability.For example, on November 22, we received 8,000 dollars as an advance for providing 100 coats.Several days later, we provided 40 coats to our customer and they accepted.Then we need to adjust our transactions as Dr.Unearned Coats Fees 3,200 dollars and Cr.Coats Fees Earned 3,200 dollars.
G: Okay, I get it.It’s very kind of you.Thanks a lot.
H: You are welcome.
New Words
Phrases and Expressions
adjusting entry 调整分录
accounting period 会计期
journal entry 分录
Exercise 1
Decide whether the following statements are true (T) or false (F) according to the dialogues.
□ 1.Mr.Gao knew nothing about accounting.
□ 2.Accountants number accounts with a three-digit system in order to locate an account easily.
□ 3.Intangible assets belong to long-term assets.
□ 4.We need to adjust the books as much as possible.
□ 5.At first, the payments are credited to one asset account.
Exercise 2
Oral practice.
Directions: Pair work.Use the questions below to interview your partner.Then change roles.
1.Can you introduce me the types of commonly used accounts?
2.What is the three-digit system?
3.Would you introduce me asset accounts?
4.When will we use adjusting entries?
5.Give me an example of adjusting entries.
Exercise 3
Practical activity: Work with your partner to create a dialogue based on the given situation.
Suppose you are Mr.Hu, a senior accountant of a large international corporation.It is the first time you meet the new staff Mr.Li who will work in the accounting department with you.
Section B
Account in Bookkeeping
An account (in book keeping) refers to assets, liabilities, income, expenses and equity, as represented by individual ledger pages, to which changes in value are chronologically recorded with debit and credit entries.These entries, referred to as postings, become part of a book of final entry or ledger.Examples of common financial accounts are sales, accounts receivable, mortgages, loans, PP & E, common stock, services, wages and payroll.
A chart of accounts provides a listing of all financial accounts used by particular business, organization, or government agency.
The system of recording, verifying, and reporting such information is called accounting.Practitioners of accounting are called accountants.
There are two criteria to classify accounts.The first one is based on nature and the second one is based on periodicity of flow.
Based on nature, accounts can be divided into real accounts, personal accounts and nominal accounts.
Real Accounts.Real accounts represent physically tangible things in the world and certain intangible things which don’t have any physical existence.Tangibles include plant and machinery, furniture and fixtures, computers and information processors, cash accounts etc.Intangibles include goodwill, patents and copyrights and so on.
Personal Accounts.Personal accounts are business and legal entities and bank accounts.Personal accounts consist of individuals, partnership firms, corporate entities, nonprofit organizations, any local or statutory bodies including governments at country, state or local levels.
Nominal Accounts.Nominal accounts are temporary income and expense accounts for recognition of the implications of the financial transactions during each fiscal year until finalization of accounts at the end, such as sales, purchases, electricity charges.
For example, a sales account is opened for recording the sales of goods or services and at the end of the financial period the total sales are transferred to the revenue statement account (Profit and Loss Account or Income and Expenditure Account).
Similarly, expenses during the financial period are recorded by using the respective expense accounts, which are also transferred to the revenue statement account.The net positive or negative balance (profit or loss) of the revenue statement account is transferred to reserves or capital account as the case may be.
The further classification of accounts is based on the periodicity of their inflows or outflows in the context of the fiscal year:
·Income is a short-term inflow during the fiscal year.
·Expense is short-term outflow during the fiscal year.(https://www.daowen.com)
·An asset is a long-term inflow with implications extending beyond the financial period.Alternatively, an asset could be valued at the present value of its future inflows.
·Liability is a long-term outflow with implications extending beyond the financial period.Alternatively, a liability could be valued at the present value of future outflows.
Items in accounts are classified into five broad groups, also known as the elements of the accounts: Asset, Liability, Equity, Revenue, Expense.
New Words
Phrases and Expressions
ledger page 分类账户
debit entry 借方分录
credit entry 贷方分录
periodicity of flow 流动周期
real account 实账户
nominal account 虚账户
fiscal year 会计年度
financial period 财务期间
profit and loss account 损益账户
income and expenditure account 收支账户
reserve account 准备账户
capital account 资本账户
Exercise 1
Choose the best answer to each of the following questions.
1.What is NOT mentioned in the text?
A.The classification of accounts.
B.The elements of accounts.
C.The definition of reserve account.
D.The definition of nominal account.
2.How many ways to classify accounts are talked about in the text?
A.One. B.Two.
C.Three. D.Four.
3.Based on nature, accounts can be divided into the following three EXCEPT?
A.Real accounts. B.Capital accounts.
C.Nominal accounts. D.Personal accounts.
4.According to the text, which of the following statement is NOT true?
A.The system of recording, verifying, and reporting such information is called accounting.
B.Expense is short-term outflow during the fiscal year.
C.Practitioners of accounting are called accountants.
D.Liability is a short-term outflow during the fiscal year.
5.Which of the following does NOT belong to real accounts?
A.Goodwill. B.Plant and machinery.
C.Money. D.Computers and information processors.
Exercise 2
Fill in the blanks with the words given below.Change the form where necessary.
1.Why does the author object to__________parenting as a personal choice.
2.Broadcasting has had to be regulated__________.
3.The__________sequence gives the book an element of structure.
4.__________, we could buy a car.
5.The government brought itself to the brink of__________disaster.
6.__________of nuclear properties began to show up.
7.He figured up the balance in their checking__________.
8.Cheerfulness does not always__________happiness.
9.To capture his__________, Murphy must either sell or refinance.
10.We have 500 people on the__________.
Exercise 3
Translate the following sentences into Chinese.
1.The boss dropped an accountant from the payroll.
2.The accounting firm deliberately destroyed documents to thwart government investigations.
3.I suggested he deposit the money in his business account to ensure the proper accounting measures were in place to record the transactions optimally.
4.An account is a record of financial transactions for an asset or individual, such as at a bank, brokerage, credit card company or retail store.More generally, it is an arrangement between a buyer and a seller in which payments are to be made in the future.
5.It has everything to do with government incentives to the banks to take loans from the Fed at 0% and put the money in their reserve account or treasuries where it earns 2%.
课文译文
会计账户
会计账户指资产账户、负债账户、收益账户、费用账户、权益账户这五种分类账户。每一种账户中，价值发生变化，都会按时间顺序以借方分录和贷方分录的形式被记录下来。这些分录，也叫作过账，是终结分录或分类账的一部分。常见的金融账户包括销售账户，应收账款，按揭账户，贷款账户，地产、厂房及设备账户，普通股账户，服务账户、工资账户和薪酬账户。
会计科目表是某个企业、组织或政府机构所使用的所有金融账户的清单。
记录、查证以及汇报此类信息的体系叫作会计。会计的执行者也叫作会计。
将账户分类的标准有两种，分别是本质和流动周期。
基于本质，账户可以分为实账户、个人账户和虚账户。
实账户。实账户代表世界上有形物体和部分没有实体的无形物体。有形物体包括工厂和机器、设备、计算机和信息处理器、现金账户等。无形物体包括商誉、专利、版权等。
个人账户。个人账户是企业个体和企业法人以及银行账户。个人账户包括个人、合伙企业、公司实体、非营利性机构，以及国家、州级（省级）、地方的地方机关或法定机构。
虚账户。虚账户是临时的收入或支出账户，目的是为了了解每一个会计年度中的金融交易，直至最终账户得以终结，比如销售账户、购买账户和电费。
举例来说，销售账户是用于记录销售的货物或服务，财务期结束后，总销售额会转入收入账户（损益账户或收支账户）。
同样地，财务期间的费用是使用费用账户来记录，后面也会转入收入账户。收入账户的净正平衡或负平衡（盈或亏）又会视情况被转入准备账户或资本账户。
账户的另一分类是依据每一会计年度的流动（流入或流出）周期。
·收入是会计年度的短期流入。
·费用是会计年度的短期流出。
·资产是不同财务周期之间的长期流入。或者，当前的资产可以用将来流入的资产来估值。
·负债是不同财务周期之间的长期流出。或者，当前的负债可以用将来流出的资产来估值。
账户的项目有五个大类，也被叫作账户五要素，即资产、负债、权益、收入、费用。
Reference
Wikipedia Foundation, Inc.Account (bookkeeping) [EB/OL].[2017-11-26].https://en.wikipedia.org/wiki/Account_(bookkeeping).
