Unit 6 Financial Statements
Lead-in
Identify the pictures below.Match them with the words in the box.
Section A
Dialogue 1
Miss Huang is reporting working progress to the accountant officer Mr.Liu.
H=Mr.Huang L=Mr.Liu
H: We’ve finished the balance sheet, income statement and cash flow statement of the year.What else do we need to include in the annual financial statement?
L: Well, a statement of changes in equity is critical this year since we had some changes in the capital structure.
H: Is there a special layout that you prefer for this statement?
L: No, there is no fixed layout for the statement, but a chart showing the change in equity can help bring life to the information.
H: Alright! A statement of changes in equity.Anything else?
L: As usual, we must also include a statement of our accounting policy, and describe extraordinary items, large or unusual items within our ordinary activities, changes in accounting estimates, fundamental errors, etc.
H: I will prepare a draft for your review.Is next Thursday too late?
L: Try to be ready early next week.We must allow some time to make changes just in case.
H: Sure, no problem.I will target Monday or latest, Tuesday.
L: OK.Thank you.
New Words
Phrases and Expressions
financial statement 财务报表
income statement 利润表
balance sheet 资产负债表
cash flow statement 现金流量表
accounting estimates 会计估计
a statement of change in equity 所有者权益变动表
extraordinary items 非常规项目
fundamental error 重大错误
Dialogue 2
Miss Li is getting some suggestions from Mr.Yang.
L=Miss Li Y=Mr.Yang
L: Do you have a minute right now?
Y: Sure! What’ up?
L: Before closing the accounts of the month, there is one thing that I need to confirm with you.
Y: Go ahead.
L: It’s the guarantee we gave for the bank borrowing of our subsidiary.Do we need to make a provision for that?
Y: No, we don’t.
L: I often mix up accruals with provision.What’s the difference between the two?
Y: The difference is on the certainty of accruals and uncertainty of provisions.
L: Then it seems we don’t have to do anything about the guarantee for our subsidiary.
Y: Not exactly.We actually need to disclose it as a contingent liability.
L: How do we judge the uncertainty? What is probable?
Y: As a rule of thumb, probable means more than 50% likelihood.If an obligation is probable, then it is not a contingent liability.Rather, it is a liability to be recognized.
L: I see.Thank you.
New Words
Phrases and Expressions
close the accounts 关账
contingent liability 或有负债
Exercise 1
Decide whether the following statements are true (T) or false (F) according to the dialogues.
□ 1.A statement of changes in equity is critical this year.
□ 2.There is fixed layout for this statement.
□ 3.We don’t need to make a provision for the guarantee.
□ 4.The difference between accruals and provisions is the certainty of accruals and uncertainty of provisions.
□ 5.Probable means less than 50% likelihood.
Exercise 2
Oral practice: Pair work.Use the questions below to interview your partner.Then change roles.
1.What should be done to bring life to the information of the annual financial statement?
2.Will Miss Huang prepare a draft for Mr.Liu?
3.When should the draft be ready?
4.What’s the difference between accruals and provisions?
5.What should be done for the guarantee for the subsidiary?
Exercise 3
Practical activity: Work in pairs and make a conversation.
Suppose you are Mr.Hu, an accountant from P & G China and you are designated to take charge of the annual financial statement.
Section B
Financial Statement
1.Overview of Financial Statements
The financial statements show the financial position and the operating results of the business at the particular time or particular period.They are the main source of financial information to persons outside the business organization and also are useful to management.It is easy to start preparing financial statement directly from information in the adjusted trial balance.For an adjusted trial balance includes all accounts and balances appearing in financial statement.
The basic financial statements include the balance sheet, the income statement, and the statement of cash flow.We usually prepare financial statements in the following order: income statement, statement of retained earnings, and balance sheet.This order makes sense since the balance sheet uses information from the statement of retained earnings, which in turn uses information from the income statement.The statement of cash flows is usually the final statement prepared.
Table 6-1
续表
2.The Balance Sheet
The balance sheet is a financial statement that shows the financial position of a company at a particular date.It is alternatively called a Statement of Financial Position.The balance sheet is prepared at least yearly, but is also customary to be prepared monthly or quarterly.The balance sheet consists of a listing of the assets and liabilities of a business and of the owner’s equity.
The balance sheet may be arranged in either account form or report form.In the account form, the assets are listed on the left side of the page and liabilities and owners equity on the right side.Table 6-2 shows the balance sheet in account form.
All balance sheets contain the same basic information regardless of format: a heading consisting of three lines, the name of the company, the title of the financial statement, and the date for which it was prepared.The balance sheet consists of three sections, the assets section, the liability section, and the owner’s equity section.The information is expressed in monetary terms and that the total of the assets is equal to the sum of the liabilities plus the owner’s equity.
Table 6-2
3.The Income Statement
The income statement is a financial statement that summarizes the results of a company’s operation by matching revenue and related expenses for a particular accounting period.It shows the net income or net loss.It is alternatively called Profit and Loss Statement.There are two common forms of income statements: the Multiple-step Income Statement and the Single-step Statement.
The Multiple-step Income Statement contains the series of steps in which costs and expenses are deduced from revenue.As a first step, the cost of goods sold is deduced from sales to produce an amount for gross profit.As a second step, operating expenses are subtracted from the gross profit to obtain operating income (or operating profit).As a final step, income tax expenses are subtracted to determine net income.
Table 6-3
4.The Statement of Cash Flows
The Statement of Cash Flow is a financial statement that reports the cash receipts and cash payments of entity during a particular period.The term “Cash” refers not only to the bills and coins we normally think of as cash, but to cash equivalents, too.Cash equivalents are highly liquid short-term investments that can easily and quickly be converted into cash, usually with a maturity of three months or less at the date of purchase.
The cash flows of an entity usually come from cash flows from operating activities.Operating activities include the sale and the purchase or productions of goods and services, including collecting accounts payable from customers, paying suppliers or employees, and paying for items such as rent, taxes, and interest.Investing activities include acquiring and selling long-term assets and securities held for long-term investment purposes.Financing activities include obtaining resources from owners and creditors and repaying amounts borrowed.
The creation of the statement of cash flows is simple.First, list the activities those that increased cash and those that decreased cash.Second, place each cash inflow and outflow into one of three categories according to the type of an activity, which is introduced above that caused it.
Table 6-4
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New Words
Phrases and Expressions
at a particular time 在特定的时刻
the adjusted trial balance 调整后的试算平衡表
the balance sheet 资产负债表
the income statement 利润表
the statement of cash flow 现金流量表
retained earnings 留存收益
the statement of retained earnings 留存收益表
total liabilities 负债总额
the assets section 资产部分
the liability section 负债部分
the owner’s equity section 所有者权益部分
the profit and loss statement 损益表
gross profit 毛利
be converted into 把……变成
Exercise 1
Choose the best answer to each of the following questions.
1.Which of the following statements is NOT true?
A.The financial statements show the financial position of the business.
B.The financial statements show the operating results of the company.
C.It’s easy to start operating financial statement from the information in the adjusted trial balance.
D.The financial statements show the financial position of the business of a week.
2.Which is NOT included in the basic financial statements?
A.The balance sheet.
B.The adjusted trial balance.
C.The statement of cash flow.
D.The income statement.
3.The balance sheet consists of the following aspects except?
A.A listing of the assets.
B.Liabilities of a business.
C.Gross profit.
D.The owner’s equity.
4.The income statement shows?
A.The assets of the company.
B.The net income or net loss.
C.The cost of goods.
D.Operating expenses.
5.Which of the following statements is NOT true?
A.The statement of cash flow reports the cash receipts of an entity.
B.The statement of cash flow reports the cash payments of an entity.
C.“Cash” refers only to the bills and coins.
D.“Cash ” also refers to cash equivalents.
Exercise 2
Fill in the blanks with the words given below.Change the form where necessary.
1.The financial statements show the financial position and the operating results of the business at the_______time.
2.It is easy to start preparing financial statement directly form information in the_______trial balance.
3.The balance sheet is_______called a statement of financial position.
4.All balance sheets contain the same basic information regardless of_______.
5.Cash equivalents are highly liquid short-term investments that can easily and quickly be_______into cash.
6.Investing activities include_______and selling long-term assists and securities held for long-term investment purposes.
7.Income statement is alternatively called_______and Loss Statement.
8.The_______sheet is a financial statement that shows the financial position of a company at a particular date.
9.The balance sheet consists of a listing of the assets and liabilities of a business and of the owner’s_______.
10.Income statement contains the series of steps in which costs and expenses are_______from revenue.
Exercise 3
Translate the following sentences into Chinese.
1.The balance sheet is prepared at least yearly, but is also customary to be prepared monthly or quarterly.
2.The income statement is a financial statement that summarizes the results of a company’s operation by matching revenue and related expenses for a particular accounting period.It shows the net income or net loss.
3.The term “Cash” refers not only to the bills and coins we normally think of as cash, but to cash equivalents, too.
4.Cash equivalents are highly liquid short-term investments that can easily and quickly be converted into cash, usually with a maturity of three months or less at the date of purchase.
5.Second, place each cash inflow and outflow into one of three categories according to the type of an activity, which is introduced above that caused it.
课文译文
财务报表
1.报表概述
财务报表是用来反映一个企业在特定时刻或特定时期的财务状况与经营成果的报表。财务报表是企业外部人员获得企业财务信息的主要来源，它对企业的管理也十分有用。直接从调整后的试算平衡表的信息开始准备财务报表很简单，因为调整后的试算平衡表包含了财务报表里要用到的所有账户和负债。
基本的财务报表包括资产负债表、利润表和现金流量表。我们准备财务报表的步骤一般是从利润表、留存收益表到资产负债表。这个顺序是有道理的，因为资产负债表需要用到留存收益表中的信息，而留存收益表中的信息又需要用到利润表中的信息。一般财务报表的最后一步是现金流量表。
表6-1
2.资产负债表
资产负债表是用来反映一个企业在特定时期财务状况的财务报表。它也被称为财务状况表。资产负债表至少是每年编一次，也有的按习惯每月编制或按季度编制。资产负债表由资产、负债和所有权益的列表组成。
资产负债表有两种格式：账户式和报告式。在账户式的资产负债表中，资产列在报表的左边，负债和所有者权益列在右边。账户式资产负债表如表6-2所示。
所有的资产负债表都包含同样的基本信息。资产负债表的表头部分由三行组成，即公司名称、财务报表标题和制表日期。资产负债表包括三部分，即公司资产部分、负债部分和所有者权益部分。资产负债表是以货币为计量单位的，同时资产总额等于负债与所有者权益之和。
表6-2
3.利润表
利润表是汇总通过配比一定会计期间的收入与费用来反映企业在该时期的经营成果的财务报表。它反映净利润或净损失。它也被称作收益表、经营成果表或损益表。利润表有两种常用格式：多步式利润表和单步式利润表。
多步式利润表包含一系列把费用从收入中扣除的步骤。第一步是把销售成本从销售收入中扣除而得出毛利。第二步是把经营费用从毛利中扣除从而得出经营收入（或经营收益）。最后一步是把所得税扣除得出净利润。
表6-3
4.现金流量表
现金流量表是反映某个企业在特定时期的现金收入和现金支出的财务报表。这里的“现金”不仅是我们通常意义上所说的纸币和硬币，还包括现金等价物。现金等价物是指具有极强流动性的短期投资，这些投资可以非常容易和迅速地转化为现金，通常是指到期在三个月或三个月以内的投资。
一个企业的现金流量主要来自经营活动产生的现金流量、投资活动产生的现金流量和筹资活动产生的现金流量。经营活动包括商品和服务的销售、购买或生产，这些活动涉及客户应付账款的回笼、对供应商或工人的支付及对诸如租赁费、税金和利息之类项目的支付。投资活动包括取得和出售长期资产和以长期投资为目的而持有的长期债券。筹资活动包括股权筹资和债券筹资以及对借债的偿还。
现金流量表的编制非常简单。首先，列出那些影响现金增加（及现金流入）和现金减少（及现金流出）的活动。其次，根据对上述活动的划分标准，将每一笔现金流入和流出分别填入相应的类表中。
表6-4
References
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