The Public Institution Center for Excellence in Information Tehnology and Information

FOREIGN
LANGUAGE IN
BUSINESS

Developed by:Cojocaru Vasile

Verified by:Negru Valentina

Chișinău 2018
 What is Accountancy?
Accountancy is the practice of managing and maintaining business
finances. Although accountancy practices are widely used for
individual financial management, the strict definition of it refers to
businesses and other organizations, such as governments and charities.
What Does Accountancy Cover?
In its most simple sense, accountancy covers the various financial
incomes and expenditure of a business, which will usually be sales,
payroll, and any payments made to third parties for the supply of
goods or services. Expanding on this, accountancy often refers to the
total management of profit and loss within a business, although an
accountant might not be involved with these areas, depending on the
needs and size of a company or organization.
The Role of an Accountant
An accountant can be used to perform many roles for a business.
Typically, accountants are mainly used for tasks such as calculating
how much tax is to be paid or for completing payroll functions,
although they may also be used for advice, as well as for preparing
profit and loss accounts in full and even advising on specific areas of a
business.
Accountants may work within a business, or simply with a business
while being employed by an accountancy firm. Where a business has
no requirement for full-time services, then they can easily find
accountants when they need to complete tax returns or have a need for
an ad hoc service.
Where Accountancy Began
Accounting practices can be traced back thousands of years, with
evidence of simple counting and organization being found in Africa
dating to almost 80,000 years ago. The industry as we know it today
has its roots in the 15th century, with Italian mathematician Luca
Pacioli generally regarded as accountancy’s founding father.
 Financial Accounting
Financial accounting is the process of preparing financial statements that
companies’ use to show their financial performance and position to people
outside the company, Including investors, creditors, suppliers, and customers.
This is one of the most important distinctions from managerial accounting,
which by contrast, involves preparing detailed reports and forecasts for
managers inside the company.

Financial Statements
Most companies put together quarterly and annual financial statements, which
they make available to shareholders and the investing public. There are four
basic financial statements used in the corporate world to show a company’s
financial performance:

1. The income statement (also called the profit and loss statement) covers a
specific period of time (such as a quarter or a year).

On an income statement, Revenues - Expenses = Net Income.

In accordance with the Generally Accepted Accounting Principals

(GAAP), revenue is always recorded in the period of the sale of the goods
and services, which may not be the same period when cash is actually
received.

2. The balance sheet is a statement of assets and liabilities at the end of an

accounting period. In other words, the balance sheet is a financial
snapshot at a specific point in time.

On a balance sheet, Assets = Liabilities + Stockholders’ Equity.

Stockholders’ equity is the amount of financing provided by operations

(retained earnings not distributed to stockholders) and by stockholders
who reinvest through contributed capital.

3. The cash flow statement shows the actual flow of cash into and out of a
company over a specific period of time, in contrast to the net income on
the income statement, which is a non-cash number.

A cash flow statement shows cash flows from operating activities,

investing activities, and financing activities.
 4. The statement of retained earnings covers a specific period of time and
shows the dividends paid from earnings to shareholders and the earnings
kept by the company.

Notes to financial statements provide additional information about the financial

condition of a company. The three types of notes describe accounting rules used
to produce the statements, give more detail about an item on the financial
statements, and supply more information about an item not on the statements.

Financial Accounting Standards

Financial statements must conform to accounting standards and legal
requirements. In the U.S., the Financial Accounting Standards Board(FASB)
establishes financial accounting and reporting standards (generally accepted
accounting principles, or GAAP). Publicly traded companies must also comply
with the requirements of the Securities and Exchange Commission.

Tax accounting
Tax accounting refers to the rules used to generate tax assets and liabilities in
the accounting records of a business or individual. Tax accounting is derived
from the Internal Revenue Code (IRC), rather than one of the accounting
frameworks, such as GAAP or IFRS. Tax accounting may result in the
generation of a taxable income figure that varies from the income figure
reported on an entity's income statement. The reason for the difference is that
tax rules may accelerate or delay the recognition of certain expenses that
would normally be recognized in a reporting period. These differences are
temporary, since the assets will eventually be recovered and the liabilities
settled, at which point the differences will be terminated.

A difference that results in a taxable amount in a later period is called a

taxable temporary difference, while a difference that results in a deductible
amount in a later period is called a deductible temporary difference.
Examples of temporary differences are:

 Revenues or gains that are taxable either prior to or after they are recognized
in the financial statements. For example, an allowance for doubtful accounts
may not be immediately tax deductible, but instead must be deferred until
specific receivables are declared bad debts.
 Expenses or losses that are tax deductible either prior to or after they are
recognized in the financial statements. For example, some fixed assets are
tax deductible at once, but can only be recognized through long-term
depreciation in the financial statements.
 Assets whose tax basis is reduced by investment tax credits.

The essential tax accounting is derived from the need to recognize two items,
which are:

 Current year. The recognition of a tax liability or tax asset, based on the
estimated amount of income taxes payable or refundable for the current year.
 Future years. The recognition of a deferred tax liability or tax asset, based on
the estimated effects in future years of carryforwards and temporary
differences.

Based on the preceding points, the general accounting for income taxes is:

1. Create a tax liability for estimated taxes payable, and/or create a tax asset for
tax refunds, that relate to the current or prior years.
2. Create a deferred tax liability for estimated future taxes payable, and/or
create a deferred tax asset for estimated future tax refunds, that can be
attributed to temporary differences and carryforwards.
3. Calculate the total income tax expense in the period .