UNIT 1 The Field of Accounting 1. Because, that no nation has all of the commodities that it needs. 2.

For assunes them of the means to buy necessary import. 3. A nations balance of payments is a record of this complex transaction. For example : ecports, tourist expenditures and immigrant remittanies 4. Yes, it can Such as great britain in the nineteenth century, based their entire economy on the consept of importing raw materials, processing them into manufactured goods, and then exporting the finish goods. The subsquent profits enable these nations to import the food they neede. 5. When an investment is mode, capital enters a country, enabling it to import manufactured materials to build a new manufacturing pant and to pay workers to build it. 6. An invesment should yield a profit. 7. Bartering : - Difficult to find an apponent transaction as need - Must bring the item to barter Trade of money: - Just bring the money - Easily find apponent transaction 8. Some nations prosess little in the way of exportable commodities or manufacture goods, but they have a mild and climite. 9. Information is reporting by a variety of sorce, and there are bound to be mistake and missions. 10. Importing tariffs (taxes) and quotas (import restriction) or both, if successfull. The cost of the import rises in the local market and the imported goods are

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comparatively more expense to the consumerthen the locally made goods when a quota is imposed, the quantity previously immported and paid for is reduced. 11. Reducing import. 12. Marely moving the gold from one custodian vault to another at the veeral reserve bank of New York.

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UNIT 2 The Field of Accounting 1. The state of a nations trade balance of payments help determine the rate of exchange for its currency. 2. The comparative value of each nations money was determined by the ratio of the gold content of each coin. 3. When a nations trade balance of payments is in deficit. 4. Spot rate Future rate : which means that stetlement occurs in two bussiness day : for setlement on delivey at any future date

This transaction result in a future or forward contract. 5. Headger : the purchase or sale of foreign exchange in the future in order

to avold a loss due to any change in the rate of exchange during that period. Speculator :buy or salles foreign exchange without of setting the purchase

contract or vice versa 6. Of a New York 7. The broker briness both sides of the transaction quickly together by telephoning in the buyer and seller and arriving at a mutually a accept table rate 8. Yes, can without a broker If a buyer and seller agree on the price of exchanging two currencies but, more can vienent to use a broker. 9. 10. Because, every country does not have all resource if need but the other might have because of that trade between country happened. To full fill the need of

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every country and the most factor that is use in the trade is currency or money. 11. The major international banks (trading primarilly for the accounts of their customer) brokurs, control bank, and large corporation with international activities ( trading usually to project their currency from short- term fluctuations) and individuals (trading as speculators and investor) 12. Because, demand and supply is not always staquan, there is a lot of factor that change demand. Example : is politic or disaster 13. Because, over to much exchange can cause a error balance of economy in a country especiallyforeign trade. A to much investation from outside or another country can show down a quowth of corporate or bussibess from inside country. A much woise ia a possibilty of take over if economy in a country by other country. 14. So he can avoid a loss due to any change in the rate of exchange during that the period. 15. Yes, it does by a when the cros rute are favorable. 16. To make a profits cause the cross over favorable. 17. To make a profits cause the cross rates are favorable. 18. Because, some corporation have a find surplus fund. Then last the funds storange. It is will money use full if it is invested the corporation my find that it can cause a higher rate of return by investing in foreign currency. If after deducting the hedger cost and any out of pocket expenses such cable cost. He funds that the rate of return is still hedger the currency of it is a was country. The many them makes the short term investment in others country.

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19. Based on supply and demand of specific currency of every country. 20. American or will street based from counts of supply and demand of every country.

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UNIT 3 The Basic Letter Of Credit 1. Because the letter of credit specifies the documents to be submitted, the shipping requirements, and the expiration date. 2. Because for the documentary requirements. 3. The written nation on the bills of lading indicates that the gods have actually been put on board the named vessel. Otherwise, the merchandise may be overlooked. 4. The bank takes possession of the merchandise. 5. The letter of credit is the bank instrument that issues the person selling merchandise of payment it he makes the agree upon shipment the payment should adjust price accordingly in the modeling contract. 6. Proof that the goods are actually on the ship. 7. The customary letter of credit calls for a full set on board ocean bills of lading to order shipper, blank endorsed. Each of these phrases will now be examined. 8. Airlines, trucks and rail roads. 9. Because this written notation on the bills of lading indicates they the goods have actually been put on board the named vessel. 10. Uniformity of the law for ocean bills of lading was achieved at an international convention held at The Hague in 1921 and resulted in what are known as The Hague Rules. 11. Then the seller must prepay the freight and insurance costs to the delivery port the of course adjust his price according in the underlying contract. 12. They have no legal obligation to inspect the actual merchandise.

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13. Insurance 14. That the documents have been successfully negotiated and that he must pay the bank in accordance with his application. 15. If the buyer goes into bankruptcy, the bank take possession of the merchandise in this way, it was a source of repayment for the extension of credit.

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UNIT 4 Letter Of Credit 1. The red clause letter of credit derives its name from the old custom of writing this particular clause in red ink to make it more noticeable. It is often used when the letter of credit is opened by the importer in favor of this agent. 2. The importer instructs the opening bank to prepare a transferable letter of credit addressed to the beneficiary and or transferee the beneficiary may then negotiate with a supplier and then notify the bank that he has transferred it to yet another specified party. 3. The documents are negotiated but instead of paying the seller, the bank accepts the draft-thus making it a bankers acceptance-and returns it into the seller. He may hold it until maturity and then present it to the receive the full amount or he may sell it in the current market for bankers acceptances, receiving a discounted amount. 4. 5. Such usance letters of enable the buyer to receive financing. He obtains the documents immediately upon negotiation from the bank by signing a trust receipt. He does not have to pay the merchandise until the specified time has elapsed. 6. Because of this, a foreign bank usually sends its letters of credit through a united states bank-rather than directly to the beneficiary-and ask the united states bank to advise or confirm them. This results in advised letter of credit and confirmed letter of credit. 7. Its actually two letter of credit are identical, except for the amounts. The first letter of credit is usually opened in favor of an agent, who then obtains a

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second letter of credit from his bank by depositing the first letter of credit. He also gives his bank advance invoices and a drat. When the beneficiary under the second letter of credit draws thespecified amount, the second bank substitutes the invoices and draft in its possession. Leaving all the other document exactly as they are, it draws on the letter of credit to reimburse itself for the payment it has made. 8. Because of the many recent abuses in the handling of standby letter of credit, united states banks are now required to include the totals of standby letter of credit with forms of customer debt in determining the banks legal lending limit to the customer. 9. Travelers letter of credit, sometime also called a circular letter of credit. This simply provides a traveler with access to large sums as he makes a trip. The only document required is a draft drawn by him. This kind of letter of credit is in much less demand these days because most people prefer the convenience of travelers checks and credit card. 10. The document are forwarded to the importers bank, while a sight draft is presented at a letter date. 11. Letters of credit may call for drafts payable after a specified number of days after sight. The documents are prepared by the shipper exactly as before, except that now he draws the usance draft payable, for example, at ninety days after sight. This arrangement has been previously agreed to at the buyers request and is indicated in the underlying contract and letter of credit application. 12. Revocable letter of credit : a latterof credit that may be canceled at any moment without prior notice to the beneficiary.

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Standby letter of credit :a latter of credit that can be drawn against, but only if another business transaction is not performed. 13. Issuing bank will check equipment and according to accepted document with condition and term in L/C, if not same, so the payment will be refused. If it is the same, issuing bank will pay for party of beneficiary (seller) through the advising bank, and also deliver the document to buyer. With original document which accepted from bank issuing, buyer will take goods/service in customer, without original document buyer cannot take goods/service. 14. Amendment : A change in the original letter of credit. The verb from is amend. 15. Because major international banks in the united states and elsewhere encourage international trade and are quite knowledgeable about the financial soundness of smaller banks, major banks are very willing to confirm letter of credit as part of their correspondent banking relationships.

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UNIT 5 The Field of Accounting 1. Accounting frequently offers the qualified person an opportunity the move ahead quickly in todays business world. 2. It records the past growth or decline of the business. 3. Because any new enterprise of any kind increases the demand for accountants. The demand for competent accountants is generally much greater than the supply. 4. They are usually familiar with the methodology of finance and the fundamentals of fiscal and business administration. 5. The simple bookkeeping procedures of a hundred years ago have been replaced in many cases by the data-processing computer. 6. The present-day accountants job developed from the bookkeepers job. 7. The accountant sets up a bookkeeping system and interprets the data in it, whereas the bookkeeper performs the routine work of records figures in the books. 8. Whereas the bookkeeper performs the routine work of recording figures in the books. Because interpretation of the figures is such an important part of the accountants function, accounting has often been described as an art. 9. The field of accounting is divided into three broad divisions : public, private, and governmental. 10. CPAs can offer their services to the public on an individual consultant basis for which they receive a fee. A certified public accountant , or CPA, as the term is usually abbreviated, must pass a series of examination, after which he or she receive a certificate.

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11. Some CPAs perform work for corporations or government offices and receive a salary like other members of management. 12. Public accounting consist largely of auditing and tax services. For Auditing, because An audit is a review of the financial record of an organization. It is usually performed at fixed intervals of time-perhaps quarterly. Semiannually, or annually. And as the tax laws have grown up increasingly complex. Not only corporation but also individuals have had to utilize the services of accountants in preparing their tax forms and calculating their tax liability. 13. These two areas are often joined together under the term governmental and institutional accounting. two similar because of legal restrictions in the way in wich they receive and spend funds. Therefore, a legal sometimes necessary for this type of accounting practice. 14. All branches of government employ accountants. Like those in private industry, work on a salary basis. They tend to become specialist in limited fields like transportation or public utilities. 15. Nonprofit organizations are of course in business for some purpose other than making money. They include cultural organization like symphony orchestras or opera societies, charitable organizations, groups, or corporate-owned research organizations. Although they are limited in the manner in which they can raise and spend their funds, they usually benefit from special provisions in the tax laws. 16. Private accountants, also called executive or administrative accountants, handle the financial records of a business. Like those who work for the background is

government or nonprofit organizations., they are salaried rather than paid a

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fee. Those who work for manufacturing concerns are sometimes called industrial accountants. Some large corporations employ hundreds of employees in their accounting offices. 17. The chief accounting officer of a company is the controller, or comptroller, as he or she is sometimes called. Controllers are responsible for maintaining the records of the companys operations. On the basis of the data that have been recorded, they measure the companys performance, they interpret the results of the operations; and they plan and recommend future action. This position is very close the top of management. Indeed, a controller is often just a step away from in order to being the executive officer of a corporation. 18. All branches of government employ accountants. In the United States, this includes federal, state, and local governments. In addition, government-owned corporations in the United States and in many other countries have accountants on their staffs. All of these accountants, like those in private industry, work on a salary basis. They tend to become specialists in limited fields like transportation or public utilities. 19. Internal auditors concerned with audits. They are in charge of the protection of the firms assets-the things of the value owned the company, including cash, securities, property, and even goodwill. The internal auditor sees that current transactions are recorded promptly and completely. He or she also identifies inefficient procedures or detects fraudulent transactions. He or she usually called upon to propose solutions for these problems. 20. Managerial accountants. In particular , they work with the kinds of financial reports necessary to management for the efficient operation of the company, including budget and cash flow projections.

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21. A small business may retain the services of a CPA to perform all or some of these functions. A medium-sized business may employ a staff accountant who does all of them. As companies grow their accounting staffs become increasingly specialized. 22. They are salaried rether than paid a free. 23. teaching accountants have formal training and some partical experience in the field. They often prefer to teach the subject, however, because of the security of a salaried position, they may work in a university or commercial school. 24. likely condidates for success in the field typically have an interest in business. 25. They must be able to understand the conditions that indicate business success or failure. 26. A new CPA can begin a private practice or from of a partnership with other accountants. 27. Since accounting work is not usually subject to either short-term changes or long-term trends in the business cycle. Salaried sccountants are not as likely to be affected by layoff or seeasonal changes in the work load as are industrial or clerical workers.

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UNIT 6 BOOKEPING 1. The procedure a small business or company may employ only one bookkeeper who records all of the financial data by hand; large organizations may employ many bookkeepers who use electronic and mechanical equipment for a large part or their work. The same basic principles. 2. The bookkeepers basic requirements must be accurate, good in math, and meticulous.that is they must be very careful to record each detail in its proper piece. 3. About 3.000 B.C., by the sumerians the Egyptians, and other peoples of the Middle East were recorded by means of written numbers. The romans, too, were prolific keepers of records. 4. The fifteenth century A.D. the stimulus for modern bookkeeping. 5. The two system bookkeeping are double-entry and single-entry. 6. The double-entry method was perfected by the merchants of Venice during the fifteenth century and is still used today. The basic principle of double-entry bookkeeping is that every transaction has a twofold effect. 7. An account is a record of the financial transactions that concern one item or a group of similar items. The account includes categories of financial data for each area of interest during of specific period: the value at the beginning of a period, changes in value during the same period, and the value at the end of a period. 8. Bookkeeping is the area of accounting concerned with external parties interested in the business firm.

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9. There is a big difference between assets and liabilities in fact two things are complete opposites of each other. An asset is something that is worth money and that someone could sell for money. A liability is something that you owe. This is could be something like a bill. Example of assets Prepaid Rent Example of liabilities other current liabilities. : Trade Creditors, Payroll deductions payable, : Cash, Supplies,

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UNIT 7 Business Transactions And Financial Statement 1. Each business should have an accounting system best suited to its particular needs. The method used must provide the most effective means of recording, summarizing, and presenting appropriate accounting data for management and for others who have an interest in the business. 2. The Accountant is responsible for the design and implementation of accounting forms, the records, and procedures. 3. Data-processing equipment have substantially increased the speed with which information can be made available to management. 4. Transaction recorded in accounting system is : a. Using a double entry system to record transactions keeps the accounts in balance. b. Source documents are important because they are ultimate proof a business transaction has occurred. c. An account is a part of the accounting system used to classify and summarize the increases, decreases, and balances of each asset, liability, stockholders equity item, dividend, revenue, and expense. d. The accounting requirement that each transaction be recorded by an entry that has equal debits and credits is called double-entry procedure. e. This double-entry procedure keeps the accounting equation in balance. 5. There are eight the typical business transaction : 1. 2. 3. Purchase of merchandise, supplies, and services Sale of merchandise Receipt and disbursement of cash

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4. 5. 6. 7. 8.

Receipt and issue of negotiable instruments, such as checks or notes Acquisition of property Incurring and paying debts Transfer of merchandise from warehouse to store Use of supplies and services in the operation of the business.

6. The dollar, of course, is the basic unit of measurement in accounting in the united states. Yes , it is. 7. The dollar amount of each transaction is entered in accounting journal of the business. The dollar amount that is involved generally appears first on a business document, such as a sales invoice. 8. Because they reflect alterations in the companys financial position and operating performance. 9. Two basic financial statements are the balance sheet and the operations statement. 10. The balance sheet shows the firms condition on the last day of the accounting period. It shows what the business owns and what it owes to its creditors or it owners. 11. Assets = Liabilities + Owners Equity 12. A statement of owners equity shows what change have occurred in regard to equity since the previous balance sheet was compiled. 13. Is also referred to as a profit and loss statement or an income and expense statement. 14. As sales of good or service.

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15. Such as general or selling expenses the balance that is left when these further expenses are deducted is called net income or net profit. 16. Comparability and without is there would be no firm basis on which to tax a company to invest in it or even to manage it. 17. Financial problems of the organization. 18. Are also prepared periodically from the financial records. 19. Accountants need variable evidence just as scientists do. 20. The company is a manufacturing company engaged in the production and processing of raw materials into finished materials. For example, a manufacturing company car assembly, car series obtained from suppliers and assembled into finished goods. 21. These financial statements are provided for anyone who has an interest in the financial information of an organization. 22. A body of principles and concepts underlies the practice of accounting. These concepts together from a general guide to the accounting profession. - Accounting system must provide consistency in the accumulation and recording of financial data. - An accounting system must make it possible to compare the data issued to management,government,and the public. 23. The two concepts are very important because they form the basis for the development of accounting techniques and procedures used in preparing the financial statements. 24. clearly allows management requires basic principles that are useful as a means to prepare a report.

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25. In practice the current accounting assumptions, just as we often assume something that can be easily accepted or performed. The assumptions of this reason that facilitate the implementation of accounting. The basic

assumptions used one of which is the period of time (Time-period/Periodicity). 26. Another underlying assumption is a special business entity, business continuity, and the use of monetary units in the recording, all the assumptions used in the preparation of the technical basis for the development of the report. 27. A. is tolook atthe theoriesthat explainandpredictreal events. B. Existbecauseemployerscanseetheassumptionsofthe theory 28. A. scilicet withthe necessaryevidence, so thatthe accountcan checkorsee. B. yes, if theaccountantdoes notseeevidence ofa transaction, theydid not audit. 29. Soby collectingall theevidenceso thatcheckscan be donethroughdirect observation ofassets, interviews, as well asthrougha variety

ofsourcesoutsidethe clientchecks.

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UNIT 8 BUDGETING 1. Budgeting involve planning, coordination, andsupervision. primary objective ofthe budgetis to expressexpectationsorobjectives the company areclearandformal, so they canavoid confusionandprovide direction to the what isto be achievedhemanagement. 2. Commonaccountingon a budgetthat is BudgetFactory Overhead Costs, budgetInventory, Non-Production Costsbudget and Profit and Loss Budget.

Budget changed the budgetcan be changedat the timethebudgetwas nottherebeforeornotbased onthe purpose ofa cleartheory. Sothe budgetcan be changed 3. Areincluded in thefinancialforecasts that is balance sheet, income statement, changes in equity, cash flow statement, cash flow statementandnotes. Forarange ofactivities(range ofactivities), not justforonelevelactivityaloneandat its coreisaseries ofbudgetsthatcan beadjustedthelevelsof different activities. 4. One of activity budgets is the sales budget. Information about unit price, that is, the price of one item of each kind of merchandise sold, and the expected sales volume are the important entries for this budget. 5. Information about unit prices, that is the price of one item of each kind of merchandise sold, and the expected sales volume are the import ant entries for this budget. If the business sells more than one kind of item, a provision for the sales mix must be added. 6. In the furniture store, one department might include dining room furniture and another department might include bedroom furniture.

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7. Budget for various sections of the company are gathered together into one overall budget. 8. The sales figures are adjusted for various reasons, some merchandise is returned for credit, a small but significant volume is unusable because of spoilage or damage, and further adjustment is necessary to account for allowances or discounts. 9. During changes and the business cycle, such as inflationary periods or recession, the principle of flexibility becomes extremely important. 10. The mirror image of the sales budget is the purchases budget, which is of course, the budget for the goods that the business will have to buy first in order to sell. The purchases budget is prepared after the sales budget is completed and after the existing inventory of goods for sale has been evaluated. 11. The sales budget and the purchases budget must be used in formulating the operating-expenses budget because these two major activities provide the justification for the size of the selling and administrative expenses. 12. It terms for estimating the cost unit costs 13. The estimated prices for purchases are strongly influenced by the profit objective incorporated in the sales plan. The volume of purchases that is budgeted depends on the estimated sales volume. This is derived in turn from external and internal business trends that are expected to influence the cycle 14. In this case of a retail establishment , it consist of two part one for those expenses which are incurred in selling the merchandise , and one for general and administrative expenses. Yes, it does

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15. Because, Only in this manner is it possible to fix responsibility for incurring operating expenses. The sales budget and the purchases budget must be used in formulating the operating expenses budget because these two major activities provide the justification for the size of the selling and administrative expenses into different categories ,such as production ,research, development , sales , and advertising 16. The break-even point is the minimum volume of sales the company needs to have, given the estimated operating expenses, in order not to incur a loss. The accuracy of the break even points depends on the skill with which the operating expenses have been estimated. Once the sales budget and the operating expenses budget are prepared, the accountant is ready to determine the break-even point 17. When preparing the case budget, it is important to know what has been estimated in the sales, purchases, and expenses budget in regard to receipts and disbursement because they will be summarized in the cash budget. 18. The cash budget is some-what different from other budgets. The other budgets are prepared on an accrual basis that is expenses are estimated for the period in which they incurred and income is calculated for the period in which it is earned. These periods may differ from those in which actual cash is expended or in which cash payments are received. The cash budget, on the order hand, is prepared on a cash basis, estimating the accounting periods in which cash must be paid out or when it will be received. 19. A. when preparing the cash budget, it is important to know what has been estimated in the sales, purchase, and expenses budgets in regard to receipts and disbursement because they will be summarized in the cash budget.

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B. outstanding obligations at the beginning of the budgets period are taken into account, and so are expected receipts from investment and collecting receivables, that are to be received in the new accounting period. 20. Because, the cash budget is often prepared for each month. it can then be revised each succeeding month, incorporating new factors that affect the cash flow of the business. a company must know how much cash it has on hand to meet its obligations, or to enable it to avoid committing itself to obligations that it cannot meet. 21. The estimated cost for new additions to plant facilities, or for replacement or improvement projects for the companys fixed assets, make up the capitalexpenditures budget. this budget may reflect a portion of a long-term planning project for this type of expenditure. 22. A. the estimated cost for new additions to plant facilities, or for replacement or improvement projects for the companys fixed assets, make up the capital expenditures budget. this budget may reflect a portion of a long-term planning project for this type of expenditure. a company may, for instance, have a fiveyear plan to improve and expand its plant facilities. B. the annual budget would then show only the part of the total amount to be spent during that particular year. this budget should therefore state whether changes in the rate of business activity will affect the long-term plan 23. For the benefit of management, the budget should indicate whether factors such as increased demand would make it desirable to speed up a long-term plan to expand production capacity; or, on the other hand, whether a reduction in business would make desirable to slow down expansion or even stop it entirely.

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24. Any significant change from the preceding fiscal year should be discussed when the budget is presented. these differences can be expressed in a percentage of positive or negative change over the previous year or the last few fiscal years.

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UNIT 9 Cost Accounting 1. To determine the selling price of the product or the cost of services that are furnished by a company. 2. it is first necessary to determine the costs of making the product or of

providing the service. And the second system is known as direct or variable costing. It is based on the concept that the costs vary according to the volume of the product that is manufactured, so that an increase in volume will bring about an increase in variable costs. 3. In the first, raw materials are shaped or assembled into a product. Example is Appliances, furniture, and clothing. The second, a continuous process. Example is Petroleum products, paper,flour,and cement. 4. Job-order cost accounting is suitable for use with the assembly type of manufacturing. It is used to determine the cost of an individual item or a batch,or job lot, of identical items. 5. Process cost accounting, is suitable for use with the continuous-process type of manufacturing 6. Because it is based on a time period that is usually determined by the nature of the processing. 7. The accounting must first determine the prime, or direct Cost of the product. 8. Direct-material-cost data are obtained through the analysis of three perpetual inventories, that is ,inventories. That are maintained at all times. The first is a record of the raw materials on hand the second is a record of the work in process and the third is a record of the finished goods.

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9. Supporting documents for the stores ledger include purchase orders, receiving and reports , store requisition slips. 10. When the overhead is added to the prime cost , the resulting figure is called the factory cost. 11. Depreciation and property taxes for the manufacturing plant, for example, are both accounted for as overhead costs, as is the plant foremans salary. 12. Costs are subdivided into fixed, variable, and semi variable categories for the purpose of record keeping. 13. Indirect costs may be allocated, or assigned, to different products, job order, or department on the basis of a predetermined rate or percentage. This is called the burden rate. 14. a. One of the methods used to allocate indirect costs is to set a burden rate based on the direct labor costs. b. A second method is to establish a burden rate according to the number of hours of direct labor that are accumulated over a period of time. c. A third method is to allocate the indirect costs on the basis of the number of hours the machines in the factory are used for a particular job. 15. Because,in process cost accounting, the indirect costs are accumulated for the process or for a department over a period of time. As in job order costing , indirect costs are usually allocated on the basis predetermined burden rate. Whereas job order costs accounting is supported by inventory ledgers, the process oriented manufacturing concern maintains cost accumulation ledgers. 16. One of the methods used to allocate indirect costs is to set a burden rate based on the direct labor costs, A second method is to establish a burden rate according to the number of hours of direct labor that are accumulated over a

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period of time, A third method is to allocate the indirect costs on the bais of the number of hours the machines in the factory are used for a particular job. These methods are normally used in job order costing. 17. The second system is known as direct or variable costing. It is based on the concept that the costs ver according to the volume of the product that is manufactured, so that an increase in volume will bring about an increase in variable costs. 18. The financial statements prepared under these two system vary for any specific period according to the sales made in the same period. At the time as the statements are issued, various schedules are also submitted to management in order to show detailed cost and to provide explanations when necessary. Such schedules usually give data about the cost of goods sold, the delling expenses, the general and administrative expenses, and non operating income and expenses items. Managements may also require reports of costs, such as the payroll, taxes accrued or paid, production rates, and receipt or shipment both of raw materials and finished goods. 19. Management establishes a predetermined standard for producing a product. Detailed records are then maintained, establishing variance accounts for various areas where the actual coasts differ from the predetermined standard.

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UNIT 10 Tax Accounting 1. Almost all individuals and organizations in the united state are required to compute their tax liability, complete the necessary forms, and pay the taxes due many features of the American system, both in the imposition and collection of taxes, have been adopted by other countries. 2. A tax accountant must have a thorough knowledge of the tax code of his or her country and of any division within in that have the power to levy, or impose, taxes. 3. Many of the larger corporations pay approximately 50 percent of their net income to the federal and state governments in the form of income taxes 4. Income taxes,Careful planning designed to decreases the tax liability to the lowest level, This planning is made possible by various provisions in the tax laws that offer alternative methods for handling particular transaction or accounting procedures. 5. 6. The individual proprietorship, the partnership, and the corporation Among these are limited liability, continuity of existence, and the ease of raising capital. 7. 8. Income is taxed to the individual proprietorship or partners The owners of these businesses therefore pay the progressive income tax rate for individuals on their business income. A progressive income tax is one that charges a higher rate for higher earnings. Example:An individual who earns $25,000 a year pays a higher percentage of his or her income in taxes than one who earns only $10,000. Corporations, on the other hand, are subject to a tax on their profits, while the stockholders

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of a corporation are also taxed at the individual rates on the dividends they receive from these profits 9. Corporations, on the other hand, are subject to a tax on their profits, while the stockholders of a corporation are also taxed at the individual rates on the dividends they receive from these profits. In Certain cases, the double tax is eliminated or reduced under special provisions of the tax laws. Under one provisions, the taxpayer receives a dividend exemption (income not subject to taxation) up to $100 for dividends received during the tax year. Another provision allows a corporation to be taxed as a partnership if it meets the following requirement for a small business: a. It is a domestic, rather than foreign, corporation b. It has no more than fifteen stockholders. c. All the stockholders are different people. d. No stockholder is a nonresident alien. e. There is only one class of stock.

10. This planning is made possible by various provisions in the tax laws that offer alternative methods for handling particular transaction or accounting procedures 11. Dividends are sums of money paid to the owners-people who own stock in the company-out of the corporations is not allowed a deduction for the dividends it pays out when its taxable income is computed.

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12. While the small-business corporation can save a great deal in taxes by being taxed as a partnership, it keeps the other nontax advantages, such as limited liability 13. The possibility of selling the business or liquidating it that is of going out of business and disposing of the assets. when this occurs, its possible to obtain long-term capital gains treatment. 14. The exception of buildings, that are acquired and placed in service. This credit was institute as a means of stimulating new investment in productive facilities. While there are certain limitations on applications of the credit on retained earnings, it offers an important opportunity to reduce taxes. 15. A special tax credit for investment in most kinds of depreciable assets, with the exception of buildings, that are acquired and placed in service. This credit was institute as a means of stimulating new investment in productive facilities. While there are certain limitations on applications of the credit on retained earnings, it offers an important opportunity to reduce taxes. 16. Fifo stands for first in, first out and it assumes that the first goods acquired are the first goods sold. Lifo on the other hand stands for last-in, first-out, and it assumes that the costs of the most recently acquired goods are the same as the costs of the goods sold during the accounting period. The second of these, the Lifo method, may be better from a tax standpoint, since this method result in a lower tax liability in a period of rising prices. Under lifo, the higher-priced goods are depreciated in the current accounting period. 17. Tax advantage also exists for businesses that sell merchandise for personal use. These sales are often made on the installment basis, with payments spread over a period of weeks, months, or perhaps event years. For tax

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purposes, it is permissible to report the profit from sales during the years in which the actual payments are made rather than during the year of the original sale. 18. A tax advantage is also available to the holders of most depletive assetsthose which are used up, or depleted, over a period of time-like oil, natural gas, uranium, or coal. The taxpayer who owns assets of this kind is allowed a deduction on the gross income derived from the asset. The deduction is known as a depletion allowance because of the economic importance of many of the depletive assets, the percentages allowed to the taxpayers are of great political concern. Some corporations received such a tax advantage that despite substantial earnings, they were paying almost no taxes. In an effort to reduce the inequities created by this preferential tax treatment, the U.S. Government recently instituted an additional 15 percent tax on tax preference items (TPIs). 19. The basic accounting procedure for computing income taxes is relatively simple. The final or estimated tax liability is charged to the income tax expense account and is deducted on the income statement. The liabilities credited to the estimation-income-taxes payable account and is then classified as a current liability on the statement of financial position. There are, however, accounting problems that arise in regard to income taxes. These problems result from differences in the amount of taxable income and the amount of income reported on the income statement. This may result from the use of different accounting methods for tax purposes.

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UNIT 11 Auditing 1. Auditing is an accounting that involves the review and evaluation of financial records. 2. Currently, however, outside audits are a normal and regular part of business practice. In addition, many corporation, especially the larger ones with complex operations, maintain a continuous internal audit be their own accounting departments. 3. System of internal control. Most good system will provide accounting controls against errors as well as a division of duties to reduce the possibility of misappropriations. An example of a business paper used in an internal control system is the petty cash voucher. 4. Ideally, a business should use as many internal controls as are consistent with efficient operation. In practice, the cost of installing and maintaining control system forces management to decide which control devices to use. If there are too many controls, a time may come when the companys employees re spending more time filling out forms than performing productive work. 5. Accountants also report on any deviations from, standard operating procedures; that is, the companys established methods for carrying on its operating and recording functions. The internal auditors also make suggestions to management for improvements in the standard operating procedures. 6. The emphasis placed on different parts of the internal auditors report varies from company to company. In some organizations, the auditors major or

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even sole function is to report on the completeness and accuracy of the books of account, as the financial records are known collectively. 7. A weakness exists, however, in internal auditing. If a report is unfavorable, it may not be shown to the person in management who can correct the problem. As a result management receives the false impression that things are running smoothly because they dont know about the problems that the internal audit has uncovered. To make effective us an internal auditing function, management must ensure that reports are received at all levels with an absolutely objective attitude. 8. The independent accountant it most always a CPA. His or her clients are generally the owners of the business or their representatives, the board of directors. 9. Independent accountant review the businesss operating activities; they also examine financial statements, the accounting records are supporting business papers, usually known collectively as evidential matter. 10. The accountants judgment or opinion on the fairness of the records is contained in a document sent to the client upon completion of the audit. It consists of a letter addressed to the client that contains both a scope paragraph and an opinion paragraph. 11. The independent auditor must also review internal controls as a basis for the applications of tests of their effectiveness. Furthermore, he or she is responsible for obtaining a responsible and appropriate amount of evidential material from business papers, ledgers, and other sources in arriving at an opinion on the accuracy of the financial statement.

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12. In addition to the extent of the audit, the scope paragraph also states the standards that have been used for the audit. 13. General categories for auditing have been development in the accounting profession. These categories cover technical competent. Independent of attitude and reporting standards. 14. The independent auditor must also review internal controls as a basis for the applications of tests of their effectiveness. The auditor do is furthermore, he or she is responsible for obtaining a reasonable and appropriate amount of evidential material from business papers, ledger, and other sources in arriving at an opinion on the accuracy of the financial statements. 15. The reporting standards deal with the contents of the report is the report must state whether the financial statements of the organization have been prepared in accoundance with generally accepted accounting principles. 16. The opinion the paragraph of the auditors letter meets the standards given immediately above. The opinion is based on a careful examination. To reach his or her conclusions, the auditor uses whatever tests and procedures he or she thinks are necessary. 17. The different categories of opinion that an auditor is: - Unqualified opinion - Qualified opinion - Disclaimer of opinion - Adverse opinion 18. The owner of a business may keep his or her own books of account and feel no need to have them examined by an auditor.

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UNIT 12 A Career in Accounting 1. It generally offers good starting salaries and excellent opportunities to move ahead. As we pointed out, many people with top job in management have risen through the accounting office. 2. One is through employment by a business or government organization in is accounting office. This is the board area of internal accounting within which there are many different specialties such as taxes, financial planning and budgeting, and internal auditing. 3. To rise to the top of the field in private accounting requires a combination of both fiscal and management ability. 4. Because, modern accounting practices grew out of bookkeeping procedures about a hundred year ago. Indeed, a knowledge of bookkeeping is essential for an accountant. The financial records of an organization are the raw materials on which accounting is based. 5. - Someone can get training business skill in schools. Because, business or commercial schools in many countries train people in the fundamentals of

accounting practices. A business or commercial school offers training in the kinds of jobs performed white-collar or office workers. Traditional include typing,

stenography (shorthand), and bookkeeping. 6. Most commercial schools offer night classes to enable someone already holding down a daytime job to work and study at the same time. 7. Because, as the principles and procedures of accounting have grown more complex, the trend has been to extend the training to a two-year period.

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8. In addition to the commercial schools, a variety of home-study or correspondence schools also offer training in accounting. In this case, the students buy a package that usually consist of textual material and assignment papers. The student reads a section of the text and does homework related to it. 9. Modern accounting practices grew out of bookkeeping procedures about a hundred year ago indeed, a knowledge of bookkeeping is essential for an accountant. The financial records of an organization are the raw materials on which accounting is based. Large organization keep separate book of account or ledgers for many different accounts, activities, and operations. Many clerical workers with an aptitude for bookkeeping study accounting in order to acquire additional skills. 10. In fact there are two major paths that a career in accounting might follow. One is through employment by a business or government organization might follow. One is trough employment by a business or government organization in is accounting office. This is the board area of internal accounting within which there are many different specialties such as taxes. Financial planning and budgeting, and internal auditing. To rise to the top of the filed in private accounting requires a combination of both fiscal and management ability. 11. Business or commercial schools in many countries train people in the fundamentals of accounting practices. A business or commercial school offers training in the kinds of jobs performed by white-collar, or office, workers. these traditionally include typing, stenography (shorthand), and bookkeeping; more recently many commercial schools have also added courses in accounting and computer programming

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12. 1.Learn more about how the company can run its activities, especially the financial part.

2. Manage their own finances our efforts, if we have my own business. 3. And every year, many companies continue job opening for an accountant, an accountant so that the future is very promising. 13. Accountants who specialize in income taxes, for example, must have a through knowledge of the extremely complicated tax codes of their country and region. Since these laws are changed frequently. They also must be an aware of the most recent legislation similarly. Managerial accountants must be thoroughly familiar not only with corporate tax laws but also with other laws that affect the particular in which the work 14. A few universities now also give courses leading to advanced degrees-the masters or the doctorate in accounting. Both public and private accountants take such courses in order to increase both their knowledge and their professional standing. It is an indication of the increasing importance of accounting that advanced degrees are now given in the field. 15. They make it possible to handle or recover very large amounts of information in very short periods. 16. In business, they are now used routinely for payroll records, inventory

control,accounts payable and receivable , and computation of tax liability. 17. Programmers prepare the data for the computers. The work out a step-bystep sequence for data and procedures that make the machines perform the desired tasks. Since the machines cannot think for themselves , the work of the programmer is essential

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