基础会计英语chapter 2 Accounting Equations and Debit-credit Bookkeeping

1、Chapter 2 Accounting Equations and Debit-credit Bookkeeping Objectives1. To understand the classification of accounting elements and setup of accounting equations;2. To learn to express account titles in English as well as how to design accounts;3. To master double-entry system and trial balance.Bra

2、instormingTry to translate these words into English:会计要素会计等式会计科目试算平衡表借贷记账法所有者权益净利润营业收入InstructionAccounting skills contain how to classify accounting elements and establish the accounting equation, how to design accounts with the double-entry system, and how to conduct accounting practice concerning

3、 transactions and costs incurred in a companys operation.Accounting elements are made up of assets, liabilities, owners equity, revenue, expenses and profits. Among them equations exist, so accounting equations express their relationships2.1 Accounting Elements 2.1 Accounting ElementsIn China, there

4、 are six accountant elements in every enterprise：AssetsLiabilitiesOwners equityRevenueExpensesProfitsElements of the Balance SheetElements of the Income Statement2.1 Accounting ElementsAssets, liabilities and Owners equity are known as the elements of the balance sheet, and the relationship among th

5、em is expressed in an equation, namely Assets = Liabilities + Equity. Income, expenses and profits are called elements of the income statement, and the relationship among them is also shown in an equation, i.e. Income Expenses = Profits. These relationships are objective and equal, so they are calle

6、d accounting equations. AssetsAssets are the resources of value that are owned and will bring future economic profits to an entity.Four characteristics: They are caused by the past transactions or matters, measured by money;They are owned or controlled by an entity;They can bring the entity future b

7、enefits. Assets are always divided into current (or liquid) assets and non-current (or long-term) assets. LiabilitiesUnlike the case of Assets, a liabilitys economic sacrifices mean a companys future cash outflow. It is a future sacrifice of economic benefits arising from present obligations of an e

8、ntity as a result of the past transaction or event. Features of a liability are the following: (1) It is caused by the past transactions or matters, and can be measured by currency; (2) It will result in outflow of economic profits; (3) It represents the entitys future economic obligations, which al

9、so reflects the creditors claims on the companys assets. Liabilities are usually classified into current liabilities and non-current (or long-term) liabilities. Owners equityThe amount by which business assets exceed business liabilities is called owners equity (or shareholders equity), namely a com

10、panys net assets.In China, there are four sections in the owners equity. paid-in capital (or share capital): owners original investmentcapital reserves: extra nonoperating transactions surplus reserves: from the net income for specific uses, including statutory surplus reserve and other surplus rese

11、rve.unappropriated profits: RevenueRevenue is the economic resources flowing into a business as a result of rendering goods or services to customers during a given accounting period. According to the differences of their contents, revenues can be sorted into: sales revenue, service revenue and reven

12、ue from transferring the rights of assets.According to the differences of their importance, they can be classified into prime operating revenue (e.g. revenues from goods sales, partly-finished products or services provision) and other operating revenue (e.g. revenues from technology transfer, materi

13、als sales or wrappings lease).ExpensesExpenses also come from the general business activities. Increase in expenses will decrease assets and the owners equity. Expenses are the outflow of a businesss economic resources resulting from earning revenue or the cost of the operational activities for the

14、business. Expenses include operation costs (e.g. cost of goods sold, manufacturing costs), and period expenses (e.g. administrative expenses, selling expenses and financial expenses). ProfitsProfits are the final result of profitable operations of a business in an accounting period. Net income (or n

15、et loss) is the result of matching revenue with expenses. When revenue exceeds expenses, net income occurs. Otherwise, net loss occurs. The earning of net income (or profit) is a major goal of almost every enterprise, no matter the enterprise is large or small. Profit can be classified into operatin

16、g profit, total profit and net income (or profit).New words and expressionsaccounting elements 会计要素accounting equation 会计等式incur ink: vt.遭受，招致, 引起accounting titles 会计账户trial balance 试算平衡variation vriein n.变化, 变动(的程度)concretely adv. 具体地New words and expressionsbalance sheet 资产负债表income statement 利润表c

17、urrent assets 流动资产non-current assets 非流动资产long-term assets长期资产cash on hand库存现金cash in bank银行存款New words and expressionsfinancial assets measured at fair valuethrough profit of loss for the current period 以公允价值计量且其变动计入当期损益的金融资产accounts receivable应收账款advances to suppliers预付款项inventory. invntri n.存货,详细

18、目录, 存货清单long-term equities investment长期股权投资fixed assets固定资产New words and expressionsconstruction in process在建工程project materials工程物资intangible assets无形资产goodwill商誉short-term loans短期借款notes payable应付票据accounts payable应付账款New words and expressionslong-term loans长期借款bonds payable应付债券long-term payables长

19、期应付款residual rzdu:l adj.存留下来的，剩余的，残余的paid-in capital实收资本capital reserve资本公积surplus reserve盈余公积New words and expressionsunappropriated profits未分配利润par value票面价值statutory sttjutri adj.依照法令的, 法定的revenue of transferring让渡资产使用权收入wrappings lease包装物出租cost of goods sold 销售成本manufacturing cost 生产成本New words

20、and expressionsperiod expenses期间费用administrative expenses管理费用selling expenses销售费用financial expenses财务费用operating profit营业利润2.2 Accounting EquationsAssets, liabilities and owners equity are always considered the basic accounting elements. The relationship among them is expressed in the accounting equ

21、ation shown as below.Assets = Equity (Creditors Equity Owners Equity) = Liabilities Owners EquityWhen the amounts of any two of these elements are known, the third can be calculated.Assets Liabilities = Owners EquityAssets Owners Equity = LiabilitiesIn an accounting period, the total profits of a co

22、mpany equal the total revenues minus the total costs. The relationship is expressed in the accounting equation shown as below.Revenue Expenses = ProfitAnd before closing entries, we can establish a new equation:Assets = Liabilities Owners Equity (Revenue Expenses)New words and expressionsequal i:kwl

23、 v. 等于; 比得上; 使相等; 同样看待; adj. 相等的，平等的;minus mans prep.（表示运算）减去;在零度以下; adj. 负的;复数: minuses2.3 Accounting Titles and Accounts Accounting TitlesAccounting titles are used to name the accounting elements that are classified scientifically. An account is the tool that can record what economic transaction

24、an account title represents, so the account title is seen as the name of an account. Accordingly, there are two methods for keeping certain transacti ons in the account, which are called single-entry system and double-entry system.Debit-credit bookkeeping is a kind of double-entry system with the sy

25、mbols of debit and credit.Accounting TitlesIn China, there are six groups of account titles such as assets, liabilities, common subjects, owners equity, costs, and profits and losses. The chart of accounts is uniform and applied in accounting. Generally, blocks of numbers are assigned to various gro

26、ups of accounts. In most cases, a four-digit system is used in a business. In a four-digit system, the first digit refers to the major group in which the account is located. For example, 1 stands for assets; 2 for liabilities; 3 for common subjects; 4 for owners equity; 5 for costs; 6 for profits an

27、d losses. Accounts An account is made up of two basic parts. (Sample 2-2) TitleIncrease(or Decrease)Decrease(or Increase)An account is made up of two basic parts. if the left side represents the increases,the right side records the decreases which forms the basic structure of an account.T-account is

28、 always used by accountants to record transactions.Account TitleDebitsIncreaseNormal BalanceCreditsDecrease(Normal Balance)Ending Balance=Beginning Balance + Increase Sum Decrease SumNew words and expressionssingle-entry system 单式记账法debit-credit bookkeeping借贷记账法general ledger 总分类账numerical nju:merik

29、l adj.数字的, 用数字表示的, 数值的designation dezgnen n.名字, 称号, 选派, 指定designate dezineit vt.指派, 委任, 标明, 命名supplies purchasing材料采购New words and expressionsraw materials原材料finished goods库存商品depreciation dpri:i:en n.(资产等)折旧，货币贬值，跌价, 减值construction in process在建工程long-term deferred and prepaid expenses长期待摊费用wait-dea

30、l assets loss or income待处理财产损溢current year profits本年利润New words and expressionsprofit distribution利润分配manufacturing overheads制造费用prime operating revenue主营业务收入other operating revenue其他业务收入investment income投资收益non-operating income营业外收入operating costs主营业务成本New words and expressionsother business expens

31、es其他业务支出tax and associate charges营业税金及附加nonbusiness expenditure营业外支出subsidiary ledgers 明细分类账accrual kru:l n.获利,利息,自然增长 (Sample 2-3) Rules of Debit-credit BookkeepingDebit（on the left side）AccountCredit（on the right side）increaseAssetsdecreaseincreaseCostsdecreaseincreaseExpensesdecreasedecreaseLiabi

32、litiesincreasedecreaseOwners equityincreasedecreaseRevenueincrease Debit-credit BookkeepingDebit-credit bookkeeping obeys the basic rules that accounts contain at least one account debited and at least one account credited, and that the total debit must be equal to the credit. For example, someone started his company with 200 000 yuan that was immediately deposited into the bank. This transactio