PRACTICE. · Familiarize yourself with the text and comment upon the use of the Infinitive, Past Participle or the “-ing” form in bold type.

· Familiarize yourself with the text and comment upon the use of the Infinitive, Past Participle or the “-ing” form in bold type.

· Translate the text into Russian.

Every year the accounts of a limited company must be approved by auditors. They act on behalf of the shareholders. Their duty is to ensure that the directors are reporting correctly on the state of affairs of the company. They do not judge whether the directors are managing the company efficiently or not. That is something the shareholders must judge for themselves.

Until recently, the accounts of Harper & Grant have been audited by Hector Grant’s son-in-law, who is in private practice as an accountant. A new firm of auditors has now been appointed. A privately owned limited company is now no longer exempt from having to publish its accounts. It was therefore considered necessary to have the accounts audited by independent auditors in no way connected with Harper & Grant.

William Buckhurst, as Company Secretary, is responsible for seeingthat the books and records for the period in question are ready for checking. It could make a bad impression if the accounts department was not able to supply immediately any information wanted by the auditors.

What precisely do the auditors check? They have to be satisfied that everything which goes into making up the Profit Statement, the Balance Sheet and the Directors’ Report is correct. The Profit Statement (sometimes called a Trading and Profit and Loss Account) shows how the profit for the year is arrived at. It starts with net sales or income, and deducts surplus, from which charges, such as depreciation on plant and buildings, auditors’ fees, and administration and selling costs must be deducted to produce the net profit (or loss).

The Balance Sheet is a summarised statement showing the amount of funds envolved in the business and the sources from which these funds are derived. On one side is listed the capital employed, which usually consists of the issued share capital plus reserves and retained earnings. The share capital of Harper & Grant consisted of five thousand £1 shares. With a total market value of five hundred thousand pounds. In other words, there are four hundred and ninety-five thousand pounds in reserves and retained earnings. This starts with the total cost of its fixedassets (land, buildings and machinery) and any trade investments (interests in other companies), followed by a breakdown of net current assets (that is, cash and stocks, plus what the firm is owed by its customers, less its liabilities, or what it owes to others). The Wentworth Mattress Company owns shares in Harper & Grant, so this would be shown as a trade investment in Wentworth’s Balance Sheet. The totals on the two sides of the Balance Sheet must agree; that is, come to the same figure. The total dividend to be paid for the year is a current liability, and is therefore an item in the compilation of net current assets.

One of the most difficult jobs in preparing accounts is stock valuation: that is, putting a value on all goods in the hands of the company. It may seem easy, as goods could be counted, and then the price paid for them could be checked against the suppliers’ invoices. But the value of commodities often fluctuates. Furthermore, much of a company’s stock will consist of work in progress or finished stock, and the volume of all stock is changing daily, if not hourly. The rule for stock valuation is that it should be taken at cost price or market price, whichever is the lower.