Перевод английских текстов различной тематики (стр. 16 из 19)

The second difference appears on the line for the Merchandise Inventory account (shown in color). The unadjusted trial balance includes the beginning inventory balance of $19,000. This amount is extended into the debit column for the income statement. Then, the ending balance is entered in the credit column for the income statement and the debit column for the balance sheet. This step allows the cost of goods sold to be included in net income while the correct ending balance is included for the balance sheet.

The adjustments in the work sheet reflect the following economic events:

(a) Expiration of $600 of prepaid insurance.

(b) Consumption of $1,200 of store supplies.

(c) Consumption of $1,800 of office supplies.

(d) Depreciation of the store equipment for $3,000.

(e) Depreciation of the office equipment for $700.

9. Accrual of $300 of unpaid office salaries and $500 of unpaid store salaries.

Once the adjusted amounts are extended into the financial statement columns, the accountant can use this information to develop the company’s financial statements.

The Adjusting Entry Approach to Recording the Change in the Merchandise Inventory Account

The previously described closing entry approach to recording the change in the inventory account is widely used in practice. However, it is not the only bookkeeping method that can be applied at the end of the year. One other possible approach records two adjusting journal entries right before the closing entries are prepared. Because these entries are recorded, the first two closing entries do not include changes in the Merchandise Inventory account. This adjusting entry approach is preferred by some accountants. It is also used by computerized accounting systems that allow only temporary accounts to be affected by closing entries.

The Adjusting Entries

Under this adjusting approach, Meg’s Mart removes the beginning balance from the Merchandise Inventory account by recording this adjusting entry at the end of 19X2:

Dec. 31 Income Summary……………………19,000.00

Merchandise Inventory…………. 19,000.00

To remove the beginning balance from

the Merchandise Inventory account.

This second adjusting entry produces the correct ending balance in the Merchandise Inventory account:

Dec. 31 Merchandise Inventory ……………21,000.00

Income Summary …….…………. 21,000.00

To insert the correct ending balance

into the Merchandise Inventory account.

After this entry is posted, the Merchandise Inventory account has a $21,000 debit balance. In addition, the Income Summary account has a $2,000 credit balance.

The Closing Entries

If the two adjusting entries for inventory are used, the closing entries differ only by not including the Merchandise Inventory account. Thus, Meg’s Mart records the following two closing entries for 19X2 under the adjusting entry approach:

Dec. 31Sales ………………………………321,000.00

Purchases Returns and Allowances …1,000.00

Purchases Discounts ……… 4,200.00

Income Summary.... ……… 326,700.00

To close temporary accounts with

credit balances.

Dec. 31 Income Summary …………………… 307,200.00

Sales Returns and Allowances…………….. 2,000.00

Sales Discounts..... …………………. 4,300.00

Purchases .......... …………………. 235,800.00

Transportation-In. ………………… 2,300.00

Depreciation Expense, Store Equipment….. 3,000.00

Depreciation Expense, Office Equipment… 700.00

Office Salaries Expense ………………… 25,300.00

Sales Salaries Expense ………………….. 18,500.00

Insurance Expense ………………… 600.00

Rent Expense, Office Space……………….. 900.00

Rent Expense, Selling Space……………… 8,100.00

Office Supplies Expense ………………… 1,800.00

Store Supplies Expense…………………… 1,200.00

Advertising Expense ……………….. 2,700.00

To close temporary accounts with debit balances

The third and fourth entries are the same as before, although the amount debited to the Income Summary account is now based on four previous entries instead of two:

Dec. 31 Income Summary…………………………21,500.00

Meg Harlowe, Capital……………………. 21,500.00

To close the Income Summary account.

Meg Harlowe, Capital………………………… 4,000.00

Meg Harlowe, Withdrawals…………… 4,000.00

To close the withdrawals account.

The Adjusting Entry Approach and the Work Sheet. If the accountant uses the adjusting entry approach to update the inventory account, the two adjustments are included in the adjustments columns in the work sheet, and a line for the Income Summary account is inserted at the bottom of the work sheet. This procedure is not demonstrated here.

Using the Information— The Acid-Test Ratio

You have learned in this chapter that a company’s current assets may include a merchandise inventory. Thus, you can now understand that a major part of a company’s current assets may not be immediately available for paying its existing liabilities. In effect, the inventory must be sold and the accounts receivable must be collected before cash is available. As a result, the current may not provide a complete description of a company’s ability to pay its current liabilities.

To deal with this limitation, financial statement users often calculate the acid-test ratio to assess the company’s ability to settle its current debts with its existing assets. The acid-test ratio is similar to the current ratio, but differs because it focuses on the company’s immediate future.

The acid-test ratio is calculated just like the current ratio except that its numerator omits inventory and prepaid expenses. The prepaid expenses are omitted because they are not usually converted into cash quickly. The remaining current assets (cash, short-term investments, and receivables) are called the company’s quick assets. The formula for the ratio is

The acid-test ratio for Meg’s Mart is computed as follows:

In contrast, the current ratio (current assets/current liabilities) for Meg’s Mart has this value:

The difference between these two ratio values describes how the company’s inventory and prepaid expenses affect its ability to pay short-term obligations with existing resources.

As an approximate rule of thumb, an acid-test ratio value of at least 1.0 suggests that the company is not likely to face a liquidity crisis in the near future. However, a value lower than 1.0 is not necessarily threatening if the company can generate adequate cash from sales or the accounts payable are not due until later in the year. On the other hand, a value higher than 1.0 may hide a liquidity crisis if the payables are due at once but the receivables are scheduled to be collected late in the year. These possibilities reinforce the point that a single ratio is seldom enough to indicate strength or weakness. However, it can identify areas that the analyst should look into more deeply.

Part 2.

Back to basis

In these less exuberant times, managers need to remember a few old-fashioned virtues, says Tim Hindie.

If bad times make good leaders, America is due for a host of them. The recession that began in March last year and the terrorist attacks on September 11^th made 2001 an unforgettably awful year. At such times people react strangely. Some are frozen in indecision while others act with unnecessary haste. Across large corporations, such behaviour, multiplied many times, can be disastrous. At times of crisis, having the right people in the right place is vital. In a boom there is enough fat to absorb some bad judgment; in a recession good management becomes a survival issue.

Dave Young, head of the Boston Consulting Group’s Boston office, maintains that for many companies the downturn will turn out to be a blessing. “It means that, increasingly, value in the capital markets will accrue not to irrational exuberance’ or to sector hype,” he says, “but to good management.” But what, in such circumstances, constitutes good management? It is certainly not something that can be conjured up out of the blue. Companies that have it now had it in good times too, and found it useful then; the difference is that in today’s harsher climate it has become essential.

This survey suggests that the core of good management is a set of three old-fashioned virtues that were often forgotten in the bubble years, when anything seemed to go. At a minimum, good managers have to meet the following criteria:

•be honest;

•be frugal;

•be prepared.

For many managers, that may sound about as exciting as shopping in Wal-Mart when they have become accustomed to Bloomingdale’s. But deep down, they know where they get the better value.

Essential virtues

Being honest, of course, is not just a matter of keeping within the law. Most managers do that, which is why the few who step –outside it receive so much attention. For the law-abiding majority, it is a matter of escaping from self-delusion. That requires setting up systems in which rewards are not related to numbers which can be massaged and exaggerated at will.

Above all, it is a matter of being honest about a company’s value and its potential. Warren Buffett, the chairman of Berkshire Hathaway and one of the most successful “value creators” in American business over the past 20 years, wrote in one of his celebrated annual letters to shareholders: “We do not want to _ulfillm the price at which Berkshire shares trade…we wish for them to trade in a narrow range centred at [their] intrinsic business value.” Managers need to think about what is their own company’ intrinsic business Value”. And so do the investment bankers, analysts, consultants and the rest on the merry go-round of business hype.

In a similar vein, being frugal is not just a matter of cutting costs in a downturn. It is a question of being sparing with resources at all times, of continually looking for new ways to cut costs, and of creating an atmosphere in which waste and excess are unacceptable, no matter what the market conditions. The extremes to which Wal-Mart’s managers take this—such as sharing bedrooms on business trips, and being expected to bring back free pens from conferences—may be counterproductive, to the point of repelling able managers. But the enduring success of many businesses— from Andrew Carnegie’s and J.P. Morgan’s in the 1900s to Warren Buffett’s and Sam Walton’stoday-have been built on a frugality bordering on stinginess.

Full Dollarization The Pros and ConsThe Pros and Cons of Full Dollarization

Since the end of the Bretton Woods system of fixed exchange rates nearly thirty years ago, the old dilemma facing countries of finding workable currency exchange arrangements has become more challenging, and the choices have become more varied.

The decision about which exchange rate system to adopt has become more difficult as world trade and capital markets have become more integrated. New problems have emerged, and with them, new answers to the question of the best exchange regime to promote each country’s development objectives. The newest of these solutions is full dollarization, under which a country officially abandons its own currency and adopts a more stable currency of another country—most commonly the U.S. dollar—as its legal tender.

From the perspective of any hard currency country, full dollarization may appear more radical than it is: use of the U. S. dollar or another major currency is pervasive to one degree or another in most developing countries, particularly in financial contracts (see Box 1, “What Is Dollarization?”). Full dollarization means taking the next step, from informal, limited dollarization to full, official use of the foreign currency in all transactions.

Box 1. What Is Dollarization?

This pamphlet focuses on full dollarization, or one country officially adopting the currency of another for all financial transactions, except perhaps the need for coins. In considering this choice of exchange regime, two points are important to keep in mind:

· The term dollarization is shorthand for the use of any foreign currency by another country. The issues it raises are identical for the other countries in the region using the South African rand, for example, and they would be for any country of, say, Eastern Europe, considering eventually adopting the euro.

· Most developing countries—as well as transitional economies just adopting market mechanisms—already have a limited, unofficial form of dollarization. To a greater or lesser degree, their residents already hold foreign currency and foreign currency-denominated deposits at domestic banks. In high inflation countries, dollars or some other hard currency may be in widespread use in daily transactions, alongside the local currency.

Such informal dollarization is a response to economic instability and high inflation, and the desire of residents to diversify and protect their assets from the risks of devaluation of their own currencies. It is useful to distinguish between two motives for the demand for foreign currency assets: currency substitution and asset substitution.

In currency substitution foreign assets are used as money, essentially as means of payment and unit of account, and it typically arises under conditions of high inflation or hyperinflation when the high cost of using domestic currency for transactions prompts the public to look for available alternatives. Once the use of foreign currency in transactions becomes accepted, it may not be rapidly abandoned. Remarkably, the increase in dollarization in some Latin American and Asian countries has continued and accelerated in recent years even following successful stabilization.

Asset substitution results from risk and return considerations about domestic and foreign assets. Historically, foreign currency-denominated assets have provided the opportunity of insuring against macroeconomic risks, such as price instability and prolonged depressions in many developing countries. Even under conditions of current stability, foreign currency-denominated assets may still serve this purpose if residents believe there is even a small chance of inflationary relapse.

Important differences exist between informal and full dollarization, presenting transitional problems for governments considering it. All government and private debt under full dollarization is denominated in dollars, and both public and private accounts must be converted to dollars. To make the conversion, countries must set the rate at which old debts, contracts, and financial assets will be converted to dollars.

Finally, the stability promised by dollarization is itself relative, given that the U.S. dollar—or any other hard currency chosen for use by another country—will fluctuate in value against other widely-traded currencies. During the post-Bretton Woods period, these swings have sometimes been large.