The diverse accounting practices have been enshrined in national accounting and auditing standards. Accounting standards are rules for preparing financial statements; they define what is useful accounting information. Auditing standards specify the rules for performing an audit—the technical process by which an independent person (the auditor) gathers evidence for determining if a set of financial accounts conforms to required accounting standards and if it is also reliable.
Substantial efforts have been made in recent years to harmonise accounting standards across countries. Perhaps the most significant body pushing for this is the International Accounting Standards Committee (IASC)
Other areas of interest to the accounting profession world-wide—including auditing, ethical, educational, and public-sector standards—are handled by the International Federation of Accountants (IFA).
By the mid-1990s the IASC had issued over 30 international accounting standards.
The main hindrance to the development of international accounting standards is that compliance with the IASC standards is voluntary; the IASC has no power to enforce its standards. Despite this support for the IASC and recognition of its standards is growing around the world.
Five Great Tips for Keeping Your Bookkeeping Accurate
Sign All Your Own Checks in a small business, people — especially full-charge bookkeepers — can bamboo/.le you too darn easily. By signing all the checks yourself, you keep your fingers on the pulse of your cash outflow. This practice can be a hassle — and you can't easily spend three months in Hawaii — you have to wade through paperwork every time you sign a stack of checks. Finally, if you're in a partnership, you should have at least a couple of the partners co-sign checks.
Don't Sign a Check the Wrong Way If you sign many checks, you may be tempted to use a John Hancock-like signature. Although scrawling your name illegibly makes great sense when you're autographing baseballs, don't do it when you're signing checks. A clear signature, especially one with a sense of personal style, is distinctive. A wavy line with a cross and a couple of dots is really easy to forge.
Review Cancelled Checks Before Your Bookkeeper Does Be sure that you review your cancelled checks before anybody else sees the monthly bank statement. A business owner can determine whether someone is forging signatures on checks only by being the first to open the bank statement and by reviewing each of the cancelled check signatures. If you don't examine the checks, unscrupulous employees — especially bookkeepers who can update the bank account records — can forge your signature with impunity. And they won't get caught if they never overdraw the account. Another point: If you don't follow these procedures, you will probably eat the losses, not the bank.
Choose a Bookkeeper Who Is Familiar with Computers and Knows How to Do Payroll Don't worry. You don't need to request an FBI background check. Just find people who know how to keep a checkbook and work with a computer. A bookkeeper who knows double-entry bookkeeping is super-helpful. But, to be fair, such knowledge probably isn't essential. I will say this, however: When you hire someone, find someone who knows how to do payroll - not just the federal payroll tax stuff but also the state payroll tax monkey business.
Choose an Appropriate Accounting System Cash-basis accounting is fine when a business's cash inflow mirrors its sales and its cash outflow mirrors its expenses. This situation isn't the case, however, in many businesses. A contractor of single-family homes, for example, may have cash coming in (by borrowing from banks) but may not make any money. A pawnshop owner who loans money at 22 percent may make scads of money even if cash pours out of the business daily. As a general rule, when you're buying and selling inventory, accrual-basis accounting works better than cash-basis accounting.
QUESTIONS
1. What is the expression of accounting as ‘the language of business’?
2. How can the government control tax discipline?
3. What is the essence of accounting?
4. What main operations does the basic accounting cycle include?
5. Why do accounting problems exist in international business? What problems do you know?
6. Name three groups of countries with similar accounting standards?
7. Give the definition of auditing and auditing standards?
8. What organizations are involved in harmonizing accounting standards?
9. Does Ukraine use national or international accounting and auditing standards?
10. What in your opinion is more important accounting or auditing? Give your reasons.
tripartite – having three parts of groups to mint – make coins overdraft – a situation in which you draw more money from a bank account than you have in it merger – joining of two commercial companies
ENGLISH AND AMERICAN BANKS
Today the English banking is a complicated tripartite system like a three-layer cake. The system is headed by the Bank of England.
This bank was established under a royal charter in 1694. The head of the Bank is Governor of the Bank appointed by me Queen on the recommendation of the Prime Minister. The Queen also appoints Deputy Governor and the Court of Directors, which consists of 16 directors.
The Bank of England is a central bank of a national bank. It controls the British banking system, issues banknotes and mints coins. It lends and borrows money for the government, manages the national debts and is in the control of the nation's gold reserve. The others two layers are:
· the commercial or joint stock clearing banks;
· specialized banking institutions such as the discount houses and merchant banks.
The commercial or joint-stock banks deal with the general public. The four large English commercial banks are known as the Big Four. They are Barclays, Lloyds, the Midland, and the National Westminster. Together they have upwards of 10,000 branches. Commercial banks render various services to companies and individuals. Some of the services are:
· to receive or accept from their customers the deposit or money;
· to collect and transfer money both at home and abroad against deposit and current accounts;
· to provide overdrafts to both personal and business customers;
· to lend loans to their customers;
· to exchange money;
· to supply economic information and to prepare economic reviews to be published;
· to make foreign exchange transactions, including spot transactions, forward transactions and swap transactions;
· to issue various banker's cards.
Merchant banks and discount houses deal only with special customers providing funds for special purposes. They accept commercial bills of exchange and offer quite a lot of commercial services. They provide advisory services about new issues of securities, mergers, take-overs and reorganizations. They also arrange financing for their customers and provide fund-management services.
Besides there is a big group of banks in the United Kingdom made up of foreign banks. All the major foreign banks are represented in the U.K. by subsidiary, branch, representative offices or consortium. They provide finance both in sterling and in other currencies and offer a wide range of financial services.
Lombard Street is the symbol of English banking. This is a place where the first bankers coming from Italy settled.
The English commercial banks have branches in all the major towns and a similar structure and mode of working is common to them all. The owners are the shareholders. At the outset they provide the necessary capital. They are all organised on the joint stock principle and are registered public companies.
The Chairman and Board of Directors are elected by the ordinary shareholders at the Annual General Meeting and are responsible for the efficient management of the bank. The Board is concerned with the over-all policy of the bank and the major decisions which put that policy into effect.
The Board will appoint a Managing Director who is directly responsible to them and a member of the Board. They will also appoint the most senior executives who in turn appoint the rest of the clerical staff who will be responsible in different capacities for the day to day running of the bank.
At the end of each business year the Directors recommend and the Annual General Meeting decides how much of the profit should be distributed to the shareholders as dividend, and how much should be retained in the business. In preparation for the Annual General Meeting, a bank publishes its Report and Accounts. These must be sent to every shareholder and are also available for anyone with an interest in the affairs of the bank. From the published accounts shareholders can easily determine the total profit the bank has earned and how much is available for distribution.
Federal Reserve System is the central banking system of the United States of America, set up by the Federal Government in 1913. On account of the vast area of the country, and the greater difficulties of travelling at that time, the country was divided into twelve Federal Reserve Districts, each with its own Federal Reserve Bank.
There are also twenty five branches of the Federal Reserve Banks to serve particular areas within each district. The activities of the Federal Reserve Banks are coordinated through the Federal Reserve Board of governors in Washington. The Board exercises general supervision over the Federal Reserve Banks.
The Federal Reserve Banks hold the reserves of the member banks, i.e. the commercial banks which are members of the Federal Reserve System. The FR Banks supply the member banks with currency if necessary and act to them as lenders by rediscounting bills. The Board determines the reserve requirements of the commercial banks. The Board too really determines discount-rates. The Board discount rate corresponds in nature to the English Bank rate, though the Federal Reserve Banks do not always have the same discount rate.
The Federal Reserve System, in collaboration with the Government of the U.S.A., determines monetary policy and, aided by the Federal Reserve Banks, carries it out.
All national banks must be members of the Federal Reserve System. Incorporated state banks including commercial banks, mutual savings banks, trust companies, and industrial banks, may also join the System.
Incorporated state banks are those which have a charter from the state to act as an individual.
Mutual savings banks are savings banks owned by their depositors. Industrial banks make loans for the purchase or manufacture of industrial products.
QUESTIONS
1. When was the bank of England established?
2. What are the layers of English banking system?
3. Name the services commercial banks render in England?
4. What can you say about foreign banks in England?
5. Who is elected and who is appointed in the English banks?
6. How can shareholders get the dividends?
7. What are specific features of the Federal Reserve System of the USA?
8. What are its functions as the central banking system of the USA?
9. In what way is the English bank connected with the FRS?
10. Describe types of American incorporated banks.
contraction - getting smaller or shorter tremendous growth – huge growth afloat – having enough money to operate and stay out of debt fee – a payment made for special service street vendors – persons who sell something in the street refuge – protection from troubles to impoverish – make poor to lodge – to place on the assets lucrative – bringing a good profit to evade – avoid (doing something) by cunning
THE COMMERCIAL BANKS
In the conditions of contracting output that dominated the first five years of Ukrainian independence any significant accumulation of capital into private hands could only be achieved by redistributing the already existing capital, be it productive assets or circulating money capital.
If the state's way of holding back the pace of economic dislocation and contraction was to subsidize the costs of heavy industry production and to print money in an effort to recoup these costs from the disposed income of consumers, the resulting inflationary spiral was also conducive to the diversion and private accumulation of social wealth by commercial banks.
Ukraine's biggest banks grew out of the reorganization of republic branches of the Soviet central banks in 1988-90. They lay the foundation for the National Bank of Ukraine (NBU) and several large banks serving key state industries. Small commercial banks also made an appearance in this period to serve the new private sector. In March 1991 the Verkhovna Rada adopted the Law on Banks and Banking, which called for their consolidation into a two tier system with the NBU as the central bank responsible for national currency issuance and clearing, foreign exchange and domestic interest rate policies, and a second tier of independent banks regulated by the NBU.
Three of the five big banks of the second tier - Prominvestbank, Ukrsotsbank and APB Ukraina were registered as shareholding companies in 1990, making them the property of specific state economic enterprises and government organizations.
But in 1993, when the Cabinet of Ministers resolved to put all the shares of state organizations under the control of the Ministry of Finance, these banks' boards of directors handed ownership rights over to new private companies and to named individuals working in the banks, the state enterprises and government organizations - i.e. to themselves as physical and juridical persons. By the end of 1994 two thirds of all the capital of Prominvestbank and 95% of that held by APB Ukraina and Ukrsotsbank were in private hands.
Between 1991 and 1993 the five largest independent banks - Ukreximbank and Oshchadbank in addition to the three cited above - took control of 90 percent of all banking services and 95 percent of all foreign currency operations in Ukraine. However, over the next three years to 1998 their share of banking services and operations decreased to 60 percent as a result of the tremendous growth of private commercial banks.
The banks accumulated money capital in several unorthodox ways. The directors of loss-making state enterprises lobbied the Verkhovna Rada and the Cabinet repeatedly and successfully for subsidies to keep them afloat. Part of the subsidies was channelled through their banks to finance domestic and foreign trade by their own and other private companies. The big banks' directors, representing substantial sectors of the economy, had privileged access to state officials that granted export and import licenses. The banks also got their credit from the National Bank of Ukraine at rates of interest that were far lower than the rate of inflation. Merely by exchanging the coupon credits into hard currency and waiting a few months before buying back enough coupons to repay the loan could the holder earn quite a few dollars. The big banks sold on some of their credits to the smaller, less well connected commercial banks for their use in money and commodity trade, and made an immediate profit from the inflated transaction fees and insurance premiums on the loans. From their own premises and through a network of thousands of franchised street vendors the banks additionally traded in foreign currencies with the population at large, who regularly sought refuge from inflation for their domestic currency earnings in the dollar and were then forced to sell them back as the cost of living spiralled upwards. Thus the wave of inflation which was impoverishing large numbers of people in these years provided a profitable environment for those who received state subsidies, credits and licenses to trade in their capacity as state enterprise managers and who then used them for private and corporate gain in their capacity as directors and shareholders of independent banks.
The government set out to stop the run on state funds from the National Bank and the state budget through to the commercial banks. State officials and enterprise managers with access to various funds (especially agricultural credit and conversion funds) from which they could make speculative earnings were investigated. Under the chairmanship of Viktor Yushchenko, the NBU changed the way it extended credit to the commercial banks from an "administrative division of resources" to credit auctions, and finally by offering state bonds.
In August 1998 the government banned the use of foreign currency as payment in the domestic retail and service sectors. The commercial banks were no longer permitted to hold foreign currencies on deposit, and were required to lodge them with the NBU instead.