Finance English practice: Unit 13 — The Balance Sheet 3: liabilities

Biz English

Apr 14, 2016

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Complete the sentences below. Use the key words if necessary.
- Liabilities
  
  key words
  Liabilities ○ long-term ○ current ○ creditors ○ deferred taxes
  
  are amount of money that a company owes, and are generally divided into two types — and . Long-term liabilities or non-current liabilities include bonds.
  
  Current liabilities are expected to be paid within a year of the date of the balance sheet. They include: — largely suppliers of goods or services to the business who are not paid at the time of purchase; planned dividends; — money that will have to be paid as tax in the future, although the payment does not have to be made now.
- Accrued expenses
  
  key words
  accrued expenses ○ built up ○ charged against
  
  Because of the matching principle, under which transactions and other events are reported in the periods to which they relate and not when cash is received or paid, balance sheets usually include . These are expenses that have accumulated or during the accounting year but will not be paid until the following year, after the date of the balance sheet. So accrued expenses are income - that is, deducted from profits — even though the bills have not yet been received or the cash paid. Accrued expenses could include taxes and utility bills, for example electricity and water.
- Shareholders' equity on the balance sheet
  
  key words
  Shareholders' equity ○ share premium ○ face value ○ reserves
  
  is recorded on the same part of the balance sheet as liabilities, because it is money belonging to the shareholders and not the company.
  Shareholders' equity includes: the original share capital (money from stocks or shares issued by the company; : money made if the company sells shared at above their — the value written on them; retained earnings: profits from previous years that have not been distributed to shareholders; : funds set aside from share capital and earnings, retained for emergencies or other future needs.
British English or American English?
- share premium
  - American English
  - British English
- paid-in surplus
  - American English
  - British English
Are the following statements true or false?
- A current liability will be paid before the date of the balance sheet. clue
  — Current liabilities are expected to be paid within a year of the date of the balance sheet (if it has been paid, it is no longer a liability and will not appear on the balance sheet).
  - true
  - false
- A liability that must be paid in 13 months time is classified as long-term. clue
  — Current is defined as within a year of the date of the balance sheet.
  - false
  - true
- A company's accrued expenses are like money an individual saves to pay bills in the future. clue
  — Accrued expenses are charged against income – that is, deducted from profits – even though the bills have not yet been received or the cash paid.
  - false
  - true
- Shareholders' equity consists of the money paid for shares, and retained earnings. clue
  — Shareholders’ equity includes: the original share capital, share premium, and retained earnings.
  - false
  - true
- If companies retain part of their profits, this money no longer belongs to the owners. clue
  — Shareholders’ equity includes retained earnings – it is money belonging to the shareholders and not the company.
  - true
  - false
- Companies can sell shares at a higher value than the one stated on them. clue
  — Share premium is money made if the company sells shares at above their face value – the value written on them.
  - true
  - false
Choose words with the following meanings.
- Money that will be paid in less than 12 months from the balance sheet date — . . .
  current liabilities
  - share premium
  - deferred
  - accrued
  - current liabilities
- The money that investors have paid to buy newly issued shares, minus the shares' face value — . . .
  share premium
  - accrued
  - share premium
  - current liabilities
  - deferred
- Delayed, put off or postponed until a later time — . . .
  deferred
  - accrued
  - share premium
  - deferred
  - current liabilities
- Built up or increased over a period of time — . . .
  accrued
  - accrued
  - deferred
  - current liabilities
  - share premium
Sort the following into assets and liabilities.
- Accounts payable
  - Liabilities
  - Assets
- Accrued expenses
  - Liabilities
  - Assets
- Dividends
  - Liabilities
  - Assets
- Inventory
  - Assets
  - Liabilities
- Accounts receivable
  - Liabilities
  - Assets
- Land and buildings
  - Liabilities
  - Assets
- Investments
  - Assets
  - Liabilities
- Cash and equivalents
  - Liabilities
  - Assets
- Deferred taxes
  - Liabilities
  - Assets
- Long-term debt
  - Assets
  - Liabilities

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