Learn Business English Vocabulary for Accounting
Today we’ll continue looking at vocabulary related to Accounting. First we’ll hear a short article introducing the topic. Then we’ll go to the rich word in detail with some example sentences to show you how you can use the words. At the end of the video, you’ll have a chance to review and practice your new vocabulary.
The rules of GAAP also require conservative methods of calculating a company’s value- for example, by using third parties to appraise assets whose value may be uncertain, by depreciating the value of fixed assets at a standard rate, and by recording capital gains and losses at, they occur.
This helps prevent managers from too optimistic in stating a company’s equity on the balance sheet. Like the rules on recording income and expenses, the rules on asset valuation reflect the principle of prudence, a basic component of GAAP.
Now we go through H word in detail with some example sentences to show you how you can use the vocabulary.
To appraise means to estimate or calculate the value of an asset, such as a house or building.
Example: “We plan to sell some of the unused land near our factory, so I’ve made arrangements to get it appraised.”
Appraisal/ appraiser- an appraisal is an estimate made by an appraiser who is independent of the company and can give an objective opinion.
Appraised value- the figure produced by the appraiser is known as the appraised value.
Example: “Since property prices have fallen substantially, we need to record our property holdings at their property holdings at their appraised value, not at the original purchase price.”
To depreciate means to reduce the value of a company asset recorded on its balance sheet. Since most assets, like machinery, will wear out over time, it can be misleading to record these assets at their original value.
Example: “Most of our company trucks still work fine, but we’re no longer carrying them on the books because they’ve been fully depreciated.”
Depreciation is one form of non- operating expense and needs to be deducted in order to calculate a company’s net income or profit.
To write down/ write off- to write down means to reduce the recorded value of an asset. To write off means to reduce the value to zero.
Example: “|We managed to reduce taxes by writing down the value of the London office, as property prices have dropped.”
Straight- line depreciation- GAAP provides standard rules for depreciating many assets. One common method is straight – line depreciation. With straight- line depreciation, the value of an asset starts at its original purchase price and falls to zero in fixed steps over a certain number of years.
Examples: “Many company accounts use a five- year period for straight- line depreciation of equipment.”
Capital Gain is income earned when the price of an asset increases. For example, when shares held by a company or individual rise on the stock market.
Capital Loss- when the price of an asset falls, the result is a capital loss.
Example: “Investment banks have sustained heavy capital losses on their holdings of company shares, as markets have fallen around the world.”
Shareholders’ equity- means the net value of a company to its shareholders. It is calculated by adding up the value of a company’s assets and then subtracting liabilities.
Example: “Shareholder equity I this firm have dropped to almost zero as the company sold off assets and took on additional debt.”
Home Equity- owners of houses and apartments are also said to have equity or home equity, meaning the value of the property minus any outstanding mortgage debt.
Negative Equity- If the price of a house falls below the value of the mortgage, the owners are said to suffer from negative equity.
Examples: “Owners of homes with negative equity often abandon their properties instead of continuing to make mortgage payments.”
Prudent- to be careful or cautious in one’s activities, especially by planning ahead for the future.
Example: “It might he prudent to identify some alternative suppliers, in case we run into problems with our current supplier.”
Principle of prudence- requires companies to make their financial statements as conservative or pessimistic as possible. The principle of prudence helps ensure that any “surprises” in a company’s future that its accounts fail to show, are more likely to be “good news” than “bad news.”
Example: “These projections assume that sales growth will be much faster in future than over the past five years, which seems to conflict with the principle prudence.”
Now, it’s your turn to practice some of the words we have studied in this episode. You’ll hear a series of sentences with the word blank out or replaced with the beep. Repeat the whole sentence but say the missing word. For example If you hear “operating”
have been cut substantially since we close all our overseas emphasis.
You should say Operating expenses have been cut substantially since we closed all our overseas offices.
We’ll play an example answer after each exercise. Let’s begin.
Question 1: The value of this property has more than doubled since we bought it.
Answer: The appraised value of this property has more than doubled since we bought it.
Question 2: Most of my taxable income last year came from gains on the shares I sold.
Answer: Most of my taxable income last year came from capital gains on the shares I sold.
Question 3: We managed to reduce taxes by down the London office, as property values have dropped.
Answer: We managed to reduce taxes by writing down the London office, as property values have dropped.
Question 4: Shareholders’ in this company has been wiped out by its recent investment losses.
Answer: Shareholders’ equity in this company has been wiped out by its recent investment losses.
This concludes our two part series on General Accounting Vocabulary. You can visit the website at www.businessenglishpod.com to watch and download lots more videos on Business English.
Transcription by: Scribe4you Transcription Services