Engleski tekstovi

1. Money and income

Money used in a country is called its currency, for example the euro, the dollar or the yen.
Money can exist in coins and banknotes, which we call cash, but today most money only exists
in bank accounts, while only a small part is in cash.

Income is all the money a person receives or earns. Some people are paid a salary every month,
others are paid wages daily or weekly. There is also extra money for overtime work, commission
for salespeople and agents, and sometimes a bonus for good results. Professionals such as
lawyers and architects receive fees. The government provides social security for unemployed
and sick people, and when people stop working at the end of their career, they receive a
pension.
On the other side, everyone has outgoings, which are the expenses they must pay regularly.
These include everyday living expenses like food, clothes and transport, as well as bills for
electricity, gas and telephone. Many people pay rent for their flat, while others repay a
mortgage if they have borrowed money to buy a house or apartment. Health insurance is
another important expense, and everyone also has to pay tax to the government.
To keep control of income and spending, people and organizations usually make a budget, which
is a plan that shows how much money they expect to earn and how much they will spend
during a certain period.
2. Personal finance:
Income is all the money a person receives or earns. It can be:
 salary - salary per month,
 wages - daily or weekly salary,
 overtime - allowance for overtime work,
 commission - commission for sellers and agents,
 bonus – extra money for good results,
 fees - fees for professionals (lawyers, architects),
 social security - state aid to the unemployed and sick,
 pension - pension.
Expenses (outgoings) are what is regularly paid, for example:
 living expenses – food, clothing, transportation,
 bills – bills for electricity, gas, telephone,
 rent - rent,
 mortgage - loan for a house/apartment,
 health insurance
2. Business finance
When people want to start or expand a company, they need money, which is called capital.
Companies can borrow this money from banks as a loan, which must later be repaid with
interest. Another way to get capital is by issuing shares, which represent ownership in the
company. People who buy these shares are called shareholders, and they own a part of the
company. Capital can also be raised through bonds, which are loans from investors that the
company has to pay back at a fixed date. The money that a business uses for everyday expenses
is called working capital or funds.
Revenue is all the money that comes into a company during a specific period. When you
subtract costs and operating expenses such as salaries and rent, the result is profit, also called
earnings or net income. A part of the profit that is paid to shareholders is called a dividend.
Companies also pay taxes to the government from their profits, and they may keep part of their
earnings, which are called retained earnings, to use in the future.
Companies regularly give information about their financial situation in financial statements. The
balance sheet shows the assets of the company, meaning the things it owns, and its liabilities,
which are the debts and obligations. The profit and loss account, also known as the income
statement, shows the revenues and expenses of the company during a certain period, for
example three months or one year.
3. Accounting and Accountancy

Accounting is the process of recording and summarizing all of a company’s business activities,
such as purchases and sales, and presenting them in financial statements. Bookkeeping is a part
of this process and refers to the daily recording of transactions. Financial accounting not only
includes bookkeeping but also preparing financial statements for shareholders and creditors,
the people or organizations who have invested in or lent money to the company. Management
accounting, on the other hand, is used by managers to analyze accounting data and make
decisions.
Auditing is the examination of a company’s system of control and the accuracy of its records.
Auditors check whether the information is correct and whether there is any fraud. An internal
audit is done by the company’s own accountants, while an external audit is carried out by
independent auditors who are not employed by the company. External auditors check whether
the financial statements are truthful and fair, making sure that no false results are presented,
for example through “creative accounting,” which manipulates figures. In Britain, companies
must provide a true and fair view of their financial situation, which means the accounts must
give an accurate picture of the company’s condition.
The rules of accounting differ across countries. In the United States, the rules are established by
the government, specifically by the Securities and Exchange Commission. In Britain, however,
the rules come from independent organizations such as the Accounting Standards Board, and
also from the accounting profession itself. Companies must follow these rules and provide
shareholders with a true and fair view in their annual accounts. In English-speaking countries,
financial statements are mainly prepared for shareholders. In contrast, in many continental
European countries, businesses are largely funded by banks, so financial statements are often
prepared primarily for creditors and tax authorities.
4. Company Law 1

A partnership is a business run by two or more people who share the profits but also the risks.
In the UK and US, partners are personally responsible for all debts of the business, because
partnerships are not separate legal entities. A sole trader – a business owned by one person –
also carries unlimited responsibility for debts.
A company, however, is a separate legal entity from its owners, the shareholders. This means it
can make contracts, be taken to court, and continue even if owners change. Most companies
have limited liability, so shareholders are only responsible for the money they invested, not for
all company debts. This encourages people to invest. Companies are managed by executive
directors, while non-executive directors give advice and make sure everything is fair and
transparent. There is also an audit committee that checks the auditors’ reports.
When starting a company, people must prepare two documents: the Articles of Association and
the Memorandum of Association. The Articles explain the rights and duties of shareholders and
directors, while the Memorandum gives the company’s name, its official office address, its
purpose, and the maximum share capital it can raise.
5. Company law 2
In the world of business, companies can be divided into two main groups: private and public.
Private companies usually carry “Limited” or “Ltd” in their names, and they are not allowed to
sell their shares openly on the stock market. Most companies fall into this category. Public
companies, however, are different. In Britain, there are only around 2,000 of them, compared to
more than a million private ones. These public companies have “plc” at the end of their names,
and their shares are traded on the London Stock Exchange. The Exchange is a place where
anyone can buy or sell shares, and in the United States, similar companies are registered with
the SEC (Securities and Exchange Commission).

Public companies must regularly share information about how they are doing. Every quarter,
they publish reports that explain how much money they earned from sales, what their profits
were, and what remained after covering all expenses and taxes. On the London Stock Exchange,
companies are also expected to publish interim reports halfway through the year, giving
shareholders an update on their progress, although these reports are not audited.

Once a year, every company must prepare a full Annual Report. This report reviews the year’s
activities, explains the company’s financial position, and presents audited accounts. It includes
not only results but also the auditors’ opinion on them. For example, Barclays PLC in its 2004
interim report proudly announced that profits were up, dividends had increased, and business
performance was strong across all parts of the group.

Public companies also have to hold meetings with their shareholders. The Annual General
Meeting (AGM) is where shareholders can ask questions, approve financial statements, and vote
on key issues like dividends or electing directors. Sometimes, if there is a crisis or something
urgent, an Extraordinary General Meeting (EGM) may be called to resolve the matter quickly.
6. Accounting policies and standards
Investors and managers always want to know how much a company is really worth. To answer
this, businesses regularly publish the value of their assets and liabilities, and they must also
calculate their profits or losses. To do so, companies choose accounting policies — their own
ways of preparing accounts. These policies follow official rules and standards, such as GAAP in
the United States or IFRS in most of the world.
Although companies may choose from different accounting methods, they have to stay
consistent. They cannot suddenly change methods unless there is a good reason, and if they do,
the change must be explained clearly in the Annual Report. This ensures shareholders can
compare results over time.
The policies a company chooses can make a big difference. For example, deciding how to value
assets, how to treat depreciation, or how to record future pension costs can all impact the final
profit figure. Because there is often more than one valid way to prepare accounts, companies in
Britain are required to present their financial statements as a “true and fair view,” meaning their
accounts should reflect reality as honestly as possible.
Another important topic is inflation. Traditionally, many countries have used the “historical
cost” method, where assets are valued at the price originally paid for them. This method is
simple and objective, but it does not always reflect current reality. In countries with high
inflation, for instance, companies may instead use “inflation accounting.” Here, assets are
valued at their current replacement cost — essentially, how much money would be needed to
replace them today.
7. Accounting assumtions and principles
When accountants prepare financial statements, they rely on a set of assumptions and
principles. These are the foundations of accounting practice. For example, the business entity
assumption says that a company is separate from its owners, managers, and creditors. The time-
period assumption divides a business’s life into chunks, such as years or quarters, so results can
be reported regularly. The going-concern assumption assumes that the company will continue
operating in the future, so its current market value is not crucial. And the unit-of-measure
assumption ensures that all transactions are reported in a single currency, even when
companies operate internationally.
Alongside assumptions, there are also accounting principles. The full-disclosure principle
requires companies to provide all important information in their reports. The principle of
materiality says that small, unimportant details can be left out. Conservatism advises
accountants to be cautious, choosing methods that do not exaggerate profits or assets. The
objectivity principle emphasizes that accounts should be based on facts and evidence, not
opinions.
There is also the revenue recognition principle, which says income should only be recorded
when it is actually earned — for instance, when goods are delivered, not just when an order is
made. Closely related is the matching principle, which ensures that expenses are recorded in
the same period as the revenue they helped to generate.
Together, these assumptions and principles create the framework that allows businesses to
report their financial position fairly, giving investors, regulators, and managers the confidence to
make informed decisions.
8. Auditing
This unit is about auditing.
First, there is internal auditing. After accountants finish the financial statements, internal
auditors – people from the company – check them. They make sure the accounts are correct,
free of mistakes, and that everything follows the right rules, standards, and laws. They also look
at the company’s internal controls, like how transactions are recorded and how assets are
valued. If something is not good enough, they can suggest changes to improve the system.
Then there is external auditing. Public companies must give their financial statements to
independent auditors, people who don’t work for the company. These auditors have to give an
opinion about whether the financial statements give a true and fair view of the company’s
situation. To do this, they check the internal control system, make sure transactions are
recorded correctly, and confirm that the assets on the balance sheet really exist and are valued
properly. They may check debtors, stock counts, and look for unusual items in the accounts.
In the past, many big audit firms also gave consulting services like business planning or
restructuring, but after scandals, most firms separated auditing from consulting to keep auditors
independent.
Finally, the section about irregularities explains what happens if auditors find problems. If
everything is fine, they write a normal audit report. If they find that systems are not good
enough or accounting principles are not applied properly, they write a management letter
explaining what needs to change. If the company doesn’t fix the problems, the auditors may
issue a qualified report, saying that the financial statements do not give a full true and fair view
and that there are problems.
9. The balance sheet 1

This unit is about the balance sheet.

A balance sheet is a financial statement that shows a company’s position at a specific date. It
always has two sides, and they must be equal – that’s why it’s called a “balance.” On one side, it
shows the company’s assets – things the company owns, like factories, machines, or stock,
which will bring future benefits. On the other side, it shows the company’s liabilities – money
the company owes to others, like loans, taxes, suppliers, or pensions. Along with liabilities, it
also shows shareholders’ equity, which is the money that belongs to the owners of the
company.

So, in simple terms: Assets equal liabilities plus shareholders’ equity.

In America and most of Europe, the balance sheet is usually written with assets on the left and
liabilities plus equity on the right. In Britain, it used to be the opposite, but now most British
companies use a vertical format – assets at the top, liabilities and equity below.

Then, there’s a section about shareholders’ equity. This includes all the money belonging to
shareholders. Part of it comes from selling shares, and another part comes from retained
earnings – profits from previous years that were not paid out as dividends. Shareholders’ equity
is basically the company’s net assets, meaning assets minus liabilities.

Finally, the balance sheet does not show how much profit a company has made in a year. For
that, we need other financial statements like the profit and loss account and the cash flow
statement.
10. The balance sheet 2

This unit is about the balance sheet: assets.

In accounting, assets are divided into fixed (or non-current) assets and current assets.

Fixed assets are things the business will use for a long time, like buildings, equipment, or long-
term investments.

Current assets are things that will probably be used in the near future. They include cash,
accounts receivable (money owed by customers), and inventory (goods ready for sale).

If a company thinks a debt will not be paid, it has to recognize the loss in advance. This is called
the conservatism principle – being cautious and recording possible losses, like bad debts, before
they actually happen.

Next, there is the question of valuation. Manufacturing companies usually have stocks of raw
materials, work in progress, and finished products. These are usually valued at the lower of two
numbers: the cost of production or the current market price. Again, this follows the
conservatism principle – you shouldn’t anticipate profits before they are real.

Finally, there are tangible and intangible assets.

Tangible assets are physical things you can touch, such as property, equipment, or vehicles.
These are recorded at their historical cost, minus depreciation.

Intangible assets are non-physical but valuable, such as patents, copyrights, trademarks, and
brand names. They give long-term benefits but cannot be touched.

Goodwill is another important intangible asset. It appears when one company buys another
company for more than the value of its net assets. The difference between the purchase price
and the book value is recorded as goodwill.

11. The balance sheet 3

When we look at a company’s balance sheet, one important part is the liabilities. Liabilities are
basically amounts of money that the company owes. They are usually divided into two groups:
current liabilities and long-term liabilities. Current liabilities are debts that the company expects
to pay within one year from the balance sheet date. These can include things like money owed
to suppliers, which we call accounts payable, unpaid expenses such as wages or taxes that are
due soon, and even planned dividends.

On the other hand, there are also non-current liabilities, which are long-term debts that don’t
need to be paid within a year. Examples of these include bonds or long-term loans, as well as
deferred taxes that will only be paid in the future.

Besides liabilities, the balance sheet also shows shareholders’ equity. This represents the money
that belongs to the shareholders. It includes the original share capital, which is the money
shareholders paid when buying the company’s stock, share premium, which is the extra money
received if shares were sold for more than their face value, and retained earnings, which are
profits from previous years that were not distributed as dividends but kept in the business.
Sometimes companies also keep reserves for emergencies or future needs.

Finally, one more important concept is accrued expenses. These are costs that belong to the
current year but are not yet paid. For example, things like utility bills or taxes that the company
has used or earned but will only pay later. These expenses are still shown on the balance sheet
and are deducted from the profits even if the cash hasn’t been paid out yet.

So, in summary, the balance sheet shows not only what the company owns but also what it
owes, both in the short term and the long term, and how much belongs to the shareholders.

12. The other financial statements

When we look at other financial statements, one of the most important is the profit and loss
account, also called the income statement. This statement shows the difference between a
company’s revenues and its expenses over a certain period. For non-profit organizations, like
charities or museums, it’s called an income and expenditure account, but the idea is the same:
if income is higher than expenses, there is a surplus or profit.

The statement usually starts with sales revenue, which is the total amount of money the
company has earned from selling its products or services. From this, we subtract the cost of
sales, also called the cost of goods sold. These are the expenses directly connected to producing
the goods, such as raw materials, labor, and factory costs. What remains is called gross profit.

After that, we deduct other operating expenses, such as rent, electricity, or salaries. These are
grouped as selling, general, and administrative expenses. The result is earnings before interest,
tax, depreciation, and amortization – often called EBITDA. If we also subtract depreciation and
amortization, we get EBIT, or earnings before interest and tax. Then, after subtracting interest
and taxes, we finally arrive at net profit, also known as the bottom line. This net profit can
either be distributed as dividends to shareholders, kept by the company to cover losses, or
transferred into reserves.

Another important statement is the cash flow statement. This shows the actual movement of
money in and out of the business. It is divided into three parts: operating activities, which are
everyday business transactions; investing activities, like buying or selling property and
equipment; and financing activities, such as taking loans or issuing shares.

The cash flow statement is important because it shows how effectively a company manages and
generates cash, which sometimes can be very different from what the profit and loss statement
shows.

13.Cost accaunting
Cost accounting is about calculating the costs of different products or services so that managers
know how much to charge and which products are most profitable. Some costs are direct,
meaning they can be clearly linked to producing a specific product. For example, raw materials
or wages of workers who make the product. These are usually easy to calculate. But there are
also indirect costs, often called overheads. These cannot be linked to one single product, such
as electricity for the factory, heating, rent of offices, or maintenance. These are usually grouped
together in the profit and loss account as administrative expenses.

Another important distinction is between fixed and variable costs. Fixed costs don’t change in
the short term, no matter how much is produced – for example, rent or insurance. Variable
costs, however, rise or fall depending on how much the company produces, such as raw
materials or overtime wages. Manufacturing companies often have to allocate both types of
costs across the different products they make. One method is absorption costing, where all
direct and indirect costs are divided and charged to products. Another method is activity-based
costing, which assigns costs to specific activities like product design, distribution, or customer
service.

Finally, companies also use breakeven analysis. This helps decide if producing a product or
service would be profitable. The breakeven point is the number of units that must be sold to
cover all costs – both fixed and variable. If the company sells more than this point, it makes a
profit; if less, it makes a loss. When setting prices, managers also consider things like demand,
competitors’ prices, the company’s financial situation, and its marketing objectives – whether
they want to maximize sales or profit.

14. Pricing
When companies decide how to set prices, they have to think about many things. First of all,
prices are influenced by production and distribution costs, both direct and indirect. Some firms
simply use markup pricing, where they calculate the unit cost and then add a percentage.

But most companies go further. They take into account demand, competitors’ prices, sales
targets, and profit goals. For example, some firms use market penetration pricing. This means
they introduce a product at a very low price because they want to quickly win a large market
share. Later, they can increase profits thanks to economies of scale. Think of products like Bic
pens or Dell computers.

Other companies might use market skimming. This works when customers are willing to pay a
high price for a new or innovative product, such as Intel’s microchips. The company starts with a
high price, then lowers it later to attract other customer segments.

If a company has strong demand for its products, and it controls the supply, it can raise prices.
This is typical for monopolists. There is also prestige pricing (or image pricing), where luxury
brands keep their prices high because customers would not trust the product if it were too
cheap. For instance, think of Rolex watches. Another strategy is going-rate pricing, where a
company sets the same price as its competitors for almost identical products.

When it comes to retail pricing strategies, things are a bit different. Supermarkets, for example,
sometimes use loss-leader pricing. They sell some items at a very low price—even at a loss—
just to attract customers, who then usually buy other profitable items.

Retailers also use odd or even pricing, because psychologically, customers perceive €29.95 as
much cheaper than €30. Finally, there is elasticity of demand. If demand changes a lot when the
price changes, we say it is elastic. But if sales stay about the same even after a price increase,
then demand is inelastic.

15. Personal banking

When we talk about personal banking, the first thing to mention is the current account. This is a
type of account that allows people to take out or withdraw money at any time, without
restrictions. The money in a current account usually doesn’t earn much interest, because it’s
easy to use. That’s why many people also have a savings account, which pays more interest but
usually has some limits on withdrawals. Banks normally send monthly statements showing
money going out—like debits—and money coming in—like credits.

Most people also have a debit card, which lets them withdraw money and make payments at
cash machines. Customers may also have credit cards, which can be used not only for buying
things, but also for borrowing money. In some countries, people pay bills by cheque, while in
others they use bank transfers. There are also standing orders, which are regular fixed
payments, and direct debits, where the amount and date can vary.

Banks don’t only offer accounts, but also products and services. For example, they give loans,
which are fixed amounts of money borrowed for a certain time, such as two years. They also
allow overdrafts, which means spending more than what you have in your account, up to an
agreed limit. This is useful for short-term needs. Another important service is mortgages, which
are long-term loans for buying property. If the borrower doesn’t pay, the bank can take and sell
the property.

Banks also help customers who travel abroad by exchanging foreign currency and selling
traveller’s cheques, which protect against theft or loss. In addition, they offer advice on
investments and private pension plans, which help people save for retirement. More and more,
banks are also offering insurance products.

Finally, there is e-banking. In the 1990s, banks believed that the future would be in telephone
and internet banking. But they realized that many customers still preferred going to local
branches, especially those with longer opening hours or those in shopping centers.

16. Interest rates

Interest rates are basically the cost of borrowing money. When you take a loan, you pay a
percentage of that loan amount to the lender as the price for using their money. Every country
has a minimum interest rate, usually set by the central bank, to help control inflation.

When interest rates are low, borrowing becomes cheap. People and businesses take more loans,
spend more, and invest in factories, machines, and jobs. This increases demand, which can push
prices up. On the other hand, when interest rates rise, borrowing becomes expensive. People
prefer to save rather than spend, and businesses invest less. This reduces demand.

If interest rates are too low, demand grows faster than supply, which can cause inflation. But if
interest rates are too high, people borrow and spend less, which brings inflation down, but also
reduces production and jobs.

There are also different kinds of interest rates. The central bank sets the discount rate for short-
term loans to commercial banks. Then, commercial banks set their own base rate, which they
charge to their most reliable customers. From this base rate, they calculate all other deposit and
lending rates.

Banks make money from the margin between what they charge borrowers and what they pay to
savers. The interest rate a borrower gets depends on their creditworthiness—basically, how
reliable they are in paying back debts. The safer a borrower is, the lower the rate they get. For
example, mortgages usually have lower rates because they are secured against property.

Other forms of borrowing, like hire purchase (HP) agreements, usually have higher interest
rates. In HP, a customer makes monthly payments for durable goods like cars or furniture. The
goods belong to the lender until they are fully paid off, so the interest is higher because the
lender has less security.

Some loans, like mortgages, can have floating or variable rates, which change depending on
supply and demand for money.