The study of accounting begins with the understanding of the way in which accountants see the business enterprise. Accountants frequently refer to a business organization as an accounting entity or a business entity. A business entity is any business organization such as a hardware store or grocery store that exists as an economic unit. As an economic unit, the business enterprise acquires, organizes and transforms factors of production in its activity of producing goods and services. This activity may be presented as the following:

the input factors (land, buildings, equipment, material, labour) are combined and transferred into an output flow of WHAT IS ACCOUNTING? goods and services

The accounting interpretation is an abstraction of the reality portrayed above. The business enterprise is viewed as a system of monetary flow, instead of a system of physical flows. In accounting, business activities are associated with transactionsand, indeed, are limited to transactions. Thus, unless there is a transaction there is no observable business activity.

A transaction occurs whenever the firm enters into a legal contract for the acquisition of means of production or the sale of goods and services. Business activities which do not refer to transactions remain unrecognized in accounting. Transactions involving the acquisition WHAT IS ACCOUNTING? of factors of production lead either to an outflow of money immediately or an obligation to pay money at a later date. Transactions by which the firm sells goods or services lead to an inflow of money or the right to receive money at a future date. The accounting interpretation of business activities leads to future analysis of these transactions.

First, transactions between the firm and its markets - both its supply markets and its selling markets - are defined as "external transactions". The totality of "external transactions" forms the subject matter of financial accounting. General purpose of financial statements WHAT IS ACCOUNTING? (reports) is to provide most of the information needed by external users of financial accounting. These financial statements are formal reports providing information on a business entity's financial position (solvency), cash inflows and outflows, and the results of operations (profitability). Financial accounting information is historical in nature, reporting on what has happened in the past. Hence the external users rely on relevant and reliable financial statements to make present decisions about future events.

Second, transactions within the firm, consisting of the exchanges which occur between the various departments are defined as "internal transactions". The totality of "internal transactions" forms the subject WHAT IS ACCOUNTING? matter of cost or managerial accounting. Managerial accounting information provides special information for the managers of a business entity. The kind of information used by managers may range from very broad, long-range planning data to detailed explanation of why actual costs varied from costs estimates. The purpose of managerial accounting is to generate information that a manager can use to make sound internal decisions.

6.2.Find in the text and write down English equivalents of the following words and phrases:

1. ділове підприємство

2. обліковий підрозділ, який має самостійний баланс

3. магазин апаратури (обладнання)

4. господарська одиниця

5. змінювати, перетворювати

6. вхідні фактори

7. випуск продукції

8. зображати, описувати

9. операція, справа, угода

10. зримий WHAT IS ACCOUNTING?, помітний

11. придбання

12. відлив готівкових грошей

13. зобов’язання

14. приплив надходжень

15. зовнішня угода

16. загальна кількість

17. платоспроможність

18.отже, таким чином

19. доречний, відповідний до

20. траплятися

21. управлінський облік

22. змінюватися у певних межах

23. дані, відомості

24. фактичні витрати

25. оцінка витрат

6.3.Answer the questions:

1. What does the study of accounting begin with?

2. In what way may the activity of an organization be presented?

3. What is business activity associated with in accounting?

4. When does a transaction occur?

5. What business activities are recognized in accounting?

6. How can transactions be classified?

7. What is financial accounting?

8. What is managerial accounting?

7.1. Read text 7 and say how many parts it consists of.