会计英语——程子建问答题整理

一、Accounting cycle (一)

1. transactions are analyzed

2. journalize transaction

3. post entries to the ledger

4. prepare trial balance

5. make end-of-year adjustment

6. prepare adjusted trial balance

7. prepare financial statements

8. journalize and post closing entries

9. prepare after closing trial balance

(二) D ifferences

1. in china, after analyzing transactions,we journal entries in

vouchers,but the West do it in journal.

2. the differences in account name, such as cash,interest revenue.

3. the last step in china is making financial statement,but it is preparing

after closing trial balance in the West.

二、The characteristics of FIFO/LIFO/SI/AC

FIFO method is based on the assumption that the units sold are the oldest units on hand. In this methodcost of goods sold is the cost of earliest purchases on hand prior to the salethe inventory is the cost of most recently purchased units.

Comments:1、cost of goods sold is based on older costs. 2、inventory valued at current costs. 3、may overstate income during periods of rising prices;may increase income taxes due

LIFO method is based on the assumption that the units sold are the last items received.In this method,cost of goods sold is the cost of most recently purchased units, the inventory is the cost of earliest purchases assumed still in inventory.

Comments:1、cost of goods sold shown at recent prices 2、inventory shown at old (and perhaps out of date)costs. 3、most conservative method during periods of rising prices;often results in lower income taxes The specific identification method determines the cost allocation according to the physical inventory flow. In this method, the cost of goods sold is the actual cost of the units, the inventory is the actual cost of units remaining.

Comments:1、parallels physical flow 2、logical method when units are unique 3、may be misleading for identical units

Average costflow assumption assigns the same average cost to the each unit. This method is based on the assumption that goods sold should be charged at an average cost,with the average being weighed by the number of units acquired at each price. In this method, the cost of goods sold is the

number of units sold times the average unit cost, the inventory is the number of units on hand times the average unit cost.

Comments:1、assigns all units the same average unit cost 2、current costs are averaged in with older costs

三、Your understanding about earnings management

“earnings management” occurs when managers use judgment in financial reporting and in structuring transactions to alter（更改）financial reports to either mislead some stakeholders about the underlying（潜在的）economic performanceof a company or influence contractual（契约的；合同的）outcomes that depend on reported accounting numbers. In other words, earnings numbers are deliberately manipulated（操纵）by management for the purpose of meeting company’s objectives whatever they might be. For example, a manager seeking to reduce expenses in the current period might defer（推迟）scheduled routine equipment maintenance（维修）until the next accounting period. The result is higher reported earnings in the current period, but the maintenance delay, of course, may be detrimental（不利的）to the company’s future operations.

四、Cash holdings

Corporate cash holdings is a kind of capital that can be put into use immediately and never be constrained by outside. Too much cash holdings show that enterprises failed to make full use of the cash, which will increase the opportunity cost and reduce the level of earnings.However, Too little cash holdings can't meet the needs of enterprise production and management of various expenses, which will affect the enterprise production and operation activities. So enterprises must have the proper cash holdings, which is the optimal cash holdings.It can meet the needs of production and business operation, make the highest efficiency and the lowest cash holdings. That can also make the sum of opportunity cost and conversion cost is lowest.

五、Over/under investment

As a result of agency, the creditor, managers and owners may have different aims. onthe one hand, when the company borrow money from creditor, the owner have the right touse itand they usually choose the high risk,high return objects to invest,when it success,the profit belong to owners, butif itfailure,the creditor takerisks and the owners only have thelimited liability. But on the other,the company maybe afraid of bankrupt,so the company usually invest the low risk,low return and result underinvestment.