ДЕНИСЮК НАТАЛІЇ, ОА 404

TEXT A
I. Find in the text Ukrainian equivalents to the following words and word
combinations and translate the sentences in which they are used.
Tax implications; special tax incentives; to encourage business; to launch programs;
appropriate tax; involuntary; allowable deductions; awareness of the tax laws; required data;
to withdraw from the business; tax return; deceased person; decedent’s debts; heirs; tax table
income; inheritances; mortgage interest payments; charitable contributions.
Податкові наслідки; спеціальні податкові пільги; для заохочення бізнесу; запускати
програми; відповідний податок; обов’язковий (не добровільний); допустимі
відрахування; усвідомлення податкового законодавства; необхідні дані; виходити з
бізнесу; податкова декларація; покійник; борги покійника; спадкоємці; дохід
податкової таблиці; спадщина; виплати відсотків за іпотекою; благодійні внески.

II. Find in the text English equivalents to the following words and word
combinations. Make sentences of your own with these phrases.
Обкладати податком; федеральний та місцевий уряд; типове домогосподарство;
чистий дохід; одноосібна власність; двічі оподатковуватися; скоригований валовий
дохід; особисте звільнення від податків; грошові виплати по полісу страхування
життя; нещасний випадок; мати право; податкові зобов’язання; відтерміновувати;
прискорювати відрахування; придбання та розміщення основних фондів.
Levy a tax; federal and local government; typical household; net income; sole
proprietorships; are taxed twice; adjusted gross income; personal exemption; life insurance
proceeds; casualty; is allowed; tax liabilities; to defer; accelerating deductions; acquisition
and disposition of fixed assets.

III. Answer the following questions.

1. Why is there the necessity of some understanding of income taxes?
A general knowledge of income taxes will help any business manager or owner to benefit
more fully from the advice of the professional tax accountant. Some understanding of
income taxes will also aid the individual citizen in voting intelligently, because a great many
of the issues decided in every election have tax implications. Such issues as pollution,
inflation, foreign policy, and employment are quite closely linked with income taxes. For
example, the offering of special tax incentives to encourage business to launch massive
programs to reduce pollution is one approach to protection of the environment.
2. How is taxable income calculated?
Income taxes are determined from information contained in accounting records. The amount
of income tax is computed by applying the appropriate tax rates to taxable income. Taxable
income is not necessarily the same as accounting income even though both are derived from
the accounting reports.
3. What are the three major classes of taxable entities?
Income taxes are levied upon four major types of taxable entities: individuals, corporations,
and estate trusts.
4. Why are sole proprietorships or partnerships not taxable entities?
Business entities organized as sole proprietorships or partnerships are not taxable entities.
Instead, their income is included in the gross income of the individual owner or owners,
whether or not it is actually withdrawn from the business and distributed to these owners. A
partnership, however, is required to prepare an information return which indicates the items
of its gross income, deductions, and credits and how these are allocated to the partners. The
partners then report these amounts in their own tax returns.
5. The earnings of a corporation are the subject to a “double tax”. Explain.
A corporation is treated as a separate entity for tax purposes and must pay taxes on its
taxable income. In addition, individual corporate stockholders must include any dividends
received from the corporation as a part of their taxable income. For this reason, it is often
argued that the profits of a corporation are taxed twice — once to the corporation when the
income is reported and again to its stockholders when dividends are distributed.
6. How is gross income defined?
Gross income is defined as all income from whatever source derived. This includes income
from sources such as wages, dividends, interests, partnership income, rents, and numerous
other items.
7. What are the deductions for adjusted gross income?
The deductions for adjusted gross income are business expenses and other expenses
connected with earning certain types of revenue. These include ordinary and necessary
expenses incurred by the taxpayer in the operation of his unincorporated business or
profession, certain business expenses of an employee, losses from the sale or exchange of
certain property, expenses incurred in connection with earning rent and royalty income.
8. What do itemized deductions include?
Itemized deductions include such items as a limited amount of charitable contributions,
mortgage interest payments, other interest payments, certain taxes paid by the taxpayer, a
limited amount of medical expenses, a limited amount of casualty and theft losses, and non-
business expenses (other than expenses incurred in connection with earning rent or royalty
income).
9. What are some of the differences between the tax rules for corporations and those
for individuals?
Although a corporation is taxed in generally the same manner as individuals, there are
several important differences:
1. The concepts of itemized deductions and personal exemptions are not applicable to
corporations.
2. Corporations may ordinarily deduct 80 percent of all dividends received on
investments in stocks of other taxable domestic corporations.
3. The deduction for charitable contributions is limited to 10 percent of taxable income
(before charitable contributions, before the 80 % dividend deduction and before certain other
deduction) in any one year.
10. What are the major areas of importance in tax planning?
Major areas of importance in tax planning are the following:
1. Selecting the form of business organization;
2. Acquisition, use, and disposition of fixed assets;
3. Employee compensation;
4. Corporate reorganization; and
5. Financing arrangements.

IV. Read the text about accounting income and taxable income and explain the main
distinction between them.
- Taxable income is determined by tax law while accounting income is based on generally
accepted accounting principles.
- Some differences between taxable income and accounting income occur because of special
tax rules that differ from generally accepted accounting principles. Certain items of revenue
are excluded by law from taxable income.
- The objective of financial accounting is a fair and accurate measurement of income and
financial position, while the objective of a business in selecting tax methods is usually to
minimize taxable income and postpone of payment of taxes.

V. Use words from the box to fill in the gaps.

1. The government needs more money, so it is planning to increase taxes.
2. He earns a lot of money — he must be in the highest tax bracket.
3. She lives there because she has to — she’s a tax exile.
4. They are planning to abolish the tax on large company cars, and replace it with a tax on
all company cars.
5. She is a student, so she is a tax exempt.
6. The government is planning to introduce new tax breaks for IT companies.
7. Don’t buy a house this year — the property taxes are being abolished next March.
8. A tax return is the same as a tax declaration — it’s a list of income and tax deductible
expenditure for the tax authority.

VI. Match the terms on the left with their definitions on the right.

1. Capital gains tax c) a. People pay this tax on the money they earn.
2. Corporation tax b) b. Companies pay this tax on their profits.
3. Creative accounting j) c. Profits from the sale of assets may be subject to this tax.
4. Excise duty i) d. These payments are not subject to paying tax.
5. Income tax a) e. This kind of tax means that the more money you earn, the
higher the rate of tax you have to pay.
6. Loophole h) f. A clever but still legal of reducing the amount of tax to an
absolute minimum.
7. Money laundering n) g. A country such as Liechtenstein and the Bahamas where tax is
low.
 8. Progressive tax e) h. A mistake in the law which allows people to avoid paying tax.
9. Tax deductable d) i. Government tax on the things such as cigarettes, alcohol and
petrol.
10. Tax evasion l) j. In the accounts the company is seen to make this if capital
expenditure is brought forward to use up profits.
11. Tax haven g) k. Investment schemes which allow people to postpone paying
tax.
12. Tax loss k) l. Avoiding paying tax by giving false information to the
authorities.
13. Tax shelter f) m. This tax is added to the price of goods and services.
14. Value added tax m) n. Handling money made from illegal activity.

VII. The following phrases are from three different letters written by an accountant
concerning tax matters. They are all mixed up. Put them in the correct order to
produce three correct letters.
Letter 1 6 4 10
Letter 2 5 2 7 3
Letter 3 8 9 1

VIII. Translate into English.

Since 1997 it has been legislatively formed separate subsystem of accounting - tax
accounting in Ukraine, therefore, businesses are required to maintain three types of
accounting - accounting, in-house (managerial) and tax. Due to the tax legislation, which, by
the way, changes almost monthly, the formation of information about the objects of
accounting in accounting and taxation are fundamentally different (for example, fixed assets
and fixed funds, gross expenses and operating expenses, gross income and operating income,
etc.).
Tax accounting is a subsystem of accounting, which, according to the rules established
by the state, generates information on the deduction and payment of taxes and fees to the
relevant governmental authorities, whose main task is to control the correctness, timeliness
and completeness of the deduction and payment of taxes and fees.
The content of tax accounting is the financial relationship arising from the deduction
and payment of taxes and fees, that is, between the state tax authorities and the legal entities
and individuals on taxes and statutory payments to budgets of all levels.
The purpose of tax accounting is to provide complete and reliable information to the
state (represented by tax authorities), which ensures the determination of the amounts of
taxes and fees and control by their timely payment, to fill the budget for the purpose of the
state to perform its functions. The ultimate purpose of accounting is to prepare statements
that are a source of information on the course and results of the taxpayer's activities during
the relevant period. The system of reporting indicators, the order of their development and
formation are determined by the State Tax Administration of Ukraine.

TEXT B
I. Give Ukrainian equivalents to the following phrases and translate the sentences
in which they are used.
Matching convention; to convert an asset into an expense; to measure in time; to have a
limited life; to require less labour; specific nature of an asset; to increase in importance;
financial performance; long-lived assets; to have many theoretical attractions; to spread over
the number of years; accumulated depreciation to date.
принцип відповідності; перетворювати актив у витрати; вчасно виміряти; мати
обмежений термін; вимагати менше праці; специфічна природа активу; зростати у
важливості; фінансова діяльність; довгострокові активи; мати багато теоретичних
пам’яток; поширюватися протягом кількох років; накопичена на сьогодні амортизація.

II. Find in the text English equivalents to the following words and word
combinations. Make sentences of your own with these phrases.
Визнавати витрати; списувати повну вартість активу; обчислювати суму
амортизаційного відрахування; неприйнятний метод; фактичне використання; легко
пристосовуватись до альтернативного використання; застосовувати
(використовувати); оцінювати вплив різних методів; очікувані витрати; залишкова
вартість; сталий процент.
Recognize the expense; write off/expense the whole cost of the asset; compute the
depreciation charge; method is not acceptable; actual usage; easily adapted to alternative
uses; to employ; appreciate the effects of the various methods; expected cost; residual value;
fixed percentage.

III. Say whether the following statements are true or false according to the text.
1. The cost of an asset is usually written off over a period of time. T
2. Depreciation is never calculated on the basis of how much asset is used. F
3. Accounting convention requires that the cost of fixed assets be extended over the year
when they are bought. T

IV. Answer the following questions.

1. What does the term depreciation mean?
Depreciation —the systematic allocation of the cost of an asset to expense over the years of
its estimated useful life.
2. Why is it not acceptable to measure depreciation as value at purchase minus
present value?
The traditional approach is to estimate the total expenditure to be written off, i.e. the cost of
the asset less its estimated scrap value, and then to write off that expenditure over the
estimated life of the asset by using one of the methods.
3. For which two groups is the choice of depreciation method particularly
important?
Expenditure and asset.
4. What are the main reasons why most fixed assets have a limited life?
These reasons may be classified as physical wear and tear, and obsolescence. Obsolescence
may be of the asset itself, e.g. a new machine may make the use of the original asset, an
older machine, uneconomic because the new machine is faster or requires less labour.
Obsolescence can also be caused by the object produced by the asset. In the latter case, the
degree of obsolescence will depend on the specific nature of the asset; some assets may be
easily adapted to alternative uses while others may have only one use, the original.
5. How many methods of calculating depreciation are described in the text?
Accelerated depreciation, Annuity method, Reducing (declining, diminishing) balance
method, Straight-line method, Sum of the years’ digits method.
6. What is the main feature of straight-line basis of calculating depreciation?
Straight line basis is a method of calculating depreciation and amortization, the process of
expensing an asset over a longer period of time. It is calculated by dividing the difference
between an asset's cost and its expected salvage value by the number of years it is expected
to be used.
7. What is the main feature of the accelerated methods of calculating depreciation?
Acceleration Depreciation method allows companies to write off more of their assets in the
earlier years and less in the later years. The biggest benefit of this method is the tax
benefit. By writing off more assets against revenue, companies report lower income and
thus pay less tax.
8. What are the two accelerated methods of depreciating assets?
Two main methods of depreciation — a straight line basis and accelerated depreciation.

V. Complete these sentences about obsolesces using information contained in the

text. Translate the completed sentences into Ukrainian.
1. Obsolescence is one of two reasons why most fixed assets other than land have a limited
life.
Моральний знос - одна з двох причин, через які більшість основних засобів, крім землі,
мають обмежений термін експлуатації.
2. Obsolescence can be caused either because the object may be produced by the asset or
because the degree of obsolescence will depend on the specific nature of the asset.
Моральний знос може бути викликаний або тому, що об'єкт може бути вироблений
активом, або через те, що ступінь застарілості залежатиме від конкретної природи
активу.
3. A firm’s management decides how obsolescent a change in fashion for its product makes
it.
Керівництво фірми вирішує наскільки моральний знос змінює вигляд її товару.

VI. Look at how the following words are used in the text. Then put each word into
one of the sentences below, using the correct grammar form. Translate the completed
sentences into Ukrainian.
1. Usually obsolescent machinery has to be scrapped.
2. Trying to compute future costs at a time of growing inflation is difficult.
3.Rules which are generally followed but are not obligatory are convention.
4. Given their shortage of foreign language, there are inherent difficulties in trading with
Eastern Europe.
5. Determining the taxes of self-employed workers can be very complex.
6. Any sensible system of taxation must appreciate the needs to encourage business
enterprises.
7. The difficulties of exporting are sometimes not taken account of by companies wishing to
expand.
8.Together with the income produced by a new product there are associated costs.
9. Owing to its inefficient management, the company has accumulated debts of £10,
000,000 up to now.
10. After a company has paid a dividend there is a residual amount known as retained
profits.
1. Зазвичай застарілу техніку доводиться брати під забір.
2. Спроба обчислити майбутні витрати в момент зростаючої інфляції є складною.
3. Правила, яких, як правило, дотримуються, але не є обов'язковими, є конвенцією.
4. Враховуючи дефіцит іноземної мови, існують властиві труднощі в торгівлі зі
Східною Європою.
5. Визначення податків само зайнятих працівників може бути дуже складним.
6. Будь-яка розумна система оподаткування повинна оцінювати потреби заохочення
бізнесу.
7. Труднощі експорту іноді не враховують компанії, які бажають розширюватися.
8. Разом з доходом, отриманим новим товаром, пов'язані й витрати.
9. Завдяки неефективному управлінню компанія нарахувала заборгованість у розмірі
10 000 000 фунтів стерлінгів.
10. Після виплати дивіденду компанією, залишається залишкова сума, відому як
нерозподілений прибуток.
VII. Task 1. Complete the text by inserting the correct forms of the verbs in the box
and translate it into Ukrainian.
Fixed assets such as buildings, plant and machinery (but not land) gradually lose value,
because they wear out or decay, or because more modern and efficient versions are
developed. Consequently, they have to be replaced every so often. The cost of buying or
replacing fixed assets that will be used over many years is not deducted from a single year’s
profits but is accounted for over the several years of their use and wearing out. This accords
with the machines principle that costs are identified with related revenues. The process of
converting an asset into an expense is known as depreciation.
Various methods of depreciation exist, but they all involve estimating the useful life of the
asset, and dividing its estimated cost (e.g. purchase price minus any scrap or second-hand
value at the end of its useful life) by the number of years. The most usual method, which
simply spreads the total expected cost over the number of years of anticipated useful life, and
charges an equal sum each year. The reducing or declining balance method write off smaller
amounts of an asset’s value each year in cases where maintenance costs for the use of an
asset are expected to increase over time. The annuity system of depreciation spreads the
cost of an asset equally over a number of years and spreads this, and an amount representing
the interest on the asset’s current value, each year.
Some tax legislations allow accelerated depreciation: writing off large amounts of the cost of
capital investments during the first years of use; this is a measure to encourage investment.
Основні засоби, такі як будівлі, машини та обладнання (але не земля), поступово
втрачають цінність через те, що вони зношуються або занепадають, або тому, що
розробляються більш сучасні та ефективні версії. Тому їх доводиться змінювати так
часто. Витрати на придбання або заміну основних засобів, які будуть
використовуватися протягом багатьох років, не віднімаються від прибутку за один рік,
а обліковуються протягом кількох років їх використання та зносу. Це узгоджується із
принципом відповідності того, що витрати визначаються із відповідними доходами.
Процес перетворення активу у витрати є зносом.
Існують різні методи амортизації, але всі вони передбачають оцінку строку
корисного використання активу та поділу його орієнтовної вартості (наприклад, ціна
придбання за вирахуванням будь-якого браку або вартості в кінці терміну корисного
використання) на кількість років. Найбільш звичайні методи амортизації - це
прямолінійний метод, який просто поширює загальну очікувану вартість на кількість
років передбачуваного строку корисного використання та стягує рівну суму щороку.
Метод скорочення або зменшення балансу списує менші суми вартості активу щороку
у випадках, коли очікується, що з часом збільшуватимуться витрати на
обслуговування активу. Система ануїтету амортизації розподіляє вартість активу
порівну протягом кількох років і стягує це, а також суму, що представляє відсотки за
поточною вартістю активу щороку.
Деякі податкові законодавчі акти дозволяють прискорити амортизацію: списання
великих обсягів вартості капітальних вкладень протягом перших років використання;
це захід для заохочення інвестицій.
Task 2. Add appropriate words from Task 1 to these sentences.
1. A worn out or obsolete machine has to be replaced.
2. Land, unlike machines, usually appreciates — i.e. it increases in value.
3. To depreciate an asset accurately, you have to estimate its useful life.
4. The materials that make up an obsolete machine can be recycled if it is sold for scrap.
5. A percentage of the value of fixed assets is charged against or deducted from the profits,
and becomes a source of funds.
6. Writing off value means reducing it.
7. Keeping a machine in good working condition is called maintenance.
8. Accelerated depreciation allows firms that makes capital investments to pay less tax.

VIII. Replace the words in brackets in each of the following sentences with a phrasal
verb of similar meaning. Choose from the following and make any necessary changes.
1. As the machine had no scrap value, they simply cleared it up.
2. The method used for depreciating the fixed assets should be set out in the notes at the end.
3. Despite massive losses this year, the firm intends to carry on trading.
4. They found the true value of the land when the firm had to sell off it.
5. We think it is best to set aside money each year for future investment in new equipment.
6. The estimated life of the assets turned out to be very accurate.
7. If you cannot remember the formula for the reducing balance method of depreciation, look
it up.
8. It’s a good idea to go over the different ways of depreciating assets before deciding on
one particular method.
9. After disposal of the asset you can close off the account.
10. The surplus or deficiency is transferred when you draw up the Profit and Loss Account.
11. The sum of the year’s digits method of depreciation is beginning to catch on in Europe
now.
12. A change in the method of depreciation should clear up the problem of allocating costs.

IX. Translate into English.

The method of determining profit in tax accounting differs from the method of
determining profit in accounting. In accounting, when determining the financial result should
adhere to the principle of accrual and consistency of the income and expenses and the
principle of periodicity.
The basic principle of the tax accounting is to reflect the gross income and gross
expenses of an event that has occurred before: or the time of receipt (disposal) of cash for
goods (works, services), or the time of shipment (receiving) of tangible goods, works or
services - that is, the so-called rule of the first event.
The object of the income taxation is income, which is determined by reducing the
amount of adjusted gross income for the reporting period by the amount of gross expenses of
the taxpayer and the amount of depreciation.
Gross income is the total amount of taxpayer's income from all activities received
(accrued) during the reporting period, in monetary, tangible or intangible forms, both within
the Ukraine and abroad.
In this case, adjusted gross income is gross income excluding the sums of transactions
of enterprises that are not included in the gross income.
Gross production and handling costs are the sum of any taxpayer's expenses in
monetary, tangible or intangible forms, offset against the cost of goods purchased
(manufactured) by such taxpayer for their continued use in their business activity.
In financial transactions, the accusation of depreciation is based on the principle of
matching income and expense, and aims to allocate the cost of the fixed assets over the
periods of their use in proportion to the cost of usefulness of such fixed assets.
The rules of the tax legislation on depreciation can be considered as a certain
mechanism for reducing taxable profit by the amount of depreciation, the amount of which is
not directly related to the expenditure of the usefulness of the fixed assets. For example, the
depreciation of the certain fixed assets for tax purposes may sometimes continue even after
their actual disposal (write-off). In general, the mechanism of tax depreciation is largely
related to the incentive function of the income tax and should help to upgrade the fixed
assets of the enterprise.