Money and Income 2

1.
Money and income

A.Currency
The money used in a country – euros, dollars, yen, etc. – is its currency. Money in
notes (banknotes) and coins is called cash. Most money, however, consists of bank
deposits: money that people and organizations have in bank accounts. Most of this is
on paper – existing in theory only – and only about ten per cent of it exists in the
form of cash in the bank.
B.Personal finance
All the money a person receives or earns as payment is his or her income. This can
include:
 a salary: money paid monthly by an employer, or wages: money paid by the

day or the hour, usually received weekly .
 overtime: money received for working extra hours
the employee generates.
 a bonus: extra money given for meeting a target or for good financial results.
 fees: money paid to professional people such as lawyers and architects.
 social security: money paid by the government to unemployed and sick
people.
 a pension: money paid by a company or the government to a retired person.
Salaries and wages are often paid after deductions such as social security
charges and pension contributions.
Amounts of money that people have to spend regularly are outgoings. These often
include:
 living expenses: money spent on everyday needs such as food, clothes and
public transport.
 bills: requests for the payment of money owed for services such as
electricity, gas and telephone connections.
 rent: the money paid for the use of a house or flat.

a mortgage: repayments of money borrowed to buy a house or flat
 a mortgage: repayments of money borrowed to buy a house or flat.

health insurance: financial protection against medical expenses for sickness or
accidental injuries
 tax: money paid to finance government spending.
 A financial plan, showing how much money a person or organization expects
to earn and spend is called a budget.
Planned monthly budget for next year (€)
Income Outgoings
Salary (after deductions) 3,250 Rent 900
Commission (average) 600 Bills 250
Living expenses 1,200
Health insurance 130
Tax 800
Total 3,850 Total 3,280
1.1 Complete the sentences with words from the box. Look at A and B opposite
to help you
Commission bonus currency earn mortgage Tax

overtime pension rent salary social security .
1 . After I lost my job, I was living on social security for three months. This was
difficult,because the amount was much lower than the , salary I had before.
2 . I used to work as a salesperson, but I wasn’t very successful, so I didn’t earn

much Commission .
3 . If the company makes 10% more than last year, we’ll all get a bonus at the end
ofthe year.
4 . It’ll take me at least 25 years to repay the mortgage on my house.
5 . Many European countries now have the same currency, the euro.
6 . My wages aren’t very good, so I do a lot of overtime.

7 . Nearly 40% of everything I earn goes to the government as Tax
8 .The owner has just increased the rent on our flat by 15%.
9 . When I retire, my pension will be 60% of my final salary.
1.2 Are the following statements true or false? Find reasons for your answers in
A and B opposite.
1) Bank deposits are not classified as money.
2) People earning wages get paid more often than people earning a salary.
3) People working on commission always get paid the same amount.
4) When you stop working at the end of your career, you receive a pension.
5) Most people pay a rent and a mortgage
1.2 answers
1. false - most money…. Consists of bank deposits
2. true - salaries are usually paid monthly and wages are usually paid weekly
3. false - commissions is a percentage of the income they generate, which can change
4. true - money paid by a company or the government to a retired person is a pension.
5. false - most people pay one or the other, depending on whether they are buying or
renting
2. Business finance
A. Capital
When people want to set up or start a company, they need money, called capital.
Companies can borrow this money, called a loan, from banks. The loan must be
paid back with interest: the amount paid to borrow the money. Capital can also come
from issuing shares or equities – certificates representing units of ownership of a
company. (See Unit 29) The people who invest money in shares are called
shareholders and they own part of the company. The money they provide is known
as share capital. Individuals and financial institutions, called investors, can also
lend money to companies by buying bonds – loans that pay interest and are repaid at
a fixed future date. (See Unit 33) Money that is owed – that will have to be paid – to
other people or businesses is a debt. In accounting, companies’ debts are usually
called liabilities. Long-term liabilities include
bonds; short-term liabilities include debts to suppliers who provide goods or services
on credit – that will be paid for later.
The money that a business uses for everyday expenses or has available for spending
is called working capital or funds.
B. Revenue
All the money coming into a company during a given period is revenue. Revenue
minus the cost of sales and operating expenses, such as rent and salaries, is known as
profit, earnings or net income. The part of its profit that a company pays to its
shareholders is a dividend. Companies pay a proportion of their profits to the
government as tax, to finance government spending. They also retain, or keep, some
of their earnings for future use.
More information
share capital revenue

share capital dividends
dividend
s
capital company profits tax
capital
debt (bonds and retained retained

earnings
loans) earningsexp
enses
C. Financial statements
Companies give information about their financial situation in financial
statements. The balance sheet shows the company’s assets – the things it owns;
its liabilities – the money it owes; and its capital. The profit and loss account
shows the company’s revenues and expenses during a particular period, such as
three months or a year.

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1.

Money and income

 a salary: money paid monthly by an employer, or wages: money paid by the

 a mortgage: repayments of money borrowed to buy a house or ﬂat.

Planned monthly budget for next year (€)

Commission bonus currency earn mortgage Tax

2 . I used to work as a salesperson, but I wasn’t very successful, so I didn’t earn

4 . It’ll take me at least 25 years to repay the mortgage on my house.

6 . My wages aren’t very good, so I do a lot of overtime.

1. false - most money…. Consists of bank deposits

4. true - money paid by a company or the government to a retired person is a pension.

share capital revenue

debt (bonds and retained retained

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