Have you ever translated a balance sheet? Pretty dull stuff. Intellectually unrewarding. Once you have translated one you have translated them all. Or so most people think—but I strongly disagree. Lots of repetition and near-repetition, yes. But I see this as a plus, not as a minus. Repetition gives me more chances to try different approaches and solutions; near-repetition gives me a chance to fine-tune solutions that reflect the minute differences between expressions that are almost the same—but nevertheless different.


The Accounting Equation

When I joined a CPA firm as a staff translator way back in 1970, I thought assets equaled liabilities because balance sheets were cooked. Now I know that assets do not equal liabilities. In fact, the basic accounting equation (equação contábil) is

• assets = liabilities + owners' equity (ativo = passivo + patrimônio líquido)

What this equation means is that if a company (or an individual, for that matter) sells everything it owes (assets) and pays off all of its debts (liabilities), the remainder, if any, is what the owner(s) actually own, their equity in the company.

This very simple equation poses some very interesting terminological questions, both in Portuguese and in English.


To each his/her own

First, we have owners' equity. The owners' used as a modifier indicates that somewhere there is some type of equity belonging to parties other than the owners themselves. Indeed, an old copy of the respected Accountants' Handbook divides balance sheet accounts into assets and equities—and further divides equities into owners', creditors' and non-stated (here meaning government). Later editions of the same book refer to assets, liabilities and owners' equity in the modern way. Today, equity account is a synonym for owners' equity account. All this to explain that owners' equity is the owners' cut of the company's assets. Creditors and the government keep the remainder—although nobody calls it equity any longer.

Or, to be a bit more precise, it is the other way round: first, creditors and the government claim and get their cuts and then the owners keep the remainder, if any. This is borne out by the older Brazilian terminology, in which the entire right-hand side of the balance sheet was called passivo and the passivo was further divided into exigível and não exigível. Exigível means liabilities toward the government and other creditors, items that those creditors could claim (exigir). Não-exigível means the owners' cut, which can not possibly be claimed by the owners themselves. The current Business Corporation Act (Lei das Sociedades por Ações) uses ativo / passivo exigível e patrimônio líquido, but não-exigível is still often used for owners' equity.

Patrimônio líquido poses a different problem. Líquido (net) as opposed to what? To bruto, total (gross, total), of course. Now, patrimônio does not translate liabilities, so what does patrimônio bruto mean? In practice, the term is never used, but the concept is clear: Patrimônio bruto (or total) is assets. So that the equation could—although in practice it is not—be stated as

• patrimônio bruto – exigibilidades = patrimônio líquido.

That is why balance sheet accounts are contas patrimoniais in Brazil.


Realize & liquidate

Asset accounts are classified in the order of their liquidity. We begin with cash (caixa), which is money at hand, and, for all practical purposes, items of several types known as cash equivalents, or near cash (equivalentes a caixa) that can be converted into cash within a very short period. The technical terms for "convert into cash" are liquidate, realize (liquidar, realizar). To liquidate / realize an asset (liquidar / realizar um ativo) means to convert it into cash. So we talk about liquidity (liquidez). Real estate has very low liquidity, meaning that usually you can not sell that great condo and cash in the proceeds overnight. Brazilian stores often run liquidações, meaning sales at lower-than-usual prices to liquidate excess inventories within a short time period, or what is called a plain sale in the U.S.

What has already been fully liquidated is ready cash. This was formerly called disponível ("available [cash]") in older balance sheets. Disponibilidades (Brazilian gobbledygook has a passion for abstraction) is used in the current Act (Article 179), but as a part of the ativo circulante (current assets).


What do Circulante and Realizável mean?

Fortunately, circulante and current mean "realizable or maturing within one year". Under the previous S. A. Law a curto prazo meant "realizable or maturing within six months" and that was a nightmare. But that was a long time ago.

The opposite of disponível is realizável, meaning items that can be realized. This poses several problems to the translator. A possible translation for realizável is receivables and it will be a very satisfactory solution most of times. Valor demonstrado no realizável can often be translated simply as as a receivable, and that is that. However, technically speaking, realizável includes inventories, and inventories are not receivables. So, in certain cases, receivable won't do. Other possibilities for realizável are assets other than cash, which has the defect of being too comprehensive, because it would include fixed assets too. Please, refer to the introduction to this article and notice that I said I have tried many solutions, but never said I had found The Perfect Solution.

The opposition between disponível and realizável is still considered important and the terms often used, but it is no longer shown in balance sheets.

Realizável a longo prazo roughly speaking is long-term receivables—no inventories here to spoil our translation.


Ativo fixo and ativo permanente

Then, of course we have the blessed ativo permanente. This dates back to the Business Corporation Act of '76 and is not the same as ativo fixo. I have often had a chance to deal with this, which in fact constitutes one of my favorite translation issues, but I can not resist the temptation of coming back to it once more.

Ativo fixo reflects what used to be called fixed assets and is now referred as property, plant and equipment, although nine out of ten CPAs will refer to fixed assets when they have reason to believe nobody is listening. Property, plant and equipment applies to industrial companies, as you know. Service enterprises, being devoid of plants, have something that usually goes by the name of premises and equipment. But ativo permanente includes both imobilizado (fixed assets), investimentos (fixed investments) and ativo diferido (deferred charges). I usually cross my fingers and translate ativo permanente as "permanent" assets and pray that the general layout of the balance sheet will help a foreign reader understand what it is. In fact, under Law 6404/76, permanente reflects assets subject to correção monetária (indexation). That, of course, does not help me very much.


The other side of the picture

The other side of the balance sheet is the passivo, or, more formally, passivo e patrimônio líquido, but we have already covered that. In English, there is also a lot of oscillation between liabilities and liabilities and shareholders' equity also, so no problem here. Passivos may also be circulante or a longo prazo, something that should not surprise anybody. The last group of accounts, of course, is patrimônio líquido, variously referred to as shareholders', stockholders', partners', members' or owners' equity in English. Owners, of course, is the most general term and thus seldom used. Partners are the owners of a partnership, of course, members are the owners of a Limited Liability Company, shareholders or stockholders are the owners of a business corporation. In U.S. English, shareholders and stockholders are synonymous.


Do you still have a minute for me?

I hope so, because I would like to mention the matter of debits and credits.

A debit (débito) is an addition to an asset account—or reduction in a liability account. A credit (crédito) is a reduction in an asset account—or an increase in an asset account. Because a debit is an increase to an asset account, we have colloquial synonyms such as charge (carregar), which you will see from time to time. To credit, on the other hand, is often referred to as release (descarregar). Do not use those colloquialisms in your translation though. Their distribution in English and Portuguese are different and your client may smile when you use carregar for charge, when the more formal debitar would be appropriate in Portuguese.

When the Ye Bookshoppe finally receives a check from X. Layter, in payment of some dictionaries bought on credit, the store's cash (caixa) account increased by the amount of the check and accounts receivable [X Layter] (contas a receber [X Layter] is reduced by the same amount.

This is shown in English as

Dr. Cash $100

Cr. Accounts Receivable $100

meaning that cash is charged for a hundred bucks, and accounts receivable is credited for the same hundred bucks. This system is called double-entry bookkeeping (contabilidade por partidas dobradas). It is practically universal these days, but there as certain differences of detail. For instance, in Brazil, the same transaction would be described as

Caixa R$100

a Contas a Receber R$100

notice the "a" and the different formatting of the entries.

After doing this, the Bookkshoppe's bookkeeper sends the customer a nice message saying

We have credited your account for $100. Thank you.

This should help you understand how debits and credits work


May I still have another minute, please?

If you are interested in the language of accounting, you may want to download a short glossary of accounting terms I posted on the Trad-prt home page. Trad-prt, as you probably know, is the oldest and largest mailing list for translators interested in Portuguese. To access Trad-prt home page, click here: http://fast.to/trad. Or try http://www.via-rapida.com.br if Trad-Prt is not available for some reason.