It all depends on how we communicate with our buddy(Dog).
For example:
Dogs in a Chinese family understands Mandarin and probably English.
But what about dogs living in a Korean family?
Do they understand Chinese or English?
Nah, or rather, they understand Korean language, as the family communicates with them in Korean language.
Hence, constant and patient communication is important.
Dog's Vocabulary
Basic words that most dogs understand:

- Fetch
- Shake Hand
- Toy
Interestingly, Stanley Coren, a psychologist who has researched on dog's intelligence, suggests that average trained dogs understand about 160 words [source: Coren].
Stanley Coren even provided an additional link to Dog IQ Test, determining dog's IQ.
Some might say yes, but the answer is dogs actually decipher our words from our sound, tones and body language.
Just like we're talking on the phone, they do not exactly understand our conversation.
Dog's Body Language
What about dogs body language?
How do we know if dogs are happy, angry, protective, sad and etc?


The above images are able to answer the question.
Not 100% true but it is sure interesting!