Basic Accounting

Author: Chief Editor: Meng Fanjin
Publisher:
Publish Date: 1998-05-01
Features: Excerpt: In a commodity-based economy, the exchange of goods and money has become a large and widespread social activity. To effectively allocate labor time and produce more and better material products with minimal labor consumption to meet people's production and living needs, it is necessary to comprehensively record, calculate, and analyze the consumption of human resources, materials, and finances. Comparing and analyzing labor costs and labor achievements requires a unified measurement unit, specifically the use of money as a quantitative measure to conduct comprehensive, systematic, continuous, and integrated recording, calculation, analysis, and comparison of reproduction activities, thereby obtaining effective information for economic management. Developing a socialist market economy means introducing enterprises into the market, enabling them to operate independently, bear their own risks, and achieve self-development. The functions of the state and government will shift from relying on plans and administrative intervention to regulating the economy to adopting economic and legal means for macroeconomic control. To remain invincible in market competition, enterprises not only need to utilize accounting to promptly and accurately reflect the status of assets, liabilities, and owner's equity but also require analyzing and comparing accounting data to evaluate economic performance, select the best decisions, forecast economic prospects, and meet the needs of management, investors, and creditors. From the perspective of the government and state's macroeconomic management, on one hand, it is necessary to summarize and analyze accounting information to plan and make decisions for the coordinated development of the national economy; on the other hand, it should guide and supervise economic activities through the accounting profession and consulting services to safeguard the integrity and appreciation of state-owned assets. Therefore, in microeconomics, accounting is an essential component of the economic management of enterprises and institutions; in macroeconomic management, it is also an important component of national economic management. Accounting originates from production practice and develops within social production practice. With the continuous advancement of science and technology, accounting's technical methods are also moving toward scientific and modern directions. Accounting is increasingly integrated with economic management, becoming an indispensable part of it.
II. The Functions of Accounting
The functions of accounting refer to the capabilities it possesses in the process of economic management. From the perspective of its functions, accounting is also a form of economic management activity. The basic functions of accounting can be summarized into two aspects: accounting for the reproduction process and supervising economic activities.
(A) The Accounting Function
The accounting function involves the continuous, systematic, and comprehensive recording, calculation, and analysis of the economic activities of enterprises and institutions, objectively reflecting the process and results of economic activities through value indicators to provide information for economic management. For example, by recording, calculating materials, goods, products, and fixed assets, it reflects a company's inventory status; by recording assets, liabilities, and owner's equity, it reflects the financial condition. Accounting primarily adopts the monetary form to record, calculate, and analyze the quantitative aspects of economic transactions, providing value indicators for economic management. Accounting is conducted comprehensively and continuously. The recording and calculation of accounting can obtain systematic and comprehensive accounting information, enabling a comprehensive and objective assessment of the process and results of economic activities. Accounting not only reflects economic transactions that have already occurred but can also predict future economic trends and prospects through calculation and analysis. By processing and organizing accounting information, calculating, and analyzing to forecast cost and profit targets, selecting the best solutions, and providing services for managers to make scientific decisions. Accounting not only provides the financial condition of an enterprise but, through summarization and organization, can also reflect the economic status of an industry, region, or department. National economic plans, tax, finance departments, as well as investors and shareholders, can use the information provided by accounting to understand the economic condition of enterprises and analyze economic development trends.