Basic Accounting (Revised Edition)

Author: Chief Editor: Chen Yuqing
Publisher:
Publishing Date: 2002-02-01
Features: Excerpt: Accounting, like other things, is also constantly developing and changing. Therefore, there are different understandings of the concept of accounting. However, to truly understand this issue, one must start with the study of accounting's functions. Only by truly understanding the functions of accounting and its role and significance in economic management can a precise definition of accounting be given.
I. Basic Functions of Accounting
The function of accounting refers to the functions that accounting possesses in economic management. Regarding this question, Marx pointed out in Capital that accounting is the "control and conceptual summary of the production process." The accounting profession generally interprets "control" as supervision and "conceptual summary" as reflection (or accounting). Thus, the basic functions of accounting are reflection and supervision.
(1) Reflective Function of Accounting
The reflective function of accounting refers to the function of accounting in providing economic information for economic management by using its specialized technical methods to reflect the economic activities of various units. The reflective function of accounting has the following characteristics:
(1) Accounting primarily uses money as the main unit of measurement to comprehensively reflect the economic activities of various units, thereby providing necessary economic information for economic management. The commonly used units of measurement by various units include three types: physical quantity (tons, kilograms, pieces, etc.), labor quantity (hours, work hours), and monetary quantity (yuan). Accounting mainly uses money as the unit of measurement, utilizing the form of value to comprehensively reflect the occupation of economic resources, the consumption of labor, the acquisition of income, the realization and distribution of net income, and other economic activities of various units. This is an important feature of the reflective function of accounting. The "conceptual summary" mentioned by Marx in Capital refers to the reflection of the economic activities of various units using conceptual money (i.e., value).
(2) The reflective function of accounting requires the complete, continuous, and systematic reflection of the actual economic activities of various units. The term "complete reflection" refers to the reflection of all content that accounting should reflect; anything that falls within the scope of accounting reflection should be recorded. The term "continuous reflection" refers to reflecting in the order of the occurrence of economic transactions without interruption. The term "systematic reflection" refers to reflecting economic activities scientifically and interrelatedly based on the relationships between relevant data. Only in this way can complete, continuous, and systematic data be provided for economic management.
(3) The reflective function of accounting is constantly developing. Traditional accounting reflection was limited to reflecting economic activities that had already occurred, i.e., post-event reflection. However, with the continuous development of social production, the expansion of business scale, and the increasing complexity of economic activities, the requirements for accounting have become higher and higher. Post-event reflection alone is no longer sufficient, and management urgently needs accounting to have foresight and planning. Therefore, accounting forecasting has emerged, developing the reflection of accounting from post-event to pre-event. It can be seen that the reflective function of accounting will continue to develop with the advancement of production and the increasing needs of management.
(2) Supervisory Function of Accounting
Accounting supervision refers to a means to ensure that economic activities proceed in an orderly manner to achieve expected goals. Each accounting entity has certain business and management objectives, and accounting supervision is about doing everything possible to ensure that economic activities proceed in an organized and orderly manner to achieve the expected goals. Accounting supervision has the following characteristics:
(1) Accounting supervision is mainly carried out using value indicators. Accounting supervision includes many contents, such as analyzing accounting data, checking compliance with regulations, evaluating the results of business operations, and adjusting action plans, etc. All of these tasks are carried out using value indicators. For example, various indicators in terms of funds, costs, and profits can not only comprehensively reflect the economic activities of various units but also, through comparative analysis of indicators, control and adjust the economic activities of various units, thereby fulfilling the role of accounting supervision. For instance, through the comparison and analysis of cost indicators, the expenditure of various costs of a company during a certain period can be reflected, which is beneficial for controlling consumption and reducing costs to achieve the expected cost goals.