Acceptance Accounting

Acceptance Accounting

 

in the USSR and other socialist countries, one of the basic methods of clearing between enterprises for stocks and material equipment dispatched or allocated, services rendered, and for work performed. This method has been practiced in the USSR since 1935 using bank collection of bills of exchange.

The essence of acceptance accounting using bank collection consists of the following: upon dispatching a product or rendering a service to a purchaser (customer), the supplier (contractor) draws upon him a commodity and freight bill and a bill of exchange that contains the necessary accounting particulars, including reference to the contract and evidence of the commodity origin of the document. Accounts for advances, demands for refunds because of poor quality, or claims resulting from breach of contract are not settled by means of bills of exchange. The bills of exchange are deposited for collection at the bank serving the supplier. The bank attends to all the paperwork involved in obtaining payment from the purchaser: it sends the bills to the bank that serves the purchaser; it transfers the collected payment to the account of the supplier; and it informs the supplier of the reasons for an incomplete or tardy payment. Before receiving payment from the purchaser the bank grants credit to the supplier in the amount of the plan-determined prime cost of the dispatched product. The purchaser’s bank presents the received bill for payment from the purchaser’s account. Payment is made with the acceptance of the purchaser, who is given a certain amount of time—usually three working days—within which to decide whether or not to accept the bill of exchange. The purchaser checks the particulars given in the bill of exchange and the supplier’s computation and sees whether the delivery corresponds to the terms of the contract, whether the price and the arithmetic are correct, and so on. In the event of a violation of the terms of the contract or of the law of delivery the purchaser has the right to refuse acceptance and payment of the bill of exchange either fully or in part. The bank verifies the reasons for the refusal of acceptance and decreases the amount of payment accordingly. The grounds on which a bank admits refusal of acceptance are regulated by the laws in force, by bank instructions, and by the terms of the contract between the parties.

On the date when payment is due the amount of the bill of exchange is deducted from the account of the purchaser and transferred to the account of the supplier. In case the purchaser’s account does not have the funds and cannot be granted credit with which to pay the bill of exchange, the latter acquires the force of a covering voucher, the sum of which is recovered from the purchaser’s account in accordance with the priority of payments established by the law. For delay of payment the purchaser is required to pay a fine in favor of the supplier. For each day’s delay the fine, as a rule, amounts to 0.03 percent of the amount owed.

Depending on the ordering procedure, acceptances are either express or negative. With express acceptance, bills of exchange are paid only upon the written assent of the payer; with negative acceptance, bills of exchange are considered accepted if no refusal of acceptance is received from the payer within the fixed time limit. In the early years following the introduction of acceptance accounting in the USSR (1931), the country had employed only express acceptance. With the introduction of negative acceptance in 1936, the employment of express acceptance decreased, and since 1958 it has been retained only in the settling of accounts involving rural soviets and public organizations. According to the time stipulated in the document, negative acceptance may be either preliminary or subsequent. In case of preliminary acceptance the date for payment is established after the termination of the time limit for acceptance. In case of subsequent acceptance, payment is made when the bill is received by the purchaser’s bank; in this case the purchaser may refuse acceptance before the date on which it is due. The amount involved in the subsequent refusal of acceptance which the bank has admitted is immediately restored to the account of the payer, and the bank of the supplier is asked to collect the amount from the latter’s account without recourse to court.

Acceptance accounting employing subsequent acceptance has been in use since 1955 and has helped to accelerate the circulation of the suppliers’ resources. By 1960, 45 percent of bills were paid by way of subsequent acceptance, and in 1968, 78.8 percent were thus paid. In 1967 subsequent acceptance was employed in settling the bulk of nonlocal accounts—earlier it was used primarily in settling local accounts. This method of settling accounts became expedient as a result of the relatively small number of refusals to honor acceptance, which in 1968 amounted to about two percent of acceptance accounting transactions.

Acceptance accounting involving preliminary acceptance has gradually decreased and by 1969 was retained primarily in economic relations with budgetary organizations (that is, those financed from a state budget); foreign trade, contracting, and planning organizations; kolkhozes—that is, in cases in which, because of the special nature of the economic transactions themselves or of the legal status of the participants, it is more expedient to check out the bills of exchange before they are actually paid. This method of settling accounts can also be employed in dealing with suppliers who regularly violate the terms of contracts.

Settling accounts through bank collection of the bills is practiced in some instances that do not involve acceptance, in which case the supplier has no right to inform a bank that he refuses acceptance. Such a procedure is usually employed in settling accounts for utilities whose quantity is measured with special devices or does not require measurement and whose cost is fixed in advance—for instance, electricity, gas, heat, water, telephone, and communal services—and also in settling accounts for the recovery of sums paid for goods which on receipt turned out to be of poor quality, incomplete, or substandard.

In acceptance accounting the bank and the economic organizations check and make sure that the parties observe contractual and accounting discipline. The bank can exact a penalty of 5 percent from the supplier for presenting a bill of exchange not based on the actual dispatch of a commodity (the so-called “commodity-less” bill of exchange). The product for which the purchaser refuses to pay goes to him for responsible storage and he is fined if he should use it without payment. For systematic delay of payments or for repeated delivery of commodities of poor quality the responsible party may be deprived by the other side of the right to employ acceptance accounting for a given period of time.

The procedure for settling accounts through acceptance accounting is determined by the bank’s instructions concerning clearing. In order to accelerate the paper work involved in acceptance accounting, payment may in certain cases be transferred by telegraph—for instance, in cases involving large sums and where transfer by mail is too slow.

Acceptance accounting remains the primary form of settling nonlocal accounts, for it helps ensure the moving of stock according to plan and is also convenient for the parties, since by this method the bank can defend the interest of each of them. In the area of local accounts, acceptance accounting is gradually becoming supplanted by simpler forms, namely by authorizations for payment and by checks from booklets with limited or unlimited total sums guaranteed to be paid by the banks.

The proportion of acceptance accounting in the State Bank’s transactions involving payment for goods and services decreased from 77 percent in 1961 to 60.6 percent in 1968. This is due to the introduction of payment by authorization and by checks, and also to planned payment.

M. M. GINDINAND V. I. SOLOVOV

References in periodicals archive ?
The Company believes that the overstatement resulted from an allocation of overhead variances in a manner inconsistent with generally acceptance accounting principles.