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The Role of the Accountant
Development of Modern Accounting
Although there were stewards, auditors, and bookkeepers in ancient times, the professional accountant is a 19th-century development. Unlike those precursors, modern accountants usually do not service a single client or employer; instead they offer their expertise, for a fee, to several individuals and businesses. The profession was first recognized in Great Britain in 1854, when the Society of Accountants in Edinburgh was given a royal charter. Similar societies were later established in Glasgow, Aberdeen, and London. In the United States the first such professional society was the American Association of Public Accountants, chartered by the state of New York in 1887.
All the states and Puerto Rico and the District of Columbia now have laws under which an accountant who fulfills certain educational and experience requirements and passes an examination may be granted the title Certified Public Accountant (CPA). CPAs have organized into state and national societies. The bodies representing the accounting profession in the United States are the American Institute of Certified Public Accountants, which is the contemporary successor organization of the American Association of Public Accountants, and the American Accounting Association, organized in 1916. In the United States, the Financial Accounting Standards Board, an independent nongovernmental organizaiton sponsored by financial-reporting industry groups, is the main institution responsible for establishing accounting standards and rules. The International Accounting Standards Board develops standards and rules that are accepted by many nations.
With the growth of corporate activity in the 20th cent., the field of accounting increased greatly in importance and saw many improvements in theory and techniques. The chief causes of changes in accounting methods have been more complex tax laws and regulations and the need to keep uniform accounts for possible governmental or public scrutiny. Contemporary accounting firms also have taken on managerial functions and are no longer concerned simply with ascertaining and reporting financial condition but also with advising a client how to act on this information; they also consult on information-technology systems and other services. This has greatly increased the potential for conflicts of interest, because the services provided to clients by accounting firms must be evaluated in their audits and because the fees paid by a client for such services may be more important to the accounting firm than that paid for an audit, potentially undermining the independence of the audit. As a result, in 2000 the Securities and Exchange Commission specified the types of services accounting firms could provide without compromising their independence as auditors.
A series of revelations concerning accounting firms' failure to detect or publicly challenge irregularities or fraud when auditing the finances of a number of corporations led Congress to establish (2002) the Public Company Accounting Oversight Board. The board is appointed by the Securities and Exchange Commission and has the power to register and regulate accountants and firms that act as auditors. It sets standards for audits and is responsible for reviewing audits and disciplining accountants and accounting firms.
See N. A. H. Stacey, English Accountancy, 1800–1954 (1954); M. Backer, ed., Modern Accounting Theory (1966); L. Goldberg and V. R. Hill, The Elements of Accounting (3d ed. 1966); J. D. Edwards, History of Public Accounting in the United States (1960); A. J. Briloff, Unaccountable Accounting (1972); M. Chatfield, A History of Accounting Thought (1977).
a type of economic calculation; a function of economic administration. Socialist accounting is characterized by a unity of methodology and general principles of organization, the possibility of calculating data on the scale of both individual economic branches and the national economy, the comparability of account indexes with plan indexes, completeness, precision and reliability, timeliness, clarity, and economy. Socialist accounting serves as a means of control over the fulfillment of plans and over the security of socialist property, and it promotes the introduction and strengthening of economic accountability and the uncovering and utilization of internal resources.
In the USSR, unified basic principles have been worked out and are in use for accounting and reporting; a unified plan of accounts has been created; and a unified system of national-economic accounting that presents the reliable, objective information necessary both for the management of individual industrial enterprises and for the national economy has been introduced and is operating successfully. The subject matter of accounting is capital, including the sources of the capital and the economic activity, aimed at the fulfillment of plans, of enterprises, organizations, and institutions and branches of the national economy. The method of accounting is the body of techniques used to devise the indexes necessary for managing socialist enterprises: an accounting balance, documentation and inventory, evaluation and calculation, accounts and double-entry bookkeeping, and reporting. All these elements of accounting are used not on an isolated basis but as parts of a whole.
Documentation is the basis for building a system of accounting, a method of reflecting in documents the objectives of accounting. For each economic operation or homogeneous group of operations a document is drawn up—a carrier of information, an official form, intended to be a written record of economic and other operations and acts. The unified direction of accounting predetermines the creation of unified forms of documents; in addition, the size of the documents is standardized. Documents are used for preliminary and subsequent control over the security of socialist property and the legality and expediency of economic operations, for impressing managers with their responsibility for the legality and expediency of operations, for preventing violations and uncovering abuses, for analyzing economic activity, and for giving legal evidence of completed operations. Diagrams of circulation provide a route for every document and a time limit for processing it in the departments of an enterprise, organization, or institution. With the automation of accounting, other carriers of information are also used. Not all occurrences can be reflected in documents, and inaccuracies, errors, and abuses are possible in accounting. Therefore, documentation is supplemented with inventorying (computation in physical units of economic assets and the sources of their formation). Full inventorying encompasses all assets and their sources. Partial inventorying affects one type of economic asset or its sources. Documentation and inventorying are used to gather primary data on accounting objectives.
Documented economic operations and inventories are reflected in accounts. Accounts are special two-sided tables intended for the grouping and current accounting of economic assets, in both their sources and their economic processes, and for revealing indexes that are necessary in the management of an industrial enterprise. The left side of the table is the asset side; the right, the liability side. All accounts are broken into basic, regulating, operational, and outside-balance accounts. Basic accounts are intended for the accounting and control of the condition and movement of economic assets and the sources of their formation. They are divided into asset accounts and liability accounts. Asset accounts take in economic assets: on the debit side, arrivals (increase); on the credit side, their removal (decrease). Asset accounts have a net debit, which shows the remainder of a certain type of economic assets. Liability accounts take in the sources of the formation of assets. On the credit side of liability accounts an increase is reflected, whereas on the debit side a decrease in these sources is reflected. Liability accounts have a net credit.
Regulating accounts correct the amount or evaluation of the economic assets and the sources of their formation that are entered in basic accounts, and they also provide an exhaustive description of the subjects of accounting.
Operational accounts are used for the accounting and control of economic processes and for revealing their results.
Outside-balance accounts (zabalansorye scheta) are used for the accounting, under the simple system of bookkeeping, of the economic assets that are being used temporarily by an enterprise.
A distinction is drawn between synthetic and analytic accounts. In synthetic accounts, accounting is conducted on a generalized basis by economically homogeneous groups. Analytic accounts are intended to give in detail the contents of synthetic accounts by individual types of assets, sources, and processes. Each economically homogeneous group of analytic accounts is combined with a definite synthetic account. Current accounting in synthetic accounts is called synthetic accounting, and in analytic accounts, analytic accounting. Each economic operation is reflected in equal amounts on the debit side of one account and on the credit side of another. This is called the double-entry method. When economic operations are reflected in accounts, a connection arises between them—an account on the asset side is linked to an account on the liability side. Such a link is called a correspondence of accounts, and the accounts are called corresponding accounts.
Economic assets are heterogeneous in their sources and economic processes. To get generalized summary data, they are evaluated in cost terms. The major method of evaluation is actual prime cost.
In addition to actual prime cost, planned prime cost and wholesale prices are used to evaluate working capital. In so doing, the difference between the projected evaluation and the actual prime cost is calculated separately in order to get data about the actual prime cost. The accounting of fixed assets is done using their original or replacement cost. Managing an enterprise (or organization) on principles of economic accountability presupposes the determination of the total expenditures of the enterprise for the production of output in order to control these expenditures and to determine the profit rate of industrial production. This is done with the aid of costing. Evaluation and costing are used to express the objects of accounting in a generalized monetary measure.
Verification of plan fulfillment for the past period requires adding up the results of the work of an industrial enterprise by basic indexes (volume of sales, output, its prime cost, profit rate, and so on) with the aid of accounting reports, one of the main forms of which is the accounting balance.
Methodological guidance in accounting is carried out by the Ministry of Finance of the USSR, which in coordination with the Central Statistical Administration of the USSR approves standard plans of accounts, standard forms of accounting and reporting, and instructions for their use. The basic normative decrees regulating the organization and methodology of accounting include the resolution of the Council of Ministers of the USSR entitled On Measures to Eliminate Serious Shortcomings in the Organization of Accounting and to Strengthen Its Role in Exercising Control in the National Economy (November 1964); the Statute on Documents of and Entries in the Accounting of Enterprises and Economic Organizations (October 1961); the Statute on Chief (Senior) Accountants of State, Cooperative (Except Kolkhoz), and Public Enterprises, Organizations, and Institutions (November 1964); and the Statute on Accounting Reports and Balances of State, Cooperative (Except Kolkhoz), and Public Enterprises and Organizations (July 1967). The most important directive on accounting of production is Basic Statutes on the Planning, Accounting and Calculation of the Prime Cost of Output at Industrial Enterprises (1970). A system of bookkeeping accounts has been established under the standardized plan of bookkeeping accounts approved by the Ministry of Finance in coordination with the Central Statistical Administration. The plan of accounts indicates the names and numbers of the primary synthetic accounts and the names of the subaccounts, as well as the types of activity in which these accounts are used. All accounts are divided into economically homogeneous groups. The instructions for the plan of accounts give a detailed description of the accounts and a standard outline of their relationship.
Accounting is done in the accounting department of an enterprise, which, as a rule, is an autonomous structural subdivision. It is headed by the chief (senior) accountant, who is administratively subordinate to the head of the enterprise and, in questions of accounting and drawing up reports, to the chief accountant of the higher organization. Instructions from the chief (senior) accountant on questions of accounting must be followed by all employees of the enterprise.
Various forms are used in accounting—the journal, the noncash journal, and the punch-card, for example. The use of one form or another depends on such factors as the size of the enterprise, the level of mechanization, and the degree of centralization of accounting. The principal ways of further developing accounting are mechanization and automation, centralization, improvement of methodological principles, and simplification and lowering of costs. Accounting in various branches of the national economy (for example, construction, trade, and agriculture) has its specific features, which are determined by the nature of the economic activity of the enterprises and organizations and their form of socialist ownership (state ownership or cooperative-kolkhoz ownership).
REFERENCESMakarov, Z. G. Teoriia bukhgalterskogo ucheta. Moscow, 1966.
Bezrukikh, P. S. Organizatsiia bukhgalterskogo ucheta na predpriiatii. Moscow, 1966.
Margulis, A. Sh. Bukhgalterskii uchet v otrasliakh narodnogo khoziaistva. Moscow, 1966.
Mukhin, A. F. Bukhgalterskii uchet v promyshlennosti SShA Moscow, 1965.
A. D. KARBYSHEV