Lecture 1.

Accounting, its essence, meaning and tasks

1.1. The concept of accounting, its place and role in the system of economic
management

In modern conditions, the economic activity of people is a complex system,

consisting of a variety of phenomena, events, processes. At the initial stages of the
development of human society, economic processes were not so diverse, they were mainly
reduced to operations of exchanging some goods for others, and subsequently for money.
With the development of human society, economic processes became more complicated.
A person could no longer keep all the information about ongoing economic phenomena in
his mind, there was a need to record data.
The expansion of human economic activities, the development of industrial and trade
relations, scientific and technological progress, the emergence of a social division of labor
created the basis for the emergence of economic accounting. Accounting stood out as an
independent activity in the system of economic management.
Economic accounting is a complex system of quantitative reflection of the facts of
economic activity of economic entities.
Managing any kind of human activity is a complex process. It is carried out with the
help of four main control functions: planning, accounting, analysis, control and regulation.
Accounting is the most important element in the management system of a particular
object, as it provides information about the actual state and change of the management
object. The place of accounting in the economic management system and its relationship
with other management functions are shown in Figure 1.1.

Control Functions

Planning Accounting Analysis Control and Regulation

Creating a Registration of the Identification of factors of Impact on the control

model of the actual state and deviation from the plan and object in order to ensure
control object change of the development of options for its effective functioning
behavior control object management decisions

Controlled object (for example, economic activity) with managed functions

Figure 1.1 – General control scheme

1
 The planning function ensures the development of a model of the object's behavior, or
in other words, programs of its functioning to achieve the set goal. It includes a specific set
of actions that the control object must perform in order to achieve a predetermined goal.
When developing a model of the behavior of a control object, methods of forecasting,
modeling, programming, etc. are used.
The accounting function provides a quantitative reflection of the actual state of the
control object, its changes, as well as the results of the actions of the control object.
The analysis function provides a comparison of the actual state of the control object
and the results of its actions with the planned ones, identification and measurement of the
influence of factors that caused the deviations of the actual indicators from the planned
ones in order to develop options for optimal management decisions.
The function of control and regulation provides the choice, based on the results of the
analysis, of the most optimal management decisions to regulate the state and directions of
development of the control object, as well as control over the progress of implementation
of the developed management decisions.

1.2. The main stages of the accounting process

Accounting as the most important management function consists of four successive

stages: registration, measurement, processing and generalization.
Registration is the first initial stage of the accounting process. It represents the
perception of objects and operations of the economic activity of the organization with the
aim of fixing them with the help of documents presented on paper, electronic and other
media. Registration confirms that a certain fact of economic life took place in the
organization, shows its economic content, place of commission, participants in the
economic transaction.
Measurement – the second stage of the accounting process, is a set of operations to
determine the quantitative characteristics of the facts of economic life, recorded at the first
stage. As a result of the measurement, it is possible to present the volume of a business
transaction, evaluate its significance in the economic activity of the organization and,
accordingly, take it into account when developing a specific decision on enterprise
management.
In order to obtain quantitative characteristics of the facts of economic life in
economic accounting, three main types of meters are used: natural, labor and monetary
(see the next question).
The essence of the third stage of the accounting process – processing – is to perform a
set of actions.
Firstly, the classification and systematization of accounting objects registered at the
first stage and measured at the second stage is carried out.

2
 Secondly, their accounting processing is carried out using special accounting methods
and technical means.

As a result, information about accounting objects, facts of economic life is

accumulated in chronological order with simultaneous systematization according to certain
characteristics, identified according to the accounting methodology and the needs of users
of economic information.
At the fourth final stage of the accounting process, a generalization of the recorded,
measured and processed information about accounting objects is carried out. Accounting
information is summarized and presented in the form of various types of reports, the
composition, content and presentation of which is determined by the information requests
of the relevant groups of users of economic data. At this stage, final indicators are formed
that comprehensively characterize the economic activity of the organization, the results
achieved by it.
However, the division of the accounting process into the considered stages in the time
mode of their completion is rather arbitrary. In practice, all of these steps can be carried
out simultaneously

1.3. Meters used in accounting

So, in order to obtain quantitative characteristics of the facts of economic life in

economic accounting, three main types of meters are used: natural, labor and monetary.
Natural meters reflect the quantitative characteristics of the objects recorded in the
accounting, operations in their natural form. Natural meters include units of mass (gram,
carat, kilogram, centner, ton, etc.), volume (cubic meter, cubic decimeter, liter, barrel,
etc.), length and distance (centimeter, decimeter, meter, kilometer, etc.), area (square
centimeter, square decimeter, square meter, etc.), temperature (degree Celsius, etc.), time
(day, hour, minute, second).
The advantage of natural meters is that they form a real picture for the user of
information about the object taken into account its natural real volume, size, state, etc. But
they also have a significant drawback: using only natural meters it is impossible to obtain
a generalized indicator that characterizes the size or state of heterogeneous objects.
Monetary meters are the most versatile and widely used in business practice.
Monetary meters are designed to measure the value of accounting objects in monetary
terms, for which the appropriate monetary units are used (Belarusian ruble, Russian ruble,
US dollar, euro, etc.). The advantage of these meters is that they allow you to evaluate
heterogeneous objects, to obtain a generalized indicator of their total cost. If the
organization's property is represented by a variety of objects (buildings, machines,
vehicles, materials, etc.), then adding up the number of these objects to obtain a final
assessment of the size of the enterprise's property will not make economic sense. If the
heterogeneous components of the property are valued in monetary terms, then their
3
addition will provide information about the property status of the organization, about the
amount of its capital (the value of all assets of the organization).
In addition to natural and monetary meters, labor meters are also used in accounting.
They are used to determine the amount of labor and are expressed in units of working
time. These include man-hour, man-day, standard hour, etc. Using labor meters,
economists calculate the labor intensity of manufacturing products, performing work,
providing services, working hours for performing individual operations of the
technological process, labor productivity, wages, control the production rates of workers.

1.4. Types of business accounting and their characteristics

In the special literature, various types of economic accounting are given, which are
distinguished depending on certain classification features.
The most common classification of economic accounting is its division into three
types – accounting, statistical and operational – which are considered elements of a
single system of economic accounting, as well as a separate type of control accounting –
tax accounting.
The basis of this classification of types of economic accounting is the sign of the
object of accounting.
Accounting occupies a central place in the system of economic accounting at the
micro level of individual organizations. In accordance with the legislation of the Republic
of Belarus, all legal entities registered on the territory of the Republic of Belarus, their
branches, representative offices and other separate divisions with a separate balance sheet,
representative offices of foreign and international organizations, business groups,
holdings, etc. must maintain it.
Accounting is kept at the micro level (at the level of individual business entities).
Accounting is carried out according to a strictly defined system, all facts and events
must be documented, the registration of these facts and events is carried out continuously
in time and space. Persons with a special economic education are allowed to keep
accounting. To keep accounting at the enterprise, a special department is created, headed
by the chief accountant – accounting department.
Statistical accounting is the most important element of the unified system of
managing the country's economy at the macro level. It is a system for collecting,
processing, summarizing and accumulating primary and summary statistical data on the
economic, demographic, social and environmental situation of the country, using all types
of meters. Statistical accounting systematizes and reflects the quantitative and qualitative
indicators of mass phenomena and processes, reveals, through analysis, patterns and trends
in the development of the country and society. In the Republic of Belarus, it is maintained
by the National Statistical Committee and its territorial departments.

4
 A distinctive feature of operational accounting is the speed of obtaining and
processing data, which almost immediately after registration in accounting can be used to
manage the economic activities of the organization and its individual structural divisions
(shops, departments, sections, teams, etc.). It is conducted in the structural divisions of the
organization in order to obtain operational data for making immediate decisions on
adjustment either at the time of their commission or in a short time after the commission
(elimination of negative causes and consolidation of positive factors).
Operational accounting provides data about the output of products, worker output, the
balances and movement of materials and finished products in warehouses (storages), etc.
Not all of his data are documented, some of the information can be transmitted orally
or using technical means of communication. The deadlines and format for providing
operational accounting data are established by the head of the organization or the relevant
structural unit after discussion and agreement with the direct executors providing
operational accounting data.
Tax accounting is maintained by business entities for the purpose of taxation and tax
control. Tax accounting is based on accounting data and (or) on other documented data
about taxable objects or related to taxation.
According to the general part of the Tax Code of the Republic of Belarus, tax
accounting is recognized as «the implementation by payers (other liable persons) of
accounting for taxable objects and determining the tax base for taxes, fees (duties) by
means of estimated adjustments to accounting data, unless otherwise is established by
law».
Tax accounting must be maintained by all business entities that, in accordance with
the legislation of the Republic of Belarus, have an obligation to calculate and pay taxes,
fees (duties). The main purpose of tax accounting is the correct determination of taxable
bases, amounts for various types of taxes, fees (duties) and their timely transfer to the state
budget.
The main meter used in tax accounting is monetary.

1.5. Essence and features of accounting, its principles

The main task of accounting is to provide the management of the organization and its
owners with information about the value of the organization's property as a result of
business transactions, as well as about the financial results of economic activity. In this
regard, accounting should cover all the property of the organization at its disposal, and all
ongoing business transactions that can be valued in money. The accounting of an
economic entity must be conducted continuously in time and space.
Accounting provides indirect monitoring of the property of the organization and the
changes taking place in it through the system of documents. All business activities of an
organization can be represented as a set of business transactions, at the time of which
5
documents are drawn up by direct participants of the operation. Business transactions are
reflected in accounting only on the basis of documents. From the foregoing, one of the
main features of accounting follows as documentary confirmation of the facts of the
economic activity of the organization.
All operations reflected in accounting, leading to a change in the composition and
structure of the organization's property, are ultimately expressed in monetary value. The
use of a monetary value to determine the value of the property or capital of an organization
is the main distinguishing feature of accounting. In accounting, all three types of meters
are used, however, when reflecting any business transaction, along with the use of natural
and labor meters, monetary meters will necessarily be used to express the value of
property. In the consolidated accounting registers and financial statements, information
about the economic activity of the organization is presented only in monetary terms. The
final summary of accounting data is always presented in monetary terms. The property of
the organization, changes in it as a result of business transactions that cannot be assessed
in monetary terms, are not reflected in accounting.
The property owned by the organization is called assets in accounting, the sources of
formation of which are equity capital and liabilities.
The Law of the Republic of Belarus «Accounting and Reporting» contains the
following definition of accounting: «accounting is a system of continuous formation of
information in value terms about assets, liabilities, equity, income, expenses of an
organization through documentation, inventory, accounting valuation, double entry on
accounts, generalization in reporting».
The main functions of accounting are:
1) informational. Accounting provides information on the actual availability,
composition and movement of the organization's property, its financial condition and
financial results;
2) controlling. Accounting controls factual information to ensure the safety of
property of business entities.
Accounting is based on certain principles. The Law of the Republic of Belarus
«Accounting and Reporting» specifies the following accounting principles.
The principle of going concern means that information about the assets, liabilities,
equity, income, expenses of the organization is formed in accounting and reporting,
depending on the intention of the organization to continue or terminate its activities in the
future.
The principle of isolation means that the assets, liabilities, equity, income, expenses
of the organization are accounted separately from the assets, liabilities, equity, income,
expenses of the owner of the property (founders, participants) of the organization.
The accrual principle means that business transactions are reflected in accounting
and reporting in the reporting period in which they are made, regardless of the date of
settlement on them.
6
 The principle of matching income and expenses means that expenses are reflected in
accounting and reporting in the reporting period in which the income associated with them
is recognized.
The principle of truthfulness means that the assets, liabilities, equity capital, income,
expenses of the organization are reflected in accounting and reporting, provided that the
conditions for recognizing them as such, established by the legislation of the Republic of
Belarus on accounting and reporting, are met.
The principle of the predominance of economic content means that business
transactions are reflected in accounting and reporting based not so much on their legal, but
on their economic content.
The principle of prudence means that the accounting valuation of the assets and
income of the organization should not be overestimated, and liabilities and expenses
should not be underestimated
The principle of neutrality means the lack of orientation of the information contained
in the organization's reporting to certain users and (or) obtaining a certain result.
The principle of completeness means the presence in the reporting of the organization
of all information that can influence the decisions made by users on its basis regarding the
financial position of the organization.
The principle of comprehensibility lies in the availability for understanding by users
of the information contained in the reporting of the organization.
The principle of comparability means the possibility of comparing the reporting of an
organization for different reporting periods, as well as with the reporting of other
organizations.
The principle of relevance means the usefulness of the information contained in the
reporting of the organization for making decisions by users regarding the financial position
of the organization.
Only if all these principles are observed, accounting will ensure the provision of
comparable and reliable financial information about the activities of business entities.