Most entrepreneurs and business owners in one way or another are faced with the need to keep track of expenses and income. This may be due to both an objective need arising from the need to solve certain production problems, and to legislative requirements. What are the specifics of accounting for income and expenses of Russian firms? What are the key tasks of businesses in this area of activity and how can the results of their solution be involved?
Principles of accounting for income and expenses in enterprises
The accounting of expenses and income in Russian organizations is carried out primarily in accordance with legislative requirements. The procedure itself is determined at the level of normative acts issued by executive bodies - in particular, the Ministry of Finance of the Russian Federation. This department develops various accounting regulations, on the basis of which Russian firms carry out the procedures in question. The main feature that characterizes the accounting of expenses and incomes sold by Russian firms is that not every cost can relate to expenses, and not every income can be attributed to income. What are the definitions of the relevant terms?
Revenue Definition
The Russian lawmaker understands income primarily as an increase in the commercial benefits of the enterprise due to the acquisition of assets that increase the capital of the organization, but without taking into account the contributions of the owners of the company. In this case, the company may have revenues that increase assets temporarily, and therefore, cannot be considered income. These may be, for example, advances, various prepayments, excise taxes, amounts to be transferred to the budget in the form of VAT.
Specialists identify the following main criteria for classifying cash receipts as income:
- the company has the right to receive appropriate revenue by virtue of a signed contract or other powers;
- the amount of cash receipts can be uniquely determined;
- there is confidence that, due to revenue, the organization will receive guaranteed economic benefits;
- revenue is received in exchange for a certain product or service produced by the company;
- expenses related to the relevant financial transaction can be unambiguously recorded.
Thus, the accounting of income and expenses in the company is carried out primarily in accordance with the first criteria that we identified above.
Cost determination
Under the expenses of the company, the legislator understands primarily the decrease in the commercial benefits of the company due to the disposal of assets or the appearance of liabilities that lead to a decrease in the capital of the organization, but without taking into account the reduction in the share of owners' deposits. Accounting for expenses and income of the company is not carried out if the first:
- associated with the purchase of non-current assets;
- represent contributions to the authorized capital of other firms;
- they are fees under commission contracts, agency agreements and others with a similar legal nature;
- represent advance payment of certain assets, works, services;
- are cash paid as advance payments for certain deliveries;
- represent cash directed to the bank to repay the loan.
At the same time, exceptions can be identified for each of the listed items.If you fix them, then accounting for the income and expenses of the organization, in turn, can already be carried out. So, for example, if it is not the principal amount of the loan that is repaid, but the interest on it, then it will already be expenses. A similar status is received in cash transactions against future deliveries of certain assets if the corresponding resources have not been delivered to the customer. For example - due to the bankruptcy of the supplier.
Basic and other income
There are a variety of approaches to the classification of income and expenses. So, the approach is widespread, according to which the former are divided into those obtained in the course of the main activity of the company, and those that are extracted as a result of other activities. The main income includes revenue that was received by virtue of the production and subsequent sale by the company of its products, the provision of services, and the performance of certain works. There are other income, also called non-operating income. These may include the provision of certain assets of a company for rent, the grant of patent rights, financial participation in the assets of other companies, and the issuance of loans to other organizations.
Cost classification
Accounting for the income and expenses of the organization in the company may have features, based on the accepted criteria of the second. The approaches here can be very different. By analogy with income, there is a classification that involves the classification of expenses as basic and other. The main criterion for classifying them as the first is that the costs of the appropriate type should be directly related to subsequent profit-making. That is, they imply inclusion in the cost of production, services or work performed. Other costs may be associated, for example, with the costs that accompany the provision of a subject for temporary use of the assets of the company, the payment of fines, penalties, compensation for exchange differences. Accounting for other income and expenses, however, should not be less priority than the corresponding procedures for the main revenue and costs.
The most important nuance of the company's activities in solving the problem under consideration is the determination of the procedure for classifying expenses as commercial and managerial. We will study this aspect in more detail.
Selling and administrative expenses
Management expenses are classified into several main types. First of all, these are fixed costs that do not correlate with the volume of output of goods. There are costs, which, in turn, are directly related to production indicators. Commercial costs, in accordance with a common definition, are those associated with the sale of goods, their promotion on the market, advertising, and the payment of remuneration to intermediaries.
Basic accounting documents
What documents can record the income and expenses of the company? The essence of these, if we talk about Russian business, as well as the principles for determining income and expenses, are recorded in legislative sources. The accounting in question is generally carried out by enterprises of the Russian Federation on accounting principles. Russian firms carry out income and expense accounting by filling out 2 main documents - the balance sheet, as well as the profit and loss statement.
In both documents, in fact, the amount of profit arising as a result of investment is recorded, as well as the costs that are directly related to its formation. In the balance sheet fixed indicators of retained earnings, in the report - mainly the amount of net as well as reinvested. Wherein undestributed profits must correspond to the difference between the figure resulting from the addition of accumulated profit in accordance with the balance sheet at the end and beginning of the reporting year.
Accounting for the income and expenses of the enterprise is carried out in correlation with the calculation of taxes.At the same time, the value of the base for certain fees most often differs from profit indicators before tax. This may be due to the fact that some actual costs may not be taken into account in the firm’s cost structure.
The importance of accounting for income and expenses
Accounting for the income and expenses of individual entrepreneurs, LLC and other forms of management is important primarily from the point of view of effective business planning, despite the fact that the provision of relevant documents is also predetermined by legislative requirements. The management of the company, examining the above-mentioned documents, can observe the dynamics of profit formation in the enterprise, track its dependence on the pace of investment. Accounting of income and expenses is also important for investors, and in some cases for potential lenders, partners and clients of the company. Corresponding data sources allow us to evaluate the company for sustainability, the effectiveness of the business model.
Accounting: optional and desirable
Note that IP, based on the current requirements of the Russian legislation, may not form accounting. However, in practice, many entrepreneurs conduct it, since the noted forms of accounting, with their competent compilation, can be an extremely valuable source of data reflecting the efficiency of enterprise development. In turn, for business entities, the formation of accounting is an obligation predetermined by the provisions of the sources of law. However, the value of such activities, as we noted above, is also significant from the point of view of business development.
Tax accounting
Along with accounting indicators, it is also important tax accounting income and expenses. It involves primarily the reflection of certain data in various declarations. These documents are important, again, due to legal requirements. Commercial firms must submit tax returns in accordance with the statutory frequency. However, the need for tax accounting is determined not only by the requirements of the law. Possession of information reflecting the dynamics of costs and revenues allows the company to choose the optimal tax model. The ratio of revenue and costs is one of the key criteria in this regard. In fact, all the procedures that financial accounting fixes are income minus expenses. However, it is they that characterize the effectiveness of the firm’s policy regarding the involvement of certain tax regimes.
Defining approaches to accounting for income and expenses
The procedure for recording income and expenses is largely determined by the organization itself, despite the fact that these procedures are a legal requirement. Normative legal acts fix mainly the main forms in which the necessary indicators should be recorded, in some cases - the timing of the provision of necessary reports to state bodies. The main procedures within which the accounting in question can be carried out are determined at the level of a particular enterprise. This process can take place in correlation with the actual content of business operations, during which the company invests or makes a profit.
Among those activities whose structure is determined mainly on the basis of internal corporate priorities is the accounting of other income and expenses. The management of the company should, therefore, develop criteria by which certain costs or types of revenue will relate to this type. Thus, accounting and tax accounting are procedures that are extremely important from the point of view of analyzing the stability of an enterprise and evaluating the effectiveness of its business model.Sources related to the indicated types of accounting record the data that tax officials need to adequately assess the level of payment discipline of the company - in relation to budgetary obligations, as well as whether its activities comply with the requirements of the law.
