There are three main approaches to the interpretation of this category: economic, accounting and accounting-analytical.
Economic approach implements the physical concept of capital, which is considered in a broad sense as a set of resources that are universal sources of income for society, and is divided into:
1) personal (inalienable from the bearer, i.e. a person);
2) to private;
3) on public unions, including the state.
The latter can be divided into real and financial capital.
Real capital embodied in material goods as factors of production (buildings, cars, vehicles, etc.).
Financial capital- in securities and cash. In accordance with this concept, the amount of capital is calculated as the total of the balance sheet for the asset.
Within accounting approach realized at the level of an economic entity, capital is the owner’s interest in his assets, i.e. the term “capital” is synonymous with “net assets”, and its value is calculated as the difference between the amount of the entity’s assets and the amount of its liabilities. The financial concept of capital can be expressed by the following balance sheet model:
Ka = SC + ZK, (5.1)
where Ka is the assets of a business entity in valuation;
SK - owners' capital;
LC - obligations to third parties.
In accordance with this approach, the amount of capital is calculated as the result of Section III “Capital and Reserves”.
Accounting and analytical approach- a combination of the previous two. With this approach, capital as a set of resources is characterized simultaneously from two sides:
■ directions of its investments (capital as a single independent substance does not exist and is always clothed in some physical form);
■ sources of origin (where the capital came from, whose it is).
Therefore, there are two interrelated types of capital: active and passive. Active capital- production capacity of an economic entity, formally presented in the balance sheet asset in the form of two blocks: fixed and working capital. Fixed capital includes:
1) fixed assets;
2) long-term financial investments;
3) unfinished construction (long-term investments);
4) intangible assets.
Passive capital- long-term sources of funds through which the assets of the entity are formed; they are divided into equity and borrowed capital.
Equity- part of the value of assets that goes to the owners after satisfying the claims of third parties. The assessment of equity capital can be carried out formally (according to balance sheet (according to current accounting and reporting data) or market estimates) or actually (in case of liquidation of the enterprise). Equity can be understood as an analogue of the long-term debt of an enterprise to its owners. Formally, equity capital is presented in the liabilities side of the balance sheet in one gradation or another (main components: authorized capital, additional and reserve capital, retained earnings).
Borrowed capital- monetary valuation of funds provided to the enterprise on a long-term basis by third parties. Unlike equity debt capital:
1) is subject to return, the terms of return are agreed upon at the time of its mobilization;
2) constant, since from the position of the creditor the nominal value of the principal amount of the debt does not change (if the amount of the long-term loan was 10 million dollars, then this is the amount that will be returned, while investing a similar amount in shares may, over time
accompanied by both gains and losses).
Formally, borrowed capital is presented in the liabilities side of the balance sheet as a set of long-term and short-term obligations of the organization to third parties.
From a material and material position, capital is impersonal, i.e. scattered across various assets of the enterprise. In this regard, it must be remembered that all funds shown in the balance sheet assets, with the exception of financial leases, are own funds, but they are financed from various sources. In the event of liquidation of the organization, satisfaction of the claims of third parties will be carried out in accordance with the law in a certain sequence and amount.
In order to avoid confusion, within the framework of the accounting and analytical approach, they try not to use the term “active capital” - the elements of the active side of the balance sheet are called “funds”. Capital is considered as a possible characteristic of sources of financing activities.
Capital classification(sources of funds for the organization).
1. Sources of short-term funds:
1.1. Accounts payable.
1.2. Short-term loans and borrowings.
2. Advance capital (long-term capital).
2.1. Equity:
■ ordinary share capital (ordinary shares, additional capital, funds and reserves, retained earnings);
■ preferred shares.
2.2. Liabilities (borrowed capital):
■ bank loans;
■ bonded loans;
■ other loans, financial leasing obligations.
You should not confuse funds and their sources. If the balance sheet shows that the organization has created reserve capital in the amount of 600 thousand rubles,
this does not mean that this amount of money is stored in the form of a reserve as goods in a warehouse; this only means that in the accounting system due to undistributed, i.e. of unpaid profits to the owners, a source (fund) is formed, which, in essence, represents part of the owners’ capital. The ways of using this fund are limited by law, and 600 thousand rubles. scattered across various assets: fixed assets, debtors, cash, etc. Therefore, it is impossible to buy anything at the expense of the fund (source) - all purchases are made using available funds.
Capital is part of the financial resources invested in production and generating income upon completion of turnover. Capital is in constant motion – circulation. The stages of the circulation of capital correspond to three of its forms: monetary, productive and commodity. General formula of capital: D – T – D1
Capital acts as a converted form of financial resources, which, by their origin, are divided into their own (internal) and those attracted on different terms (external).
The economic process of forming the capital of an enterprise is characterized by the following main features.
1. Capital formation is the main initial condition for creating a new business. Investing capital in entrepreneurial activity (creating enterprises in the real sector of the economy, new financial institutions, etc.) requires its preliminary formation in the required volume. Without the formation of capital advanced to purchase the assets of the enterprise being created, the process of opening a new business cannot be carried out. When forming capital for these purposes, the general need for it for the functioning of the enterprise in its initial stage is determined, and the satisfaction of this need is ensured through various sources.
2. The process of forming the capital of an enterprise is directly related to the process of its initial accumulation. From whatever sources capital is formed in the process of creating and developing an enterprise, in whatever forms it is attracted, this must be preceded by its preliminary accumulation. The rate of initial capital accumulation is largely determined by the level of economic development of the country.
3. Capital formation accompanies all stages of the enterprise’s life cycle associated with its progressive economic development. Starting from the “birth” of an enterprise and ending with its “aging”, the process of capital formation is continuous. Moreover, each stage of the enterprise’s life cycle is characterized by distinctive features in the purposes and methods (sources) of capital formation.
4. The process of capital formation is deterministic and regulated. The determinism of this process is characterized by its quantitative certainty in time, volume, structure and other parameters. The regulation of this process is determined by a system of specific effective methods of financial management that make it possible to achieve and maintain the specified parameters of capital formation. The determinacy and adjustability of the capital formation process allows it to be carried out on a planned basis.
5. Capital formation is inextricably linked with the goals and directions of strategic development of the enterprise. Being the financial basis for the implementation of the chosen strategy for the economic development of an enterprise, capital formation is allocated, as a rule, to an independent target block, for which strategic target standards are developed. In some cases, the ability of an enterprise to form capital themselves determines the pace of its strategic development.
6. The rate of formation of new equity capital of a functioning enterprise from internal sources is determined by the time preference of its owners (managers). The process of such formation (accumulation of new equity capital) is carried out through the mechanisms of dividend policy (policy of distribution of newly created profits). The level of profit reinvestment, determined by the time preference for its consumption, is formed at each enterprise individually, taking into account the specifics of its economic activity and the conditions of the external economic environment.
7. The process of capital formation is inextricably linked with ensuring an increase in the market value of the enterprise, which is one of the priority goals of financial management. This increase is ensured not only by an increase in the amount of own financial resources in the economic turnover of the enterprise, but also by the formation of a rational structure of the capital used.
8. Effective formation of capital in the context of its individual types is the most important condition for ensuring the financial stability of an enterprise. The rational structure of the capital being formed makes it possible to reduce the level of financial risks in the future activities of the enterprise and prevent the threat of bankruptcy.
9. The possibility of forming the capital of an enterprise in the coming period is largely determined by its structure achieved at the previous stage of the business cycle. First of all, this relates to the formation of additional capital from borrowed sources. There is an inverse relationship between the proportion of borrowed capital actually used by an enterprise and the possible volumes of its additional attraction. This feature should be taken into account when forecasting the potential and rate of capital formation of an enterprise.
10. In the process of forming capital of an enterprise, it is necessary to take into account the cost of attracting it from various sources. At the same time, the cost of additionally attracted capital must be compared with the size of the additional effect from its use. In other words, the volumes and rates of capital formation of an enterprise are largely determined by the possibilities of its future effective use in the operational (production) and investment process.
Capital has a multidimensional essence:
First, it is a factor of production;
Secondly, these are the financial resources of the enterprise that generate income;
Thirdly, it is a source of wealth for owners (mainly equity capital);
Fourth, it is a measure of firm value;
Fifthly, capital and its dynamics are the most important indicator of the effectiveness of the financial and economic activities of the company.
Capital is classified according to the following criteria:
1) by sources of formation or by affiliation: own and borrowed. Equity capital characterizes the total value of an organization's assets owned by it. In a certain sense, equity capital can be interpreted as an analogue of the organization’s long-term debt to its owners.
Equity characterizes the total value of the enterprise's funds owned by it by right of ownership. Its composition takes into account the authorized (share), additional, reserve capital, retained earnings and other reserves.
Authorized (share capital) is formed at the time of creation of the enterprise and is at its disposal throughout the life of the enterprise. Depending on the organizational and legal form of the enterprise, its authorized (share) capital is formed through the issue and subsequent sale of shares, investments in the authorized capital of shares, shares, etc.
The authorized capital of an enterprise determines the minimum amount of its property, which guarantees the interests of its creditors. Thus, the authorized capital is the main source of equity capital.
Capital is called authorized capital because the size is fixed in the charter of the enterprise, which is subject to registration in the prescribed manner. Its minimum amount is determined by the minimum wage established by the legislation of the Russian Federation (from January 1, 2014, the minimum wage is 5,554.00 rubles per month).
During the life cycle of an enterprise, its authorized (share) capital can split, decrease and increase, including in terms of the internal financial resources of the enterprise.
Extra capital includes:
The amount of revaluation of fixed assets, capital construction projects and other tangible assets of the enterprise with a useful life of more than 12 months, carried out in the prescribed manner;
Values received free of charge by the enterprise;
The amount received in excess of the par value of the issued shares (share premium of the joint stock company);
Other similar amounts.
Additional capital accumulates funds received by the enterprise during the year through the above channels. The main channel here is the results of the revaluation of fixed assets.
Reserve capital is created to cover possible losses of the enterprise, as well as to repay bonds issued by the enterprise and repurchase its own shares.
In order to evenly include future expenses in the costs of production or circulation of the reporting period, an enterprise can create the following reserves:
Doubtful debts in settlements with other enterprises and organizations;
For the payment of annual remuneration for long service;
For the payment of remunerations based on the results of work for the year;
For repairs of fixed assets;
For future costs of repairing items intended for rental under a rental agreement;
For warranty repairs and warranty service;
To cover other unforeseen costs and other purposes provided for by law.
Profit represents the final financial result of the enterprise's activities and is an important component of the enterprise's equity capital.
Borrowed capital includes a monetary valuation of funds raised by the organization on a repayable basis. All forms of such capital represent financial obligations of the organization, subject to repayment at specified times;
2) by purpose of use: productive, lending, speculative. Productive capital characterizes those funds of the organization that are invested in its operating assets to carry out business activities.
Speculative capital used in the process of carrying out speculative financial transactions, i.e. transactions based on the difference in purchase and sale prices.
Loan capital characterizes the organization’s funds that are used in the process of carrying out investment activities (we are talking about financial investments in monetary instruments, such as deposits in banks, bonds, bills and others);
3) by investment object distinguish between fixed and working capital.
Main capital - This is that part of the capital used by the enterprise that is invested in all types of non-current assets, and not just in fixed assets, as is sometimes interpreted in the literature.
Working capital- this is part of the capital of the enterprise invested in the current assets of the enterprise.
4) by organizational and legal forms of activity: joint-stock, share (share) and individual capital;
5) by sources of attraction: domestic (Russian) and foreign capital.
Capital in monetary form is liabilities enterprises, and in productive form - assets enterprises.
Assets reflect in value terms all the tangible, intangible (intellectual) and monetary values and property rights available to the enterprise in terms of their composition and placement for investment.
Liabilities reflect the sources of formation of the funds available to the enterprise, their purpose, ownership and payment obligations.
Thus, assets are the property of the enterprise, and liabilities are the funds from which this property was formed.
Assets are classified according to the following criteria:
According to the form of functioning distinguish between tangible, intangible and financial assets.
Money - These are assets that have a material form (buildings, structures, machinery, equipment, raw materials, materials).
Intangible assets do not have a material (material) form, but they also take part in the process of production activity (trademark, trade name, shares, shares, patents, know-how, etc.).
Financial assets characterize various monetary instruments owned by the enterprise:
Monetary assets in national currency;
Accounts receivable;
Short-term and long-term financial investments.
By the nature of participation in the production cycle distinguish current (current) and non-current assets.
Current assets serve the operational activities of the enterprise and are completely consumed during one production cycle.
Negotiable:
o Value added tax on purchased assets
o Accounts receivable (payments for which are expected more than 12 months after the reporting date)
o Accounts receivable (payments for which are expected within 12 months after the reporting date)
o Short-term financial investments
o Cash
o Other current assets
Fixed assets repeatedly participate in the process of economic activity until they completely transfer their value to the products produced.
Non-negotiable:
o Intangible assets
o Fixed assets
o Construction in progress
o Profitable investments in material assets
o Long-term financial investments
o Deferred tax assets
o Other non-current assets (for example, equipment for installation).
Depending on the sources of formation distinguish between gross and net assets.
Gross assets represent the entire set of assets of the enterprise, formed at the expense of own and borrowed capital.
Source of formation net assets is only equity.
Depending on ownership enterprises are divided into assets:
On own, permanently owned enterprises by right of ownership;
- rented, enterprises temporarily owned by lease (leasing).
According to the degree of liquidity, those. According to the speed of transformation into monetary form, assets are divided:
On absolutely liquid(monetary assets of the enterprise);
- highly liquid(short-term financial investments, short-term accounts receivable);
- medium liquid(finished product inventories, accounts receivable, etc.);
- weakly liquid(non-current assets, long-term financial investments);
- illiquid(bad accounts receivable, losses, etc.).
Assets and liabilities are usually divided into current and non-current. In international practice, assets on the balance sheet are listed in order of their liquidity. Claims are listed in the order in which they must be paid. Liability requirements are divided into two types:
Liabilities are those funds owed by the company for which the balance sheet is being prepared;
Shareholders' equity.
In accordance with Russian accounting standards, liabilities are divided into:
- Capital and reserves
o Authorized capital
o Own shares purchased from shareholders
o Additional capital
o Reserve capital
o Retained earnings (uncovered loss)
- long term duties
o Loans and credits
o Deferred tax liabilities
o Other long-term liabilities
- Short-term liabilities
o Loans and credits
o Accounts payable
o Debt to participants (founders) for payment of income
o Deferred income
o Reserves for future expenses
o Other current liabilities
CAPITAL,– Value that, as a result of the use of hired labor, brings surplus value (self-increases). Ozhegov
CAPITAL (German Kapital, from Latin capitalis - main), economic category; human-created resources used to produce goods and services and generate income. Capital appears in the form of money capital and real capital: at the enterprise level, capital is the entire amount of material goods (things) and money used in production; divided into main and reverse. In Marxism, capital is the value that produces surplus value as a result of the exploitation of wage workers by the capitalist class. BEKM
For enterprise capital can be considered as:
The totality of means of production created by human labor and employed in production,
The monetary equivalent of property (assets) owned by the enterprise,
Source of funds for the formation of enterprise property.
The concept of “capital” in our practice and economic science after 1934, at the suggestion of G. Strumilin, was replaced by the concept of “funds”.
There are different types of capital:
Fixed and working capital;
Active and passive;
Constant and variable;
Own and borrowed.
Table Composition of the enterprise's capital
| capital | ||||
| active - consists of the property and obligations of the organization, it includes what the organization owns | = | passive – characterizes the sources of property (fixed capital) of the organization | ||
| basic | negotiable | own | borrowed | |
| Fixed assets | Current assets | the value of property owned by the organization, its net assets | part of the value of property (money or valuables) that the organization is obliged to return to the lender after the agreed period | |
| Constant - part of capital that is used to purchase means of production - equipment, raw materials, materials, but without labor. Variable is the part of capital that is used to purchase labor power. |
The term fixed capital was used by Karl Marx, who proceeded from the fact that in the production process this part of capital completely transfers its value to the result of production. With such a transfer, capital does not change the value of its value, only its physical form changes - raw materials disappear, equipment is destroyed. In return, products appear that fully include the cost of raw materials, materials and equipment depreciation. In this case, no changes in the value occur; the transferred value does not change and remains constant. http://ru.wikipedia.org/wiki/%CF%EE%F1%F2%EE%FF%ED%ED%FB%E9_%EA%E0%EF%E8%F2%E0%EB
According to Karl Marx, variable capital is that part of capital that does not transfer its value to the result of production, as constant capital does. The purchased labor power creates new value, which is usually greater than the value of the capital paid to purchase that labor power. It reproduces its own equivalent and, moreover, surplus - surplus value. Since the amount of newly created value does not coincide with the amount of capital that is exchanged for it, Karl Marx called this part of capital variables.
The composition of active (real) capital, which includes fixed and working capital, is presented in the figure.
Rice. 17.1. Real capital structure
Capital is often divided according to the areas of its application: production (industrial), commercial, financial (loan), etc. Owners of capital receive income from its use. In the case of loan capital, income takes the form of interest. In other cases (these are other types of money capital or all real capital), income takes the form of profit. It can be in different versions: company profit, dividends from the owner of shares, royalties from the owner of intellectual capital (for example, the owner of a patent), etc.
http://www.nuru.ru/ek/general/018_1.htm
Capital- a set of material assets in cash, cash, financial investments necessary for the economic activities of the organization. Active capital consists of the property and liabilities of organizations. Active capital is the value of all property of the enterprise. Active capital consists of fixed capital and working capital.
Passive capital characterizes the sources of financing of the enterprise’s property, that is, it shows with what funds it was formed. As part of the sources of property formation allocate equity capital, borrowed funds and liabilities. Business owner's concern is conservation and increase in equity capital.
Equity
Wherein equity includes:
Authorized capital;
Extra capital;
Reserve capital;
Retained earnings;
Targeted special funds,
Targeted funding and revenues.
Table Composition of equity capital
| Types of equity capital | Characteristic |
| statutory | the totality in monetary terms of the founders’ contributions to the property of the organization upon its creation |
| additional | increase in value during the revaluation of fixed assets, gratuitous receipt of assets from legal entities and individuals, share premium of a joint-stock company (the excess of the sales value of sold own shares over their par value), |
| spare | is created in the form of deductions from profits and is intended to cover losses, and for joint-stock companies to repay bonds and repurchase shares in the absence of other funds. |
| targeted special funds | - accumulation funds - for updating fixed assets and creating new property (production development) of the organization, - consumption funds - for additional material incentives for the team, - social funds - for increasing property for socio-cultural purposes and social development activities in the organization |
| retained earnings of the reporting year | the difference between the final financial result (profit) and the amount of profit used to pay taxes and other payments to the budget |
| targeted funding and revenues. | additional funds received from the budget, industry and inter-industry funds for special purposes, from other organizations and individuals for the implementation of targeted activities, for example, expansion of activities or financing of research work with a lack of internal resources. These funds are non-refundable. |
The authorized capital of the enterprise plays a special role. This role is that it gives financial stability to the enterprise. In addition, the authorized capital serves as a guarantee in business relations with partners and government bodies, i.e. it acts as collateral guaranteeing repayment of debts and payment for services in accordance with contractual and other financial and commercial obligations.
The authorized capital represents the sum of funds and the value of tangible and intangible assets represented by the founders when creating an enterprise and is the initial, starting capital of the enterprise. Its value is determined taking into account the proposed activity and is recorded during state registration of the enterprise in its constituent documents.
The minimum amount of authorized capital is regulated by law:
- in an open joint-stock company it cannot be less than 1000 times the minimum monthly wage (minimum wage);
- in a closed joint-stock company and LLC - at least 100 minimum wages. The maximum amount of authorized capital is not regulated by law.
Monetary and property contributions may be received as payment for the authorized capital.
1.3.2. Borrowed capital.
Borrowed capital can be long-term or short-term. Borrowed capital– bank loans, loans, and current accounts payable. Bank loans include long-term and short-term (for temporary needs) loans. Short term loans intended for creating inventories, replenishing working capital, paying wages, etc. Long-term loans intended for investment in development, modernization, rationalization of production and improvement of its organization. Loans These are amounts borrowed from legal entities and individuals for various purposes on condition of repayment. Accounts payable represents debts to suppliers and other creditors. It occurs if materials arrive at the enterprise before payment for them is made (without prepayment).
Liabilities– a unique source arising from settlement relations with other organizations and persons (creditors). In essence, an obligation is a temporary debt to relevant organizations and persons, arising before the next date of payment of obligations. Thus, wages are paid twice a month, and funds for wages are constantly accumulated as the products are sold and until the subsequent payment, the corresponding funds are at the disposal of the enterprise.
Table Composition of obligations
Passive capital can be increased through loans. However, it is advisable to attract loans if the interest rate is lower than the return on capital used.
The amount of capital characterizes the value of the enterprise. One of the challenges is to continually increase this value. The value of an enterprise is determined not only by the amount of capital, but also by the efficiency of its use.
If the profitability of using an enterprise's capital increases, then the value of the enterprise and its selling price also increase.
Question 2. Essence, composition, structure and classification of fixed assets
2.1. The essence of fixed assets.
The essence of fixed assets can be characterized as follows:
They are materially embodied in the means of labor;
Their cost is transferred in parts to the products;
They retain their natural shape for a long time as they wear;
Recovered on the basis of depreciation at the end of its useful life.
Fixed assets- this is part of the means of production (tangible assets), which are repeatedly involved in the production process, without changing their natural material form, gradually wear out and transfer their value in parts to the finished product as they wear out.
A set of resources owned by an enterprise and used to make a profit.
From an accounting point of view, the structure of active capital is determined by the industry characteristics of the company, its size, and relationships with other market participants. For example, most of the active capital of construction companies consists of land plots (registered as property) and stocks of materials (concrete blocks, building mixtures).
Circulation of active capital in the enterprise
The list of property classified as active capital is reflected in the balance sheet accounts and demonstrates the circulation of funds invested in the business. The company's economic activities transform active capital in four stages.- Cash and non-cash funds with the greatest liquidity. This form of capital goes to the organization’s current account or cash desk and covers the costs of conducting main and other activities. For example, a research laboratory receives a cash grant to conduct a project and invests the entire amount in the necessary equipment and consumables.
- Material assets necessary for the main activities of the enterprise. A collection of tools, production materials, buildings, stocks of raw materials and semi-finished products that are used to produce finished products. For example, a sewing shop purchases cutting tables, stocks of fabrics and accessories for making clothes.
- Productive form of active capital. The totality of production costs necessary to start the process of manufacturing goods (providing services). The category includes investments in the maintenance and repair of machines, costs for current (work in progress) production. For example, to start a steel rolling machine, the services of a foreman are required to prepare the equipment for the next cycle.
- The commodity expression of active capital is the cost of finished products produced for subsequent shipment or resale. From an accounting point of view, this form of capital refers to current assets. For example, the total volume of furniture produced, which is stored in factory warehouses before shipment to distributors.
Formation of active capital of the enterprise
The components of active capital have a confirmed legal status and are involved in the main activities of the enterprise. The use of assets brings economic benefits in the form of profit, positive business reputation, and investment income. Accounting standards (RAS or IFRS) require active capital to be divided into categories.- Fixed assets of a company are assets with a useful life of one year. Vehicles, industrial buildings, machine tools, unfinished construction projects.
- Intangible assets are legal rights to use unique technologies, property, and land.
- Accounts receivable and company investments are future profits from investing capital in the production of products or the purchase of securities.
- Cash - cash and non-cash resources of the enterprise in bank accounts, at the cash desk, traveler's checks, bills of exchange.
Question. Define capital.
Answer. Any organization operating separately from others, conducting production or other commercial activities, must have a certain capital, representing a set of material assets and funds, financial investments and costs for the acquisition of rights and privileges necessary for the implementation of its economic activities.
In accounting, capital is conventionally divided into active capital, i.e. acting (functioning) in the form of property and liabilities, and passive capital, reflecting the sources of formation and payment of operating capital. Despite the different accounting procedures for active and passive capital, they represent a unity and are different characteristics of the total capital that ensures the economic activity of the organization.
Question. What is the circulation of capital?
Answer. In the process of economic activity, there is a constant turnover of capital: capital changes its monetary form to a material one, which again turns into cash. The circulation of capital is reflected in accounting. An example of such a circuit is reflected in table. 1.
Rice. 1. Circulation of capital
Table 1
CIRCULATION OF CAPITAL
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Current accounts (account No. 51) |
Settlements with suppliers and contractors (account No. 60) |
Goods (account No. 41) |
Profits and losses (account No. 99) |
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Starting position |
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1st position |
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Account balance |
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2nd position |
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Account balance |
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3rd position |
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Account balance |
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4th position |
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Account balance |
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* Previous income shown
The circulation of capital is carried out as if separately - separately for debit accounts and separately for credit accounts. This is clearly represented in the diagram, where debit connections are shown in bold and credit connections are shown in thin lines. The same thing happens in reality.
Question. What is active capital?
Answer. Active capital consists of the property and liabilities of the organization, i.e. it includes what the given organization owns as a separate economic entity. Active capital is the value of all assets of the organization.
In relation to the turnover rate, they distinguish durable property, which has been in the organization’s circulation for more than a year, and property, intended for current (one-time) use in the process of economic activity or organizations in circulation for no more than one year. A one-year period as a boundary separating the second type of property from immobilized property, i.e. intended for longer use, is consistent with the reporting period, which is taken to be a full calendar year from January 1 to December 31 inclusive. However, these dates may not coincide calendar-wise. The cost of bonds purchased in September with a maturity date of May 25 of the following year should be attributed to property in current circulation. If the maturity date was September 25 of the following year, we would have to classify them as non-current property. Thus, the active capital of an enterprise is divided into fixed (long-term) capital and working (current) capital.
In turn, in main capital includes fixed assets, intangible assets, long-term financial investments.
Fixed assets – This is the value of the totality of movable and immovable property located in a given organization for a long time. Fixed assets leased with the right of subsequent purchase or at the end of the lease under the terms of the agreement become the property of the lessee, are accounted for in the same way as own fixed assets.
Fixed capital includes costs for unfinished capital investments in fixed assets and for the purchase of equipment not installed in the reporting period. These costs represent that part of the costs for the acquisition and construction of fixed assets that have not yet become fixed assets, cannot participate in the process of economic activity, and therefore should not be subject to depreciation. They are accounted for separately from fixed assets on separate accounting accounts: “Capital investments”, “Equipment for installation”. But these costs have already been withdrawn from working capital, the amount of working capital has decreased by their amount, therefore, they are classified as fixed capital.
Intangible assets – these are the long-term costs of an organization for the acquisition of the right to use land plots, natural resources, intellectual property, copyrights, the acquisition of various licenses and other privileged rights. This takes into account the costs of brands, trademarks, "firm price" and other similar costs.
Rice. 2. Components of fixed and working capital
The cost of some types of intangible assets is also repaid through monthly depreciation charges, included in production and distribution costs. Thus, part of the value immobilized in intangible assets is returned to working capital in cash, ready for further use in the organization’s new capital turnover cycle.
Long-term financial investments include costs for equity participation in the authorized capital of other organizations, for the acquisition of shares and bonds on a long-term basis. Financial investments also include long-term loans issued to other organizations against debt obligations.
The costs of long-term financial investments are repaid in different ways, depending on their nature and type. For example, long-term loans are repaid within the terms established by the agreement. Shares and bonds can be sold at any time at the exchange rate to other organizations and the money spent will be fully returned to circulation.
Working capital has several components: tangible working capital, funds in current accounts, short-term financial investments, cash. Note that the elements of working capital are arranged in the diagram in order of increasing liquidity, or their ability to be converted into cash. The most difficult thing is to convert material resources into money; to do this, they need to be sold. Next come the funds in settlements that need to be collected from debtors, to return their money or valuables adequate to them. Financial investments turn into cash faster than other components of working capital.
TO material negotiable means include production inventories (purchased or extracted material resources intended for further processing in a given organization); finished products; goods. Intangible working capital also includes the organization's costs for creating backlogs of work in progress as a necessary condition for the technological cycle to continue production in future reporting periods. Work in progress is the most difficult part of working capital to sell.
Finished goods represent the actual costs of products ready for sale located in warehouses and other storage areas. Goods accumulate the costs of purchasing goods from other organizations for further resale or for completing products of their own production. Finished products and goods are the easiest to sell (liquid) part of material current assets, i.e. convertible into money or funds in settlements.
Funds in current settlements – these are the obligations of individuals and legal entities of the organization. With the exception of so-called bad debts, these are highly liquid funds. At the very least, they are converted into cash according to a predetermined payment schedule.
Financial investments – expenses of an organization for the acquisition of shares and bonds for a period of up to one year, short-term loans, including against bills of exchange, cash in time deposit accounts of banks, other financial investments invested to generate income in the form of interest, dividends or differences in the cost of securities upon their resale. Typically, short-term financial investments quickly turn into cash. They are even called “almost money”.
Cash – the amount of money on hand, in settlement, current and other bank accounts, money transfers, other cash ready for further circulation.
Question. What is passive capital?
Answer. Passive capital characterizes the sources of property (active capital) of a separate organization and includes equity and borrowed capital.
Equity organization, as a legal entity, is generally determined by the value of property owned by this organization.
The components of equity and debt capital are called the net assets of the organization. They are defined as the difference between the value of the property (active capital) and borrowed capital. Of course, equity capital has a complex structure; its composition depends on the legal form of the organization.
The organization's own capital consists of authorized, additional and reserve capital, retained earnings and target (special) funds.
Borrowed capital represents part of the value of the organization’s property acquired as part of the obligation to return money or valuables equivalent to the value of such property to the supplier or bank, or other lender. As part of borrowed capital, a distinction is made between short-term and long-term borrowed funds.
Long-term borrowed funds are loans and borrowings received by an organization for a period of more than a year, the repayment period of which occurs no earlier than in a year.
Short-term borrowed funds are obligations whose repayment period does not exceed one year. Among these funds, one should highlight current accounts payable, which arises as a result of commercial and other current settlement operations. This includes: arrears of wages to staff; debt to the budget and extra-budgetary funds for mandatory payments; advances received; advance payment of orders and products; debt to suppliers, etc.
Question. How is the authorized capital formed?
Answer. Authorized capital of a joint stock company is made up of the par value of the company's shares acquired by shareholders.
Promotion is a security that certifies the fact of contribution of a certain amount to the authorized capital of a joint-stock company, giving the right to participate in meetings of shareholders and receive a certain share in the form of dividends (income of the shareholder).
Shares are divided into ordinary (simple) And privileged. The latter can be issued no more than (by value) 10% of the established amount of the authorized capital. Preferred shares give the right to guaranteed income; dividends on them are paid no less than the established amount, usually as a percentage of their nominal value.
Owners of common (non-preferred) shares receive income from them depending on the results of economic activities and the decision of the meeting of shareholders on the amount of net profit allocated for the payment of dividends based on the results of a given reporting year.
The authorized capital of a joint stock company is formed during the time specified by the charter. Cash, intangible assets, including confidential intellectual property (know-how), fixed assets, and other tangible assets are accepted as payment. On account of your contribution to the authorized capital, you can transfer property for use to a joint-stock company (i.e. without transferring ownership). Property and other valuables accepted as deposits are valued by agreement of the parties.
The authorized capital is assessed at the par value of the acquired shares. The excess of the value of shares over their par value, the so-called constituent or issue income, is accounted for separately and is used to compensate for the difference resulting from the sale of shares at a cost below their par value. These funds are included in the additional capital created by the enterprise along with the authorized capital.
A joint stock company has the right to increase the size of its authorized capital by increasing the par value of shares or issuing additional shares.
The size of the authorized capital can be reduced by reducing the par value of the shares or by purchasing part of the shares in order to reduce their total number.
Rice. 3. Components of your own and
working capital
Question. How is the authorized capital accounted for?
Answer. The authorized capital of a joint stock company consists of funds contributed by shareholders (participants). It is the collective property of shareholders (participants) and at the same time the property of the joint-stock company as a legal entity. From this point of view, it acts as the equity fund of the joint-stock company. On the other hand, it is the property of each shareholder. Each person's share is determined by the value of the shares he owns.
The authorized capital of a newly created joint-stock company is formed from monetary and material resources provided by shareholders in payment for their block of shares in the amount of the registered authorized capital.
Fixed assets transferred by shareholders into the ownership of the joint-stock company are credited to the authorized capital (as payment for shares) at the initial (market) or residual value agreed with the board, but in the “Fixed Assets” account these items are stated at historical cost.
This operation is formalized by posting:
Debit account 01 “Fixed assets”,
Credit account 75 “Settlements with founders.”
This posting takes into account the cost of fixed assets.
Debit account 75 “Settlements with founders”,
Credit account 02 “Depreciation of fixed assets.”
table 2
SALE OF SHARES
This posting takes into account the amount of depreciation of transferred fixed assets.
This can be illustrated with an example.
Example: The joint stock company received 13,800 thousand rubles from the sale of its shares. with their declared nominal value of 12,500 thousand rubles. All shares were sold for non-cash funds. In accounting, this operation will be recorded, as shown in table. 2.
Question. How should reserve capital be accounted for?
Answer. The amount of reserve capital and the amount of mandatory contributions to it from net profit are determined by the charter of the joint-stock company. Contributions to the reserve capital cease after it reaches the value provided for by the registered charter.
The formation of other funds in joint-stock companies (list of funds, amounts of deductions, procedure for use) may be provided for in the charter or in the accounting policies of the joint-stock company. If this is not stipulated in the charter or accounting policies, then the creation of such funds is not necessary.
Reserve capital is reduced when funds from it are used to cover balance sheet losses of the reporting year and other legitimate purposes.
Reserve capital is created by business entities as a guarantee of increased liability for their obligations. In joint-stock companies and limited liability companies, the amount of actual profit received is reduced by the amount of reserve capital created.
Question. How is retained earnings accounted for?
Answer. retained earnings– net profit (or part thereof) not distributed in the form of dividends among shareholders (founders) and not used for other purposes. Typically, this part of the profit is used to accumulate the property of a business entity or replenish its working capital in the form of free cash, i.e. ready for a new turn at any moment. Retained earnings can increase from year to year, representing an increase in equity capital based on internal accumulation. Precisely internal, i.e. not brought in from outside, as in cases with authorized or additional capital. In this context, retained earnings are a close cousin of reserve capital. Retained earnings are the result of a deliberate decision of the owners, their voluntary refusal to distribute part of their net profit. In growing, developing joint stock companies, retained earnings over the years take a leading place among the components of equity capital. Its amount is often several times the size of the authorized capital.
Retained earnings of the reporting year are determined as the difference between the credit balance on the “Profit and Loss” account and the debit balance on the “Use of Profit” account. At the end of each reporting year, these accounts are closed by the final accounting entries, and the credit balance on the “Profit and Loss” account is transferred to subaccount No. 1 of the “Retained Earnings (Uncovered Loss)” account. In this case, make the following entries:
Credit account 99 “Profits and losses” (and account No. 99 is closed),
Debit account 99 "Profits and losses",
Credit account 84 “Retained earnings”, subaccount No. 84/2 (and account No. 99 is closed and has no balance).
Question. How are target (special) funds accounted for?
Answer. Target (special) funds are created at the expense of the net profit of a business entity and must serve for certain purposes in accordance with the charter or decision of shareholders and owners. All these funds are part of the net profit that belongs to them, and, in principle, are a type of retained earnings. In other words, this is retained earnings that have a strictly designated purpose. To account for all created special funds at the expense of profits, subaccounts No. 1, 3, 4, 5 of account No. 84 “Retained earnings” (uncovered loss) are used. Links
The use of the concepts of “movement” and “use” in relation to retained earnings should not be misleading. Retained earnings are not spent irrevocably. They constantly contact organizations, changing their form - from monetary to commodity and vice versa. At the same time, the total amount of assets does not change. As a rule, the balance in account 84 “Retained earnings (uncovered loss)” can only increase, indicating the process of self-financing of the organization, the increase in its property compared to the amount of initial investments.
