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Abstract

Abstract on the topic of the final work

Content

Introduction

The amount and components of capital are fundamental for the efficiency of the functioning of an industrial enterprise, the implementation of investment decisions. Resources of equity capital are funds used in the production process and are the means of forming assets. This is where its regulating function is manifested. Identification of bottlenecks allows you to comprehensively optimize the work of management.

However, the methodological mechanisms for rationing the capital of an industrial enterprise require deep regulatory regulation at the state level. The main purpose of capital analysis is to identify trends in the dynamics of the volume and composition of capital in the preplanned period and their impact on financial stability and capital efficiency. In modern economic conditions, the analysis of the financial stability of an enterprise is the most important stage in assessing its activities and a guarantee of financial and economic well-being, reflects the results of its current, investment and financial development.

1. Relevance of the topic

The functioning of any enterprise depends on the effective management of its own capital and its structure. Equity capital characterizes the degree of financial independence, as well as the degree of the company's creditworthiness. Equity management helps to improve operational efficiency, optimize profits and increase the competitive advantage of the organization. An enterprise that effectively manages the capital structure has the following characteristics: increased profitability and business activity, continuous production process, intensive development, high capital turnover rate, excess of return on invested capital over the weighted average cost of capital, balance between return on equity and risks that it takes enterprise, etc.

The main goal of any enterprise is to maximize profits, therefore, the management of the enterprise must have an accurate idea from which sources the activity will be carried out, and in which specific areas of activity the capital will be invested. Capital, as a source of financing the resources of activities, is an important object of accounting and government audit. Effective capital management is impossible without studying and further improving the methodology and organization of accounting and state audit of capital.

2. Purpose and objectives of the study, planned results

The purpose of the master's thesis is to identify bottlenecks in the organization of accounting and government audit of equity capital, as well as to determine the directions of its rationing.

In accordance with this goal, the following tasks were formed:

1. To study the theoretical foundations of accounting and audit of equity capital;

2. To investigate the organization of accounting of the company's equity capital;

3. Disclose the mechanism of state audit of equity capital;

4. To reveal the internal reserves of capital rationing of a coal-mining enterprise.

Object of research: financial and economic activities of the enterprise, associated with the formation and use of equity capital.

Subject of research: accounting and government audit of the formation and use of the company's equity capital.

The theoretical and methodological basis of the work is scientific works concerning the problems of organizing the accounting of equity capital, regulatory and legislative acts, statistical and accounting statements of enterprises and other information obtained from open sources.

The scientific novelty of the results obtained lies in the theoretical substantiation and development of organizational, methodological and practical recommendations for improving accounting and state audit of the company's equity capital.

3. Review of research and development

Capital is one of the most important and complex economic categories. The essence and structure of capital directly depends on the evolution of the development of economic science, affecting almost all areas of activity, which undoubtedly confirms the importance and necessity of studying the issues of defining the concept of capital and determining the rational structure of enterprise capital.

There are various approaches to defining the definition of capital.

I. F. Sher, M. I. Kuter understand the total value of assets minus liabilities, formed as a result of the use of fixed and working capital, by the company's own capital, i.e. clean[28].

I. Fisher, P. Samuelson, H. Anderson consider capital as the entire accumulated stock of funds that is necessary for the production of material goods[21].

Y.A. Babaev believes that capital is a combination of equity and borrowed capital required for financial and economic activities[19].

Many experts in the field of economics considered the formation and use of capital. So I. A. Blank[1], V. A. Gavrilenko[3], I. D. Lazarishina[15], E. R. Sukhaya [10], O. I. Ukhin[34] deeply studied both theoretical, and practical aspects of the functioning of the enterprise's capital.

V. V. Sopko gives the following definition to equity capital: Equity as an accounting object is the company's own sources, which, without defining the return period, were contributed by the founders – individuals or legal entities, or left by them (founders) at the enterprise from profit after taxation[13].

S. V. Mocherny defines capital as a production relation in which instruments of labor, certain material goods, exchange values are a means of exploitation, appropriation of part of someone else's unpaid labor[15].

F. F. Butinets, A. P. Voynalovich and I. L. Tomashevskaya understand by equity capital the total value of the enterprise's funds belonging to him on the basis of property rights and is a source of assets formation[14].

Moreover, the most fundamental definition of capital is given by K. Marx. Capital is a combination of material, intellectual and financial resources used to obtain additional benefits[11]. Regarding physical capital, K. Marx emphasizes that this type of capital cannot be created by itself. It can be realized through ownership of it.

In world practice, the concept of capital is defined as the difference between the assets and liabilities of an enterprise. So, according to NP(C)BU 1 General requirements for financial reporting, as well as IFRS in the section Principles of preparation and preparation of financial statements, capital is defined as the part of the company's assets remaining after deducting all its liabilities.

Before talking about accounting problems, it is worth giving a description of the economic category of capital (1).

Functions and characteristics of equity in the enterprise

Animation 1 – Functions and characteristics of equity in the enterprise, (animation: 7 frames, 7 repetition cycles, 17 kilobytes).

Capital management is an incredibly complex process of constantly monitoring the level of risk tolerable for an industrial strategy. Or in other words, it is a certain set of strategies used to increase money in a stable way.

One of the functions of equity capital is regulatory and its use is possible only through reforming the current regulatory framework. It is through normative regulation that it is possible to rationalize commodity production at the level of the state and individual economic entities.

Equity accounting is an important part of the accounting system of an industrial enterprise and requires special attention. High-quality regulatory regulation will allow at the enterprise level to identify bottlenecks in the organization of capital assessment, as well as determine the directions of its rationing.

4. The structure of the object of accounting for equity

Equity is the net worth, measured as the difference between the value of an organization's assets and its responsibilities.

The structure of equity capital is represented by the following categories:

Registered (share) capital:

Authorized capital – reflects the capital of business entities, state and communal enterprises;

Share capital – summarizes information on the amounts of share contributions of members of a consumer society, collective agricultural enterprise, housing construction cooperative, credit union and other enterprises provided for by the constituent documents;

Other registered capital – reflected in the part of the registered capital of other companies, private enterprises, the formation of which is provided for in the constituent documents;

Contributions to unregistered share capital represent contributions received for the formation of the share capital, in particular of a joint stock company, after its announcement and before the registration of the corresponding changes in the constituent documents.

Capital in additional estimates:

Revaluation (markdown) of fixed assets summarizes information about revaluation of fixed assets, markdowns of such objects within the amounts of previously carried out revaluations, referring the revaluation amounts to retained earnings;

Revaluation (markdown) of intangible assets summarizes information on revaluation of intangible assets, markdowns of such objects within the amounts of previously carried out revaluations, referring the revaluation amounts to retained earnings;

Revaluation (markdown) of financial instruments summarizes information about changes in the carrying amount of the hedged item when the value of the effectiveness ratio of the cash flow hedge is within certain limits;

Other capital in revaluations summarizes information on other capital in revaluations that is not reflected in other sub-accounts.

Additional capital:

Share premium reflects the gain (loss) on the sale, issue or cancellation of equity instruments;

Other invested capital includes other capital invested by the founders of enterprises (except for joint stock companies) in excess of the authorized capital, other contributions, etc. without decisions on changes in the amount of the authorized capital;

Accumulated exchange rate differences summarize information on exchange rate differences, which, in accordance with national accounting regulations (standards), are reflected in equity and recognized in other comprehensive income;

Non-current assets received free of charge reflect the value of non-current assets received free of charge by the enterprise from other persons;

Other additional capital takes into account other types of additional capital that cannot be included in the above sub-accounts, in particular, capital in the amount of the value of non-current assets received under a lease agreement for integral property complexes.

Reserve capital , represented by all kinds of reserves:

– reserve for the forthcoming vacation payment;

– reserve for payment of annual remuneration for length of service;

– reserve for the repair of fixed assets;

– reserve for warranty repair and warranty service;

– reserves for depreciation of material assets;

– provision for depreciation of investments in securities.

Retained earnings (uncovered losses):

Retained earnings reflects the formation and movement of retained earnings;

Uncovered losses reflect the excess of the expenses of the reporting period over the income received from the implementation of these expenses. Losses are written off at the expense of retained earnings, reserve or additional capital, etc .;

The profit used in the reporting period shows the distribution of profit among owners (accrual of dividends), deductions to reserve capital and other use of profit in the current period.

Withdrawn capital:

Withdrawn shares reflect the actual cost of self-issued shares, resale or cancellation of repurchased shares;

Withdrawn deposits and shares represent the actual cost of shares (shares) redeemed from members of a business entity or operations for the re-placement of withdrawn shares (shares) or their cancellation;

Other withdrawn capital includes other types of withdrawn capital that cannot be included in the above.

Unpaid capital (varies depending on the organizational form of ownership of the enterprise):

Operations that are carried out with this type of capital:

– reflection of the participants' debt;

– debt repayment;

– assessment of contributions on unpaid capital;

– accounting of unpaid capital by types of shares;

– assignment of rights to unpaid capital;

– contributions to the registered (share) capital;

– payment for a subscription to a share.

An increase in unpaid capital (occurs due to the issue of shares or an increase in the debt on contributions to the registered (share) capital; exchange rate differences when recalculating the debts of founders to pay for shares in cash in foreign currency.

Reduction of unpaid capital (occurs as a result of payment of issued shares or repayment of debts on contributions of founders to registered (share) capital; exchange rate differences when recalculating debts of founders for payment of shares in cash in a foreign currency.

A qualitative understanding of the structure of equity capital will make it possible to organize accounting and state audit in all its components, taking into account the peculiarities of the business form of the enterprise. And this will make it possible to optimize and rationalize the company's own capital.

5. The state of the equity problem

Today, one of the main issues is the problem of settling disputes and inaccuracies in accounting for equity capital. The importance of this issue is due to the fact that equity capital ensures the financial stability of the enterprise and is the foundation for starting and continuing its activities. The problems of accounting and analysis of the SC have been studied by many domestic and foreign scientists. Among which we can highlight such as K. Marx, V. A. Gavrilenko, V. V. Sopko, F. F. Butinets and others.

So, let us consider in more detail the most significant reasons that lead to the formation of capital that do not reflect its value. It is the operation of the standard P(S)BU 7 Fixed Assets and a number of other standards that leads to the fact that the real cost of capital is hidden and is very often overstated. So, let us consider in detail the effect of markdowns and revaluations of fixed assets on the company's equity capital. Accounting for additional estimates and markdowns is regulated by P(S)BU 7 Fixed assets[3].

Regarding the influence of revaluations, it can be noted here that revaluations also affect the size and value of the capital of enterprises, lead to an artificial increase in the amount of capital. There are also some problems with this issue, this is due to the differences between accounting and tax accounting.

When the revaluation is reflected in the accounting, the capital of the enterprise increases by the amount of the revaluation, although in reality this increase was not:

Dt 10 Fixed assets

Kt 411 Capital in additional estimates

Thus, a part of equity capital is formed, which is not provided with monetary resources, which in turn leads to the formation of the so-called dead capital.

Upon disposal of property, plant and equipment, such revaluation and indexation is written off to the growth of retained earnings, which is reflected as follows:

Dt 411 Capital in additional estimates

Kt 441 Retained earnings

In this case, deferred tax liabilities arise, accrued on the amount of the revaluation and are recorded by posting:

Dt 54 Deferred tax liabilities

Kt 441 Retained earnings

At the same time, as V. A. Gavrilenko, on the one hand, creates a penny profit, which cannot be used later. On the other hand, the company must pay real tax on this amount. And again, there are contradictions between income and expenses that cannot be settled at all.

The need for depreciation of fixed assets indicates that the company in previous periods underestimated the cost of depreciation and now it is necessary to reduce the book value of the object by writing off part of it to costs. The peculiarity of accounting is that the applied low depreciation rates lead to the fact that the accounting depreciation is significantly lower than the actual one (the difference is up to 30–40%). If you bring the carrying amount of property, plant and equipment to their fair value, this leads to a significant overstatement of expenses for the reporting period and incurring losses.

Thus, in case of a devaluation, the amount of the devaluation is attributed to expenses, which leads to an increase in the expenses of the reporting period, and, consequently, to a decrease in taxable profit. Thus, it is advisable to adjust the Retained earnings (uncovered losses) by this amount in order not to distort the real financial position of the enterprise[18].

Also, another of the problems of accounting for equity capital is the accounting of fixed assets received free of charge. Fixed assets received free of charge are recognized as capital with its subsequent transfer to income in parts as depreciation is calculated. This approach contains contradictions and shortcomings that affect the economic activities of the enterprise. But this entry violates the conceptual rules of accounting, because these assets are not earned by the enterprise, in addition, no costs were incurred to obtain this income, therefore it is considered inappropriate to use the capital and income account in correspondence. Therefore, it is advisable to use a different account in correspondence with the capital account, so it is recommended to use account 69 Deferred income.

Upon receipt of the asset:

Dt 10 Fixed assets

Kt 69 Deferred income

As depreciation is calculated:

Dt 69 Deferred income

Kt 746 Other income from ordinary activities.

Thus, the regulatory framework for accounting for IC contains a number of contradictions and shortcomings, which leads to distortion of the enterprise's reporting. Consequently, in this way, the reliability of capital accounting is artificially distorted, a situation occurs when changes occur in various elements of equity capital. Capital contains many more problems and unresolved issues.

Conclusions

The basis for managing the company's own capital is the management of the formation of its own financial resources. In order to ensure the efficiency of managing this process, the company is developing a special financial policy. The policy of forming its own financial resources is part of the overall financial strategy of the enterprise, which consists in ensuring the necessary level of self-financing of its production development.

An important factor that affects the amount of the company's equity capital is the amount of net profit (loss) and the procedure for its use (or coverage) in the reporting period. Basic information regarding this indicator is produced by the enterprise accounting system. A qualitative definition of the object of accounting and government audit regarding operations with equity capital opens up reserves for increasing the efficiency of using the internal resources of the enterprise.

It should be noted that the organization of accounting and government audit of equity capital requires serious reforms. And these reforms, first of all, should affect the current regulatory framework for accounting and state audit of equity capital, since it is precisely through regulatory regulation that it is possible to rationalize commodity production at the level of the state and individual business entities[1].

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