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Abstract

The content

Introduction

The equity of the enterprise is the main source of the profit of its owners in current and future period, the size and dynamics characterize the level of economic efficiency. Capital is one of the fundamental economic categories, the essence of which is investigated by economic science has been for centuries, but the new value of the concept was only in the conditions of market relations. In an unstable market situation and the crisis, the more equity capital in the financial market, the higher the competitiveness of the enterprise and safer its financial position. Therefore, to ensure that the enterprise functioned successfully, careful work that requires a lot of time and effort for organizing and creating effective systems of accounting, reporting and management of own capital of the enterprise, that will help to improve the profitability of own capital, i.e. to maximize profits.

The wide range of organizational and legal forms of enterprises, where there are differences in the relations of ownership and property regulation offers features of equity and reflection of this information in the financial statements. The disclosure of these characteristics and methodological aspects of the accounting for equity the enterprises will improve the completeness and accuracy of information about financial and property status in the financial statements. Therefore, at the present stage activity of the enterprises is of critical importance to improve the methods of accounting for the formation of property relations and private capital.

1. Theme urgency

The equity is the basis for the establishment and functioning of business enterprises, one of the significant indicators which characterizes financial condition of the enterprise. The equity is an important moment in the relationship of the enterprise with foreign creditors, since the value of equity associated with the solvency of the company. The company, apart from the other operating, must have capital. Structure and dynamics of equity capital is the most significant indicator that determines the financial condition of the enterprise. At the same time the main source, where it is accumulated and sistematizarea necessary information, is accounting. It reflects the process of formation of the ownership, the scope of rights of owners, the distribution of the results of their activities, that is, information about the formation and use of equity capital as the financial basis of activity of the enterprises. All this determines the relevance of the chosen topic of the master thesis.

2. Goal and tasks of the research

Goal of the final work is the identification of inconsistencies and shortcomings in the organization of equity.
the goal of the work involves the following tasks:
1. To explore the concept and economic essence of capital.
2. To characterize the legal regulation of accounting of own capital.
3. To solve tasks in accounting policies the components of equity.
4. To assess the organization of accounting of own capital in the enterprise.
5. To develop ways of improving equity.

Subject of the research is a set of theoretical, methodological and practical aspects of accounting equity.

Object of research is the process of accounting for equity in the conditions of joint-stock companies.

Scientific novelty of master's thesis is to clarify theoretical principles and develop practical recommendations on improvement of approaches to accounting equity.

Obtained results of this work can be used by the Ministry of Finance of the Donetsk People's Republic in the development of the national accounting standards, aiming to eliminate a number of contradictions and shortcomings, leading to distortion of the financial statements.

3. Capital as an economic category

The original meaning of the word "capital" comes from the Latin "capitalis" is the main. In economic theory and business practice, perhaps, there is no concept that has been used so often and so ambiguous. It can be concluded that under capital is understood as a set of resources, which can bring economic benefits. In this connection, Marx wrote that "...the full form of the process under consideration is expressed as follows:

The general formula of capital

Figure 1 – The general formula of capital

is avansirovannoy the original amount, plus some increment. This increment, or surplus over original value, I call surplus value (surplus value). Thus, the originally advanced value is not only preserved in circulation, but changes its magnitude, adds to itself a surplus value, or increases and this movement converts it into capital" [1].

"Buy, to sell, or buy to sell higher, is at first glance a form characteristic of only one type of capital — merchant capital. But also industrial capital is money which are converted into product and then through the sale of goods turn into more money. Acts committed outside the sphere of circulation in the interval between buying and selling, does not change this form of motion" [1]. In the future, revealing the contradictions of this formula, Marx underlines: "How not to fidget, but the fact remains, if share equivalents, then there is no surplus value, and if the exchange neekvivalentnosti, also there isn't any surplus value. Circulation, or the exchange of goods, does not create any value" [1]. In the future, revealing this contradiction, Marx comes to the conclusion that the common carrier cost there are finished products that may occur in the production process. Therefore, he emphasizes that capital, as such, in a General sense can only be created through relations of production. The basis of the disclosure of this entity is based on the theory of Marx about the transformation of money in capital through the processes of production and sales of goods, which occurs according to the scheme:

The increase of capital through the production process and sales

Figure 2 – The increase of capital through the production process and sales
(animation: 7 frames, 5 cycles of repeating, 100 kilobytes)

The formula shows that in the production process increases the amount of goods and money (T', D'), which means the capital gain. Speaking of trade and financial (banking) capital, Marx emphasized that these funds exist, but their occurrence still must be considered from the angle of relations of production. In disclosing this problem, you must remember that only carrier of value is finished goods. If there is no production, there will be no cost, and there will be neither trade nor financial (banking) capital. This gives grounds to conclude that the occurrence of trade (commercial) and financial capital based on the expropriation of the value including the surplus value created in the production process [2].

Next, Marx stresses that capital is not only a thing but a result of certain social relations, which gives this thing a specific social character. On this basis, Marx concludes, that capital has a dual nature – the physical and the abstract. That is, the capital at the same time manifested, on the one hand, in the form of material substance (fixed and circulating capital) in the aspect of industrial relations, where it has no physical form. But on the other hand, in the aspect of social relations, where capital is an abstract form that reflects the right of ownership. Physical form, as a material substance, reflected in the assets. Abstract a form as the right of ownership, is reflected in liabilities and indicates the source of the physical, i.e. material substance. In this sense, the abstract form of capital is mirrored her physical (material) substance [2]. This is derived from the equation of assets and liabilities, i.e.

The basic balance equation

Figure 3 – The basic balance equation

Abstract shapes also can be seen in any part of the capital is formed at their own expense and applies to private and in some parts at the expense of borrowed funds. If you put the liabilities into two parts equity and debt, we get another equation: ASSETS=EQUITY+LIABILITIES

Thus, it appears that the assets are equal to equity and liabilities of the company. The modern definition of equity capital is in full compliance with the stated contents.

At the legislative level the concept of "equity" enshrined in the NPAS № 1 "General requirements to financial reporting". Thus, under private capital is understood as part of the assets of the company remaining after deduction of its liabilities [8].

The essence of enterprise's equity capital is revealed through its main features:

1. Foundation and introduction. It registered capital is the basis for the creation of a new entity.

2. The provision of credit, liability and warranties. Registered capital is a money back guarantee for creditors. What it is, the large losses may be incurred by the company without threatening the interests of creditors and the higher its creditworthiness.

3. Ensure viability of the enterprise. The company is better protected from the effects of threatening factors in the case when equity capital increases, since it is at the expense of own capital to cover the losses of the enterprise. If the result of a loss of activity, there is a constant reduction in shareholders and registered capital, the company may be on the verge of bankruptcy.

4. Funding and liquidity. Contributions to the equity capital (buildings, equipment, funds) used to Finance operational and investment activities of the enterprise, and for repayment of the loans. This increases the liquidity of the company and increases the opportunities for long-term financing.

5. Ensuring independence. Equity capital directly affects the level of dependence of the enterprise from creditors, borrowers and other financial institutions in which the company has borrowed funds.

6. Management and control. Business owners can participate in the management of its activities. Owning a controlling stake gives the opportunity to conduct and shape their own strategic development policies of the enterprise, advertising policy, dividend policy and to control personnel issues. Thus, the authorized capital provides the right to control production factors and assets of the company[9].

Accounting of own capital starts from the moment of registration in the Unified state register of enterprises and organizations and shall expire on the date of exclusion of companies from the register in result of the termination of activities in case of reorganization, liquidation, etc[10].

Conclusion

The capital is one of the fundamental economic categories, the essence of which explores scientific thought for many centuries. Equity is an integral part of the organization and functioning of any enterprise. Own capital of the enterprise is determined as the difference between its assets and liabilities. At the time of establishing the enterprise's starting capital is embodied in assets, invested by the founders (participants), and represents the value of the property business. Equity is the total value of assets of the company belonging to him the rights of ownership and used them to create assets. Such assets are formed at the expense invested in their own capital and represent the net assets of the company.

today there are a number of unresolved problems and issues associated with a clear legal regulation of accounting of financial and economic activities of enterprises, including private capital. The solution to these problems will improve the understanding of capital as an economic category, will increase the efficiency of the enterprise and promote the maximization of profit.

In recent years, legal regulation is undergoing significant changes to improve all systems. Companies need to carefully monitor all legislative and regulatory changes regarding accounting and financial reporting of equity capital with the goal prevention of offences for non-compliance with accounting and reporting legislation requirements.

References

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