Intrafactory Profitability Accounting

a method of organizing the work of the structural subdivisions of socialist enterprises and the work of the separate production units (shops, services, departments, sections, and brigades) by applying profit-and-loss management and accounting. Intrafactory profitability accounting is a method of economic management of the subdivisions of the enterprise, based on economic incentives to these subdivisions to increase the effectiveness of production and on economic responsibility for the execution of their assigned tasks. Intrafactory profitability accounting is a component part of full profitability accounting. Each production subdivision working on the basis of profitability accounting is assigned a target for the volume of production (including its schedule), wage fund, prime cost of the output of the subdivision or the service that it renders (for subsidiary shops), and other production expenses. The economic results of the work of each subdivision (comparability of the actual expenditure with the planned expenditure must be provided for without fail) are determined at the end of the accountable period (ten days, a month, a year). Intrafactory profitability accounting should be organized so that the workers of each subdivision have a personal interest in the efficient and thrifty use of the fixed and circulating production funds, to achieve maximum results for minimum expenditures. Work by the production subdivisions on the basis of profitability accounting involves delegating to the head of the subdivision on profitability accounting the right to dispose of the resources necessary for the fulfillment of the assignment; equipping the production unit with the technical means for measuring the work done and for ascertaining the amount of expenses; setting up technically valid norms for the outlay of raw materials, use of fuel and energy, the expenses of labor, and the rate of output; working out a target assignment showing a volume of work (output of products), an amount of expense, the methods of accounting, and an ongoing control for fulfillment of the assignment and expenditures; assessing the results of productive activity (savings or overexpenditure); encouraging active participation of the workers of the production subdivision in the organization of their work; and using the principle of economic incentives and financial responsibility in the results of the labor of the production subdivisions.

The Statute on Intrafactory Profitability Accounting provides for a list of indexes for such subdivisions, a procedure for accounting for the volume of completed work and for expenses, a procedure for relations between subdivisions, a procedure for and the dates of the work review, and a system for and the norms of economic rewards for goals achieved. These are worked out directly at each enterprise on the basis of typical situations at the branch level and confirmed by the director of the enterprise. Profitability accounting demands the kind of organization of work that makes possible a more extensive use of economic methods of management and a more active display of economic initiative in searching out the best ways to fulfill the production assignment. The application of economic methods of management increases the significance of such indexes of production as profit and economic efficiency. Therefore, where it is possible (for example, in such industries as metallurgy, chemistry, and mining), profit is included among the indexes of separate shops. In such circumstances, payment for production funds is usually included in the expenses of those subdivisions working on the basis of intrafactory profitability accounting.

In some enterprises the principles of intrafactory profitability accounting are even applied to the work of many of the departments of the factory management. Such departments are given assignments that determine the economic results of their work, and a system of bonuses is set up according to the results of the work. Enterprises that are members of industrial associations also work on the basis of intrafactory profitability accounting. The directives of the 24th Congress of the CPSU on the Five-Year Plan for the Development of the National Economy of the USSR for 1971-75 proposed an increase in profitability-accounting incentives for enterprises, industrial associations, and ministries in order to achieve the greatest productive results with the least expense of labor, material resources, and capital investments.

REFERENCES