Assets of Socialist Enterprises

in the USSR, the aggregate of the current and capital assets that are used to produce goods and services and provide material incentives to workers. The two groups into which the assets are divided are the productive assets, which are placed at the disposal of enterprises (associations) to ensure uninterrupted production, and the monetary funds, which are formed annually from various sources and used for specific purposes.

The first group—the productive assets—includes the property of enterprises (associations), that is, the fixed capital stock and circulating capital, which together make up the enterprise’s charter fund. The charter fund appears on the balance sheet. Fixed capital stock includes items that may or may not be used in production; these items last for a number of years and their physical form does not change during their service life. Fixed production assets, which figure directly in production, constitute the bulk of fixed capital stock. The value of production assets is gradually transferred to the finished goods through depreciation deductions. The fixed capital stock that does not figure directly in production constitutes the nonproduction fixed assets. The replacement of fixed capital stock is planned so as to introduce technological advances and improve working conditions. The financial plans of enterprises (associations) make provision for the capital investments and sources of financing necessary for this replacement.

Circulating capital comprises the circulating productive capital and the circulating funds. Circulating capital embodied in inventories and supplies (circulating productive capital and inventories of finished goods) constitutes the enterprise’s (association’s) own working capital. The minimum (normative) working capital necessary to guarantee the continuous operation of an enterprise is established by higher-level organizations on the basis of current economic conditions.

The composition of the other group into which the assets of socialist enterprises are divided—the monetary funds—is regulated by enactments on the structural subdivisions of the various sectors (enterprises, production associations). The procedure governing the formation and use of the funds is regulated by existing legislation and directives. Incentive funds, of which there are three types, are set up at enterprises (associations). One is the material incentive fund, which is used for paying bonuses and rendering financial assistance to workers. The size of the fund, which is formed from profits, is set by a higher-level body on the basis of targets relating to the growth of production (sales), product quality, labor productivity, and overall profitability. Another fund is the social-cultural and housing fund, which is designed to improve the conditions of life of the workers from both a material and cultural standpoint. This fund too is formed from profits. The third fund—the fund for the expansion of production—is used to finance capital investments for introducing new technology, mechanizing and automating production processes, modernizing production, and implementing measures for improving the organization of production and labor. It is formed from enterprise profits, depreciation deductions for the replacement of fixed capital stock, and the proceeds obtained from the sale of surplus property. Industrial enterprise funds, which are designed to improve production and the conditions of life of workers, are created at enterprises and organizations that do not come under the new planning and incentive system. Incentive funds give workers, both as individuals and as groups, a greater interest in the performance of enterprises (associations), and they also make production more efficient.

Enterprises (associations) also form other types of monetary funds that are used primarily to provide material rewards to workers and to improve production. These are special-purpose funds that stimulate scientific and technological progress; they include the bonus fund for the development and application of new technology, the fund for the introduction of new technology, and the fund for promoting the introduction of inventions and the application of rationalization proposals. Certain funds are intended to promote the efficient use of material resources, for example, the bonus fund for rewarding those who collect scrap metal, the fund being created from proceeds obtained on the sale of the metal. Other funds of this type are the consumer goods fund and the funds rewarding those who economize on fuel, electricity, and heat. There are also funds intended to stimulate the production of certain types of goods; examples here are the fund providing bonuses for the delivery of products for export and the funds formed from profits derived from the sale of new types of household chemicals and consumer durables.

The total monetary funds of state enterprises and economic organizations increased from 2.559 billion rubles in 1965 to 22.785 billion rubles in 1975. In industry alone, the increase was from 1.363 billion rubles to 13.516 billion rubles. In all, 16 percent of the profits of state enterprises and economic organizations were channeled into monetary funds.

The amortization fund for the repair of fixed capital stock is of great importance in handling assets. The fund can also be used for the modernization of fixed capital stock and for the replacement of obsolete equipment when repair is not economically warranted. Amortization deductions for capital repairs totaled 21.1 billion rubles for the economy in 1975.

The assets of socialist enterprises are closely bound up with profit-and-loss accounting. The creation, acquisition, and use of assets constitute an important part of the financial management of enterprises (associations) and economic organizations.

The economic activity of the socialist enterprises (associations) in other member nations of the Council for Mutual Economic Assistance is also based on profit-and-loss accounting. The enterprises have fixed capital stock and circulating capital at their disposal, and they set up monetary funds from their revenues to expand production, raise the level of technology, and provide incentives to their workers. The methods of creating and acquiring assets vary from country to coutry because of differences in the system of management.