Payment Circulation

the circulation of money in which money functions as a means of payment. In accordance with the character of the payments, payment circulation is divided into cash and noncash turnover. In 1973, the entire noncash payments passing through the system of the State Bank of the USSR (Gosbank) was 1,800 billion rubles (seeNONCASH PAYMENTS).

Payment circulation in the USSR and other socialist countries is carried out on a planned basis. A socialist society consciously determines the flows of money and introduces such progressive forms of payment as settling of accounts by payment authorizations, checks, and planned payments. These methods of payment limit the unplanned redistribution of funds in the economy. The planning of the basic indicators for economic and financial operations makes it possible to determine the volume of deliveries and consequently of payments, using the contracts concluded by economic organizations as a source of data. These contracts also indicate the major flows of goods and payments.

Payment circulation is directly dependent on the movement of goods and on the specific economic transaction. For this reason, payments between enterprises are not initiated in the form of advances against outlays; the extension of commercial credit is prohibited in the USSR and most other socialist countries. Rather, payments are made after the actual outlays. Such a principle contributes to the more rapid sale of the finished product and to the prompt receipt by the supplier of the money for the delivered goods.

In terms of its economic content, role in socialist reproduction, and mechanism for organizing payments, payment circulation of enterprises and organizations encompasses two groups. The first group is comprised of payments related directly to production and economic operations and includes payments for means of production and commodities acquired, work performed, and services rendered. Payments in this group account for more than two-thirds of the total payment circulation passing through the State Bank. The second group consists of payments related to financial obligations and other noncommodity operations. It includes redistribution of the turnover tax, payments from profit, and amortization payments.

In facilitating diverse aspects of an enterprise’s internal economic and financial operations, payment circulation is directly related to the circulation of working capital (the sphere of production and circulation of goods) and fixed capital (the sphere of capital investment). All payments related to basic production activities and capital expenditures are made from different accounts. They are reflected separately in the accounting balances for basic activities and for capital investment. There is an organic unity between these two spheres of payment circulation. Enterprise assets allocated for capital investments are created, to a significant degree, by corresponding transfers from the accounts of basic production activities. A reverse movement is also possible, with funds from the special accounts for capital expenditures being transferred to the accounts for basic activities. This intertwining of diverse payments reflects the unity of the reproduction process in socialist enterprises.