Balance of Enterprise Income and Expenditure

a form of financial plan for a socialist enterprise. It is the final part of the technical, output, and financial plan, and it expresses in a monetary form the results of the economic and financial operations as well as the payments to and allocations from the state budget. The September (1965) Plenum of the CPSU Central Committee worked out a new system of planning and economic incentive which broadens the rights of the enterprises in the USSR. In accord with this new system, the superior organizations approve for the enterprises in the area of finances not an entire income and expenditure balance, but only the total amount of profit, the profit rate (in terms of the total fixed and working capital), and the payments to and allocations from the budget. In accord with the designated indexes, the enterprises themselves approve the entire income and expenditure balance. This makes it possible for the enterprises themselves, in elaborating the financial plan within the limits of the established relationship with the state budget, to adjust the amount of income and expenditure and, in particular, to increase expenditures by the amount of additionally received income. At the same time the enterprises have gained an opportunity to determine independently the financing sources for the corresponding expenditures.

The balance of enterprise income and expenditure is elaborated on the basis of the indexes of the national economic plan. Before the balance of enterprise income and expenditure can be computed, calculations are drawn up for the individual income and expenditure items. The most important calculations are profit, turnover tax, payment for productive capital, fixed (rent) payments, economic incentive funds, amortization deductions with the isolation of the part to be spent on the full replacement of fixed capital stock and major overhauls, the norms for the enterprises’ own working capital, fixed liabilities, capital investment financing, and the demand for funds to support scientific research organizations and sociocultural institutions.

On the basis of these calculations, a trial (column and line) table is filled out for the income and expenditure balance. In this table, the income is distributed in terms of use, and the sources for financing each expenditure are determined.

The balance of enterprise income and expenditure has four sections.

The first shows the income and receipt of funds, including profit and turnover tax, amortization deductions, and other income and resources of the enterprises such as mobilization of internal resources in capital construction, deductions from product costs, receipts from contracts for scientific research work, receipts from a superior organization under the redistribution procedure, funds constantly in the circulation of the enterprises (the so-called fixed liabilities), and so forth.

The second shows the expenditures and deductions of funds, including centralized capital investments, an increase in working capital in capital construction, expenditures on major overhauls, an increase in the norms of the enterprises’ own working capital, the deduction for forming economic incentive funds (separately for each of the funds for material incentives, sociocultural measures and housing construction, and production development), and operating and other expenditures.

The third shows credit relationships. Under income, provision is also made for the receiving of long-term loans for centralized capital investments (as a substitute for budget allocations). Under expenditures, provision is made for retiring (out of profits) the credits for the centralized capital investments; organizing and broadening the production of consumer goods, as well as the carried-forward liability on bank loans provided for measures relating to the production of new products; improving quality, reliability, and durability of articles; and paying interest on bank credit.

The fourth shows relations with the budget. The first part of this section contains payments to the budget including the turnover tax, the payment for productive capital, fixed (rent) payments, and the free profit balance to be turned over to the state budget. The second part indicates the allocations from the budget for particular purposes, including centralized capital investments, operating expenditures, scientific research and experimental work, an increase in the norms of the enterprises’ own working capital, and so forth.

As a result of the income and expenditure balance, information is provided on the basic indexes used in setting the individual items of the plan: the volume of sold product in current wholesale enterprise prices; the volume of sold product in terms of full costs; the norms of the enterprises working capital; and production profit rate (total and adjusted).

The compiling of the income and expenditure balance is an important job for the enterprise. In the process of formulating the financial plan, there is an opportunity to bring out economic reserves to raise production efficiency and to improve the utilization of material and financial resources.