PROBLEM STATEMENT
Accounting expresses a measure of value limited to profit, since only that which is the object of economic measurement is recognized as measurable in accounting terms, that is, that accounting includes some concepts in terms of value, (such as working capital, variable, fixed) and elaborates a quantitative conception. This fact leads to the fact that variable capital (component of economic value) is not recognized as a generator of value and the measurements that are made have some valuation limitations..
The problem, mainly, is in establishing the measurement criteria according to an economic environment consistent with the interpretation of the facts surrounding accounting, as well as things, How to articulate value as a generator of wealth in terms of a comprehensive value system?
OBJECTIVES
OVERALL OBJECTIVE
Recognize some elements around the concept of economic value and link them to a comprehensive valuation system, in accounting.
SPECIFIC OBJECTIVES
* Provide some analysis tools for the interpretation of an economic balance, and the development of its measurements.
* Establish the possible relationship between accounting and economy as value generation.
BACKGROUND
The Economic Environment, understood as the medium in which the various economic agents are related, has developed an economic theory that supports the theory of value insofar as it makes an interpretation of value according to men's social and therefore mercantile relations, influence that is observed in accounting, firstly in the accounting principle of Valuation or Measurement and second measure by the transformation that the value undergoes through: of the merchandise, the product and the price expressed in accounting as a component of the represented capital in the profit account. This Theory of Value, presents some limitations that reach accounting solved from historical prices, not expressing the integral value that covers the economic or social resources.
JUSTIFICATION
A recognition of the value would allow to structure a plan that leads to a comprehensive interpretation of accounting information and constitute the beginning of an approach to an accounting theory thought from the valuation problems present in accounting, (as is the case of historical value, market and replacement; used according to each situation.)
Analyzing the background of the theory of economic value and its proximity to accounting allows for some interpretations of measurement, valuation and location of value, present in organizations seeking to solve measurement and valuation problems in accounting, (generation of wealth social and valuation of resources not necessarily economic).
EXPECTED IMPACT
The contribution in terms of measurement is expected to be satisfactory as it attempts to clarify the valuation problems that accounting has as a discipline that informs the economic and financial situation of organizations. This contribution will be reflected when analyzing the components of value generation and the exchange necessary to generate profit. The accounting information will provide the user with a contextualization of the economic and social situation of the organizations, specifying the origin of the surplus value and its circulation in an economic environment.
THEORETICAL FRAMEWORK
ACCOUNTING EQUATION VS VALUE GENERATION
Conceptual Aspects
The accounting equation known as Assets = Liabilities + Equity (A = P + Pt) is the result of the adoption of an accounting recording method based on double entry based on empirical developments associated with the mode of production dominated by each era, beginning in the fourteenth century, with mercantilism, seventeenth century with trade and the emergence of capitalism, the industrial revolution, until reaching our time with the revolution of knowledge and free market
In this equation, the unit of measurement is essential for the preparation of accounting information. This monetary unit is known in accounting as the currency, which allows determining the information that corresponds to each of the accounting items in the financial statements. The relationship between the economy and accounting arises from the appropriation of economic systems associated with the accounting system, an example of this is money. In this sense, accounting determines the patrimonial situation and the obtaining of the benefit in terms of monetary units. In such a way that accounting takes as important everything that is the object of monetary measurement in this way, corporate profit or profit shows the effects of capital accumulation, at the national unit level.
With the new role of money in the modern industrial phase as "Merchandise" the exchange of goods and services is facilitated, but it is not this one that generates value but only serves as a means to facilitate exchange. In quantitative terms, money is homogenized, in order to equalize profit levels. The accounting technique facilitates the measurement of the capital generated, and redistributes it in the economic process of the investors.
In accounting, the results are quantified from monetary units making the difference between income (I) and expenses (G), obtaining a profit or loss. This is also verifiable in the equity statement from one period to another, known as the statement of changes in the asset position.
Thus when comparing the economic equation C = c + v + p, (Marx Kart, Capital. Where C = anticipated capital; c = Constant Capital; v = variable capital and pl = surplus value) with the modern accounting equation A = P + Pt (double item Luca Pasiolo A = assets; P = liabilities and Pt = equity) the sources of production and profit are established. In accounting, the cost of variable capital (v) is not recognized but as a source of financing, “since the movement of money that enters as an asset to the cash register goes out as workers collect wages and for this reason the balance is reduced to C1 = c + p, where C1 = C - v; capital appears as the sole generator or source of surplus value or profit ”.
Technical, Accounting and Economic Aspects
The relationship between the accounting equation and the economic equation suggests some caveats that must be taken into account for a better interpretation of the proposed approach:
1. Fixed capital only reflects a part of its value, as wear and tear on machinery, at the price - cost of the merchandise.
2. The circulating capital is made up of materials and wages that enter in their totality in the price - cost.
3. The transformation of surplus value (pl) into profit (g) for the economic case assumes that the anticipated capital (c + v) is equal to its cost of production (pr) plus the profit (g) from the circulation of the merchandise (m); m = pr + g, (g = pl).
4. Constant capital adds value because it is a replacement for invested capital. It reappears as an element of value but is not born in the production process of a commodity.
5. Variable capital (v) creates value because it is the labor force that replaces capital and by production anticipates capital for a new process.
6. The rate of profit g = pl * v does not contemplate the period of time equal to c
magnitude of accounting time, since the first is production time and the second is of appropriation and accumulation.
7. The rate of profit is calculated on the totality of the advanced capital; Accounting examines the income and expenses of a period.
8. The rate of surplus value (pl / v) in economics is calculated on variable capital; in accounting this fact is considered as payment of labor and is not a generator of value but a cost of production.
9. The percentage of the rate of surplus value, profit and accounting profit are different because each one obeys different natures.
10. The economic equation C1 = c + v + p in an initial period (1) is increased for a final period (2) C2 = c + v + p '. The accounting equation A1 = p + pt in an initial period (1) increases its equity for a final period (2) A2 = p + pt '
11. Accounting profit arises from the difference between income less expenses
(U = I - G) where the interference of constant capital in the accounting income statement (profit and loss) is momentarily eliminated, a proportional part of the wear and tear of assets is recognized. In this equation (U = I - G) the generation of value that is transferred to equity in a final period (2) is observed as follows:
A = P + Pt + (I - G).
In accounting, the fundamental equations are related to economic gain and surplus value, offering information on economic and financial facts, of changes in assets, by means of currency equality as an economic element that serves as a magnitude, and from which accounting elaborates your measurements.
Economic and Accounting Equation Relationship
C = C + V + P (economic equation)
Asset = p + pt + (I - G) (Accounting equation)
Capital = Capital + Goodwill or profit
Circulating constant
The accounting and economic equations allow analyzing a financial approach, the way in which an accounting balance is structured, where assets represent the investment made, while liabilities and equity represent the way of financing the business organization.
The generation of value in economics is the sum between variable capital plus capital gain (v + pl) and in accounting it is the difference between income and expenses (I - G). The relationship between economics and accounting in terms of value generation corresponds for the first, some degree of generation of surplus value, and for the second identification of profit.
METHODOLOGY
The confrontation between economic value and accounting valuation requires:
1. analyze the conceptual aspect to falsify or ratify it
2. develop a historical recognition of value formation.
3. propose a mechanism of action to articulate the concepts studied with the application of the proposed approach.
EXPECTED RESULTS
Economic Balance and Value
The economic balance must try to eliminate the tensions that are caused by the monetary variations that affect the value of the assets.
1. Recognize work as a generator of value
2. Interpretation and management of asset wear - depreciation.
3. Choice of the asset valuation method according to the economic needs of the region.
4. Use conversion factors to value assets that respond to previous technical studies.
The economic balance is then, an accounting statement prepared based on updated prices and replacement costs, the preparation of which is based on the fact that the true economic and financial situation of the company is not shown many times since:
a) There is instability in the value of the currency, due to the fluctuations it suffers from various causes of time and space, which lead to misinterpretations.
b) The balance sheet and profit and loss statement do not clearly show the relationship between income and capital actually invested.
c) The consolidated balance sheet and the profit and loss statement often serve only as a historical reference, it is difficult to find the reflection of the continuous changes in the price levels, a factor of the visible profit and with it the financial position of the organizations.
The economic balance includes, among other things: Elimination of variable levels of prices on the relation of income and investment, gains and losses from monetary transactions, revaluation of fixed assets and conversion factors.
It is necessary from this writing to clarify that the results must be achieved to the extent that the path taken by the economic measurement regarding price as a mechanism of comparability and homogenization of value is glimpsed. How commensurable are the price-value relationships between an underdeveloped economy and a highly industrialized one, which of the two produces or generates more value?
The relationship and comparison between economics and accounting should demystify value, showing that this is nothing but the expression of the social relations of men present in all the historical moments of our civilization, of course this statement must be demonstrated and that will be the direction of this investigation.
SOME BIBLIOGRAPHIC SOURCES CITED OR CONSULTED
CHICANGANA ROLANDO JOSÉ. Presentation "Approach to the Economic Interpretation of Financial Information". XIII FENECOP congress. Medellin Colombia. Book of Memories.
HOMERO CUEVAS, VALUE AND PRICE SYSTEMS. RESEARCH CENTER FOR DEVELOPMENT, NATIONAL UNIVERSITY OF COLOMBIA, 1986 Edition.
MARX KARL, THE CAPITAL VOLUME I, II AND III. Cartago Publishing House. Translation Floreal Maria. Printed in Buenos Aires, Argentina 1974 1st edition 1973. (Here it is cited as a reference but not as a deep approach to the text).
WERNER BECKER, THE MARXIST THEORY OF VALUE, ALPHA EDITORIAL. Translation Ernesto Garzón Valdés. Original title: Kritik der Marxchen Wertlehre Hoffmann and Campe Verlag, Hamburg 1972.
Download the original file
