Abstract

The search for efficient operation of enterprises in the Soviet Union is the focus of this article. The informational requirements needed in a decentralized; centrally planned economy and the new management control system are described. The importance of two key accounting indicators, profit (sales) and the rate of return on capital are indicated. The purpose of accounting in any economic system, whether privately directed or state controlled, is to provide economic information which private investors or state planners can use to allocate the society's resources efficiently. Inefficiency in the use of a society's limited resources means that those resources could be rearranged so that at least one output could be increased without diminishing any of the other outputs. The move toward decentralization in the Soviet Union has resulted in the adoption of a new management control system which stresses the importance of two key accounting variables, profits and the rate of return on gross assets at original cost. The use of these accounting variables means that the measurement problem is more important and that managerial decisions will be affected by the financial results.