On Assessing the State of the Existing System of Accounting and Reporting of Repair Costs at Thermal Power Plants

ON ASSESSING THE STATE OF THE EXISTING SYSTEM OF ACCOUNTING AND REPORTING OF REPAIR COSTS AT THERMAL POWER PLANTS

M. G. Privalikhina, A. K. Pushkova

(Presented by the scientific seminar of the Department of Economics)

The transfer of thermal power plants and energy-repair enterprises to a new system of planning and economic incentives makes it especially important to improve the efficiency of repair work production at power plants.

It is known that approximately half of all personnel are engaged in the repair of the fixed assets of thermal power plants, which, for the Ministry of Energy and Electrification as a whole, amounted in 1970 to about 160 thousand people. In addition, considerable labor and material resources are spent annually on repairs—on average about 5 rubles per kW of installed capacity, which for the Ministry as a whole amounted in 1970 to 480 million rubles.

The constant growth in the volume of repair work and in the cost of repairing power equipment places the issues of economic analysis of repairs among the foremost tasks in the activity of enterprises (power plants and energy-repair enterprises). The ultimate goal of the economic analysis of repairs is to determine ways to reduce repair costs, equipment downtime, and to improve the quality of repair work by identifying the level and dynamics of generalized indicators of repair efficiency and assessing the influence on them of the principal determining factors (the type and capacity of units, technical parameters, type of fuel).

For the economic analysis of repairs, it is necessary, as an initial basis, to introduce a system of accounting and reporting on the cost of power-equipment repairs and labor expenditures, in addition to technical reporting on its operation.

At present, at thermal power plants, cost accounting, like planning, is conducted separately for current and major repairs. The expenditure of funds for carrying out repairs is limited by object estimates or estimate-and-financial calculations. For each facility (unit) taken out for major repair, an annual card (or statement) of analytical accounting of repair costs is opened (by balance-sheet accounts), in which all actually incurred costs are reflected monthly. The actual performance of a major repair itself (if it is carried out by the enterprise’s own resources) is reflected in the usual primary documents for the consumption of materials and wages.

The accounting of expenditures for major repairs looks somewhat different if they are carried out by a contracting organization. In this case, the cost of the major repairs performed by the contractor is established on the basis of invoices accepted by the customer enterprise and the certificate of acceptance of completed major repairs, and is reflected in the analytical accounting card.

Whatever method is used to carry out major repairs—by the enterprise’s own forces or by contract—and regardless of the physical group of the objects being repaired, the costs of carrying them out are always recorded in the balance-sheet account “major repairs.” As completed work is finished and formalized by acceptance certificates, the cost of the major repair performed, recorded in the “major repairs” account, is covered by the corresponding sources of financing under the “depreciation fund” account; at the same time, corresponding entries are made to the credit of the “authorized fund” account and the debit of the “depreciation of fixed assets” account.

Accounting for expenditures on current repairs is maintained by shops, without subdivision by groups of fixed assets. For current repairs carried out by the enterprise’s own repair-and-mechanical shop, costs are determined at the level of actual direct costs, with inclusion of the corresponding share of shop expenses in proportion to the basic wages of workers engaged in the production of current repairs. These works are not charged with general-station expenses. Current repairs performed by outside organizations are accepted at actual cost, according to invoices submitted for payment and accepted. In the process of carrying out current repairs, costs are accumulated in the balance-sheet account “current repairs.”

As reporting indicators for power-repair production, such disparate indicators of the economy of repairs are used as the duration of downtime in repair, the volume of repairs in monetary terms, specific output per worker, specific costs per unit of capacity or per hour of downtime in repair, etc. The existing system of accounting and reporting repair costs at thermal power plants has the following serious shortcomings:

1. Information on the actual costs of repairing objects can be obtained only after the expiration of a month, quarter, or year of production activity. Under this method of production accounting, deviations, their causes, and those responsible are identified not in the course of performance, but after its completion. In reality, for proper management of production it is very important to know both the causes giving rise to deviations from the norms and those responsible not after completion of the repair, but daily, in the process of carrying out the work and incurring the costs. Therefore, the existing accounting method, as a means of identifying production reserves, is ineffective.

2. The essence of this method of accounting for repair costs comes down to the fact that such costs as materials and the wages of production workers are charged to the cost of the repaired objects according to the data of primary documentation. However, in many cases this basic requirement is not observed, for the simple reason that it is impracticable. Under this accounting method, materials are issued on requisitions for each object (“cost code”) separately. In the shop these materials lose their individual identity and are consumed as needed on one or another unit, regardless of the specific objects for which they were issued. It is simply not possible to determine how much and what material was used on each object. But since, in accordance with the essence of the method, direct charging of materials is provided for, then in

at the end of the month the foreman is forced to “allocate” the cost of materials to objects on a notional basis. The situation is no better with the charging of direct production wages to objects. A large share of repair workers are paid under a time-bonus wage system. Under these conditions the foreman distributes wages among objects at the end of the month very approximately, since there is no other solution.

Thus, most often neither materials nor wages can be charged directly to objects, which violates the requirements of this cost-accounting method. Hence the conclusion follows: the existing method of accounting in repair shops, despite all its complexity and laboriousness, does not justify itself and must be replaced by a more progressive one.

1. The existing system of accounting and reporting of repair costs at an energy enterprise makes it possible, with a certain degree of approximation, to determine the costs for each repaired object. Economic analysis of repair costs is reduced mainly to comparing the values of actual and planned (estimated) costs, which are identified with the concept of the result of the production activity of repair personnel. Since the result of work is identified with costs, there can be no comparison of them in the form of an indicator of unit cost. This is the organic shortcoming of the applied comparison of the costs of the repair shop (cost) with the estimated cost of repairing the power unit.

2. The system of accounting and reporting for the repair of power equipment must be the starting element of economic analysis. The inadequacy of the currently used indicators for the repair of power equipment reduces the possibilities for conducting high-quality analysis, and at a number of enterprises no attention at all is paid to questions of economic analysis of repair costs.

A necessary prerequisite for the effectiveness of the new system of planning and economic incentives for the repair of power equipment is a fundamental improvement of the system of accounting and reporting for repairs. Reporting must be structured in such a way that, on the basis of its data, it would be possible to judge the level and dynamics of unit costs for repair output. The development of questions of internal cost accounting within the repair enterprise must be continued.