Since economists are not well-versed in practical business matters, they
cannot understand the realities of the economy.
Since economists are not well-versed in practical business matters, they cannot understand the realities of the economy. It is a true tragedy--without any comic element--that such economists who do not understand accounting talk about business conditions.
Why is it that economics is not taken up in the business world? It is because present economics is useless for the business world.
The essence of economics is the analyses businessmen made to begin a new business, enter a new region or country or make investments. In economics, however, such research or opinions of businessmen are unfairly given low marks. Therefore, economics loses touch with the actual conditions of the economy.
In our contemporary economy, the efficiency of manufacturing is the only problem. But, efficiency should be measured not only in terms of manufacturing but also in terms of distribution and consumption. The economy should be controlled by mutual checks of manufacturing, distribution and consumption.
The functions required for the market are not only to realize low prices but to achieve balance among manufacturing, distribution and consumption.
Accounting methods depend on the type of business. In particular, the difference is remarkable in financial and construction businesses. In financial institutions, the key standard and structure are heterogeneous. But, the financial industry does not clarify this heterogeneity.
In addition, unique restrictions are needed for each kind of fund, expense, debt, capital and earnings.
It is a premise for individual markets to unify as much as possible the conditions needed to make the market work. What is required to achieve this is standardization of that premise.
The world of sports is a good example. To make a given sport work, the preconditions must be the same.
Do not make a person compete with a vehicle. Likewise a combat sport between one man and a hundred men does not work out. Do not make a robot or a combat vehicle fight with a man. Do not make a tiger or a lion fight an unguarded man. Do not make an armed man fight with an unguarded man. Acts of this sort are called slaughter.
If one party uses only human power and the other party uses a machine, the competition is unfair from the beginning. But, in the field of economics, such things often happen under the name of fairness.
At least, it the basic premise is that there are rules. A claim to put away rules without talking about fairness is barbaric. It is not at all a civilized idea.
Before the establishment of the money economy, the place of manufacturing and the destination for consumption was the same. In the process of separating manufacturing from consumption, the place of manufacturing and the place of consumption were also separated. While the place of manufacturing became an independent workplace, the place of consumption became an independent residence. At the same time, the division of labor intensified. The separation of places of manufacturing and consumption, as well as the division of labor, spread as physical distribution developed. Along with this, the money economy developed.
When the place of manufacturing and the place of consumption were identical, the upper limits of consumption were restricted by the sum of manufacturing and storage. The development of physical distribution mitigated such restrictions.
A corporation is a relaying and distributing agent as well as a producing agent. By contrast, a household is a consuming agent. A corporation producing goods. At the same time, it is an agent that relays from a producing agent to a consuming agent.
A corporation provides products to the market by producing goods. Also, it creates employment and distributes income in the form of money to a consuming agent in return for labor.
If corporations became nonfunctional, neither goods nor money would be transferred to end consumers. This means that the distribution function would become inoperative.
The problem is that corporations cannot fulfill the functions to relay goods and money.
In the double-entry bookkeeping, assets are offset by the counter account and the value is balanced to zero. Corporations are established on a very subtle balance. Their profit is small compared with their total assets, earnings and expenses. Profits would disappear due to tiny changes in the economic climate.
Those who say that large corporations are given priority in receiving benefits from all kinds of revenue recovery measures are strongly influenced by revolutionary ideas. They criticize such measures only for the purpose of subverting the establishment.
Revenue recovery measures do not always benefit only large corporations.
In present economic statistical materials, the cash flow basis and the periodic profit and loss basis coexist, and this makes the actual condition of the economy rather difficult to understand. The cash flow basis and the periodic profit and loss basis have different objectives.
The actual conditions of the economy should be understood focusing on the steadiest part. The steadiest part is the flow of cash currency. The flow of cash currency is deeply involved in the periodic profit and loss and the cash flow.
There are a number of indices for economic analysis. The decisive index for the economy is the direction of cash flow and the amount of cash in distribution.
Cash flow is important. Deposits and debt are only the trace of a passing currency.
Margin trading is a virtual transaction but requires cash as an additional margin.
For corporate management, funds determine the fate off the corporation. The amount of cash available for settlement is the decisive factor. There is more than one result from profit and loss calculation. There are several possible results depending on how the reference is set. Namely, the calculation of profits and losses is just one point of view. It is not a hard fact. In this regard, cash flow is actually expressed in substantive figures.
There is a critical difference between capital and other accounting factors such as assets, expenses, debt and earnings. First of all, capital is the account based on the balance. Second, capital is an externally determined factor. As such, it is the account that affects management not directly but indirectly. Third, the value of capital is decided through capital transactions. Capital transactions are carried out in a place that is not directly involved in management. But capital has a decisive influence on the method of management. And for that reason, it is necessary to establish capital restrictions that fully take into account the nature of capital.
Wages, interest and land rent are income in the light of cash flow. Profit is income in the light of periodic profits and losses. Figures in the black plus column of finance and accounting are to be viewed in the light of cash flow. When corporations’ are in the black, this is seen in the light of periodic profits and losses.
It is accounting systems that control market transactions. Cash supply in the market is determined by the method of financing and adjusted by the accounting system. Periodic profits and losses restrict manufacturing volume and determine supply volume. That is to say, the money supply in the market is determined by periodic profits and losses, and those periodic profits and losses are controlled by accounting.
Accounting systems analyze cash volume and cash flow direction in connection with economic phenomena, and then establish profit and tax system standards for better circulation of cash currency and design economic systems that include the market.
Large corporations have advantages not only in terms of capital but also in terms of accounting.
Large corporations are not given preferential treatment in terms of accounting. But they can take a preferential position in terms of accounting. The first is depreciable assets. There are many options in accounting processes.
Mass manufacturing reduces costs. The objective of mass manufacturing is to restrict costs. Mass manufacturing is not premised on how many products would be sold. Large corporations produce goods in large quantities to reduce their costs and work them off. They produce goods in large quantities in response to their accounting requirements. Consequently, inexpensive goods go on sale in large quantities and decide the market price. After that, the price is regarded as a fair price. Even if the quantity sold is less than the profitable point, the price remains.
Eventually, bargain sales at unfair prices would change the market so that the market would have a structure that ignores profitability. The press does not know the actual conditions but makes so much fuss over bargain sellers only. The press is irresponsible for the outcome. In short, cheap goods are welcome. Furthermore, cheap goods switch the argument from economic theory to morality.
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