What does a financial account include?

What does a financial account include? We know that a financial account refers to an account used to record various financial transactions that occur in various institutional units during a certain period of time. Then What does a financial account include? If you want to know more, come take a look with me below! What does a financial account include 1

What is a financial account

The so-called financial account is an account of various financial transactions that occur in a certain period of time (sector or economic aggregate).

Introduction

Financial accounts refer to accounts used to record various financial transactions that occur in various institutional units (departments or economic aggregates) in a certain period. They are the basis for accounting of financial transactions. Main forms of expression.

Classification

Classification by function:

1. Direct investment (DirectInvestment) Direct investors (DirectInvestment) own 10% or More than 10% equity. Includes: equity capital, earnings for reinvestment and other capital.

2. Portfolio Investment is an investment in equity securities and debt securities across national borders.

Including: long-term bonds; money market instruments, or transferable debt instruments; derivative financial instruments (Derivative Financial Instruments)

3. Other investments.

Balanced relationship

(1) Internal balance within the department, vertical balance:

Financial institutions: Net acquisition of assets = net occurrence of liabilities + net lending.

Total of all domestic departments: Net acquisition of assets = Net occurrence of liabilities + Net borrowing.

(2) Department external balance relationship, horizontal balance:

Net acquisition of assets = net occurrence of liabilities.

Net lending = net borrowing.

Function

The accounting scope of financial accounts covers strict financial transactions and other monetary transactions. From the perspective of the entire national economy, borrowing and lending among domestic institutions and departments will offset each other, and the net lending or net borrowing of the entire economy must find solutions in foreign financial markets.

1. An overall comprehensive description of the flow of funds formed through financial transactions between various departments, and also reflects the international flow of funds;

2. Recording of financial The change in the stock of assets and liabilities due to economic transactions is the main part of the change in the stock;

3. Financial accounts are not isolated accounts, but the entire economic flow caused by economic transactions in the current period. an integral part of accounting. The reason is:

The financial account is the second account that deals with accumulation. It is connected to the capital account - the balancing items of the financial account and the capital account have the same amount and the same sign, but the recording direction is opposite. , that is, the balancing item of the financial account is carried forward from the balancing item of the capital account. It explains the whereabouts of capital surpluses and the sources of capital shortages formed by various institutional departments in non-financial transactions, and is the account that ends all economic transaction accounts.

4. Transactions between financial instruments and non-financial instruments, through double-entry accounting, link financial accounts with production accounts, income distribution accounts, and use accounts to form a whole. Unlike production accounts, income distribution accounts, and use accounts, financial accounts do not have balancing items that can be carried forward to another account, indicating that a series of accounts describing the transaction flows of various departments ends with financial accounts, which are the final step in accounting for economic flows. With one account, the flow accounting in the national economic movement ends here;

5. The changes in financial assets and liabilities recorded in the financial account are the main part of the stock changes, and the national economic accounting is transferred to stock accounting;

6. The financial account also comprehensively reflects the overall situation of a country’s financial market and its participation in the international financial market. It records various financial activities through different financial item classifications, in order to grasp the overall situation of the current financial market from a macro perspective. Situation, analysis of the current flow and main flow of financial activities provides information.

Login principle

1. Transactions between financial instruments, such as the exchange of one financial asset for another financial asset (or new liability), or repayment with financial assets financial liabilities. The accounting rule is: both parties to the transaction log in twice to their financial accounts, that is, when a transaction is accounted for, four corresponding items must be recorded on the financial account, and the transaction occurs entirely within the scope of the financial account.

2. Transactions between financial instruments and non-financial instruments, such as purchasing goods and services with cash or deposits, paying wages in cash, etc. The accounting rules are: both parties to the transaction log in once to their own financial accounts, and the corresponding items must be recorded in the institutional department's production account, income distribution and expenditure account, or capital account respectively.

The above login instructions:

1. For transactions recorded to the source in non-financial accounts, the corresponding items must be an increase in assets or a decrease in liabilities in the financial account;

< p> 2. When a transaction is recorded to the user in a non-financial account, the corresponding item must be a decrease in financial assets or an increase in liabilities.

Therefore, a transaction will cause an increase in financial assets (or decrease in liabilities) in one department and a decrease in financial assets (or increase in liabilities) in another department, thereby changing the difference between the financial assets and liabilities of one department (i.e. changing The amount of net lending/net borrowing of funds of a department). Changes in the balance reflect movements in real resource flows across sectors and in the opposite direction of their corresponding financial flows.

Accounting

1. Monetary gold and special drawing rights.

2. Currency and deposits.

Based on the net increase in currency holdings at the end of the period compared with the beginning of the period → the change in assets of each holding department, corresponding to this: the net issuance of domestic currency in the current period is recorded as the change in liabilities of financial institutions, and foreign currency Net currency inflows are recorded as changes in the liabilities of the foreign sector. The current net increase in deposits of each department → the asset side of each department’s financial account ← → changes in liabilities of financial institutions (referring to the domestic deposit portion) and changes in liabilities of foreign departments (referring to the portion deposited abroad).

3. Securities other than stocks.

4. Loan.

Loans issued by domestic financial institutions to enterprises, governments, residents and foreign countries in the current period minus the current repayment of original loans → changes in the assets of financial institutions and changes in liabilities of each borrowing department; loans obtained from abroad Net lending should be the change in liabilities of each borrowing segment and the change in assets of the foreign segment.

5. Stocks and other property rights.

6. Special reserves for insurance.

Residents’ net equity in life insurance reserves and pension funds: Net change based on increases and decreases caused by transactions in the current period → Factors causing increases on the asset side of the financial account of the resident sector and on the liability side of financial institutions: The total value of insurance premiums received by the insurance enterprise in the current period and all contributions received by the pension fund, and the net property income obtained from the investment of the original insurance reserves and pension fund reserves, while deducting the corresponding labor fees and management fees; causes a decrease Factors: The amount payable by an insurance company to policyholders and beneficiaries (including dividends and profits) due to the expiration of the insurance or the death of the policyholder in the current period, and the amount paid by pension funds to retirees and dependents in one time or on a regular basis during the current period. For insurance premium advance payments and outstanding claims reserves: the change amount from the beginning to the end of the period → the asset side of the financial account of the department to which the policy holder belongs and the liability side of the financial account of the financial institution, but this should not include gains and losses from holding assets.

7. Other accounts receivable/payable.

Based on the net amount incurred and settled in the current period → changes in assets of the financial account of the department to which the receivable unit belongs and changes in liabilities of the department to which the payable unit belongs. What does financial accounts include 2

What are financial accounts

The so-called financial accounts refer to the various financial transactions that occur in various institutional units (departments or economic aggregates) in a certain period of time. Transaction accounts are the main form of financial transaction accounting.

Characteristics of financial accounts

Financial accounts record and account for all transactions involving changes in financial assets and liabilities that occur between institutional units and between institutional units and foreign countries, including Transactions between financial instruments also include transactions between financial instruments and non-financial instruments.

Its basic structure is as shown in the table:

(2) The right side of the account records the net changes in various liabilities caused by transactions;

< p> (1) The left side of the account records the net changes in various financial assets caused by transactions;

(3) The classification and arrangement of financial means on the left and right side of the account are exactly the same (except for currency Gold and Special Drawing Rights do not appear outside the right side of the account);

Due to the subtraction of the value of the financial assets net acquired on the left side of the account and the net liability value incurred on the right side of the account (equivalent to the net Financial investment), which is exactly equal to the balancing item transferred from the capital account - net lending (+) / net borrowing (-), keeping both sides of the account in balance, so there is no balancing item in the financial account that can be carried forward to another account .

This is not only the biggest feature that distinguishes financial accounts from other accounts, but also shows that financial accounts are the last account to record the economic transactions of various institutional units (departments or economic aggregates).

Types of financial projects

Financial projects can be divided into: direct investment, securities investment, other investments and reserve assets according to investment type or function.

1. Direct investment means that direct investors own 10% or more of the common shares or voting rights in a foreign-invested enterprise, thereby having an effective say in the management of the enterprise. Direct investment includes equity capital, investment in other assets and reinvestment of profits and gains, etc.

2. Securities investment is also called indirect investment. It is investment in equity securities and debt securities across national boundaries.

Equity securities include stocks, shares or other similar documents (such as certificates of deposit in the United States); debt securities include: first, medium and long-term bonds, uncollateralized corporate bonds, etc.; second, money market instruments, or transferable debt. Instruments, such as short-term treasury bills, commercial papers, bank acceptance bills, negotiable certificates of deposit, etc.; third, derivative financial instruments, such as various financial options, futures, etc.

3. Other investments refer to financial transactions other than direct investment and securities investment. Including loans, advances, goods, currency and deposits under financial leasing projects (referring to residents holding foreign currency and non-residents holding local currency), etc.

4. Reserve assets refer to the reserve assets (also known as official reserves, international reserves) and external claims held by a country’s financial authorities, including gold reserves, foreign exchange reserves, reserve positions in the IMF, Special drawing rights and official claims and debts held externally. This item is sometimes listed separately and plays the role of ultimately balancing the balance of payments. The total balance formed by the balance of the current account and the balance of the capital and financial accounts (excluding reserve assets) in a country's international balance of payments often leads to imbalances and requires the use of reserve assets to adjust. If the total balance is a surplus, the official reserves will increase, mainly the increase in foreign exchange reserves; or the surplus balance will be lent to foreign countries, thereby increasing the official's external short-term claims; or the surplus balance will be used to repay the official's external debt, thereby increasing the official's external debt. Short-term liabilities decrease. Increases in assets and decreases in liabilities are recorded as debits. If the total balance is a deficit, the official reserves will decrease, mainly the foreign exchange reserves; or the original central bank's loans to foreign officials will be claimed to make up for it, thereby reducing the official's short-term claims; or foreign exchange funds will be borrowed from foreign central banks to make up for the deficit. to make up for it, thereby increasing official short-term debt. A decrease in assets and an increase in liabilities are recorded as credits.