Factors Influence Development of China Accounting Systems and Structure

Brief history of Chinese accounting development

From Warring states to Qin and Han Dynasties, economic management system and accounting has been initially appeared. During the Tang and Song Dynasties (AD618-1279), account book and scientific bookkeeping method began to be used. Ming and Qing Dynasties (AD1369-1644) continued to use and improve single-entry bookkeeping method and created a new method: double-entry bookkeeping. These two accounting methods represented the advanced level of Chinese accounting. In 1949, When People’s Republic of China (PRC) founded, China’s accounting has entered a new period of development. There are four stages in the reform of Chinese financial accounting.

In the first stage, National Bank used uniform accounting system to give full play to the function of bank’s accounting, supervision and management before 1978. The second stage is from 1979 to 1992. Due to a large number of sino-foreign joint ventures appeared, the Ministry of Finance (MOF) carried out ‘Sino-foreign joint venture enterprise accounting system’ in 1985. China’s accounting system has experienced a transition and construction. Thirdly, from 1992 to 1997, a new accounting standard has been issued to complete Sino-foreign joint venture enterprise accounting system. The fourth stage is from 1997 to present. In 2001, the new Accounting System for Business Enterprises was issued by MOF. In 2006, MOF carried on the new ASBE with 38 standards that was based on IASs. Listed companies should apply it on January 2007. (Hao, 1999)

Traditional use of Chinese accounting

There are three crucial traditional use of Chinese accounting. Firstly, in 1949, China adopted communist accounting system from the Soviet Union with the founding of PRC and then made new accounting regulations for different economic departments. In the nation’s beginning, the government paid great attention to developing state-owned enterprises (SOE) under the socialist economic system. And then the government made the uniform accounting system and established a complete set of financial accounting system for state-owned enterprises, which created favorable conditions for planed economic management.

Secondly, from 1991 to 1992, according to the requirement of socialist market economy, China’s Ministry of Finance issued Accounting System for Business Enterprise (ASBE). It indicates that Chinese accounting has transformed from planned economy to socialist market economic model.

Thirdly, the MOF released ‘Enterprise accounting system’ and ’Financial Enterprise accounting system’ in January 2001. This is another important step to improve the quality of accounting information. The MOF also issued the Basic Accounting Standard, which consisted of 38 standards in February 2006. Meanwhile, the new accounting standard brings Chinese accounting closer to IFRS/IASs, which