Attached
It has become clear that the developing countries such as Sri Lanka
can no longer rely solely on the price mechanism for the efficient
allocation and utilization of available resources. Free market
competition, which is a prerequisite for the working of the price
mechanism, may lead to the wastage or less than optimal allocation
of resources. There has therefore been increasing acceptance of
central planning as a policy tool in the strategy for economic
development in emerging countries. Since public ownership of resources
facilitates planning and c9ntrol from above, economic development
planning tends to encourage the expansion of public sector enterprises.
The Sri Lanka government is committed to a policy of establishing
a mixed economy in which most of the major industrial and commercial
enterprises belong to the planned ot public sector of the economy.
The changes in economic and business conditions towards state ownership
have created new challenges for accounting and accountants. With the
introduction of comprehensive planning in the public sector, the need
for reliable financial information has greatly increased. That
information is necessary for the efficient utilization of resources
through state planning because any plan is only as good as the data
on which it is based. Particularly pertinent for planning purposes
is information about the present stock and disposition of resources.
The investigation on which this thesis is based led to the conclusions
that: (a) the existing accounting systems used by state enterprises
in Sri Lanka are defective, (b) there is no clearly defined function
for accounting reports under existing accounting systems, (c) as a
result, accounting is not serving satisfactorily as a source of
information, and (d) there has not been any detailed study in this
respect in Sri Lanka.
This thesis seeks to shed some light on a largely neglected area in
the study of accounting. The primary objectives of this exercise
are: (a) to draw attention to the existing accounting problems of
state industrial and commercial enterprises in Sri Lanka in relation
to financial reporting, and (b) to try and develop a set of ideas which
may be used in formulating a system of accounting suitable for the
special needs of the state ente!prises in Sri Lanka. The ideas
developed point to the need for a system of accounting based on
current market prices and which takes account of the full effects
of price and price-level changes. It is argued that such a system
will be of greater assistance in the process of decision making by
interested outsiders, particularly regulatory bodies in regard to the
financial affairs of these enterprises.
In developing the ideas referred to, some reliance is placed on the
work of R.J .Chambers. The commercial activities of s.tate enterprises
are not in principle different from those of private enterprises. The
proposed system of accounting, accordingly, i~an adaptation of the
style of accounting developed and advocated by Chambers and R.R.Sterling, with only minor modifications to allow for the special circumstances arising from the particular functions served and the ownership r
structure of enterprises.
