Chapter Ⅵ Revenue

Article 44. Revenue refers to the financial inflows to an enterprise as a result of the sale of goods and services, and other business activities of the enterprise, including basic operating revenue and other operating revenue.



Article 45. Enterprises shall rationally recognise revenue and account for the revenue on time.



Enterprises generally recognise revenue when merchandise shipped, service provided as well as money collected or rights collecting money obtained.



Revenue of long-term project contract (including labor service) shall be reasonably recognised, in general, according to the completed progress method or the completed contract method.



Article 46. Return of sales, sa1es allowances and sales discount sha1l be accounted for as deduction item of operating revenue.



Chapter Ⅶ Expenses



Article 47. Expenses refer to the outlays incurred by an enterprise in the course of production and operation.



Article 48. Expenses directly incurred by an enterprise in production and service provision, including direct labor, direct materials, purchase price of commodities and other direct expenses shal1 be charged direct1y into the cost of production or operation; indirect expenses incurred in production and provision of service by an enterprise is to be allocated into the cost of production and operation, according to certain criteria of allocation.



Article 49. General and administrative-expenses incurred by enterprise's administrative sectors for organizing and managing production and operation, financial expenses, purchase expenses on commodities purchased for sale, and sales expenses for selling commodities and providing service, shal1 be direct1y accounted for as periodic expense in the current profit and loss.



Article 50. The expenses paid in current period but attributable to the current and future periods shall be distributed and accounted for in current and future periods. The expenses attributable to the current period but not yet paid in current period sha1l be recognised as accrued expenses and charged to cost of the current period.



Article 51. Enterprises shall generally calculate products cost every month.



Costing methods shall be decided by the enterprise itself according to the characteristics of its production and operation, type of production management and requirements of cost management. Once it is decided, no change can be made arbitrarily.



Article 52. Enterprises shall calculate expenses and costs on actual amounts incurred. Those adopting the norm costing, or planned costing in accounting for dai1y calculation shall reasonably calculate the cost variances, and adjust them into historical cost at the end of the month while preparing accounting statements.



Article 53. Enterprises shall convert the cost of commodities sold and service provided into operating cost accurately and timely, then account current profit and loss together with periodic expenses.

Chapter Ⅷ Profit and Loss



Article 54. Profit is the operating results of an enterprise in an accounting period, including operating profit, net investment profit and net non-operating income.



Operating profit is the balance of operating revenue after deducting operating cost, periodic expenses and all turnover taxes, surtax and fees.



Net investment profit is the balance of income on externa1 investment after deducting investment loss.



Net non-operating income is the balance of non-operating income after deducting non-operating expenses. Non-operating income and expenses have no direct relating with the production operations of an enterprise.



Article 55. Loss incurred by an enterprise shall be made up according to the stipulated procedure.



Article 56. Items that constitute the profits and the distribution of profits shal1 be shown separate1y in the financial statement. A distribution of profit plan which is not yet approved at time of publication of a financial statement is to be identified in notes to the financial statement
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