ABSTRACT

The total cost law has been used to account for the cost of power transmission and distribution in China. In spite of China’s accounting system reform since 1993, it demands that the manufacturing cost accounting method should substitute for the full cost method in the process of costs accounting for enterprises, and management costs, marketing costs, and other expenses should single out from the product cost. However, considering the particularity of power products, grid enterprises did not change the full cost accounting

1 INTRODUCTION

State Electricity Regulatory Commission of China (2005) clearly pointed out that the transmission and distribution cost refers to the cost of “power grid enterprises for transporting and providing with power in transmission and distribution sectors” in a file named “the power transmission and distribution cost accounting approach”. A lot of literatures had explained the compositions of the power transmission and distribution cost. Chi (2004) divided the transmission and distribution cost into fixed cost and variable cost in accordance with the rule of cost variation. Li & Zhou (2008) divided the costs of transmission and distribution into five components of fixed assets costs, power grid operation costs, the congestion costs, ancillary service costs, and reliability costs. According to the different types of concrete production and management activities, Liu (2013) regarded that the transmission and distribution costs could be divided into transmission costs, wages, depreciation, proprietary material costs, outsourcing material costs, outsourcing maintenance fee, commissioned operation maintenance fees, social insurance premiums, lowvalue consumable amortization, property insurance, research and development expenses, and other

method into the manufacturing cost accounting method. Liu (2007) contrasted the advantages and disadvantages of manufacturing cost method and full cost method for cost accounting of the power grid enterprises, and the results showed that the manufacturing cost would increase the management cost of the grid enterprises, while the full cost method could more realistically reflect the actual operation situation of grid enterprises.