Accounting Law of the People’s Republic of China

(Adopted by the Ninth Meeting of the Standing Committee of the Sixth National People’s Congress on January 21, 1985; amended in accordance with the Decision on Revising the Accounting Law of the People’s Republic of China adopted at the Fifth Meeting of the Standing Committee of the Eighth National People’s Congress on December 29, 1993; revised at the 12th Meeting of the Standing Committee of the Ninth People’s Congress on October 31, 1999 and promulgated by Order No.24 of the President of the People’s Republic of China on October 31, 1999)

Contents

Chapter I General Provisions

Chapter II Accounting Practice

Chapter III Special Provisions on Accounting Practice of Companies and Enterprises

Chapter IV Accounting Supervision

Chapter V Accounting Offices and Accounting Personnel

Chapter VI Legal Liability

Chapter VII Supplemental Provisions

Chapter I General Provisions

Article 1 This Law is enacted with a view to standardizing accounting acts, ensuring the truthfulness and completeness of the accounting materials, strengthening economic management and financial control, raising economic results and maintaining the order of the socialist market economy.

Article 2 State organs, social organizations, companies, enterprises, institutions and other organizations (hereinafter generally referred to as units) must handle accounting affairs in accordance with this Law.

Article 3 All units must set up account books according to law and ensure their truthfulness and completeness.

Article 4 The person in charge of a unit shall be responsible for its accounting work as well as the truthfulness and completeness of its accounting materials.

Article 5 Accounting offices and accounting personnel shall, in accordance with the provisions of this Law, conduct accounting practice and exercise accounting supervision. No unit or person may, by any means, suggest, instruct or compel any accounting office or accountant to forge or alter any accounting document, account book or other accounting material or to submit any false financial accounting statement.

No unit or person is allowed to retaliate upon any accountant because of his resistance against any act violating the provisions of this Law in the performance of his duty.

Article 6 Moral encouragement or material award shall be given to any accountant who has shown conscientiousness in implementing this Law, devotion to his duty and consistence in principle, thus achieving remarkable results in his work.

Article 7 The department of finance under the State Council shall administer the accounting work throughout the country.

Departments of finance under local people’s governments at or above the county level shall administer the accounting work in their respective administrative areas.

Article 8 The State practices a unified accounting system. The State’s unified accounting system shall be formulated and promulgated by the department of finance under the State Council in accordance with this Law.

For those trades which have special requirements on accounting practice and accounting supervision, the relevant departments of the State Council may, in accordance with this Law and the State’s unified accounting system, formulate concrete measures or supplementary provisions for the implementation of the State’s unified accounting system and submit them to the department of finance of the State Council for examination and approval.

The General Logistics Department of the Chinese People’s Liberation Army may, in accordance with this Law and the State’s unified accounting system, formulate concrete measures for the implementation of the State’s unified accounting system in the army and report them to the department of finance of the State Council for the record.

Chapter II Accounting Practice

Article 9 All units must fulfill accounting practice, fill in and prepare accounting documents, record account books and work out financial accounting statements according to the economic and business transactions actually taken place.

No unit may fulfill accounting practice on the basis of untrue economic and business transactions or false materials.

Article 10 Accounting procedures shall be conducted and accounting be practiced with respect to the following economic and business transactions:

(1) receipts and disbursements in cash and in negotiable securities;

(2) acceptance, delivery, increase, decrease and use of property;

(3) occurrence and settlement of claims and debts;

(4) increase and decrease of capital and funds;

(5) computation of income and expenditure, expenses and costs;

(6) computation and treatment of financial results; and

(7) other transactions that are subject to accounting procedures and accounting practice.

Article 11 The fiscal year shall start on January 1 and end on December 31 on the Gregorian calendar.

Article 12 Renminbi (RMB) shall be the basic accounting currency in accounting practice.

The units that use a currency other than Renminbi (RMB)  as chief currency in their business receipts and expenditures may select one specific currency as their basic accounting currency, but the accounts to be reported in their financial statements shall still be converted to and expressed in Renminbi (RMB).

Article 13 Accounting documents, account books, accounting statements and other accounting materials must all comply with the unified accounting system of the State.

Where computers are used for accounting practice, the software and accounting documents, account books, financial accounting statements and other accounting materials produced therefrom must also comply with the provisions of the State’s unified accounting system.

No unit or person may forge or alter any accounting documents, account book or other accounting material, or submit any false financial accounting statement.

Article 14 Accounting documents include original documents and accounting vouchers.

In handling the economic and business transactions specified in Article 10 of this Law, original documents must be filled in or obtained, and be promptly submitted to the accounting office.

Accounting offices and accounting personnel must, in accordance with the provisions of the State’s unified accounting system, examine and verify the original documents and are entitled to deny any untrue or illegal original document and report the case to the person in charge of the unit or and to return any original document which carries inaccurate or incomplete records and require it to be corrected or supplemented in accordance with the provisions of the State’s unified accounting system.

All entries recorded in the original documents may not be altered; if an original document contains mistake, it shall be replaced with a new one or corrected by the issuing unit and a stamp of the issuing unit shall be affixed right over the place where the correction is made. If the amount of money in an original document is wrong, the issuing unit shall correct it by issuing a new document and may not do it by a correction on the original document.

Accounting vouchers shall be prepared according to the examined and verified original documents and related materials.

Article 15 Entries into account books must be based on the examined and verified accounting documents and comply with the provisions of related laws, administrative regulations and the State’s unified accounting system. Account books include general ledgers, detailed ledgers, journal books and other auxiliary books.

Entries to an account book shall be recorded in the order of the pages consecutively numbered. Any occurrence of mistake, skip of page, omission of number or skip of line in the entry to an account book shall be remedied according to the method specified in the State’s unified accounting system, and the interested accountant and the person in charge of the accounting office ( or the accountant-in-charge) shall affix their seals right over the place where remedy is made.

If computers are used for accounting practice, the entries and corrections of account books shall comply with the provisions of the State’s unified accounting system.

Article 16 All economic and business transactions take place in a unit shall be recorded and calculated in the account books set up according to law, and no unit may, in violation of the provisions of this Law and the State’s unified accounting system, set up privately any other account book for recording and calculating such transactions.

Article 17 All units shall regularly check the records in their account books against the property in kind, amount of money and related materials and shall ensure the conformity between the records in the account books and the actual amount of property in kind and money, the conformity of the related contents between the account books and the accounting documents, the conformity of the corresponding records between the relevant account books, and the conformity between the records of account books and the related contents in the accounting statements.

Article 18 The accounting method used by a unit shall be consistent throughout all periods and may not be changed arbitrarily; if it is necessary to change the method, it shall be changed according to the provisions of the State’s unified accounting system, and the cause for the change, the situation and impact of the change shall all be explained in the financial accounting statement.

Article 19 Such probable items as guarantee provided by a unit and pending legal proceedings shall be explained in the financial accounting statement in accordance with the provisions of the State’s unified accounting system.

Article 20 Financial accounting statements shall be prepared on the basis of the examined and verified records of the account books and the related materials information and comply with the requirements set by this Law and the State’s unified accounting system for the preparation of financial accounting statements as well as the provisions concerning the target and time limit of their submission; if other laws and administrative regulations provides otherwise, those provisions shall govern.

A financial accounting statement shall be composed of the accounting statement, notes to the accounting statement and explanations on financial conditions. The basis for preparing financial accounting statements to be provided to the different users of accounting materials shall be uniform. If the accounting statements, notes to the accounting statements and explanations on financial conditions must, as stipulated by related laws and administrative regulations, be subject to auditing by a certified public accountant, the auditing report issued by the certified public accountant and the interested certified public accountant’s office shall be provided together with the financial accounting statement.

Article 21 The financial accounting statement shall be signed and stamped by the person in charge of the unit, the person in charge of the accounting work and the person in charge of the accounting office (or the accountant-in-charge). If a unit has a chief accountant, it must also be signed and stamped by the chief accountant.

The person in charge of the unit shall guarantee the truthfulness and the completeness of the financial accounting statement.

Article 22 The language used for accounting records shall be Chinese. In the national autonomous areas, a national language commonly used in the area may concurrently be used for accounting records. A foreign investment enterprise, foreign enterprise or any other foreign organization in the territory of the People’s Republic of China may concurrently use a foreign language for its accounting records.

Article 23 All units shall establish and properly preserve archives for their accounting documents, account books, financial accounting statements and other accounting materials. The period of preservation of the archives and the procedures for their destruction shall be stipulated jointly by the department of finance under the State Council and the relevant departments.

Chapter III Special Provisions on Accounting Practice of Companies and Enterprises

Article 24 Accounting practice of companies and enterprises shall, in addition to the compliance with the provisions of Chapter II of this Law, comply with the provisions of this Chapter.

Article 25 Companies and enterprises must, according to the economic and business transactions actually taken place and in accordance with the provisions of the State’s unified accounting system, verify, compute and record their assets, liabilities, creditor’s rights, incomes, expenses, costs and profits.

Article 26 In fulfilling accounting practice, companies and enterprises may not commit any of the following acts:

(1) arbitrarily changing the verification standards or computation method for their assets, liabilities and creditor’s rights, and falsifying the statement of their assets, liabilities and creditor’s rights by false statement, over-statement, no-statement or under-statement;

(2) false statement of or concealing their incomes, delaying or anticipating the verification of their incomes;

(3) arbitrarily changing the verification standards or computation method for their expenses and costs, and falsifying the statement of their expenses and costs by false statement, over-statement, no-statement or under-statement;

(4) arbitrarily adjusting the computation and distribution method for profits, conjuring up false profits or concealing profits; or

(5) any other act violating the provisions of the State’s unified accounting system.

Chapter IV Accounting Supervision

Article 27 All units shall establish and perfect their internal accounting supervision system. The units’ internal accounting supervision system shall meet the following requirements:

(1) The limits of, responsibilities and powers of the persons to record the accounts, the persons to examine and approve economic and business transactions and accounting affairs, the persons to deal with economic and business transactions and accounting affairs and the persons to keep money and property shall be clearly defined as well as mutually separated and constrained;

(2) The mutual supervision and mutual constraint procedures for making and implementing the decisions on important external investment, assets disposition, capital allocation and other important economic and business transactions shall be clearly defined;

(3) The scope, time limit and organizational procedures for inventory-taking of property shall be clearly defined; and

(4) The measures and procedures for regular internal auditing of accounting materials shall be clearly defined.

Article 28 The person in charge of a unit shall guarantee that the accounting office and accounting personnel perform their duties according to law, and may not suggest, instruct or compel the accounting office and accounting personnel to handle accounting affairs in violation of law.

Accounting offices and accounting personnel are entitled to refuse the conduct of any accounting affair violating the provisions of this Law and the State’s unified accounting system, or to rectify any such violation according to their duties and powers.

Article 29 The accounting offices or the accounting personnel shall, whenever discovering any unconformity between records of account books and property in kind, money and related materials, handle the case without delay if they have the power to handle it on their own according to the provisions of the State’s unified accounting system; if they do not have the power to handle the case on their own, they shall immediately report it to the person in charge of the unit and request him to ascertain the cause and to handle it.

Article 30 Any unit or person is entitled to accuse any act violating the provisions of this Law and the State’s unified accounting system. The department receiving the accusation shall, in accordance with the division of duties and functions, deal with the case without delay according to law if it has the power to do so; if the department does not have such power, it shall, without delay, transfer the case to the department which has the power to deal with it. The department receiving the accusation and the department responsible to deal with the case shall keep secret for the accusing person, and may not disclose the name of the accusing person and transfer the accusing materials to the unit or person accused.

Article 31 Units which, according to the provisions of relevant laws and administrative regulations, shall be subject to auditing by a certified public accountant, shall truthfully provide accounting documents, account books, financial accounting statements and other accounting materials as well as related situations to the empowered certified public accountants’ office.

No unit or person may, by any means, request or instruct a certified public accountant and the interested certified public accountants’ office to issue any untrue or improper auditing report.

Departments of finance are entitled to supervise the procedures and contents of the auditing reports issued by certified public accountants’ offices.

Article 32 Departments of finance shall exercise supervision over the following situations in all units:

(1) Whether account books have been established according to law;

(2) Whether the accounting documents, account books, financial accounting statements and other accounting materials are truthful and complete;

(3) Whether the accounting practice complies with the provisions of this Law and the State’s unified accounting system; and

(4) Whether the persons engaged in the accounting work have the qualifications.

In exercising supervision over the situations mentioned in sub-paragraph (2) of the preceding paragraph, if there is suspicion of serious law-violation, the department of finance under the State Council and its designated agencies may make inquiries of the units which have economic and business transactions with the unit under supervision and of the financial institutions at which the unit under supervision has opened accounts; the units and financial institutions involved shall render support.

Article 33 Departments in charge of finance, auditing and taxation, the people’s banks as well as securities regulatory and insurance regulatory authorities shall, in accordance with the duties and functions specified by the relevant laws and administrative regulations, exercise supervision over and conduct inspection of the accounting materials of the related units.

The supervisory and inspection departments mentioned in the preceding paragraph shall issue inspection conclusions after exercising supervision over and conducting inspection of the accounting materials of the related units according to law. If the inspection conclusion made by a supervisory and inspection department is sufficient to meet the requirements of other supervisory and inspection departments for performing their duties and functions, the other supervisory and inspection departments shall make use of the conclusion and shall avoid making repeated account inspection and verification.

Article 34 Departments and their personnel exercising supervision over and conducting inspection of the accounting materials of the related units according to law have the obligation to keep confidential all State secrets and commercial secrets that came to their knowledge in their supervision and inspection.

Article 35 All units must, in accordance with the provisions of relevant laws and administrative regulations, accept the supervision and inspection conducted according to law by the relevant supervisory and inspection departments and honestly furnish accounting documents, account books, financial accounting statements and other accounting materials and relevant situations, and may not refuse inspection, conceal materials or report falsely.

Chapter V Accounting Offices and Accounting Personnel

Article 36 Each unit shall, according to the needs of its accounting affair, set up an accounting office or staff a relevant office with accountant and designate a person as accountant in charge. Where conditions do not so permit, the unit may entrust its bookkeeping to an intermediary agency engaged in bookkeeping and established with due approval.

Any large and medium-sized enterprises owned by the State, or in which State-owned assets have a controlling stake or dominant position, must institute a chief accountant. The qualifications, the procedures for appointment and dismissal and limits of duties and powers of the chief accountant shall be prescribed by the State Council.

Article 37 In all accounting offices, an internal auditing system shall be instituted.

A cashier shall not concurrently take charge of auditing, custody of accounting archives or recording the revenue, expense or claims and liability accounts.

Article 38 Whoever engages in accounting work must obtain a professional accountant qualification certificate.

A person in charge of an accounting office (or an accountant-in-charge) in a unit shall, in addition to obtaining a professional accountant qualification certificate, have the professional title of certified accountant or above, or have engaged in accounting work for more than three years.

Measures for the administration of professional qualifications for accountants shall be stipulated by the department of finance under the State Council.

Article 39 Accounting personnel shall abide by their code of ethics and improve their professional quality. Education and training for accounting personnel shall be enhanced.

Article 40 A person who is investigated for criminal responsibility according to law due to any illegal acts pertaining to his accounting position such as making untrue financial accounting statement or false account, concealing or intentionally destroying accounting documents, account books or financial accounting statement, embezzling or misappropriating public funds or seizing property by taking advantage of his position, may not obtain or obtain again a professional accountant qualification certificate.

Besides the cases mentioned in the preceding paragraph, whoever is punished by revocation of his professional accountant qualification certificate may not obtain again a new professional accountant qualification certificate within five years from the date of revocation of his original certificate.

Article 41 An accountant to be transferred to another place or to leave his post must fulfill the hand-over procedure with the person to take over his post.

The person in charge of the accounting office or the accountant in charge shall supervise the hand-over procedure to be fulfilled by ordinary accountants. The person in charge of the unit shall supervise the hand-over procedure to be fulfilled by persons in charge of the accounting office or accountants in charge; when necessary, the competent authority may send people to jointly supervise the hand-over.

Chapter VI Legal Liability

Article 42 Whoever, in violation of the provisions of this Law, commits any of the following acts, the department of finance under the people’s government at or above the county level shall order it to make corrections within a given period of time and may concurrently impose a fine of not less than 3,000 yuan but not more than 50,000 yuan on the unit and a fine of not less than 2,000 yuan but not more than 20,000 yuan on the person-in-charge directly responsible and other persons directly responsible; if the said person is a State functionary, the unit to which he belongs or the interested unit shall give him administrative sanctions according to law in addition:

(1) failing to set up account books according to law;

(2) setting up an account book in private;

(3) failing to fill in or obtain original documents as stipulated or the original documents filled in or obtained do not comply with the provisions;

(4) entering into an account book on the basis of accounting documents not examined and verified, or in a manner not conforming to the provisions;

(5) arbitrarily changing the accounting method;

(6) the basis for preparing financial accounting statements provided to different users of accounting materials is inconsistent;

(7) not using the language or basic accounting currency for accounting records as stipulated;

(8) failing to preserve accounting materials as stipulated, causing thus damage or losses of accounting materials;

(9) failing to set up and implement the unit’s internal accounting supervision system as required, or refusing supervision conducted according to law or failing to truthfully provide relevant accounting materials and relevant particulars; or

(10) employing accounting personnel in a manner not complying with the provisions of this Law.

Where any of the acts mentioned in the preceding paragraph constitutes a crime, criminal responsibility shall be investigated according to law.

Where any of the acts committed by an accountant as mentioned in the first paragraph constitutes a serious case, the department of finance under the people’s government at or above the county level shall revoke his professional accountant qualification certificate.

If relevant laws stipulate otherwise on the punishment of acts mentioned in the first paragraph, the provisions of those laws shall govern.

Article 43 Where forgery or alteration of an accounting document or account book or preparation of a false financial accounting statement constitutes a crime, criminal responsibility shall be investigated according to law.

If the offence mentioned in the preceding paragraph does not constitute a crime, the department of finance under the people’s government at or above the county level shall circulate a notice of criticism and may concurrently impose a fine of not less than 5,000 yuan and not more than 100,000 yuan on the unit and a fine of not less than 3,000 yuan and not more than 50,000 yuan on the person-in-charge directly responsible and other persons directly responsible; if the said person is a State functionary, the unit to which he belongs or the interested unit shall give him in addition administrative sanctions according to law such as removal from position up to expulsion from public function; with regard to the accounting personnel involved, the department of finance under the people’s government at or above the county level shall revoke their professional accountant qualification certificates.

Article 44 Where concealment or intentional destruction of any accounting document, account book or financial accounting statement that shall be preserved according to law constitutes a crime, criminal responsibility shall be investigated according to law.

If the offence mentioned in the preceding paragraph does not constitute a crime, the department of finance under the people’s government at or above the county level shall circulate a notice of criticism and may concurrently impose a fine of not less than 5,000 yuan but not more than 100,000 yuan on the unit and a fine of not less than 3,000 yuan and not more than 50,000 yuan on the person-in-charge directly responsible and other persons directly responsible; if the offender is a State functionary, the unit to which he belongs or the interested unit shall give him in addition administrative sanctions according to law such as removal from position up to expulsion from the public function; with regard to the accounting personnel involved, the department of finance under the people’s government at or above the county level shall revoke his professional accountant qualification certificate.

Article 45 Whoever suggests, instructs or compels an accounting office, an accountant or any other person to forge or alter any accounting document or account book or to prepare any untrue financial accounting statement or to conceal or intentionally destroy any accounting document, account book or financial accounting statement that shall be preserved according to law shall be investigated for his criminal responsibility according to law if the offence constitutes a crime; if the offence does not constitute a crime, a fine of not less than 5,000 yuan and not more than 50,000 yuan may be imposed; and if the offender is a State functionary, he shall be given in addition administrative sanctions according to law such as degradation, removal from position or expulsion from the public function by the unit to which he belongs or by the interested unit.

Article 46 The person in charge of a unit who retaliates against any accountant who performs his duties according to law and rejects acts violating this Law in form of degradation, removal from position, transfer to another job, disengagement or expulsion from the public function shall be investigated for his criminal responsibility according to law if the offence constitutes a crime; if the offence does not constitute a crime, administrative sanctions shall be given according to law by the unit to which the offender belongs or by the interested unit. The reputation of the accountant retaliated shall be rehabilitated and his original position and grade be restored.

Article 47 The functionary of a department of finance or of a relevant administrative department who, in exercising supervision and administration, abuses his power, neglects his duty, practices favoritism or irregularity or divulges State secrets or commercial secrets shall be investigated for his criminal responsibility according to law if the offence constitutes a crime; if the offence does not constitute a crime, administrative sanctions shall be given according to law.

Article 48 Whoever in violation of the provisions of Article 30 of this Law, discloses the name of an accusing person and transfers the accusing materials to the unit or person accused shall be given administrative sanctions according to law by the unit to which he belongs or by the interested unit.

Article 49 Whoever violates the provisions of this Law and concurrently the provisions of other laws shall be punished according to law by the interested departments within the scopes of their respective powers.

Chapter VII Supplemental Provisions

Article 50 The following terms used in this Law mean respectively:

Person in charge of a unit means the legal representative of a unit or the major person representing a unit in exercising functions and powers as provided for by laws and administrative regulations.

The State’s unified accounting system means the system for accounting practice, accounting supervision, accounting offices, accounting personnel and the management of accounting work formulated by the department of finance under the State Council in accordance with this Law.

Article 51 Specific measures for accounting control in private industrial and commercial households shall be separately provided for by the department of finance under the State Council in the light of the principles of this Law.

Article 52 This Law shall go into effect as of July 1, 2000.