An Inquiry into the Non‑Classification of Gains and Losses as Accounting Elements

Abstract

Accounting elements are the basic classification of accounting objects and the foundation for establishing the system of accounting recognition, measurement, recording, and reporting. They directly determine the completeness and relevance of accounting information. China’s Accounting Standards for Business Enterprises – Basic Standards have established six accounting elements: assets, liabilities, owner’s equity, revenue, expenses, and profit. Gains and losses are not included as independent accounting elements; instead, they are separately classified under owner’s equity and profit for accounting and disclosure. This treatment differs from international accounting standards and has triggered many controversies in practice. Based on the core theories of accounting elements and combined with China’s accounting standards, this paper explores the historical background, practical reasons, and dilemmas of not treating gains and losses as independent accounting elements, compares the differences between Chinese and foreign standards, and puts forward targeted optimization suggestions to provide references for improving China’s accounting standards.