T HE growing complexity of managerial structures in the modern economy requires an increasing reliance on accounting as a tool of management. Effective management in such bureaucratic structures is achieved only by allocating responsibility unambiguously and then applying sanctions and conferring rewards in close accordance with the execution of responsibility. The effectiveness of control depends in large part on detailed reporting concerning the fulfillment of responsibility, and the crucial role of accounting in this process is determined by the simple circumstance that responsibility is often specified in terms of accounting magnitudes. In the Soviet Union, the consolidation of the entire economy under the direction of the state has confronted the Soviet economic administrators with the general problem of control in an acute form, and they have been strongly conscious of the necessity to strengthen accounting as one of the instruments of control. In particular they have placed great emphasis on cost performance as a general index of operating efficiency, and have elaborated a comprehensive system of cost accounting and reporting as an aid in controlling the manager-bureaucrats of their economic system. The purpose of the present article is to describe some of the problems of cost accounting in the setting of the Soviet economy and to make some evaluation of the effectiveness of Soviet cost accounting as an instrument of control.' Accounting supplies merely an ex-post record, and so cannot per se control anything. What it does, however, is to furnish information on performance so that performance can be checked against standards and appropriate action taken. Because of the oblique nature of this process its effectiveness depends on two important conditions. (i) There must be accurate and detailed standards against which performance can be measured. These standards must be objective, for if they are not, failure to comply with them means nothing; and they must be very detailed, so that over-all variances can be traced to the exact places where they arise. (2) The ex-post reports on performance must be truthful and accurate. This is an especially important problem in the Soviet Union, where there exist strong incentives to falsify cost reports. It is against the background of these prerequisites that we will discuss the effectiveness of Soviet accounting for cost control purposes. In the Soviet system the primary motivation of management at the level of the enterprise is to fulfill the assigned plan rather than to earn the greatest possible profit. For this reason management at the lower level has little incentive to minimize costs except to the extent that cost goals are embodied in the assigned plan, so the responsibility for controlling costs lies ultimately with the higher organs of administration such as the ministry or the glavk.2 It will be useful, therefore, to discuss separately two levels of cost control in the Soviet system: (i) the level at which the superior organ sets and enforces cost goals for the enterprise, and (2) the level at which the enterprise management uses internal cost controls to meet the assigned cost goals.