Rostow’s theory looked at the country’s economic development as a process of gradual change and form a straight line. According to Rostow, the development of the country can be divided into five stages.

a. Phase traditional economy
At this stage the economy is still oriented to the effort to meet their own needs. Application of technology and management is still very low so that its productivity is still low.

b. Pre-takeoff
Traditional societies though very slowly, constantly moving and at one point reaching a precondition for takeoff. This situation usually occurs because of interference from outside, ie from a more advanced society.
This stage is a transition period when people reach the stage of preparing for takeoff. Prerequisites that must be met to be able to take off is the presence of considerable changes in fundamental economic, political, social, cultural, and value systems. During this transition period is essential to succeed in the takeoff stage.

c. Phase takeoff
Take-off stage is the stage when the economy is able to grow and evolve with its own power. At this stage the application of modern management technology and more extensive and intensive. In addition, a drastic change in the social and political as well as the creation of rapid economic progress due to innovations and the opening of new markets. All that can increase the rate of investment which further accelerate the growth of national income over the rate of population.

d. Stage of maturity
This stage is a period when society was effectively using modern technology in most of the factors of production and natural wealth. At this time of rapidly growing sectors of the economy and leading industry suffered a setback, but was replaced by other sectors. Economic growth is not as high off the stage, but offset by the growth of qualitative matters so that the economy is getting stronger and independent. After takeoff the progress will continue to move despite the occasional ups and downs. Industry grew rapidly and began to produce goods previously imported.

e. Stage of mass consumption of high levels
At this stage the level of public consumption is very high, especially energy consumption. It can be seen in the lives of Western Europe, North America, and Japan.
The characteristics of this stage are:
- The labor force has a better warranty.
- Providing food for people who increasingly inadequate.
- State seeking the expansion of power in the eyes of the world.
Because of rising incomes, consumption is no longer limited to basic needs, but increased in the higher needs. At this stage are the traits of an ideal mass when people live comfortably so that there is a tendency to increase the number of families and the population will increase.

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The size of the progress of a country can be seen from the successful development of the country. Income per capita, economic growth, unemployment, and population growth rate is partly an indicator to measure the success of development. Grouping the countries into developed and developing countries is generally based on economic and technological sectors.

The characteristics of developed countries
Developed countries are countries whose lives are patterned industry that has the following characteristics.
a. Average income per capita of the population is generally high.
b. Education level of high average population.
c. Life expectancy of the population average height.
d. Population growth rate per year is relatively small.
e. The death rate per year is relatively small population.
f. Life-style market economy.
g. His wide and varied field.
h. Economic activity in most industry sectors, as well as export commodities.
i. The majority of the population lives in cities.
j. Relatively high level of population health.

The characteristics of developing countries
General characteristics of the developing countries are as follows.
a. Average income per capita of the population were generally low.
b. Education levels low average population.
c. Life expectancy lower average population.
d. Population growth rate per year is quite high.
e. The mortality rate is relatively high population per year.
f. Livelihoods of the population is generally patterned agrarian.
g. Narrow the field work.
h. Commodity exports of raw materials, rather than processed ingredients.
i. The majority of the population live in rural areas.
j. Low levels of population health.
k. High unemployment figures.

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There are two functions of the economic functions of capital markets and financial functions. Fungi capital market economy is to provide a facility or vehicle that brings the two interests, ie that the excess funds and those funds are needed. With the stock market then the company can obtain funds from the public owner of the funds through the sale of securities.

Capital market finance functions related to various investment alternatives for investors in capital markets. In capital markets, investors can invest in stocks or bonds. Capital markets provide the possibility and opportunity to obtain rewards for investors. In addition, the existence of capital markets led to increased economic activity as an alternative capital market funding for companies to increase profits and revenue. It was eventually bring prosperity to society more broadly. Therefore, it is proper if all parties working to develop the presence and progress of capital markets in economic activity.

For the economy, capital markets have a very important role. The role is as follows:
a. The capital market is a place in an efficient allocation of funds. Investors can buy securities that are traded in capital markets. Conversely, companies can raise funds by offering instruments or securities in the capital markets.
b. Capital markets are an alternative investment to provide benefits and certain risks.
c. The existence of capital markets allow investors to participate have a healthy company and good prospects, such as through stock ownership.
d. Capital markets encourage the implementation of corporate management in a more professional, transparent, efficient, and profit-oriented. This is done to attract investors willing to invest their capital.
e. Capital markets can increase national economic activity. The companies will be easier to obtain funding so as to encourage more companies going forward. Furthermore, more and more employment opportunities, higher income, and welfare.

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Understanding of economic growth

Economic growth can be defined as an increase in national income (as reflected in the capacity of production of goods and services) regardless of the increase is larger or smaller than the population growth rate or no change in economic structure or not.

The theory of economic growth

The theory of economic growth is essential to address issues of economic growth and efforts to improve the economy.

Classical economic growth theory

There are two influential figures in classical flow that appears around the time of the Industrial Revolution.

a. Adam Smith. Is the most popular figures in the world of economy. His book analyzing how the economy can grow. There are two factors mentioned by Adam Smith, namely the growth of total output and population growth. Growth in total output is determined by three variables, namely natural resources, human resources, and capital stock or capital available. Meanwhile, population growth will determine the extent of the market and determine the fast or slow economic growth.

b. David Ricardo. Almost the same as Adam Smith, David Ricardo also put forward the concept of economic growth mechanisms. According to him, because of limited land, then population growth (labor) it will lower the marginal product. This is known as ‘The Law of Diminishing Returns’. Need to capital accumulation and technological progress to improve labor productivity so as to inhibit the operation of ‘The Law of Diminishing returns’.

Neoclassical growth theory

Neoclassical growth theory developed based on classical economic analysis.

a. Joseph A. Schumpeter. Theory of Joseph A. Schumpeter stated in his book ‘The Theory of Economic Development’. This book is a lot of peeling on the role of entrepreneurs in development. The process according to Schumpeter’s economic growth is the process of innovation undertaken by the innovators and entrepreneurs.

b. Robert Solow. He argues that economic growth depends on the addition of the provision of factors of production and the rate of technological progress.

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Investment in a country may affect economic progress. If an economy is to progress then the investment should be increased.
Investments to influence changes in incomes, employment, and output growth. Investment can be done by way of purchase of securities (financial investment) and purchases of capital goods (physical investment). Physical investments are expenditures that could increase the amount of capital in an economy within a certain time.
Physical investments can be distinguished as follows:
a. Investment of capital goods and buildings. Investments in the form of capital and the building are also called fixed assets investment. Called fixed asset investment for capital goods and buildings are generally older than one year. The amount of investment that counts is the net investment of fixed capital formation less depreciation.
b. Inventory investment. Inventory investment is also called the planned investment. A company often produce more targeted products to anticipate if demand increases. This production excess included to inventory investment. Inventory investment is expected to increase earnings or profits.

Factors affecting the level of investment
Factors that influence the investment can be explained as follows:
a. Interest rate. The main factor that affects investment is the real interest rate. The real interest rate is the nominal interest rate which has been reduced by inflation figures.
b. Expectations of profit to be achieved. The company invests generally aim for profit. If companies have expectations or hopes of their goods and services products will benefit the investment made will be increased.
c. Costs for capital goods. Costs for capital goods such as operation and maintenance costs were giving the effect on the amount of investment that will be done. If these costs are considered too high then the investment will be decreased. This is because these costs affect the profit to be gained.
d. Technological change. Advances in technology will be a driving factor in making an investment. Various technological discoveries will bring a change in production costs that could ultimately increase profits. Investing too much more done because of the expected benefits.

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Interstate commerce has the following benefits:
a. Enhance friendly relations between nations. Countries that conduct trade with each other would have a more intimate relationship.
b. Fulfilled the needs of each country. With the interstate commerce, the lack of production of a country can be met by importing goods from other countries that have surplus production, while countries that have an excess of production can export goods to countries that lack such a production.
c. Exporting countries getting profit. Exporting countries would receive payment from the importing country. Payments can be used to pay for needed imports. Thus, exporting countries will gain benefit.
d. Each country can specialize in production. With the interstate commerce, each country undertakes to maintain maximum production specialization.
e. Encourage the advancement of science and technology. Each country is always trying to improve the progress of science and technology to improve the quality and quantity of goods produced.
f. Encourage the production of goods to the fullest. With the interstate commerce, each country tried to expand the marketing of goods production. When marketing products more widely, then the production will bigger and will save on production costs.

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The level of progress of a country’s economy can be seen from the results obtained in the present, compared with the results obtained in previous periods. If at the time the result obtained is now greater than the results obtained in the past, this shows that the economy of the country’s progress. Conversely, if the results obtained when compared to the number now is less than or equal to the results obtained in the past, means the country’s lack of economic progress.

The results obtained from an economic activity, are generally manifested in various forms of development to increase productivity. Productivity can be used as a means of providing a variety of needs of life.

Income levels affect the size of the changes that occur in production activities, in relation to the business providing the goods and services that is needed. Besides that, the level of income also can affect changes on the consumption side in relation to the ability to buy (acquire) goods and services. Both of these can be known by comparing the prices that occurred in other periods. Thus, in economic activities, the price index may be useful as follows:
1. price index can be used by government as a tool to establish price policies in the future. The policy aims to avoid setting an arbitrary price by the manufacturer and can lead to unequal conditions between the price of goods or services to be paid and the ability of consumer to buy.
2. price index can be used as a basis for comparison in assessing the economic progress now with the previous period.
3. price index can be used as the basis to determine the factors that lead to economic progress and the factors that hinder economic progress.
4. price index can be used as basis in determining the patterns of overall economic policy and monetary policy.

The basic concept of accounting is the basis for recording transactions generally accepted so that financial information can be presented systematically for those who need it.

a. The concept of business entity
This concept was explained that the finances of a business should be separated by financial owners, managers, and employees. This means that the company’s financial statements should be separated with a personal interest. That way, owners can find out the company’s financial performance from one accounting period to the next period.

b. Sustainability (Going concern)
Based on this concept, the financial statements should be prepared periodically so that users of the accounting information can compare the progress of the company. Users of financial information can see the profits or losses received by the company at a specific period.

c. Comparative principle
The financial statements of revenues and expenditures can be presented through the following two approaches.
1. Cash Basis. In this approach, the income is reported when cash is received and expenses are reported when the money has been spent. For example, revenues are recorded when the company receives an amount of money. Electricity costs are recorded when the electricity bill has been paid.
2. Accrual Basis. In this approach, the income was reported at the time of the transaction. Similarly, the cost is recorded in the event. For example, credit sales are recorded as revenue even though the company has not received money. The purchase of credit is also considered a cost, though the company did not spend money.

d. Acquisition price
Acquisition price represents a number of costs incurred to acquire an item until ready for use.

e. Determination of costs and revenues (Matching concept)
This principle is used to see the comparison between revenue and cost of the company at one time period. If the company’s earnings greater than costs, the company earned a profit. Conversely, if income is less than the cost incurred, the company suffered losses.

Economic globalization is the life of the global economy, that is open, without knowing the limits of territorial (regional) between one country with another country. Economic globalization views the world as a whole. Trade and investment side move towards liberalization of trade and investment world as a whole. The causes of economic globalization are as follows:
1. globalization in the field of information and communication between the nations of the world
2. progress of science and technology, particularly in the field of communication and transportation
3. more rapid advancement of international cooperation

Economic globalization is very closely related and are always associated with free trade. Free trade seeks to create a wider trade area and removing barriers that resulted in not smooth international trade.

Trade barriers usually occurs because the export and import tariffs imposed too high so the prices of goods are not competitive. In addition, due to trade policy barriers (eg protection) imposed by certain countries to protect domestic production.

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