Finished products are goods that the manufacturing company manufactures for further sale. Finished products can have any shape, size and cost: from clothing to industrial equipment. All that unites them is the accounting of finished products, which must be carried out at each enterprise.
According to PBU 5/01 “Inventory accounting”, finished products are an integral part of the company’s inventory. It includes products and semi-finished products that no longer need to be processed and that comply with current standards or specifications. They must be taken to the organization’s warehouse or ordered by the buyer.
Also, the accounting of GP is regulated by the following legal acts:
- Regulations on Accounting and Financial Reporting in the Russian Federation (approved by the Ministry of Finance).
- Methodological guidelines for the accounting of inventory (approved by the Ministry of Finance).
- Instructions for the use of the Accounting Chart of financial and economic activities of organizations (approved by the Ministry of Finance).
In this article, we will take a detailed look at the accounting of finished products in accounting statements, including methods.
Accounting goals and objectives
The purpose of GP accounting is a timely and complete reflection on the accounting accounts of data on the release and shipment of finished products in the company.
The main tasks are as follows:
- In the correct and timely documentation of operations for the release, logistics and departure from the GP warehouse.
- In the control of the safety of GP in storage warehouses.
It is important to know that GP accounting occurs with a time interval that consists of the difference from the moment of acceptance in the warehouse to the date of determining the actual cost of products manufactured during the month.
PBU 5/01 prescribes to take into account the GP for the actual costs incurred for its manufacture. However, it is not always possible to determine the cost of production at the time of its release from the factory. Then the organization applies the method of accounting prices, at which the GP is registered in the warehouse of the organization within a month and written off when selling. Such transactions can be reflected in the account 40 “Output of products (works, services)”.
Methods of evaluation of finished products in accounting
The evaluation of finished products should be carried out according to the account 43 “Finished products”. All manufacturing companies must use this account. The document takes into account the GP in one of three ways:
- According to the actual production cost.
- At discount prices – using account 40 “Output of products (works, services)”.
- Without counting 40.
Let’s consider each of these types of evaluation of finished products in accounting in more detail.
1. At the actual cost price.
The method assumes the use of account 43 exclusively for accounting GP. The receipt of finished products to the warehouse is reflected by the posting: “debit 43 credit 20”.
It is important to note that one of the simplest methods of accounting for GP, but accountants are in no hurry to use it. So, the actual cost of the GP can be compiled only at the end of the reporting month. At the same time, all production costs are determined – direct and indirect. That is why the use of the method does not allow to determine the cost of production as it is released and transferred to the warehouse. This is associated with unnecessary inconveniences.
With this method of accounting, the cost at which products of the same type, manufactured at different times, are taken into account may be different.
Therefore, when selling and otherwise disposing of finished products, it should be written off at the unit cost or at the average cost, or according to the FIFO method.
2. At the accounting prices (planned cost price).
In this case, accounting prices are set for all finished products, which are attributed to the product when it is shipped to the warehouse and for which it is written off during sale. Thus, accounting prices can be applied at storage sites. As such, the actual production cost, standard cost, contractual prices, as well as other types of prices can act. The organization can choose from the following options. However, the choice should be reflected in the accounting policy.
When using accounting prices, deviations are often obtained – the difference between the standard and actual cost. The size of the deviation becomes apparent at the end of the month.
As for the application of the account 40 “Output”, it takes into account the deviations between the actual costs of manufacturing finished products and its standard (planned) cost.
When working with an account , the accounting procedure is as follows:
- Reflection of the actual cost of manufactured products in correspondence with accounts 20, 23, 29.
- Reflection on the loan of the standard or planned cost of finished products in correspondence with the account 43.
- On the last day of the month, debit and credit turnover on account 40 are compared and deviations of the actual production cost from the standard are determined.
- With a positive debit, the actual cost exceeds the standard (planned). This indicates overspending. A Debit 90-2 Credit 40 transaction is made for the excess amount.
- With a positive loan, the actual cost is lower than the standard (planned). In this case, the same accounting record is made for the amount of savings (Debit 90-2 Credit 40).
- Account 40 must be closed monthly.
Account 40 reflects the cost of the GP on the balance sheet at the standard or planned cost. The amounts of deviations are written off to the account 90 “Sales” in full, which affects the amount of income and expenses.
3. Without using the 40 account
Here, deviations arising from the discrepancy between the accounting price and the actual production cost are taken into account on account 43, the sub-account “Deviations of the actual cost from the accounting price”.
According to the debit of the account 43 and the credit of the accounts 20, 23, 29, a record is made of the GP actually shipped to the warehouse at discount prices. At the end of the reporting period, the work in progress is estimated, the actual production cost is calculated and the records on account 43 are adjusted.
If the actual production cost of the GP is greater than its estimate at the discount price, then an extra entry is made for the amount of excess on the debit of account 43 and the credit of accounts 20 and 23. When saving, you need to make a reversal record on the debit of account 43 and the credit of accounts 20 and 23.
Thus, the balance of the GP at the end of the month in the warehouse is reflected in the estimate at the actual production cost.
How to account for revenue when selling
Operations for the sale of finished products are carried out with the help of such records:
- Debit 62 and Credit 90-1. This is how the revenue from the sale of finished products is reflected.
- When revenue from the sale of finished products is recognized in accounting, its value is debited from the account 43 “Finished products” to the debit of the account 90 “Sales”.
How else to reflect the movement of the GP in the company’s documents?
- The shipment of finished products to the storage warehouse is reflected in the invoice requirement.
- The receipt of finished products to the warehouse is reflected in the material accounting cards in the form N M-17 “Materials accounting card”.
- Operations for the sale of GP are issued by a waybill.
- Finished products are reflected in the balance sheet at the actual or normative (planned) production cost.
- In the balance sheet, the price of the SOE balances not sold or shipped to customers on the reporting date is indicated on page 1210 “Inventory”. Companies themselves can determine the details of this indicator. For example, in the balance sheet, you can provide separate data on the cost of materials, GP, costs in work-in-progress, if such information is recognized by the organization as important.
- If the finished products are reflected in the current accounting at the actual production cost, then it is also reflected in the balance sheet.
- When accounting for the issue of GP at the standard production cost using account 40, the balance sheet shows the standard production cost of GP.
If problems arise in the case of drawing up accounting documents for finished products, it is necessary to seek qualified assistance. VALEN specialists will conduct a competent consultation and provide a service for drafting documents.
Question and answer
Indeed, in practice, there are often cases when products were not produced. Thus, the company cannot take into account the GP for completed production. However, there were expenses for the current period, including salary and depreciation. These costs cannot be attributed to finished products. How to reflect these current costs? We advise in the periods when the GP will not be issued for sure, to reflect the costs on the same accounts that were used during the period of production activity. At the end of the month, the amount of expenses during the period of non-working production is attributed to the expenses of future periods: Debit 97 sub-account “Activities in the absence of production” Credit 20. This is how the costs for the idle period are written off.
The procedure for writing off these expenses to the cost of finished products in the following months should be determined in the accounting policy. In tax accounting, such expenses are not distributed between accounting periods, but are recognized in the period of their occurrence.