A subsidiary of Motorola Mobility, which was acquired in 2014 by...
The personal account of the Beltelecom subscriber is not only a means of managing...
The method for assessing the disposal of inventories (IPZ) of an organization is one of its elements. We talked about the calculation of the cost of MPZ using the FIFO method in ours. However, the most common way to assess the disposal of inventories is to estimate the average cost. This method can be used both in accounting and in tax accounting (clause 4 of PBU 1/2008, clause 16 of PBU 5/01, clause 8 of article 254, clause 3 of clause 1 of article 268, clause 2 paragraph 2 of article 346.17 of the Tax Code of the Russian Federation).
Let's give an example of calculation in our material for the average cost method.
The formula for calculating the average cost of materials and goods
The calculation of the average cost of goods or materials for a month involves dividing the total cost of a group (type) of stocks by their quantity, which is made up, respectively, of the cost and the amount of the balance at the beginning of the month and the stocks received during this month (clause 18 PBU 5/01).
In this case, the calculation of the average cost can be made in two versions (clause 78 of the Order of the Ministry of Finance of December 28, 2001 No. 119n):
- weighted average;
- rolling estimate.
A weighted estimate involves finding the average cost per month based on the quantity and cost of materials at the beginning of the month and all receipts for the month.
And with a moving average, the calculation is made for each moment of disposal of the inventory. Accordingly, the moving average is calculated based on the quantity and cost of inventories at the beginning of the month and the receipt of inventories until the moment of issue.
Let us give an example of calculating the average weighted estimate of the disposal of the inventory on conditional digital data.
Based on the balance of the inventory as of March 01, 2018 and the receipts for three batches for March, the average cost of an inventory unit is 55.9 rubles per piece. (18,831.3 rubles / 337 units).
Accordingly, the cost of disposal of 216 pcs. Inventory for March 2018 is 12,074.4 rubles. (216 pieces * 55.9 rubles / piece). Therefore, the value of the remainder is 121 units. The MPZ as of March 31, 2018 is 6,756.9 rubles. (18,831.3 rubles - 12,074.4 rubles).
Costs are given great attention in enterprises. The expediency of all types of expenses must be reasoned and justified.
Thus, the choice of a method for writing off inventory items to costs as they are retired depends on the characteristics of production and the goals pursued by the company.
For example, the FIFO inventory time-in-and-out method is particularly suitable for goods with a limited useful life: perishable or obsolete.
In addition, it allows you to evaluate the payback and efficiency of the use of materials.
Despite some negative manifestations, for example, ignoring inflationary processes and price fluctuations, many organizations choose the FIFO method due to its logic and simplicity.
An example of calculation on specific figures, the scope and specifics of the application, the pros and cons of the method are in the article.
Cost calculation methods
If you are serious about getting into trading, you will have to choose which costing method to use. To date, there are three methods of assessment and calculation permitted by law:
- at the cost of each unit of goods,
- at an average cost,
- according to the FIFO method (English "first in, first out").
Each of them will give different indicators for the profitability of the business, and hence for tax and management accounting. Such a seemingly simple question - at what cost to write off goods sold - can seriously affect how your trade develops.
In this material, we will consider all the presented costing methods, evaluate the advantages of each, and also tell you when it is better to use which one.
At the cost of each unit
As the name implies, this method assumes that the cost of each specific product is taken into account in the calculations.
Such a system is used when trading unique and expensive goods, when accuracy is important. For example, it is suitable for those who will sell cars, art or jewelry.
It is logical that when the goods are piece goods, and one cannot freely replace the other, exactly the price at which it was delivered is entered into the accounting when writing off goods and materials. This method also assumes that it is always clear from which specific shipment the item sold came from.
Average cost method
It is used more often than the previous one, and involves the monthly calculation of the cost of goods according to the arithmetic average. At the same time, it does not matter from which specific delivery this or that product “left”. This method of write-off of goods and materials is suitable for companies selling products for which piece accounting is not important.
It can be, for example, stationery, clothes, shoes, toys, cosmetics and any other consumer goods. The average cost method is especially beneficial for those goods, the price of which is constantly changing both up and down. This method is the easiest to account for.The average cost of goods is calculated using the following formula:
[average cost of goods and materials] = ([cost of goods at the beginning of the month] + [cost of goods received during the month]) / ([number of goods at the beginning of the month] + [number of goods received during the month])
And the cost of inventories written off per month is calculated as follows: [cost of written-off goods and materials] = [average cost of goods and materials] X [number of goods and materials sold per month].
An example of calculation using the average cost method.
At the beginning of the month, there were 370 ballpoint pens left in the stationery store at a purchase price of 10 rubles. Within a month, another 1,000 pens were delivered in two batches - 500 for 9 rubles 50 kopecks and 500 for 9 rubles.
Calculate the average cost:
The cost of goods and materials at the beginning of the month: 370 X 10 \u003d 3700 (rubles)
The cost of the 1st new supply of goods and materials: 500 X 9.5 = 4750 (rubles)
Cost of the 2nd new delivery of goods and materials: 500 X 9 = 4500 (rubles)
Average cost of goods and materials: (3700 + 4750 + 4500) : (370 + 1000) = 9.45 (rubles)
1100 X 15 - 1100 X 9.45 = 6105 (rub.)
The advantages of the average cost calculation method are in the price stability of the materials sold and simplicity. However, from the point of view of tax accounting, it is not optimal when, for example, you buy the same pens from the same supplier, and he gradually reduces prices for you. Consider the following option.
FIFO method: costing example
This is the most popular cost calculation method. It uses the principle of a queue. It is assumed that the goods that were delivered earlier are written off first. Hence the name of the FIFO method (English “first in, first out” - “first in, first out”).
At the same time, except for cases when the expiration date is important, it is not necessary to ship goods from an earlier delivery first - this is used in the calculations as an assumption. That is, the cost of goods that are sold first is calculated at the price of the remains of the "oldest" supply. When the balances are quantitatively exhausted, the inventory is written off at the price of the next delivery in time, then the next one, and so on.
An example of a calculation using the FIFO method. Let's take our stationery store with ballpoint pens and exactly the same situation as above.
We have 370 ballpoint pens for 10 rubles and delivery in two batches of 500 pens - first for 9 rubles 50 kopecks, then for 9 rubles. Sold 1100 pens for 15 rubles. We consider profit.
The first to leave will be 370 pens for 10 rubles - this is 3700 rubles. Then 500 pens at 9.5 rubles each go - that's another 4,750. There are 230 pens at 9 rubles each, which is 2,070 rubles.
1100 X 15 - (3700 + 4750 + 2070) = 5980 (rub.)
As can be seen from the FIFO calculation example, the profit in this case is lower than in the average cost example. Accordingly, the income tax will be less.
What's better
Both of these methods work quite well. However, FIFO is considered more accurate than the average cost method. It is especially beneficial in terms of taxes if the price of the goods you buy is constantly decreasing. Then the cost of the written-off goods will be the largest, and the remainder - the minimum. Therefore, the answer to the question of which is better, FIFO or average cost, in most cases will be the first option.
In the warehouse program
Despite the fact that the FIFO method is quite simple in terms of understanding the principle of its operation, manually calculating the cost each time is very laborious. Especially if you have a small business, and you yourself are a director, a cashier, an accountant, and a chief purchaser.
It's much easier if you just enter the data on deliveries and sales and get the result immediately. This is how you can work with the MySklad service. The program fully automates trading processes and calculates the cost of written-off goods using the FIFO method.
MoySklad calculates profitability for each product or product group, stores and displays current and historical balances, as well as many other data that may be useful. Thus, you save time and can be sure of the accuracy of the indicators on the basis of which you make decisions.
Company accounting policy
According to the law, the organization itself chooses how to calculate the cost of goods. It is important that the method you consider to be reflected in the accounting policy of the company. This is stated in article 313 of the Tax Code of the Russian Federation, as well as in paragraph 73 of the Guidelines approved by order of the Ministry of Finance of Russia dated October 28, 2001 No. 119n.
Changes to the accounting policy can be made once a year. That is, you can make them earlier, but they will begin to act according to the law next year - at the beginning of the new tax period. The accounting policy is compiled by the accountant and approved by the head of the organization.For management accounting purposes, you are free to use any costing method. Our advice is to use the same one that is written in your accounting policy - this way there will be less confusion.
Source: moysklad.ru
Calculation and write-off of cost of goods sold
According to paragraph 16 of P (C) BU 9, an enterprise can use the following methods to determine the cost of retired inventories:
- identified cost;
- weighted average cost;
- FIFO;
- LIFO;
- normative;
- sale prices.
Previously, catering establishments have traditionally used the selling price method to determine the cost of goods sold and kitchen products. But from January 1, 2003, the new wording of paragraph 5.9 of Art. 5 of the Profit Law, it is determined that for the purposes of tax accounting for the increase or decrease in inventories, only the identified cost method or the FIFO method can be used.
Using the identified cost method in practice is very difficult.
Therefore, today the vast majority of catering establishments have opted for the FIFO method for tax and accounting purposes in order to avoid double work.
And yet, we consider it appropriate to provide a description of all six methods provided for by P (S) BU 9 within the framework of the “School of Accountant”. After all, be that as it may, but changes in tax legislation do not “cross out” the current accounting standards.
- Identified cost method.
The essence of this method lies in the fact that accounting is kept separately for each unit of inventory, i.e. each item of inventory is disposed of at the same value at which it was capitalized upon receipt.
- The weighted average cost method is very convenient for enterprises that have a large range of inventories with a constantly changing cost.
- The FIFO method (“first in - first out” - “first in - first out”) is based on the assumption that stocks are disposed of in the order in which they entered the enterprise. That is, it is believed that the stocks acquired first are also sold first.
Let us illustrate the use of the FIFO method with an example.
Example 1. As of June 1, 2003, the balance of stocks of a certain type was 10 units at a price of UAH 10.00. Within a month, the enterprise received 260 units of this type of stock: the first batch - 20 units. at a price of UAH 15.00; the second batch - 40 units. at a price of UAH 12.00; third batch - 200 units. at a price of 20.00 UAH.
Dropped out in a month 170 units. Let's determine the cost of retired inventories and balance using the FIFO method:
The table easily traces the sequence of inventory write-offs using the FIFO method. First of all, the balance at the beginning of the month is written off, then the receipt in the reporting month: first - the first batch, then the second, etc., until the total amount of inventory to be written off in this month is reached (in the example - 170 units) .
From the receipt of the third batch (200 units), exactly as much is taken as necessary to ensure that the result is a quantity of 170 units.
It does not matter that in fact all 170 units. stocks could well have been "taken" only from the last batch - for the purposes of FIFO, it is considered that the stocks that arrived first are the first to retire.
From the above calculation, it can be seen that the application of the FIFO method in practice is quite laborious. In this regard, we recall that accounting for the increase (loss) of stocks, in accordance with clause 5.9 of the Profit Law, consists in comparing the book value of stocks at the end and beginning of the reporting period (quarter, six months, 9 months, year).
Therefore, for the purposes of tax accounting, it is not important at what price the stocks were retired, but how they are valued at the end and beginning of the reporting period. This allows you to use a simplified version of the FIFO method, which is based on the fact that inventory balances are valued at the cost of the latest inventory in time.Example 2. According to the condition of example 1, it will be enough:
- find the invoice that accounted for the last batch 3 by the time of receipt;
- make sure that the actual balance of stocks of this type (100 units) does not exceed the last receipt (200 units at a price of UAH 20.00);
- conclude that the value of the balance of stocks of this type at the end of the period is UAH 2000.00. (100 units x UAH 20.00).
Having transformed the well-known formula of the “balance of goods” (Balance at the end of the period = Balance at the beginning of the period + Income - Expenses), we obtain a calculation formula for determining the value of retired stocks:
Expense = Balance at the beginning of the period + Income - Balance at the end of the period = 100.00 + 4780.00 - 2000.00 = 2880.00 UAH.
As you can see, the results are absolutely the same both when using the original and the simplified FIFO method. Traditionally, when using the FIFO method, inventories are accounted for at their original (purchase) cost. Meanwhile, "simplified FIFO" can also be used in the case of accounting for goods and products at selling prices.
To do this, it is necessary to organize the accounting of trade margins for each batch of goods (for example, mark the amount of the trade margin on each incoming invoice).
And then, in the same manner as described above, you can determine the balance of trade margins attributable to the balance of goods, as well as the amount of trade margins for retired goods.
Example 3. Suppose that in examples 1 and 2 the cost of goods is given in sales prices (sub-account 282 "Goods in trade"). We also provide information on the size of the trade margin per unit of each batch of goods:
- balance as of 06/01/2003 - UAH 5.00. for 1 unit (5.00 x 10 \u003d 50 UAH for the entire balance - the balance of Kt 285 "Trade margin" at the beginning of the month);
- batch 1 - 7.00 UAH. for 1 unit (7.00 x 20 = UAH 140.00 for the entire batch);
- batch 2 - 6.00 UAH. for 1 unit (6.00 x 40 = UAH 240.00 for the entire batch);
- party 3 - 9.00 UAH. for 1 unit (9.00 x 200 = UAH 1800.00 for the entire batch).
The total amount of the trade margin for goods of this type received during the month: 140.00 + 240.00 + 1800.00 = UAH 2180.00. (turnover on the loan sub-account 285 "Trade margin")
Knowing that there are 100 units in the balance at the end of the month. of goods from batch 3, we determine the balance of trade margins at the end of the month for this type of goods: 9.00 UAH. x 100 units = 900 UAH. (balance Kt 285).
Now, using a formula similar to that given in example 2, it is easy to calculate the amount of trade margins for retired goods: 50.00 +2180.00 - 900.00 = UAH 1330.00.Thus, the cost of goods retired during the month was: 2880.00 - 1330.00 = 1550 UAH.
- The LIFO method ("last in - first out" - "last in - first out") is based on the assumption that stocks retire in the reverse order of their arrival. That is, it is believed that the stocks that arrived last are eliminated first.
- The standard cost method is usually used in the evaluation of material costs as part of work in progress and finished products.
According to this method, the cost of retired inventories is determined based on the norms of expenses per unit of output (work, services). Cost rates are set by the enterprise independently, taking into account normal levels of use of stocks, labor, production capacity and current prices.
In order for standard costs to be as close as possible to actual costs, cost rates and prices should be regularly (for example, once a month) checked and reviewed by the enterprise.
- Sales price method.
The procedure for calculating the cost of goods sold and finished products using the sales price method is presented in the table:
The following conventions are used in the table:
- ТН% - the average percentage of the trade margin;
- ТНн - the balance of trade margins at the beginning of the reporting month (balance Kt 285 "Trade margin");
- TNp - the amount of trade margins attributable to goods (products) received in the reporting month (credit turnover on account 285 "Trade margin");
- Tn - selling (retail) value of the balance of goods (products) at the beginning of the reporting month (balance Dt 282 "Goods in trade" and Dt 23 "Production");
- Tp - selling (retail) value of goods (products for the kitchen) received in the reporting month (debit turnover on accounts 282 "Goods in trade" and 23 "Production" respectively);
- TNreal - the amount of the trade margin attributable to the goods sold;
- Treal - selling (retail) cost of goods sold;
- С/Сreal - the cost of goods sold.
Example 4. We use the data of examples 1 - 3 to calculate the cost of goods sold using the sales price method.
Recall: as of June 1, 2003, according to the accounting data, there were goods of a certain type worth UAH 100. in sales prices, incl. trade margin - UAH 50.00; goods of this type were received within a month in the amount of 4780 in sales prices, incl. trade margin - UAH 2180.00; sold within a month of goods of this type in the amount of 2880.00 UAH. in selling prices.
Determine the cost of goods sold per month using the sales price method:
- average markup percentage: [(50.00 + 2180.00)/(100.00 + 4780.00)] x 100% = 45.70%;
- trade margin on sold goods: 2880.00 x 45.70% / 100% = UAH 1316.16;
- cost of goods sold: 2880.00 - 1316.16 = 1563.84 UAH.
So, we have considered all 6 existing methods for estimating the cost of disposal of inventories.
And now we give the possible correspondence of accounts for writing off the trade margin and the cost of goods sold, as well as reflecting income and determining financial results from sales:
It is also possible to pay by bank transfer, in which case the debit will be account 31.
The difference between the debit and credit turnover of account 791 is the financial result of the enterprise.
Since subaccount 791 should not have a balance at the end of the month (or quarter), the resulting difference is debited to account 44. If the turnover on the debit of account 791 is greater than the turnover on the loan, then the difference between them will be the amount of loss, and if vice versa, then the amount of profit .
Source: "dtkt.com.ua"
FIFO method
Organizations must pay sufficient attention to costs. In order to justify the costs, it is necessary to be able to argue the expediency of their occurrence. The write-off of material assets is subject to certain rules. Often, entities use the FIFO method in accounting to determine the value of used inventories.
Write-off
It is practically impossible to imagine a situation in which the purchase of homogeneous groups of goods necessary for work occurs identically for a long time. As a rule, materials and raw materials come from several organizations and at different prices. At high turnovers, it is not possible to track the cost of a particular unit used for production needs.
The legislation allows you to write off material assets as costs as they are retired, using several methods. According to PBU 5/01 “Accounting for inventories”, accounting allows the use of several methodologies:
- Focusing on the cost of each unit. Suitable for accounting for high-value goods, when it is possible to track the disposal of each batch of materials and stocks.
- At an average cost. The total costs are defined as the ratio of the average price (by the value of the balance and the amount of receipt) to the total quantity, determined in a similar way.
- The FIFO method means that the stocks that arrived first in time are initially consumed.
The FIFO rule is also often referred to as the pipeline method. The name is the English abbreviation FIFO, which means First in first out. That is, "first in, first out."
The method of writing off FIFO in accounting in 2018 has not changed. Homogeneous stocks are still retired in the order in which they arrived. Accordingly, materials from subsequent batches do not drop out until the previous ones are completely used up.
The FIFO principle means that write-offs for production or for economic needs occur at the actual cost of inventories received first in line.
Thus, the cost of inventories received later and not used up is included in the cost of balances at the end of the period.
FIFO principle in the warehouse
Under certain conditions, the FIFO method is preferable in terms of warehousing of goods. Considering that FIFO in accounting in 2018 is still the priority of writing off initial receipts, inventory leaves the warehouse in a strict sequence of posting. The batches of newly received homogeneous goods are not written off until the previous ones are used up.
The FIFO method is especially preferred when it comes to perishable goods. The chronological sequence of the write-off of materials must be confirmed by financial planning, affecting, first of all, the efficiency of the warehouse.Stoppages of production processes due to lack of raw materials must be avoided. No less important is the task of minimizing losses due to untimely damage to goods.
When writing off materials, which is the FIFO method, the following features are distinguished:
- incoming goods are considered separately by batches;
- the cost of purchased consignments of goods is determined;
- product spoilage prevention;
- minimizing losses through the efficient use of inventory.
The FIFO method as applied to warehouse accounting is relevant for the following types of products:
- perishable goods;
- products with a limited shelf life;
- goods that may become obsolete.
The FIFO method adopted in accounting, an example for writing off the listed inventories, allows you to avoid potential losses in the form of damage to the inventory as much as possible.
At the same time, in practice, the implementation of this principle can be quite difficult. Large enterprises with a large turnover require a developed inventory accounting system, including monitoring the movement and balance of materials. Of great importance is the organization of the placement of goods, warehouse zoning, which makes it possible to ship materials that are in demand in time.
Calculation example
At the moment, the provisions of RAS 5/01 in relation to the issue under consideration have not changed. The FIFO method in accounting in 2018 is also valid: the costs incurred include the cost of used goods that were originally purchased. The rest of the inventory is the cost of inventory received later.
In accounting, the FIFO method is an example of the impact of changes in purchase prices on the financial result:
- So, with an increase in the cost of the inventory of a homogeneous group, the initial low price will be included in the cost of production. Accordingly, the cost of production will be small, the profit will increase.
- The FIFO method, the calculation example of which involves a decrease in purchase prices, on the contrary, will increase the cost of production, reducing profits.
Example. The company is engaged in the production of bakery products. At the beginning of the period, the remaining flour at a price of 20,000 rubles. per ton were 2 tons, only 40,000 rubles. Then the flour came in batches: 1st receipt 3 tons of 25,000 rubles; 2nd receipt of 5 tons of 30,000 rubles. During the period under review, 4 tons of flour were consumed.
The organization uses the FIFO method. An example of a write-off calculation will be as follows:
The cost of flour put into production is 2 tons at 20,000 rubles and 2 tons at 25,000 rubles. Total 2 x 20,000 + 2 x 25,000 = 90,000 rubles. The average cost of a ton of flour is 90,000/4=22,500 rubles.
The rest of the flour is 1 ton at 25,000 rubles and 5 tons at 30,000 rubles. Total 1 x 25,000 + 5 x 30,000 = 175,000 rubles. The cost of the remainder is 175,000/6= 29,166.67 rubles per ton.
According to the results of calculations, the FIFO method allows you to initially take into account the goods that arrived first in time. The cost of purchasing subsequent MPZs will be taken into account as they are used.
Source: spmag.ru
FIFO concept. Calculation. Example
FIFO method (eng. FIFO, First In First Out, conveyor model) is a method of accounting for inventories of an enterprise in chronological order of their receipt and write-off. The basic principle of this method is “first in, first out”, i.e. the materials that arrive at the warehouse first will also be used first.
To inventories (IPZ) include current assets used in the production cycle of the company:
- raw material,
- materials,
- semi-finished products,
- finished products.
Stocks occupy a significant part of the current assets of the enterprise and require competent accounting. In accounting, there are other methods of accounting for inventories:
- at the cost of each unit;
- at the weighted average cost;
- at the cost of last purchases (LIFO).
Advantages and disadvantages
The opposite method of accounting for FIFO is the LIFO method (LIFO, Last In First Out). The LIFO method is also called the “barrel model”, since the materials that arrived last are written off first. It should be noted that the LIFO method is used only for tax accounting purposes. Methods are also used in warehouse logistics, so the FIFO method is used for inventory accounting of perishable inventories.
FIFO valuation example
Consider an example of using the FIFO method in practice. The figure below shows the initial data on the receipt and use of inventories of fabric. For the month of March, 270 meters of fabric were used up, it is necessary to determine the stocks of fabric for April.
When calculating using the FIFO method, it is necessary to use the data sequentially, starting with the balances for the previous month. The total amount of fabric received in March amounted to 13,400 rubles.
270 includes the balance for the previous month - 100 m, 120 m for the first entry and 50 m for the second entry.
The cost of the written-off material is calculated as follows: 100 x 35 rubles. + 120 x 40 rubles. + 50 x 45 rubles. = 10,550 rubles.Estimated cost of one meter of fabric using the FIFO method is: 10,550 / 270 = 39.07 rubles.
Calculation of the value of the balance at the end of the month: (3500+ 13400) - 10550 = 6350 rubles.
It should be remembered that the first thing next month will be the materials from the second batch of fabric. At the end of March, the remainder will include materials from the second and third batches of fabric, in the amount of 30 and 100 meters, respectively.
Source: "online-buhuchet.ru"
FIFO method in accounting
This method is used when the cost of inventories is carried out based on the cost of materials that arrived at the enterprise earlier. For example, if an enterprise had several deliveries, then materials are first taken into account in production at the price of the first delivery, then at the price of the second delivery, and so on. sequentially.
An example of the use of FIFO in accounting is discussed below. So, let's carry out the assessment of inventories using the FIFO method.
Solution. With the FIFO method of inventory accounting, we must, when sending materials to production, first of all send the materials that came to us earlier.
So, the first batch sent to production is 170 kg. At the beginning of the period, we had a balance of 200 kg at a price of 50 rubles per kilogram. Therefore, 170 kg is taken into account at a price of 50 rubles per kilogram, which will be 170 * 50 = 8500 rubles.
The second batch sent to production is 160 kg.
We have a balance from the beginning of the month of 30 kilograms at a price of 50 rubles per kilogram. And in the first delivery, we received 100 kg of materials at a price of 20 rubles. per kilogram. Which gives us 130 kg, but we need 160 kg. Therefore, we take another 30 kg from the second delivery at a price of 30 rubles. per kilogram (remember that in the second delivery there are (150-30) 120 kg of materials at a price of 30 rubles per kilogram.
So, the second batch sent to production will be accounted for in the amount of = 30 * 50 + 100 * 20 + 30 * 30 = 4400 rubles.
The third batch sent to production is 80 kg. We have the remainder from the second delivery of 120 kilograms at a price of 30 rubles per kilogram. Therefore, 80 kg (the third batch sent to production) is taken into account at a price of 30 rubles, which will be 80 * 30 = 2400 rubles (remember that in the second delivery there are (120-80) 40 kg of materials at a price of 30 rubles per kilogram.
The fourth batch sent to production is 40 kg. We have the remainder from the third delivery of 40 kilograms at a price of 30 rubles per kilogram.
Therefore, 40 kg (the fourth batch sent to production) is taken into account at a price of 30 rubles, which will be 40 * 30 = 1200 rubles.
In total, using the FIFO method, we send materials in the amount of 8500 + 4400 + 2400 + 1200 = 16500 rubles to production.
Let's summarize the data obtained in the table:
Source: goodstudents.ru
Understanding fifo with an example
The FIFO method is a write-off method in which previously purchased materials are written off first. As a result, the materials are listed on the balance at the price most corresponding to the current prices on the market.
Let's consider a simple example. The following information is available for stock balances:
Let's determine the cost of materials released into the production of FIFO valuation methods.
(50 * 23 rubles) + (23 * 23 rubles) + (7 * 22 rubles) \u003d 1833 rubles.
The rest of the materials is: 35 pcs. 22 rubles each, 30 pcs. for 24 rubles. in the amount of 1490 rubles.
Let's consider a typical problem for fixing the material. According to the accounting data of LLC "Start" as of 01.01.2013. the warehouse has the following balances of materials on account 10.1:
01/05/2013 from the supplier LLC "Logos", the warehouse of the enterprise LLC "Start" received a fabric - a tapestry in the amount of 500 meters at a price of 136.88 rubles. per meter, including VAT.
01/07/2013 paid for materials LLC "Logos" in the amount of 68 440 rubles. 01/12/2013 from the supplier LLC "Decor", the warehouse of LLC "Start" received a fabric - a tapestry in the amount of 750 meters at a price of 138.65 rubles. per meter, including VAT.
01/18/2013 1480 meters of tapestry fabric were released from the warehouse for the purposes of the main production.According to the accounting policy of Start LLC, when materials are released into production or otherwise disposed of, they are evaluated using the FIFO method. It is necessary to calculate the cost of materials released into production and draw up accounting entries. Let's compile a journal of business operations of Start LLC for January 2013:
The warehouse has 480 meters at a price of 115 rubles, it remains to write off another 1000 meters, we take 500 meters at the price of the first delivery of 116 rubles and 500 meters from the last receipt at 117.5 rubles.
We get: 115 * 480 + 116 * 500 + 117.5 * 500 \u003d 55,200 + 58,000 + 58,750 \u003d 171,950 rubles.
Thus, the cost of written-off materials will be 171,950 rubles. and on the balance, Start LLC will have 250 m of tapestry at a price of 117.5 rubles.
In addition to FIFO, there is an average cost method. Until 2008, the LIFO method also existed, but it is no longer used. Schematically, the differences between these methods looks like this:
This article will be useful to all accountants, because inventories (IPZ) are used in almost all organizations. The organization must choose and fix in the accounting policy the method of writing off the inventory. Often the choice of the method of writing off the inventory is chosen intuitively. However, you will agree that each choice must be justified. The article will consider the essence of the methods for writing off inventories, options for using methods in accounting, tax and management accounting, and will also present the grounds for choosing one or another method for writing off inventories.
Recall that in accordance with PBU 5/01 "Accounting for inventories", approved by order of the Ministry of Finance of Russia dated June 09, 2001 N 44n, inventories include: materials, goods, finished products.
Meanwhile, situations often arise in organizations when the same inventories are purchased at different prices, from different suppliers, the amount of expenses included in the cost of inventories may also differ. What does this lead to? Often, when inventory is written off, it is impossible to determine exactly which batch these stocks are from, especially with a large range of materials.
Inventory is an object that is taken into account in accounting, tax and management accounting. For each type of accounting, its own method of assessing the inventory at their disposal can be chosen.
We estimate the inventory at disposal in accounting
The assessment of the inventory for accounting purposes is established in paragraph 16 of PBU 5/01, which establishes that "the use of one of the indicated methods for a group (type) of inventories is based on the assumption of the sequence of application of the accounting policy."
What methods are used to write off inventories in accounting?
All types of inventories, except for goods accounted for at sale value, are valued in one of the following ways:
- at the cost of each unit;
- at an average cost;
- at the cost of the first inventory acquisition time (FIFO method).
The organization can choose the method of writing off the MPZ on its own, based on preferences. So, let's consider the possibilities of using each method.
According to paragraph 17 of PBU 5/01, "inventories used by the organization in a special manner (precious metals, precious stones, etc.), or inventories that cannot normally replace each other, can be valued at the cost of each unit of such reserves". An example would be a situation where an organization sells antiques or expensive exclusive cars.
We propose to consider in more detail the assessment of the inventory at the average cost.
As of July 1, 2014, there were 40 kilograms of chalk in the warehouse of Shkolny Dom LLC at a price of 30 rubles per kilogram (initial balance). Within a month, the warehouse received three batches of chalk (see Table 1).
We determine the cost of the chalk remaining in the warehouse at the end of the month when it is written off for production by three methods - at the average cost, FIFO, at the cost of each unit.
Calculate the total cost and the amount of purchased chalk:
45 rubles / kg x 60 kg = 2700 rubles.
In total, there are 280 kilograms of chalk in the warehouse at a cost of 10,700 rubles.
For a month, chalk was used up in the amount of 200 kilograms. Let's calculate its cost.
Average cost method
When using this method, the average cost of one kilogram of chalk is determined, for this the total cost of purchased chalk should be divided by its quantity:
10,700 rubles: 280 kg = 38.21 rubles / kg.
Let's write down the chalk for the amount:
38.21 rubles / kg x 200 kg = 7642 rubles.
Then in the warehouse of LLC "School House" there will be chalk in the amount of:
10700 rub. - 7642 rubles. = 3058 rubles.
Now consider the FIFO method. According to paragraph 19 of PBU 5/01, "estimation at cost of the first acquisition of inventories (FIFO method) is based on the assumption that inventories are used within a month and another period in the sequence of their acquisition (receipt), i.e. Inventories that are the first to go into production (sales) should be valued at the cost of the first acquisitions, taking into account the cost of inventory at the beginning of the month. , is made at the actual cost of the latest acquisitions, and the cost of goods, products, works, services sold takes into account the cost of early acquisitions.
FIFO method
When using this method, chalk is written off from the first in time of receipt, starting from the balance, according to the principle "first in, first out", i.e. "first in, first out" until the required amount is collected - 200 kilograms.
Remains in the warehouse (initial balance):
30 rubles / kg x 40 kg = 1200 rubles;
35 rubles / kg x 80 kg = 2800 rubles;
40 rubles / kg x 80 kg = 3200 rubles.
In total, 200 kilograms of chalk were written off from the warehouse in the amount of 7200 rubles.
10 700 rub. - 7200 rubles. = 3500 rubles.
Another subtlety that few people know about. According to paragraph 78 of the Guidelines for accounting for inventories, the methods of average estimates (at the average cost and the FIFO method) of the actual cost of inventories can be carried out as follows:
- based on the average monthly actual cost (weighted estimate), which includes the number and cost of inventories at the beginning of the month and all receipts for the month (reporting period);
- by determining the actual cost of goods at the time of their release (rolling estimate), while the calculation of the average estimate includes the quantity and cost of inventories at the beginning of the month and all receipts until the moment of release.
The difference in the application of the rolling estimate is only in the choice of the date on which the EMF is estimated, but we will get more accurate results. When using a weighted estimate, it is made at the reporting date, and when using a rolling estimate, at the time of goods release.
What about tax accounting?
The procedure for applying methods for assessing goods during their sale is not disclosed in Chapter 25 of the Tax Code. The names of the methods are identical to the methods of applying the valuation of goods for sale and other disposal in accounting. Therefore, on the basis of articles 11 and 54 of the Tax Code, an organization can refer to the procedure provided for by the legislation on accounting, which describes in detail how to apply these methods.
In tax accounting, there are four methods (methods) for evaluating goods when they are sold, while in accounting there are only three.
- at the cost of the first in terms of acquisition time (FIFO);
- at the cost of the latest acquisitions (LIFO);
- at an average cost;
- at the cost of a unit of goods.
Currently, when writing off raw materials and materials for production (clause 8, article 254 of the Tax Code of the Russian Federation), when selling purchased goods (subclause 3, clause 1, article 268 of the Tax Code of the Russian Federation), the taxpayer can use the LIFO method. This method is characterized by the fact that the first to write off those inventory items that arrived last. But it should be remembered that from January 1, 2015, the legislator excludes this method from tax accounting (subparagraph "c" of paragraph 7, paragraph 9 of article 1 of the Federal Law of 04.20.2014 N 81-FZ). Thus, the rules of tax accounting are brought into line with the provisions of accounting, because the LIFO method has not been used in accounting since January 1, 2008 (see Order of the Ministry of Finance of Russia dated March 26, 2007 N 26n "On Amendments to Regulatory Legal Acts on Accounting" ).
We use the initial data of example 1 and calculate the cost of spent chalk by another method.
LIFO method
The essence of the LIFO method is that the inventories are written off starting from the last received inventories.
45 rubles / kg x 60 kg = 2700 rubles;
40 rubles / kg x 100 kg = 4000 rubles;
35 rubles / kg x 40 kg = 1400 rubles.
In total, 200 kilograms of chalk were written off from the warehouse in the amount of 8,100 rubles.
When using this method, chalk will remain in the warehouse of School House LLC in the amount of:
10 700 rub. — 8100 rub. = 2600 rubles.
We will enter all the calculated data from examples 1, 2 and 3 in table 2.
After analyzing the data in the table, we can conclude that the FIFO method makes it possible to reduce the cost of production by reducing the cost of the materials used.
It should be noted that the average cost method is more traditional for domestic accounting.
Management Accounting. What do you need to know?
For the purposes of management accounting, methods for evaluating materials are used, both traditional and those that are rarely used. For example, the HIFO method (HIFO, or "highest in, first out"), when released into production, materials are first written off from the warehouse from the lot with the highest purchase price. After the exhaustion of this batch, the next batch, the price of which is the highest, is written off, and so on until all the necessary materials are written off in the reporting period for production purposes. That is, when applying this method, the material resources remaining in the warehouse at the end of the month are valued at the lowest purchase prices. The LOFO method (LOFO, or "lowest in, first out"), when materials are released into production, are evaluated first of all at the lowest prices. In other words, the materials purchased at the lowest price are written off first. After this batch is exhausted, the next batch is written off, the price of which is the lowest, and so on until the required amount of materials is written off in the reporting period. Therefore, when applying this method, the material resources remaining in the warehouse at the end of the month are valued at the highest purchase prices. And this is not all the methods that are used in management accounting. What is the accountant-analyst guided by when choosing the method of writing off inventories in management accounting? It focuses on the goals of management in a particular organization.
What should we show in the financial statements by applying inventory valuation methods?
And now let's determine how the impact of one or another method of writing off the cost is compared with the general task of reporting - to reliably present a picture of the financial position of the organization that is as close as possible to reality. What should you pay attention to?
The evaluation of financial statements should include the following elements:
- the balance of inventories at the end of the period, reflected in current assets in the balance sheet,
— the financial result of the period and the expenses of the period in the income statement,
- the amount of retained earnings (uncovered loss) in the liabilities side of the balance sheet.
Inventories are part of current assets, that is, these are resources that should bring us income in the future.
Estimation of current assets determines the value of the overall liquidity ratio (or overall solvency), which is calculated as the ratio of the value of current assets and short-term liabilities. The reality of the assessment of current assets in this case is ensured by its maximum compliance with the current price level. Therefore, the most realistic assessment should be recognized by the FIFO method.
Profit is an indicator of the growth of the organization's capital, not associated with an increase in its liabilities. The growth of capital in the reporting of the organization indicates either the possibility of expanding the scope of its activities, or the possibility of withdrawing from the turnover of the organization part of the funds "earned" by it without prejudice to its financial position, which it had at the beginning of the period for which the profit was calculated in accounting. The FIFO method, in the conditions of rising prices, shows the maximum estimate of reserves and profits, and in the conditions of decreasing prices for the acquisition of reserves - the minimum estimate of these indicators. Compliance of the assessment of reserves in the balance sheet at the end of the reporting period with their "last" prices using the FIFO method brings their assessment as close as possible to the real state of affairs. And the larger the share of precisely the "last" prices in the calculation of the estimate of the balance of stocks, the more realistic it will be in this sense.
The advantage of the valuation method at the average cost is manifested to a greater extent if the cost of the acquired inventory is constantly changing. In such a situation, averaging the cost of decommissioned inventories allows you to "keep" the profit at an average level, thereby helping to avoid both its unpredictably high values that occur with a sharp drop in prices, and unexpected losses resulting from an increase in their value. Accordingly, the stability of the financial performance of the organization will be preserved to a greater extent. To what extent and in what cases is it fair? The application of the average price method is suitable for situations where the accountant's professional judgment allows him to assess the impact of changes in the prices of the acquisition of current assets on the financial statements as insignificant or insignificant.
The method of estimating the average cost can also be used in tax accounting (clause 8 of article 254 of the Tax Code of the Russian Federation and subparagraph 3 of clause 1 of article 268 of the Tax Code of the Russian Federation). The mention of this method in both accounting policies will help to avoid the difference between accounting and tax accounting data.
The method of calculating the cost of each unit of inventory is applied, if necessary.
The LIFO method (recall that its application is possible only within the framework of tax and management accounting) in the context of rising prices for acquired reserves forms the minimum estimate of reserves in the balance sheet at the end of the period, the maximum amount of period expenses in the income statement and the minimum estimate of the financial result ( profit or loss). In a declining price environment, LIFO gives us the maximum estimate of inventory on the balance sheet, the minimum estimate of period expenses, and the maximum estimate of financial result.
Thus, from the point of view of assessing current assets and calculating the organization's solvency indicators, the FIFO method is the best assessment option. However, the choice of the FIFO method does not have such a positive effect on the assessment of the financial result. Write-off of inventories under the FIFO method is carried out in the sequence of acquisition, that is, at the "first" prices. This effectively overestimates the financial result in comparison with the level of inventory purchase prices at the reporting date. The amount of profit, therefore, demonstrates the exaggerated ability of the owners to withdraw funds from the company's turnover and / or expand business volumes. The organization looks exaggeratedly profitable.
In financial accounting, when choosing between the FIFO method and the average price method, one should not forget about the analytical value of profit. A significant increase in prices for inventories can lead to an irrational withdrawal of funds from the organization's turnover. Based on this, the average price method, when you have to choose between it and FIFO, in our opinion, is more in line with the principle of prudence (conservatism).
Assessment of methods for writing off inventories and their impact on reporting
The trading company turned to the Ministry of Finance of Russia with the question: how is the valuation of purchased goods at an average cost for profit tax purposes? The financiers gave their recommendations on this matter in a letter dated 11.08.2015 No. 03-03-06 / 2/46207.
In the Tax Code of the Russian Federation only general rules
When selling purchased goods, the organization has the right to reduce the income from such operations by the cost of acquiring these goods (subclause 3, clause 1, article 268 of the Tax Code of the Russian Federation). It can be determined by one of the following methods of valuation of purchased goods:
at the cost of the first by the time of acquisition (FIFO);
or at the average cost;
or unit cost.
Recall that the tax accounting system is organized by the company independently based on the principle of the sequence of application of the norms and rules of tax accounting (Article 313 of the Tax Code of the Russian Federation). The procedure for conducting tax accounting should be established in the accounting policy of the organization.
Therefore, the company has the right to independently choose the method of valuation of purchased goods during their sale, including the method of valuation of purchased goods at average cost. The main thing at the same time is that such an order should be provided for by the accounting policy.
Accounting contains specifics
In the commented letter, specialists of the Ministry of Finance of Russia, having cited the general norms of the Tax Code of the Russian Federation, came to the following conclusion. Since for the purposes of tax accounting there are no rules for assessing purchased goods at an average cost, the procedure for such an assessment can be used based on accounting rules.
In accounting, the method of estimating the average cost is used to evaluate both inventories and goods (clause 18 PBU 5/01 “Accounting for inventories”, clause 2 of the Guidelines for accounting inventories, approved by order of the Ministry of Finance of the Russian Federation dated December 28, 2001 No. 119n, hereinafter - Methodological recommendations).
Note that the method of evaluating purchased goods at an average cost is more profitable for companies with a large turnover of goods. That's what it is. Write-off (release) of goods when assessed at the average cost is carried out for each group (type) of goods. At the same time, the average cost is calculated as a quotient of dividing the total cost of a group (type) of goods by their quantity, which is made up of the cost and quantity, respectively, of the balance at the beginning of the month and of goods received this month (clause 75 of the Methodological Recommendations).
Evaluation of goods at an average cost in accordance with clause 78 of the Methodological Recommendations can be carried out in two ways.
Weighted score
With this option, the assessment is based on the average monthly actual cost. In this case, the calculation includes the quantity and cost of materials at the beginning of the month and all receipts for the month (reporting period).
Example 1
The organization is engaged in the wholesale of office furniture. According to the delivery contract in August, she must deliver 30 racks. In the accounting of the organization, a variant of the weighted valuation of goods is used by the write-off method at the average cost.
The average cost at which racks will be written off as expenses when they are sold in August will be 9383.33 rubles. per rack: [(160,000 rubles + 42,500 rubles + 79,000 rubles) : (20 racks + 10 racks)].
rolling estimate
In this case, the goods are valued by determining the actual cost of the material at the time of issue. When using this option, the calculation of the average estimate includes the quantity and cost of materials at the beginning of the month and all receipts until the issue.
Example 2
The organization is engaged in the wholesale of office furniture. According to the delivery contract in August, she must deliver 30 racks. Delivery must be carried out in separate batches no later than five calendar days from the moment the prepayment is transferred on account of the delivery of each batch of racks. In the accounting of the organization, a variant of the rolling valuation of goods is used by the write-off method at the average cost.
As of August 1, 2015, there were 20 unsold racks in the warehouse in the amount of 160,000 rubles. (20 racks x 8000 rubles / piece).
The organization for subsequent implementation acquired:
On account of the delivery of each consignment of goods, the organization received an advance payment on August 1, August 10 and August 15.
The organization provided:
August 4 - ten racks. The average cost at which racks will be written off as expenses will be 8,000 rubles per piece. (160,000 rubles : : 20 racks). The total cost of sold racks will be 80,000 rubles. (8000 rubles x 10 racks);
August 12 - ten racks. The average cost at which racks will be written off as expenses will be 10,125 rubles per piece. [(160,000 rubles + + 42,500 rubles) : (10 racks + 10 racks)]. The total cost of sold racks will be 101,250 rubles. (10,125 rubles x 10 racks);
August 19 - ten racks. The average cost at which racks will be written off as expenses will be 9383.33 rubles per piece. [(160,000 rubles + + 42,500 rubles + 79,000 rubles): (10 racks + 10 racks + 10 racks)]. The total cost of sold racks will be 93,833.3 rubles. (9383.33 rubles x 10 racks).
Note that the use of the rolling estimate option is more labor intensive than the weighted estimate option. This is due to the fact that the assessment of goods during the month occurs at the time of each sale of goods (consignment of goods), and not at the end of the month.
Clause 16 PBU 5/01 and clause 73 of the Guidelines for accounting for inventories, approved by order of the Ministry of Finance of the Russian Federation of December 28, 2001 No. 119n, establishes the following methods for assessing the inventory when released into production and other disposal:
at the cost of each unit;
at the average cost
· according to the FIFO method (according to the cost price of the first in time acquisition of materials);
· according to the LIFO method (at the cost price of the most recent acquisition of materials).
It should be noted that for accounting purposes, an organization may use different write-off methods for different groups of inventories.
Let's take a closer look at each of these methods.
Write-off of inventories at the cost of each unit
The method of writing off materials at the cost of each unit is convenient for use in cases where an organization uses a small range of materials in production and it is easy to track which batch the materials are written off from, and their prices remain fairly stable over a long period. In this case, accounting is kept for each batch of materials separately, and materials are written off exactly at the prices at which they are accepted for accounting. Paragraph 74 of the Methodological Guidelines for Accounting for Inventories proposes two options for writing off materials at the price of each unit:
1. The unit cost includes all costs associated with the acquisition of these inventories. This method is used when it is possible to accurately determine the amounts of acquisition costs that relate to different materials.
2. A simplified method in which the unit cost includes only the cost of inventories at contract prices, and transportation and other costs associated with their acquisition are accounted for separately and written off in proportion to the cost of materials written off to production at contract prices. This method is used when it is impossible to determine exactly what proportion of the transportation and procurement costs relate to each specific batch of purchased materials.
Example 1
1 option
At the beginning of the month, the Etalon organization had paint residues in the amount of 120 kg in the amount of 3600 rubles. at actual cost.
The first batch - 150 kg, the cost of the batch - 3200 rubles, transport costs amounted to 1000 rubles;
The second batch - 200 kg, the cost of the batch - 5600 rubles, transport costs amounted to 1000 rubles.
Accounting for materials is carried out with the inclusion of transport and procurement costs in the actual cost. For ease of calculation, all amounts are given without VAT.
The actual cost of paint is:
balance at the beginning of the month: 3600 / 120 = 30 rubles;
first batch: (3200 + 1000) / 150 = 28 rubles. for 1 kg;
second batch: (5600 + 1000) / 200 = 33 rubles. for 1 kg.
During the month spent:
The cost of the used paint is:
100 × 30 + 90 × 28 + 120 × 33 = 9480 rubles.
Example 2
Option 2
Entity A uses a simplified write-off of materials at unit cost.
At the beginning of the month, organization "A" has 120 kg of paint in the amount of 3,100 rubles. at bargain prices. Transportation costs - 500 rubles.
Within a month, two batches of paint were purchased:
1) 150 kg, the cost of the batch is 3200 rubles. Transportation costs - 1000 rubles;
2) 200 kg, the cost of the batch is 5600 rubles. Transportation costs - 1000 rubles.
The prime cost of paint at contractual prices is:
balance at the beginning of the month: 3100 / 120 = 25.83 rubles;
first batch: 3200 / 150 = 21.33 rubles;
second batch: 5600 / 200 = 28 rubles.
Released for production within a month:
100 kg of paint from the balance at the beginning of the month;
90 kg of paint from the first batch;
· 120 kg of paint from the second batch.
The cost of the released paint for production per month at contractual prices is: 100 kg × 25.83 rubles. + 90 kg × 21.33 rubles. + 120 kg × 28 rubles. = 8132.70 rubles.
Calculate the percentage of TZR:
(500 + 1000 + 1000) / (3100 + 3200 + 5600) × 100 = 21.01%.
The amount of TZR attributable to the increase in the cost of paint released into production:
RUB 8132.70 × 21.01% = 1708.68 rubles.
The main advantage of the inventory write-off method at the cost of each unit is that all materials are written off at their real cost without any deviations. However, we repeat, this method is applicable only in cases where the organization uses a relatively small range of materials and when it is possible to determine exactly which materials have been written off.
In those cases where it is impossible to accurately track which materials from which batch were released into production, it is advisable to use one of the three methods described below.
Write-off of materials to production at average cost
The method of writing off inventories at the average cost is as follows. For each type of material, the average unit cost is determined as the quotient of the total cost of these materials (the sum of the cost of materials at the beginning of the month and those received during the month) by the quantity of these materials (the sum of the balance at the beginning of the month and those received during the month).
The cost of materials written off to production is determined by multiplying their quantity by the average cost. The cost of the balance at the end of the month is determined by multiplying the amount of material on the balance by the average cost price. Thus, the average unit cost of materials can vary from month to month. The balance of inventory accounting accounts is reflected at the average cost.
Example 3
Suppose that in the organization "Etalon" at the beginning of the month the rest of the fabric is 1,500 m, the average cost is 95 rubles. for 1 m. Within a month, the following fabric was received:
1st batch: 1000 m at a price of 89.50 rubles. for 1 m;
2nd batch: 500 m at the price of 100 rubles. for 1 m;
3rd party: 1200 m at the price of 80 rubles. for 1 m.
Within a month, 3500 m of fabric was spent on the production.
The average cost of fabric is:
(1500 × 95 + 1000 × 89.50 + 500 × 100 + 1200 × 80) / (1500 + 1000 + 500 + 1200) = 90 rubles. for 1 m.
The cost of the fabric written off for production is: 3500 × 90.00 = 315,000 rubles.
The rest of the fabric at the end of the month: (1500 + 1000 + 500 + 1200) - 3500 = 700 m.
The cost of the rest of the fabric at the end of the month: 700 × 90.00 = 63,000 rubles.
Note!
The letter of the Ministry of Finance of the Russian Federation dated March 10, 2004 No. 16-00-14 / 59 “On accounting for inventories” provides an explanation on the application of methods for average estimates of the actual cost of materials:
“In accordance with the Order of the Ministry of Finance of Russia dated December 28, 2001 No. 119n “On Approval of the Guidelines for Accounting for Inventories”, paragraph 78, the use of methods of average estimates of the actual cost of materials released into production or written off for other purposes, provided for in subparagraphs “b”, “c”, “d” of paragraph 73 of these Guidelines, can be carried out in the following ways:
Based on the average monthly actual cost (weighted estimate), which includes the quantity and cost of materials at the beginning of the month and all receipts for the month (reporting period);
· by determining the actual cost of the material at the time of its issue (rolling estimate), while the calculation of the average estimate includes the quantity and cost of materials at the beginning of the month and all receipts until the moment of issue.
The use of a rolling estimate should be economically justified and provided with appropriate computer technology.
Thus, there are no restrictions, with the exception of a purely economic factor arising from the “principle of rational accounting”, in the application of these options for average estimates.
The difference between weighted and rolling valuation lies in the choice of the date on which the valuation of raw materials and materials is made. When using a weighted estimate, it is made on the reporting date, and when using a rolling estimate - at the time of writing off raw materials and materials to production. Let us explain what has been said with an example.
Example 4
Figures are without VAT.
At the beginning of the month, the Etalon organization registered the remnants of fabric for the production of garments in the amount of 500 m in the amount of 25,000 rubles. The average cost of 1 m of fabric is 50 rubles.
Within a month, the warehouse of Etalon LLC received:
2nd: 100 m of fabric at a price of 45 rubles. in the amount of 4500 rubles;
10th: 200 m of fabric at a price of 52 rubles. in the amount of 10,400 rubles;
25th: 300 m of fabric at a price of 47 rubles. in the amount of 14,100 rubles.
Within a month, 700 m of fabric were put into production, including:
17th - 400 m;
27th - 300 m.
1. Organization "Etalon" applies a weighted assessment (assessment is made at the reporting date).
Let us determine the quantity and cost of fabric received during the month, taking into account the quantity and cost of fabric at the beginning of the month:
500 + 100 + 200 + 300 = 1100 m.
25,000 + 4,500 + 10,400 + 14,100 = 54,000 rubles.
The average price of 1 m of fabric per month will be:
54 000 rub. / 1100 m = 49.09 rubles.
The cost of fabric written off during the month:
700 m × 49.09 rubles = 34,363 rubles.
The rest of the fabric at the end of the month: 1100 - 700 = 400 m.
The cost of the rest of the fabric at the end of the month: 54,000 - 34,363 \u003d 19,637 rubles.
RUB 19,637 / 400 m = 49.09 rubles.
2. The Etalon organization applies a rolling estimate (the estimate is made on the date the materials are written off to production).
The first batch of fabric was put into production on the 17th, therefore, when using this method, you should determine the average cost of the fabric on this date.
Let's determine the quantity and cost of the incoming fabric (taking into account the balance at the beginning of the month) on the 17th day:
500 + 100 + 200 = 800 m.
25,000 + 4,500 + 10,400 = 39,900 rubles
The average cost of 1 m of fabric: 39,900 rubles. / 800 m = 49.88 rubles.
On the 17th, 400 m of fabric were released into production, its cost will be:
400 m × 49.88 rubles. = 19,952 rubles.
Now you should determine the quantity, cost and average cost of 1 m of fabric left in stock on the 18th:
800 - 400 = 400 m.
39,900 - 19,952 = 19,948 rubles.
RUB 19,948 / 400 m = 49.87 rubles.
The next batch of fabric was put into production on the 27th, but on the 25th the warehouse received another batch of fabric in the amount of 300 m for the amount of 14,100 rubles. Therefore, it is necessary to determine the average cost of 1 m of fabric, which has developed on the 27th.
Let's determine the quantity and cost of 1 meter of fabric received from the 18th to the 27th (taking into account the balance on the 18th):
400 + 300 = 700 m.
19,948 + 14,100 = 34,048 rubles
The average cost of 1 m of fabric at the time of release of the next batch will be:
RUB 34,048 / 700 m = 48.64 rubles.
The cost of fabric released for production on the 27th will be:
300 m × 48.64 rubles. = 14,592 rubles.
Remaining fabric at the end of the month: 700 - 300 = 400 m.
The cost of fabric at the end of the month: 34,048 - 14,592 = 19,456 rubles.
The average cost of 1 m of fabric at the end of the month (at the beginning of the next month):
RUB 19,456 / 400 m = 48.64 rubles.
End of example.
Note that the choice of one or another method of assessment is influenced by the order of workflow established in the organization.
Write-off of materials to production using the FIFO method
This method is based on the assumption that materials are released to production during the reporting period in the order in which they were purchased, i.e. materials that are first released to production should be valued at the cost of purchases first in time. When applying this method, the assessment of materials in the warehouse of a manufacturing organization at the end of the reporting period is carried out at the cost of the latest purchases, and the cost of finished products takes into account the cost of the earliest purchases.
If the first batches of materials by the time of purchase are cheaper, and the subsequent ones are more expensive, then the use of the FIFO method leads to an increase in the balance sheet profit, since the materials are written off to production at a lower cost, which reduces the cost of finished products, however, the balance of materials in the warehouse is reflected at higher price.
If the prices of materials tend to decrease, then the application of this method leads to an increase in the cost of production and, accordingly, to a decrease in the balance sheet profit.
There are two ways to determine the cost of materials written off to production using the FIFO method:
1. First, materials are written off at the cost of the first purchased lot, if the amount of written-off materials is more than this lot, the second one is written off, etc. The balance of materials is determined by subtracting the cost of materials written off from the total cost of materials received during the month (taking into account the balance at the beginning of the month).
2. The balance of materials at the end of the month is determined at the price of the last ones at the time of purchase. The cost of materials written off to production is determined by subtracting the resulting value from the total cost of materials received during the month (taking into account the balance at the beginning of the month).
Example 5
In the example, the figures are given without VAT.
At the beginning of the month, Electron LLC recorded the remains of black-and-white picture tubes in the amount of 28 pieces at a price of 892.86 rubles. per piece in the amount of 25,000 rubles. Within a month, Elektron LLC received kinescopes:
1st batch: 10 pieces at a price of 930 rubles;
2nd batch: 20 pieces at a price of 900 rubles;
3rd batch: 15 pieces at a price of 830 rubles.
Within a month, 60 kinescopes were put into production.
For greater clarity, we summarize all the data in a table.
Initial data
|
Number of units |
Price per unit, rub. |
Amount, rub. |
|
|
Balance at the beginning of period |
|||
|
Received for the period, total |
|||
|
including: |
|||
|
1st batch |
|||
|
2nd party |
|||
|
3rd party |
|||
|
Total including the balance at the beginning of the period |
|||
|
Released for production |
|||
|
Balance at the end of the period |
When using this method, the actual cost of kinescopes put into production will be:
1 option
In total, 60 kinescopes were put into production, and first the rest of the kinescopes at the beginning of the month (28 pieces) was completely written off, then the first incoming batch (10 pieces), the second (20 pieces), and the remaining quantity (2 pieces) were written off from the third batch. The cost of kinescopes put into production is:
28 pieces × 892.86 rubles. + 10 pieces × 930 rub. + 20 pieces × 900 rubles. + 2 pieces × 830 rub. = 53,960 rubles.
The actual cost of one kinescope is: 53,960 rubles / 60 pieces = 899.33 rubles.
The quantitative balance of kinescopes in the warehouse is: (28 + 45) - 60 = 13 pieces.
The cost of the rest of the kinescopes in stock: 13 pieces × 830 rubles. = 10,790 rubles.
As you can see, with this option, it is necessary to determine exactly which kinescopes from which batch make up the balance at the end of the month, since next month it is she (the third batch) that is the first to be written off.
Option 2
The balance of kinescopes at the end of the month is 13 pieces worth 830 rubles, therefore, its cost is 10,790 rubles.
The cost of kinescopes put into production is: (25,000 + 39,750 - 10,790 = 53,960 rubles.
The actual cost of 1 kinescope put into production is: 53,960 rubles. / 60 pieces = 899.33 rubles.
From the above examples, it can be seen that the cost of kinescopes put into production and their balance in stock are the same when using both options. In the second option, it is sufficient to accurately determine which batch of kinescopes the stock balance consists of, and the cost of kinescopes put into production is determined by calculation without necessarily attributing to a specific batch, while in the first option it is necessary to determine exactly which batches of kinescopes are written off and stay at the end of the month. This option becomes very time-consuming if, during the month, purchases of materials and components in the organization are made quite often.
Write-off of materials to production using the LIFO method
This method is based on the assumption that materials are released into production in the reverse order in which they were purchased. Materials from previously purchased batches are not written off until the last one is used up. With this method, materials put into production are valued at the actual cost of the materials that were last in terms of the time of acquisition, and the balance of materials at the end of the month is valued at the cost of the first in terms of the time they were acquired.
In the event that the first purchases of the batch are cheaper, and the subsequent ones are more expensive, the use of the LIFO method leads to an increase in the cost of production and a decrease in book profit. The balance of materials on account 10 "Materials" is reflected at lower prices.
If the prices of materials tend to decrease, then the situation is reversed.
There are two ways to determine the cost of materials written off to production using the LIFO method:
1. First, materials are written off at the cost of the last purchased lot, if the amount of written-off materials is more than this lot, the previous lot is written off, etc. The balance of materials is determined by subtracting the cost of materials written off from the total cost of materials received during the month (taking into account the balance at the beginning of the month).
2. The balance of materials at the end of the month is determined at the price of the first at the time of purchase. The cost of materials written off to production is determined by subtracting the resulting value from the total cost of materials received during the month (taking into account the balance at the beginning of the month).
Example 6
Consider the write-off of materials into production using the LIFO method, using the conditions of the previous example (see table).
1 option
In total, 60 kinescopes were put into production, and first the third batch (15 pieces) is completely written off, then the second incoming batch (20 pieces), the first (10 pieces), and the remaining quantity (15 pieces) are written off from the balance at the beginning of the month. The cost of kinescopes put into production is:
15 pieces × 830 rub. + 20 pieces × 900 rubles. + 10 pieces × 930 rub. + 15 pieces × RUB 892.86 = 53,142.90 rubles.
The actual cost of one kinescope is: 53,142.90 rubles. / 60 pieces = 885.72 rubles.
The cost of the rest of the kinescopes in stock: 13 pieces × 892.86 rubles. = 11,607.18 rubles.
Option 2
The balance of kinescopes at the end of the month is 13 pieces worth 892.86 rubles, therefore, its cost is 11,607.18 rubles.
The cost of kinescopes put into production is: (25,000 + 39,750) - 11,607.18 = 53,142.82 rubles.
The actual cost of 1 kinescope is: 53,142.82 rubles. / 60 pieces = 885.72 rubles.
N.S. Kulaeva, consultant-methodologist of CJSC "BKR-Intercom-Audit"
