Cost in accounting is the value expression of resources for various purposes spent on the production and sale of products or services. Planned and actual cost values are distinguished. The accounting of finished products is regulated by PBU 5/01, as well as by Order No. 119n of December 28, 2001.
Cost accounting procedure
The actual cost is taken into account based on the amount of actual costs for manufacturing products using the direct reflection method on the account. 43 “Finished products”. The cost price is formed based on the results of the reporting period, for example, the month, when the company’s expenses become known - direct (materials, wages, depreciation, etc.), as well as indirect (general business and/or general production). Before the end of the period, when products are released or transferred to the organization's warehouse, it is not possible to determine and calculate the cost, which is the main disadvantage of this method in contrast to accounting based on planned indicators.
Note! When accounting for the production of products at actual cost and the need to determine values earlier than the end of the reporting period, methods for calculating cost based on average indicators can be used; per unit of production; FIFO or LIFO method.
The basis for reflecting products are the following documents - acceptance certificates, release sheets, delivery notes. Analytical division into account. 43 is not required. This technique greatly facilitates accounting for the production of finished products.
Examples of postings based on actual cost:
- D 43 K 20 – reflects the release of finished products from the main production shops. Item-by-item costs are collected in the account analytics. 20.
- D 43 K 23 – reflects the release of finished products from auxiliary production shops. Item-by-item costs are collected in the account analytics. 23.
- D 43 K 29 – reflects the production of finished products from service farms and industries. Item-by-item costs are collected in the account analytics. 29.
- D 10 K 20 (23, 29) - reflects the release of products intended not for sale, but for use in the organization.
Formation of cost - posting
Accounting for finished products of an enterprise according to planned (standard) indicators can be carried out using an account. 40 “Release of products/works/services” or without it. The method used must be fixed in the company’s accounting policy.
Cost written off. Postings using accounts. 40
D 43 K 40 – reflects the output of finished products according to planned indicators.
D 90.2 K 43 - reflected in the implementation of the write-off of cost according to planned indicators.
D 40 K 20 (23, 29) – the actual cost has been generated.
D9 0.2 K 40 – reflects overexpenditure when actual and planned indicators deviate.
Reversal D 90.2 K 40 – savings are reflected in case of deviation of planned and actual indicators.
Postings without using an account. 40
Main posting: D 43 K 20 – products are reflected at planned prices.
When selling: D 90.2 K 43 – the cost of sales is reflected at actual prices.
Deviation from actual cost indicators is formed at the end of the reporting period by postings D 90.2 K 43 for the amount of overruns or reversal D 90.2 K 43 for the amount of savings.
In simple words, cost is the cost expression of an enterprise’s costs for producing goods, providing services or performing work. In accounting, the cost price is recorded in different accounts depending on the type of activity of the company. For formulas and calculation examples, see the article.
What is cost
Cost is the valuation of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources and other costs for its production and sales used in the production of products (works, services). So what is cost in simple words? This is the cost expression of a company’s costs for producing goods, providing services, and performing work.
The cost of production includes various types of costs that are either associated with production or independent of the production process. The order in which costs are reflected in accounting will depend on what type of activity the organization is engaged in and what cost estimation method it uses.
In which accounts should the cost be taken into account in accounting?
Depending on the main type of activity, accounts 20, 21, 23, 25, 26, 28, 29, 40, 43 are used to account for cost in accounting (Chart of accounts, approved by order of the Ministry of Finance of Russia dated October 31, 2000 No. 94n).
For example, a manufacturing company accounts for costs on account 20 “Main production”. They are stored in this account until they lead to the final result - the finished product. Accountants call the balance of account 20 the actual cost of production.
What methods exist for calculating product costs?
Elena Popova answers,
State Advisor to the Tax Service of the Russian Federation, 1st rank
« Costs associated with the production of products should be taken into account on account 20 “Main production”. In this case, use the following costing methods or combinations thereof:
In the activities of manufacturing companies, costs also arise that cannot be directly attributed to a specific type of finished product, but they are also taken into account in calculating costs. This is, for example, the cost of materials and spare parts that go into servicing and repairing equipment used in the production of all types of products. Such expenses are collected on account 25 “General production expenses”.
In order to correctly calculate the cost of each type of product, overhead costs are taken into account separately for each workshop or division of the company. For analytical accounting, a cost accounting sheet is used. The data for it is taken from the primary source. For example, statements of distribution of materials, wages, services of auxiliary production, calculation of depreciation of fixed assets.
Auxiliary divisions of the company (transport service, repair shop, etc.) form the cost of production in accounting on account 23 “Auxiliary production”. At the end of the reporting period, the expenses of auxiliary workshops are written off to the cost of finished products in proportion to the number of products or services produced.
Non-manufacturing companies, with the exception of trading ones, use account 26 “General business expenses” to formulate costs. For example, commission agents, agents, brokers, dealers, etc.
The cost of defective products is reflected in account 28 “Defects in production”. Analytics is carried out by structural divisions, types of products, expense items, causes and culprits of defects.
Sometimes, to form the cost in accounting, companies also use account 21 “Semi-finished products of own production.” It is used by organizations that produce not only goods ready for use or consumption, but also semi-finished products.
Account 43 “Finished products” is used when finished products are accounted for at actual cost. If standard or planned accounting is used, then additional account 40 “Output of products (works, services)” can be used. On account 40, products will be accounted for at planned cost, and then written off to account 43 at actual cost.
Accounting for finished products at actual cost
It is impossible to determine the actual cost within a month. After all, it includes all the costs of the enterprise that arise during the production process: general production and material costs, depreciation, wages, etc. Therefore, at the time of transfer to the warehouse, finished products can be capitalized in a preliminary estimate or at zero cost.
Accounting for finished products at standard cost
When the product is ready, it is moved from the workshop to the warehouse. At the same time, the accountant credits these products to account 43 at standard cost. It is set in advance by economists, technologists or other company specialists responsible for calculating these indicators.
Capitalization of goods at book value is the rarest method. At account 41, goods are accepted at discounted prices. The company can set any value as the accounting price. For example, contractual or planned prices, the actual cost of goods for the previous reporting period and other indicators.
What is included in the cost
The cost of products sold, products, services, goods includes various types of expenses. The cost includes the following costs:
- related to the manufacture of products, the purchase of goods, the performance of work, the provision of services;
- with the provision of property for rent, rights to use the results of intellectual activity, participation in the authorized capital of other organizations (provided that the direction relates to the main type of activity);
- amounts of deviations, claims, incentive payments recognized as part of revenue under construction contracts in previous reporting periods, if there are doubts about receipt;
- other expenses.
Reason - paragraphs 4, 5, 9 PBU 10/99, paragraphs 11, 22, paragraph 3 of paragraph 23 PBU 2/2008.
Expenses are calculated based on the contract price taking into account the discount, no matter in what form it is provided (clauses 6.1, 6.5 of PBU 10/99, Appendix to Letter of the Ministry of Finance of Russia dated 02/06/2015 No. 07-04-06/5027). On accounts 20 - 29, expenses are grouped by item and place of occurrence.
Postings at cost in accounting
See the table for the main entries for cost accounting in accounting.
|
Wiring |
Decoding |
|
Debit 20 Credit 02, 10, 16, 70, 69, 71, 60, 76, 28, 21, 29, 79, 23, 25, 26 |
Accumulated actual expenses of the main workshops |
|
Debit 43 Credit 20, 23 |
Finished products of the main, auxiliary and service shops and divisions were capitalized at actual cost |
|
Debit 90 subaccount “Cost of sales” Credit 43 |
The cost of products is written off at the time of sale |
|
Debit 43 Credit 40 |
Finished products are accepted for accounting at standard cost |
|
Debit 40 Credit 20 |
Accrued actual cost of finished products |
|
Debit 90 subaccount “Cost of sales” Credit 40 |
The amount of excess of the actual production cost of finished products over its standard cost is reflected. |
|
Debit 20 Credit 23 |
Reflects the amount of the actual cost of completed production of auxiliary production products allocated to the main production |
|
Debit 20 Credit 29 |
Reflects the amount of the actual cost of completed production of service production products when they are sold to third parties |
Accounting for expenses of enterprises producing products (performing work, providing services)
Manufacturing organizations divide costs into direct and indirect. Direct debits to account 20 from the credit of cost accounts that are directly related to production. Analytical accounting for account 20 is carried out by types of costs and types of products (works, services). Indirect expenses are collected on accounts 25, 26, 23, 29. They are written off to the debit of account 20 from the credit of accounts 25, 26, 23, 29.
Manufacturing organizations include all expenses recorded on account 20 in the cost of finished products. At the same time make a note:
Debit 43 Credit 20
- finished products released.
The cost of finished products sold to customers is written off to the debit of account 90, subaccount “Cost of sales”.
Companies that carry out construction work or provide services write off the costs recorded on account 20 to the debit of account 90, subaccount “Cost of sales”.
The products produced (work performed, services provided) of the organization are valued at full or reduced cost. The procedure for generating cost and its accounting depends on the chosen valuation method.
Accounting for products (works, services) at full cost
When accounting for products (works, services) at full cost, costs include direct and indirect costs. Indirect expenses are taken into account in accounts 25 and 26. At the end of the month, the accountant writes them off to the debit of account 20. With this accounting method, costs on account 26 can be attributed directly to the debit of account 90, the “Cost of sales” subaccount.
Example:Cost accounting in construction organizations
LLC "Contractor" performs construction work. Work is accounted for at full cost. Revenue under the contract is 300,000 rubles. (including VAT - 45,763 rubles). Expenses - 200,000 rubles, of which direct - 100,000 rubles, general production - 60,000 rubles, general business - 40,000 rubles.
The accountant will make the following entries:
Debit 62 Credit 90 subaccount "Revenue"
- 300,000 rubles, - revenue from the work is reflected;
Debit 90 subaccount "VAT"
- 45,763 rubles, - VAT is charged on revenue;
Debit 20 Credit 02 (10, 69, 70...)
- 100,000 rubles, - direct expenses are taken into account;
Debit 25 Credit 02 (10, 69, 70...)
- 60,000 rubles, - general production costs are taken into account;
Debit 26 Credit 02 (10, 69, 70...)
- 40,000 rubles, - general business expenses are taken into account;
Debit 20 Credit 25
- 60,000 rubles, - general production expenses are written off;
Debit 20 Credit 26
- 40,000 rubles, - general business expenses are written off;
Debit 90 Credit 20
- 200,000 rub. (100,000 + 60,000 + 40,000), - the full cost of the work performed is written off;
Debit 90 subaccount “Profit from sales”
Credit 99
- 54,237 rub. (300,000 - 45,763 - 200,000) - profit is reflected.
Accounting for products (work, services) at reduced cost
In a system of accounting for products (works, services) at a reduced cost, production costs include only direct costs. The accountant monthly writes off indirect expenses (general production and general business expenses) to the debit of account 90 the subaccount “Cost of sales” in full, bypassing account 20.
Example of reflection in cost accounting:
Cost accounting in trade organizations
Trade organizations account for goods in two ways:
- at actual cost
- at sales prices (retail sales only).
When accounting for goods at actual cost, the accountant makes the following entry:
Debit 90 subaccount “Cost of sales” Credit 41
— the actual cost of goods sold is written off.
When accounting for goods at sales prices, the cost of goods sold is written off minus the trade margin from the credit of account 41 “Goods” to the debit of account 90 subaccount “Cost of sales”. The accountant makes the following entries:
Debit 50 Credit 90 subaccount “Revenue”
-
revenue received from the sale of goods at retail;
Debit 90 subaccount “Cost of sales” Credit 41
-
the cost of goods sold is written off;
Debit 90 subaccount “Cost of sales” Credit 42
-
markup reversed;
Debit 90 subaccount "VAT" Credit 68 subaccount “VAT calculations”
-
VAT has been charged.
The cost of products (works, services) is the valuation of natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources used in the production process of products (works, services), as well as other costs for its production and sale.
How is cost taken into account?
The main accounting accounts on which costs associated with the formation of product costs are collected are (Order of the Ministry of Finance dated October 31, 2000 No. 94n):
- production cost accounts (accounts 20-29);
- account 44 “Sales expenses”.
So, for example, in the credit of account 20 “Main production” the amounts of the actual cost of completed products, works and services performed are reflected. These amounts are debited to accounts 43 “Finished products”, 40 “Product output”, 90 “Sales”, etc.
Cost: wiring
The actual cost of wiring may vary. If the cost price is written off when selling finished products, the postings may be as follows:
Debit account 90 “Sales” - Credit account 43 “Finished products” - to the actual production cost of finished products sold
Debit account 90 “Sales” - Credit account 40 “Product output” - for the standard (planned) cost of sold finished products, as well as the deviation of the standard cost from the actual production cost.
For accounts accounting for costs associated with sales, as well as costs of auxiliary and servicing production, entries at cost may be as follows:
Debit account 90 - Credit account 44 - Expenses for the sale of finished products are written off
Debit of account 20 - Credit of account 23 “Auxiliary production” - Reflects the amount of the actual cost of completed production of auxiliary production products sold to the main production
Debit of account 20 - Credit of account 29 “Service production” - Reflects the amount of the actual cost of completed production of service production products when they are sold to third parties.
The cost of goods is the total of all expenses incurred to manufacture and sell those goods. From this article you will learn how cost accounting is carried out in accounting.
The cost of production will be taken into account based on the total amount of all costs for the production of goods, reflected in account No. 43. The formation of the cost is carried out based on the results of the reporting period, when the costs of direct and indirect nature become known.
The main tasks of a cost accountant
When solving problems related to taking into account the cost of production, an accountant must:
- Registration in special journal of transactions for those costs that are included in the cost of goods;
- Calculation of the cost of goods;
- Use of books accounts to reflect transactions performed.
It is worth considering each of these actions of an accountant in more detail.
Registration of transactions
To reflect cost transactions, from the size of which the cost is formed, special registers are used in accounting. They must be such that the accounting employee has the opportunity to:
- Monitor the connection between costs that belong to different categories;
- Add up expenses to reflect the cost in accounting documentation.
The significance of the correct classification of accounting objects lies in its subsequent use in calculating the cost of production.
Cost calculation
Cost calculation in accounting can be calculated using one of four methods:
- Transverse (used for mass production of products);
- Showy (used by small companies that produce a small number of products);
- Boiler (used by companies that produce only one type of product);
- Regulatory (it is used by companies that produce a large number of different types of goods).
Use of books accounts
To reflect the costs from which the cost of manufactured goods is formed, the following accounts are used. counts: 20, 23, 26, 28, 21 and 25.
These accounts can correspond with the following accounts:
- 10 – write-off of materials for production;
- 69, 70 – inclusion in costs of expenses for contributions to insurance funds and wages of employees;
- 02, 05 – accrued depreciation on fixed assets.
Postings for cost accounting
The actual cost of wiring may vary. Let's consider the main ones:
- D43 – K20 – reflection of the production of goods from the main production shops.
- D43 – K23 – production of products in additional production shops.
- D43 – K29 – production of products by service industries and farms.
- D10 – K20, 23, 29 – production of goods for the company’s own needs.
- D43 – K40 – production of products according to planned indicators.
- D90-2 – K43 – write-off of cost according to planned indicators (when selling goods).
- D40 – K20, 23, 29 – formation of the actual cost of production.
- D90-2 - K40 - a reflection of overexpenditure in a situation where there was a deviation of real and planned indicators.
- D43 – K20 – reflection of goods at planned prices.
- D90-2 – K43 – cost of goods when sold at actual prices.
Today we'll figure it out account 20 “Main production”. Why is it needed, what is taken into account on it. Which entries in account 20 reflect the accounting of production costs. For greater clarity, examples of cost accounting and cost formation on accounts are given. 20. In this article we will look at accounting for production costs, typical transactions and situations for account 20.
Account 20 records the costs of the main production, that is, all the organization’s expenses related to production are reflected.
What is production? In fact, production is the process of creating the cost of finished products, and the cost of finished products is, as we found out in, the sum of all costs associated with production and sales. All these costs are collected in the debit of the account. 20 “Main production”, forming the cost.
Accounting for production costs (account 20)
Now let's talk about exactly what costs are taken into account as the debit of account 20, and what entries are reflected in accounting.
- Direct costs, that is, those that are directly related to the production process. It could be (wiring D20 K70), used in production (wiring D20 K10), participating in the production process (posting D20 K02), social contributions from staff salaries (posting D20 K69).
- Auxiliary production costs. An example of an auxiliary production could be a company’s own boiler room; the costs of its maintenance are taken into account in the debit of the account. 23 “Auxiliary production”, then the amount of all these costs is written off to the debit of the account. 20 “Main production” (posting D20 K23).
- Indirect costs, that is, those associated with the management and maintenance of production, are written off from the credit of accounts 25 “General production expenses” and 26 “General expenses” (entries D20 K25 And D20 K26).
- Defects in production are products, parts and work that do not meet established quality standards and cannot be used for their intended purpose. We’ll talk more about defects in production in. For now, I’ll just say that the defect is taken into account and written off as a debit to the account. 20 “Main production” (posting D20 K28).
Accounts 23 “Auxiliary production”, 25 “General production expenses”, 26 “General expenses” are not always used by the enterprise. These are intermediate, auxiliary accounts; they are convenient to use in large production. If the company has a small production, then there is no point in entering additional accounts; all costs can be taken into account immediately on the account. 20.
Thus, it was determined that according to the debit of the account. 20, all costs associated with the main production are taken into account, that is, the cost of finished products is formed.
This cost is then written off from the credit account. 20 to the debit of the account. 40, 43 or 90.
If the cost of finished products is taken into account at standard (planned) cost, then all expenses from the credit account. 20 are debited to the account. 40 “Release of products, works, services” (posting D40 K20).
If the cost of finished products is taken into account at the actual (production) cost, then all expenses from the credit of account 20 are written off to the debit of account 43 “Finished products” (posting D43 K20).
Products can also be immediately sent for sale, bypassing product accounts, then posting D90/2 K20.
At the end of the month, account 20 “Main production” is closed, the balance on account 20 reflects the value of work in progress, this balance is transferred to the beginning of the next month.
To reinforce the above information, I suggest looking at a couple of examples.
Video lesson Accounting for production costs. Account 20. Postings and typical examples
In this video lesson, Natalya Vasilyevna Gandeva, an expert teacher at the site “Accounting for Dummies,” explains accounting for production costs, account 20 with a description of typical entries and examples ⇓
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You can get the slides and presentation for the lesson using the link below.
Examples of production cost accounting entries
Example No. 1 of posting cost accounting in production
The organization provides services, revenue for services is 36,000 rubles. including VAT 6000 rub. Expenses associated with the provision of services: salary 8,000 rubles, material expenses 2,000 rubles. What entries are reflected in the accounting department?
Sum | Debit | Credit | Operation name |
Salary expenses included |
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Material costs taken into account |
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The cost of services for sale has been written off |
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Services provided |
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VAT charged on services provided |
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The financial result is reflected (in this example, profit) |
Example No. 2 of posting cost accounting in production
The company produces irons. Material expenses are 180,000 rubles, employee salaries are 200,000 rubles. Depreciation 90,000 rub. Other expenses 50,000 rub. The products are credited to the finished goods warehouse at actual cost in the amount of 1000 pieces. What kind of wiring is done in this case and what is the cost of one iron?
Cost of one iron = (180000 + 200000 + 90000 + 50000) / 1000 = 520 rubles.
I hope the issue of accounting for the costs of main production no longer causes difficulties, let's move on. In the next article we will continue the topic of production, we will deal with.
