Every business enterprise strives to ensure that its work no downtime, which may adversely affect the financial results.Such smooth operation implies that at the end of the reporting period in the processing of the remainder have some work in progress.The correctness of the calculation of the value of the finished product depends on how correctly determine the amount of unfinished products.It is important to evaluate these data correctly, because they depend on the size of tax payments and many other indicators.
What is a work in progress
By definition, a work in progress - it is the products, goods or products that have not undergone the necessary processing steps are provided for the technology.Thus, it may refer to the following products:
- raw materials and intermediates, processing of which has already been launched with the aim of turning them into finished products;
- undersized products;
- products that have not undergone the necessary technical acceptance or test;
- finished works (services), which have not yet been accepted by the customer.
other words, work in progress in accounting - is the cost trend in the production costs (materials, resource consumption, depreciation, accrued employee salaries) and other costs of production, the production of which has already begun, but the balance sheet date has not yet beenending.This
the costs collected on the end of the period, is not charged to other accounts, as well as it is in the relevant production account (for example, 20 or 23).And even if in the reporting period there was no production, but the costs are incurred, such costs will be considered as work in progress.Subsequently, they will be charged to the cost of the finished product.With the concept of "work in progress" faced by even those businesses that are engaged in trade or services and does not produce any products.Costs incurred during the reporting period will be treated as work in progress until such time has not yet realized the sale of goods (services).
volume of work in progress, and its composition is quite different for companies in various industries.The duration of the production cycle and the sum of costs can vary greatly depending on the nature and organization of items of the industrial process.Therefore work in progress in accounting of different companies can be considered different from each other ways.
For companies with a long production cycle and provides comprehensive services (design, research, construction, etc.) The sale may be recognized as follows:
- upon completion of all work and signing the necessary documents;
- as you complete each stage of work.
In most cases, the first option.
Work in progress in accounting is found in the ground and in the secondary production, as well as in serving households.Accordingly, using information collected by the same name in the following accounts:
- through 20;
- through 23;
- by 29.
debit balances of these accounts at the end of the month - this is a work in progress in the enterprise.
the second case, provided by 46 "Completed stages of unfinished work."According to the bank collects information about completed stages of the works, each of which has independent meaning and provided the concluded agreement.
Possible accounting entries involving accounts:
|accounting entries||Contents business transaction|
AT 46 - CR 90/1
|Revenue recognition for the amount of the value of one of the stages of work whencustomer payment|
AT 62 - 46 Km
|written off the customer paid the full cost of all work after the completion of all stages|
Work in progress in accounting trade companies suggests the remains unsold goods and attributable to its share of the costs.
In its work, the firm-seller faces a number of costs: the purchase of goods, costs associated with the provision of commercial services (space rental, advertising costs, staff salaries, travel expenses, etc..).In the trade, these costs are called distribution costs.In the presence of unsold goods at the same time can not completely write off the costs, incurred during the reporting period.The amount of these costs should be allocated, with the proportion attributable to the rest of unsold goods remain on the account 44 "Selling expenses".
in Russian legislation considered several options WIP valuation.All of them are spelled out in paragraph 64 PVBU.Thus, we consider them in order.
calculation using the actual cost
Extremely accurate method.In this case, going to all the costs that are associated with the release of products.Its essence lies in the fact that the number of units of the refinery, available at the end of the month is multiplied by the calculated average cost per unit of the refinery.
calculation using the standard (or planned) cost
This method assumes that economists expect an enterprise (planned) price per unit of WIP.Plus this method is that if you use accounting prices evaluation work in progress as the process is greatly simplified.The downside can be considered a time-consuming process of calculating the cost of the finished product for release.Deviations between the accounting and actual cost prices WIP is necessary to consider the account 20.
calculation using the direct cost items
special way that in the cost of work in progress are sent only to the sum of the direct costs that are directly attributable to the production of.All other costs are transferred to the cost of finished goods.A list of these costs defined accounting policy.
calculation of the cost of raw materials used
This method is similar to the previous one, with the difference that included only the cost of the value allotted to the production of raw materials (including semi-finished products).
However, these methods are not available to all organizations.Estimation method selection normally depends on the type of production.Companies engaged in the production of a single piece and is available only on the actual cost accounting.Organizations with a mass and mass production are able to choose any of the four methods of accounting.
Cost of WIP
Cost of work in progress - the amount of money spent on the creation of products (works, services), which at the end of the reporting period is still being processed.
Calculate the cost - absolutely necessary process.Data on the value of work in progress and finished to output required in the preparation of financial statements.Do not do without them, and in the formation of price and assortment policy of the enterprise.
To understand how interconnected concepts work in progress and the cost of the finished product, it is worth considering the following formula:
- SE = WIP (Balance at beginning of period) + Costs - WIP (Balance at end of period).Where:
GP - the cost of manufactured products in the actual evaluation;
costs - the costs of production for the month (debits, 20);
WIP - residues, respectively, at the beginning or end of the month in a row 20.
Calculate the cost of WIP
When operating cost is worth remembering about planning and regulation costs.This will require cost-sharing on the various components in order to analyze the structure and control of the change in the value of each.In domestic practice, apply the classification according to various criteria.In one of them there is division of the costs of economic elements, and the other - to articles costing.
Composition economic elements set PBU 10/99, it is the same for all business organizations:
- cost of raw materials;
- amount of wages;
- social contributions;
- other expenses.
course typically work in progress are not limited to this list.List of Articles of calculation more extensive and is determined by the enterprise independently, depending on the nature of production.However, the legislation proposed by the typical range, which includes the following items:
- own raw materials;
- purchased semi-finished products or services provided by;
- recyclable waste (deducted string);
- energy and fuel for technological purposes;
- wages of production workers;
- mandatory payments and contributions to social funds;
- costs associated with the preparation and development of production;
- overhead expenses (maintenance of main and auxiliary facilities);
- general expenses (costs associated with the management);
- losses from marriage;
- other production costs;
- costs of implementation (so-called business expenses).
first 11 rows form a production cost.In order to calculate the full cost of manufactured products need to add up all the 12 articles.
For effective management of expenses is useful to apply the two categories described.
No records management can not guarantee the absolute accuracy of the accounting data.In order to clarify their organization conducted an inventory.The order of its defined guidelines.Before the inventory in warehouses rented all materials, components or semi-finished products for which treatment at this stage is completed.Other raw materials that already have jobs, but the processing of which has not yet begun, is recorded separately.The same applies to defective parts, the rest of their work in progress can not be attributed.
Under current guidelines, an inventory shall be required prior to the preparation of the annual balance sheet.In addition, depending on the specific production, the company conducted its quarterly or monthly.
Assigned standing committee, approved by order of the head, makes an inventory by weighing, peremerivaniya and actual count.For each separate structural division constitutes a separate list, which specifies the name of stocks, their stage or degree of readiness, volume or quantity.Thus, to determine the exact remnants of unfinished production at the plant.
When the inventory of work in progress is over, completed acts are transferred to the accounting department for processing.If any discrepancies from the credentials filled collation statements, and any excess or deficiency recorded the relevant accounting entries.The Commission should identify the perpetrators and the causes of deviations found to determine the order of write-off of these sums.
|accounting entries||Contents business transaction|
AT 94 - Km 20
|debiting the amount detected in inventory shortages within the norms of natural loss|
AT 94 - CR73/2
AT 20 - 94 Km
|debiting the amount of shortage, which was caused by personnel|
AT 94 - 91 Km
AT 20 - 94 Km
|written off shortfalls in the case where the perpetratorsFound|
AT 20 - 91 Km
|actual balance of work in progress does not correspond to the accounting data.Identified and capitalized surplus|
Reducing the amount of work in progress is useful in that it contributes to the acceleration of the turnover, which, in turn, directly positive effect on the turnover and profit.This can be achieved by reducing the duration of the production cycle in the optimization of production and labor in the enterprise.At the same stocks in progress, their size and composition should be formulated so as to ensure maximum continuity and rhythm of the industrial process.The determination of these values is called the valuation of work in progress.
ratio of work in progress - this is the minimum amount of working capital that is capable of providing a continuous and uniform operation of the enterprise.This value should always be available to the company.For its calculation the following formula exists:
- WIP = Volume sr.sut x length x Odds cycle.rise where:
volume sr.sut - production costs per day (in monetary terms);
cycle length - the length of the production cycle (measured in days);
Koef.narastaniya - the coefficient of increase of expenses.
Thus, it is clear that the standard of work in progress is directly proportional to the volume of production enterprises, the duration of the industrial cycle and the degree of increase of expenses.
consider more content formula.
average daily production volume is determined by dividing the value of output for the year by the number of working days per year.Obviously, the time schedule of the enterprise directly affects the total amount.
By length is meant the cycle time required for production direction materials (materials) were converted into finished products.
factor of growth indicates the degree of readiness of products and is calculated using the ratio between the average cost of WIP to the production cost of the SE.
- Coefficient.Rise = Cost of WIP average.: Cost of GP production.
This is not all the information that may be required to calculate the required reserves in progress.Experienced economists remember that too low amounts can cause that the work "will rise", a shortage of resources up to the failure of the enterprise in a timely manner to pay its liabilities.But excess reserves could lead to the fact that the funds that could "turn around" and generate income, come to "freeze".Hence the possibility of loss, decline in profitability and the increase in the amounts of payments of various taxes.
Work in progress.Asset or liability?
WIP meets all the necessary criteria to be considered an asset - it is a resource (property) owned by the company in the long term and able to bring tangible benefits.In turn, as we remember, the asset balance sheet is divided into two major parts: the long-term (non-current) and short-term (current) funds.
Work in process is often one of the main components of working capital.This work in progress in the balance sheet is not displayed separately.It provides information in the section "Current assets", the line "Inventories" (1210).This line includes the collecting information on the following points:
- prepaid expenses (BPO);
- goods shipped;
- work in progress;
- finished products;
- goods for resale;
- other reserves and costs.
For companies with a long production cycle, it is possible to display the WIP in the section "Non-current assets".
Work in progress can be reflected in the balance sheet and as a separate line.