What is work in progress, how to evaluate it for the purposes of accounting and tax accounting, what legal norms should be followed in this case? About this and many other things our topic of the issue.

Accounting

According to paragraph 63 of the Regulation on accounting and financial reporting in the Russian Federation, approved by Order of the Ministry of Finance of Russia dated July 29, 1998 No. 34n (hereinafter - Order No. 34n), work in progress is a product that has not passed all stages (phases, redistributions) of technological process, as well as incomplete products not subjected to testing and technical acceptance.

Accounts 20-29 are used to account for the costs of producing products (works, services) in accordance with the Instructions for the use of the Chart of Accounts. With the use of these accounting accounts, expenses are grouped by items, places of occurrence and other characteristics, as well as the cost of products (works, services) is calculated (commentary to section 3 of the Instructions for the use of the Chart of Accounts).

At present, enterprises have the right, when choosing the procedure for accounting for the costs of production of products (works, services), to use the current industry instructions for accounting for production costs and calculating the cost of products (works, services), which are applied to the extent that they do not contradict the current regulatory documents on accounting . This approach is recommended by the chief financial department in Letter No. 16-00-13/03 dated April 29, 2002 “On the application of regulatory documents governing the issues of accounting for production costs and calculating the cost of products (works, services)”.

The balances of accounts 20 "Main production", 23 "Auxiliary production", 29 "Service production and farms" at the end of the month show the cost of work in progress (comment to the relevant accounts of the Instructions for the application of the Chart of Accounts).

The attribution of losses from defective products to the cost of work in progress is generally not allowed, with rare exceptions in individual and small-scale production, provided that the losses from defects relate to a specific order that has not yet been completed.

REFERENCE

Losses from rejects are written off monthly to the cost accounting accounts (they are included in the cost of the product or type of work for which the reject is detected). Losses from external marriage related to products manufactured in the previous reporting period are written off to the cost of similar products manufactured in the current reporting period. In the absence of similar products in the reporting period, losses from external marriage are distributed among all manufactured products according to a method similar to the method of distribution of general business expenses.

Thus, the balances of work in progress at the end of the month are determined by calculation using the formula:

WIP \u003d (WIP initial + ZPtek.) - (GP + SB),

where:

Work in progress - the cost of work in progress at the beginning of the month;

ZPtec. — production costs in the current reporting period;

GP - the cost of finished products manufactured in the current reporting period;

SB - the cost of an irreparable marriage.

Based on paragraph 20 of PBU 4/99 “Accounting statements of an organization”, costs in work in progress should be reflected in the balance sheet in the group of articles “Inventories” in the “Current assets” section.

In the balance sheet, work in progress may be reflected:

1) in mass and serial production:

- according to the actual or standard (planned) production cost;

- direct cost items;

REFERENCE

Direct costs are directly related to a specific type of product (work, services) - these are the costs of raw materials and materials, the wages of production workers involved in the manufacture of products, together with deductions for social needs and other costs that can be attributed to the cost of production on the basis of primary documents.

Indirect costs are not directly related to the production of a specific product name, and therefore cannot be included in their cost directly, but are distributed indirectly (i.e. conditionally).

- at the cost of raw materials, materials and semi-finished products;

2) in case of a single production of products - according to the actual costs incurred (clause 64 of Order No. 34n).

When choosing a method for estimating the balance of work in progress, the method chosen by the organization for cost accounting and calculation of manufactured products will be of fundamental importance.

REFERENCE

The method of cost accounting and calculation is a certain relationship between methods and methods for reflecting and controlling production costs and calculating the actual cost of production.

In practice, the following main methods of cost accounting and calculation are used:

· order-by-order method (used in individual and serial and small-scale production), the object of cost accounting are individual orders that are opened for one product or a series of products. Direct costs are attributed directly to orders, and indirect costs are distributed in proportion to the accepted base for individual orders. Work in progress is valued, as a rule, at the actual or planned production cost. In industries characterized by a short production cycle, work in progress may be reflected in direct cost items;

· the progressive method (used in industries in which the production process consists of separate stages of the technological cycle with independent technology and organization of production), the object of cost accounting is the product of each redistribution, which is a semi-finished product for the subsequent redistribution. Operational accounting in the case of the cost accounting method is carried out in quantitative (natural) terms. Thus, the compliance of accounting and operational accounting data is usually determined only on the basis of an inventory of all material assets in production, i.e., an inventory of work in progress;

· the process-by-process method is a variation of the progressive method (used in the extractive industries and energy). Due to the specifics of these industries (characterized by a short technological cycle), work in progress in such industries is absent or insignificant.

WIP valuation method at actual cost

This assessment method is the most common.

Direct costs for the production of products (works, services) are recorded in the debit of accounts 20, 23, 29 in correspondence with accounts: 02 “Depreciation of fixed assets”, 10 “Materials”, 60 “Settlements with suppliers and contractors”, 69 “Calculations on social insurance and security”, 70 “Settlements with personnel for remuneration”, etc. Indirect costs recorded on account 25 “General production costs” (expenses for servicing the main and auxiliary production of the organization: expenses for the maintenance and operation of machinery and equipment; depreciation deductions and expenses for the repair of fixed assets and other property used in production; expenses for insurance of the said property; expenses for heating, lighting and maintenance of premises; rent for premises, machinery, equipment, etc. used in production; remuneration of employees, employed in servicing production; other expenses similar in purpose), at the end of the month are written off to the debit of accounts 20, 23, 29.

When choosing a method for writing off indirect expenses recorded on account 26 “General business expenses” (expenses not directly related to the production process: administrative and management expenses; maintenance of general business personnel not related to the production process; depreciation and expenses for the repair of fixed assets of management and for general economic purposes, rent for premises for general economic purposes, expenses for payment of information, audit, consulting, etc. services, other management expenses similar in purpose), a variance is possible, as stipulated by clause 9 PBU 10/99 "Expenses of the organization", Instructions for the use of the Chart of Accounts.

Depending on how general business expenses are written off, there are two options for forming the cost of products (works, services):

1) formation in accounting of the full production cost of products (works, services). In this case, the expenses recorded on account 26 are included in the cost of manufactured products (works, services) by analogy with general production expenses and are written off at the end of the month to the debit of accounts 20, 23, 29. In this case, work in progress is assessed taking into account management expenses ;

2) the formation of a reduced cost. General business expenses at the end of the month are written off in full to account 90 "Sales". In this case, management costs will not participate in the formation of the value of work in progress.

EXAMPLE 1

The organization produces and sells industrial products of the same type.

Over the past month, the amount of actual production costs amounted to 100,000 rubles, including:

- the cost of raw materials amounted to 40,000 rubles;

- wages and unified social tax of workers of the production workshop - 5000 rubles;

- depreciation of fixed assets for production purposes - 15,000 rubles;

- other expenses of the main production - 5000 rubles;

- general production costs - 15,000 rubles;

- general business expenses - 20,000 rubles.

There is no work in progress at the beginning of the month, at the end of the month it is 35,000 rubles.

The organization calculates the full production cost. WIP is valued at actual costs.

Debit 43Credit 20

— 65,000 rubles. - Finished products are credited to the warehouse.

EXAMPLE 2

Let's use the conditions of example 1. In this case, the organization calculates the reduced production cost of WIP is estimated at actual costs. All manufactured products are sold.

At the end of the month, the accountant needs to make the following entries:

Debit 20Credit 02, 10, 25, 60, 69, 70…

— 80,000 rubles. - reflects the costs in the main production

Debit 90Credit 26

— 20,000 - general business expenses are included in the cost of goods sold

Debit 43Credit 20

— 45,000 rubles. - Finished goods received at the warehouse

Debit 90Credit 43

— 45,000 rubles. - Finished products sold.

Other WIP valuation methods

If an enterprise uses other methods when evaluating work in progress (by direct cost items, by cost of raw materials and materials, by standard (planned) indicators), costing items that are not involved in the assessment of work in progress, and the amount of deviations of standard (planned) indicators from actual ones are subject to inclusion in the cost of finished products (works, services) (debit of account 43 “Finished products” or 90 “Sales”).

EXAMPLE 3

Let's use the conditions of example 1. In this case, the organization calculates the full production cost. WIP is valued at the cost of raw materials and materials. There is no work in progress at the beginning of the month, at the end of the month it is 35,000 rubles, including the cost of raw materials - 10,000 rubles.

At the end of the month, the accountant must make the following accounting entries:

Debit 20Credit 02, 10, 25, 26, 60, 69, 70…

- 100,000 rubles. - reflects the costs in the main production

Debit 43Credit 20

— 90,000 rubles. - Finished products are credited to the warehouse.

REFERENCE

To calculate the cost of certain types of products, the costs are grouped and accounted for by costing items. Each article defines the purpose of a particular type of cost in the production process.

WIP inventory

An inventory of work in progress is carried out in the manner prescribed by the Guidelines for the inventory of property and financial obligations, approved by Order of the Ministry of Finance of Russia dated June 13, 1995 No. 49 (hereinafter - the Guidelines).

When inventorying work in progress, the following are determined (see clause 3.27 of the Guidelines):

- the actual number of backlogs (parts, components, assemblies) and unfinished manufacturing and assembly of products that are in production;

—actual completeness of work in progress (backlogs);

— the balance of work in progress on canceled orders, as well as on orders whose execution has been suspended.

The results of the inventory are documented in documents drawn up according to the forms approved by the Decree of the Goskomstat of Russia dated August 18, 1998 No. 88 and the Decree of the Goskomstat of Russia dated March 27, 2000 No. 26.

When accounting for work in progress at actual cost, the purpose of the inventory is to establish the actual balances of work in progress at the end of the month for reconciliation with accounting data.

When using other methods of accounting for work in progress, the results of the inventory are used as a source of initial data to determine the cost of work in progress and finished products (works, services).

tax accounting

An organization that determines income and expenses on an accrual basis, when accounting for production and sales costs, applies the provisions of Art. 318 of the Tax Code of the Russian Federation.

In this case, the production and sales costs incurred during the reporting (tax) period should be divided into direct and indirect.

It should be noted that, unlike the previous (before January 1, 2005) order, the list of direct costs is open and the organization independently determines in the accounting policy for tax purposes a list of direct costs associated with the production of goods (performance of work, provision of services).

— material costs, determined in accordance with sub. 1 and 4 paragraph 1 of Art. 254 of the Tax Code of the Russian Federation;

— labor costs of personnel involved in the process of production of goods, performance of work, provision of services, as well as the amount of the unified social tax and the cost of mandatory pension insurance used to finance the insurance and funded part of the labor pension, accrued on the indicated amounts of labor costs ;

— the amount of accrued depreciation on fixed assets used in the production of goods, works, services.

Indirect expenses include all other amounts of expenses, with the exception of non-operating expenses, determined in accordance with Art. 265 of the Tax Code of the Russian Federation, carried out by the organization during the reporting (tax) period.

At the same time, the amount of indirect expenses for production and sale, carried out in the reporting (tax) period, is fully related to the expenses of the current reporting (tax) period. In a similar manner, non-operating expenses are included in the expenses of the current period.

Direct costs relate to the costs of the current reporting (tax) period as the sale of products (works, services), in the cost of which they are taken into account in accordance with Art. 319 of the Tax Code of the Russian Federation.

The changes made to Art. 318 of the Tax Code of the Russian Federation by the Law of 06.06.2005 No. 58-FZ, are aimed at convergence of accounting and tax accounting. Thus, enterprises have the opportunity to bring tax accounting closer to accounting in terms of the procedure for forming the value of work in progress.

ATTENTION!

If the company does not use the recommended list of direct costs and there will be a difference between the procedures for dividing costs into direct and indirect in accounting and tax accounting, the company will have to provide reasoned evidence of the economic feasibility of classifying certain costs as direct or indirect in tax accounting ( naturally, in the case when the list of direct expenses in tax accounting is less than in accounting).

So, the expenses of the current reporting (tax) period include direct expenses for sold products (works, services).

These cannot include direct costs attributable to the balance of work in progress.

It should also be noted that organizations providing services have the right to attribute the amount of direct expenses incurred in the reporting (tax) period in full to the reduction of income from production and sales of this reporting (tax) period without distribution to the balance of work in progress.

Considering the provisions of Art. 318 and 319 of the Tax Code of the Russian Federation, the algorithm for calculating direct costs related to the costs of the current reporting (tax) period can be represented as the following formula:

PRRtm=ONPnm+PRRtm-ONPkm-OGPSkm-OGPOkm,

where:

РРртм - direct expenses related to the expenses of the current month;

ONPnm - direct costs attributable to the balance of work in progress at the beginning of the current month;

РРртм - direct expenses incurred by the organization in the current month;

ONPkm - direct costs attributable to the balance of work in progress at the end of the current month;

OGPSkm - direct costs attributable to the balance of finished products in stock at the end of the current month;

OGPOkm - direct costs attributable to the balance of products shipped, but not sold at the end of the current month.

Since the procedure for evaluating the balances of finished products in the warehouse at the end of the current month and the balances of products shipped but not sold at the end of the current month has not changed, let us dwell in more detail on the procedure for evaluating the balances of work in progress, established from January 1, 2006.

According to paragraph 1 of Art. 319 of the Tax Code of the Russian Federation under work in progress for the purposes of Ch. 25 of the Tax Code of the Russian Federation is understood as products (works, services) of partial readiness, that is, they have not passed all the processing (manufacturing) operations provided for by the technological process. Work in progress includes works and services completed but not accepted by the customer. Work in progress also includes the remains of unfulfilled production orders and the remains of semi-finished products of own production. Materials and semi-finished products in production are classified as work in progress, provided that they have already been processed.

The assessment of the balances of work in progress at the end of the current month is made on the basis of data from primary accounting documents on the movement and balances (in quantitative terms) of raw materials and materials, finished products by workshops (productions and other production divisions of the organization) and tax accounting data on the amount carried out in the current month of direct expenses.

At the same time, it is provided that the taxpayer independently determines the procedure for distributing direct costs for work in progress and for products manufactured in the current month (work performed, services rendered), taking into account the compliance of the costs incurred with manufactured products (work performed, services rendered). The specified procedure for the distribution of direct costs (formation of the value of work in progress) is established in the accounting policy for tax purposes and is subject to application for at least two tax periods. If it is impossible to attribute direct costs to a specific production process for the manufacture of this type of product (work, service), the accounting policy for tax purposes also determines the mechanism for distributing these costs using economically justified indicators.

Thus, in contrast to the previously established normative procedure for assessing the balances of work in progress, the current version of the Tax Code of the Russian Federation gives taxpayers almost complete freedom of action. In this regard, it seems to us appropriate to fix in the accounting policy of the organization for tax purposes the procedure for estimating the balances of WIP, corresponding to the rules applied for accounting purposes.

As in accounting, in tax accounting, expenses are divided into direct and indirect (clause 1, article 318 of the Tax Code of the Russian Federation). However, these are completely different concepts. If in accounting direct costs are understood as such costs that are directly (in particular, without distribution) included in the cost of production, then in tax accounting direct costs are understood as all costs that are included in the tax cost of products.

The taxpayer independently determines in the accounting policy for tax purposes a list of direct costs associated with the production of goods (performance of work, provision of services) (clause 1 of article 318 of the Tax Code of the Russian Federation). Accordingly, they relate to the expenses of the current reporting (tax) period as products are sold (clause 2, article 318 of the Tax Code of the Russian Federation). The procedure for including direct costs in the balance of work in progress, the balance of finished products, goods shipped is established by Art. 319 of the Tax Code of the Russian Federation.

For the purposes of Chap. 25 of the Tax Code of the Russian Federation, work in progress (WIP) is understood as products (works, services) of partial readiness, i.e. not passed all the processing (manufacturing) operations provided for by the technological process. WIP includes works and services completed but not accepted by the customer.

WIP also includes the remains of unfulfilled production orders and the remains of semi-finished products of own production. Materials and semi-finished products in production are classified as WIP, provided that they have already been processed.

The estimate of WIP balances at the end of the current month is made by the taxpayer on the basis of data from primary accounting documents on the movement and balances (in quantitative terms) of raw materials and materials, finished products by workshops (production facilities and other production units of the taxpayer) and tax accounting data on the amount carried out in the current month of direct expenses.

The taxpayer independently determines the procedure for distributing direct costs for WIP and for products manufactured in the current month (work performed, services rendered), taking into account the compliance of the costs incurred for manufactured products (work performed, services rendered). This procedure is fixed in the order on the accounting policy of the organization for tax purposes (UNP) and is subject to application for at least two tax periods.

The amount of WIP balances at the end of the current month is included in direct expenses of the next month.

Thus, the rules for the formation of WIP in tax accounting may, in principle, not differ from similar rules in accounting. The determining factor is the composition of the costs included in the cost of production.

In accounting, indirect costs are understood as those costs that relate to production as a whole (accounts 25 and 26). They are also included in the cost of a particular type of product, but not directly, but after the calculation (distribution) of the corresponding share.

In tax accounting, all remaining expenses are included in indirect production and sales costs, i.e. those that are not included in the tax value of products (do not relate to direct costs) and are not recognized as non-operating expenses in accordance with Art. 265 of the Tax Code of the Russian Federation, but in principle they are recognized as expenses for the purposes of Ch. 25 of the Tax Code of the Russian Federation (clause 1 of article 318 of the Tax Code of the Russian Federation). At the same time, the amount of indirect expenses of the reporting (tax) period is fully attributed to the decrease in the profit of this period (clause 2, article 318 of the Tax Code of the Russian Federation).

It turns out that part of the indirect costs of accounting in tax accounting can be attributed to direct costs. For example, this happens when general production and general business expenses reflected in accounts 25 and 26, or a certain part of them, according to the UNP, are classified as direct expenses. The taxpayer chooses the mechanism for distributing ODA and OCR for direct expenses in tax accounting independently (using economically justified indicators) and also fixes it in his accounting policy for tax purposes (paragraph 5, clause 1, article 319 of the Tax Code of the Russian Federation).

It should be noted that such a discrepancy in the classification of expenses is not so significant for tax purposes, if, in the end, the expenses, called differently in tax and accounting, are included in the cost and, accordingly, form WIP in both accounting.

On the contrary, such discrepancies in the classification of expenses are very significant, which lead to a discrepancy between the actual cost in tax and accounting.

For example, part of the direct costs of accounting in tax accounting may be classified as indirect costs. In particular, according to the accounting policy for accounting purposes (hereinafter referred to as UBP), the rent for an item of fixed assets used exclusively for the production of one type of product is recognized as a direct expense and is immediately reflected in account 20, and according to the accounting policy for tax purposes, this expense is not refers to direct costs.

The most common case of a cost discrepancy is when OHS in accounting are included in the cost of production (i.e. account 26 is allocated to account 20) and, accordingly, in WIP, and in tax accounting these same costs are recognized as indirect, immediately written off and, accordingly , are not included in WIP.

Of course, in order to simplify the accounting of the income tax payer, the provisions of the accounting policy for the purposes of accounting and tax accounting should provide for the same composition of expenses included in the cost of production. But this is not always feasible (for example, due to the concept of enterprise management accounting).

For organizations applying RAS 18/02, if there are discrepancies between the amount of WIP in accounting and tax accounting, there are discrepancies in the amount of expenses recognized in the reporting period, and it becomes necessary to reflect permanent or temporary differences in accordance with RAS 18/02.

Press service of the MRI of the Federal Tax Service of Russia No. 3 for the Belgorod Region

What is work in progress - this question sooner or later arises before many accountants. How to understand, and what should not be classified as WIP? The answer is in this article.

What are the costs of work in progress?

What is work in progress? define normative documents:

1. Tax Code of the Russian Federation, namely article 319.
2. Order of the Ministry of Finance of the Russian Federation “On Approval of the Regulation on Accounting and Accounting in the Russian Federation” dated July 29, 1998 No. 34n (hereinafter - Order No. 34n).
3. PBU 4/99.

TIP: pay attention to PBU 5/01 “Accounting for inventories” in order to clearly understand the difference between inventories and assets that are not related to them. Work in progress does not apply to inventories, despite the fact that when drawing up a balance sheet in current assets, the article “Inventory” also includes the amount of work in progress.

So what about work in progress can attributed And what are the costs associated with this term? About the costs that the company has incurred for the production of works, goods, products, services, but the full production cycle for which has not yet been completed, we can say what they belong to work in progress.

Such goods and products have not yet been released by the production unit, are not formalized as finished products, have not passed all the necessary stages of acceptance and verification. Services and works, certificates of completion for which have not yet been signed by the customer, are referred to work in progress.

The amount of assets, , at large enterprises with a large number of products can be formed in accounting in three ways (clause 64 of order No. 34n):

• by the amount of costs for materials, raw materials, components;
• for direct costs;
• at actual production cost.

For other types of production, the cost of WIP is taken into account at actual costs.

Characteristics of work in progress

Assets, what is work in progress, have the following characteristics.

• Incompleteness of the technological cycle. WIP products do not have a final design, are at the final stage of the production cycle, but have not yet been formalized as finished products.
• No final verification or testing. Products and works that are awaiting testing or quality control, provided for by the technological or production cycle. For example, an industrial plant designed to operate under high pressure in a chemical plant must pass a high pressure test at the plant. Until such a check has been made, the unit is not considered a finished product and cannot be released to the buyer. And that means what attributed her to work in progress it is forbidden. The cost of such an installation is reflected in the debit of the 20th account.
• Missing all items of equipment. Sometimes during production there are situations when the necessary components are not available (they are not in stock, not delivered on time by suppliers, changes have been made to the product design). Products awaiting final assembly are included in the value of work in progress.

Work in progress is formed not only on the 20th account. Auxiliary shops and service industries and farms can also form the value of assets, what is work in progress. Therefore, one of the characteristics of WIP is the place of value formation:

• main production (account 20),
• auxiliary workshop (account 23),
• service shops or farms (account 29).

You can read more about the formation of costs for work in progress in the article.

What assets include work in progress

Current assets of an enterprise are assets that have a period of circulation, acquisition or use of less than 12 months, or these assets are used (circulated) during the normal production cycle (if it is longer than 12 months).

PBU 4/99 states that when forming the balance sheet of an enterprise, in the section “Current assets”, in addition to inventories, finished products, cash, receivables, assets are added, what is work in progress. The cost of WIP is summed up in the balance sheet item "Inventory" with the sum of other current assets of this type.

Test: which of the following applies to work in progress

Check if you understand well what is classified as work in progress, offer with a test question.

Check all options that can be attributed to WIP.

A. Finished products in stock.

B. Raw materials and materials received by the workshop.

B. Semi-finished products made by the auxiliary workshop, ready to be sent to the next stage of processing in the main production.

D. Products that have not passed the acceptance of the technical control department.

D. Raw materials in the warehouse of the enterprise.

E. Products that have not passed the stage of mandatory technological tests.

Answer: to the number of assets, what are work in progress, the options listed above include the assets specified in paragraphs: C, D, F.

Results

Making a decision what is a work in progress, one simple principle must be kept in mind. It lies in the name of this asset - the principle of incompleteness. Everything that is produced by the enterprise (including works and services), but not completed, checked and tested, is included in the WIP.

To begin with, let us recall what, in fact, an accountant can choose from, who forms the accounting policy of an organization.
In single-unit production, the estimate of WIP is prescribed to be carried out at actual costs, but in mass or batch production, you can choose from four methods:

• according to the standard (planned) production cost;
• by direct cost items;
• at the cost of raw materials, materials and semi-finished products.

Finished products are to be reflected in the balance sheet in one of the following ways:

• at actual production cost;
• according to the standard (planned) production cost.

Moreover, the standard cost, in turn, can be determined in one of two ways:

• by the amount of standard costs associated with the use of fixed assets, raw materials, materials, fuel, energy, labor resources, and other production costs in the production process;
• direct cost items.

If, according to the accounting policy, the products will be valued at the actual production cost, in the current accounting it becomes necessary to apply accounting prices, which can be used as the standard cost, and the contractual (sales) price of the product, and other types of prices.
And already at the end of the month, emerging deviations (calculation differences) will be identified and written off.

Practical examples of WIP evaluation

In order to make a reasonable choice of methods for assessing WIP and GP, it is necessary to analyze how they are applied and what consequences they lead to. And to make the difference obvious, within the framework of this article we will consider different options on the same initial numerical example.

Example 1 The company produces canned vegetables. At the beginning of the month, there were no unfinished production (in the workshop) or remnants of unsold products (in the warehouse).

Within a month, 10,000 units were put into production. of products, in fact, during the month 9800 units were released and credited to the warehouse, of which 9500 units were sold during the month. at a price of 90 rubles. per unit (assume that the company does not pay VAT).

Thus, work in progress at the end of the month is 200 units. (in the workshop), and the balance of unsold finished products - 300 units. (in stock).

The cost of the workshop for the current month amounted to:

• raw materials, materials, semi-finished products - 400,000 rubles;
  
• wages of workers and insurance premiums - 65,000 rubles;
  
• equipment depreciation - 6000 rubles;
  
• shop expenses (salary of maintenance and management personnel of the shop with insurance premiums, depreciation of the shop building, utility bills, etc.), distributed according to the results of the month for this type of product - 90,000 rubles.
  

The total amount of actual production costs for the month amounted to 561,000 rubles.

Management (general) and commercial expenses are not considered in this example (we will assume that, according to the accounting policy, they are considered conditionally fixed and are related to the reduction of the financial result, that is, they do not participate in the formation of production costs).

In accounting, the collection of costs is reflected in the following entries:

	Debit	Credit	Sum, rub.
Reflected the cost of raw materials, materials, semi-finished products transferred from the warehouse to production
Salary paid to the main production workers, as well as insurance contributions from her
Accrued depreciation of production equipment
Collected general production (shop) expenses (the amount is reflected in the part of expenses, attributed at the end of the month to the type of product in question)		02, 10 60, 69, 70 etc.
Written off at the end of the month expenses

It is more convenient to advance according to the principle "from simple to complex", in our case - from the minimum set of costs included in the calculation to the maximum. After all, of course, the smaller the range of costs taken into account when evaluating WIP, the easier it is to make the necessary calculations, but, on the other hand, the more expenses will be included in the cost of finished products and, ultimately, the cost of sales will be higher, and the financial result will be lower ( less profit and more loss).

Estimation of WIP at the cost of raw materials, materials and semi-finished products

This option is very convenient. Indeed, as a rule, the bulk of raw materials, materials and semi-finished products are released from warehouses to production units at the very beginning of the production cycle, and the amount of raw materials “launched” into the workshop corresponds to the amount of expected output, and if less came out, then the corresponding part of the raw materials and materials " settled" in the NZP.

Example 2 Let's go back to example 1 and assume that the accounting policy fixes the method of estimating WIP at the cost of raw materials, materials and semi-finished products.

The consumption of raw materials, materials and semi-finished products per unit of production (including both finished products and WIP, that is, based on the "launched" volume) is: 400,000 rubles. / 10,000 units = 40 rubles.

Since work in progress is 200 units, its cost will be estimated at: 40 rubles. x 200 units = 8000 rubles.

• the share of unfinished products in the total number of "launched" products: (200 units / 10,000 units) x 100 = 2%;
  
• share of the cost of raw materials, materials and semi-finished products related to WIP: 400,000 rubles. x 2% = 8000 rub.
  

Accordingly, the actual production cost of manufactured products will be: 561,000 - 8,000 = 553,000 rubles.

If the cost of raw materials and materials makes up a significant part of the cost of finished products - say, 80% or even 90% (or at least 70 - 75%) - this assessment method can be considered quite accurate and adequate and there is little point in wasting time and energy on then, to add to the cost of raw materials, materials and semi-finished products also relatively insignificant and insignificant amounts of wages, insurance premiums, depreciation and other production costs, which in such circumstances are easier, more convenient and, in general, more logical to attribute entirely to the finished (released) products.

This situation - the predominance of material costs in the structure of production costs - is especially characteristic of the food industry, and therefore this option may be the most preferable "in all respects": from the standpoint of simplicity, convenience, visibility, and adequacy.

Evaluation of WIP for direct cost items

If the share of material costs is not so large and the role of the labor factor is quite significant - that is, a significant part of the cost is the remuneration of workers who manufactured the products (and, of course, insurance premiums from this salary), as well as, possibly, depreciation deductions - the first method estimates may give an insufficiently adequate picture.

In this case, another method may come in handy - the assessment of WIP by direct cost items. Usually, direct articles mean:

1) "direct materials", that is, the cost of basic materials, raw materials, semi-finished products that form the basis of production;

2) "direct labor", that is, the wages of those main workers who are directly involved in the manufacture of products (performing certain technological procedures, operations, etc.), and insurance premiums from it.

In addition, depreciation charges or the cost of renting production equipment can be direct, but this is only relevant if only one type of product is produced on this equipment, that is, depreciation costs are not indirect and cannot be distributed among several types of products ( in such a situation, they are included in the overhead costs).

Roughly speaking, "direct cost items" are those costs that the accountant immediately charges to account 20 "Main production" (for example, in correspondence with accounts 10 "Materials", 70 "Settlements with personnel for wages", 02 "Depreciation of the main funds", etc.). If the expenses are previously collected on account 25 "General production expenses" within a month, they are not direct and, accordingly, should not be taken into account when applying the considered WIP assessment method.

Example 3 Let's go back to example 1 and assume that the accounting policy specifies a method for estimating WIP for direct cost items and these are considered to be:

• raw materials, materials, semi-finished products;
  
• wages of the main production workers with insurance premiums;
  
• depreciation of production equipment, if this equipment produces one type of product (that is, it is not subject to distribution among several types of products).
  

Let's assume that in our case, three cost items are direct, and per unit of "launched" production they are:

• raw materials, semi-finished products - 40 rubles. (see example 2);
  
• wages of workers and insurance premiums: 65,000 rubles. / 10,000 units = 6.50 rubles;
  
• equipment depreciation: 6000 rubles. / 10,000 units = 0.60 rub.
  

Thus, each unit of "unfinished" products should be valued by direct cost items in the amount of: 40 + 6.50 + 0.60 = 47.10 rubles.

And, therefore, the entire volume of WIP should be estimated in the amount of: 47.10 rubles. x 200 units = 9420 rubles.

Accordingly, the actual production cost of manufactured products will be: 561,000 - 9420 = 551,580 rubles.

If the specifics of the production process are such that future products go through several stages during processing, at which labor costs are “added”, for a correct assessment by the direct cost method, an inventory of WIP residues should be carried out at the end of the month with fixing the number of unfinished products remaining at each stage to calculate the amount of direct labor costs to be included in their cost. Also, the accountant needs to know the rates of direct labor for each of the operations (stages) or the time spent at each stage and the hourly wage rates.

Estimation of WIP at standard cost

In order to evaluate the WIP at the standard cost, the accountant at the end of the month needs to know only the total number of unfinished (incomplete) products.

Well, and, of course, you need to know the value of the standard cost, but it is determined in advance based on plans and established standards, that is, this value does not depend on the actual results of the current month. In principle, it is not even the accounting department that can determine the standard cost, but the planning and economic department of the enterprise, if there is one, and then it is even easier for the accountant.

Usually, the standard cost of WIP is determined in the same way as the standard cost of finished products - either by direct costs or by all production costs (based on established standards).

Example 4 Let us again turn to the data of example 1, but suppose that the accounting policy provides for the evaluation of finished products and work in progress at the standard cost, which, according to the estimate of the planning and economic department, is 56 rubles. per unit of production.

Since the quantitative WIP is 200 units, the accountant evaluates the "incomplete" in the amount of: 56 rubles. x 200 units = 11,200 rubles.

And the actual cost of finished products in this case will be determined as follows: 561,000 - 11,200 \u003d 549,800 rubles.

At the same time, in accounting, this finished product is already reflected at the standard cost in the amount of: 56 rubles. x 9800 units = 548,800 rubles.

Evaluation of WIP at actual production cost

And, finally, the most complex, but also the most complete and accurate method for estimating WIP is based on the actual production cost, which takes into account not only direct, but also indirect (general production) costs.

Example 5 Using the data in Example 1, suppose that a business decides to value WIP at actual production costs.

At the end of the month, the accountant summed up all the costs incurred during the month reflected on account 20 (including those written off from other accounts, including account 25), and received a total amount of actual production costs for the month - 561,000 rubles.

This means that the actual production cost of each unit of production - both completed and unfinished - amounted to: 561,000 rubles. / 10,000 units = 56.10 rubles.

And the "incomplete" will be valued at: 56.10 rubles. x 200 units = 11,220 rubles.

And the cost of manufactured products will be determined in the amount of: 561,000 - 11,220 \u003d 549,780 rubles.

Ideally, the degree of readiness of products should also be taken into account here, if such can be determined (then overhead costs, when assessing WIP, are "tied" to direct labor costs).

Let us pay special attention to the fact that the normative acts are talking about the evaluation of WIP exclusively at the production cost. However, the understanding of this term may be different.

In foreign practice, the production cost clearly does not include general business (management) and commercial expenses - they are attributed directly to the decrease in the financial result (which is equivalent to entries from the credit of accounts 26 and 44 directly to the debit of account 90 "Sales").

In Russia, however, another option is acceptable and often used - when general business expenses are not considered as conditionally fixed, but are also included in the cost of production, in other words, account 26 is closed in the debit of account 20 (as well as accounts 23, 29 when selling products, works, services, auxiliary and servicing industries and farms on the side). With this option, "production cost" is considered the total amount of costs collected on account 20, including general business expenses. And what is considered "production cost" according to Western ideology, in this case is called "shop".

Thus, depending on the chosen approach and the option of writing off general business (administrative) expenses in the accounting policy, it is necessary to further clarify the concept of production cost and the composition of the costs included in it (calculation items), based on which finished products and WIP are evaluated.

Practical examples of finished product evaluation

Now, for the sake of completeness, we will show how finished products are evaluated and how operations for the production and sale of products, as well as writing off the cost of finished products (taking into account the estimated WIP) are reflected in accounting.

Evaluation of GP at standard cost

As a rule, if an enterprise decides to evaluate finished products at the standard cost and uses this assessment not as a discount price, but as an option for generating balance sheet indicators, it becomes necessary to use account 40 "Output of products (works, services)".

Example 6 Let's continue to consider examples 1 and 4 and add the condition: let's say that the accounting policy also provides for the use of account 40 to reflect operations for accounting for the release of finished products and the evaluation of products both on account 43 and in the financial statements is carried out at standard cost.

In addition to the accounting entries presented in example 1, the accountant will reflect the posting of products (at the standard cost) and their sale within a month, and at the end of the month write off the actual cost and the resulting deviation with such entries:

	Debit	Credit	Sum, rub.
acceptance to the warehouse, according to the normative prime cost): 9800 units x 56 rub.
9500 units x 90 rub.
prime cost): 9500 units x 56 rub.
enterprises)
Written off the actual cost of production at the end of the month, taking into account the assessment of WIP for standard cost, component RUB 11,200, see example 4
Difference written off (deviation, overrun) between normative and actual cost price: 549 800 - 548 800
855 000 - (532 000 + 1000)

As a result of all the above entries, the following account balances are formed, which must be taken into account when forming the balance sheet asset:

• on the account 20 - 11 200 rubles. (estimation of WIP at the standard cost, the balance of WIP - 200 units);
  
• on account 43 - 16,800 rubles. (assessment of the balance of unsold products at the end of the month in the amount of 300 pieces at the standard cost).
  

And the income statement will show:

• revenue in the amount of 855,000 rubles;
  
• cost of sales in the amount of 533,000 rubles;
  
• gross profit 322,000 rubles.

Actual cost and accounting prices

As already emphasized earlier, it is possible to determine the actual cost only on the basis of the results of the month, and customers have to receive and write off products as they are released from production and received at the warehouse, as well as leave the warehouse within a month, even before summing up, when the exact cost of products and WIP values ​​are still unknown. Therefore, if the organization chose not to use account 40 and not evaluate products at standard cost (for balance sheet purposes), accounting prices have to be used in current accounting. These can be, for example, contractual prices (sales price) or even standard (planned) cost. But at the end of the month, the difference between the actual cost and the book price - the so-called cost difference - will be written off to the same account 43 "Finished products", where the products are already reflected at discount prices, and ultimately the balance of account 43 will reflect the actual cost of the balance of the finished product. products.

Example 7 Now let's take examples 1 and 2 and suppose that in accordance with the accounting policy:

• WIP is assessed at the cost of raw materials, materials and semi-finished products;
  
• finished products are evaluated at the actual production cost (not including general business expenses debited "month by month" directly to account 90, but in this example they will not be considered);
  
• accounting of finished products is kept on account 43 (without using account 40), while contract prices (90 rubles per unit) are used as the discount price, and the calculation difference is reflected in a separate sub-account, that is, sub-accounts are used:
  

43-1 "Finished products at the accounting (contractual) price";

43-2 "Calculation difference".

In addition to the accounting entries presented in example 1, the accountant will reflect the posting and sale of products (at discount prices) within a month, and at the end of the month write off the actual cost and the resulting deviation with such entries:

	Debit	Credit	Sum, rub.
Products are credited (as they are released and acceptance to the warehouse, at discount prices, corresponding to the selling price): 9800 units x 90 rub.
Reflected revenue from the sale of products in within a month (as products are shipped): 9500 units x 90 rub.
Written off sold products (according to regulatory prime cost): 9500 units x 90 rub.
Payment received from buyers of products (according to the amount of funds credited to the current account enterprises)
Written off cost difference (reversed the difference between the cost products at discount prices and actual production cost at the end of the month taking into account the estimate of WIP, which is 8000 rubles, see example 2): 882 000 - 553 000
Written off (reversed) costing difference in the part relating to the sold products: (329,000 / 882,000) x 855,000
Identified and written off the financial result - profit from the sale of products per month: 855 000 - (855 000 - 318 929)

As a result of all the above entries, the following account balances are formed, which must be taken into account when forming the balance sheet asset:

• on the account 20 - 8000 rubles. (estimation of WIP at the cost of raw materials, materials and semi-finished products, the balance of WIP is 200 units);
• on account 43 - 16,929 rubles. (assessment of the balance of unsold products at the end of the month in the amount of 300 units at actual cost), including:

on subaccount 43-1 (value at discount prices) - 27,000 rubles;

on subaccount 43-2 (calculation difference, reversal) - 10,071 rubles.

And the income statement will show:

• revenue in the amount of 855,000 rubles;
• cost of sales in the amount of 536,071 rubles;
• gross profit RUB 318,929

Taking into account the specifics of the food industry, in cases where the cost of raw materials and materials is a significant (about 80 - 90%) part of the cost, the simplest method for assessing WIP is quite adequate - by the cost of raw materials, materials and semi-finished products.

However, in any case, when choosing a method for estimating WIP and finished products, it is necessary to take into account not only the simplicity of its application, but also its impact on the generated financial statements in order to ensure acceptable accuracy in estimating assets (WIP and unsold finished products) and financial result. Also important are the technological features of the production process, and the specifics of the activities of a particular organization as a whole.
In addition, many accountants strive to bring accounting and tax accounting as close as possible. Therefore, another factor that influences their choice is the requirements of tax legislation on this issue. We will discuss this problem in the next issues.

The financial plan of any project assumes that at the end of the reporting period there may be residual work in progress. Even the delayed work of the enterprise cannot insure the organization against the occurrence of unfinished production, which, one way or another, will affect the final financial performance. Work in progress, as well as finished products, must be able to correctly evaluate and calculate the cost in order to make further mandatory payments.

What is work in progress

Work in progress (WIP) is a physical product, work or service that did not pass certain stages of technological production, control, or was not accepted by the customer as a result. At the same time, production processes can be at various stages: from the approval of the project, and ending with the preparation of product documentation.

Work in progress is the main component of the company's working capital. At the same time, its scale will depend on the area of ​​industrial production and such factors as:

• type of product and technology of its manufacture;
• financial costs for ensuring production processes;
• the time allotted for the full production cycle.

The remains of work in progress are considered to be raw materials and other consumables, as well as the labor of land workers, as a result of which the product of production takes its final form. When maintaining financial statements, special attention is paid to time indicators, as well as labor and cost costs:

1. The cost indicator reflects all financial inclusions that ensured the production of products during the specified reporting period.
2. The time indicator is the ratio of the balance of work in progress and the total amount of output based on the cost price.

The main way to reduce the level of WIP is to reduce the time of the full production cycle. It is possible to reduce the time indicator through improved technological processes, the use of advanced technologies and production automation systems, as well as an increase in the number of skilled employees.

Reflection on accounts

The amount of expenses involved in work in progress, among other things, is reflected in the balances of accounts 20, 23 and 29. It is in these accounts that the cost of those products, goods or services that have not completed their production cycle is reflected. In other words, the balances on these accounts are work in progress.

Also, “work in progress” can include products that have passed the production process, but, for some reason, are understaffed, or have not passed technological control or testing.

In order to maintain constant control over the costs of funds for work in progress, a special type of accounts for the reporting period is used in the financial statements. An enterprise accountant can determine WIP costs using one of the following methods:

1. Calculation of the actual cost of production. This method must be approved by the management of the enterprise as part of the accounting policy. It is applicable in both single and mass production, and contains indicators of all costs for the production of products or the provision of services.
2. Accounting for standard or planned cost. This method is relevant for large-scale production, where the costs for each unit of finished products are foreseen in advance, when planning a project for a certain financial period.
3. The use of cost items. The method provides only for the actual costs of work in progress, approved by the accounting department of the organization.
4. Calculation of the cost of consumables. The method includes only the cost of consumables used in production.

The last two methods of determining costs make sense only if the production of products involves the use of a wide range of different materials, since the cost of the finished product will depend on this.

Work in progress according to 10 P(S)BU 9 "Stocks" is part of the production stocks. It does not matter which method of cost calculation is used by the accounting department, the main thing is that the WIP should be reflected in the synthetic and analytical accounting of the financial statements debit 26 “Finished products” and credit 23 “Production”.

WIP in the accounting of trading companies involves a list of unsold products, as well as the costs incurred for the implementation of its production.

Cost of work in progress

The cost of work in progress is the total amount of funds spent that provided the produced process, which was not completed at the end of the reporting period.

Calculating the cost of a crane is an important process, because accounting records include not only data on work in progress, but also information on products ready for release. The data is also necessary for the formation of the pricing policy of the manufacturing organization.

The close relationship between the costs of work in progress and the cost of finished products can be reflected in the formula:

NPZP + Costs - KNZP \u003d GP, where

NZP - balances at the beginning of the reporting period on account 20

Costs - expenses for ensuring production during the month (debit to account 20)

KNZP - balances at the end of the reporting period on account 20

GP - the cost of finished products.

Expenses

Of particular importance is the size of work in progress, the smaller the WIP, the better working capital will work.

At the same time, work in progress must maintain standard settings for such parameters as volume, composition and placement along the entire production line, while maintaining the pace and quality of the entire enterprise. It can be concluded that an insufficient volume of work in progress can also negatively affect the activities of the organization.

When preparing a report on all types of expenses of an enterprise, the following classification is used:

• expenditure of material resources;
• the cost of providing employees with wages;
• depreciation funds;
• the cost of meeting social needs;
• other costs.

However, it should be understood that the list of costs is much wider and depends on the nature of the manufacturing industry. The legislation proposes a model nomenclature, which includes the following items:

• own raw materials and materials;
• returnable production waste (deduction line);
• purchased materials, as well as services provided by third parties;
• energy or fuel, to ensure production;
• wages of production workers;
• overhead costs (providing the main and auxiliary production);
• expenses for preparation of production, training and development of technology;
• general business expenses (management expenses);
• mandatory contributions (including contributions to social funds);
• the cost of defective products;
• business expenses;
• other expenses.

Repetitive production, including work in progress of tangible products or services, is broken down in the balance sheet into the following items:

1. Price settings for raw materials, semi-finished products and other materials.
2. Planned production cost.
3. The amount of consumables.

If an enterprise is engaged in a single production of a certain type of product, then in the balance sheet, WIP is taken into account upon the fact of direct material costs.

The funds that were spent by the organization during the preparation of reports, and related to future reporting periods, should be entered by the accounting department in a special article. These funds must certainly be written off for the period to which they relate, evenly and in accordance with the procedure established by the enterprise.

Volume of work in progress

Reducing the balance of work in progress increases the speed of turnover, and therefore implies a profit. One way to reduce WIP is to reduce the time period attributable to certain stages of production and optimize labor. At the same time, it is necessary to ensure uninterrupted and well-functioning industrial processes for WIP. This way of WIP normalization is called rationing.

The WIP standard is the minimum amount of working capital that can ensure the stable operation of the enterprise under any external conditions. This amount must always be available to the manufacturer and is calculated as follows:

SSO × DC × KeH = WIP, where

CCO - the average daily cost of production (determined by dividing the total number of products produced by the number of working days in a year);

DC - the duration of one production cycle (in days), during which materials are converted into finished products;

KeN - the coefficient of increase in production costs (determined by the ratio of the cost of WIP and the full production cost.

It is important to calculate the standard with maximum accuracy, since a shortage of funds can lead to production downtime. Excess stocks of funds are also undesirable, since funds that could "turn around" will be in a state of "freezing" without making a profit.

Active or Passive

Work in progress is considered an asset, as it is the property of the enterprise, capable of generating income in the future. In turn, the asset balance is divided into two parts: long-term and short-term funds (non-current and current).

WIP is not reflected in the balance sheet of the enterprise, however, is one of the important components of working capital. Information about it is entered in the section "Current assets", line "Stocks" (1210). This line includes collective information about the following components:

1. Inventory.
2. Unfinished production.
3. Expenses for future periods.
4. Finished products.
5. Goods shipped.
6. Goods for further sale.
7. Finished products.
8. Other reserves and costs.

In enterprises where the production process takes a long time, WIP can be reflected in the "Non-current assets" section.

If the cost of production is a large amount, the WIP in the balance sheet is reflected as a separate line.

In this case, it is necessary to attach detailed information to the balance sheet with ready-made statements, as well as form 2 “Report on financial results”.

tax accounting

The calculation of income tax should be made taking into account all direct and indirect costs indicated in the company's own accounting system.

In order for a specific list of costs to be included in direct costs, it is necessary to establish a direct connection between these costs and the production process, the provision of services or the performance of work.

In some cases, the costs of providing production processes can be attributed to indirect costs. The adjustment can be allowed only if the production costs are not related to direct costs, and a business case must be attached to the report.

Direct costs are allocated to products produced in a specific reporting period (services or work) and work in progress. Distribution occurs independently, according to the procedure established by the enterprise. At the same time, an important detail is the full compliance of costs and finished products.

In the case when direct costs do not correspond to any of the stages of production, it is necessary to produce a mechanism for the distribution of such funds, their separation in accordance with the economic justification.

Provision of services

The provision of various services can be attributed to the type of work in progress, since the result of the provision of a service often has material results.

If the organization provides services of this kind, then the enterprise may keep records of direct costs. According to the tax legislation of the Russian Federation, the payer has the right to share the direct and indirect costs of organizing work to provide unfinished services.

Finished services are also fashionable to be attributed to work in progress if they were rejected by the customer.

At the end of each month, the organization is required to make an estimate of the remaining WIP based on the primary documentation of progress and the number of outstanding services, as well as tax records for all direct expenses for the past month.

Inventory

Inventory of work in progress depends on the type of products produced, as well as the features of its production technology. From these indicators, we can conclude that the inventory in each individual enterprise will take place in different ways. In general, the inventory process has the following objectives:

• determination of the actual number of parts, mechanisms, tools, equipment and other items involved in the production process, as well as parts that have not been assembled or are in the process of being manufactured;
• control of the acquisition of production with the necessary materials, parts and equipment;
• identification of WIP residues that were rejected by the customer based on the results of readiness.

Inventory at the enterprise begins with the formation of a warehouse with those materials that are no longer used in production in a given period of time. Next, the actual amount of materials used is calculated, as well as their weighing or renaming.

The inventory is a special document that reflects the results of the inventory process. Such a document is drawn up separately for each production site or workshop. The document takes into account all materials, mechanisms and equipment, as well as their name, condition and quantity.

If we are talking about construction or installation work, then a separate inventory is drawn up, which reflects the total amount of work in progress, their order of execution and volume.

Separate inventories are compiled for defective parts and materials, semi-finished products and equipment that have not yet entered the production process.

At enterprises that are engaged in the manufacture of raw materials and materials, inventory is carried out using two technologies:

• accounting and control of the quantity of products;
• accounting and quality control of the components that make up the finished product.

If we are talking about construction, then the inventory documents will consist of separate inventories for:

1. Finished objects, indicating their names.
2. Type of work.
3. Construction elements.
4. Equipment and technique.
5. Materials.
6. Equipment that has not yet been installed.

At construction sites, work on which has been suspended or frozen, are also subject to inventory. The inventory must indicate the degree of readiness of the object, the cost of the work performed and the reasons why the construction was suspended.

Reflection in reporting

WIP is displayed in the financial statements:

1. In fact, all the costs of providing a single production.
2. In linear production, on the fact of establishing the cost, planned cost, total cost of materials, as well as on cost items.

In order to determine the total volume of work in progress, the documentary method and inventory are used. Generalization of WIP costs occurs in accordance with the Instructions for the application of the chart of accounts, using account 20 "Main production".

The debit of account 20 includes information on all direct and indirect costs, as well as the costs of providing additional and auxiliary production related to the production of specific products. Credit cost on the fact of production results. At the end of each month, the balance of account 20 reflects the value of work in progress.

In accounting, WIP is taken as the sum of the total costs of providing production processes, while the start of production was laid in the reporting period, but was not completed.