Account 20 “Main production” in accounting

Cost accounting for main production: general principles

The costs of main production for enterprises of any form of ownership and any type of activity are expenses associated with the main activity.

The first goal of business enterprises is to make a profit. This goal is achieved through the performance of specific functions (production, provision of services). These are the costs for performing these main functions and are reflected in account 20 “Main production”. Let us recall that in trading enterprises, costs associated with core activities can be reflected in account 44 - “Distribution costs”.

What are these expenses? In the debit of the 20th account, material costs, expenses for wages and social insurance of personnel of the main production are allocated to the expenses of the main production. It also reflects the depreciation of production equipment and other objects used for the same purposes (real estate, engineering structures related to production workshops). Here the cost of fixed assets less than 40,000 rubles is included in expenses. (clause 5 of PBU 6/01).

For more information on how to calculate depreciation, see the article: “Calculation of depreciation of fixed assets in 2016.”

The listed expenses form the direct production costs of the enterprise. Indirect costs are formed on the 25th and 26th accounts.

Note that the expenses of auxiliary production related to production costs are distributed proportionally to the expenses of the main production. Part of the costs on the credit of account 23, written off to the debit of account 20, also forms expenses for the main production of the enterprise.

Reflection on accounts

The main production in the balance sheet should be recorded in line 1210, after the enterprise accumulates debit balances of the 20th account at the end of the reporting period.
The article will discuss the intricacies of the procedure for reflecting information in this report. Where is the main production reflected on the balance sheet?

Count 20 - main purpose

What are direct and indirect costs?

How is work in progress accounted for and valued?

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

Also, “unfinished” products can be classified as 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 expenditure of funds on 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 actual production costs. This method must be approved by the management of the enterprise as part of the accounting policy. It is applicable in both individual 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 product are provided for in advance when planning the project for a certain financial period.
3. Application of cost items. The method provides exclusively for actual costs of work in progress, approved by the organization’s accounting department.
4. Calculating the cost of consumables. The method includes exclusively the costs 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 “Inventories” is part of industrial inventories. It does not matter which method of calculating costs is used by the accounting department, the main thing is that the work in progress is 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 to produce them.

WIP is displayed in the financial statements:

1. In fact, all costs for ensuring a unit production.
2. In linear production, based on the fact of establishing cost, planned cost, total cost of materials, as well as cost items.

In order to determine the full volume of work in progress, the documentary method and inventory are used. Generalization of costs for work in progress occurs in accordance with the Instructions for using 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 costs for providing additional and auxiliary production related to the production of specific products. Credit cost based on production results. At the end of each month, the balance on account 20 reflects the value of work in progress.

In accounting, work in progress is taken as the sum of the total costs of supporting production processes, while production began in the reporting period, but was not completed.

Accounting for production costs when releasing products

The expenses of an enterprise engaged in the production of products are, as a rule, standardized. The company sets its own standards based on the technology used and economic and statistical calculations. If an enterprise does not have the opportunity to develop technologically sound standards, then standardization is carried out based on actual costs. In this case, the standard is usually taken as the average cost per unit of production. In order for the application of standards to be effective, established standards must be periodically analyzed, corrected, and supplemented.

To determine the planned and actual production costs, product cost calculations or cost calculations are compiled. In such calculations, the value of all types of direct and indirect costs per unit of production is established. Indirect costs are distributed in one of the following ways:

• by distributing indirect costs in proportion to material costs;
• by distributing indirect costs in proportion to the wages of key production personnel;
• distribution of indirect costs in proportion to production costs.

IMPORTANT! Expenses collected on account 26 may not be distributed to main production. In this case, accounting in the main production will be carried out at a reduced cost (direct production costs only). Then the amounts accumulated in the indirect costs account must be attributed directly to the cost of sales by posting Dt 90.2 Kt 26. Which method of accounting for production costs is chosen is necessarily recorded in the accounting policy of the enterprise.

Production costs include:

• materials for production;
• labor costs;
• costs for compulsory social insurance of production personnel;
• depreciation of production assets;
• other costs;
• costs of auxiliary production.

The cost items indicated above (except for the costs of auxiliary production), in accordance with clause 8 of PBU 10/99, form a grouping of expenses from ordinary activities by type of cost. The last point of the above classification may or may not be included in production costs by an enterprise. The adopted accounting method must be reflected in the accounting policy.

How to classify production cost items can be found here: “Classification of production cost items.”

Line 213 “Costs in work in progress”

Work in progress (WIP) is considered to be products or work that have not gone through all stages of production, which are required according to the regulations (clause 63 of the regulations approved by order of the Ministry of Finance of the Russian Federation dated July 29, 1998 No. 34n). Depending on the industry and the characteristics of the enterprise, WIP may or may not be present;

• at actual production cost;
• at planned production cost;
• for direct cost items;
• at the cost of material costs.

For organizations producing piece goods, single goods, there is no choice - work in progress is accounted for at actual cost.

Accounts are provided to collect data on production costs:

• for costs of products (work, services), the production of which is the main task of the organization - 20;
• for the costs of auxiliary production that ensure the functioning of the main production - 23;
• for the costs of service industries, without which the functioning of the main production is possible - 29.

The 20th account reflects all costs directly related to the manufacture of products (works, services).

Account 23 is used to collect costs of departments such as transport, energy, repair, etc. The debit of the 23rd account accumulates costs associated with auxiliary production, and the credit shows the actual cost of the final products of auxiliary departments, which falls on the 20th account (or 29, 40, 90).

The 29th account collects the costs of such industries and households as a canteen, kindergarten, sanatorium, laundry, and dormitory. Their work is not related to production, which is the primary purpose of the organization, but is necessary to support this primary purpose. The credit of the 29th account reflects the actual cost of products manufactured by service production, which is written off to the accounts of finished products, other material assets or to the costs of other departments.

If at the end of the period there is a balance in the debit of these accounts, then it is WIP.

To learn more about the organization of cost accounting, read the article “Production cost accounting system and their classification.”

In addition, since semi-finished products of own production fall under the definition of work in progress, they will also be included in its composition. That is, the debit balance on the 21st account must be included in the work in progress.

For construction organizations using account 46, which reflects costs for completed stages of work for long-term orders, the work in progress will also contain a debit balance for this account.

WIP costs are a component of the organization's current assets. Current assets are considered in the second section of the balance sheet. The unfinished item falls into the “Inventories” article. The “Inventories” line is formed by adding up the debit balances of accounts 10, 11 (minus reserve - account balance 14), 15, 16, 20, 21, 23, 29, 41 (minus markup - account balance 42), 43, 44 , 45, 46, 97.

Please note that the form of the balance sheet and other reporting components was approved by Order of the Ministry of Finance of the Russian Federation dated July 2, 2010 No. 66n. Balance sheet items are explained in the explanations to it. The organization independently determines the details. Possible subsections of the “Inventories” article are discussed in the diagram.

For information on drawing up a balance sheet, see the article “Balance sheet (assets and liabilities, sections, types).”

The size of work in progress is of particular importance; the smaller the work in progress, the better the 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 work of the entire enterprise. We can conclude that an insufficient volume of work in progress can also negatively impact the organization’s activities.

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

• consumption of material resources;
• costs of providing employees with wages;
• depreciation means;
• costs to meet social needs;
• other costs.

However, it is worth understanding that the list of costs is much wider and depends on the nature of the manufacturing industry. The legislation offers a standard 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 support production;
• wages of production workers;
• general production expenses (provision of main and auxiliary production);
• expenses for production preparation, training and technology development;
• general business expenses (management expenses);
• mandatory contributions (including contributions to social funds);
• costs of defective products;
• business expenses;
• other expenses.

Serial production, including work in progress of material products or services, is analyzed in the balance sheet according to the following points:

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

If an enterprise is engaged in a single production of a certain type of product, then in the balance sheet the work in progress is taken into account based on the direct costs of the material.

Funds that were spent by the organization during the preparation of reporting, and at the same time relating to future reporting periods, must be entered into a special item by the accounting department. 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.

Home/ Accounting statements/ Line 213

Line 213 of the financial statements refers to the balance sheet until 2011.

The amount of work in progress must be confirmed by relevant calculations (accounting statements).

If a non-trading organization distributes commercial expenses between sold and unsold products (goods, services), then when filling out line 213, not the entire balance of account 44 “Sales expenses” is taken. Unwritten-off expenses for packaging and transportation, recorded as commercial expenses on account 44, are reflected on line 217 “Other inventories and costs” of the balance sheet, and not on line 213.

In accordance with Order of the Ministry of Finance of the Russian Federation No. 34n dated July 29, 1998 (clause 64), accounting and evaluation of work in progress in accounting are carried out through various methods for determining the value of products. The chosen method is necessarily fixed in the accounting policy of the institution.

Let's consider the main methods of assessing value:

1. According to standards or planned cost. Used in the manufacture of complex types of goods. The calculation is carried out according to reliable information about the balances of work in progress using current standards and data on deviations from accepted standards. Cost is calculated using the formula:

CNWP = quantity of work in progress × cost value of a unit of work in progress.

1. At actual cost. All costs associated with the production process are accumulated. Accounting is carried out for both direct and indirect costs. Used for small-scale production. The cost is calculated as follows:

With fact. = direct costs general production R general economic R.

1. Raw materials - based on price costs for raw materials. Used in material-intensive production processes. The main costs are spent on the purchase of materials.

When considering the methodology for assessing work in progress, it is also necessary to mention the coefficient of increase in costs in work in progress, the formula of which will be presented below.

The growth rate characterizes the increase in costs for each unit of production during the full production cycle. With its help, you can determine the dynamics of growth of certain costs included in the work in progress.

To increase = From unit of production of work in progress / total costs of the production process.

Accounting for material costs is an important part of the work of an accountant in an organization. Let's figure out what is included in material costs, how to calculate them correctly, and what wiring to use.

An accountant is a universal profession; specialization in it is only temporary, when the accounting department and the company are large and each specialist is engaged in his own area.

However, to ensure that employees do not lose versatility and useful skills, experienced chief accountants try to regularly change their positions.

And then the specialist who dealt with wages has to remember how to correctly calculate material costs, and what they actually are. Let's try to refresh our memory of basic knowledge together and start with the concept itself.

The concept of material costs (MC) is found in both accounting and tax accounting. According to the provisions of Article 254 of the Tax Code of the Russian Federation, material costs include:

• expenses for the purchase of raw materials, materials and components;
• expenses for the purchase of fuel, water, energy of all types spent for technological purposes;
• expenses for the purchase of works and services of a production nature;
• losses from shortages and damage to inventories within the limits of natural loss;
• other expenses.

This list in tax accounting is closed. In accounting, the concept of MH is defined in paragraph 8 of PBU 10/99 “Expenses of the organization,” but without a list.

Therefore, each organization can independently determine the definition of this concept in accounting and be sure to prescribe the corresponding list in its accounting policies.

In fact, these will be the same expenses that are prescribed in the Tax Code of the Russian Federation, taking into account the specifics of the company’s activities.

Accounting for expenses of service industries and farms

Service industries and farms are those structural divisions of an enterprise that perform functions not directly related to the main activities of the enterprise. Such service industries and farms may include:

• objects of the social structure that are on the balance sheet of the enterprise (dormitories, kindergartens, clubs, clinics, hospitals, dispensaries, sanatoriums, etc.);
• farms for the production of products not related to the main activity of the enterprise (for example, a pig farm at a metallurgical enterprise - its products are used to provide meat for workshop canteens and social facilities of the enterprise).

The debit of account 29 is used to reflect direct expenses associated with the activities of service industries and farms. The credit of account 29 reflects the actual cost of products and services produced by service industries and farms.

IMPORTANT! Account 29 does not correspond with account 20, as follows from the Chart of Accounts and instructions to it, approved by Order of the Ministry of Finance dated October 31, 2000 No. 94n. This is explained by the fact that, according to the meaning of the transactions for which account 29 is provided, it should not reflect anything that could form the production cost of the types of main products produced.

Account 23 “Auxiliary production”: use

Ancillary (or auxiliary) production is a division that provides the main production with various works and services. Such work, as a rule, includes mechanical repair and transport services, as well as energy supply with heat, electricity, gas, etc. At agricultural enterprises, auxiliary production is considered to be a farm that produces salting, canning, drying vegetables, fruits, berries and other products.

To reflect the expenses of auxiliary production, Dt 23 is used, to write them off and attribute them to the cost of production - Dt 23.

Accounting for expenses of auxiliary production

Account 23 “Auxiliary production” accumulates information about expenses in the divisions of the enterprise that are classified as auxiliary. These divisions include:

• transport workshops (at enterprises that are not transport companies);
• repair shops;
• tool workshops, workshops for the production of tools and equipment, processing shops;
• units for the construction of non-title (temporary) structures;
• divisions for the extraction of non-metallic materials (stone, gravel, sand);
• logging and sawmill divisions;
• workshops for processing agricultural products (as part of agricultural enterprises whose main activity is growing, rather than processing agricultural products).

The debit of account 23 reflects the formation of direct costs. The indirect costs of managing and maintaining auxiliary workshops are also written off to the debit of account 23 from the credit of accounts 25 and 26. If the technological cycle and accounting system at the enterprise allows, then the costs of servicing and managing auxiliary production can also be collected directly on account 23.

Posting Dt 20 Kt 23 reflects the release of work, services, products produced by auxiliary shops to the main production of the enterprise. If products and services of auxiliary production are sold to service farms, then posting DT 29 Kt 23 is used.

Auxiliary workshops can provide services and produce products intended for third parties. In this case, to write off the cost generated according to Dt 23, the following posting is relevant: Dt 90 Kt 23.

The analysis of expenses is carried out in the context of various auxiliary productions, therefore, for analytical accounting, subaccounts of the 23rd account are opened for the types of auxiliary workshops. The balance of account 23 shows the cost of work in progress in auxiliary departments.

Accounting for the production process in accounting

The main account used to reflect OP costs is account 20. This account is used to summarize accounting data on costs incurred for OP products or performance of work (services), which are the main activity of the enterprise.

Account 20 accumulates all the costs of the OP; this method is called consolidated cost accounting.

Completed production is written off against the credit account. 20, at actual cost with debit of accounts: 43 “Finished products”, 40 “Product output”, 90 “Sales”. Debit account balance 20 at the end of the reporting period shows the actual value of work in progress.

The scheme for reflecting production costs depends on the method chosen by the enterprise:

• normative;
• process-by-process;
• transverse;
• custom.

At the enterprise, production waste is recorded on account 10 “Inventory”, if the waste is returnable. That is, waste can be reused in production processes. Irrevocable waste cannot be reflected in property accounting accounts.

During the EP there are frequent cases of deviations from established norms and requirements. For example, violation of safety regulations and, as a result, occupational injury. For such cases, the enterprise must keep records of industrial accidents. This obligation is spelled out in Art. 227 Labor Code of the Russian Federation.

Similar accounting methods should be organized to stop the OP. Recording of downtime in production should be carried out in accordance with the norms of the current legislation regarding labor remuneration.

Manufacturing Cost Accounting: Example

Let's look at an example.

1. Technological standards establish that the production of one set of linen requires:

• 8.5 m of calico at a price of 110 rubles/linear. m;
• 2 spools of sewing thread, 200 m each, priced at RUB 14/spool;
• 12 m of cotton stitching at a price of 50 rubles/m.

All prices are excluding VAT.

2. The production rate of workshop No. 1 for sets of bed linen per month is 1,000 pieces.

In the first sewing workshop, where the production of these sets is planned, 4 seamstresses work. The production norm for one seamstress is 250 sets.

3. The salary of one seamstress per month is set at 15,000 rubles.

4. Payroll charges: PFR - 22%, FSS for temporary disability and maternity - 2.9%, FFOMS - 5.1%, FSS for injuries - 0.4%. Total payroll accruals - 30.4%

ATTENTION! On July 11, OKVED-2 (OK 029-2014, NACE rev. 2) came into force, but occupational risk classes are still tied to OKVED-1. In accordance with OKVED-2, the production of such garments as bed linen belongs to class 13. According to OKVED-1, this type of activity is related to class 18 - production of garments - and has a 3rd class of professional risk with a rate of 0 ,4%. Starting from 2021, this discrepancy will be eliminated by legislators, but do not forget to submit to the Social Insurance Fund information about the main type of activity for 2021 by April 1, indicating the new OKVED-2 code (according to OK 029-2014).

5. The payroll for the second sewing workshop is 250,000 rubles. per month.

6. Auxiliary production - sewing machine adjuster. Works for two sewing shops. The adjuster's salary is 25,000 rubles/month.

7. The salary of the master of the first sewing workshop is 17,000 rubles/month.

8. Shop No. 1’s electricity costs are 1,200 rubles/month. (without VAT). An electricity consumption meter is installed in the workshop.

9. Heating costs for the entire building of production workshops - 35,000 rubles/month. Excluding VAT.

10. Depreciation of equipment installed in workshop No. 1 - 4,500 rubles/month.

11. Other production costs of the 1st workshop - 12,500 rubles/month.

12. Administrative expenses - 685,000 rubles/month.

13. Sales expenses - 140,000 rubles. /month

14. According to the accounting policy, finished products are accounted for at full cost. General production and general business expenses are distributed in proportion to the wages of production workers.

The kits were produced in December 2021. All products were sold in December.

Let's calculate:

• Production cost of 1 set.
• Production costs of the 1st sewing workshop for December.
• The full cost of 1 set of linen.

Table 1. Production cost per unit of production.

Thus, the production cost of one set of bed linen was 1,681.61 rubles.

Table 2. Production costs of workshop No. 1 for December.

Table 3. Total unit cost of production of sewing shop No. 1 for December

We will allocate expenses to main production and write off production expenses to the cost of products sold.

Table 4. Write-off of production costs

The cost of finished products released from the main production and sold in December amounted to RUB 1,891,828.00.

Results

The production cost of products is formed on the 20th account. General production and general business expenses:

• are allocated to production costs in proportion to one of three indicators: material costs, wages and direct production costs of products, if the accounting policy provides for accounting at full production costs;
• are charged to the cost of sales (debit of account 90), if the accounting policy establishes accounting at a reduced cost.

Service industries and farms, the costs of which are formed on the 29th account, have no relation to the main production. Auxiliary shops of the main production can both sell products (provide services) to other divisions within the enterprise, and sell part of the products (work, services) to the outside.

The production cost of finished products is formed on the 40th or 43rd account.

You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.

Main production in the balance sheet line

This section shows the formed funds and reserves of the organization, the amount of profit or loss of the reporting year and previous years, target income and income of future periods.
A decrease or increase in the authorized capital must be reflected in the constituent documents of the organization. It should be borne in mind that the data in this line are subtracted when calculating the results for Section III of the balance sheet. Line 440 “Profit (loss) of the reporting period” shows the financial result obtained by the organization for the reporting period and accounted for in account 99 “Profits and losses”. The amount of loss is shown in this line with a minus sign.

Taxpayers are given the right to independently determine in their accounting policies for profit tax purposes a list of direct expenses associated with production and sales.

This also includes products or components that did not pass quality control or were rejected by the customer.

Work in progress in the balance sheet is reflected as a debit balance in the following accounts:

• Account 20 “Main production”;
• Account 23 “Auxiliary production”;
• Account 29 “Servicing industries and farms”;
• Account 44 “Sales expenses”;
• Account 46 “Completed stages of unfinished work.”

If at the end of the reporting period there are balances on the above accounts, then this is work in progress.

It is worth keeping in mind that Account 20 can only be applied if the production process is not divided into separate stages (phases).

The item relating to work in progress is classified as inventory. Accordingly, all kinds of data related to this category will be reflected in line number 1210, reserved for the item - reserves. In addition, in some cases, work in progress is not entered as a separate line if we are talking about a simplified reporting form.

Unfinished construction may mean costs associated with the construction of industrial buildings and all kinds of structures, as well as costs of geological and engineering work, the purchase of equipment to equip premises with the necessary capacities, and installation costs.

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Account 26 can be distributed similarly to account 25 (then the full cost will be collected on the corresponding accounts), or you can write off the entire amount collected on it every month to the financial result (to the debit of account 90). In the latter case, the cost of a specific product (work, service) will not include its data.

Composition of main production costs

Account 20 is used to account for direct and indirect expenses incurred in connection with:

• with the production of products of any kind;
• provision of all types of services;
• performing construction and contracting, design, survey and geological exploration work;
• carrying out repair work;
• carrying out design and research work, etc.

The main production on the balance sheet is

Read more about the structure of the balance sheet in the article “Balance sheet (assets and liabilities, sections, types)” .

You will find information on the procedure for filling out a balance sheet in the material “Compiling a balance sheet .

You will learn how to fill out a balance sheet for “simplified” people by reading the material “How to fill out a balance sheet under the simplified tax system?” .

Work in progress: accounting account

Costs in work in progress are taken into account in production cost accounts: 20 “Main production”, 23 “Auxiliary production”, 29 “Service production and facilities”.

The main production on the balance sheet is an asset or liability

They did not go through all the necessary phases, were not fully staffed, or simply did not pass the suitability test.

The group of such goods includes:

1. Materials and raw materials, work with which has already begun, but they do not yet constitute a finished product, but are in the process of processing or assembly;
2. Products not yet assembled;
3. Products that have not passed the required quality and safety tests;
4. Work completed but awaiting customer approval.

How is work in progress reflected in the accounting accounts?

Account 20 “The main production accumulates all the main costs. Its use is approved by the “Instructions for the use of the chart of accounts.”

All expenses, both direct and indirect, as well as expenses of other workshops that relate to this product are transferred to its debit.

Source: https://supcore.online/osnovnoe-proizvodstvo-v-balanse-stroka