What applies to fixed and working capital?

Current assets include the following components

Let's look at the diagram to see what the company's current assets are.

From 01/01/2021, PBU 5/01, which determines the accounting procedure for inventories, will no longer be in force, and a new FSBU 5/2019 “Inventories” will be introduced. Some accounting rules have been changed significantly. An analytical review from ConsultantPlus will help you rebuild your inventory accounting. Get trial access to K+ for free and proceed to the material.

What is included in other current assets on the balance sheet

According to the norms of PBU 4/99, OA are displayed in section II of the balance sheet.

The balance sheet should also display information about non-material assets that are not included in other articles of Section II. Other current assets include:

1. The cost of completed stages of unfinished work, recorded in the account. 46.
2. VAT on advances, allocated separately to the account. 62 or 76.
3. Shortages or damaged valuables for which a decision on write-off has not yet been made.
4. VAT and excise taxes subject to reimbursement after the reporting period.
5. VAT on goods shipped, revenue for which will be recognized in the next year.

This information is displayed in line 1260 “Other current assets”.

Differences between working capital and fixed assets

• Fixed assets include: furniture, buildings, machines, which, although they are directly involved in the production cycle, do not transfer their elements to the finished product. Working capital is included in the final result in full and without remainder. They are consumed during one completed cycle.
• The cost of both funds is included in the cost price with only one difference: fixed assets in the form of depreciation are only partially reflected in the price, but working capital is included in full. After all, the final retail price for the consumer mainly depends on the cost of raw materials.
• Capital resources can only be replaced after their cost has been fully recovered. This sometimes takes several years. Current assets are sold immediately, which means they need to be purchased for the next production cycle.

What can be classified as low-liquid current assets?

Liquidity is an indicator of the speed at which an asset is converted into money. A very important aspect in making a company profit is the competent management and control of OA. To carry out the control functions of the company and determine risks, it is necessary to develop a gradation that will allow determining the possible liquidity of the asset in the event of a crisis situation. In the economic literature, a variant of risk gradation by degree has been proposed.

Low-liquid assets are considered to be those assets whose conversion into money takes more than a year. For example, a receivable with an expected return period of more than 12 months or goods stored in warehouses. That is, all OA that are considered high risk are considered the least liquid.

For details, see the material “Which current assets are the least liquid?”

Categories

1. COMPOSITION AND STRUCTURE

Working capital is a combination of circulating production assets and circulation funds in monetary terms. These components of working capital serve the reproduction process in different ways: the first - in the sphere of production, and the second - in the sphere of circulation.

The conditions of production and sale of products require that the warehouses of a manufacturing enterprise constantly contain stocks of material assets consumed in the production process, as well as finished products. In addition, to ensure uninterrupted operation, it is necessary that the workshops have certain backlogs of unfinished products. And finally, the enterprise must have certain funds on hand, in bank accounts, and in settlements.

The assets of an enterprise, which, as a result of its economic activities, completely transfer their value to the finished product, take a one-time part in the production process, changing or losing their physical form, are called working capital.

Working capital represents the most mobile part of assets. In each circulation, working capital passes through three stages: monetary, production and commodity.

At the first stage, the funds of enterprises are used to purchase raw materials, materials, fuel, packaging, purchased semi-finished products, components, etc., necessary for carrying out production activities. In the second stage, inventories are converted into work in progress and finished goods. At the third stage, the process of selling products and receiving funds occurs. Working capital, according to the composition and nature of the site in the production process, is divided into two components: circulating production assets and circulation funds.

Working production assets serve the production sector. They form the material basis of production and are necessary to ensure the process of production and the formation of value. The second part of working capital includes circulation funds, consisting of finished products and cash assets of the enterprise. Circulation funds do not participate in the formation of value, but are carriers of already created value. Their main purpose is to ensure the rhythm of the circulation process with money.

The unification of working capital and circulation funds into a single system of working capital follows from the continuity of the advanced value across the three named stages of their circulation.

Let's consider individual elements of working production assets. The overwhelming majority of working capital assets are inventories. Industrial inventories are stocks of raw materials and materials, semi-finished products and components, fuel, containers, household equipment, spare parts for repairs, and tools.

Raw materials and basic materials are objects of labor that form the material (material) basis of the manufactured product. Raw materials are products of agriculture (grain, wool, cotton, fruits, vegetables) and mining industry (oil, ore, gas, etc.). The main materials are considered to be manufactured products (flour, sugar, fabric, metal, leather, etc.).

Semi-finished products are objects of labor, the production of which is completely completed in one workshop, but which are subject to further processing in other workshops of the same enterprise or can be sold.

Auxiliary materials, unlike raw materials and purchased semi-finished products, do not form the main content of the manufactured product, but only facilitate the implementation of the technological process and the formation of the product.

Along with production inventories, working capital assets include assets in production, including unfinished products and deferred expenses. Work in progress (WIP) are items of labor that have entered the production process, but have not undergone all processing operations provided for by the technological process.

The only intangible element of working production assets is future expenses necessary to create reserves, install new equipment, etc. Deferred expenses include costs for the preparation and development of new types of products, new technology, produced in a given period, but subject to repayment in the future.

The ratio of individual components of working capital to their total value characterizes the structure of working capital. This is the ratio between individual elements of working capital (raw materials, basic materials, fuel, packaging, spare parts, finished products, etc.), expressed as a percentage of the total.

Based on the sources of formation and replenishment, working capital is divided into own and equivalent funds and borrowed funds.

Own working capital is the working capital allocated by the participants (founders) for the uninterrupted functioning of their enterprise. The main sources of formation of own working capital are profit, intra-economic financial resources and their redistribution.

Funds that do not belong to the enterprise, but according to the terms of settlements are constantly in its circulation, are considered equivalent to own working capital. These are the so-called stable liabilities. These include minimum wage arrears, payroll accruals, reserves to cover future payments, accounts payable and other stable liabilities.

Stable wage liabilities UPZP are calculated using the formula:

UPzp = ZPkv × PD / 90,

where ZPkv is the wage fund of the fourth quarter of the planned year, taken as the basis when calculating the standard of own working capital, rubles;

Pd - gap between accrual and payment of wages, days.

The amount of the minimum wage arrears for wages and salaries is determined by the following formula:

Zzp = Zpl × Pd / 90,

where ZPpl is the planned wage fund for the corresponding quarter, rub.;

PD - the number of days from the beginning of the month until the day of payment of wages.

Borrowed assets are working capital received from financial organizations in the prescribed manner in the form of loans and credits.

2. RATING OF WORKING CAPITAL

Rationing of working capital is the basis for the rational use of an enterprise's economic assets. It consists in developing reasonable norms and standards for their consumption, necessary to create constant minimum reserves for the uninterrupted operation of the enterprise.

According to the degree of planning, working capital is divided into standardized and non-standardized.

Standardized include working capital in production inventories.

Non-standardized includes : cash, shipped goods and completed work, all types of accounts receivable, etc.

In practice, three main methods of rationing working capital are used: analytical, coefficient and direct counting method.

The analytical method uses actual data on the amount of working capital for a certain period. At the same time, excess and unnecessary inventories are clarified, and adjustments are made to account for changes in production and supply conditions. The updated result of these calculations is considered the working capital standard for the planned period. This method is used in cases where significant changes in the operating conditions of the enterprise are not expected and funds invested in material assets and inventories have a large share.

The coefficient method is that the standards for the planning period are calculated by making amendments (using coefficients) to the standards of the previous period. The coefficients take into account changes in production volumes, working capital turnover, assortment shifts and other factors.

The direct counting method consists in calculating the amounts of working capital for each specific type of inventory, then adding them up, and as a result, determining the standard for each element of standardized working capital. The general standard represents the sum of the standards for all elements. This method is the most accurate, reasonable, but at the same time quite labor-intensive.

When rationing working capital, it is necessary to establish stock standards for individual types of regulated materials, determine standards for each element of working capital, and calculate the total standard for regulated working capital.

Working capital standards characterize the minimum inventories of inventory, calculated in days of supply or as a percentage of a certain base (commercial products, volume of fixed assets). As a rule, they are established for a certain period of time (quarter, year), but can be valid for a longer period. Standards are established for production inventories, work in progress, and finished product inventories in the enterprise warehouse.

Let's consider the calculation of the norms of inventories, work in progress and finished goods.

The norm in days for production inventories (raw materials, supplies, purchased semi-finished products) is the sum of time:

unloading, receiving, warehouse processing and laboratory analysis (preparatory stock);

the presence of materials in the warehouse for the current production process (current stock) and insurance or guarantee stock (safety stock);

preparation of materials for production (technological stock);

stay of materials in transit (transport stock).

The largest share in the general working capital norm for a group of materials is occupied by the current stock norm.

Current stock is a constant supply of materials that are fully prepared for launch into production and intended for the uninterrupted operation of the enterprise. Its value depends on the average daily consumption of materials, the interval between next deliveries, the size of supply batches and production launch batches. For many materials, the interval between successive deliveries is taken in half or calculated using the arithmetic mean method.

The maximum value of the current stock Зmax is determined by the formula:

Зmax = Аn × Т,

where An is the average daily need for this material, natural units of measurement;

T is the time between two next deliveries, days.

In this case, the average daily consumption is established by dividing the total need for this material in the planning period (year, quarter, month) by the number of calendar days for the same period, if the enterprise operates continuously, or by the number of working days, if it does not work on holidays and weekends.

The average value of the current stock (often called the transition stock) Zsr is determined by the formula:

Zsr = Zmax / 2.

Next in importance is the safety stock, which is created in case of possible supply disruptions, delays in transit, receipt of low-quality materials, etc. The size of the safety stock is usually set as a percentage of the working capital norms for the current stock (from 30 to 50%).

The insurance, or guarantee, reserve stock can also be determined by the formula:

Zs = Adn × Pm,

where Adn is the norm of safety stock of materials, days;

PM - average daily demand for this type of materials, rub.

On average, the transport stock formed in the event of a discrepancy in the timing of document flow and payment for them and the time the materials are in transit is of the same duration.

At enterprises, the so-called technological reserve (Ztech) is also formed, which is necessary for preparation for production. The amount of such reserve is determined by the formula:

Ztech = Ap × Tc,

where An is the average daily need for this material, natural units of measurement;

Tc — duration of the technological cycle, days.

The general inventory norm Ztot for raw materials, basic materials, purchased semi-finished products is determined by the formula:

Ztot = Ztek + Zs + Ztr + Ztech.

The standard requirement of working capital for spare parts for routine maintenance and repair of equipment is calculated as the product of the stock norm in rubles, established in relation to a certain indicator, by the total planned value of the latter.

For example, the standard stock of spare parts for equipment maintenance and repair is set in rubles. for 1 thousand rubles. book value of equipment.

The standard working capital rate for Atip spare parts is determined by the formula:

Atyp = Atotal / Sob,

where Atotal is the total need for working capital for spare parts, rub.;

Sob - the cost of equipment and vehicles at the end of the planned year.

The stock norm for work in progress Nwp is established based on the duration of the production cycle and the degree of readiness of products, which is expressed through the cost increase coefficient. The norm is defined as follows:

Nnz = Tc × Knz,

where Tc is the duration of the production cycle, days;

Knzp - cost increase coefficient.

The coefficient of increase in costs in work in progress characterizes the level of product readiness and is due to the fact that costs in work in progress are carried out at different times and increase gradually throughout the entire cycle. The cost increase coefficient is always greater than 0 and less than 1.

The stock norm for finished products depends on the time of processing payment documents, packaging and labeling, storage in the warehouse before shipment, assembling of products to the transit norm, the duration of transportation of products from the enterprise warehouse to the departure station and loading into vehicles.

After establishing inventory standards, the working capital standard in monetary terms is determined for individual elements of working capital and for the enterprise as a whole.

Working capital ratio is the minimum amount of cash required by an enterprise to organize production activities.

Basically, the standard for individual elements of working capital Sni is determined by the formula:

Sni = H3i × Ai,

where H3i is the stock rate of the i-th element, days;

Ai is the indicator in relation to which the norm is established.

Let's look at the calculation of working capital standards using examples.

The standard for production inventories (raw materials, materials, purchased semi-finished products, etc.) is determined by multiplying the standard in days by their daily consumption.

Sni = H3i × M / Tk,

where M is the consumption of raw materials and materials for a calendar period of time, rub.;

Tk - calendar period, days (year - 360 days; quarter - 90 days, month - 30 days).

The work-in-progress standard Anzp is calculated by multiplying the work-in-process stock rate by the average daily output of products assessed at production cost.

Anzp = Psut × Nnzp,

where Psut is the average daily output at production cost, rub.;

Nnsp - stock norm in work in progress, days.

The working capital standard for finished products of the enterprise in the warehouse of the enterprise is determined by the formula:

ZGP = Psut × Nzg,

where Psut is one-day output of finished products at production cost;

Nzg - standard stock of finished products, days.

Calculation of the working capital standard for future expenses Ab.p is determined by the formula:

Ab.p. = Zn + Zpl - Zpog,

where Zn is future expenses at the beginning of the planning period;

Salary - expenses of the planned period for these purposes;

Zpog - costs in the planning period that are subject to write-off to the cost of production.

The process of standardization ends with the establishment of a total working capital standard by adding up private standards for inventories, work in progress, deferred expenses and finished products.

The average rate of working capital for the enterprise as a whole is calculated by dividing the total standard by the one-day output of marketable products at production cost.

Thus, rationing of working capital is a necessary condition for determining the minimum sufficient amount of funds to ensure the effective operation of the enterprise as a whole.

Formula for calculating the liquidity ratio of current assets

To calculate the rate of asset turnover and quickly track the solvency of the company, financiers calculate the current liquidity ratio of the company. This indicator shows whether the company can pay off current obligations at the expense of OA. Accordingly, the higher it is, the better for the company. Formula for calculation:

Ktl = OA/Co,

Where:

Ktl - current liquidity ratio,

OA - current assets,

Co - short-term liabilities.

Important! Hint from ConsultantPlus The source of information for financial analysis is the balance sheet... Possible type of formula (balance sheet line): Ktl = (line 1200 - line 1230 - line 1220) / (line 1510 + line 1520 - line 1550 ). Read more about liquidity analysis in K+. Trial access is free.

Find out which balance sheet lines to use to calculate the ratio in the publication “Current liquidity ratio (balance sheet formula).”

Mobility and maneuverability coefficients

These ratios are also obtained by using working capital data

Own funds maneuverability coefficient

This indicator demonstrates how capable the organization is of maintaining the level of its own working capital and whether it can replenish working capital, if necessary, through the use of its own sources. Calculated using the following formula:

[ Equity agility ratio ] = [Own working capital] / [Equity capital]

To calculate own working capital, line 1100 is subtracted from line 1300 of the balance sheet. Own capital is line 1300.

Working capital mobility coefficient

This indicator demonstrates the amount of ready-to-pay funds in the total amount of assets that are used to repay short-term debt obligations. The formula used for calculation is:

[ Mobility coefficient ] = ([Cash] + [Financial investments]) / [Current assets]

[ Mobility Rate ] = ( [line 1240] + [line 1250] ) / [line 1200]

If the mobility coefficient increases, one can judge that the rate of property turnover is increasing.

Similar articles

• Working capital in the balance sheet, line
• Own working capital
• Classification of working capital of an enterprise
• Tangible current assets are
• Working capital turnover

Results

Effective management of current assets is the key to the smooth operation of the company.
Each company determines the volume of OA required for work independently based on its own needs, the rate of resource consumption and the size of the business. At the same time, their lack can lead to a stoppage of production or the inability to pay off current obligations. Excess indicates inactivity of assets and the inability to quickly convert them into cash, i.e. low liquidity. You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.