Costing can be done either within an accounting system (an orderly, regular process) or on demand (for example, collecting and measuring costs associated with replacing equipment). Of course, continuous costing is more expensive than occasional costing, and the decision on how much detail should be provided from the production accounting system on a regular basis is made on a cost-to-revenue basis.
Calculation at any enterprise, regardless of its type of activity, size and form of ownership, is organized in accordance with certain principles.
1. Scientificjustifiedclassificationcostsonproduction.
Currently, in the absence of industry recommendations, issues of cost classification must be resolved by organizations independently, taking into account industry characteristics and management goals.
2. Establishment of cost accounting objects, costing objects and costing units. In many cases, cost accounting objects and costing objects are not the same. Cost accounting objects are the places of their origin, types or groups of homogeneous products. Cost center in management accounting they call the structural units and divisions of an enterprise in which the initial consumption of production resources occurs (workplaces, teams, workshops, etc.).
Under object of calculation (cost carrier) understand the types of products (works, services) of the enterprise intended for sale on the market.
In the extractive industries, in the absence of work in progress (for example, in energy, gas, oil, etc.), the cost accounting object coincides with the calculation object (cost carrier). The same is observed in enterprises with an individual nature of production (for example, heavy engineering enterprises), as well as in organizations working on an order system (consumer service enterprises, repair shops, audit firms, etc.). In those industries where the technological process is divided into a number of stages (reprocessing stages), such correspondence is not observed. For example, in the textile industry, the objects of cost accounting are individual processes - spinning, weaving, finishing, and the object of calculation is the finished product, i.e. textile. In other words, the choice of cost accounting object depends on the technological features of production and the specifics of the products being manufactured.
The choice of costing unit depends on the characteristics of production and products (services provided, work performed). Natural units can be used (pieces, tons, meters, etc.); conditionally natural units (for example, in the shoe industry - 100 pairs of shoes of a certain type, in the foundry industry - a ton of castings of a certain type, in the canning industry - conventional cans); units of time (hours, machine hours, man days); units of work – one ton of transported cargo.
3. Choosing a method for allocating indirect costs is extremely important for the correct calculation of the cost per unit of production (work, services). It is produced by the enterprise independently, recorded in the accounting policy and remains unchanged throughout the entire financial year.
4. Distribution of costs by periods. In this case, it is necessary to be guided by the accrual principle. Its essence lies in the fact that transactions are reflected in accounting at the time of their completion and are not linked to cash flows. Income and expenses received (incurred) in the reporting period are considered income and expenses of this period, regardless of the actual time of receipt (or payment) of funds. Income and expenses not related to the reporting period are not recognized as income (expenses) of the reporting period, even if the money for them was received or transferred in a given period.
5. Separate accounting for current production costs and capital investments. This principle is reflected in the Law of the Russian Federation “On Accounting” (Article 8, paragraph 6) and in the Regulations on accounting and financial reporting in the Russian Federation.
6. Choosing a cost accounting and calculation method.Under the method of accounting for production costs and calculating production costs understand a set of techniques for documenting and reflecting production costs that ensure the determination of the actual cost of production, as well as the attribution of costs per unit of production. In other words, this is a set of methods for analytically accounting for production costs by costing objects and methods for calculating costing units. There is no generally accepted classification of cost accounting and costing methods yet. Nevertheless, they can be grouped according to three criteria: by objects of cost accounting, by the completeness of the costs taken into account and by the efficiency of cost accounting and control (Fig. 4.1).
Rice. 4.1. Classification of cost accounting and calculation methods
According to the objects of cost accounting, there are process-by-process, part-by-part, order-by-order methods, as well as the method of accounting (calculating) costs by function. From the point of view of the completeness of the costs taken into account, it is possible to calculate full and incomplete (“truncated”) costs. Depending on the efficiency of accounting and cost control, a distinction is made between the method of accounting for actual and standard costs.
The method of cost accounting and calculation is chosen by the enterprise independently, since it depends on a number of private factors: industry, size, technology used, product range, etc., in other words, on the individual characteristics of the enterprise. In practice, these methods can be used in various combinations. For example, you can resort to the order-by-order method, calculating the partial cost of orders; You can use incremental calculation using norms for the consumption of material resources, or you can also take into account their actual consumption, etc. The main thing is that the method chosen by the organization provides the ability to group costs into individual accounting objects, ongoing control over production costs, as well as the ability to implement the most important principle of management accounting - cost management by deviations.
The variety of methods for accounting and calculating product costs is regulated by factors that are divided into 2 groups:
industry specifics
· organizational prerequisites
Industry specific features depend on the range of products produced, the nature of production and the technologies used. Organizational prerequisites are formed by the enterprise, which include:
level of development of production accounting;
accepted method of operational cost control;
the degree to which the administration provides information for decision-making.
The method of accounting for production costs and calculating the cost of production is understood as a set of techniques for documenting and reflecting production costs that provide the actual cost and the necessary information to control the formation of the cost of production.
The classification of cost accounting methods is based on:
· cost accounting objects;
· calculation objects;
· ways to control product costs.
Product cost– the costs of its production and sale expressed in monetary terms.
One of the main conditions for obtaining reliable information about the cost of production is a clear definition of the composition of production costs.
For the organization of accounting of production costs, the choice of the nomenclature of synthetic and analytical production accounts and calculation objects is of great importance.
In large and medium-sized organizations, to account for the costs of production, accounts 20 “Main production”, 23 “Auxiliary production” are used, collective and administrative accounts: 25 “General production expenses”, 26 “General business expenses”, 28 “Losses from defects”, 97 “Future expenses”, 46 “Completed stages of work in progress.”
Expenses are taken into account in the debit of these accounts, and their write-off in credit. At the end of the month, the costs recorded in the collection and distribution accounts (25, 26, 28, 97) are written off to the accounts of the main and auxiliary production.
In small organizations, to account for production costs, as a rule, accounts 20 “Main production”, 26 “General business expenses” are used », 97 “Deferred expenses” or only account 20.
At trading enterprises, costs are collected on account 44.
Costing objects– individual products, groups of products, semi-finished products, works and services, the cost of which is determined. Analytical accounting of production costs is carried out, as a rule, according to costing objects. It is allowed to open analytical accounts not for each object, but for their group.
Their classification is of great importance for the correct organization of accounting for an organization's expenses. Expenses for ordinary activities are grouped according to the place of their occurrence, types of products (works, services) and types of expenses.
According to the place of origin, expenses are grouped by production, workshop, site and other structural divisions of the enterprise. This grouping of costs is necessary for organizing in-plant cost accounting and determining the production cost of products.
Expenses are grouped by type of product (work, service) to calculate their cost.
By type of expense, costs are grouped by cost elements and costing items.
The organization's expenses for production consist of the following elements:
1. material costs (minus the cost of returnable waste);
2. labor costs and social contributions;
3. depreciation;
4. other costs (postal and telegraphic, telephone, travel expenses, etc.).
To calculate the cost of individual types of products, the organization's expenses are grouped and taken into account according to costing items. The Basic Provisions for Planning, Accounting and Calculating Product Costs at Industrial Enterprises establish a standard grouping of expenses by costing items, which can be presented in the following form:
1) “Raw materials and supplies”;
2) “Returnable waste” (subtracted);
3) “Purchased products, semi-finished products and production services of third-party enterprises and organizations”;
4) “Fuel and energy for technological purposes”;
5) “Wages of production workers”;
6) “Deduction for social needs”;
7) “Expenses for preparation and development of production”;
8) “General production expenses”;
9) “General business expenses”;
10) “Losses from marriage”;
11) “Other production costs”;
12) “Business expenses.”
The total of the first 11 items forms the production cost of products, and the total of all 12 items forms the total cost of products sold.
Main These are the costs directly related to the production process: raw materials and basic materials, auxiliary materials and other costs, except for general production and general business expenses.
Overheads are formed in connection with the organization, maintenance and management of production. They consist of general production and general business expenses.
Direct costs are associated with the production of a certain type of product and can be directly and directly attributed to its cost: raw materials and basic materials, losses from defects and some others.
Indirect costs cannot be attributed directly to the cost of certain types of products and are distributed indirectly (conditionally): general production, general economic, commercial expenses and some others.
The list of cost elements and the procedure for their accounting are determined by Chapter 25 of the Tax Code.
1. "Material costs » reflect the cost:
purchased raw materials and materials used for production and economic needs, as well as
Product components and semi-finished products that are subject to further installation or additional processing in this organization;
Works and services of a production nature performed by third-party organizations or production facilities and farms of the organization that are not related to the main type of activity;
Natural raw materials - deductions for the reproduction of the mineral production base, land reclamation, payment for land reclamation work, payment for standing timber, payment for the use of water bodies;
Fuel of all types, purchased from outside and spent on technological purposes, production of all types of energy, heating of buildings, transport work for servicing production, performed by the organization’s transport;
Purchased energy of all types, spent on technological and other production and economic needs;
Losses from a shortage of received material resources within the limits of natural loss.
The cost of material resources reflected in the element “Material costs” is formed on the basis of their acquisition prices (excluding value added tax), markups (surcharges), commissions paid to supply and foreign economic organizations, the cost of services of commodity exchanges, including brokerage services, customs duties, fees for transportation, storage and delivery carried out by third parties.
An entry is made for the cost of materials supplied:
Debit 20 (23,25,26)
2. “Labor costs and social contributions » reflect the costs of remunerating the main production personnel of the enterprise, including bonuses to workers and employees for production results, incentive and compensatory payments, including compensation for wages in connection with price increases and indexation of income within the limits provided for by law, compensation paid in in the amounts established by law for women on partially paid parental leave until they reach the age specified by law, as well as the cost of remuneration of unemployed workers engaged in the main activity and mandatory social tax deductions from the cost of remuneration of workers included in into the cost of products (works, services). In addition to those types of payment for which insurance premiums are not charged.
For the amount of accrued wages:
Debit 20 (23,25,26)
For the amount of accrued payments for social insurance and security:
Debit 20 (23,25,26)
3. According to the article « Depreciation of fixed assets" reflect the amount of depreciation charges for the complete restoration of fixed production assets, calculated on the basis of their book value and norms approved in the established manner, including accelerated depreciation of their active part, carried out in accordance with the law.
For the amount of accrued depreciation of fixed assets:
Debit 20 (23,25,26)
4. "Other costs" reflect taxes, fees, payments (including for compulsory types of insurance), deductions to insurance funds (reserves) and other mandatory deductions made in accordance with the procedure established by law, payments for emissions (fees) of pollutants, costs of paying interest on loans received, for business trips, lifting, for training and retraining of personnel, payment for communication services, computer centers, banks, rent in the case of renting individual objects of fixed production assets (or their individual parts), depreciation on intangible assets, contributions to the repair fund , as well as other costs included in the cost of products (works, services), but not related to the previously listed cost elements.
The cost of other costs is reflected in correspondence:
Debit 20 (23,25,26)
Credit 50,51,71,76,68...
Accounting for expenses by cost elements is carried out in journal order No. 10.
One of the main indicators of the enterprise's performance is the cost of production. Calculation of the unit cost of individual types of products or work and all products sold is called calculation.
Product cost calculation is carried out using various methods. The costing method is understood as a system of techniques used to calculate the cost of a costing unit. The choice of method for calculating the cost of production depends on the type of production, its complexity, the presence of work in progress, the duration of the production cycle, and the range of products produced.
Industrial enterprises use standard, order-by-order, incremental and process-by-process (simple) methods of cost accounting and calculating the actual cost of products.
Ivanovo branch
Educational institution of higher professional education
Central Union of the Russian Federation
"Moscow University of Consumer Cooperation"
Course work
Discipline: “Management Accounting”
On the topic: “Cost accounting methods”
Performed:
2nd year student, 2nd group SSO
Specialties 060500
Fedorova A.S.
Checked by: Mikheeva I.I.
Cipher:
Option:
Ivanovo 2005.
Concepts of cost accounting and costing.
Cost accounting method based on actual and standard costs.
Transverse cost accounting method.
Order-by-order method of cost accounting.
Process-by-process method of cost accounting.
Cost accounting method at full cost.
Marginal cost accounting method.
Introduction
Chapter 1 “Cost Accounting Methods”
Chapter 2 “Practical part”
Conclusion.
Bibliography.
1. Introduction.
Management accounting is one of the new and promising areas of accounting practice. Management accounting provides management personnel of organizations with the information necessary for planning, control and management. The object of management accounting is the costs (current and capital) of the enterprise and its individual structural divisions - responsibility centers; results of economic activities, both of the entire enterprise and of individual responsibility centers; internal pricing, budgeting and internal reporting. To make optimal and rational management decisions, you need to know about the composition of your costs and understand information about production costs.
The most important function of management accounting is calculation.
The topic of this course work: “Methods of cost accounting.”
The purpose of the work is to describe modern accounting methods and identify the most alternative ones. The objective of the course work is expressed in comparing the types, methods and systems of cost accounting and cost calculation in order to identify the best and most promising ones.
The paper describes the evolution of cost accounting methods, the organization of production cost accounting, the role of calculating product costs in production management, the main methods of costing: process-by-process, incremental and order-by-order, as well as actual and normative methods of cost accounting and calculation.
2. Chapter 1 “Cost Accounting Methods”.
2.1. Concepts of cost accounting and product costing.
Production (circulation) costs are usually called the costs of living and embodied labor for the manufacture of products, goods (performance of work, provision of services) and their sale. In practice, the term “production costs” is used to characterize all production costs for a certain period. Costs related to manufactured products, work performed, services provided are expressed in the cost of products (works, services). Production costs represent the total costs of an enterprise for the production and sale of products for a certain period, regardless of whether the costs are for a finished product (which corresponds to the cost of production) or for work in progress.
The cost of production is defined as “the current costs of living and embodied labor expressed in monetary terms for the manufacture (production) and sale of products (works, services).”
The “classical” definition of cost was contained in clause 1 of the Regulations on the composition of costs for the production and sale of products (works, services), included in the cost of products (works, services), and on the procedure for the formation of financial results taken into account when taxing profits: “Cost of products (works, services) is a valuation of the natural resources, raw materials, materials, fuel, energy, fixed assets, labor resources used in the production process of products (works, services), as well as other costs for its production and sale.”
In other words, the cost of products (works, services) shows how much it costs each organization to produce and sell products (works, services), and how diverse the costs incurred are.
However, cost calculation may vary due to the following factors:
a) depending on the degree of readiness of the product and its sale, the cost of gross, marketable, shipped and sold products is distinguished;
b) depending on the quantity of products - the cost per unit of production, the total volume of products produced;
c) depending on the completeness of inclusion of current expenses in the cost of the costing object - the full actual cost and the reduced (truncated) cost;
d) depending on the efficiency of cost formation - actual (historical, “posthumous”) or normative, planned.
For planning and accounting, costs associated with the production and sale of products (works, services) are grouped according to calculation items. This allows you to formulate the production and full cost of manufactured products. Costs for costing items are broader in composition than elemental ones, since they take into account the nature and structure of production, creating the basis for determining the price of the products being created and economic analysis.
So, since, according to current legislation, costs are understood, essentially, as costs associated with the production and sale of products, despite the fact that by their purpose they relate not only to costs that are included in the cost of finished products, but also to work in progress, We will more often use the phrase “production and distribution costs” or the shorter term “costs”.
The concept of cost appears in many regulations of the Russian Federation. In this case, it is necessary to distinguish at least two aspects of this term - economic and tax.
When considering the economic aspect of cost, one should be guided by the content of acts included in the system of regulatory regulation of accounting. Given the complex nature of this concept, it is explicitly or implicitly present in almost all documents. Therefore, the economic meaning of the cost of a product should be sought in regulatory documents at all four levels of the existing system of accounting legislation in Russia.
At the first level it is:
Civil Code of the Russian Federation, parts one and two;
Tax Code of the Russian Federation, parts one and two, including Chapter 25 of the second part of the Tax Code;
Federal Law “On Accounting”;
Federal Law “On a simplified system of taxation, accounting and reporting for small businesses” (with amendments and additions);
Regulations on accounting and reporting in the Russian Federation;
At the second level is the System of National Accounting Standards - Accounting Regulations (PBU). At the moment, 15 provisions have been adopted that regulate the principles of accounting for individual objects (fixed assets, inventories, property and liabilities denominated in foreign currency, capital construction contracts, etc.), as well as general principles of accounting and reporting (compilation of accounting records). organizational policies, rationing of expenses and income, conditional facts of economic activity, etc.).
The third level is various kinds of methodological instructions, recommendations mainly from the Ministry of Finance of the Russian Federation, taking into account, among other things, the industry specifics of various organizations.
The fourth level is the internal working documents of the organization, the main one of which is the Regulations on the accounting policies of the organization.
The main regulatory act on the issue of the composition of costs (costs), currently in force, is the Accounting Regulations “Expenses of the Organization” PBU 10/99.
2.2. Cost accounting method based on actual and standard costs.
Fig. 1 “Classification of cost accounting and calculation methods”
cost accounting and calculation methods
process-by-process
method
transverse
method
custom
method
Regardless of the variety of accounting objects, costs can be studied by two methods - the actual method and the method of accounting for standard costs.
Actual cost accounting is a method of sequential accumulation of data on actual costs incurred without reflecting in accounting data on their value according to current standards.
The standard accounting method involves the preliminary determination of standard costs for operations, processes, and objects with the identification of deviations from standard costs during production. Actual costs are determined by the algebraic addition of costs according to standards and deviations from them.
Both methods are aimed at identifying and ultimately reflecting the actual cost of production, but the first - through direct cost accounting, and the second - through deviations from norms.
The actual cost accounting method is traditional and most common in domestic enterprises. However, this method has many disadvantages, which will be discussed below.
Accounting for actual costs is based on the following principles: complete and documented reflection of primary production costs in the accounting system of accounts, accounting registration at the time of occurrence, assignment of actually incurred costs to objects of their accounting and cost carriers, comparison of actual indicators with planned ones.
The method allows you to determine the actual (historical) cost.
At the beginning of the twentieth century, this method began to be criticized by economists. Thus, G. Emerson touched on this issue in his book “Labor Productivity as the Basis of Operational Work and Wages.” In the chapter on cost accounting, the author emphasized the slowness of accounting, and the erroneousness of the resulting digital cost data as a consequence of “the confusion of production costs with incidental (random) expenses that do not have even the most distant relationship to cost.” According to G. Emerson, the main disadvantage of the method is that it has almost no value in eliminating losses.
And also the disadvantages of the actual cost accounting method are:
Insufficient efficiency in providing data to management personnel. Data on the cost of the manufactured product are provided only upon completion of production;
There are no standards - accounting for “historical” cost is labor-intensive, creates a lot of additional work on recording business facts, and therefore turns out to be more expensive.
The most important disadvantage of the method is the impossibility of promptly sending a signal to the administration about productive losses of labor and materials, which could be eliminated by taking emergency measures.
Thus, the most progressive options, especially in conditions of developing market relations and fierce competition, are the options for accounting for standard costs.
The normative method assumes that a preliminary standard cost estimate is drawn up for each type of product, i.e. calculation calculated according to the norms for consumption of materials and labor costs in force at the beginning of the month.
Ph.D., Director for Science and Development of JSC "KIS"
Cost accounting methods
Cost determination is a process that begins with the collection of all information on the costs incurred in purchasing, producing and selling a product or service. Having collected the necessary cost data, it is necessary to analyze the total cost and determine methods that allow one to accurately calculate the cost of each type of product.
The use of specific techniques and methods that make up a particular cost accounting method is determined by the accounting policy of each organization, the formation of which directly depends on the characteristics of economic activity.
Accounting for production costs in traditional accounting practice is part of the overall accounting system. At the same time, accounting and production accounting are interconnected, since they have uniform procedures for documenting business transactions and their valuation. In this case, accounting acquires a managerial orientation.
By transforming production accounting data into a management information base, supplementing with operational information and internal reporting of materially responsible persons, a unified integrated information system is formed that allows for effective management of costs and results.
For the rational organization of cost accounting, it is important to identify cost accounting objects, cost accounting methods, costing objects, costing units and methods for calculating product costs.
Cost Accounting Objects for production - these are actually occurring production costs, grouped according to various characteristics necessary to obtain information for the purposes of control and management.
Object of cost calculation is a manufactured product in varying degrees of readiness.
Cost Allocation pursues the goal of adequately describing the cost of finished products and sold products. The choice of the most optimal cost allocation option should be carried out taking into account the restrictions imposed by production processes, legal requirements, information system and other factors.
To reflect costs, depending on the choice of a particular accounting object, the following can be used: basic methods: simple, custom-made, cross-distribution, process-by-process, boiler and standard accounting system.
Easy way Cost accounting is used primarily in simple (single-process) industries, the distinctive features of which are the absence of work in progress and semi-finished products, a small homogeneous range of products obtained as a result of a short one-time technological process. With this method, costs are charged directly to the cost of individual types of products (services).
Custom method accounting is used in production, where products are in the nature of individual orders. According to the order, direct production costs are localized and grouped; orders act as signs of analytical cost accounting accounts, between which indirect costs are periodically distributed. Analytical accounts consistently collect all costs for a given order. Before the order is completed, the costs for it represent work in progress, and after its completion, regardless of the duration of its completion, they represent the cost of the finished product.
Transverse method Cost accounting is used in the production of mass products obtained by sequential processing of raw materials into semi-finished products, and from them into a finished product. With this method, direct costs are usually taken into account by processing stages, and within them - by types of products produced (where possible). Costs associated with the operation of equipment are also taken into account by processing areas (shops), and then distributed within each processing area by type of product. General production and administrative expenses are distributed in a similar manner between production stages and types of products (products).
As a rule, operational accounting is carried out only in quantitative terms. The correspondence of accounting and operational accounting data is usually determined only on the basis of an inventory of all material assets in production, i.e. inventory of work in progress.
Process-by-process method accounting allows you to determine the cost of production attributable to one or more technological stages (processes) in which semi-finished products are not formed; it is used in organizations with mass production. The essence of the process-by-process method is that costs follow the product along the technological chain, i.e. upon completion of any operation, costs accumulate, the volume of which can be correlated with their average standard or standard size. The distribution of costs between output and work in progress, as well as between several types of products, is carried out at any stage of the production process.
In some organizations, in order to reduce the labor intensity of accounting work, it can be used impersonal (boiler) method cost accounting. This method is characterized by keeping records as a whole for the organization, workshop or economically justified established product groups.
Regulatory accounting system involves taking into account actual costs with the subsequent determination of deviations from established standards, identifying the causes of deviations and their regulation.
The option for organizing standard accounting involves changing the forms of primary accounting documents, which should contain separate items of deviations from the norms, drawing up a consolidated accounting of production costs according to norms and deviations, identifying unaccounted deviations and calculating products.
As a rule, the system of normative accounting is distinguished separately, since order-by-order, per-distribution, process-by-process and other named methods can be normative.
Cost accounting methods
Technological and organizational features of production, the duration of the production cycle, the quantitative and qualitative characteristics of the finished product require a different combination of methods and techniques for accounting for production costs and calculating the cost of production.
The method of cost accounting and calculating the cost of production is understood as a set of methods for organizing the documentation and reflection of production costs, ensuring the determination of the actual cost of production and the necessary information for monitoring the process of formation of the cost of production.
In the domestic literature, the following main methods of cost accounting and calculation of the actual cost of products are called:
1. custom;
2. process-by-process;
3. transverse;
4. normative;
5. standard-cost;
6. direct costing;
Custom method of accounting and costing cost is used in single and small-scale production that produce unique, expensive products of limited consumption or created at the request of the customer, as well as in construction.
With the order-by-order method, the object of accounting and costing is a separate production order. An order means a product, small series of identical products, or repair, installation and experimental work. When manufacturing large products with a long production process, orders are issued not for the product as a whole, but for its units, assemblies, representing completed structures.
The technological process and accounting procedures in the order-based costing system differ by industry and type of production, but most enterprises use to one degree or another:
Production planning in general and in terms of cost flows;
Cost registration card for the order;
Production schedule;
Collection and distribution of costs;
Preparation of reports on order costs;
Maintaining calculation accounts, books, journals and other accounting registers that form the accounting structure and its connection with the calculation system.
A feature of account 20 “Main production” with this calculation method is that analytical accounting is maintained by type of product or order.
At the end of the month, account 20 “Main production” is not closed and has a carryover balance, meaning work in progress. Accounts 25 “General production expenses” and 26 “General operating expenses” are closed monthly for the cost of the order or type of product; they do not have a balance.
The fundamental advantages of the order-based costing method are that this method makes it possible to compare costs between orders, shows the most and least profitable orders, as well as which operations in similar orders are the most expensive and which are the most effective. The order-by-order method provides a basis for planning costs and sales prices for future orders. The method provides data for controlling costs on orders by calculating variances between estimates and actuals, and also makes a sufficient allocation of overhead costs between orders.
The process method is used in organizations with the following characteristics of the production process:
Mass production of one or several types of products;
Short period of the technological process;
There is no work in progress or it is insignificant.
Such organizations should include organizations in the extractive industries (coal mining, oil mining, etc.), the building materials industry, power and heating plants, etc. The process-by-process method is widely used in energy facilities of auxiliary industries.
Thus, process costing is convenient for those companies that produce a large mass of identical products through a series of operations, stages, and processes.
There are methods of simple, two-stage and multi-stage calculation systems.
The first option (the simplest) is used in the main production of those organizations where one type of product is produced and there is no work in progress - in organizations in the coal and mining industries, in the production of building materials, etc., as well as in energy facilities of auxiliary industries. The cost per unit of production in these industries is determined by dividing the amount of costs for the production process by the number of units of output.
The second option is used in those industries where several types of products are produced and there is no work in progress - in power plants where electricity and heat are simultaneously generated, oil industry organizations (oil and gas are produced), etc. When simultaneously producing or extracting different types of products, costs , related to a certain type of product, are taken into account for these types of products. Costs common to all types of products are distributed between types of products in ways established in the organization.
The third option for calculating the cost of a unit of production is used in industries with a fairly long production period and therefore having work in progress at the end of the reporting period - organizations in the logging, peat industry, etc. Remains of work in progress at the beginning and end of the reporting period are assessed in the manner established in the organization ( usually at standard cost). Then the costs of the reporting period are adjusted by the cost of work in progress at the beginning and end of the reporting period and the adjusted amount of costs is divided by the number of units of output produced.
The cross-cutting method is used in industries with the complex use of raw materials and supplies, as well as in industries with mass, large-scale and continuous production, in research and development organizations, etc., in which raw materials and materials undergo successive several independent processing phases ( redistributions, stages).
Each processing stage represents a completed phase of raw material processing, as a result of which the enterprise receives not the final product, but a semi-finished product of its own production, with the exception of the last processing stage. This semi-finished product can be transferred to the next stage for further processing or sold to other enterprises as a finished semi-finished product. Based on the results of the last stage, finished products are produced.
The essence of the transfer method is that direct costs are reflected in current accounting not by type of product, but by redistribution (stages) of production.
Processing is a part of the technological process (a set of technological operations) that ends with the production of a finished semi-finished product or finished product.
As a result of the sequential passage of the source material through all processing stages, finished products are obtained, i.e., at the exit from the last processing stage we have not a semi-finished product, but a finished product.
The essence of the normative method is that the calculation of the actual cost is based on the standard cost of products, works and services, which is calculated before the start of the reporting period on the basis of the cost standards in force at the enterprise for all types of resources.
Separately, operational records of deviations of actual costs from standard costs are kept, indicating the place of their occurrence, causes and culprits. Deviations from norms may represent savings or overruns. Changes in current standards as a result of the implementation of organizational and technical measures are also recorded and the impact of these changes on the cost of production is determined. Changes in standards are reduced or increased in subsequent reporting periods (month, quarter, year).
The actual cost is calculated as the algebraic sum of the standard cost, identified deviations from the norms and changes in the norms for each costing item.
The “standard-cost” method is a modified analogue of the Russian normative method. It is widely used in foreign management accounting practice.
The system is based on the principle of accounting and control of costs within the established norms and standards and for deviations from them.
A standard is the amount of necessary production costs to produce one unit of product or the pre-calculated costs of producing a unit of product or providing services. Based on established standards, it is possible to determine in advance the amount of costs for the production and sale of products, calculate the cost per unit of a product to set prices, and draw up a plan for income and expenses for the next year.
The Direct Costing system involves calculating the cost of products only based on variable costs, and fixed costs, regardless of whether all products released from production were sold, were written off to the sales result.
The procedure for writing off fixed costs for the result of sales led to a significant decrease in income from the sale or to a loss.
The Direct Costing system makes it possible to determine marginal income at different levels of enterprise management (team, site, workshop, enterprise as a whole).