What applies to work in progress as of 2021?

Non-current assets accounts

Non-current assets represent the property of an organization that it uses in the course of its activities to generate income over a long (more than a year) period of time.

PBU 4/99, approved by order of the Ministry of Finance of the Russian Federation dated July 6, 1999 No. 43n, identifies 4 main types of property:

• NMA;
• OS;
• profitable investments in material assets;
• financial investments.

Among those types of property that concern the issue of accounting for investments in non-current assets , the instructions for the Chart of Accounts, approved by Order of the Ministry of Finance of the Russian Federation dated October 31, 2000 No. 94n, include the first three:

• NMA - account 04;
• OS - account 01;
• profitable investments - account 03.

A feature of most of this property is the gradual (during the useful life period established for each object) write-off of its value as expenses (depreciation). Taking into account the fact that the period of use is long (up to several years), the correct determination of the value of this property when putting it into operation is of particular importance.

To learn about the types of non-current assets in accounting, read the article “Balance Sheet (Assets and Liabilities, Sections, Types)” .

Cash management

Management of cash or cash balance constantly at the disposal of an organization plays a very important role in the system of managing the use of working capital. Firstly, from the perspective of current activities, cash is of great importance, because they are used to bridge any gaps and disruptions in financial and production processes. Secondly, the size of the cash balance determines the level of absolute solvency of the organization (the readiness of the organization to immediately pay off all its financial obligations) and affects the amount of capital invested in current assets. Thirdly, from the standpoint of monitoring and assessing the effectiveness of an organization’s functioning, it is very important to understand which types of activities generate the bulk of cash inflows and outflows.

The purpose of
cash management
is to ensure the ongoing solvency of the organization.

The organization's funds are managed according to the following algorithm:

1. Cash analysis.

The main purpose of this analysis is to assess the amount and level of the average cash balance from the standpoint of ensuring the solvency of the organization, as well as determining the effectiveness of their use.

2. Optimization of the average cash balance
of the organization.
This optimization is achieved by calculating the required balance in the upcoming period.

There are a number of models that allow you to determine the optimal cash balance in an organization’s account. The most widespread in the theory and practice of financial management are the Baumol model (1952) and the Miller-Orr model (1966).

The Baumol model is used in the case of stability of cash receipts and expenditures, taking into account the fact that the storage of all monetary assets is carried out in the form of short-term financial investments and the change in the cash balance occurs from the maximum amount to zero.

In the Miller-Orr model, cash receipts and expenditures are stochastic, i.e. independent random events. The main feature of this model is the presence of a certain safety reserve of funds, at the level of which the minimum amount of cash balance is established. The maximum cash balance is set at three times the size of the safety stock.

Differentiation of the average balance of monetary assets in the context of national and foreign currencies.

Such differentiation is carried out only by organizations that conduct external economic activities. The purpose of such differentiation is to separate out the currency part of them from the overall optimized need for monetary assets in order to ensure the formation of the necessary currency funds for the organization.

3. Selection of effective forms of regulation of the average balance
of monetary assets.
Such regulation is carried out in order to ensure the constant solvency of the organization, as well as to reduce the estimated maximum and average need for balances of monetary assets.

4. Building effective systems for monitoring
the organization’s assets .
The object of such control is the total level of the balance of monetary assets that ensure the current solvency of the organization, as well as the level of efficiency of the formed portfolio of short-term financial investments - cash equivalents of the organization.

Principles of accounting for investments in assets

Accounting for investments in non-current assets consists of forming the value of objects that will subsequently be accepted as part of non-current assets, and occurs on a separate accounting account (account 08). The required number of sub-accounts are opened for this account, allocated, first of all, by type of property:

• OS;
• NMA;
• R&D;
• development of natural resources;
• creation (increase) of a herd in livestock farming.

Additionally, subaccounts are divided according to the methods of receipt of property of each type, and within subaccounts accounting is carried out object by object.

The cost of each object includes all costs associated with its receipt by the organization. At the same time, accounting and tax accounting of investments are kept separately. Their formation must be treated especially carefully, because not all costs can be taken into account equally in the value of non-current assets.

The issue of including general business expenses in the developing value of an asset is determined by the accounting policy adopted by the organization. When using the direct costing method, they are not included in this cost. If the method of including general business expenses in the cost of production is used, part of them will also be included in the cost of the created non-current assets. Further, for simplicity of presentation, we will not take into account general business expenses in the cost of the created object.

An auxiliary account for accounting for investments in non-current assets is account 07. It includes ready-to-use equipment that cannot be used without additional installation work: foundation construction, installation or connection to existing process equipment.

The asset is listed on account 08 until it is fully ready for use. Its definition also needs to be taken with care, because being on this account presupposes that the property is not ready for use and, therefore, allows you not to charge depreciation on it and not pay property tax on real estate. Artificially delaying the period of location of objects ready for operation in account 08 will lead to disputes with the Federal Tax Service. It should be borne in mind that the costs of developing natural resources used in the creation process, despite the fact that they are recorded on account 08, can be depreciated.

Inventory Management

The main objectives of creating inventory inventories are:

· Ensuring the current production activities of the organization (inventories of raw materials and materials).

· Ensuring current sales activities (inventories of finished products).

· Independence from seasonal fluctuations (accumulation of seasonal reserves).

The purpose of inventory management is to optimize inventory inventories

Inventory management tasks:

· optimization of inventory size;

· optimization of inventory structure;

· minimizing inventory maintenance costs;

· ensuring effective control over their movement.

Optimal inventory management techniques are based on the idea of ​​minimizing two main types of costs:

q purchase and delivery costs;

q storage costs.

One of the most well-known methods used in inventory management is the construction of a model of the optimal order batch EOQ (Economic ordering quantity), which allows minimizing the total costs of the order, taking into account the costs of delivery and storage of inventory.

The EOQ model allows you to optimize the proportions between these two groups of operating costs so that their total amount is minimal. Graphically this can be represented as follows.

An important method of inventory management is to build various effective systems for monitoring the movement
an organization's
inventory . The main task of such control systems is the timely placement of orders for replenishment of stocks and the involvement of over-formed types into the operational turnover.

Among inventory control systems in countries with developed economies, the ABC System is the most widely used. The essence of this control system is to divide the entire inventory of inventory items into three categories based on their value, volume and frequency of consumption, the negative consequences of their shortage on the course of operating activities and financial results, etc. and the implementation of constant control (monitoring) of category A reserves

In category "A"

include the most expensive types of inventory with long order cycles, which require constant monitoring due to the serious financial consequences caused by their shortage.
Category “B”
includes inventory items that are of less importance in ensuring an uninterrupted operational process and the formation of the final results of financial activities.
Category “C”
includes all other low-cost inventory items that do not play a significant role in the formation of final financial results.

Methods for receiving enterprise assets

Incoming non-current assets, the organization can:

• buy ready-made, not requiring additional investments in them;
• receive without payment as a result of a gift or discovery;
• receive as a contribution to the management company;
• build (create) independently (in an economic way);
• create (construct) with the involvement of a third party organization (contractor);
• create (construct) in a mixed way: buy part of it or hire a third-party (contractor) organization for the work, and do the rest on your own (in your own way).

But even if you purchase a completely finished object, there may be additional costs that need to be included in its price.

If a receipt transaction is accompanied by VAT, then depending on whether the recipient works with it, the following situations of accounting for this tax are possible:

• it is allocated to account 19 if the recipient works with VAT, and this tax is indicated in the receipt documents;
• it is not allocated if the recipient works with VAT, but this tax is not included in the receipt documents;
• it is included in the price if the recipient works without VAT; the exception here will be the operation of receipt of a contribution made by property to the management company; the tax allocated in the transfer documents cannot be taken into account by the recipient working without VAT in the value of the property or taken as a deduction.

Accounting for purchases, donations and contributions to the management company

The process of purchasing property that is completely ready for use is recorded with wiring Dt 08 - Kt 60.

Expenses associated with the purchase and carried out by one’s own or others may be added to the purchase price:

• on a business trip related to the selection of an object (Dt 08 - Kt 71 and Dt 08 - Kt 69, 70);
• for delivery and loading and unloading performed on their own (Dt 08 - Kt 23 or Dt 08 - Kt 69.70 and Dt 08 - Kt 10);
• for delivery, loading and unloading, storage, customs clearance performed by third parties (Dt 08 - Kt 60.76).

For postings on unpaid receipts, there are 2 options:

• Dt 08 – Kt 76, if the object is donated and it is known who the donor is;
• Dt 08 – Kt 98, if the object is found (during inventory).

Property received free of charge is assessed at market value. The final cost of it can also be increased due to additional costs, for example, for repairs carried out in one of the following ways:

• by an outsider (Dt 08 – Kt 60.76);
• on your own (Dt 08 - Kt 23 or Dt 08 - Kt 69.70 and Dt 08 - Kt 10).

An object made as a contribution to the management company is accounted for by posting Dt 08 - Kt 75 at the cost agreed upon between the founders. It may also incur additional costs associated with delivery, loading and unloading, and repairs, which, depending on who performed them, will be taken into account in correspondence with the corresponding invoices, similar to the above transactions.

Characteristics of work in progress

Assets classified as work in progress have the following characteristics.

• Incompleteness of the technological cycle. WIP products do not have final design; they are at the final stage of the production cycle, but have not yet been registered as finished products.

Find out how to take into account semi-finished products of your own production when applying the new FSBU 5/2019 in ConsultantPlus. If you do not have access to the K+ system, get a trial online access for free.

• No final stage of inspection or testing. Products and work that are awaiting testing or quality control as required by the technological or production cycle. For example, an industrial installation intended to operate in chemical production under high pressure must undergo a high pressure test in production. Until such verification has been carried out, the installation is not considered a finished product and cannot be released to the buyer. This means that it belongs to work in progress. The cost of such an installation is reflected in the debit of the 20th account.
• All components missing. Sometimes during production situations arise when the necessary components are not available (not in stock, not delivered on time by suppliers, changes have been made to the product design). Products awaiting final assembly are classified as work in progress.

Work in progress is formed not only on the 20th account. Auxiliary workshops and service industries and farms can also form the value of assets, which are classified as work in progress. Therefore, one of the characteristics of WIP is the place where the value is formed:

• main production (account 20),
• auxiliary workshop (account 23),
• servicing workshops or farms (account 29).

You can read more about the formation of costs for work in progress in the article “Costs in work in progress - accounting.”

Creation on your own and through contracting

Among the assets that arise as a result of creation on their own, through contracting or in a mixed way, assets that have a long period of value formation predominate. In this way the following can be obtained:

• OS and intangible assets;
• R&D, the result of which will be OS or intangible assets;
• results of natural resource development (material and intangible);
• individuals that make up an adult herd of young animals raised on their own.

The cost of objects of the first 3 types is formed directly on account 08, consisting of all costs related to them. With a mixed method, this account will correspond with the maximum possible number of accounts reflecting all sources of expenses:

Dt 08 – Kt 02, 05, 10, 23, 60, 69, 70, 76

When creating an operating system, the following additional transactions may occur in relation to them:

• Dt 08 - Kt 07 - according to the reflection of equipment that requires installation. Before it is credited to account 08, account 07 must collect all the costs of bringing the equipment to a state of readiness for installation (delivery, loading and unloading, storage, customs clearance).
• Dt 08 - Kt 66, 67 - on the inclusion in the accounting value of the asset of interest accrued on targeted borrowed funds. They will not be taken into account in its tax value, so the appearance of such costs must be treated extremely carefully.
• Dt 08 - Kt 68 - for the calculation of land tax, if the land was acquired specifically for construction on it.

Postings for the formation of the cost of an adult herd on account 08 will be different. All costs for raising young animals are collected on account 11, and from there they are charged to account 08 according to the planned cost of adults, which will be adjusted to the actual cost at the end of the year: Dt 08 - Kt 11.

Current assets management

The theory of financial management considers three policy options for the formation of an organization's current assets - conservative, moderate and aggressive

.

· Conservative

– provides for the complete satisfaction of the need for all types of current assets and the creation of a significant amount of their reserves in case of the occurrence of various unforeseen situations, for example, delays in repayment of accounts receivable, increased demand for products, etc. Ensures the minimization of the organization’s risks, but negatively affects the efficiency of use of current assets .

· Moderate

– provides for the complete satisfaction of the need for all types of current assets and the creation of a sufficient volume of their reserves in case of the occurrence of the most typical unforeseen situations. Provides an average level of risk and acceptable efficiency in the use of current assets.

· Aggressive

– consists of minimizing all forms of reserves, which ensures the highest level of efficiency in the use of current assets in the absence of failures in the process of operating activities and leads to significant financial losses if they occur.

The main characteristics of each of the three options can be presented as follows.

Policy for the formation of current assets

Thus, various options for the formation of an organization’s current assets, reflecting different ratios of the level of efficiency of its use and risk, ultimately determine the amount and level of this capital in relation to the volume of operating activities. From the above data it is clear that with alternative approaches to the formation of an organization’s current assets, its amount and level in relation to the volume of operating activities vary over a fairly wide range.

Nuances of reconstruction (modernization)

Expenses for reconstruction (modernization) form independent units of accounting for investments in non-current assets in relation to each object of this process.

With these costs, as with the creation of the OS, the following may occur:

• performing work on your own, by contractors or in a mixed way;
• use of equipment that requires installation;
• attracting funds from targeted loans (loans).

That is, the same transactions that are made when creating an OS are possible.

Reconstruction (modernization) is carried out in 2 ways:

• with a stop in the operation of the facility - during a break lasting more than a year, it is possible to stop accruing depreciation;
• endless.

The cost of completed reconstruction (modernization) work will increase the cost of the fixed asset and may lead to a change in the useful life period if its technical characteristics are significantly improved. Accordingly, after an increase in the cost of an asset, even if the duration of its useful life does not change, the amount of monthly depreciation on it will change. It is possible to establish a new useful life period only within the same depreciation group in which the asset was included before reconstruction. You should be prepared for the fact that differences in depreciation charges will arise in the accounting and tax accounting of the reconstructed facility.

It is possible to carry out reconstruction (modernization) of fully depreciated assets (having zero residual value). After completion of the reconstruction work, the amount of costs incurred will be amortized for the period established by the commission.

In the process of reconstruction (modernization) work, some parts may be removed from an object that will no longer be used at this object, but are suitable for further use. They are placed in a warehouse according to the rules in force for accounting for property received free of charge (at market value).

Disposal of objects from attachments

An asset for which investments in its value have been completed is most often removed from account 08 by putting it into operation. Depending on the type of property created (OS or intangible assets), this is recorded by posting Dt 01, 03 - Kt 08 or Dt 04 - Kt 08. Acquired objects that do not require modification are accepted for operation immediately after receipt, and those requiring additional work and created by one from existing methods or reconstructed (modernized) - after completion of all work and drawing up a commissioning or acceptance certificate from reconstruction (modernization). For these reasons, acquired assets are almost never found in the balances of account 08, while those created, especially over a long period, are usually present in these balances.

For information on the specifics of reflecting investments in non-current assets in the balance sheet, read the material “On which line should the balance of account 08 be reflected in the balance sheet?” .

At the same time, other disposal transactions may arise:

• Dt 91 - Kt 08 - when writing off ineffective R&D or contribution to the development of natural resources, as well as other unfinished investments, the further development of which is impractical;
• Dt 90, 91 – Kt 08 - when selling unfinished investments;
• Dt 99 - Kt 08 - for losses that occurred in emergency situations;
• Dt 94 - Kt 08 - when identifying the perpetrators of damage caused to objects of unfinished investments;
• Dt 79 - Kt 08 - when transferring unfinished investments to other divisions of the same person.

VAT on investments in assets

The VAT allocated to account 19 is taken as deductions. For quite a long time, the Ministry of Finance and the Federal Tax Service adhered to the following points of view at the time of deduction:

• for equipment recorded on account 07, deduction is possible immediately (letter of the Ministry of Finance of the Russian Federation dated July 23, 2012 No. 03-07-08/211);
• for completed contract work and a purchased unfinished construction project registered on account 08, you can also make a deduction immediately (letter of the Ministry of Finance of the Russian Federation dated July 16, 2012 No. 03-07-11/185, Federal Tax Service of the Russian Federation dated July 12, 2011 No. ED-4- 3/ [email protected] );
• For purchased fixed assets, deduction becomes possible only after they are put into operation, i.e. after accounting on account 01, and not at the time of reflection on account 08 (letter of the Ministry of Finance of the Russian Federation dated January 24, 2013 No. 03-07-11/19); this point of view was constantly refuted by the courts (decision of the Supreme Arbitration Court of the Russian Federation dated March 17, 2008 No. 2862/08, resolution of the Federal Antimonopoly Service of the Moscow District dated August 31, 2012 No. A41-15463/11), and if for objects that did not require modification, this issue was not fundamental, then in relation to property that needs to be brought to a state of suitability for use, and over a long period of time, this circumstance turned out to be quite significant;
• for acquired (transfer of ownership has occurred and the property is reflected in accounting) fixed assets that are in transit, deduction is not possible until it is actually received (letter of the Ministry of Finance of the Russian Federation dated September 26, 2008 No. 03-07-11/318); The courts also did not agree with this position (resolution of the Federal Antimonopoly Service of the West Siberian District dated November 17, 2010 No. A27-3324/2010).

Disagreements on the last two points can be considered removed by the latest letter of the Ministry of Finance of the Russian Federation dated November 20, 2015 No. 03-07-RZ/67429, which states that a deduction for an acquired item, including one that requires modification, is possible after it is accepted for accounting on account 08 .

See also “Deduction for fixed assets on account 08 is not a problem.”

Letter No. 03-07-РЗ/67429 also draws attention to the possibility that has appeared since 2015 of deductions for 3 years from the date the taxpayer began registering an object (clause 1.1 of Article 172 of the Tax Code of the Russian Federation).

When returning defective equipment to the seller, VAT on which has already been deducted, the obligation to restore the tax does not arise due to the fact that such a case is not in the list given in clause 3 of Art. 170 Tax Code of the Russian Federation. But the return operation is regarded as a sale (subclause 1, clause 1, article 146 of the Tax Code of the Russian Federation), in which an invoice is issued and, accordingly, tax is charged for payment.

Read about the features of deduction for intangible assets in the article “What is the procedure for accounting for VAT on sold and acquired intangible assets?” .

The implementation of construction and installation work also obliges the calculation of VAT ( subclause 3, clause 1, article 146 of the Tax Code of the Russian Federation). It is calculated quarterly at the end of the period ( clause 10 of article 167 of the Tax Code of the Russian Federation) and at the same time taken into deduction (clause 5 of article 172 of the Tax Code of the Russian Federation). The basis for calculating the tax is the volume of work carried out in-house, i.e. economically, even if construction and installation works were actually carried out using a mixed method (letter of the Federal Tax Service of the Russian Federation dated July 4, 2007 No. ШТ-6-03/527).

Property tax on investments

This tax includes (with some exceptions) property that is recorded as fixed assets (Article 374 of the Tax Code of the Russian Federation). Investments in non-current assets, the formation of which has not been completed, are not yet fixed assets and therefore are not subject to property tax. The same applies to objects whose taxation is based on cadastral value (letter of the Ministry of Finance of the Russian Federation dated 06/06/2014 No. BS-4-11 / [email protected] ).

If investments in an object are completed and it is ready for operation, then even if there is a temporary absence of actual use in work, it must be put into operation after the completion of value formation. The continued accounting of such an object as part of investments in non-current assets will be considered by the Federal Tax Service to be an understatement of the property tax base.

Of particular danger here are objects of construction and installation work or reconstruction (modernization), in relation to which, in order to bring them to the technical characteristics provided for by the project, trial operation is carried out, during which production of products sold externally occurs.
The systematic use of such objects in the production process in the absence of additional investments in their improvement will inevitably lead to disputes with the Federal Tax Service, which will assess property tax on them. The lack of registration of ownership of newly constructed property will not play a role in this case: these objects must be taken into account as fixed assets. This position of the Federal Tax Service Inspectorate is also supported by the courts (resolutions of the Federal Tax Service of the Ural District dated March 12, 2015 No. F09-9720/14, North Caucasus District dated April 15, 2015 No. A18-138/2014 You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.

Cash flow management

The functioning capital of an organization is in constant motion during its use. This movement of capital is accompanied by a constant modification of its forms. The process of such constant movement is characterized in economic theory by the term “capital turnover”. Under capital turnover

is understood as the process of its continuous movement in the economic system, accompanied by the consistent transformation of one of its forms into another.

Cash flow management includes: cash management, accounts receivable management, inventory and cost management, debt management. In addition, the most important elements of the cash flow management process are: forecasting the total cash flow, planning the cash flow and monitoring the efficiency of the cash flow.

The period of complete turnover of the entire amount of current assets, during which their types change, represents the operating cycle of the organization.

Operating cycle:

funds are used to purchase raw materials and supplies, which in the process of production activities are converted into inventories of finished products. Finished products are sold to consumers and, before payment is made, are converted into accounts receivable, which are then converted back into cash.

Operating cycle time:

POTs = POsm + POnz + POgp + POdz

POsm – turnover period of the average stock of raw materials and materials

POnz – turnover period of the average volume of work in progress

POgp – turnover period of the average inventory of finished products

POd – receivables turnover period

Within the operating cycle, there is a production cycle and a financial cycle.

Production cycle

determines the period of complete turnover of material assets used to service the production process, starting with the receipt of raw materials and ending with the shipment of finished products.

Production cycle duration:

PPC = POsm + POnz + POgp

POsm – turnover period of the average stock of raw materials and materials

POnz – turnover period of the average volume of work in progress

POgp – turnover period of the average inventory of finished products

Financial cycle

The organization determines the period of full cash turnover, starting from the moment of repayment of accounts payable for received raw materials and materials and ending with the repayment of accounts receivable for finished products.

Duration of the financial cycle:

PFC = PPC + POdz - POkz

PPT – production cycle duration:

POdz – average period of receivables turnover

POkz – average period of turnover of accounts payable