The full cost of finished products includes production costs and sales costs. How production and sales costs are accounted for in accounting, what accounts are used and what postings are made.
Accounting accounts for production costs
There are several accounting accounts for recording production costs. In the chart of accounts, Section 2 is devoted to the production process, which provides a list of accounts involved in this process. We have already touched on this issue in, where we provided a list of costs associated with production and the corresponding accounts in which these costs are recorded.
Main production (count 20)
Direct costs of main production are collected in the debit of the account. 20.
Account 20 “Main production” is intended to take into account the direct costs of the main production and form the actual cost of production.
The direct costs are:
- Raw materials, materials – posting Debit 20 Credit 10;
- Semi-finished products of own production - posting Debit 20 Credit 21;
- Depreciation of fixed assets - posting Debit 20 Credit 02;
- Amortization of intangible assets - posting Debit 20 Credit05;
- Staff salaries – posting Debit 20 Credit 70;
- Insurance premiums from staff salaries - posting Debit 20 Credit 69;
- Services of third parties – posting Debit 20 Credit 60.
Postings for cost accounting of main production:
| Debit | Credit | Operation name |
| 20 | 02 | Depreciation was calculated on fixed assets used in the main production |
| 20 | 05 | Depreciation accrued on intangible assets occupied in the main production |
| 20 | 70 | Accrued wages workers of main production |
| 20 | 69 | Insurance deductions are calculated from the salaries of production workers |
| 20 | 10 | Raw materials and supplies released into production are taken into account |
| 20 | 21 | The cost of own semi-finished products was written off to the main production |
| 20 | 60 | The cost of third-party services for main production is taken into account |
Ancillary proceedings (account 23)
Account 23 “Auxiliary production” is intended to account for the direct costs of auxiliary production, which include the repair of fixed assets involved in the production process, transport services, and power supply.
The postings for accounting for these costs look similar, only instead of invoice. 20 is taken count. 23.
General production expenses (account 25)
This account is intended to collect costs associated with the maintenance of main and auxiliary production. These are indirect costs that are collected in the debit of the account during the month. 25
The same costs include depreciation, staff salaries and deductions from them, materials, etc. The postings for accounting for general production expenses look the same as for the main production, only instead of invoices. 20 is taken count. 25.
General expenses (account 26)
The debit of this account collects costs for administrative and managerial needs, these are also indirect expenses that are collected throughout the entire month in the debit of the account. 26.
Defects in production (count 28)
Another type of cost that must be taken into account in the production process is.
If defective products are produced during the production process, then eliminating them will require certain costs, which include depreciation, materials, raw materials, semi-finished products, wages and deductions from them. Accounting for the costs of correcting defects occurs on account 28 “Defects in production”, in the debit of the account. 28, all these costs are collected using the postings indicated above (instead of account 20, account 28 is taken).
Thus, at the end of the month, according to the debit of the account. 20 collected direct costs associated with basic production in the debit of the account. 23 – direct costs associated with auxiliary production, in the debit of the account. 25 – indirect overhead costs, in the debit of the account. 26 – indirect general business expenses, in the debit of the account. 28 – costs associated with defective products.
The next step in the formation of production costs is the distribution of auxiliary production costs between main production, general production and general economic needs.
Postings for distribution of costs of auxiliary production:
The next step in the formation of product costs is the write-off of general production and general business expenses.
Postings for writing off these costs are D20 K25 and D20 K26.
General production costs can be written off proportionally:
- Salaries of main production personnel;
- Wasted materials;
- The amount of direct costs;
- Revenue from the sale of manufactured products.
General business expenses are written off:
- By distribution between types of products;
- In full at the end of the month.
The last step is to write off losses from marriage.
Accumulated by debit account. 28, the costs of correcting defective products are written off to the debit of account 20 by posting D20 K28.
As a result of the manipulations performed on the debit of the account. 20 the production cost of products is formed.
Such costs, in turn, can be allocated to general production and general business expenses.
Methods for distributing general production and general business expenses
Availability of specifics production process for each individual organization does not imply a universal and strictly fixed division of costs into general economic and general production. Each company independently chooses methods for distributing overhead and general business expenses. The principle of correlating expenses in accounting to one category or another is enshrined in the accounting policy. However, there is a general approach that all companies should adhere to. General production expenses include costs in the usual line of business that arise for an enterprise in connection with the need to maintain main and auxiliary production facilities. General business expenses include costs associated with managing an organization that are not directly related to the production process. However, they also participate in determining the cost of goods or services produced.
More specifically, general production expenses are the costs of maintaining machinery and equipment, deductions for depreciation and repair costs of fixed assets, costs of various utilities, the purchase of which is necessary as part of the production process, rent of premises, machinery, equipment and others objects used in production, salaries of technical personnel, and so on. In short, these are all those costs that a company can accurately correlate with the production of a specific product.
General business expenses include the costs of maintaining administrative and management personnel not related to the production process, depreciation and other costs of maintaining the operating system and rent and maintenance of premises related specifically to this company structure, costs of paying for information, auditing, consulting services, etc. administrative expenses similar in purpose. Such costs are important for the functioning of the company as a whole, but they cannot be attributed to a specific production process.
How exactly are general production and general business expenses distributed in accounting? Let's try to figure it out.
Accounting for overhead costs
To reflect costs that are directly related to the production of any product, the Chart of Accounts uses account 25 “General production expenses”. Postings on it are reflected taking into account information about the costs of servicing the main and auxiliary production facilities of the organization. The debit of this account accumulates data on the composition of costs, which are also reflected in the credit of accounts payable to personnel, accounting for inventory, rental deductions, etc. Simply put, analytical accounting for account 25 can be carried out in the context of various expense items. If the company has many divisions, workshops or similar separate structures, then it is also advisable to carry out analytics on account 25 “General production expenses” taking this factor into account, using additional division. General production expenses are written off by posting from the credit of account 25 to the debit of accounts 20 “Main production”, 23 “Auxiliary production”, 29 “Service production and facilities”. This entry is made at the end of the month, thus the accumulated cost data on account 25 is reset to zero.
An example of reflecting general business expenses and postings:
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Materials written off for general production purposes |
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Accrued depreciation of general production equipment |
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Wages paid to employees involved in production |
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Accrued insurance premiums for the wages of workers engaged in production. |
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Works/services of third party suppliers purchased for general production purposes are accepted |
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General production expenses were written off as expenses of the main production |
Accounting for general business expenses
To summarize information about expenses for management needs not directly related to the production process, the “General business expenses” account is intended. In contrast to the distribution of general production expenses, general business expenses on account 26 in most cases are not divided in terms of analytical accounting across various organizational structures. After all, as a rule, a company has only one administrative and management division, which is responsible for overseeing its work as a whole. However, if accounting tasks require it, the organization can maintain additional parameters for data reflection.
At the same time, the reflection of the costs themselves in various areas (wages, materials, rent, depreciation, etc.) will be similar to the registration of entries in account 25 “General production expenses”. That is, the postings in this case will be formed exactly according to the same principle: from the credit of inventories accounts, settlements with employees for wages, settlements with other organizations (individuals) to the debit of account 26. At the end of the month, as well as general production, general business expenses are written off by posting to the debit of accounts 20, 23 or 29.
If we are talking about companies that do not carry out production activities, but, say, are engaged in the provision of services, then such organizations can use account 26 to summarize information about expenses for all their activities. In this case, the expenses reflected on it will be written off at the end of the month not through account 20, but immediately to the debit of account 90 “Sales”.
General production expenses- these are the costs of maintaining, organizing and managing production (main, auxiliary, servicing).
These include:
- the cost of materials, spare parts used for maintenance and repair of production equipment;
- labor costs for employees involved in servicing production (foremen, shop managers, technologists, workers performing maintenance and repair of technological equipment), with deductions for social needs;
- depreciation charges and costs for repairs of fixed assets and other property used in production;
- costs of dismantling equipment, costs of materials, parts, purchased semi-finished products used in setting up equipment;
- rent for premises, machinery, equipment and other fixed assets used in production;
- expenses associated with the operation of fixed assets directly involved in production (gas, fuel, electricity, etc.);
- depreciation charges for intangible assets used in production;
- the cost of shortages and losses from downtime, damage to valuables in production and warehouses, etc.
General production expenses are reflected in the debit of account 25 “Overhead production expenses” from the credit of accounts for inventory accounting, settlements with employees for wages, etc.
Expenses recorded on the collection and distribution account 25 are written off on the last day of the past month to the debit of the accounts “Main production”, “Auxiliary production”, “Servicing production and farms”. The organization sets the distribution procedure independently (for example, in proportion to direct production costs or wages of production employees).
The established procedure for the distribution of costs is fixed in the accounting policy.
Accounting records (entries) for general production expenses:
| № | Contents of the operation | Debit | Credit |
| 1 | The cost of materials, spare parts used for maintenance and repair of equipment has been written off. |
25 |
10 |
| 2 | Depreciation has been calculated on fixed assets (intangible assets) used in production |
25 |
02,05 |
| 3 |
Salaries of general production personnel accrued |
25 |
70 |
| 4 |
Contributions to extra-budgetary funds were accrued from the salaries of general production personnel |
25 |
69 |
| 5 |
Expenses for maintaining premises written off |
25 |
60,76 |
| 6 |
General production expenses associated with the activities of the main production were written off |
20 |
25 |
| 7 |
General production expenses associated with auxiliary production activities were written off |
23 |
25 |
| 8 |
General production expenses associated with the activities of service production were written off |
29 |
25 |
Analytical accounting of overhead costs is carried out for each workshop in the cost accounting sheets of workshops (form No. 12), which are filled out on the basis primary documents and development tables for the distribution of materials, wages, auxiliary production services, etc.
General expenses- expenses not directly related to the production process.
These include: administrative and management costs; maintenance of general business personnel; depreciation charges and expenses for repairs of fixed assets for management and general economic purposes; rent for general business premises; expenses for payment of information, auditing, consulting, etc. services; other administrative expenses similar in purpose.
General business expenses are reflected in the debit of the collecting and distribution account 26 “General business expenses” from the credit of accounts for accounting for inventories, settlements with employees for wages, settlements with other organizations (individuals), etc.
Analytical accounting of general business expenses is carried out in the statements of accounting for general business expenses, deferred expenses and non-production expenses (Form No. 15), which are compiled on the basis of primary documents and development sheets.
General business expenses are written off depending on the method of cost formation.
- If finished products is taken into account at full production cost, then the expenses recorded on account 26 are written off to the debit of accounts 20 “Main production”, 23 “Auxiliary production”, 29 “Service production and farms” (if auxiliary and service production and farms performed work and services outsourced The organization establishes the procedure for distributing general business expenses to main, auxiliary and service production independently in its accounting policies (for example, in proportion to the direct costs of these productions).
- If reduced cost is used, then expenses from account 26 are immediately written off to subaccount 90-2 “Cost of sales”. Accounts 25 and 26 are closed at the end of the month and have no balance.
Organizations providing intermediary services: agents, brokers, dealers, commission agents indicate all their expenses on account 26. Accounting for account 20 “Main production” is not maintained.
Accounting entries (entries) for general business expenses:
| № | Contents of the operation | Debit | Credit |
| 1 | The cost of materials, spare parts used for maintenance and repair of equipment used for administrative purposes has been written off |
26 |
10 |
| 2 | Depreciation has been calculated on fixed assets (intangible assets) used for administrative purposes |
26 |
02,05 |
| 3 |
Salaries of general business personnel accrued |
26 |
70 |
| 4 |
Contributions to extra-budgetary funds were accrued from the salaries of general business personnel |
26 |
69 |
| 5 |
General business expenses for maintaining premises are written off |
26 |
60,76 |
| 6 |
General business expenses related to the activities of the main production were written off |
20 |
26 |
| 7 |
General business expenses related to auxiliary production activities were written off |
23 |
26 |
| 8 |
General business expenses related to the activities of service production were written off |
29 |
26 |
For servicing main and auxiliary productions, they are accounted for separately on the account.
¨ depreciation and costs for repairs of fixed assets and other property used in production;
¨ expenses for insurance of the specified property;
¨ expenses for heating, lighting and maintenance of premises used for main and auxiliary production;
¨ rent for premises, machinery, equipment and others used in production;
¨ remuneration for workers engaged in production maintenance (foremen, shop managers, technologists, workers performing maintenance and repair of process equipment, if such maintenance is not carried out by special structural units classified as auxiliary production, and others)
¨ other expenses similar in purpose.
These expenses are collected from the debit of account 25 “General production expenses” in correspondence with the credit of the corresponding accounts:
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Account correspondence |
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Debit |
Credit |
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Cost of materials, spare parts used for maintenance and repair of equipment |
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Calculation of depreciation on fixed assets used in main and auxiliary production |
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Payment of utilities, other expenses for maintaining premises, rent for premises, equipment, etc. |
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Payroll |
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Calculation of unified social tax and contributions for insurance against accidents and injuries |
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If account 25 takes into account indirect costs associated with servicing both the main and auxiliary production, the corresponding subaccounts are entered, for example 25-1 “Overhead production costs of the main production” and 25-2 “Overhead production costs of auxiliary production”. At the end of the month, account 25 “General production expenses” is closed. Expenses recorded in subaccounts are written off to the debit of the corresponding accounts:
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Account correspondence |
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Debit |
Credit |
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General production expenses related to main production were written off |
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General production expenses related to auxiliary production were written off |
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If general production expenses cannot be initially attributed to the main or auxiliary production, then their total amount is subject to distribution between the appropriate accounts.
In addition, accounting for overhead costs can be kept in separate sub-accounts opened for individual departments or by type of product. If there is no such division, then general production expenses when written off are distributed according to the types of products produced. Methods of distribution can be different - in proportion to the wages of production workers, in proportion to the amount of direct expenses, in proportion to the volume of products produced (in kind or in value terms), in proportion to the proceeds from the sale of products, and others. Depending on the chosen method of distribution of the amount of overhead costs written off to different types products may vary.
Example.
The organization produces two types of products. The total amount of general production expenses to be written off to the main production account is 300,000 rubles. Let's consider the most common ways of distributing expenses - in proportion to the wages of production workers and in proportion to the amount of direct expenses.
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Indicator |
Product 1 |
Product 2 |
Total |
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Salaries of main production workers, rubles |
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Share in the total |
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Amount of direct expenses, rubles |
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Share in the total |
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Distribution of overhead costs, rubles |
As can be seen from the example, in order for the generated product cost to have a reliable value, you need to carefully consider the choice of cost distribution method.
For example, if the wages of workers do not depend on the volume of output (time-based wages), and the change in the amount of direct costs is largely determined by the amount of raw materials used, then it is advisable to distribute costs in proportion to the amount of direct costs.
If the amount of workers’ wages directly depends on the volume of output (), then the method of distribution proportional to workers’ wages will give more accurate results.
End of the example.
You can find out more about issues related to the specifics of accounting and tax accounting in production in the book of JSC “BKR-Intercom-Audit” “ Production».
Production of products is always associated with certain costs, which subsequently form the cost value. General production expenses combine the amounts necessary to maintain the main and auxiliary production workshops. Costs not directly related to the manufacture of products are classified as general business expenses and are accounted for separately.
Definition
Manufacturing overhead costs are costs directly related to production activities. The main distinguishing feature from direct costs of manufacturing products is that the amounts cannot be attributed to a specific type of product. General production expenses may include costs for:
- depreciation charges;
- equipment maintenance;
- payment for utility services;
- rent of industrial premises;
- wages for workers involved in the service process;
- other expenses.
Although costs are not directly related to any type of product, they must be taken into account when calculating production costs.
The concept of general expenses
The activities of any enterprise are necessarily connected with the functioning of its various departments. A production workshop cannot operate on its own without management and control employees. The products must subsequently be stored and sold, which requires other personnel and premises. All this leads to the formation of costs that seem to be far from the production process, which are combined into the group of general business expenses.
They may include amounts necessary for:
- covering administrative and management expenses;
- remuneration for employees employed outside production;
- depreciation and repair of general purpose fixed assets;
- payment for rent of non-production premises;
- covering other expenses of a similar nature.
General business expenses are also written off to the cost of manufactured products in accordance with the rules of the enterprise's accounting policy.
Characteristics of overhead costs
General production and general business expenses are combined into a group of indirect costs that arise in the course of the enterprise's activities. It is difficult to trace the ratio of their amount to types of products and production time, so they are written off by the method of allocating costs in proportion to a given indicator.
General production and general business expenses are taken into account, highlighting separate cost items and departments (shops). This allows you to control the distribution of funds and identify the most expensive objects to maintain and manufacture.
Overhead costs in accounting data
General and general production expenses in total terms are reflected in synthetic accounts 25 and 26. Both accounts do not have a balance at the end of the month, since they serve to collect and distribute the costs of main production. The amounts are written off to account 20, making entries Dt 20 Kt 25/26. Some enterprises (for example, those providing intermediary services) account for all administrative and general business expenses on account 26, without using account 20.
Analytical accounting is also kept for accounts 25 and 26. Sub-accounts are opened for each workshop, as well as for individual items of general business expenses. When filling out, the accountant is based on data from primary documentation and other forms of accounting registers developed by the enterprise. Additionally, statements No. 12 and 15 are maintained to account for general production and general business expenses.
Typical entries for the debit of accounts 25, 26
Accounting for overhead costs includes collecting information about cost items for maintenance, servicing and fulfilling the needs of main and auxiliary production. The use of account 26 pursues the same goals, only the amounts of administrative and management expenses are recorded. During a certain period, the necessary information is collected in the debit of accounts 25 and 26.
In this case, the following postings Dt 25/26 can be made:
- Kt 02, 05 – depreciation of fixed assets and intangible assets has been accrued;
- Kt 70 – wages accrued to general production (administrative) personnel;
- Kt 69 – social benefits accrued. payments to employees involved in servicing workshops (management employees);
- Kt 76 – general production (general business) expenses include payment of utility bills;
- Kt 10 – materials were sent for the maintenance of production (administrative) facilities.
In addition to the account assignments discussed above, others can be used. The main thing is not to violate the principle of double entry and follow the rule of an active account: credit in debit, write-off in credit.
Loan transactions: write-off of overhead costs
The instructions for using the standard chart of accounts say that collective synthetic accounts 25 and 26 must be closed at the end of the month. This requirement means that all debit amounts are charged to account 20 (or 90 for general expenses). The accountant will record entries like:
- DT “Main production” CT “General production expenses” – the amounts of general production expenses incurred for the needs of the main production shops are written off;
- DT “Service production” CT “Overhead production costs” – the amounts of overhead expenses for remuneration of personnel of servicing production are attributed;
- DT “Auxiliary production” CT “General production expenses” – expenses for utility bills for auxiliary production facilities are written off;
- DT “Main production” CT “General expenses” - general economic expenses were included in the actual production cost;
- Dt “Cost of Products” Ct “General Business Expenses” - the amounts of administrative and managerial costs are written off to the cost of production.
Depending on which account the data from the debit turnover of general business expenses is credited to, the full or production cost of the products is formed.
Production cost
Costs arising in connection with the maintenance or maintenance of production facilities can be attributed to the final result in proportion to the amount specified by the accounting policy. The distribution of overhead costs aims to calculate the cost per unit of production at the exit from the workshop, taking into account all the costs of the industrial cycle.
The distribution of general production and general business expenses when using this method occurs in different ways: from account 25 the amounts are written off to the 20th account, and from 26 to 90. Thus, administrative, managerial and other overhead expenses in terms of general business expenses are not included in the production cost, but relate directly to the financial result.
This is one of the methods that can be applied in an enterprise. Production cost indicators allow you to analyze the profitability of a particular workshop and regulate the amount of production costs individual species products.
Cost and taxation
In order not to create additional registers for tax accounting purposes, it is better to account for overhead costs at the full production cost. The method involves writing off to the debit of account 20 both general production and general business expenses. The accountant’s choice of a method for attributing indirect costs to the cost of products should be based primarily on the provisions of the enterprise’s accounting policy.
General production expenses (account 25) and expenses for general business needs, together with data from account 20, make up the bulk of the cost of manufactured products. The data is used for accounting and analysis purposes financial activities enterprises and for tax service data.
