Fifo accounting. Methods for estimating reserves as an element of the organization's accounting policy. Write-off of materials at the cost of each unit

The correct determination of the cost of products manufactured by the enterprise is one of the tasks of the departments that conduct accounting and tax accounting. The expenses of the organization, representing an estimate of the value of all material resources used in the production of products, are grouped according to certain criteria, and then summed up in a certain sequence.

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The rules of this grouping are reflected in the accounting policy of the enterprise and are unchanged, at least, throughout the entire reporting year. The complexity of accounting for the determination of the cost of acquiring inventory items (hereinafter referred to as inventory) increases with the increasing complexity of each individual production.

What it is?

LIFO and FIFO are methods that allow you to get the financial result of the activities of any enterprise, relying on different approaches to the cost of goods and materials. Moreover, the choice of approach is limited by law.

Concept

The process of writing off material assets for production and determining the actual cost of materials is carried out using the following methods:

at the average cost;
fIFO method - at the cost of the very first purchases;
lIFO method - at the cost of the most recent purchases;
at the cost of each unit.

It should be borne in mind that the company has the right to determine the valuation method in the accounting policy for all used goods and materials at once, but it is allowed to determine different methods for different groups of material values.

Decoding

This explanation is the basis for determining the disposal method.

Last in first out

LIFO method - LIFO (Last in First out) stands for "Last in - first out". The bottom line is that when writing off inventories, the cost of the latest acquisitions is initially taken into account.

First in First out

The FIFO method - FIFO (First in First out) means "first in - first out". In theory, it is assumed that the first materials received in time will be used first.

Differences and comparative characteristics of assessment methods

FIFO and LIFO differ from each other in some criteria.

And these differences are as follows:

FIFO is an official way of accounting for the cost price of TIC, while LIFO was officially canceled in 2008. If we touch on tax accounting, then FIFO is also still used, and the second method was canceled in 2015.
With FIFO, the cost is estimated strictly at the cost of the first purchased batch, and with LIFO - the last one.
With the FIFO method, there is a risk of making mistakes in the course of calculations, which is associated with the impact on the cost of inflation, and in the case of LIFO, such a miscalculation is minimal.

Pros and cons

The FIFO method has the following qualities:

The LIFO method has the following features:

Application in accounting

The presence of raw materials in the company is the main condition so that the production of the enterprise and other economic entities does not stop.

For accounting purposes, it is possible to use different methods of determining the cost.

Features of the LIFO method

Evaluation of goods and materials based on the LIFO method means that in whatever sequence and at what price goods and materials are purchased, they will be written off for sale or for production in the reverse order of receipt.

Regardless of the sequence of receipt of consignments of goods and materials, the last received consignment at the last price will always be written off.

This method is most suitable for materials that do not have a shelf life, that do not lose their properties and qualities over time.

The main feature of the LIFO method is that it allows you to take into account the effects of inflation in the cost of production.

Its current level has already been taken into account in the prime cost of the last batch of goods and materials, which is written off to production at a price taking into account the inflationary component.

This approach allows you to keep the cost of products in accordance with the economic situation in the country and keep competitive prices for your products in relation to competing manufacturers.

Important! Currently, the LIFO method has been legally canceled.

Example of a task with transactions

The organization records the cost of materials at purchase prices. The write-off is carried out by the LIFO method. As an example of goods and materials, we will choose electrodes that the company purchases in packs (packages). Initially, there were 100 packs in the warehouse at the same price of 60,000 rubles per pack, for a total of 6,000,000 rubles.

200 packs (packs) of 80,000 rubles each, total - 16,000,000 rubles;
100 packs (pack) - 70,000 rubles per pack, total - 7,000,000 rubles.

Within a month, 200 packs of electrodes were released from the warehouse.

At the same time, 100 packs of 70,000 rubles were written off for production with a total cost of 7,000,000 rubles and 100 packs (packages) of 80,000 rubles for a total of 8,000,000 rubles.

Let's calculate the cost of written off electrodes:

100 p. (C.) * 70,000 rubles. + 80,000 rub. * 100 p. (Y.) \u003d 15,000,000 rubles.
The cost of one pack: 15,000,000 rubles. / 200 p. \u003d 75,000 rubles / p.

The accounting department will issue the wiring:

Dt account 20 Cr. accounts 10 - 15,000,000 rubles. - writing off materials (electrodes) for production.

Features of the FIFO method

FIFO, as a method, is based on the fact that regardless of the sequence of goods and materials entering the warehouse, the very first batch of values \u200b\u200bwill be written off.

This approach is simply irreplaceable if the used goods and materials have a shelf life and their qualities are lost over time.

According to the FIFO method, each group of received materials is considered separately, without taking into account all previous receipts.

The very first batch of materials is written off into production, if this quantity is not enough, then the missing materials are written off from the next batch, and so on.

What goods and materials are used for?

Currently, the term "shelf life" is very relevant for many groups of goods and materials, for example, in the production of meat or dairy products.

The release of sophisticated household appliances is also associated with this problem. New models of TVs, refrigerators and other equipment must be immediately sold in order to get ahead of their competitors and put their products on the market first. This will maximize your profit.

Therefore, at whatever price the subsequent parties are purchased, they will be evaluated not at the actual cost, but at the price of the very first party.

This approach is economically justified when it is necessary to conduct an accurate analysis of the return on investment in goods and materials and to really estimate the costs.

But this approach has its drawbacks:

the real impact of inflation on the cost of everything that the company specializes in is not taken into account;
there is no way to take into account price fluctuations between different consignments of goods and materials, which can be purchased at different times and from different suppliers.

Average cost estimate

The most convenient is the method defined as write-off at average cost.

The essence of this approach is that during the reporting month, inventory is written off at discount prices.

It is not the actual cost of goods and materials that are taken as them, but the abstract value obtained by calculation, for example, the planned estimated price or the average price for previous periods (quarter, year).

The average cost of a unit of inventory at the end of the period under consideration by groups of material assets is separately determined as the ratio of their entire value (the entire amount of inventory at the beginning of the period and the amount of inventory purchased for the reporting period) to the number of these materials (the number of materials remaining at the beginning of the period and purchased for the reporting period ).

The cost of written off inventory is found by multiplying the number of values \u200b\u200bby the average calculated cost.

In turn, the cost of the number of remaining goods and materials at the end of the period is found by multiplying their remaining quantity by the average estimated cost of these values.

Example of a task with transactions

We will use the same initial conditions that were considered in the example of accounting by the LIFO method.
According to the chosen method, it does not matter from which batch the electrodes will be written off.

Let's calculate their average cost at the end of the reporting period:

100 p. * 60,000 rubles + 200 p. * 80,000 rubles. + 100 p. * 80,000 rubles. \u003d RUB 30,000,000

Determine the average cost of one pack of electrodes in the reporting period:

RUB 30,000,000 / 400 p. \u003d 75,000 rubles / p.

Let's calculate the cost of written off electrodes:

200 p. * 75,000 rubles \u003d RUB 15,000,000

The accountant will issue the following entry:

Dt count. 20 Cr count. 10 - 15,000,000 rubles. - writing off materials (electrodes) for production.

Which one is canceled?

For quite a long time, the methods of valuation in accounting differed from tax accounting. LIFO has been canceled for accounting purposes. The decree introduced a number of amendments to certain regulatory legal acts on accounting.

From that moment on, the FIFO method continued to be used only in calculating taxes. From 01.01.2015, the situation was corrected, and the LIFO method was also canceled in tax accounting.

The main reasons for this decision:

In Western European countries, the LIFO method is not used; therefore, this decision of the Russian government was prompted by the desire to bring the world accounting system closer to the Russian accounting system.
Calculations have shown that, in conditions of constantly growing inflation, this method has a negative impact on production, reduces the profitability of economic entities. In practice, the benefits of this method are obvious only with constantly decreasing prices for goods and materials. But practically nowhere in the world is the process of reducing the cost of resources observed.

Application in warehouse logistics

As they grow, virtually all businesses use a variety of storage facilities. Although they themselves are a source of costs, without convenient warehouses, the costs of maintaining, storing and fast delivery of goods and materials to the right place increase dramatically.

They increase the overall costs and reduce the profitability of any enterprise that uses a large range of goods and materials in its activities.

The rapid growth of competition in the warehouse services market leads to increased requirements for warehouse logistics, improved logistics processes and reduced administration costs. For this, warehouses use various picking principles.

The LIFO picking method is based on the principles under which the stored materials (cargo) can be added and removed only from one end - the top.

As an example, consider a stack of books: to take the second book, you must first remove the one on top, and to take the lowest book, you must first remove all the top ones.

This method is used if the number of goods is limited, and access to them must be organized in a certain order.

The LIFO principle is used in cases when the last delivered materials must be shipped first.

The picking according to the FIFO method is carried out according to the principle: first loaded into the warehouse - first and shipped from the warehouse. All other goods arriving later await their turn.

It should be borne in mind that the methods of picking goods are not used in their pure form in warehouse activities. A combination of different methods is always chosen for different groups of goods.

To organize miscalculations of the effectiveness of the application of methods, special software is used.

Attention!

Due to frequent changes in legislation, information sometimes becomes outdated faster than we can update it on the site.

Tax optimizers advise to write off materials and goods using the LIFO method, experts in management accounting - FIFO. The accountant uses the average cost, which is calculated by a standard computer program. And all because accounting for each material unit seems inaccessible to simple firms. But it only seems so.

The right to choose

While giving preference to one or another accounting method, the accountant proceeds from two considerations. First of all, he wants to spend as little time as possible on routine operations. At the same time, he does not forget that he will receive a scolding from the head if the accounting information turns out to be unsuitable for making managerial decisions or it turns out that the amount of taxes could be less.

It is great if the accountant is entrusted only with the routine and management accounting is handled by the CFO's office, and the tax consultant - by the tax consultant. If you work for such a firm, there is nothing to worry about.

In this case, you probably have a super program, which, responding to one keystroke, will give, for example, the following information: “Warehouse No. 1. 1520 pots of the Tyazhmash plant, cost price - 15,834 rubles; of them: 475 pieces for 10 rubles, 593 pieces for 12 rubles, 344 pieces for 9 rubles 50 kopecks, 100 pieces for 7 rubles, and 8 pieces were received free of charge. Moreover, it is possible that such information is available to your manager, who has the right to calculate maximum discounts for VIP-clients, or, conversely, sell goods with an increased mark-up. If so, then this article is not for you.

It is for those who use standard programs, that is, they cannot take into account each batch separately, and therefore write off inventory items according to FIFO-LIFO.

Such accountants do not even dream of writing off at the actual cost, being content with the "weighted average" - according to the formula invented with the advent of accounting software. A product or material is written off here as follows. For a specific name, the entire stock in the warehouse is taken and the "one-time" average cost is calculated. This method is absolutely contraindicated for most companies.

Forgotten accounts

The average cost method is unpredictable in its effect on taxes. Moreover, it, however, like LIFO and FIFO, is completely unacceptable if the suppliers of your company put the purchase price of goods and materials depending on the type and terms of payment in USD. e. or currency.

As a rule, such agreements provide for some deferred payment. As a result, goods and materials are credited to the balance sheet before they are paid for. Due to the lack of information about the price, the accountant receives receipts, say, one ruble per unit, so that later not to be confused with the adjustment. The time comes for reports and the same accountant begins to puzzle over what to do with income tax.

Yet the biggest cost problem arises for those accountants who have to postdate documents. Often they are brought documents for the shipment of goods that are not registered at all. Worse, non-cash payments have already fallen into the account for this product.

You cannot hide the proceeds from the bank, and the accountant willy-nilly needs to retroactively register the arrival of the goods that have already been disposed of. It is easiest to do this right away, at discount prices. Later, maybe at the end of a month, or maybe a quarter, when it will become known for sure that it is useless to wait for genuine invoices, you can without haste draw up all the necessary documents and submit them for signature to a “friendly” supplier.

Under socialism, discount prices were called "planned and calculated". Previously, they were traditionally used in manufacturing and construction. It is convenient to do this even now. After we began to live according to the Tax Code, it became profitable for trading companies to use discount prices (see page 44 of the December 2003 issue of "Calculation"). For those who are new to "socialist" accounting, we recommend first of all to read the instructions for accounts 15 "Procurement and acquisition of material assets" and 16 "Deviations in the cost of material assets".

The use of accounting accounts means that regardless of the purchase price, materials of the same name are received by the storekeeper on one card at a constant (accounting) price. Deviations in one direction or another, as the name suggests, are accounted for on the account in total.

This method allows you to show in the accounting the actual value of the purchased inventory, and release them for production (sale) at constant prices. This means that the accountant for some time can do without the "belated" primary.

In addition, the book price method does not require a change in the usual accounting program.

Reverance towards leadership

Discount prices are not just an accounting device. Based on deviations from the valuation prices, you can evaluate the performance of the suppliers. This opportunity will surely please your leadership.

LIFO (from English last in, first out - the last one entered, the first one left)

With this method of accounting, the cost price first includes the cost of inventories acquired in a later period, while earlier acquisitions remain on the balance sheet. As a result of using LIFO, the balance sheet may contain inventories acquired many years ago. In an inflationary environment, they turn out to be significantly lower than current market prices. Indeed, with this method of accounting, you may have stocks in your warehouse at prices of many years ago. But the prime cost turns out to be as high as possible and, accordingly, income tax - as low as possible. When prices go down, the situation is reversed.

Accounting and planning system

- materials are capitalized at discount prices (excluding VAT);

When writing off materials for production, sale or other disposal, different approaches to their price are considered.

The attractiveness of each method depends on the goal pursued by the company, such as reducing taxes or increasing financial results in the eyes of potential investors.

LIFO is a method in which materials are written off at the last purchase price first, and then at the price of the previous receipt.

If the write-off is carried out at rising prices (inflation), then the materials used are reflected at the highest price, respectively, the profit margin is the smallest possible and the most realistic.

In addition, the remaining stocks are recorded at the lowest prices, thus reducing the tax base.

When prices fall, the picture will be exactly the opposite.

Currently, the LIFO method is no longer used in accounting. And where it is used and what are its advantages - read the article.

LIFO is a method for evaluating inventories

As you know, inventories received by the organization can be written off to cost by three methods: LIFO, FIFO, average cost. In this article, we will consider the LIFO Method with an example. For those who know English, remembering what LIFO means is not difficult. It translates as "last in - first out" - the last to enter, the first to flow.

That is, the materials that entered the organization last (last) and at the price of the last batch are first written off into production, and then the materials from the previous batch are written off, and so on until all materials are used.

A little about the LIFO method. As you understand, the Lifo method involves writing off to the cost price, first of all, the last batch of inventories received in time. If you visualize this method, imagine a stack of sheets in a warehouse, stacked on top of each other.

Moreover, the first sheet was bought earlier, then as purchases proceeded, other sheets from subsequent purchases were superimposed on this sheet. It's time to use them, and first of all, for convenience, you take the top sheet that came in last.

What are the advantages of this write-off method - the LIFO method? Considering all of the above, the Lifo method allows you to increase the cost of production, as well as underestimate the cost of balances of material assets at the end of the month.

This leads to an underestimation of profits, and, accordingly, a decrease in income tax. This method can be used if you want to reduce income tax.

The disadvantage of the Lifo method is that the cost of leftover materials in an organization is underestimated in conditions of inflation.

The advantages of this method are that stocks are accounted for at the market price, respectively, and the profit is real in fact.

Source: "prednalog.ru"

LIFO: the pros and cons

LIFO method (LIFO) - a method of accounting for inventory in value terms at the price of the last manufactured or received batch. In accordance with this method, the last registered inventory items are removed from the accounting records first. The use of this method eliminates the underestimation of the estimated cost of production due to inflation.

In conditions of rising prices when using the LIFO method, the reporting reflects the lowest possible profit indicators due to the write-off of the cost of inventories in a decrease in profit. Accordingly, the LIFO method makes it possible to solve the problem of demonstrating the minimum amount of profit in the reporting at the maximum amount of expenses.

Understanding the method

When using the LIFO method, the current costs of goods and materials are included in the profit and loss statement, so the profit is shown less and closer to real figures. In the balance sheet, the cost of inventories is gradually decreasing, since it records the balances acquired at the lowest actual cost.

It should be noted that since 2008 the LIFO method has been prohibited in accounting, but it can still be used for tax accounting purposes.

LIFO tax accounting is a method of accounting for inventories at the cost of goods that are the latest in time of purchase. In tax accounting, this method is used when writing off raw materials for production, when selling purchased goods, or other disposal of securities.

LIFO accounting

The LIFO method is based on the assumption that inventory items that are the first to enter production (sale) should be valued at the cost of the latter in the order of production or purchase.

In this case, inventories in stock at the end of the period are estimated at the actual cost of the first purchases, and the cost of goods sold takes into account the cost of material resources that are the latest in time of acquisition.

In conditions of inflation, the application of the LIFO method allows organizations to be the first to write off the most expensive goods (materials, raw materials), which makes it possible to minimize payments for income tax for the current period.

Varieties

Along with the classic LIFO method, accounting policies can use such varieties as:

method of standard volume of reserves,
lIFO method for retail.

The method of the normative volume of reserves is used only to account for the normative minimum of stocks of raw materials (grain, metals, etc.), and the rest of the reserves are accounted for using other methods. The basis for the method is the statement that the organization should always have a certain stable volume of raw materials.

If this volume falls below a certain level, then part of the profit should be directed to restoring inventories. Unlike the traditional LIFO estimates, the normative estimates do not take into account the benefit from layer mixing.

In the long term, the normative method provides more conservative and consistent estimates of profit compared to the LIFO method.

The LIFO method for retail uses a special technique based on the retail price index. Initially, the inventory of each department of the store is estimated using the retail method, after which the costs decrease in inverse proportion to the increase in the price of the goods according to the price index.

In this case, a departure from the usual rule that when using the LIFO method, the calculation of indices must be performed by the organization itself using internal data.

Advantages and disadvantages

The use of the LIFO method is beneficial in conditions of rising prices due to the possibility of increasing the value of the sold property, which leads to a decrease in the tax base for income tax. If the organization has a relatively constant stock of goods in the warehouse, using this method will give it certain advantages.

In addition, since inventory balances are included in the tax base for corporate property tax, the use of the LIFO method allows the use of purchased goods at lower prices in calculating this tax. However, in accounting, the LIFO method is not particularly beneficial for organizations looking to attract investment.

The fact is that the use of this method in conditions of inflation entails a decrease in the financial result of the company, which reduces the attractiveness of the organization from the point of view of potential investors.

On the contrary, when prices fall, the LIFO method makes it possible to demonstrate higher profit indicators in the reporting. However, the use of the LIFO method becomes the reason that the cost data shown by the company in the reporting does not coincide in many respects with the real picture. That is why today the use of this method is limited to the framework of only tax accounting.

Source: "class365.ru"

LIFO method in accounting

With this method, when materials are released into production, at the beginning the materials are written off at the price of the last delivery, then the next quantity at the price of the penultimate delivery, etc.

However, it should be noted that if earlier in Russia the possibility of using the LIFO method in accounting was stipulated in the PBU and the tax code, now this method is not used to calculate the cost of materials released for production in accounting, but it can still be used in logistics and other areas for cost accounting.

This method is used when the company adheres to the principle of "last in, first out" based on the abbreviation LIFO, i.e. LAST ITEM FIRST OPERATION. For example, if the enterprise had several deliveries, then first the materials are taken into account in production at the price of the last delivery, then at the price of the penultimate delivery, etc.

An example of applying the LIFO method is discussed below. So, let's carry out an assessment of inventories using the LIFO method. You want to calculate the cost of inventories released into production using the LIFO method. The data for the solution are given in the table:

Decision. When accounting for inventories using the LIFO method, you should first take into account the prices of materials that were received by us last.

So, the first batch sent to production is 170 kg.

The last delivery is 80 kg at 45 rubles. per kg. But we need 170 kg. We are looking at the penultimate delivery. In the third delivery we received 50 kg at a price of 15 rubles. per kg. In total, we already have 50 + 80 \u003d 130 kg, but we need 170 kg. We are looking at the second delivery. In the second delivery we received 150 kg at a price of 30 rubles. per kg (we use 40 kg from it).

So, with the LIFO method, we send materials to production in the first batch for the amount of 80 * 45 + 50 * 15 + 40 * 30 \u003d 5550 rubles.

The second batch sent to production is 160 kg.

We have the remainder from the second delivery of 110 kg at a price of 30 rubles. per kg. But we need 160 kg. Let's see what was in the first delivery. In the first delivery, we received 100 kilograms at a price of 20 rubles per kilogram. We take 50 kg from it (50 kg remains).

So, with the LIFO method, the second batch that we send to production will be accounted for in the amount \u003d 110 * 30 + 50 * 20 \u003d 4300 rubles.

The third batch that we will send to production is 80 kg.

We have the remainder from the first delivery of 50 kilograms at a price of 20 rubles per kilogram. But we need 80 kg. Therefore, we look at the balance at the beginning of the period. There was a remainder of 200 kg at a price of 50 rubles. per kg. We take 30 kg of them.

So, with the LIFO method, the third batch that we send to production will be accounted for in the amount \u003d 50 * 20 + 30 * 50 \u003d 2500 rubles.

The fourth batch sent to production using the LIFO method is 40 kg.

We have a balance at the beginning of the period of 170 kg at a price of 50 rubles. per kg. We take 40 kg of them at a price of 50 rubles. per kg. Therefore, 40 kg (the fourth batch that we will send to production) is taken into account at the price of 50 rubles, which will be 40 * 50 \u003d 2000 rubles.

In total, we send materials to production using the LIFO method in the amount of 5550 + 4300 + 2500 + 2000 \u003d 14350 rubles. Let's summarize the obtained data in the table:

Logically, it was possible to understand that by sending 450 kg of materials to production in this way, we would have 130 kilograms (from the initial balance of the enterprise, and there were 200 kilograms at 50 rubles per kg).

We knew that at the beginning of the period we had materials in the amount of 10,000 rubles, in total we received 10,850 rubles. Those. we had materials for 20,850 rubles. With the LIFO method, we send to production everything except 130 kg from the initial balance (130 * 50), therefore, we sent materials to production in the amount of 20850- (130 * 50) \u003d 14350 rubles. We got the same result. So you can double-check the solution.

Source: "goodstudents.ru"

LIFO

It stands for "last in, first out", which translates as "last came, first left". It:

the method of accounting for inventories at the price of the last received or manufactured batch;
the method of calculating bank interest in case of early partial withdrawal of deposits, in which the amount that was last accepted into the deposit is considered withdrawn.

The LIFO valuation of inventories is based on the assumption that the resources that are first put into production (sold) should be valued at the cost of the latter in the sequence of acquisitions.

When using this method, the assessment of material resources in stock (in stock) at the end of the month is made at the actual cost of the earliest in time of acquisition.

And the cost of sold products (works, services) takes into account the cost of acquisitions later in time.

Source: "1-fin.ru"

Accounting says goodbye to LIFO

Many accountants use the LIFO method when writing off inventories.

The article will tell you how to correctly change the method of writing off inventories, and what difficulties you will have to face in this case.

Inventories (MPZ) include:

raw materials,
materials,
products,
finished products.

Until now, during release to production, sale or other write-off, they could be estimated in four ways:

at the cost of each unit;
at the average cost;
according to the FIFO method (entered first - first written off);
by the LIFO method (the last to arrive - the first to be written off).

For accounting, this was allowed by clause 16 of PBU 5/01, approved by order of the Ministry of Finance of Russia dated June 9, 2001 No. 44n. And for tax accounting, these methods are provided for by paragraph 8 of Article 254 and paragraph 1 of Article 268 of the Tax Code of the Russian Federation.

Of the listed methods, the LIFO method is the most beneficial for tax accounting. Indeed, in conditions of inflation and rising prices for raw materials and materials, it increases the costs of the company, since the most expensive resources are written off first. As a result, profits and taxes are reduced.

The use of the LIFO method in accounting also makes it possible to bring it closer to tax accounting and "leave" PBU 18/02. However, improving national accounting standards and bringing them closer to international ones, since 2008 the Ministry of Finance of Russia has banned the use of the LIFO method in accounting (order of March 26, 2007 No. 26n).

This step, according to financiers, will make it possible to objectively evaluate the inventories and make the financial statements more reliable. You also have to choose another accounting method of assessing stocks from the remaining three.

Choosing a method of accounting for inventories

Writing off inventories at the cost of each unit is rarely used. As a rule, this is done when using unique materials (precious metals and stones), as well as tools, overalls and some other types of materials, write-off of piece goods or products (jewelry and the like).
With a massive supply and consumption of resources, this method is almost impossible to apply.
If you change the LIFO method to write off resources using the FIFO method, there will be a sharp decrease in the cost of production and an increase in the “accounting” profit. Therefore, with significant remnants of inventories in the warehouse, it is impractical to switch to the FIFO method.
The method of writing off at the average cost is devoid of this drawback. It will make the transition to the "new rails" of accounting smoother.

Let's show this with an example.

Example 1. As of January 1, 2008, the warehouse of CJSC Stroyresurs has 600,000 pieces of silicate bricks worth 1,800,000 rubles. In January Stroyresurs bought 2 lots of this brick. 1st batch (200,000 pieces) purchased on January 10.

It cost 700,000 rubles. (without VAT). The second batch (800,000 pieces) was purchased on January 28, having paid 3,200,000 rubles for it. (without VAT). In January, 1,000,000 bricks were sold. Let's calculate the cost of a brick sold by each of two methods - average cost and FIFO.

Average cost method

The average cost of 1 brick is: (1,800,000 rubles + 700,000 rubles + 3,200,000 rubles): (600,000 pieces + 200,000 pieces + 800,000 pieces) \u003d 3.5625 rubles / piece.

The cost of the brick sold in January was: 3.5625 rubles / piece. x 1,000,000 pcs. \u003d RUB 3,562,500

The cost of warehouse balances is equal to: 1,800,000 rubles. + 700,000 rubles. + 3,200,000 rubles. - 3,562,500 rubles. \u003d 2,137,500 rubles.

FIFO method

Stroyresurs wrote off:

from last year's warehouse balances - 600,000 pcs. bricks in the amount of RUB 1,800,000;
from the first batch of 2008 - 200,000 bricks for the amount of 700,000 rubles;
from the second batch of 2008 - 200,000 bricks for the amount of 800,000 rubles. (3,200,000 rubles: 800,000 pieces x 200,000 pieces).

The total cost of the brick sold was: 600,000 rubles. + 700,000 rubles. + 800,000 rubles. \u003d 2,100,000 rubles.

The cost of warehouse balances is equal to: 1,800,000 rubles. + 700,000 rubles. + 3,200,000 rubles. - 2,100,000 rubles. \u003d RUB 3,600,000

Thus, when writing off a brick at an average cost, the company's expenses are 1 462 500 rubles. (3,562,500 - 2,100,000) more than with the FIFO method, and stock balances are less.

If the prices for the bulk of your inventory are steadily decreasing, then it is more profitable for you to switch to the FIFO method.

We apply PBU 18/02

Despite the changes in accounting legislation, the LIFO method continues to operate in tax accounting. Therefore, when calculating income tax, you can still apply it. However, remember: if you use different accounting methods, the cost of written off resources "for accounting" and for income tax will be different.

Because of this, differences appear in the accounting (PBU 18/02, approved by order of the Ministry of Finance of Russia dated November 19, 2002 No. 114n). True, when the inventories are completely written off, the same amount will eventually fall into expenses both in accounting and in tax accounting. Therefore, such differences are considered temporary. That is, when the inventories are written off, they will gradually disappear (extinguish).

If prices go up

If the LIFO method is used in tax accounting, and FIFO or the average cost for accounting, then the “accounting” expenses are likely to be less than the “tax” ones. Accordingly, in conditions of rising prices for inventories, the "accounting" profit will be higher than the "tax" one.

Then the difference will be taxable. It needs to reduce the "accounting" profit. As a result, it will become equal to the tax base reflected in the income tax return.

When a taxable temporary difference occurs, a deferred tax liability is calculated:

Deferred Tax Liability \u003d Temporary Taxable Difference x Income Tax Rate (24%)

And in accounting they make a posting: DEBIT 68 subaccount "Calculations of income tax" CREDIT 77 - a deferred tax liability has been charged.

When the difference disappears, the liability is also gradually extinguished: DEBIT 77 CREDIT 68 subaccount "Calculations of income tax" - the deferred tax liability is extinguished.

Let's take an example, what records need to be made in accounting when changing the method of writing off inventories.

Example 2. As of January 1, 2008, there were 17 Bosch coffee grinders left in the Elektrotovary store.

Of these, 3 pieces (from the 1st batch) - the cost of 600 rubles. each, 4 pieces (from the 2nd batch) - 800 rubles each. and 10 pieces (from the last batch) - 2100 rubles each. The goods are included in the purchase prices. The retail price for the Bosch coffee grinder is 2600 rubles. per piece, including VAT - 396 rubles. 60 kopecks. The store sold 10 grinders in January and 5 in February.

In tax accounting, as in previous years, "Electrical goods" use the LIFO method. In accounting, according to the accounting policy, since 2008 the store has switched to the average cost method.

In January, the cost of sold coffee grinders was:

in accounting:
((600 rubles x 3 pcs. + 800 rubles x 4 pcs. + 2100 rubles x 10 pcs.): 17 pcs.) X 10 pcs. \u003d 15 294 rubles.
in tax accounting:
RUB 2100 x 10 pcs. \u003d RUB 21,000

Thus, the accounting costs of 5706 rubles. less than for taxation. And the “accounting” profit is more than the tax base by the same amount. This is the temporary taxable difference. Accounting profit must be reduced by this difference in order to bring it to the level of the tax base.

The store accountant made the following entries in the accounting:

DEBIT 62 CREDIT 90-1 - 26,000 rubles. (2600 rubles x 10 pcs.) - reflects the sale of goods;
DEBIT 90-3 CREDIT 68 subaccount "Calculations for VAT" - 3966 rubles. (396 rubles 60 kopecks x 10 pcs.) - VAT charged on sales;
DEBIT 90-2 CREDIT 41 - 15 294 rubles. - the cost of goods sold has been written off;
DEBIT 90-9 CREDIT 99 - 6740 rubles. (26,000 - 3966 - 15,294) - the profit from the sale of goods was determined;
DEBIT 99 CREDIT 68 subaccount "Conditional income tax expense" - 1618 rubles. (RUB 6,740 x 24%) - conditional income tax expense was charged;
DEBIT 90-2 CREDIT 90-2 analytical account "Taxable temporary differences" - 5706 rubles. - the temporary taxable difference is reflected;
DEBIT 68 subaccount "Calculations of income tax" CREDIT 77 - 1369 rubles. (5706 rubles x 24%) - deferred tax liability has been accrued.

In February, the cost of sold coffee grinders is as follows:

in accounting:
(600 rubles x 3 pcs. + 800 rubles x 4 pcs. + 2100 rubles x 10 pcs.): 17 pcs.) X 5 pcs. \u003d 7 647 RUB
in tax accounting:
800 RUB x 4 pcs. + 600 rub. x 1 pc. \u003d 3800 RUB

So, in February, expenses in accounting were, on the contrary, more than in tax.

Therefore, in February, the temporary taxable difference will be partially repaid in the amount of RUB 3,847. (7647 - 3800).

The accountant reflected business transactions with such records:

DEBIT 62 CREDIT 90-1 - 13,000 rubles. (2600 rubles x 5 pcs.) - reflects the sale of goods;
DEBIT 90-3 CREDIT 68 subaccount "Calculations for VAT" - 1983 rubles. (396, 6 х 5 pcs.) - VAT charged on sales;
DEBIT 90-2 CREDIT 41 - 7647 rubles. - the cost of goods sold has been written off;
DEBIT 90-9 CREDIT 99 - 3370 rubles. (13,000 - 1983 - 7647) - the profit from the sale of goods is determined;
DEBIT 99 CREDIT 68 subaccount "Conditional income tax expense" - 809 rubles. (RUB 3370 x 24%) - conditional income tax expense was charged;
DEBIT 90-2 analytical account "Temporary taxable differences" CREDIT 90-2 - 3847 rubles. - the temporary taxable difference is partially repaid;
DEBIT 77 CREDIT 68 subaccount "Calculations of income tax" - 923 rubles. (RUB 3,847 x 24%) - deferred tax liability has been partially settled.

At the beginning of March, 2 Bosch coffee grinders remained in the store. Moreover, their cost was:

in accounting - 3059 rubles. (26,000 rubles: 17 pcs. X 2 pcs.);
in tax accounting - 1200 rubles. (600 rubles x 2 pcs.).

If prices fall

But it can also happen that the resources that the company buys become cheaper. If, in conditions of price reduction, the LIFO method is used in tax accounting, and FIFO or the average cost in accounting, then “accounting” expenses may turn out to be more than “tax” costs. And the “accounting” profit will be less than the “tax” one. Then the temporary difference will be deductible. This difference needs to increase the "accounting" profit.

When a temporary deductible difference occurs, the deferred tax asset is calculated:

Deferred tax asset \u003d Temporary Deductible x Income Tax Rate (24%)

And in accounting they make a posting: DEBIT 09 CREDIT 68 subaccount "Calculations of income tax" - a deferred tax asset is accrued.

When the deductible difference fades out, the asset also fades out:
DEBIT 68 subaccount "Calculations of income tax" CREDIT 09 - deferred tax asset is extinguished.

Source: "buhkadr.ru"

Inventory valuation method at cost of last LIFO purchases

The LIFO method is a method for estimating stocks at the cost of the most recent purchases, "last in - first out" - "last received, first used". For production (for sale), first, stocks are written off in the amount of the last received batch and at the price of the last batch, then materials are written off in the quantity of the penultimate batch and at the price of the penultimate batch, and so on, until the total amount of inventory consumed for the month is written off.

The LIFO method assumes the priority write-off of inventories in production or the sale of the last received batches. Here the assumption is used that all the stocks arriving at the enterprise are, as it were, stacked on top of each other and it turns out that the stocks received first "lie closer" and they are first of all put into the production or sales process.

This ensures the overestimation of the value of the values \u200b\u200bspent on production or sold values, the underestimation of their balance at the end of the month, which means a decrease in profit and a deterioration in the financial performance of the enterprise. Therefore, this method is recommended to use if the company seeks to reduce income tax.

Example (in the table in bold type the initial data are highlighted, and in normal type - the calculated data):

The advantages of the LIFO method are that stocks are included in the cost of production at the market price, the estimated profit of the enterprise corresponds to the actual one. The disadvantage of this method is that the cost of stocks at the end of the period under inflation conditions is underestimated.

Inventory Management

One of the most significant factors determining the efficiency of operating expenses, as well as the level of organization of financial management for many industrial and trading companies, is the size of inventories.

From the point of view of a financier, the ideal state for doing business should be the absence of any inventory with full provision of the production process with all the necessary components.

Today, due to a number of objective reasons, it is not possible for the majority of enterprises to achieve a complete absence of commodity “excesses”. And if stocks cannot be disposed of, then they must be managed.

Stocks and competition

The rivalry between the two largest world economies, the United States and Japan, in the mid-1980s was characterized by a clear superiority of the latter in the field of industrial production. The basis of the competitive advantage of the Japanese was a sharp decline in production costs and, as a consequence, market prices for products of engineering, electronics and other capital-intensive industries.

The policy of protectionism adopted by the Americans towards their own producers, as a response to cheap imports of Japanese goods, did not give the desired results: Asian competitors continued to squeeze North American producers in both hemispheres of the planet.

Research conducted by leading analysts and economists in the United States and Europe in 1985-1987 showed that one of the main conditions for the superiority of the Japanese is insignificant (minimum) inventories. This approach to the organization of production allowed, first of all, to reduce the investment base, which in turn significantly increases the return on investment (ROI), all other things being equal.

Later, the system used by Japanese managers was called "just in time" (abbreviation JIT), which was later used by the most successful companies in America as the basis for integrated material requirements planning (MRP).

Today this system has transformed into a special economic discipline - logistics.

JIT means that the production process must be organized in such a way that raw materials and materials are delivered to the place of production at the moment when they are needed, and the finished products are immediately sent to the customer or consumer.

Toyota example

One of the classic examples of just-in-time implementation is Toyota, which has built its business in such a way that about 90% of all suppliers of this car monster are concentrated on the outskirts of Toyota.

Moreover, the vast majority of components are delivered to the place of assembly within a few hours or minutes before they are used. This circumstance allows the company to significantly reduce operating costs and get rid of unproductive labor.

However, such an organization of the conveyor requires increased requirements for the quality of all elements of the production process: the presence of even minor defects in components can paralyze an entire production line. This further proves that JIT inventory management is closely related to TQM quality management.

A statistical report prepared by the US National Association of Manufacturers in 1997 shows that 16% of the 385 companies surveyed achieved the greatest success with the JIT system, and the survey confirmed the willingness of another 53% of companies to switch to this supply system.

It is no coincidence that Ford, General Motors, Hewlett-Packard, Intel, Motorola, Campbell Soup, GE and many other major manufacturers are among the pioneers of JIT in the United States. It was the introduction of JIT that in many ways allowed these industrial giants to defend their market positions.

New sourcing philosophy

JIT best practices have shown that just-in-time is much broader than just stock reduction. Today's most progressive management experience in the field of supply and sales organization was based on the dialectical development of four fundamental elements:

Statistical Process Control (SPC).

This approach, in fact, was the original prototype of the JIT and was adopted by companies immediately after the Second World War. This concept was based on the organization of such a control system at the enterprise, which excludes the presence of "incoming" marriage at all stages of production and, as a result, the absence of defects at the "exit".

Modern companies cannot fully comply with just-in-time principles if suppliers (both external and internal) allow even a small percentage of defective products.

The method of statistical process control was based on the so-called no-defect idea, formulated by Philip Crosby, who argued that “quality is free”.

Integrated quality management (TQM).

The concept of integrated or total quality management appeared around the late 70s - early 80s as a logical continuation of SPC and was based on the need to improve the quality of all components (factors) of production.

The use of TQM methods required an increase in all quality indicators of production and service, and not only the elimination of defects in raw materials and products.

The scientific substantiation of the method of integrated (total) quality management is associated with the name of the same Crosby and his associates Deming and Juran, who believed that it was necessary to control not the quality of the product, but the quality of the organization of production.

With this approach, each employee must be responsible for improving quality in their own process area. They also believed that the implementation of TQM principles should save the company from the need to maintain huge technical control departments (QCD).

Business process reengineering (RBP).

At the turn of the 80-90s. The TQM philosophy has been supplemented by a new complex concept in corporate management called RBP. The concept of reengineering was based on the assumption that it is possible and necessary to permanently improve all business processes, including inventory management.

RBP has become a continuous optimization process as its primary focus, with the focus on maximizing cost savings and eliminating unproductive labor (NVA). Despite the relative youth of the RBP method, most of the ideas underlying it have been known to economists for more than a decade.

The very concept of business process reengineering and its principles were first formulated in articles published in 1990 by Hammer and his colleagues Davenport and Short.

Total money management (TCM).

From the mid-90s to the present day, the most advanced concept in the field of management is the TCM concept, which is based on the priority of cash flows over all other management objects. But this does not mean that SPC, TQM and RBP "are no longer good for anything": these elements have not lost their relevance, but have become just tools in ensuring the process of total money management.

The just-in-time system has also become one of the components of TCM. From now on, the philosophy of inventory management should be subordinated not to quality or optimality, or "customer satisfaction", etc., but only to increase real income.

In other words, companies that have adopted the TCM approach should not produce a high-quality product, but one that provides maximum profit over time.

Another major achievement of TSM was the final victory of profit over marketing. Today, the most progressive companies have finally realized that marketing should be subordinated to financial goals of increasing income, and not vice versa.

The father of the concept of total money management is rightfully considered Alfred M. King, who was the first to scientifically substantiate the TCM method in his book Total Cash Management. The main idea of \u200b\u200bKing's work is that in order to manage the company, preference should be given to cash flows.

Inventory management methods

As we have already said, one of the prerequisites for effective inventory management is to take into account the impact of their size on the company's cash flows.

Conventionally, all material costs for inventory maintenance can be divided into three large groups:

costs associated with the organization of procurement;
storage costs;
losses associated with inadequate inventory availability.

The problems associated with managing the listed costs can be solved by building an optimal order size (EOQ) model.

The main condition for the construction of this model is the division of costs into those that are directly proportional to the size of reserves, and those that are inversely related to the amount of accumulated resources.

The solution to the problem of optimizing the size of certain items of goods in a warehouse for a trading enterprise can be carried out according to the following formula:

where F - fixed costs for the formation of one order;
S - sales volume of this product for the period;
С - variable costs that depend on the amount of stock in the warehouse;
P is the purchase price of a commodity unit.

Once the optimal stock level has been established, it is not difficult to determine the moment at which to place an order.

This moment will be determined by multiplying the days of manufacture and delivery of goods by the supplier by the number of goods sold per day.

The quantity received is the stock level for the item at which the next order should be sent to the supplier. The solution of these simple tasks in companies with a significant range of goods (large production, supermarket, etc.) is impossible without the use of adapted ERP-systems for inventory management.

The method of enterprise resource planning (Enterprise Resource Planning or ERP for short) allows, through the implementation of specialized software, to manage inventory taking into account the dynamics of changes in all factors of production and in compliance with the general strategy and tactics of the company's development.

The pioneers in the application of the ERP method were such world-famous retail giants as Wal-Mart, Dayton Hadson, Kmart. This is due, first of all, to the fact that these companies had the largest share of inventory in the total structure of all assets.

Wayn Hud, a recognized authority on retail ideology back in the late 1980s, wrote: “In the late 1990s, computer technology like ERP will divide all retailers into winners and losers. Companies that do not intend to invest in modern computer technology, even if they are going through hard times, will never be able to win. "

Example from Kmart

Products with a short life cycle, such as gifts for the New Year or St. Valentine, have a higher rate of return. Therefore, a shortage of such stocks on the eve of the holiday means lost profits and customer dissatisfaction. Conversely, an oversupply of seasonal goods can result in significant financial losses for the seller.

The complex task of planning the inventory of gift items and determining the optimal time for their sale at reduced prices in Kmart supermarkets was solved using an ERP system.

Calculations showed that 50% of New Year's gifts are sold in the last two days before the holiday. This conclusion allowed Kmart stores to maximize the profit from the sale of gift sets and the minimum losses associated with the sale.

Suppliers

The effectiveness of a company's inventory management largely depends on the organization of relationships with third-party suppliers. Large companies (and after them and smaller ones) are mainly guided by the “undeniable” motto: “the client is always right”. That is why many consumer firms use all possible methods of pressure on their suppliers in order to reduce prices and improve service.

However, the objective relationship of the last two indicators, as a rule, is expressed as follows: the higher the quality, the higher the prices and vice versa. In order for the just-in-time system, which promises companies significant savings in operating costs, to really work, it is necessary to prioritize not prices, but the quality and speed of delivery.

At the same time, it is necessary to achieve price reductions not by administering suppliers, but through their economic stimulation. In order for suppliers to really be interested in "knocking down" prices without compromising the quality of service, it is necessary to maximize the size of orders and increase the terms (history) of cooperation.

Thus, in order to save money, improve quality and increase the speed of working with suppliers, the latter should not be perceived as competitors or rivals, but as strategic partners. As a general rule, the least number of suppliers can bring the greatest savings in procurement costs.

Accounting and taxes

The deafening success of Internet commerce is mainly due to the low level (or even absence) of inventory in virtual stores.

It is this circumstance that has allowed companies like Amazon.com to significantly reduce their own overhead costs and to maintain highly competitive prices compared to traditional forms of selling.

Unfortunately, not all types of business are able to do without inventory. So, for example, many industrial and manufacturing enterprises, due to the specifics of their activities, cannot yet do without a sufficient amount of inventory and (as a consequence) the cost of maintaining warehouse premises and other related costs.

Domestic enterprises paying VAT, as a rule, are interested in the accumulation of those inventories, which are accompanied by a tax credit of 20%. Such a tax credit from the supplier is often able not only to cover the costs of maintenance and storage of goods and materials, but also to bring additional benefits due to a delay in paying part of tax liabilities.

Material reserves can also have an important effect on the balance sheet indicators of the enterprise. Inventories are displayed in accounting and reporting at the lower of two estimates: historical cost or net realizable value.

This means that in the event of an increase in market prices for previously purchased goods and materials, their book value will not change, and in the event of a fall in prices for similar products, the company will be forced to display the corresponding losses in the financial statement.

This circumstance makes the accuracy of accounting "one-sided", and also allows managers interested in "playing" to reduce shares in large companies to manipulate financial results.

In companies with significant inventories, the choice of one or another method of reflecting the write-off of goods in accounting allows you to very significantly adjust the final financial indicators both in financial and tax reporting.

Write-off of inventories

When inventories are released for production, sale or other disposal, their assessment is made using one of the following methods:

the identified cost of the corresponding inventory unit;
weighted average cost;
the cost of the first-in-time inventory (FIFO);
the cost of the most recent inventory receipt (LIFO);
regulatory costs;
selling prices.

So, for example, when using the LIFO method (“last in, first out”) in conditions of inflation (or a rapid rise in purchase prices for the same product), it is possible to significantly reduce the reported profit of the enterprise and minimize income tax payments.

However, if, with this method of writing off inventories, their constant reduction is carried out, then there will be a completely opposite effect - profit will increase, and income tax will increase.

The organization's stocks of raw materials and supplies is one of the conditions for the continuous operation of a production enterprise and other business entities. For accounting purposes, it is allowed to use various methods: operating methods - at average cost and fifo; and lifo, which were canceled back in 2008.

Accounting for inventories in the organization

To carry out current economic activities, the enterprise needs to periodically purchase various materials, raw materials related to the refinery. The needs for reserves depend on the type of activity of the entity, its size. For small organizations, there are no special problems with accounting for materials, especially if inventories are to be written off immediately after capitalization and in the same amount. The situation is different with larger flows of stocks, which is immediately impractical to write off for the needs of the enterprise.

The purchase of goods of a homogeneous group, but at different times and from several suppliers, is also characterized by a difference in prices. With large volumes, it is almost impossible to track the cost of a batch of goods when they are released into production or otherwise used.

When determining the cost of material assets, the following factors are taken into account:

payment to suppliers for shipped goods;
customs duties and taxes not reimbursed from the budget;
intermediary and consulting services;
fare;
insurance costs of operations.

In order to streamline accounting by materials, the legislation allows the use of several methods for writing off inventories, which is regulated by PBU 5/01 "Accounting for inventories". Method Fifo and Lifo refer to methods of writing off MPZ, however, the latter has not been effective for a long time. Relevant accounting methods include the following:

At the cost of an inventory unit. It is used in the case when the organization has the ability to track the movement of goods by receipt lots. Suitable for businesses where the acquisition of certain stocks seems to be a unique process. So, when selling expensive goods, other methods of assessing receipts are inapplicable.
Average price method. It is the most convenient for most business entities. Average prices are determined taking into account existing stocks and newly received goods.
The fifo method is based on the principle that goods are written off first at their original receipt price.

The Lifo and Fifo method involves the assessment of goods to be written off in order of receipt. The difference is that in the first case (lifo) MPZs were assessed as retired in the reverse order, that is, the materials that were received last were written off first. In other words, lifo and fifo - this is disposal of inventories in the order of priority of receipt.

Fifo and lifo accounting methods

The decoding is the basis for determining the method of disposal of the MPZ fifo and lifo - decoding of English abbreviations:

FIFO method - FIFO (First in First out), means "first come - first out". In theory, it is assumed that the first materials received in time will be used first.
Lifo method - LIFO (Last in First out) is the opposite of the previous one. The principle of evaluating materials at their disposal is the same, only the action takes place in the reverse order. It stands for "Last came - first left". The bottom line is that when writing off inventories, they are initially taken into account at the cost of recent acquisitions.

Considering the MPF by the above methods, significant differences arise. So, under the action of fifo in the context of an increase in prices for homogeneous materials, the final stocks of goods are assessed to the maximum, costs due to this are reduced, the assessment of financial indicators increases. With a decrease in prices for stocks, the opposite process occurs - the cost of expenses increases, the amount of stocks in monetary terms and the financial result itself decrease.

Using the lifo methodology has the opposite effect. An increase in purchase prices reduces the final cost of inventory and increases costs. A decrease in prices implies a maximum amount of material balances at the end of the period, a decrease in costs and an increase in financial performance indicators.

Fifo and lifo method - which one canceled?

The methods of estimating reserves for accounting and tax purposes have long been different. There is a striving to bring domestic accounting standards closer to international standards. As we said above, the lifo was canceled, the fifo was left. By order of the Ministry of Finance of the Russian Federation of March 26, 2007 No. 26n, the method for determining the price of a lifo is no longer valid for accounting.

However, in tax accounting, the corresponding changes were adopted a little later. Organizations will no longer be able to choose the method of calculating goods to be written off between FIFO or LIFO, the last one was canceled from January 1, 2015.

Other methods of determining the cost of inventories when writing off (at cost, at an average price, fifo) continue to operate.

When compiling accounting records, a certain sequence of products release from the warehouse... In order to preserve the order of goods issue, various methods are used. The most famous of them are LIFO and FIFO, which are widely used in accounting.

Each method has distinctive features. For example, the FIFO technique is deciphered as follows "First in, first out", and it can be literally translated as "First came, first left"... That is, the first to be produced will be the products that arrived before everyone else.

LIFO works in the opposite way. Initially, the products sold are those that went on sale last. It stands for as follows "Last in, first out", can be literally translated as "Last came - first left"... Both methods are used in accounting and warehouse logistics.

In accounting

Goods will not be released if no expiration date... This explains the fact that the choice of one of the methods is of an abstract nature, the significance of which is only within the framework of accounting. Otherwise, it can be formulated in such a way that, given the priorities, the accountant or manager will be able to more accurately determine which product was released.

Most often, it is customary to use the FIFO dispensing method, which allows you to track the progress of products. It is customary to use LIFO in the case when there are certain circumstances.

Sometimes FIFO has formal character, this means that the release of the goods occurs only on the basis of some specific motives of the warehouse employee or seller. The product has the same cost as when purchasing a batch.

With the help of FIFO, you can estimate the cost of real expenses, as well as track their return. The disadvantages of this method include the fact that inflation and price fluctuations are not taken into account. As a result, the profit may be incorrectly calculated.

If FIFO is used, then follow a set of rules:

The cost of the first batch of products includes not only profit and costs, but also the remainder that is stored in the warehouse.
It is possible to use a regular FIFO and a modified one.
Accounting for the remainder of products is carried out no more than once a month.

Most often, the standard FIFO is used, with which it is much easier to perform calculations.

In logistics

In logistics you can use both methodsbut which one is more effective and best? An important criterion when choosing a method for writing off products will be the products driving along the supply chain, and more specifically, its features.

The FIFO method is reasonable for already obsolete product, which must be implemented in a limited time. Quite often, you can see that FIFO is used in warehouses where raw materials are stored, while LIFO is used in warehouses where there are already products ready for sale.

The most important thing is that there is enough territory in which the warehouse is located, as well as there is specialized equipment to help optimize the workflow.

Since 2008, lIFO method has become prohibited to use... This can be explained the following reasons:

Due to the need to bring the state accounting system closer to the international one.
Due to the high inflation rate, it is not profitable to use among entrepreneurs. It is relevant only when the value falls.

At the moment this the method is still valid within the framework of tax reporting... Its use is possible in the case of writing off raw materials and product leftovers in the warehouse. Still, it would be more reasonable to use the FIFO method, which is much simpler, because the goods are received and written off in accordance with the sequence.

The FIFO method for inventory accounting is quite simple, because products arrive at the warehouse and are written off in accordance with the chronology of events. Objects for accounting can be various products: construction materials, raw materials or blanks, semi-finished products and finished products.

Given the fact that stocks in the warehouse have a significant part of working capital, then in this case it is important to optimize the process... Practice has shown more than once that it is best for organizations that manufacture products with shelf life limitations to use the FIFO method.

Advantages and disadvantages

Each way to write off products has its own advantages and disadvantages. There will be benefits when using LIFO only in case of price increase due to the fact that the cost of products sold will increase.

In the case when the organization has a permanent stock of products in the warehouse, then the use of this method will be beneficial. LIFO is not beneficial in the case of accounting. Especially for those organizations that count on attracting investment.

As a result of inflation the financial profit of the enterprise will significantly decrease... But in the event of a fall in value, LIFO will allow you to demonstrate good profit in the reports. Although sometimes the data on the cost price in the reports does not coincide with reality. For this reason, it was forbidden to use this method outside of tax accounting.

As for the FIFO method, its main advantages can be called high speed of settlements and easy use... A huge advantage of the FIFO method is the opportunity to improve the creditworthiness of the enterprise.

Also, there are opportunities to attract a larger number of investors, that is, if the creditworthiness increases, the enterprise automatically has a chance to attract investors. With the FIFO method, real costs can be estimated more efficiently. The disadvantage of the method is that it is difficult to account for the degree of inflation or price fluctuations if used unevenly.

Consequences of canceling LIFO

Starting from January 1, 2008, it was decided to prohibit the use of LIFO in accounting as a methodology for estimating product inventories, which means that many enterprises had to look for other methods.

The decision of the Ministry of Finance of the Russian Federation became somewhat unexpected and may have entailed a number of consequences. Why was the use of the LIFO method canceled after all? This decision was another step towards the approach to the financial reporting standards of International importance.

The LIFO method was excluded from the list of international standards in order to improve the quality of the reports, as well as increase their reliability. The principle of the LIFO method is to write off the last purchased items first. In the event of inflation, this does not affect the activities of many organizations very well.

All existing methods were approved by order of the Ministry of Finance. They include writing off goods based on several criteria. These include following:

At the cost of one unit of goods.
At the average cost.
By FIFO method.

In each case, there are certain peculiarities.

At the cost of one unit... The purpose of this method is to estimate certain reserves or those reserves that cannot replace each other. It is extremely rare to notice the use of this method in practice and only in exceptional situations. The method most often used is the average cost.

At average cost... This method is more common than the previous one. With its help, you can display the average cost of written off products. Calculations are easy, using a fairly simple formula. For calculations, parameters such as the average cost of goods, the balance at the beginning of the month, the cost of inventories that were capitalized for the month, as well as the amount of inventory remaining at the beginning of the month and capitalized are used.

FIFO technique... It allows you to display the real situation in accounting. New products will not be discarded until the previous batch is consumed. There will be no inconsistencies in tax accounting, so this method is much more effective. and for the same reason it is used more often than previous techniques.

With the abolition of the use of LIFO, other methods began to be used that were previously little known. Despite the ban on LIFO, everything remained unchanged in tax accounting. When an organization does not follow the accounting regulations, then it is necessary to choose equally similar methods for assessment. In the event of an increase in the cost of products sold, the rejection of LIFO may inevitably lead to an increase in income taxes, which is the main consequence of the cancellation.

Recall that accounting at enterprises of different forms of ownership must be kept qualified specialists... Only in this case, you can avoid serious problems when submitting reports to the tax authorities.