The topic “Material costs” is probably one of the most entertaining in the field of finance. It closely echoes the laws of taxation, which attracts attention even more, since they should not only be studied, but simply useful to know. Speaking about the costs of material resources, we immediately represent a large enterprise, in the production process of which I would like to sort it out more quickly. What are we going to do now.
Accounting for material costs
Any enterprise, and primarily a production one, uses in its activity a huge amount of various materials, raw materials, fuel, etc. The correct, competent reflection in the accounting of the costs of their acquisition allows you to minimize the tax base when making payments to the budget.
What the law says about it
The composition of material costs is very clearly regulated by the Tax Code of the Russian Federation, in particular, article 254, part 2. It states that the following taxpayer's expenses are related to material costs:
- The costs associated with the purchase of raw materials and materials that are used directly in production when performing a certain type of work or when providing various kinds of services.
- Funds for materials for packaging or any other type of preparation of production or marketed goods, including pre-sale. Also, the costs of other needs related to the economic part: testing, quality control and maintenance, operation of fixed assets and other purposes.
- Costs of tools, fixtures, inventory, instruments, laboratory equipment, work clothing, all kinds of personal and collective protective equipment, as well as other types of property provided for by the legislation of the Russian Federation.
In addition to the above, the consumption of material resources includes: the purchase of components for installation work, semi-finished products for additional processing, funds for fuel, water and energy of all kinds, its generation, transformation and transmission, which includes the entire technological process of production. As well as the costs of the work performed by specialists of the organization of the taxpayer.
How to interpret it
All material resources entering the enterprise are taken into account in price terms. This includes all costs except the cost of returnable packaging. If it is separately indicated in the contract, it is taken into account at the price of possible use and without VAT, which is taken into account in a separate account. In addition, the amount of material costs does not imply the price of returnable waste, which, according to the technology, is generated in the production process and can be used in future for commercial purposes.
Release of materials to production
For a more rapid launch of materials into production, limit-intake cards are used, which belong to the category of primary documentation. In order to include the cost of the materials used in the costs of the main production at specified intervals on the basis of these documents, their actual consumption is determined. It is important to know that at this stage it is necessary to reconcile, to find out whether real and standard material costs correspond to each other.
Inventory accounting
At large enterprises that use an extensive range of materials in the production process of several types of products, it is advisable to use standard or coefficient methods to write them off. This will not only more accurately determine the cost of various types of products, but also determine the discrepancies (cost overruns) of certain material values. One recommendation is periodic inventories. Also, in the case of a long production cycle (for example, when purchased semi-finished products are used in several stages of the production process), it is necessary to maintain an operational balance of the movement of parts in production, based on the principle "the more detailed, the better."
Identification of discrepancies between the normative and actual consumption of materials, as well as analysis of the reasons for this situation will minimize costs, which ultimately will positively affect the overall financial condition of the enterprise. And in the future it will provide an opportunity to competently build the entire production process, correctly conduct pricing policies, and therefore competently take into account material costs, based on the experience gained.
Costs for tax purposes
It is also worth paying attention to Art. 261 part 2 of the Tax Code of the Russian Federation, according to which the material costs should include used funds for the restoration of land resources and ongoing environmental activities. In addition, to account for losses from damage and shortages during storage or transportation of material and production stocks, funds if they exceeded the permissible rate of natural losses established by the Government of the Russian Federation. The Code also includes technological losses that occurred during the production process or the same transportation. Moreover, such losses mean the loss of goods, work, services, which are caused by the features of the production cycle, displacement issues, as well as the physico-chemical composition of the raw materials used in the work. When mining, working in quarries, during underground mining within mining enterprises, fixed preparatory expenses are added to fixed expenses plus everything else.
Important nuance
Taking into account the recommendations of the Ministry of Taxes and Fees, material costs can be taken into account for tax purposes only after they are paid. However, the cost of materials and components should be written off to expenses directly at the time of their transfer to the main production. There are no direct indications of this in the Law, but the recommendations of the Ministry, as practice shows, must be listened to in the most thorough manner.