In accounting, the system of generating costs for production is one of the most important mechanisms in any enterprise. The profitability of future production and the receipt of income from products depend on the correct distribution of funds. Cost accounting for production takes the most important place in calculating the cost of manufactured goods. In view of the fact that the management of the enterprise independently determines the market value of its products, the calculation of costs and costs, especially its correct technique, serve the active growth of the enterprise and its profitability.
When the cost of production is recorded , the management of the enterprise, as well as, first of all, the accountant, can determine how high the level of costs is, calculates the cost, and subsequently the final price of the goods on the market. Having analyzed all the data obtained, we can say how promising the enterprise will be and what profit is expected.
Some elements of accounting are strictly controlled by government regulations for the further processing of taxes on the profits of an enterprise. To understand what accounting for production costs is, you need to consider the basic principles of accounting for these very costs.
The main goal of each individual enterprise is to constantly increase profits and independence of the enterprise in the market among other competitors. This is the main reason why the cost of production is kept. That is, the accountant carefully notes all the costs that directly or indirectly affect the cost of goods. This is the purchase of raw materials, fuel and energy costs, workers' wages and other types of production services. Among other things, here you can include the costs of VAT, depreciation of equipment, deductions to the insurance fund, rental of premises and other variable types of costs.
It is worth noting that the cost of production is affected only by documented accounting of all costs incurred in the production process. The costs themselves are divided into two separate units: these are direct costs for the manufacture and sale of goods and other expenses.
In order to determine how much money an enterprise may need for production, the accountant conducts an initial accounting of production costs. The estimated cost per unit of production is calculated and the average cost is forecasted. This is called the planned and actual cost.
Accounting of production costs is carried out by several methods: as mentioned earlier, a planned cost estimate is compiled for a certain period of time, as well as an estimate - for a one-time production, if any. Then, at the end of the reporting period, the result is summed up, the actual accounting of the costs of production, which also includes unplanned expenses for the month.
Also included in the cost accounting is depreciation of the main equipment involved in the production process. As the equipment begins to break down over the years, the company management is obliged to take care of its replacement, and the purchase of new equipment is a new cost. Therefore, in order for the enterprise to have funds for the purchase of equipment, the state provides for depreciation to be included in the cost of goods.
All other expenses of the enterprise that are not related to the production of products are accounted for at other points of the financial statements. Thus, the report identifies indicators indicating total profit and expenses deducted from this profit.