Method of accounting for inventory is the business to track fluctuations in import – export – inventory consists of two main method is declared regular (continuous track updates every transaction) and inventory periodically (just noticed the end of the period based on actual inventory), consistently applied, as well as compliance with accounting Standards (VAS 02) to ensure the value of the property accurately.
However, many new business or systematic warehouse complex, often have difficulty in choosing the method of accounting consistent, shipment tracking, valuation of stock as well as recorded fluctuations in inventory accuracy. Errors in accounting can lead to cost is calculated wrong, do affect the financial reporting and potential risk in the audit process.
The same Lac Viet learn in detail the method of accounting of inventory, how to calculate the price of stock, pros, cons, and selection criteria suitable to implement professional standards and efficiency.
1. What is inventory?
Inventory is short-term assets that the business holds in order to serve manufacturing operations – business. This is a group of assets which have high volatility directly affects the price of capital, profits and cash flow, at the same time are important factors in assessing the efficient use of capital as well as supply chain management of the business.
According to VAS 02, inventory includes the following categories:
- Materials and supplies: includes all the inputs to production service or business, from raw materials to the materials and auxiliary.
- Tools: These properties cater directly to manufacturing operations – business but not selling products, such as appliances, tools, small engine labor.
- Unfinished products & cost of production, unfinished business: includes the products are in the process of production or provision of services, but not completed.
- Finished goods: Is the finished product ready to sell or export warehouse.
- Consignment, consignment machining: includes goods have transferred to your dealer or unit Tuesday to sell or machining.
- Service cost unfinished: includes the cost has dropped out, but the service has not completed.
Accounting and inventory details to help businesses working capital management efficiency, reduce risks deficiency or residues, while ensuring financial reporting transparency and compliance with accounting standards.
2. Method of accounting what is inventory?
Method of accounting for inventory is the way business record, monitor, evaluate, as well as reflect fluctuations in input – output – inventory during an accounting period.
Currently, there are 2 methods of accounting for inventory downloads:
- Declare regular: continuous tracking of all transactions input – output – inventory, update the data as soon as they arise.
- Inventory periodically: Only recorded fluctuations in inventory, end of period based on the results of actual inventory.
Selection method of accounting should be based on the scale of business, the level of complexity of inventory, capacity, technology and requires internal control. Apply the method of accounting for inventory details help reduce the risk of errors, the optimal price of capital, transparency of financial statements aims to enhance effective business decisions.
3. The principles basic accounting dominated inventory
Accounting principles govern inventory is the basic rules that businesses need to comply with when recorded, monitoring and evaluation of inventory. The basic principles include:
- Principle of original price: inventory is recorded at the actual purchase price, including the purchase price, cost of processing and the costs directly related to bringing the goods on the status ready for use or sale.
- Principle of consistency: once A business choice of method of accounting for inventory, that method must be applied consistently during the entire accounting period.
- Principle of prudence: Business to set up the decline in value of inventory if the value is true fact lower than original price.
- Accounting principles in detail: the inventory should be accounted for in detail according to the quantity, value, as well as locations.
4. The method of accounting of inventory, including what types are there?
4.1. method regular inventory
Method of accounting inventory declaration is frequently a form of accounting in which all fluctuations of inventory are recorded when incurred transaction import, export, or adjustment. The number and value of inventory is constantly updated, reflecting the real state of the repository at any time.
Formula:
- Inventory, end of period = inventory the beginning of the period + warehouse Import – Export warehouse
- The price of capital goods inventory = Number × unit value calculated by the method warehouse export selected (FIFO, LIFO, weighted Average or the destination list)
Way of accounting for inventory under the 200/133:
- Enter the repository:
- Debt TK 152, 156, 155 (Raw materials, goods and Finished products)
- Have TK 111, 112, 331 (Cash, Bank, pay the seller)
- Values recorded include the purchase price, shipping costs, and costs directly related.
- Stock:
- Debt TK 632 (cost of goods sold) or TK 154 (production Costs unfinished business)
- Have TK 152, 156, 155 (Reduce inventory by number – price already selected)
- Adjust inventory:
- Acknowledging the loss, damaged goods, returned goods, stock transfer: Debt TK 138 or TK 811 / Có TK 152, 155, 156
- Continuous reporting System: general accounting data in real time, providing reports, inventory, cost of sales and management reports.
Pros and cons:
| Criteria | Advantages | Cons |
| Accurate data | Inventory & value is constantly updated | Need modern software, high investment costs |
| Internal control | Minimize losses, errors in the import – export warehouse | Personnel must have the skills to operate & control closely |
| Report | Report inventory and price capital immediately, transparent | Complex when the warehouse has a variety of goods & multiple locations |
| Database Mgnt. | Decision support production, timely business | Need maintenance and software updates regularly |
Illustrative examples: Business enter 3 batches of goods:
- Lot 1: 100 product price 50.000
- Lot 2: 200 product price 55.000
- Lot 3: 150 product price 60.000
In January, the business made:
- Export warehouse 180 products for sale
- Internal stock transfer 20 products
- Goods damaged must get: 5 products
Accounting according to the inventory regularly:
- When entering 3 shipment:
- Record increase 152/156 according to each input, each time recording the correct value plots.
- After 180 products:
- The price of capital is system now according to the FIFO, or other method of business to choose.
- Set up a write-down of inventory in the right plot, the price of capital.
- When shipping 20 products between warehouses:
- Accounting internal: discount warehouse A – rise warehouse B, but does not change the total inventory.
- When cancelling 5 products:
- Record inventory reduction 152/156
- At the same time noted the cancellation costs: Debt 811 – Have 152/156
- End date/period:
- The system always know the inventory accurate for updates in real time.
4.2. Methods of inventory periodically
Method of accounting for inventory under the inventory periodically is the recognition that data inventory is determined only at the end of the accounting period based on the results of actual inventory. In the states, the import – export track only temporary and do not change right balance of inventory on the ledger.
Formula:
- Cost of goods sold = inventory the beginning of the period + Enter stock in the period – inventory end of period
- Inventory, end of period = value actual inventory at our warehouse
Way of accounting for inventory under the 200/133:
- Track provisional: Recorded vote, import – export warehouse under the form of diary or window, does not affect the balance of inventory official.
- Inventory end of period: specify the number of values inventory at the warehouse.
- Calculate cost of goods sold: Based on number of warehouses in the usa and inventory end of period, recorded the price of capital:
- Debt TK 632 (cost of goods sold) or TK 154 (production Costs unfinished business)
- Have TK 152, 155, 156 (Reduce inventory end of period)
- Adjustment data: make adjustments, inventory, provision for diminution in value, if necessary.
Pros and cons:
| Criteria | Advantages | Cons |
| Implementing | Easy to make, low system requirements and technology | Data inventory is not updated continuously |
| Cost | Management costs, low operating | Price of capital and the financial statements reflect slow |
| Fit | Small business stock is less volatile | Difficult to control losses promptly, to develop deviations |
| Report | Inventory last states to provide data synthesis | 't support timely decision-making in the states |
Illustrative example: the Enterprise are:
- Survive the beginning of the period: 300 product price 40.000
- In states import more:
- 100 products price 45.000
- 200 product price 48.000
- In stock: 420 products (only track votes)
- Final actual inventory: 150 products
Accounting according to the inventory periodically:
- In states:
- Recorded vote input, vote casting, the form window (not recorded in 152/156).
- Not determine the price of capital in the period.
- End:
- Actual inventory define inventory actual = 150 products
- Survive the end of the period = 150 × value calculated according to the method of calculating the price of stock selected.
- Calculate the price of capital:
Cost of goods sold = Inventory the beginning of the period + Total income in the states – Survive the end of a. - Recorded the price of capital:
- Debt 632
- There 152/155/156
- If there are any discrepancies shortage/excess:
- Accounting as prescribed: Debt 138/811 or Have 338/711
5. The method of calculating price inventory
The method of calculating the price of stock is the base to determine the price of goods sold and the inventory value in the states. The selection of suitable methods directly affect the profitability, financial reporting and tax obligations of the business. Currently, the common methods include FIFO, LIFO, weighted average price and purpose of the.
5.1. Methods first-ago (FIFO)
FIFO method based on the assumption that goods enter the warehouse will be prerendered. So, the price of the capital stock is calculated according to the price of the shipment to enter the first, also inventory end of period carrying value of the shipment enter after the same (close to the market price over).
Formula (special according to FIFO method)
- The price of the capital stock = (the Number of production batches enter first × Unit price lot 1) + (remaining quantity × Unit price of the next batch...)
- Inventory last states: includes top quality of the lot entered last.
Pros and cons:
| Criteria | Advantages | Cons |
| The price of capital & profits | The price of capital is lower when price increases → high profit | Price high capital when the price drops → reduced profitability |
| Inventory | Inventory reflected close to the market price, as well as the price of admission latest | Can increase the value of property in any price rise |
| Financial statements | Easy to apply, transparent | Can make high profits → increase the CIT |
| Database Mgnt. | Matching goods revving naturally | Not properly reflect the flow physics with a number of industry |
Illustrative examples:
- Enter 100 products price 50.000
- Enter 100 products price 60.000
- 150 products
Calculate the price of capital FIFO: 100 × 50.000 + 50 × 60.000
Inventory, end of period = 50 products price 60.000
5.2. Method enter the following export ago (LIFO)
Method LIFO assumes that the shipment entered last will be first. The price of the capital stock is calculated according to the price of the lot entered latest inventory while also bring the price of the lot older.
Formula:
- The price of the capital stock = (Number taken from plots import lastly × unit price latest) + (rest taken from previous batch)
- Inventory last states: Includes goods of the lot entered earlier.
Pros and cons:
| Criteria | Advantages | Cons |
| The price of capital & profits | Price high capital when the price increase → decrease in CIT | Low profit → reduce the possibility of attractive financial |
| Inventory | Inventory carrying old price → value in property, low | The inventory does not reflect actual price current |
| Financial statements | Suitable when businesses want to reduce taxable profits | Don't be IFRS accepted |
| Database Mgnt. | Useful when raw material prices, increased volatility fast | 't reflect the flow of physical goods |
Illustrative examples:
- Enter 100 products price 50.000
- Enter 100 products price 60.000
- 150 products
Cost of LIFO:
100 × 60.000 + 50 × 50.000
Inventory, end of period = 50 products price 50.000
5.3. Method weighted average
Method weighted average valuation of stock based on the average value of inventory. Every time a stock, the price of capital is calculated according to the unit price average, which is determined according to the period (periodic) or enter after each (continuous).
Recipe
- Weighted average for the period (periodic):
Unit price average = (Total value of inventory the beginning of the period + Total value of income in the period) / (Total number of inventories the beginning of the period + Total amount of income in the states)
- Weighted average continuous (declaration often):
Unit price average new = (value inventory before + value input) / (Number of inventories before + the Number of imported new)
Pros and cons:
| Criteria | Advantages | Cons |
| Calculate the price of capital | Simple, easy, stable | Not properly reflect the fluctuations in price of each lot |
| Report | The price of capital & inventory less volatility | May cause deviations when price volatility |
| Fit | Apply for business many kinds of items, fluctuations often | Not suitable for high value items, easy to distinguish |
| Database Mgnt. | Convenient in system software | Don't follow the actual price each batch import |
Illustrative examples:
- Survive the beginning of the period: 100 product, price 40.000
- Extra income: 100 product, price 60.000
Unit price average = (100×40.000 + 100×60.000) / 200 = 50.000
If 150 products → the Price of capital = 150 × 50.000
5.4. Method specific price
Method specific price applied to the goods may identify the private value or peculiarities. The price of capital is determined in accordance to the purchase price of the products, the warehouse, not average, or in order to enter.
Formula:
The price of the capital stock = original Price of the products repository (according to code, serial number, batch number...)
Pros and cons:
| Criteria | Advantages | Cons |
| Accuracy | Reflect the true cost of each product | Waste management, request tracking system details |
| Report | Clear, transparent | Does not fit with the big volume |
| Fit | High value goods: car, computer, electronics, jewelry | Does not apply to orders, the number of more |
| Database Mgnt. | Support profit in each order | Need code of strict management |
Illustrative examples:
A showroom motorbike enter 3 car with 3 different prices. After sale 1 pcs, accounting grab the correct price of the capital of that car according to the number of frames – number of the machine, do not take the average or the FIFO.
6. Selection criteria method of accounting is suitable
The choice of method of accounting for inventory (declaration frequent or inventory periodically) directly affect the transparency of financial statements, the ability to control goods and operational efficiency. Businesses need to carefully consider the criteria for management and the scale of operation to choose the right method.
- Scale enterprise – level complex inventory: Decide which method of accounting is suitable. Big business, many code and rotated quickly, so apply the declaration often to control exactly; small business, less the transaction may select inventory periodically to optimize cost.
- Technology – level of automation: the key element when choosing method of accounting. Declare regular fit enterprises with ERP/accounting software integration to record real-time data, while business operated craft should apply inventory periodically to limit errors.
- Request internal control: Enterprises need to control high risks, limit losses, or management of goods of great value should be the priority of; while the simple model, low demand, real-time tracking can apply inventory periodically.
- Prescribed accounting standards – management policies: Both methods suitable VAS and circular current, but must be applied consistently to ensure transparency. Manufacturing under the order or request control plots/seri should choose the method appropriate internal policies.
The choice of method of accounting of inventory should be based on the operational capacity, the level of technology application and required internal control of the business. The method is suitable not only ensure accurate data, but also create a platform to optimize costs and improve the efficiency of management, decision support consistent, and timely manner.
7. Accounting solutions Accnet ERP optimal accounting process efficiency
To optimize the process of accounting for inventory and related costs, the business can apply accounting software Accnet ERP to help automate as well as transparent the whole process:
- Automatically accounted for by the KKTX or KKĐK: The software allows businesses to choose the method of accounting of inventory declare regular or inventory periodically, automatically records the pen payments arising under the correct method selected, reduce errors and crafts.
- Automatic calculation of price of stock to support the method of calculating the price of stock as popular as FIFO, weighted Average Price of destination the..., help to ensure the price of capital reflect the actual and optimal cost management.
- Data connection contact information: System closely linked between the parts inventory – purchases – sales – accounting, ensure data inventory as well as cost-sync, minimize deviations due to input manually.
- Track inventory in real time: Business can monitor the number of inventory realtime, get warnings when exceeding the maximum threshold or falls below the survival minimum, from which actively adjust purchases and manufacturing.
- Automatically set up accounting allocation & reserve: The software automatically set the accounting cost allocation, adjust the value of inventory, provision for diminution in value of inventory, help accountants save time as well as compliance standards VAS.
- Report inventory, multi-dimensional: Supply warehouse report details the multi-dimensional (code, plots, warehouse, time), support fast inventory as well as evaluate the effectiveness inventory management, increased transparency and accurate decisions.
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The application software Accnet ERP not only optimize the process of accounting for inventory, but also improve the efficiency of financial management overall, help business control costs, manage the public debt as well as cash flow in a transparent, accurate, and effective.
Method of accounting, inventory plays a key role in cost control, optimal price of capital and ensure the transparency of financial reporting. Choosing the right method to help reduce the risk of errors, losses and improve operational efficiency, internal. When is consistently implemented, compliance with accounting standards and associated tools compliance management, accounting, inventory become the platform to support business decisions accurately and enhance the competitiveness of the business.
