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

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

Inventory write-off

When stocks are released into production, sale or other disposal, they are evaluated using one of the following methods:

• the identified cost of the relevant unit of inventory;
• weighted average cost;
• cost of first-in-time inventory (FIFO);
• the cost of the latest in time inventory (LIFO);
• standard costs;
• sale prices.

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

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

Models for applying FIFO There are 2 varieties of the FIFO method:

• standard (usual), involving the calculation of incoming and outgoing materials, and unused materials are taken into account once at the end of the month;
• modified (rolling), assuming the reverse order of calculations - first, the balance of materials at a certain point in time is determined at the price of the last ones at the time of purchase, and then the cost of inventories written off for production is calculated.

Example A special additive is used in the production of LLC "Tekhnologiya" products. At the beginning of the month, the company records the balance of the additive in the amount of 60 kg (the price of 1 kg is 245 rubles, the cost of the balance is 14,700 rubles).

Fifo method, calculation example and application features for writing off inventory

Within a month, the warehouse received two more batches of nails at the following prices: 120 boxes of 400 rubles and 200 boxes of 450 rubles. During the same period, 180 boxes of nails left the warehouse for production purposes.

In accordance with the write-off rules according to the FIFO method, we will assume that 100 boxes of nails of 300 rubles each (for the amount of 30,000 rubles) and 80 boxes of 400 rubles each (for the amount of 32,000 rubles) were used up. At the end of the month, 40 boxes of 400 rubles each (worth 16,000 rubles) and 200 boxes of 450 rubles each (worth 90,000 rubles) remain in stock.

Let's do the calculation using the first method. Let's calculate the average cost of the boxes remaining in the warehouse: (16,000+90,000)/(40+200)=441.66 rubles. We multiply the resulting value by the quantity of goods in stock at the end of the reporting period: 441.66*(40+200)=105,998.40 rubles.
For ease of calculation, we will round the amount received to 106,000 rubles.

Fifo accounting. fifo method: definition, application

Cost of goods and materials at the beginning of the month: 370 X 10 = 3700 (rubles) Cost of the 1st new supply of goods and materials: 500 X 9.5 = 4750 (rubles) Cost of the 2nd new supply of goods and materials: 500 X 9 = 4500 (rubles) Average cost of goods and materials: (3700 + 4750 + 4500): (370 + 1000) = 9.45 (rub.) At this average cost, written-off goods will be considered and profit will be calculated. For example, if pens are sold at 15 rubles, and 1100 pens were sold in a month, the profit specifically for these pens will be calculated as follows: 1100 X 15 - 1100 X 9.45 = 6105 (rub.) materials and simplicity.

The fifo method is... the fifo method means

And in the first delivery, we received 100 kg of materials at a price of 20 rubles. per kilogram. Which gives us 130 kg, but we need 160 kg. Therefore, we take another 30 kg from the second delivery at a price of 30 rubles.

per kilogram (remember that in the second delivery there are (150-30) 120 kg of materials at a price of 30 rubles per kilogram.

So, the second batch sent to production will be accounted for in the amount of = 30 * 50 + 100 * 20 + 30 * 30 = 4400 rubles. The third batch sent to production is 80 kg.

We have the remainder from the second delivery of 120 kilograms at a price of 30 rubles per kilogram. Therefore, 80 kg (the third batch sent to production) is taken into account at a price of 30 rubles, which will be 80 * 30 = 2400 rubles (remember that (120-80) 40 kg of materials remain in the second delivery at a price of 30 rubles.

per kilogram. The fourth batch sent to production is 40 kg.

An example of calculation by fifo and lifo methods in accounting

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The FIFO method (English First-In, First-Out, FIFO) is one of the most common methods for estimating the cost of inventory and cost of goods sold (Eng.

Important

Cost of Goods Sold, COGS) during the reporting period. Using this method assumes that inventories are written off in the order in which they were placed on the balance sheet.

Cost calculation methods

Attention

In fact, materials from any parish can be written off. For the disposal of the second and further parties, the cost is determined at the prices of the second, third, and so on in the order of delivery.

For example, it can be used by wholesale trading companies, industrial enterprises, organizations involved in logistics. The only exception is retail trade, the accounting of which requires the cost to be written off at the exact price of individual products.

fifo method | first-in, first-out (fifo)

We calculate the cost of valuables that have left the warehouse: ((100 * 300) + (120 * 400) + (200 * 450)) - 106,000 rubles = 62,000 rubles Total for the reporting period, 180 boxes of nails were removed from the warehouse for a total amount of 62,000 rubles . Consequently, the average cost of one unit was 345 rubles. Now we will once again calculate the cost of retired goods using the second method. In this case, the calculations will be simple and take less time. 100*300+80*400 = 62,000 rubles. The cost of one sold unit also amounted to 345 rubles. The results of the calculations are the same, and this proves that both methods are correct. This example is quite simple, so it was easier to calculate according to the second option. But, if you need to take into account a large range of goods that were received and released several times during the reporting period, the first calculation option using the FIFO method will come to the rescue.

fifo method

The remaining stock in the warehouse after this operation will be 50,000 units. (85000-35000) at a cost of 231500 c.u. (50000*4.63). March 25. The cost of goods sold will be 194460 USD. (42000 * 4.63), and the balance of stock in the warehouse is 8000 units. (50000-42000) at their cost of 37040 c.u. (8000*4.63). Thus, the cost of goods sold for the 1st quarter will be 1104010 c.u. (97750 + 116750 + 152250 + 382750 + 160050 + 194460), and the balance of drywall sheets in the warehouse is 8000 units. at a cost of 37,040 USD, which coincides with the results of calculations in the system of periodic inventory accounting using the FIFO method.

fifo calculation method

FIFO method in accounting example This method is used when the cost of inventories is carried out based on the cost of materials that arrived at the enterprise earlier. For example, if an enterprise had several deliveries, then materials are first taken into account in production at the price of the first delivery, then at the price of the second delivery, and so on. sequentially. An example of the use of FIFO in accounting is discussed below. So, let's carry out the assessment of inventories using the FIFO method.

It is required to calculate the cost of inventories released into production using the FIFO method. The data for the solution are given in the table. Table 2. FIFO method in accounting Data Received materials, kg Price per unit, rub.

Amount, rub.

fifo costing method

At the cost of the first in time acquisition of material assets (FIFO).

• At the cost of the latest acquisition of tangible assets (LIFO).
When writing off, you need to remember that the same method will be applied in tax accounting. Selecting the right method Generally, the procedure for writing off inventories is set by the company's internal policy.

At the same time, different types of values ​​can be written off in different ways. But for the same inventory item, the method is unchanged. In modern accounting, the first and second methods are more common. FIFO and LIFO raise a lot of questions from economists and business leaders. However, it would be a serious omission not to take them into account. For example, the FIFO method is a great opportunity to improve the company's image in the eyes of partners.

fifo method calculation example

We have the remainder from the third delivery of 40 kilograms at a price of 30 rubles per kilogram. Therefore, 40 kg (the fourth batch sent to production) is taken into account at a price of 30 rubles, which will be 40 * 30 = 1200 rubles. In total, using the FIFO method, we send materials in the amount of 8500 + 4400 + 2400 + 1200 = 16500 rubles to production. Let's summarize the obtained data in the table. Table 1 Implementation of the FIFO method Data Received materials, kg Price per unit, rub. Amount, rub. Balance (balance) at the beginning of the period 200 50 10000 Received per month: 1 delivery 100 20 2000 2 delivery 150 30 4500 3 delivery 50 15 750 4 delivery 80 45 3600 Total received 380 110 10850 batch Released for production 1 batch 170 8500 2 3rd batch 80 2400 4th batch 40 1200 Total 450 16500 Balance (balance) at the end of the period 130 4350 This example is for practical exercises.

Organizations must pay sufficient attention to costs. In order to justify the costs, it is necessary to be able to argue the expediency of their occurrence. The write-off of material assets is subject to certain rules. Often, entities use the FIFO method in accounting to determine the cost of used inventories.

FIFO write-off method

It is practically impossible to imagine a situation in which the purchase of homogeneous groups of goods necessary for work occurs identically for a long time. As a rule, materials and raw materials come from several organizations and at different prices. At high turnovers, it is not possible to track the cost of a particular unit used for production needs.

The legislation allows you to write off material assets as costs as they are retired, using several methods. According to PBU 5/01 “Accounting for inventories”, accounting allows the use of several methodologies:

1. Focusing on the cost of each unit. Suitable for accounting for high-value goods, when it is possible to track the disposal of each batch of materials and stocks.
2. At an average cost. The total costs are defined as the ratio of the average price (by the value of the balance and the amount of receipt) to the total quantity, determined in a similar way.
3. The FIFO method means that the stocks that arrived first in time are initially consumed.

The FIFO rule is also often referred to as the pipeline method. The name is the English abbreviation FIFO, which means First in first out. That is, "first in, first out."

The method of writing off FIFO in accounting in 2017 has not changed. Homogeneous stocks are still retired in the order in which they arrived. Accordingly, materials from subsequent batches do not drop out until the previous ones are completely used up.

The FIFO principle means that write-offs for production or for economic needs occur at the actual cost of inventories received first in line. Thus, the cost of inventories received later and not used up is included in the cost of balances at the end of the period.

FIFO principle in the warehouse

Under certain conditions, the FIFO method is preferable in terms of warehousing of goods. Considering that FIFO in accounting in 2017 is still the priority of writing off initial receipts, inventory leaves the warehouse in a strict sequence of posting. The batches of newly received homogeneous goods are not written off until the previous ones are used up.

The FIFO method is especially preferred when it comes to perishable goods. The chronological sequence of the write-off of materials must be confirmed by financial planning, affecting, first of all, the efficiency of the warehouse. Stoppages of production processes due to lack of raw materials must be avoided. No less important is the task of minimizing losses due to untimely damage to goods.

When writing off materials, which is the FIFO method, the following features are distinguished:

• incoming goods are considered separately by batches;
• the cost of purchased consignments of goods is determined;
• product spoilage prevention;
• minimizing losses through the efficient use of inventory.

The FIFO method as applied to warehouse accounting is relevant for the following types of products:

• perishable goods;
• products with a limited shelf life;
• goods that may become obsolete.

The FIFO method adopted in accounting, an example for writing off the listed inventories, allows you to avoid potential losses in the form of damage to the inventory as much as possible. At the same time, in practice, the implementation of this principle can be quite difficult.

Large enterprises with a large turnover require a developed inventory accounting system, including monitoring the movement and balance of materials. Of great importance is the organization of the placement of goods, warehouse zoning, which makes it possible to ship materials that are in demand in time.

FIFO method - calculation example

At the moment, the provisions of RAS 5/01 in relation to the issue under consideration have not changed. The FIFO method in accounting in 2017 is also valid: the costs incurred include the cost of used goods that were originally purchased. The rest of the inventory is the cost of inventory received later.

In accounting, the FIFO method is an example of the impact of changes in purchase prices on the financial result. So, with an increase in the cost of the inventory of a homogeneous group, the initial low price will be included in the cost of production. Accordingly, the cost of production will be small, the profit will increase.

The FIFO method, the calculation example of which involves a decrease in purchase prices, on the contrary, will increase the cost of production, reducing profits.

Example

The company is engaged in the production of bakery products. At the beginning of the period, the remaining flour at a price of 20,000 rubles. per ton were 2 tons, only 40,000 rubles. Then the flour came in batches:

• 1st receipt of 3 tons of 25,000 rubles;
• 2nd receipt of 5 tons of 30,000 rubles.

During the period under review, 4 tons of flour were consumed.

The organization uses the FIFO method. An example of a write-off calculation will be as follows:

1. The cost of flour put into production is 2 tons at 20,000 rubles and 2 tons at 25,000 rubles. Total 2 x 20,000 + 2 x 25,000 = 90,000 rubles. The average cost of a ton of flour is 90,000/4=22,500 rubles.
2. The rest of the flour is 1 ton at 25,000 rubles and 5 tons at 30,000 rubles. Total 1 x 25,000 + 5 x 30,000 = 175,000 rubles. The cost of the remainder is 175,000/6= 29,166.67 rubles per ton.

According to the results of calculations, the FIFO method allows you to initially take into account the goods that arrived first in time. The cost of purchasing subsequent MPZs will be taken into account as they are used.

Fifo Method- a method popular in accounting, which implies the valuation of inventories at the cost of initial (first) purchases. The name of the FIFO method stands for "first in - first out", that is, the product that arrived first should be applied first.

Fifo Method- a method of inventory valuation, in which the materials of the first batch are written off first (according to its volume and price), and then the goods of the second batch go, and so on. are executed until the total number of inventories spent per month is written off.

Fifo method: essence and features of accounting

The FIFO method is often referred to as the "natural queue" method. The latter has found its application in various fields (computer science, traffic rules and accounting as well). Thanks to fifo, the accountant avoids complex calculations and does not take into account inflationary processes. The essence of the technique is that the specialist calculates the company's material resources in the course of their purchases and entering the warehouses.

fifo technique- a popular way to assess the resources of an enterprise, which is actively used in accounting today. Its peculiarity is the chronological copying of the material. The basic principle is contained in the name - "first in - first out". That is, the material values ​​​​that arrived at the warehouse first should be spent in the first place. Those that came after them - in the second and so on.

In the practical sphere of activity, the write-off of resources occurs in two directions - for sale or for production. It all starts with the first batch (accounting for its volume and price). Then the turn goes to the second batch and so on. The process lasts until all resources are written off or accounted for by the accountant.

When using the usual methodology, the accountant does not make complex assumptions - he works with the volume of all batches (first, second, third, and so on). The end result is the accounting of all products that were used up in production. The result is a complication of calculations and the appearance of excess balances for the last month or for the reporting period used as the basis from the 1st batch (one price), then from the 2nd batch (another price) and so on.

Feature and specificity of the fifo technique in that the goods and material values ​​of real production cannot be spent at one moment. The accountant accepts this fact and writes off resources at different time intervals, taking into account the cost of goods and materials. Only the time of arrival at the warehouse is taken as a basis. Accounting always begins with the materials that arrived at the warehouse in the first place.

Due to this feature of the calculation, the fifo method can be used in companies of various directions, for example, in logistics activities (when placing and storing goods in warehouses), in complex production, in enterprises engaged in wholesale trade, and so on.

But there is an exception. The fifo method cannot be used in organizations that are engaged in retail trade. The reason is that this involves the write-off process at the exact price for each of the items. In fifo it is not possible to do this.

Due to its qualities and accuracy, the fifo method is actively used in accounting and taxation. With its help, it is possible to significantly speed up the calculation processes and not wait for the end of the reporting period. As a result, the accounting department works in a stable mode and manages to carry out accounting in a timely manner. With the fifo method, there are no situations when the accountant is overwhelmed with work by the end of the year or quarter - everything is done evenly. At the same time, we must not forget that when calculating according to the fifo method, it is not taken into account.

Fifo method: write-off features, advantages and disadvantages

In the case of using the fifo method, the following disadvantages must be taken into account :

First, when accounting for goods, inflationary processes are not taken into account. If the consumption of materials occurs unevenly, then at the cost of the first batch, values ​​\u200b\u200bthat arrived at a higher price (for example, increased in price due to inflation) can be written off. As a result, the results obtained after the calculations may turn out to be unrealistic - overestimated. In some cases, this can lead to unpleasant consequences;

Secondly, when calculating the fifo method, there is an overestimation of tax payments and financial indicators of the company. This is possible if the consumption of materials is uneven, that is, in different volumes in each of the reporting months. An increase in tax payments is unprofitable for the enterprise;

Thirdly, the company's cost planning becomes more complicated and the process of enterprise management worsens. The manager, upon the fact of the calculation, receives obviously high data. As a result, he draws up an incorrect policy for the further development of the company. This may cause negative consequences in the future.

To avoid such problems, the fifo method is necessarily taken into account when developing the policy of the enterprise and when drawing up financial plans for future periods.

The advantages of the fifo method include:

- ease of accounting. The use of this method of calculation allows you to speed up the work of an accountant and get rid of all unnecessary balances for the reporting period;

- Ease of use. The fifo method is especially relevant in those companies where incoming goods are used first. An important point is the "assumptions" of the accountant. If they are correct and have a place in the enterprise, then fifo will be profitable and convenient. This factor is especially relevant for enterprises dealing with perishable products;

- excellent indicators for attracting investments. If the director (manager) of a company (enterprise) decides to raise funds in the production process and interest investors, then the fifo method is the most profitable and convenient (when compared with other accounting methods).

To understand the differences of the fifo method, it is enough to appreciate its practical value. For example, a company's warehouse receives goods in small batches. Each of them rises in price due to inflation. At the same time, the consumption of materials is uneven. As a result, at the end of the month, the accountant undertakes to take into account the current balances from each batch and the materials used in production.

If you use the usual method, then the accountant has to calculate the balances and expenses for each of the batches. At the same time, the balances do not disappear for the next period, they accumulate and further complicate the life of a specialist when making calculations in future months.

The use of fifo is an opportunity for an accountant to write off the first batch in the period when the materials were spent at the enterprise and, most importantly, in the amount of the same batch. At the end of the month, the balances do not disappear (we are talking about materials received at the warehouse of the enterprise), but their accounting is carried out at the cost of the last batch from the end. This simplifies the specialist's calculations.

A special issue is the write-off of products . In some cases, the use of the fifo method is purely formal. That is, the release of products is carried out taking into account the decision of the seller (storekeeper), and the goods are accounted for at the price at which the first (oldest) batch was purchased. On the other hand, the use of the fifo method allows you to see real enterprises, track current investments and calculate their payback.

The fifo method is acceptable and is noted in paragraph 73 of the manual on accounting for the company's inventories. In the process of writing off goods using the fifo method, it is worth considering the following rules :

Not only the consumption and receipt of goods should be calculated, but also the presence of a balance in the warehouse;
- in the case of using the usual fifo, the balances are taken into account only once - at the end of each of the months;
- in practice, two fifo methods can be used - simple and modified. The peculiarity of the latter is taking into account the "moving" cost, namely the average price. The average cost is recalculated daily at the time of vacation.

The essence of the fifo method can be disassembled using a simple example. In the first reporting month, there is a small balance in the warehouse - 40 toys at a price of 100 rubles each. The next month, another 10 pieces arrive, but at a higher price - 110 rubles. Further - 2 pieces, the price is 115 rubles. As a result, the storekeeper must release 52 toys.

The calculation can be done in two ways:

1. Standard. In this case, the price of the lot to be shipped is - 2*115 + 10*110 + 40*100 = 5.33 thousand rubles. At the same time, the average cost of a toy is 102.5 rubles (5330/52). As a result, there will be 10 toys in the warehouse at a total price of 1.15 thousand rubles, the cost of each is 115 rubles.

2. Modified. In such a situation, the average cost of the toy will be 104.5 rubles. The calculation is made as follows - (12 * 115 + 110 * 10 + 40 * 100) / 62. It is at the price of 104.5 rubles that the goods will be sold. In this case, the buyer receives the product that arrived at the warehouse in the first place.

The total volume of purchases is 104.5 * 52 rubles = 5.434 rubles, and the remaining batch of goods in warehouses - 104.5 * 10 = 1045 rubles.

Of the software, BukhSoft, 1C, Rouse and others are used.

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The LIFO method (LIFO) is a method of accounting for inventory items in value terms at the price of the last manufactured or received batch. In accordance with this method, inventory items that were registered last are the first to be removed from the register.

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The application of this method makes it possible to exclude the underestimation of the estimated cost of production due to inflation. In an environment of rising prices, using the LIFO method, the reporting reflects the lowest possible profits due to the write-off of the cost of inventories to reduce profits. 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 LIFO Method

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

It should be noted that since 2008, the LIFO method has been banned in accounting, but it can still be used for tax accounting purposes. Tax accounting according to the LIFO method is a method of accounting for inventory items at the cost of goods that are the last to be acquired. In tax accounting, this method is used when writing off raw materials and materials for production, when selling purchased goods, or other disposals of securities.

LIFO Accounting

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

At the same time, goods and materials that are in stock at the end of the period are valued at the actual cost of the first purchases, and the cost of goods sold takes into account the cost of material resources that were last purchased.

In conditions of inflation, the use 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 income tax payments for the current period.

Varieties of the LIFO Method

Along with the classical LIFO method, such varieties as the standard inventory method and the LIFO method for retail trade can be used in accounting policies. The method of the standard volume of stocks is used only to account for the standard minimum stocks of raw materials (grain, metals, etc.), and the rest of the stocks are accounted for using other methods.

The basis for the method is the assertion that an organization must always have a certain stable amount of raw materials at its disposal. If this volume falls below a certain level, then part of the profits received should be directed to the restoration of stocks.

Unlike traditional LIFO valuations, normative valuations do not take into account the profit from mixing layers. In the long term, the normative method provides more conservative and constant profit estimates compared to the LIFO method.

The LIFO method for retail is to use a special technique based on the retail price index.

First, 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 deviation from the usual rule is allowed, according to which, when using the LIFO method, the calculation of indices must be carried out by the organization itself using internal data.

Advantages and disadvantages

The use of the LIFO method is beneficial in the face 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, the use of this method will give it certain advantages. In addition, since commodity balances are included in the tax base for corporate property tax, the use of the LIFO method makes it possible to use purchased goods at lower prices when calculating this tax.

However, in accounting, the LIFO method is not particularly beneficial for organizations hoping 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 financial statements largely do not coincide with the real picture. That is why today the use of this method is limited to only tax accounting.

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