What Is an Inventory Company?

Inventory refers to the finished products or commodities held by the enterprise for sale in daily activities, work in progress in the production process, materials or materials consumed in the production process or the provision of labor services, etc., including various types of materials, Products, semi-finished products, finished products or inventory goods, as well as packaging materials, low-value consumables, consignment processing materials, etc. ^[1] .

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Inventory refers to the finished products or commodities held by the enterprise for sale in daily activities, work in progress in the production process, materials or materials consumed in the production process or the provision of labor services, etc., including various materials,

Classification of inventory

Classified by its economic content

Raw materials. It refers to the various raw materials and main materials, auxiliary materials, fuels, repair materials (spare parts), packaging materials, outsourced semi-finished products (outsourcing Pieces) and so on.

Work in progress. It refers to the work in process that is not finished in the enterprise and needs further processing and is being processed.

(3) Semi-finished products. It refers to the intermediate products that the enterprise has completed the processing tasks in a certain production process, has passed the acceptance inspection, and is in storage, but needs further processing.

Finished products. It means that the enterprise has completed the entire production process and has passed the acceptance inspection. It can be delivered to the ordering unit according to the conditions stipulated in the contract, or it can be sold as a commodity.

Goods. It refers to all kinds of goods purchased or sold by commodity distribution companies for completion of inspection and storage.

Turnover materials. It means that the enterprise can use it many times and gradually transfer its value to maintain the original form. It is not recognized as

Inventory generally has the following characteristics:

Inventory is a tangible asset, which is different from

(1) Confirmation of inventory

The criterion for confirming whether an inventory is an enterprise's inventory is to see whether the enterprise has legal person property rights (or legal property rights) to the inventory. All articles whose legal property rights belong to the enterprise on the inventory date, regardless of where they are stored or in what state, should be recognized as the enterprise's inventory. Conversely, all articles whose legal property rights do not belong to the enterprise should not be recognized as the enterprise's inventory even if they are stored in the enterprise ^[2]

(1) Accounting for inventory depreciation provisions

Withdrawal of inventory depreciation provisions:

Provision for inventory depreciation should generally be made based on a single inventory item; inventory with larger quantities and lower unit prices can also be made by category.

Borrow: asset impairment losses

Loan: provision for inventory depreciation

Switch back to inventory depreciation reserve:

When the influencing factors of the previous write-down of the inventory value have disappeared, the write-down amount should be restored and reversed within the amount of the inventory depreciation reserve originally provided.

Borrow: inventory depreciation reserve

Credit: Asset impairment losses

Carry-over of inventory depreciation provisions:

The enterprise has made provision for inventory depreciation. If some of the inventory has been sold, the enterprise shall carry forward its provision for inventory depreciation when carrying forward the cost of sales. (When carried forward, it needs to be calculated in proportion.)

Borrow: inventory depreciation reserve

Loan: cost of main business ^[5]

Valuation method for inventory issue

First In First Out

Advantages: Overall, the cost of issuing and closing inventory can be calculated at any time, which facilitates the daily management of inventory.

Disadvantages: In the case of frequent inventory receiving and sending operations and frequent changes in unit prices, the calculation workload of enterprises is very large. In addition, when the price continues to rise, matching the current lower income with the earlier low cost will overestimate the current profit of the enterprise and overestimate the value of inventory.

Weighted average method

Advantages: When using the weighted average method, the inventory detail account usually only records the quantity, unit price and amount of each batch of income inventory and the number of issued and closed inventory; at the end of the month, the amount of the issued and closed inventory is calculated at one time, simplifying the daily routine. Accounting workload. At the same time, the method takes into account the quantity of each batch of inventory stock and its unit price, and the calculation result is relatively balanced. No matter whether the price is rising or falling, there will be no significant increase or decrease in the cost of issuing and closing inventory, and a significant current profit. Low or high phenomenon.

Disadvantages: All calculations of this method are concentrated at the end of the month. Usually, the unit price and amount of inventory issued and settled cannot be reflected from the account, which is not conducive to strengthening the management and control of inventory.

Moving average method

Advantages: The moving weighted average method is more objective in calculating the cost of issuing and closing inventory, which is also in line with

(1) The following items of inventory do not belong to the inventory of the enterprise:

Inventory that has been confirmed for sale but not yet shipped to the purchaser in accordance with the sales contract and agreement.

Inventory agreed to be purchased in the future ^[2]

"Accounting Standards for Business Enterprises No. 1-Inventory" (referred to as the new inventory standards) is one of the 39 accounting standards issued by the Ministry of Finance on February 15, 2006. It is an "Accounting Standard for Business Enterprises" issued on November 9, 2001. Inventory (referred to as the old inventory guidelines).

Differences between old and new inventory guidelines

In the new inventory standards, first, the cost structure of inventory has changed. The old inventory standard cost does not include borrowing costs. The cost of new inventory includes borrowing costs that should be included in inventory. This is in accordance with the "Accounting Standards for Business Enterprises No. 17-Borrowing Costs", which can be used to extend capitalizable borrowing costs to "fixed assets, investment real estate that can reach its intended use or sale status after a considerable period of production activities" And inventory. "

In terms of the impact on the cost of investors 'investment in inventories, the old standard stipulated that investors' investment in inventories should be recorded as actual costs based on the value confirmed by the investors. The new standard stipulates that the cost of an investor's inventory investment shall be determined in accordance with the value agreed in the investment contract or agreement, except that the value agreed in the contract or agreement is not fair.

In addition, the scope of use of the new inventory standard has been expanded. It has included previously unclearly regulated harvested agricultural products and inventories obtained through business combination into the standard accounting, filling the gaps of the original standard. The cost calculation method of the inventory issued by the new standard is also cancelled Last in, first out method.

In terms of changes in accounting accounts related to inventory accounting, the corresponding account for inventory depreciation provision under the old standard is "management expenses", and the corresponding account under the new standard is "asset impairment loss". The company uses the planned cost for daily calculation of materials, and the subjects of the procurement cost of the purchased materials have resumed from the "material procurement" to the original "material procurement". The "tax payable" and "other payable" subjects related to the purchase and sale of inventory are merged into the "tax payable" subject.

Analysis of the practical handling of the new inventory standard

In order to analyze the above changes in the old and new inventory standards, let us try to illustrate. Xinghua Company is an industrial enterprise and belongs to the general taxpayer. The business of inventory in 2007 is as follows. Regardless of other taxes and fees other than value added tax, please make simple accounting for the following businesses:

1. Purchasing material A pays 351 thousand yuan (including 51,000 yuan in taxes) for processing and producing A products, and obtains special invoices for anti-counterfeiting tax control. A shipping fee of 50,000 yuan occurred during the procurement process, and a professional freight invoice was obtained, including a construction fund of 30,000 yuan. Another RMB 6,000 for loading and unloading and RMB 1,500 for insurance were obtained. Ordinary invoices were obtained, all of which have been paid. then:

Borrow: Raw materials-A354000

Taxes payable-VAT payable (input tax) 54500

Loan: bank deposit 408500

The new inventory standard eliminates the provision that the transportation and storage fees of commodity circulation enterprises are not included in the cost.

2. In order to improve product competitiveness, the company developed a new product B using high technology. Due to insufficient funds in the development and production process, the company obtained a special loan of 50,000 yuan on September 30, 2007. The loan period is one year and the loan interest rate. 8%.

If it takes a long time to raise a special loan for the production and development of product B, if it does not take a long time, it does not fall into the scope of capitalization, and the borrowing cost should be included in the "financial cost" account.

3. On the 20th of a month, the company accepted the investment of Liguo Company's products (Xinghua Company as the raw material management and accounting), and the VAT invoice indicated on the obtained special VAT invoice was 4 million yuan without tax and the VAT amount was 680,000 yuan . Assume that the total share capital of Xinghua Company is 30 million yuan, and the share of Liguo Company in Xinghua Company is 10%. The contract price is the fair price. then:

Borrow: Raw materials 4000000

Taxes payable-VAT payable (input tax) 680000

Loan: Equity-Liguo Company 3000000

Capital reserve-equity premium 1680000

4. On December 31, 2007, there were 200 B products in stock, the cost (excluding VAT) was 4.8 million yuan, and the unit cost was 24,000 yuan. The sales contract signed with the New Century Company stipulated that on January 20, 2008, Xinghua Company should provide 200 pieces of B products to the New Century Company at a price of 24,000 yuan (excluding VAT). The average sales cost provided by the sales department of Xinghua Company was 0.012 million yuan per unit. On December 31, 2007, the sales price of product B was 26,000 yuan / unit (excluding VAT). Then: The sales price of 200 B products in stock is all agreed by the sales contract. In this case, the net realizable value of Product B shall be determined on the basis of the price agreed in the sales contract of 24,000 yuan per unit. Net realizable value = 2.4 × 2000.012 × 200 = 477.6 (ten thousand yuan), which is lower than the cost of 4.8 million yuan. The inventory depreciation reserve is calculated based on the difference of 24,000 yuan, that is:

Borrow: Asset impairment loss 24000

Loan: Inventory depreciation reserve 24000

5. Account handling when the above products are sold on January 20, 2008:

Borrow: bank deposit 5616000

Loan: income from main business 4,800,000

Taxes payable-VAT payable (output tax) 816,000

Carry-over costs:

Borrow: cost of main business 4800000

Credit: Inventory goods 4800000

Borrow: inventory depreciation reserve 24000

Loan: Main business cost 24000

6. The company obtained 1.1 million yuan of C materials on June 30, 2007, and the net realizable value was 1 million yuan on September 30, 2007. Business processing:

Borrow: Asset impairment loss 100,000

Loan: inventory depreciation reserve 100,000

Accounting processing on December 31, 2007:

Borrow: inventory depreciation reserve 80,000

Loan: Asset impairment loss 80,000

The credit balance of the "Inventory depreciation reserve" account reflects the difference between the net realizable value of the inventory and its cost.

Differences and coordination between new inventory standards and tax laws

In addition to the financial and tax differences under the new inventory standard, the financial and tax differences under the old standard are different, such as differences in inventory preparations for fiscal decline in taxation (not recognized in tax law), different approval procedures for permanent or substantial damage (accounting has not stipulated corresponding approval procedures, tax law Only after being approved by the tax authority can it be deducted in the declaration of corporate income tax) etc., and some new fiscal and tax differences have been created:

The valuation of exchanged inventories in non-monetary asset exchange is different. The "Accounting Standards for Business Enterprises No. 7-Non-monetary Asset Exchange" stipulates that if an exchange does not satisfy the conditions of having a commercial substance and the fair value of the assets that are exchanged in or out can be measured reliably, The book value and the relevant taxes and fees payable are taken as the cost of the asset transferred. The tax law stipulates that the exchange of non-monetary assets should be decomposed into two economic business processes: sales of non-monetary assets and purchase of non-monetary assets. The fair value and related taxes payable shall be used as the cost of the asset. The difference between the book value of assets is included in the current gain or loss.

The new inventory standard eliminates the LIFO method. According to the tax law, if the actual process of the inventory being used by the taxpayer is consistent with the LIFO method, the LIFO method can also be used.