Audit and economical analysis

Evaluation of prime cost of products (works, services). The following methods are used to determine the prime cost of inventories’, such as products, works and services, in National Accounting Standart 4:

Simple method is used in organizations that produce a single product (works, services), semi-finished products and incomplete production . The cost of the unit of products (works, services) shall be calculated by dividing the amount of production expenses into the total quantity of products (works, services) produced;

The normal method is based on the cost of raw materials, materials, labor costs and the established standards for the use of production capacity, which is more widely used in practice;

Ordering method is used in organizations with individual and small scale production. All charges are considered to be incomplete production until the end of the order. If the order consisted of a series of products (works, services), the cost of the unit of goods (works, services) shall be determined by the sum of expenses for this order, in the quantity of product units;

The method of stage-by-stage application of raw materials and materials in production of a number of phases, phases, stages. This method identifies the cost price of all products (works, services), then the unit cost of the unit. In this case the step-by-step method can be implemented in two variants depending on the organization's affiliation: semi-finished and semi-finished versions;

Inventory Asset Evaluation Technique (in trading). The method selection will depend on the Inventories nomenclature and their type, type of production, its complexity, incomplete production, and the length of production. The selected method is displayed in the Account Policy.

Reassess inventory. The corporate accounting policy also makes it clear that the value of Inventories will be adjusted, which will be based on the current value of Inventories - net realizable value (if net realizable value is lower than cost).

Valuation of Inventories. The enterprise independently defines the method of valuation of the commodity inventory accounted for production: the cost of unit of the purchased materials. This method will be used regardless of whether the items intended for specific projects are purchased or manufactured;

Average Convertible Value (AVECO). The value of each unit of inventories is determined at the beginning of the period based on the weighted average of the same units and the value of the same units purchased or produced during the period. The cost of each INVENTORY unit according to the AVECO method determines the cost and amount of the inventory balance at the beginning of the period, and the amount receivedthe total cost of the same units, formed from the cost and cost of inventories, by their total number. The average value can be calculated according to the method selected by the organization, and can be calculated on a regular basis or by the arrival of each new INVENTORY family.

Inventories costing (FIFO) at first purchasing time. Output units of INVENTORY are primarily included in the cost of inventories purchased or produced, and the cost of inventory at the end of the period is the sum of the last acquired or generated stock units.

For each group (type) of inventories, a single valuation method is applied throughout the reporting period. The method that you use should also be reflected in your account policy.

Table 193

The advantages and disadvantages of valuation methods

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