Accounting of Finished Goods

the keeping of records on inventories of finished goods at factory warehouses; the records reflect the production, shipment, and sale of the goods. In the USSR, this type of accounting is used to check on the fulfillment of contractual obligations by enterprises to their consumers, the timeliness with which accounts are settled with the customers, the compliance with norms governing supplies of finished goods, and the extent to which estimates of selling expenses have been adhered to.

Goods are considered finished if they meet established standards or technical specifications and are accepted by quality control. Finished goods are entered either at wholesale prices or at the unit costs foreseen in the plan in the asset accounts of the enterprise; in the latter case, a separate account shows the difference between the planned and the actual cost. On the enterprise’s balance sheet, inventories of finished goods are shown at actual unit costs. The placement of finished goods in the warehouse is recorded on receipt documents. At this point, the finished-goods account is debited and the primary-production account is credited. (Accounting prices are used during the course of the month; at the end of the month, adjustments are made so that the amounts debited and credited reflect actual unit costs.) Those making entries on the cards of the stores ledger enter only the quantity of goods received.

On the basis of contracts with customers, dispatching documents are drawn up (allocation orders, shipment invoices). The sale is completed as soon as money from the customer is entered in the enterprise’s account for settlement. Until payment is received, goods that have been shipped are assigned to the dispatched-goods account. A distinction is made between dispatched goods for which payment is not overdue, dispatched goods for which payment is overdue, and goods being stored by and on the responsibility of the customer. When payment is received, the account for settlement is debited, and the sales (revenue) account is credited, using wholesale prices. The sales account reflects both production costs (the finished-goods account) and nonproduction costs (selling expenses, taken from the overhead-expenses account). Turnover tax is also recorded in the sales account (under the heading of the state budget account). Thus, the debit side of the sales account includes both the full cost of the goods and the turnover tax (if the enterprise pays this tax), and the credit entry reflects the wholesale price of the goods. The difference between these two sides gives the size of the profit or loss, which at the end of the month is entered in the profit-and-loss account (profits being credited, losses being debited). The sales account makes it possible to monitor fulfillment of the plan in terms of an extremely important economic indicator—the quantity of goods sold.