UDC: 657

Anastasia Khazaniuk,
student of economic faculty
direction 6.030509 “Accounting and Audit”

Scientific supervisor: Yulia Kharchuk,
PhD in Economics, Associate Professor at the Department of Finanse,docent,
National University of Ostroh Academy


This article reviews the essence of production stocks, the principles of accounting organization at an enterprise, the problems of inventory accounting and ways of its improvement.

Key words: production stocks, inventory accounting, inventory estimation, stocktaking.


У статті розглянуто суть виробничих запасів, досліджено засади організації їх обліку на підприємстві, наведено проблемні аспекти обліку виробничих запасів та запропоновано шляхи його вдосконалення.

Ключові слова: виробничі запаси, облік виробничих запасів, оцінка запасів, інвентаризація запасів.


В статье рассмотрены суть производственных запасов, исследованы принципы организации их учета на предприятии, приведены проблемные аспекты учета производственных запасов и предложены пути его усовершенствования.

Ключевые слова: производственные запасы, учет производственных запасов, оценка запасов, инвентаризация запасов.

Problem formulation. Production stocks play an important role in the functionality of any enterprise. In their absence, it is impossible to imagine continuous production activity. They ensure constancy, continuity and rhythmic activity of the enterprise, guarantee its economic security, however, when it comes to large industrial enterprises, they require significant investments, therefore the accuracy of the determination of the company’s profit, its financial status, market competitiveness and work efficiency depends on the correct organization of their accounting and analysis in general. Therefore, any enterprise in a competitive market environment must keep records of inventory and provide relevant and reliable information to the managers of all units to improve the productivity of the enterprise.

Analysis of the latest research and publications. The research of the peculiarities of inventory accounting was lead by the following scientists: Astakh M., Voskalo N., Kovtun I., Kuzminsky O., Malyshev I., Palyy V., Tkachenko M., Chornaya M. and others. Despite the significant development in the field of inventory accounting the problems of inventory accounting and the ways of its improvement do not receive the needed attention, therefore, there is a need for further study.

Goals and tasks. The goal of the study is developing recommendations for improving inventory accounting by generalizing theoretical and evaluating practical aspects of selected topics.

To achieve this goal, the following tasks must be completed: uncover the essence of the concept of production stocks; take a look at their classification; investigate the process of stock evaluation at an enterprise; uncover the peculiarities of initial and synthetic inventory accounting; study the problematic aspects of inventory accounting; offer ways of improving enterprise inventory accounting.

Main material presentation. In a competitive market environment, any and all businesses should strive to improve the competitiveness of its products, improve the work efficiency of the company, backbone of which are new technologies and effective accounting management. Proper organization and record keeping of inventories plays a big role in the completion of these tasks, which allow accounting of and control over its preservation and rational exploitation. Equally important is the efficient and rational use of production stocks which in itself can have over influence profits.

Inventory accounting is one of the main objects of accounting, since the cost of inventories affect the price of the finished product and the profitability of production.

The methodological basis for inventory accounting is regulated by the Provisions of Accounting Standard 9 “Stocks”, according to which stocks are recognized as assets if:

  • Stocks are kept for further sale (redistribution, transfer);
  • Stocks are in the process of production with intent of selling the produce further down the road;
  • Stocks are kept for consumption during production, service provision, as well as management of an enterprise or institution [5].

Any economic benefit embodied in the asset may be profitable for the enterprise. However, not all things material may be recognized as assets and be accounted for in inventories. Such as: things acquired for charitable purposes, and things acquired to meet the personal needs of employees.

Purchased (or otherwise obtained) or produced reserves are credited to the balance of the enterprise at its initial cost.

The main purpose of production stocks is to ensure the continuity of the production process. In order to ensure the best output at the lowest cost, it is necessary to maintain sufficient, but not excessive level of production stocks, as excess reserves lead to negative outcomes.The classification of stocks in accordance with Provisions of Accounting Standard 9 (fig. 1).

Fig. 1. Classification of enterprise inventory

Source: made by the author on the basis of [1].

Stock evaluation plays an important role in the formation of enterprise accounting policies. For its proper evaluation, subjects may use a system of continuous or periodic accounting for inventory display purposes, specifying this procedure in an order for accounting policies.

According to Provisions of Accounting Standard 9, stock evaluation at an enterprise may be carried out at the time of receipt, withdrawal and on the date of storaging [5].

The evaluation of inventories at receipt is characterized by the fact that the produced or the received reserves are deposited to the balance at their original cost, which includes the amount of actual costs for their manufacture or purchase.

The estimation of stock withdrawal is characterized by the fact that materials arrive at the enterprise at contractual prices during the reporting period, but at the end of the reporting period arises a task of evaluating the spent inventories [5]. Inventory withdrawal according to Provisions of Accounting Standard 9 is carried out in different ways:

  • by the method of the identified cost of the corresponding unit of inventories;
  • by method of average cost;
  • by method of standard cost;
  • by selling price method.

Stock evaluation on the balance date, is carried out at the lowest estimate: the initial cost or the pure realizable, which is used when stocks are outdated or deteriorated and is determined by each unit of production by ways of deducting from the future expected selling price, the expected costs of completion of production or from sales [5].

Documentation of inventories is a complicated process, since the structure of the workflow must be such as to ensure the timely receipt of the necessary information. The continuous document registration of data on all transactions is an important means of control over the objects of economic activity, and, in particular, the correct and rational use of the stocks of the enterprise.

Primary documents used to account for enterprise inventories are divided into:

  • documents on the receipt and publication of inventories: the consignment invoice (form No. 1-TN), the account invoice (form No. 63), the income order (form No. M-4), the material receipt act (form No. M-7 );
  • documents from the warehouse and internal transfer of stocks: a warehouse accounting of materials card (form No. M-12), a record of inventory remnants in the warehouse (form No. M-14), material report (form No. M-19), etc;
  • documents on the issue (write-off) of raw materials, production materials and management needs: limit-collecting certificate (form No. M-8, M-9), act-requirement for replacement (additional leave) of materials (form No. M-10), invoice requirement for leave (internal transfer) of materials (form No. M-11) [4].

To summarize the information on production stocks, account 20 “Industrial stocks” is used, which records stocks of materials and raw materials (including in transit and in  processing), construction materials, spare parts, agricultural materials, fuel, containers and packaging materials, waste of the main production [6]. This account has nine sub-accounts (fig. 2).

Fig. 2. Structure of account 20 «Production stocks»

Source: made by the author on the basis of [10]

Inventory is a list, transfer, weighing, remeasurements of inventory located in places of storage, and a comparison of the availability of accounting data. It is also used to identify actual costs of production and services if other ways of obtaining data on the cost of material resources can not be used.

Maintaining inventory records has drawbacks. Here are some of them:

  • the complexity of determining the fair value of stocks, which lies in the use of barter exchange by enterprises;
  • low level of efficiency of information management of industrial stocks;
  • Inadequate control and operational regulation of stockpiling processes;
  • Limited control over the use of inventories [7].

At enterprises there is still an unresolved issue on the improvement of documentation of operational and analytical accounting of inventories, and especially the problem of automating their accounting [11].

An important direction in improving the organization of operational and warehouse inventory accounting is the rationalization of document forms, document circulation in general and the entire system of registration, registration and processing of documents.

The write-off of inventory costs for production, assessment of work in progress and the reporting depends on a well-organized documentation of economic assets. The structure of the document flow should be such as to ensure the timely receipt of the necessary information for accounting, control, and operational management of material stock movement. Stocks entering the enterprise are accepted by quantity and quality [12].

For a rational construction of the accounting system at an enterprise, it is necessary to determine the purpose of accounting in the management of the release of inventory.

The use of traditional methods for assessing the outflow of inventory in the accounting system does not fully provide the management of the enterprise with the necessary information in the system of optimizing pricing for their own products, works and services, and determining the break-even point. Therefore, here are some methods for assessing the outflow of inventories:

  • the lowest cost of inventory (cheapest – in – first – out), the estimate of the outflow on which is based the assumption that from the beginning the best-selling stocks are first released into production;
  • the highest cost of inventory (expensive – in – first – out) the estimation of stock outflow using this method is based on the assumption that at first the most expensive stocks are released, which are the first in line for production.

However, the high complexity and lack of competition on most Ukrainian markets greatly complicates the application of these methods in practice [3].

Analytical inventory accounting requires constant monitoring and improvement, therefore, it will be expedient to introduce second-order subaccounts for its improvement 20 «Production stocks» (fig. 3).

Fig. 3. Account structure model 20 «Production stocks»

Source: made by the author on the basis of [13].

Thus, the detailing of individual sub-accounts 20 of the “Production stocks” will make it possible to simplify the obtaining of accounting information on their effective use in the production process.

Conclusions. Analyzing the above, it can be concluded that in order to improve the organization of inventory accounting of enterprises, special attention should be paid to their analytical accounting. It is necessary to add analytical accounts to some subaccounts of the account 20 “Production stocks”, which will make it possible to simplify the work of the accountant and effectively use the stocks in production.

It is also necessary to review the assessment of inventory at the enterprise and use such evaluation methods as the least cost of inventories (cheapest – in – first – out) and the highest cost of inventory (expensive – in – first – out), which will provide the management of the enterprise with necessary information in the system optimization pricing of their products, works and services, and optimize the determination of the breakeven point .

Such methods of improving the inventory accounting will increase the efficiency of the use of industrial inventory of an enterprise, which in turn will ensure the accuracy of its profit determination, stable financial condition, market competitiveness and overall performance.


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