The influence of the accounting method for finished products on financial accounting assessment

The article discloses the impact of the accounting treatment of finished products on the working capital value and the financial results presented in the company’s financial statements; explains possible legal distortions in the assessment (estimation) of assets and profit indicators. The Russian Financial Accounting Regulation provides for two options for the treatment of finished products. The first option allows application of the account 43 «Finished Products» exclusively and estimation of finished products at the actual cost of production. As a result, the indicators are reliably valued. Accounting: Finished goods at the warehouse, unfinished production, cost, gross profit and profit from sales. The second way of accounting is to use two accounts – accounts 43 and accounts 40 «Output of production, (works, services), and allows to form normative cost of production. In general, this option is preferred by mass and mass production enterprises. They choose the standard cost accounting and costing method. The article discloses how this treatment of finished products distorts the reasonable valuation of these financial reporting figures. When performing financial analysis on the basis of the financial analysis, the estimation of the movement of final balances in the warehouse, the profitability of the sold products and the efficiency of sales will not be true (fairly justified). Such accounting records do not provide an indication of the size and evolution of production costs. In order to obtain reliable results of economic analysis and business evaluation in this way of accounting for the final product of an enterprise, these financial reporting items are subject to special adjustments. The article emphasizes the importance of prior familiarization with the final product accounting option in an enterprise’s accounting policies for the correct understanding and «reading» of the accounting financial statements items.