What account 2010 is for
When a furniture workshop makes a table, it first buys timber, accrues wages for the craftsmen, calculates the wear of the machine and pays for electricity. These costs appear on different accounts. To find out the cost of the table, they have to be collected in one place. That place is 2010. Under paragraph 117, information about products (work, services) recognised as the main type of activity and about the costs of primary production is summarised in account 2010.
Account type and sub-accounts
In the chart of accounts, group 2000 has type "A" (asset) and contains only one account: 2010. On an asset account the balance and increases are shown on the debit side and decreases on the credit side (NAS No. 21, paragraph 3). There are no other sub-accounts, so detail is provided in analytical accounting (paragraph 119): by types of costs and types of products being made. If grouping of costs by place of origin and costing are not kept in a separate system of accounts, analytical accounting of 2010 is kept by the separate units of the company.
What is recorded on the debit
Under paragraph 119, three groups of costs accumulate on the debit side:
- costs directly related to creating products, performing work or rendering services, which are transferred from the credit of the accounts for production stocks, settlements for wages and similar accounts to the debit of 2010;
- costs of auxiliary production, from the credit of 2310;
- costs indirectly related to managing and servicing primary production, from the credit of 2510.
In addition, losses from defective products are written off from 2610 to 2010.
The table below shows the main debit rows of paragraph 120 (see the official text for the full list):
| Transaction | Credit | Row |
|---|---|---|
| Depreciation of fixed assets | 0211-0299 | 1 |
| Amortisation of intangible assets | 0510-0590 | 2 |
| Write-off of direct material costs | 1010-1090 | 3 |
| Release of semi-finished products to workshops for further processing | 2110 | 6 |
| Inclusion of auxiliary workshop costs | 2310 | 7 |
| Inclusion of general production overhead | 2510 | 8 |
| Inclusion of losses from defective products | 2610 | 9 |
| Valuables and services received directly by the workshops | 6010 | 13 |
| Insurance costs | 6510 | 15 |
| Contributions to state trust funds | 6520 | 16 |
| Accrual of wages | 6710 | 17 |
| Costs incurred by accountable persons | 4220-4290, 6970 | 18 |
| Debts for services rendered to primary production | 6990 | 19 |
What is recorded on the credit
Under paragraph 119, the credit side shows the actual cost of finished products, work performed and services rendered. These amounts may be written off to the debit of 2810, 9110 or 9130. The rows of paragraph 120 for this direction:
| Transaction | Debit | Row |
|---|---|---|
| Return of materials; receipt of materials produced in-house and returnable waste | 1010-1090 | 22 |
| Receipt of semi-finished products into the inter-operation warehouse | 2110 | 25 |
| Write-off of losses from irreparable defective products | 2610 | 26 |
| Production of goods at actual cost | 2810 | 27 |
| Sale of work or services; write-off of costs of accepted stages of work | 9130 | 28 |
| Cost of other disposals of products (free transfer, etc.) | 9110 | 29 |
| Work-in-progress losses from events such as natural disasters and fire | 9720 | 30 |
| Shortage of material valuables | 5910 | 31 |
The table for the debit and credit of 2010 contains other rows as well (for example rows 4 and 23, related to slaughtering and raising animals, and row 24, revaluation of work in progress), so treat the two tables above as the "main rows".
Month-end balance
Under paragraph 119, the balance of 2010 at the end of the month represents the cost of work in progress. That is, the costs accumulated during the month minus the amount transferred to finished products is the work that is still unfinished in the workshop.
What to watch for
- Direct and indirect costs. Materials and workers' wages go straight to 2010; costs indirectly related to managing and servicing primary production are first accumulated in 2510 and then transferred to 2010 (paragraph 119; paragraph 120, row 8) (practical advice).
- Do not hide defects. Losses from defective products are added to 2010 through 2610 (paragraph 120, row 9). Do not write defects off to a separate expense: let the cost come out realistic (practical advice).
- By period. Under paragraph 118, a cost is included in the cost of the reporting period to which it relates, regardless of when it was paid. The relevant share of prepaid costs is transferred from 3110-3190 to 2010 (paragraph 120, row 10).
- Check the balance at month-end. The debit balance of 2010 must match the actual work in progress found by the stock-take (practical advice).
Main journal entries 22
Debit and credit are as in the model table of Appendix 2 to NAS No. 21. The transaction text briefly restates the table row.
| Transaction | Debit | Credit | Source |
|---|---|---|---|
| Depreciation accrued on fixed assets directly involved in production | 2010 | 0211–0299 | NAS No. 21, para. 120, row 1 |
| Amortisation accrued on intangible assets related to production | 2010 | 0510–0590 | NAS No. 21, para. 120, row 2 |
| Direct material costs written off to production | 2010 | 1010–1090 | NAS No. 21, para. 120, row 3 |
| Semi-finished products made in-house released to primary production workshops for further processing | 2010 | 2110 | NAS No. 21, para. 120, row 6 |
| Costs of auxiliary workshops included in the cost of primary production | 2010 | 2310 | NAS No. 21, para. 120, row 7 |
| General production overhead included in the cost of primary production | 2010 | 2510 | NAS No. 21, para. 120, row 8 |
| Losses from defective products included in cost | 2010 | 2610 | NAS No. 21, para. 120, row 9 |
| Material valuables and services received directly by the workshops accepted | 2010 | 6010 | NAS No. 21, para. 120, row 13 |
| Insurance costs in primary production | 2010 | 6510 | NAS No. 21, para. 120, row 15 |
| Contributions to state trust funds relating to primary production costs accrued | 2010 | 6520 | NAS No. 21, para. 120, row 16 |
| Wages accrued to primary production employees | 2010 | 6710 | NAS No. 21, para. 120, row 17 |
| Primary production costs incurred by accountable persons | 2010 | 4220–4290, 6970 | NAS No. 21, para. 120, row 18 |
| Debts for services rendered by primary production | 2010 | 6990 | NAS No. 21, para. 120, row 19 |
| Various organisations rendered services to workshops and service units | 2010, 2310, 2510, 2710 | 6990 | NAS No. 21, para. 309, row 22 |
| Materials returned from primary production; materials produced in-house and returnable waste received | 1010–1090 | 2010 | NAS No. 21, para. 120, row 22 |
| Semi-finished products received into the inter-operation warehouse | 2110 | 2010 | NAS No. 21, para. 120, row 25 |
| Losses from irreparable defective products written off | 2610 | 2010 | NAS No. 21, para. 120, row 26 |
| Products made at actual cost (finished products received into the warehouse) | 2810 | 2010 | NAS No. 21, para. 120, row 27 |
| Work or service sold; costs of accepted stages of work written off | 9130 | 2010 | NAS No. 21, para. 120, row 28 |
| Cost of other disposals of products (free transfer and others) written off | 9110 | 2010 | NAS No. 21, para. 120, row 29 |
| Work-in-progress losses from events such as natural disasters or fire written off | 9720 | 2010 | NAS No. 21, para. 120, row 30 |
| Shortage of material valuables found in primary production | 5910 | 2010 | NAS No. 21, para. 120, row 31 |
Example
Quva Kafel LLC (a fictitious tile-making company) made the following entries on primary production during a month. The amounts are taken for illustration only.
| No. | Transaction | Dr | Cr | Amount, soums |
|---|---|---|---|---|
| 1 | Clay and other direct materials written off to production (from the range 1010-1090, for example 1010) | 2010 | 1010 | 64,000,000 |
| 2 | Wages accrued to the main workshop workers | 2010 | 6710 | 18,000,000 |
| 3 | Contributions to state trust funds | 2010 | 6520 | 2,000,000 |
| 4 | General production overhead included in cost | 2010 | 2510 | 5,400,000 |
| 5 | Auxiliary workshop costs included in cost | 2010 | 2310 | 3,000,000 |
| 6 | An external organisation rendered a service to the production workshop | 2010 | 6990 | 1,600,000 |
| 7 | Finished tiles received into the warehouse at actual cost | 2810 | 2010 | 85,000,000 |
Source of the entries: 1 is para. 120, row 3; 2 is row 17; 3 is row 16; 4 is row 8; 5 is row 7; 6 is para. 309, row 22; 7 is para. 120, row 27.
Calculation for 2010:
| Indicator | Amount, soums |
|---|---|
| Balance at the start of the month | 0 |
| Debit turnover (1-6) | 64,000,000 + 18,000,000 + 2,000,000 + 5,400,000 + 3,000,000 + 1,600,000 = 94,000,000 |
| Credit turnover (7) | 85,000,000 |
| Debit balance at the end of the month | 9,000,000 |
Check: 94,000,000 − 85,000,000 = 9,000,000 soums. Under paragraph 119, this balance is the cost of work in progress: the value of tiles that are not yet ready in the kiln or in the workshop. Next month it is added to the new costs (example prepared by the author).