What account 9110 is for
When a company has produced goods and shipped them from the warehouse to a customer, those goods are no longer the company's asset. Their cost, the expenditure that went into producing them, becomes an expense that is matched against revenue in the profit calculation. This is the amount accumulated in 9110. If you deduct the cost from revenue, you see the gross result from selling the products.
Under para. 384 of the NAS No. 21 Instructions, group 9100 has five sub-accounts:
| Sub-account | What it is for |
|---|---|
| 9110 "Cost of finished products sold" | Cost of finished products sold |
| 9120 "Cost of goods sold" | Cost of goods sold |
| 9130 "Cost of work performed and services rendered" | Cost of work and services |
| 9140 "Purchases of inventories under the periodic inventory system" | Purchases under the periodic method |
| 9150 "Inventory adjustments under the periodic inventory system" | Inventory count adjustments under the periodic method |
A transit account: what that means
In the chart of accounts, 9100 is of type "T" (transit). Under para. 3 of NAS No. 21, transit accounts are used during the reporting period and carry no balance at the end of the period: they are temporary accounts for income and expenses. So 9110 does not sit as a balance in the balance sheet: during the month or year cost builds up in it, and at the end of the period everything is closed.
What goes to the debit side
Under para. 385, when products are sold, their cost is recorded on the debit side of 9110 against the finished goods accounts (2800). The main rows by which 9110 is debited, from the table in para. 390 and other tables (given only as examples):
| Situation | Credit | Source |
|---|---|---|
| Cost of finished products sold | 2810-2830 | para. 390, row 1 |
| Cost of animals being disposed of | 1110, 1120 | para. 390, row 2 |
| Cost of semi-finished products of own production sold | 2110 | para. 390, row 3 |
| Write-off of the cost of other products leaving, for example when given away free of charge | 2010 | para. 120, row 29 |
| Cost of products sold by auxiliary production (9110 or 9130) | 2310 | para. 126, row 33 |
| Cost of products sold by service units (9110 or 9130) | 2710 | para. 135, row 28 |
What goes to the credit side
The Instructions give no separate transaction that credits 9110, only the closing entry. Under para. 386, at the end of the reporting period accounts 9110, 9120 and 9130 are closed to 9910 "Final financial result (profit or loss)": Dr 9910 Cr 9110 (para. 390, row 10; para. 436, row 2).
Perpetual and periodic systems
Under para. 387, the practical use of the 9100 accounts depends on which method the company applies. Under the perpetual method, cost builds up in the cost accounts during production (para. 388), so on sale it can be transferred to 9110. Under the periodic method, purchases are temporarily accumulated in 9140 during the period, and the actual cost is determined after the inventory count (para. 389).
Points to watch
- 9110 or 9120. If products made by the company itself are sold, use 9110; if goods bought from someone else are sold, use 9120 (para. 390, rows 1 and 4). If you mix them up, the cost will be shown wrongly by sub-account.
- Cost together with revenue. On the date the products are sold, also record the write-off of the cost: otherwise the accounts show income but no expense, and the result for the period is overstated (practical advice).
- No balance should remain at the end of the period. If a balance is visible in 9110 after closing, the closing entry was not posted in full: compare the turnover of 9110 with the amount transferred to 9910 (practical advice).
Main journal entries 7
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 |
|---|---|---|---|
| Cost of finished products sold written off | 9110 | 2810–2830 | NAS No. 21, para. 390, row 1 |
| Cost of animals being disposed of written off | 9110 | 1110, 1120 | NAS No. 21, para. 390, row 2 |
| Cost of semi-finished products of own production sold written off | 9110 | 2110 | NAS No. 21, para. 390, row 3 |
| Cost of other products leaving, for example given away free of charge, written off | 9110 | 2010 | NAS No. 21, para. 120, row 29 |
| Actual cost of products and services of auxiliary production sold written off | 9110, 9130 | 2310 | NAS No. 21, para. 126, row 33 |
| Actual cost of products and services of service units sold written off | 9110, 9130 | 2710 | NAS No. 21, para. 135, row 28 |
| At the end of the reporting period the cost account closed to the final financial result | 9910 | 9110 | NAS No. 21, para. 390, row 10 |
Example
"Bog'ishamol Konfet" LLC (a fictional confectionery workshop) made the following entries during the month:
| No. | Transaction | Dr | Cr | Amount, soums |
|---|---|---|---|---|
| 1 | Finished sweets made in the workshop taken into the warehouse | 2810 | 2010 | 90,000,000 |
| 2 | First batch sold: cost written off | 9110 | 2810 | 64,000,000 |
| 3 | Second batch sold: cost written off | 9110 | 2810 | 14,500,000 |
| 4 | Cost written off of sweets given away free of charge at a fair directly from the workshop, without being taken into the warehouse | 9110 | 2010 | 1,200,000 |
| 5 | Account 9110 closed at the end of the month | 9910 | 9110 | 79,700,000 |
Sources of the entries: 1 — para. 120, row 27; 2 and 3 — para. 390, row 1; 4 — para. 120, row 29; 5 — para. 390, row 10.
Calculation for 9110:
| Indicator | Amount, soums |
|---|---|
| Debit turnover (2, 3, 4) | 64,000,000 + 14,500,000 + 1,200,000 = 79,700,000 |
| Credit turnover (5, closing) | 79,700,000 |
| Balance at the end of the month | 0 |
Check: after closing, 9110 has no balance, and 79,700,000 soums moved to the debit of 9910. In the warehouse, finished products worth 90,000,000 − 64,000,000 − 14,500,000 = 11,500,000 soums remain in 2810 (example prepared by the author).