Basic materials are Concept, types, characteristics

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Fixed assets or materials play an important role in the activities of any company. The financial stability of the enterprise depends on the correct determination of the needs for basic materials. The lack of key components can lead to production disruptions and delivery delays, which in turn affects financial well-being. Therefore, it is important to correctly take into account, analyze and use the material basis or base economically, reducing the cost of production.

What are materials in production?

The division of all materials into the class of basic and auxiliary depends on the scope of the company. For example, in industrial plants, steel is a basic material, as is paper in a printing company. But in other companies, these same materials are classified as auxiliary. For example, if paper is used as the production of labels or tags in light or food industries.

Basic materials are the main components of the production of any company, regardless of its field of activity. They participate in the production process for a certain time, their cost is fully taken into account in the cost of the finished product. In industry and agriculture, these include raw materials, as well as other materials after primary processing.

For companies, regardless of the field of activity, such an indicator as material consumption is important, the lower it is, the lower the cost of the finished product.

Basic and auxiliary materials

The cost estimate of the enterprise must indicate the consumption of basic materials, as well as auxiliary elements. In this case, the cost of return costs, if any, of purchased materials and semi-finished products is deducted.

In logistics, the object of control is materials. This may include fuel, raw materials, overalls, spare parts for repairs, tools, equipment. They are all displayed in the accounting of the enterprise for a certain period of time. There is such a thing as the rate of consumption of materials, depending on the scope of the company.

Each enterprise plans the consumption of both materials and economic indicators in advance (month, quarter, year). Further, the planned indicators are compared with the actual figures, from which the profitability of the enterprise is calculated. The main and auxiliary materials are taken into account. It is important for every firm to minimize theseindicators, but at the same time so that this does not affect the number of products produced.

Where do the basic materials come from?

Basic materials are the main values of the enterprise that come to production from suppliers, intermediaries or partners. The fact of receipt of materials must be documented and displayed in the company's accounting records.

When delivering material, both main and auxiliary, the supplier must provide accompanying documents (usually a waybill), then a representative of the supply department checks the accuracy of the information and the delivered goods. If there are no discrepancies, the bill of lading and the invoice remain one copy signed by both parties. If the goods are received outside the organization, and not in the warehouse, then a power of attorney is issued.

Further, the movement of fixed assets occurs already in the organization itself, starting from the receipt of goods at the warehouse, displaying the movement card in the material accounting card and using it directly in the work of the enterprise.

Why do we need to take into account the main materials and their classification

Each enterprise is interested in reducing the cost of its products. That is why expensive materials are replaced by cheaper ones, it depends primarily on the characteristics of the base material. It is also important to reduce production waste and rationalize costs. To do this, companies use advanced technologies, increasingquality of raw materials and materials, as well as secondary resources.

In the production process, the main materials can be used in different ways. Some are completely consumed in the production process (raw materials), others change their shape (paint, lubricant), others enter the finished product completely without being processed (spare parts), others contribute to the formation of products, but do not enter them (MBP).

Also, materials can be divided by technical properties, which determines the reporting form that enterprises fill out.

Accounting for basic materials

Basic materials are the basis of accounting for any enterprise, which is based on three stages: receipt, issuance directly for the production process and return, that is, waste accounting. Sometimes the company's waste is reused in production, which minimizes costs. Funds in accounting are accepted at actual cost without VAT.

Actual costs for basic materials include:

• amount paid to a seller or supplier;
• amount for information and consulting services related to the purchase of materials;
• customs duties (if the funds were purchased from foreign companies outside the country);
• taxes associated with the purchase of materials and which are not refundable;
• remuneration to an intermediary if fixed assets were purchased through him;
• shipping costs for the delivery of materials (includinginsurance).

Actual cost of materials is based on direct material costs from sourcing to transportation.

Main materials used in analysis

The main material is the main item of the account 10 "Materials". It is also possible to use some sub-accounts to record the cost of additional expenses associated with the acquisition of fixed assets.

Each enterprise pays special attention to the analysis of materials, which are the basis of production. It is important to correctly take into account the consumption of materials, calculate their level of use by the company. All these indicators are calculated on a planned basis, and are also compared with previous similar periods (for a month, a quarter, a year). Patterns allow you to identify where the overrun of basic materials occurred and for what reason. Also, through analysis, it is possible to identify methods and ways to reduce the cost of basic materials, which entails a reduction in production costs.

There is such a thing as the utilization rate of materials. It is defined as the ratio of the volume of certain materials in the composition of finished products for a certain period of time to the funds spent and their quantity for another period of a similar time. If this indicator is close to one, then there is practically no waste in production and fixed assets are used rationally.

Materials Accounting Tasks

Basic materials are the base from which it workscompany. Their accounting and analysis is the most important task for a company that wants to increase its profitability.

The main tasks of material accounting are:

• formation of the actual cost;
• timely and correct documentation of the acquisition, acceptance and use of materials;
• control over the preservation of materials, all their properties at each stage of the movement;
• control and analysis of the required amount of materials so that the enterprise works non-stop;
• identifying waste that can be reclaimed (recycled, resold or resold in other products);
• conduct material efficiency analysis.

Conclusion

Such concepts as materials and basic production are closely related to each other, moreover, they depend on each other. And in many ways they determine the financial condition of the company. Their effective use leads to an increase in the profitability of the enterprise, and, accordingly, an increase in profitability. But these figures are also influenced by factors such as consumer demand, inflation, force majeure (as a result - a breach of agreements) and taxes.

It is important for every enterprise to fully calculate and analyze all indicators of the use of basic materials, since the well-being of the company directly depends on this.