Plant production biological assets

By Yana Voloshina, Head of Accounting Department, Otten Consulting

March. Sowing plans are approved, technological maps are prepared, equipment is repaired. Agricultural enterprises are almost ready to start field work, and their accountants and analysts are ready for the inevitable influx of primary documentation.

It’s time to ask the question of how to record production costs properly and start preparing now for the cost price calculating of finished products. Analytical information on the cost price of production is required not only for presentation to the statistical authorities, it is the main element for analyzing the performance of the enterprise and its managers.

The quality of accounting information will determine whether the manager can correctly understand how the resources were used, what are the opportunities for further savings, what to expect from the harvest, and many more things critically important for making adequate management decisions.

So, the task of accounting is not only to correctly allocate costs to accounts, but also to analytically correctly reflect them in the context of cost items and nomenclature. If the company maintains management accounting separately, then the analytics of accounting and management accounting should be comparable in order to be able to match the data consistency. It is ideal when both the decryption and the data of the articles in accounting and management accounting coincide, because the data for them should be identical. In the context of the Ukrainian economy, it is not always observed by numbers, but it is 100% can be observed in the form and detail accuracy and the methodology of the indirect costs distribution.

Cost price accounting

To establish the accounting of production, first of all, it is necessary to understand what exactly the manager expects to receive as information, which data are important to him for analysis for analysis. What costs were incurred in the context of each unit (cost center)? What is the total cost price in the context of elements? The answers to these questions should determine the structure of accounting and/or management accounting of production.

Cost price accounting in context of cost centers (such a system has historically been used by agricultural enterprises) is not a sufficiently analytical metod. For example, the various expenses of the machine and tractor brigade accumulated in a separate subaccount are closed on the cost of crops by one article, while the distribution of such costs on each of the crops is not done by a direct method, but using certain coefficients, the determination of which is a fairly subjective process.

This approach has a number of significant disadvantages:

  • the cost price of each crop formed in this way is quite relative and does not give an adequate idea of a particular culture profitability, because a significant part of the expenditure, and of these, a part of potentially direct expenditure, is distributed rather conditionally;
  • detailing regarding the elements of the costs incurred is lost, that is, we no longer have depreciation, repair, fuel expenditures, but only one item, which is a part of all these expenditures.

Such a cost price is doubtful both in terms of its value for analysis and in terms of transparency of cost formation. The manager wants to understand where exactly the funds were spent, what is the specific weight of this or that item of expenditure in the cost price structure, he would want to compare the fact with the budget and the like. Give him that opportunity, help him make the right decisions, and provide clear detailing.

Depending on the complexity of analytics, it will be useful to use technical solutions for automation of accounting: from setting up 1C, using numerous Excel features to additional software. Here, everyone decides for himself. A recommendation from our practice: start with Excel to, at a minimum, decide on the cost items and the reporting form, as a maximum, use it for management accounting, using data import from accounting programs.

List of articles and their contents

Next, the question of determining the list of items of expenditure and their content arises. What do we mainly see in the accounting of a medium-sized agricultural enterprise? Solid vinaigrette. The cost items are duplicated and cloned, some items are not detailed enough, while others have three pennies of accumulated expenditure. Unfortunately, quite often accounting department and analysts do not pay enough attention to quality accounting precisely in terms of expenditure elements, but simply randomly scatter expenses on the first available article.

As a result, management suffers again, trying to analyze the money spent. At the same time, compliance with simple accounting rules can dramatically change this situation, and most importantly, it will save time and nerves spent on adapting and interpreting information.

Trying to adjust accounting, first of all, one should not neglect the importance of accounting policies. As they say, everything that is not formalized does not exist. Approved accounting system, and in this particular case, analytical cost items of, greatly facilitates the work of both the units recording the information and those that analyze it. An accountant with a written policy in front of his eyes does not need to think about where to classify this or that document, and the analyst does not need to wrack his brains by deciphering the intentions of each accountant.

In the process of the cost items determining that should be used in accounting, the basic principle should be respected — creating and maintaining information expenses should not be higher than the cost of information, that is, the existence of each item should be economically justified.

It is necessary to determine a certain materiality border when deciding on the cost types that should be highlighted in a separate item, because in reality — what is the point of a separate item “business trip expenses” if the company has 5,000 UAH/year of such expenses, and also distributed over two seasons, and 5 crops annually?

It is advisable to record the list of items of expenditure, as well as the details of their content, in the accounting policy. And in this process one should not skimp on the details — the more accurately the policy is written out, the less chance there is for users to interpret it in two senses and ambiguously.

Agricultural enterprises that are part of a group of companies under the control of one owner should additionally take care of intra-group items of costs. This mainly concerns the services that one company of the group provides to another, and in fact, the buyer company receives for itself not only the cost price of such services, but also a certain margin of the seller. Such intra-group trading, which generates a certain margin, can significantly distort information about the actual production cost price of the group of companies as a whole. Therefore, the reflection of operations within the group should be allocated to separate analytical items, which will further simplify the analysis of information, facilitate the consolidation and elimination of internally generated margins.

Having recorded the items in the accounting policy, take care of introducing them into the automated accounting system and block access for users to change or add other articles.

Direct and general manufacturing costs

An equally important issue is the determination of direct and general manufacturing costs. Expenditure are charged to the cost price of a particular crop using the direct method if it is possible to clearly identify the field and/or crop to which they were incurred. All other production costs are divided into crops according to certain coefficients.

A number of expenditure, which are historically accounted as general manufacturing, can actually be identified to crop and must be accounted as direct. For example, the transportation of grain from the fields by hired transport is mainly reflected in accordance with the certificate of the services provided by the carrier, where there is usually no detail on the crops that were transported. However, the cost of services was calculated taking into account a certain amount of transportations from the field to the farm. Moreover, each such mission is recorded at the weight platform or in a different way is taken into account when accepting the grain, that is, the carrier’s certificate can also be divided into crops and directly classified to cost price.

According to the Regulation (Standard) of Accounting 16, the distribution of general manufacturing cost for products, work, services produced by the enterprise is carried out using the distribution base. For example, in proportion to the amount of employees wages of direct production personnel, in proportion to hectares under crops, direct material expenses and the like.


If you want your accounting department to work exactly for your company, and not for regulatory authorities, make it an assistant to managers and an adviser who can clearly and accurately provide the necessary information. And for this, it is necessary to agree on what information is necessary for the management, who provides it and in what form, what methods of detailing to apply, what structure of details to coordinate and fix in the accounting policy, and how to ensure that managers regularly receive clear, timely, and accurate information.

In general, the deeper the preparatory work is carried out, the types of direct and indirect costs, the methods of distributing indirect costs are determined, the more accurately the cost price of the crop will be formed, and the information on crop profitability will become more accurate.