Accounting of material stocks in budgetary organizations

The accounting of material stocks in the budget sector is carried out according to NSS2 /2002 and the instructions of the State Treasury Directorate of the Ministry of Finance. The accounting reporting of SMZ is carried out at historical price (delivery value). The standard gives instructions for:

• Determination of historical price;
• Subsequent recognition of historical cost;
• Any reduction in historical cost to net realizable value;
• The methods of write-off of the accounting value, according to which the costs of the SMF are determined

Inventories are: short-term tangible assets in the form of materials acquired for the purpose of investment in a production process, production produced in the enterprise for the purpose of sale, goods acquired through purchase intended for sale, work in progress, investment in material inventory – inventory acquired for investment purposes and not for the purpose of use.

Classification of SMZ

In the budget organizations, the classification of the SMB is carried out according to the accounts set in the SBO, which as of 01.01.2014 are:

• 3010 Work in progress;
• 3020 Materials;
• 3030 Production;
• 3040 Goods;
• 3100 Young animals and animals for fattening;
• 3210 State reserve stocks;
• 3220 Purchased produce;
• 3330 Confiscated and acquired material stocks;

NSS 2 does not apply to material stocks of producers from agriculture, animal husbandry, forestry. For such inventories, IAS 41 is applicable, and in this regard, the objects reported in account 3100 do not fall under the provisions of IAS 2. To the extent that account 3010 is possible to account for materials arising on the basis of construction contracts, they will also not fall within the scope of NSS2.

Evaluation of the HCMC

Inventories are valued at the lower of the deliverable and net realizable value (estimated selling price in the normal course of business, reduced by the costs necessary to complete the production cycle and the costs necessary to make sales), the difference being counts as other expenses for the activity. According to item 2.3 of VAT 20/2004, at the end of the year, a revaluation of the SMF is carried out.

The account used to account for revaluation differences from 2014 is 7802 MH Revaluation . Valuation to net realizable value is carried out at the end of the year. If the reported value is higher than the net realizable value, the value is reduced to net realizable. If a SCM is reduced to net realizable value and subsequently the conditions for this reduction are no longer met, an increase is undertaken. According to item 11.3 of HSC2, this increase cannot be greater than the value they had before their impairment to net realizable value.

The Commission decides to include them in the protocol for the depreciation of SMZ to net realizable value. The accounting transaction they have taken in accounting is:

D-t s/ka 7802/K-t s-ka 3020 BGN 1500.

During the following year, half of these materials were used and they were written off for 750 BGN. At the end of the year, it was found that due to the high rate of inflation for this year, the value of the materials was BGN 1,900 and the materials were revalued. The accounting item is:

D-t s/ka 3020/K-t s/ka 7802 BGN 750.

i.e. the value of the materials is restored to the value they would have been had they not been impaired.

Delivery value of SMZ

In case of delivery, SMZ are entered at the delivery value, which includes the costs of the purchase:

• Purchase price;
• Import duties and taxes;
• Non-refundable taxes and excise duties;
• Delivery costs and other costs that contribute to bringing the material to a state of use (transportation, cargo unloading, installation and trial operation);

Cost of production

As already stated, the scope of the SMP also includes the production produced by the enterprise. The cost of production includes the costs of processing, which are:

• Costs directly related to the manufactured products;
• Systematically accrued fixed (do not depend on the volume of production, for example: rent of the production premises) and variable general production costs (depend on the volume of production);

The allocation of general production costs is carried out depending on their type: fixed costs are allocated on the basis of the normal capacity of production facilities, and variable costs are allocated on the basis of output. The accounting of the cost of production in budgetary organizations is carried out according to item 50 of VAT 20/2004. Production costs are first reported under item 60-expenses by economic elements. At the end of each month (mandatory at the end of a quarter, the cost of production is determined) the accounting article is taken:

D-t s/ka 3010 /K-t s/ka 6503 – reporting of unfinished production

D-t s/ka 3030/K-t s/ka 3010 – reporting of finished products

We must note that in the accounting policy of the budget organization, the method of reporting and the method of determining the cost of production must be specified – the types of costs and the method of distribution of indirect costs must be specified.

Deregistration of the SMZ

In NSS2, the methods of write-off of SMF are defined as follows:

• Recommended approach – SMZ are written off at a specifically determined value, when their consumption affects specific batches of production, projects or a client;
• When there are no conditions for applying a specific value, one of the following two approaches is allowed: FIFO (first in – first out) or weighted average value
• Allowable alternative approach: LIFO (last in-last out)

Until 01.01.2014, the materials were reported as stocks under several accounting accounts 3020, 3021, 3022, ..3029. After this date, only account 3020 is provided in the SBO. The accounts for reporting the cost of materials are as follows:

• 6010 Fuel, water and energy costs;
• 6011 Stationery expenses;
• 6012 Food expenses;
• 6013 Expenses for medicines and drugs;
• 6014 Costs of teaching materials and aids;
• 6015 Expenses for bedding and work clothing;
• 6016 Costs of construction materials;
• 6017 Costs of consumables and spare parts for hardware;
• 6018 Costs of other spare parts;
• 6019 Costs of other materials;

The accounting article for writing the cost of materials for current consumption:

D-t s-ka 601X /K-t s/ka 3020 – if the material is in stock

Or

D-t s/ka 601X /K-t s/ka 4010, 45ХХ, 50ХХ, 7500- if put into use directly

Very often in practice when purchasing materials with direct realization, in accounting systems they are entered in transit through the account for materials 3020, i.e.

D-t s/ka 3020/K-t s-ka 7500 and immediately write:
D-t s/ka 601X/K-t s/ka 3020.

We would like to note that from an accounting point of view this makes reporting more difficult and need not be done unless mandated by an internal regulation, such as an accounting policy and methodology of a first-tier disposer.

Reimbursed expenses

In the activity of budgetary organizations, it happens that once reported expenses for materials are reimbursed by other organizations, and for this purpose the expense is converted as a receivable from the relevant organization. Reimbursement of the expenses is carried out to the credit of the relevant expense account.

Depending on the organization of the document flow in the enterprise, there are two options in this case.

First option: together with the electricity invoice, the accountant also has a report from the electricity meter of the tenant YY. In this case, the foreign electricity can be reported directly as a claim. The accounting item is:

D-t w/ka 4887 BGN 1000
D-t w/ka 6010 BGN 1400
K-t w/ka 4010 ; 7500; 5013

Second option: the electricity meter report of the tenant YY is not available when the invoice is posted. It is accounted for at a later stage. The accounting items are:

D-t s/ka 6010/ K-t s/ka 4010 ; 7500; 5013 BGN 2400 – electricity invoice;
Apartment house 4887/ Apartment house 6010 BGN 1,000 – electricity meter report of tenant YY;

Pledges and collaterals through the SMZ

In the case of certain transactions, the budget enterprise can provide its own SMP as a pledge or as security for an obligation according to the order of the special pledges. In this case, the SMZ itself continues to be reported in section 3 of the SBO and no accounting entries are made directly with them, but additionally accounting items are taken on the off-balance sheet accounts 9231 or 9233 to account for the pledge/collateral at the fair value of the SMZ.

• Provided as a pledge: D-t s/ka 9989/K-t s/ka 9231
• Secured obligations according to the order of special pledges: D-t s/ka 9989/K-t s/ka 9233

Accounts 9231 and 9233 must be organized by types of SCM and type of bet.

Absences and marriage of SMZ

The accounting of shortages and credits of material stocks and other assets is carried out taking into account the following:

• The entire article under D-t s/ka 6993 (account from 2014) is written, regardless of whether it is the fault of the MOL or not;
• If it is the fault of the MOL, a claim is recorded: D-t s/ka 4213/K-t s/ka 7198
• If the absence is from an unknown perpetrator: D-t s/ka 9289/K-t s/ka 9981

Purchase of SMZ

In the case of the purchase of the SMZ, the options for accounting entries depend on the status of the supplier – whether it is a budget organization or not and also whether the purchase is with a large volume discount. The differentiation towards suppliers was made with VAT 14/2013. While the requirement for the accounting of the large volume discount is from VAT 20/2004. The accounting items are as follows

• Purchase from a non-budgetary organization
  D-t s/ka 3020/K-t s/ka 4010
• Purchase from a budget organization
  D-t s/ka 3020/ K-t s/ka 4523,4548,4599 D-t s/ka 4970/K-t s/ka 6081
• When paying
  D-t w/ki g.75/K-t w/k g.50,7500 D-t w/k g.45/K-t w/ka 4970
• Purchase with a significant volume discount (for example, more than 50%) The purchase with a significant volume discount, when this is not a usual policy of the counterparty and is not part of its advertising campaign, but is made purposefully for and benefits the budget organization, this transaction must to be accounted for by entering an accounting item and recognizing revenue for the organization. Donation income is recognized.
  D-t w/ka 3020/
  K-t w/ka 4010 BGN 200.
  K-t w/ka 7419 BGN 500

Issuance of a medical certificate

• Provision as a donation to a non-budgetary organization: D-t s/ka 64XX/K-t s/ka 3020, 3040, 3030
• When purchasing production at prices well above market prices from non-budgetary organizations, the difference is reported as a donation:
  D-t s/ka 3XXX/K-t s/ka 4010
  D-t s/ka 64XX/K-t s/ka 4010
  D- t s/ka 4010/K-t s/ka 50 with the paid amount;
• In the case of the sale of the CMZ, the expense is reported according to items from subgroup 611 D-t s/ka 6111/K-t s/ka 3010
  Work-in-progress
  D-t s/ka 6112/K-t s/ka 3020 Materials
  D- t s/ka 6113/K-t s/ka 3030 Production
  D-t s/ka 6114/K-t s/ka 3040 Goods
  D-t s/ka 6115/K-t s/ka 3100 Young animals and animals for fattening

Accounting for the sale of the SMZ

Analogously to the purchases of the SMZ and the sale of the SMZ with VAT 14/2013, the reporting of sales to budgetary and non-budgetary organizations is different. In the budgetary sector, for the most part, the exchange of assets is carried out by transfer without payment. In these cases, from the point of view of the summary report, no difference occurs. However, there are cases when a pure commercial transaction is carried out between budgetary organizations, which does not differ in essence from transactions with non-budgetary organizations. Assets, liabilities, income and expenses arise for independent budget organizations. At the aggregated level, however, these transactions should be eliminated because otherwise they lead to information distortion. This is the reason why transactions between budgetary organizations are accounted for differently from transactions with non-budgetary organizations.

• Sale of non-budgetary organization
  D-t s/ka 4110
  t-t s/ka 7111 Work-in-progress
  t-t s/a 7112 Materials
  t-t s/a 7113 Production t-t s/a
  7111 Goods
  7115 Young animals and animals for fattening
• Sale of a budget organization
  D-t s/ka 4522/K-t s/ka 7111, 12,13, 14,15
  D-t s/ka 6111,12,13,14,15/K-t s/ka 3XXX
  D-t s/ka 7180/K-t 4960 recording of the correction
• At the payment
  D-t s/ka 4960/C-t s/ka 4522
  D-t s/ka 5013/C-t s/ka 7511

Long-term use (more than one year) put-in-use PPE (MMP)

Medical equipment with long-term use (over 1 year) is expensed when provided for use:

D-t w/ka 601X/K-t w/ka 3XXX

Depending on the approved accounting policy and threshold of materiality for the relevant organization, some of them can be entered on the off-balance sheet account 9909 for the purpose of control.

D-t s/ka 9909/K-t s/ka 9981

Provided as a reward to the staff of the Medical Center

The SMP provided as remuneration to the staff are reported in connection with the instructions of item 2.10.2 of VAT 20/2004, on account 6049. The accounting items are:

D-t s/ka 6049/K-t s/ka 711; 4511
D-t s/ka 611/K-t s/ka 3XXX

Excerpt from VAT 20/2004 regarding the provision of goods and services to staff

• 19.3.1 . as a general rule, goods and services used by staff, acquired/paid for by budget enterprises, are reported as expenses for staff remuneration in kind (6049) when the goods and services are consumed by the employee/worker or his household at his discretion and desire for personal needs unrelated to the company’s activities and when they are provided for work performed;
• 19.3.2 . similarly, when such goods and services are used by the staff for the purposes of the budget enterprise’s activity (work clothes, food for work in harmful conditions and other similar cases), these costs are classified as maintenance costs (materials, external services, business trips, rents, etc.);
• 19.3.3 . the rules and procedures regulated in item 2.10 of these instructions are applied in relation to the material stocks provided to the staff;
• 19.3.4 . the recovery/reimbursement by the enterprise of expenses incurred by the staff for assets and services that are used in the enterprise’s activity is reported as current expenses on the relevant accounts for the given type of expense (materials, external services, business trips, rents, etc.);
• 19.3.5 . the funds allocated to the remuneration for SBKO, clothing and the like are reported as expenses for cash remuneration for personnel. When long-term assets are acquired with the funds for SBKO, which remain in the enterprise for use by the staff, these assets are reported in the general order, as assets of the enterprise. When expenses for additional voluntary insurance at the employer’s expense are incurred with the SBKO funds, the amounts are reported as an expense on the relevant account from subgroup 605. In cases where goods and services are purchased with SBKO funds that are consumed directly by the staff ( e.g. medical subscription), costs are reported as personnel costs in kind;
• 19.3.6 . the rent paid by the enterprise for the employee’s residence, which can also be used by his household, is reported as an in-kind personnel expense. The payment of rent and the costs of accommodation of the staff in the performance of official duties (travel, business trip, etc.) and the corresponding premises cannot be used by the household, are counted as current maintenance expenses;
• 19.3.7 . payments to an external carrier for the transport of staff to the workplace and back (including purchased travel subscription cards), are reported as personnel costs in kind, and when the transport is organized by own transport, these costs are reported on the accounts for the relevant type of expense (materials, etc.);
• 19.3.8 . provided meal vouchers and other similar bonuses are reported as personnel costs in kind;
• 19.3.9 . the classification of expenses under this point does not lead to a change in the way of budgeting and reporting on a cash basis of these items, nor does it change the way of reporting the relevant taxes (including tax credits), fees and insurance contributions arising from these expenses.

Paragraphs and accounts for reporting of HCV and costs of HCV

Correspondence of the accounting accounts accounting for EMS, their costs and the paragraphs of the EBC accounting for payments for EMS is presented in the following table:

Switch to the 2014 chart of accounts

With VAT 14/2013, only account 3020 is provided in the SBO for the reporting of health insurance and accounts: 3021, 3022, 3023,…3029 are removed. The balances on these accounts are transferred with an accounting item:

D-t s/ka 3020/K-t s/ka 3021, 3022,..3029

Since the analysis of these accounts is sometimes quite voluminous and with a complex organization, VAT 14/2013 allows until the end of 2015 budget organizations to work in their accounting system with counter-accounts. This means that currently, for the purposes of analytical reporting, they could continue to use the SBP accounts – 3021, 3022, …3029, but at the end of the reporting period, for the purposes of preparing the turnover statement for the Ministry of Finance, the turnover on these accounts had to be reversed through the appropriate counter-accounts and presented on the 3020 account. However, even if only on an analytical level, we recommend that this information be retained, which will lead to an easier determination of the correspondence of the 3020 account with the 601 flu expense accounts.

Author: Eleonora Bilbileva – RO
For all those who would like to organize the accounting of the budget organization in a way that meets all budget requirements and manage it with ease, see the following link:
http://www.ada-soft.bg/ bg/mproducts/forbudget/budgetaccounting2