How To Prepare Inventory Depreciation, Preparation For Short-Term Investment Depreciation And Long-Term Investment Depreciation Reserves

In early 1998, the Ministry of Finance promulgated the new Limited by Share Ltd accounting system -- accounting subjects and accounting statements, and stipulates that it will be implemented from January 1, 1998.

The new system fully embodies the principle of conservatism, which not only preserves the original provision for bad debts, but also increases the provision for the provision of inventory depreciation, the preparation of short-term investment depreciation, and the depreciation of long-term investments.

According to the new Limited by Share Ltd accounting system, the operating profit is more realistic, squeezing the water, eliminating the potential deficit factors, and protecting the interests of investors.

This paper discusses how to confirm the preparation of stock depreciation, short-term investment depreciation and long-term investment depreciation.

In the accounting process, the scope of inventory is relatively wide, there are materials in pit, raw materials, packaging, products, low value consumables, inventory commodities, finished products, commissioned processing materials, commissioned sale goods, entrusted sale goods, installments and so on.

Whether the inventory is required to make a loss in price depends on whether the ownership of the stock belongs to the enterprise and whether the inventory is in the processing or using state.

Any ownership of the company does not belong to the company's inventory, and it does not require the loss of stock price, such as the goods entrusted to sell on behalf of the company. All the savings and loans in the process or in the process of use do not require the loss of inventory, such as the processing of goods, the products (the physical form and quantity of inventories are not easy to determine), and the use of low value and easily consumed items (low value and cost).

The price is required to account for the loss of inventory price, and it is necessary to calculate the loss of inventory price, and it must be classified in terms of varieties, specifications, producing areas and brand names. However, in practice, it is very difficult to do so because it is difficult to do so. It seems that there are tens of thousands of varieties and specifications of large commercial enterprises, and there are hundreds of thousands of them. Especially in the current market downturn, many stock market selling prices are lower than the cost price. According to the new system, no matter how much the amount of loss in inventory falls, it is necessary to make a deposit loss. The accounting work is already very large and can not be done all the way. Two, the loss of inventory with a relatively low loss is also a matter of practical significance. The amount limit for loss of stock price is calculated: theoretically, the market price or realizable value of any stock is lower than its cost.

From the point of view of the importance of accounting principles, the author stipulates that the scope of the loss balance of savings and loans should be calculated according to the importance principle of accounting. The absolute number can be used to indicate that the amount of loss more than the amount of inventory loss should be calculated or not mentioned.

Determining the range or percentage of the amount of loss to be calculated depends on the degree of impact on the profit of the enterprise.

The formula for calculating the stock price depreciation is: the inventory depreciation reserve = inventory quantity * (unit cost price - the market price without tax). If the calculation result is positive, it means that the inventory realizable value is lower than the cost price. If there is a loss, the provision for the depreciation of inventory will be made according to this amount. If it is negative, there is no need to mention it.

In the above formula, the inventory quantity and unit cost price can be found from the accounts, and how to determine the market price without tax becomes the key to calculate the amount of loss.

In my opinion, according to the different state of stock, we should use different methods to determine the market price of non tax, and strive to be accurate and practical.

This work needs the support and cooperation of the Sales Department of our company.

1., for the appearance of intact, to maintain the original value of use and in a marketable way of deposit and loan, its tax free market price can be determined by the following methods: A: the average selling price of the enterprise in June or December calculated by the weighted average method.

This method is suitable for the normal sale of goods, and the interval is shorter and more accurate, and the number is also easier.

B: use the daily average sales price without tax.

The selling price of the market is the amount of the sales tax. For the same caliber, it should be converted to tax free price.

The formula of conversion is: tax, market, sale, price, tax, market price, etc. - the 1+ value-added tax rate is applied to enterprises that have not sold such goods for a long time.

In actual work, we can choose the sales price of representative 3 to 4 large shopping malls or farmers' markets to calculate the average selling price.

C: Based on customer quotations and appropriate addition.

This method is applicable to enterprises that have not sold such products for a long time and do not sell such products in the market in that month.

When the company has such a product, it will continuously send out the selling information, and some customers will ask for the purchase and offer the quotation.

Generally speaking, the quotation of the customer is relatively low, so it can be determined based on the quotation of customers and appropriately added.

D: the price of a commodity that does not include tax is calculated by the unified sales price stipulated by the state.

2., for the goods that are not damaged in the field and retain their original use value, but the stock with outdated or reduced quality, the market price without tax can be determined in the first case without tax market price, and the discount should be given appropriately.

The 3. is good for appearance, but it has changed the original use value, and can still be used for sale or production. The market price without tax should be determined according to its new usage or use value.

In case of damage, completely deterioration, loss of any use value, and no sale or production of inventory, the reasons should be found out and the responsibilities should be dealt with according to the provisions.

Two, short term investment price drop preparation for enterprises. Short term investment projects include equity investment, bond investment and entrusted loans less than one year.

The new system stipulates that short-term investments with market price below cost need to be prepared for short-term investments.

The author thinks that it should be calculated according to different investment projects: 1. calculation of stock investment depreciation price: the calculation of short term stock investment depreciation price = book cost price - (book share stock + dividend share number) * June 30th or December 31st market closing price, June 30th or December 31st market closing price can be found from newspaper, such as June 30th or December 31 day rest day without stock trading, the closing price of stock trading day can be used the previous day.

2. bond investment: under the present circumstances, bonds can be divided into circulating bonds and non circulating bonds.

In short-term investments, there are generally only circulating bonds, but no non circulating bonds.

The formula for calculating the depreciation price of short-term bond investment is prepared by the company, and the provision for the short-term bond investment depreciation: the book cost of bonds, the number of bonds, the average price of market pactions in June 30th or December 31st, and the average market paction price in June 30th or December 12th can be found from newspapers. If June 30th or December 31st is a rest day, there is no bond paction, and the average price of the day before the bond paction can be used.

3.. The entrusted loan companies below a year will temporarily idle funds to entrust banks to lend money to earn more interest than bank deposits. There is no risk of loss or loss. In addition, it can not be traded in the market. Therefore, it does not have a loss of price loss, and does not need to make provision for falling prices.

Three, long-term investment impairment, long-term investment is divided into equity investment and debt investment. Equity investment includes stock investment and other investments. When using equity method to calculate long-term investments, the book value changes with the changes in owner's equity of the invested enterprises. Under normal circumstances, the amount of recoverable amount will be equal to or greater than its book value, so there is no need to prepare long-term investment depreciation reserves.

Only when the cost method is used to account for long-term investments, the recoverable amount may be lower than its book value.

When the recoverable amount is lower than its book value, according to the new system, it is necessary to make provision for long-term investment depreciation.

It should be calculated according to the contents of different investment projects: 1. of the stock investment: the long term stock investment impairment allowance is the same as the short-term stock investment depreciation reserve preparation method.

In the present situation, the long-term bond investment can be divided into the circulation bond and the non negotiable bond 2..

Only the circulation of bonds, such as treasury bonds, can be called the recovery amount below the book value. Its long-term bond investment depreciation reserve calculation method is similar to the short-term investment bond investment depreciation reserve method.

Non circulating bonds, such as Three Gorges bonds and railway bonds, are not traded in the market. It is impossible to see that the amount of recovery is lower than the book value, nor do we need to prepare for long-term investment impairment.

3. other investments: the formula for calculating the long-term investment impairment of the company: the long term investment impairment reserve = book value (including the long term investment discrepancy): the owner's equity of the invested enterprise * the positive ratio of the investment proportion of the enterprise is positive, indicating that its recoverable amount is lower than the book value, and the long-term investment depreciation allowance is prepared according to this figure; if negative, there is no need to mention.

4. years of entrusted loans do not require long-term investment impairment provision. The reason is the same as that of the short-term investment in which the entrusted loan is less than one year.

5., when calculating other investment projects in the equity method, if the owner's equity of the invested enterprise is below zero or insolvency, according to the new system, the long-term investment book value of the investment enterprise can only be zero, and it can not be turned into a negative number, and does the calculated difference need to prepare the long-term investment depreciation allowance?

The author believes that the key lies in the organizational form of the invested enterprise.

If it belongs to the form of a limited liability company, it is not necessary to make provision for long-term investment depreciation, because in accordance with the provisions of the state law and the form of limited liability companies, investors can only bear the debts and debts of the invested enterprises with the amount of capital invested.

It belongs to the form of Unlimited Company.

Provision for long-term investment impairment should be made, because investors must bear joint and several liability of the invested enterprises.

For the first time, the preparation for the depreciation of inventory and the preparation of short-term investment depreciation are mentioned above.

According to the new system.

The preparation for the later period of each period is to make a comparison between the reserve price calculation based on the end inventory or short-term investment projects and the comparison of the original depreciation price preparation of the inventory or short-term investment projects. Later, it is determined that the depreciation reserve at the end of the term inventory or short-term investment project is larger than the end of the term. The difference between the stock price or the short-term investment project's original depreciation reserve should be raised. The lower price preparation calculated at the end of the inventory or short-term investment project is less than the original price reserve for the inventory or short-term investment item at the end of the period, and the difference should be rushed back.