Each company that is engaged in production has a number of articles that need to be tracked. These include production items, expenditure items, and capital, and they are also the main ones since, by following them, the company will be able to plan its future activities and monitor indicators. Although production items, expenses, and capital items relate to the budget of the enterprise, they still have differences and imply various types of financial transactions of the enterprise.
Production costs are materialized costs, and they are included in the price of production. In the textbook Ebert and Griffin (2019), which is marked in the reference list, it is indicated that production costs include direct material costs, direct labor costs, and general costs. They form the basis of the production of specific products because of deviations from which the manufactured products will differ from the technology provided for their output. The aggregate of production costs includes the remuneration of the heads of the division and other personnel providing the work of production units, accruals for the payment of managers and other personnel, as well as the cost of technical and transport maintenance, repairs, replacement spare parts, consumables, energy resources.
The expenses are a set of costs for the production and sale of products, works, or services combined based on their uniformity. Cost accounting provides a grouping of the organization’s expenditures concerning the way they are included in the cost of a particular type of product (Walz, & Guenther, 2021). Expenses are an essential element for accounting expenses of enterprises. During economic activity, any enterprise incurs certain costs, the correct accounting of which will allow the company to present the actual financial situation of the company and avoid claims from regulatory authorities.
Capital can be characterized as the value used to generate profit through productive and economic activities based on voluntary exchange. Capital is a source of income in the form of means of production or the money with which they were acquired (Abdurahimovna & Sultanbekovna, 2022). Capital items include fixed, circulating, own, authorized, and financial capital. Fixed capital is a part of the assets of an enterprise that participates in the production process for an extended period and, as it wears out in parts over several periods, transfers its value to the cost of finished products. The working capital includes the organization’s current assets–the property it uses to carry out business activities. The authorized capital is an assessment of the value of the organization’s support that the founders contributed. Equity is all property the organization owns, including authorized, additional, and reserve capital and retained earnings.
The difference between production items, expenditure items, and capital items lies in what precisely each cost unit carries. In addition, capital items, unlike production items and expenditure items, imply only fixed assets of producers. Production items include only what is required for the production of a certain amount of goods, and expenditure items include the total amount of costs, including salaries to employees. Still, these expenses are essential for the work of the enterprise.
In conclusion, production items, expenses, and capital items directly relate to the financial activities of the company, but each of the articles differs in its focus. Production items at the enterprise imply labor costs, material costs, and the costs of arbitrariness in general. They are included in the final price of the product and include the cost of depreciation of equipment, spare parts, and other expenses. The expenses are a set of fees for the production and sale of products. The capital item implies the value used to profit from the show and economic activities based on voluntary exchange. Each item is responsible for its types of expenses, and that is how they differ from each other.
References
Abdurahimovna, C. D., & Sultanbekovna, M. M. (2022). Cost and accounting concepts in accounting and their accounting. Global Scientific Review, 4(1), 21-26. Web.
Ebert, R. J., & Griffin, R. W. (2019). Business essentials. Pearson.
Walz, M., & Guenther, E. (2021). What effects does material flow cost accounting have for companies? Evidence from a case studies analysis. Journal of Industrial Ecology, 25(3), 593-613. Web.