Today, agricultural holdings are actively conquering domestic markets and confidently stepping into European ones. With the expansion of activities and the range of products there are many questions about the accounting of its individual categories. Consider the important features of production records for chicken eggs.
Eggs are agricultural products
Businesses keep chickens purchased from third parties to obtain eggs, ie agricultural products.
The fact that eggs are agricultural products is indicated by:
1) the definition of agricultural products given in paragraph 4 of NAS 30, which states that agricultural products are an asset obtained as a result of separation from a biological asset, intended for sale, processing or domestic consumption. Eggs are obtained just after separation from the biological asset, ie after it is laid by the hen;
2) annex to NAS 30, which states that eggs are agricultural products covered by NAS 30.
Therefore, the production of eggs from hens should be reflected in the production of agricultural products.
Rearing costs
The costs incurred by the business entity for egg production should be recorded in account 23 “Production”. The debit of this account will collect the costs incurred for obtaining eggs (ie for keeping chickens), and the credit - the cost of agricultural products (eggs, manure, etc.).
On account 23 “Production” farmers open analytical sub-accounts, which collect costs for the production of certain products (in this case, eggs). Usually for this purpose sub-account 232 “Animal production” is used.
The costs of growing poultry products, namely food eggs, are grouped by cost items listed in NAS 16 “Costs” (item 17 of NAS 30, item 2.7 of the Guidelines for planning, accounting and costing products (works, services) of agricultural enterprises, approved by Order of the Ministry of Agrarian Policy No. 132 of May 18, 2001; hereinafter – Guidelines No. 132).
For each company engaged in the production of eggs, the list of cost items will be different. Although usually the approximate list of major cost items is as follows.
Direct material costs
This cost item includes costs of:
- feed, both of own production (grain) and purchased from other persons (compound feed), which are used for feeding chickens. The following costs are reflected by conducting Dt 232 – Kt 208 27;
- means of animal protection, namely the cost of biologicals, drugs used to combat chicken diseases. The following costs are reflected by conducting Dt 232 – Kt 208;
- fuels and lubricants used, for example, for the transport of feed from storage sites to chicken houses (poultry houses) or for the operation of maintenance of equipment used for keeping chickens, etc. The following transactions are reflected by conducting Dt 232 – Kt 203;
- spare parts used to replace used machine parts and equipment placed in the poultry house. These costs are reflected by conducting Dt 232 – Kt 207;
- other materials needed for the production of eggs, including construction materials used to repair the poultry house or the equipment installed in it. These costs are reflected by conducting Dt 232 – Kt 207, 209, 22, etc.
Payroll expenses
This item includes the amount of accrued salaries of employees engaged in the production of table eggs. For example, engaged in caring for chickens (poultry). In order for such costs to be included in the cost of egg production, Dt 231 – Kt 661 is formed.
Other direct cost
This item covers other production costs associated with egg production. Namely:
- deductions for social activities, ie accrual of a single social contribution to the payroll. Accounting reflects these costs by conducting Dt 232 – Kt 651;
- deductions for depreciation of premises for keeping chickens (poultry houses) and equipment located in it and used in the production process. Accounting reflects these costs by conducting Dt 232 – Kt 13;
- other costs related to egg production, including electricity, water supply, land or property rent, property tax, livestock insurance, cost of work and services provided by third parties and own ancillary production. Accounting reflects these costs by conducting Dt 232 – Kt 63, 685, 234.
General animal production costs
This item covers costs associated with the production of eggs and other animal products. We are talking about the cost of labor of zootechnicians, machine operators, veterinarians, as well as the depreciation of equipment engaged in the production of eggs and other products (tractors). In agricultural enterprises, general production costs are collected on sub-account 912 “general animal production costs” and are not divided into fixed and variable (item 2.21 of Guidelines No. 132). They are distributed at the end of the year between different types of animal products in proportion to the amount of direct costs (excluding the cost of feed). This distribution is made by conducting Dt 232 – Kt 912.
In essence, these are the main items of expenses during egg production. As you can see, among the costs of egg production there are no costs for laying chickens. Chickens in accordance with NAS 30 belong to the current biological assets of livestock, as they are able to produce agricultural products for a period not exceeding 12 months. Therefore, chickens cannot gradually transfer their cost to the cost of egg production, for example, through the depreciation mechanism. Current biological assets in accounting are not depreciated.
Therefore, the cost of chickens will not be included in the cost of egg production through the depreciation mechanism. Chickens after the end of service life (after the end of the productive period) will be either:
- sold. Then the cost of chicken will be part of the costs due to the cost of current assets sold;
- butchered. Then the cost of chicken will be included in the cost of meat production and after its sale – in the cost of meat.
