When implementing NS, the issue of whether or not to use the purchase overhead allocation function may come up.
In Japanese accounting, in principle, the purchase cost is included in the purchase price of goods. If this function is not used, does this mean that the various costs are not allocated at all, and that the accounting treatment is not appropriate?
Of course not.
Basically, NS’s allocation function allocates various costs as item costs on a per-transaction and per-item basis.
The following is an example of processing when this function is used and when it is not used. (Please refer to this only as an example.)
方法①-諸掛機能を使う場合
The above is a reference example of using the Morokoshi function. Since the cost of goods sold after allocation of various costs will be determined on an item-by-item basis, the cost of goods sold will be the purchase price of item A + the amount of various costs. The same applies to inventories on the balance sheet.
Method 1 – Summary of using the MOROKAKE function
Advantages:
・Allocates various costs for each item, which is superior in terms of cost-profit correspondence (elaborate cost of sales)
Disadvantages:
・Because various costs are allocated by item and by receipt, there is a large input man-hour burden (development is required when reducing man-hours by batch allocation of allocation calculation results, etc.). (Development is required when reducing man-hours by batch allocation of allocation calculation results, etc.)
Other features:
・Sales and cost-of-sales statements by item and PL are costs including various costs.
If you do not use the Morokoshi function, you have two options. (1) No allocation, or (2) allocation in financial accounting only.
The (1) no allocation method is allowed when the materiality of the costs and expenses is not high based on the tax law. Since this method is only required if the various costs are treated as expenses, I will skip the explanation of this method and introduce method (2) below.
Method 2 – Allocation in financial accounting
This method allocates the costs incurred during the period based on the ratio of inventory to cost. Although the standard for allocation is monetary amount, there is no problem with quantity or weight as long as they are recognized as appropriate (continuity is also required, as in (1)). Although the difference between (1) and the resultant amount may occur, a certain level of accuracy and reasonableness is required, but this is also an accepted method.
Method 2 – Summary of allocation method in financial accounting
Merit:
・Allocation of the total amount of various expenses is done only on the BS PL, so the man-hours required for allocation are small. (If only tax accounting is considered, it is only necessary to do so at the end of the fiscal year, and even if not, it is processed on a monthly basis.
Disadvantages:
・Correspondence between expenses and income is coarse.
The gross profit and cost ratio including other expenses can be known only in the PL (profitability of each item may become unclear).
→(The gross profit and cost ratio including various costs can be known only on the PL (item-by-item profitability may be opaque).
General comments
When you first look at the various accounts payable allocation function, you may often decide not to allocate at all due to the man-hour burden, but this man-hour burden can also be reduced by development.
If you want to start small, it may be better to select Method 2 (allocation in financial accounting only), and then consider and introduce Method 1 (various accounts payable allocation function), including development, when the operation is settled.
We hope this will be helpful for your consideration at the time of introduction.