Working capital in the enterprise: composition, structure, circuit
One of the most important factors of production are working capital. This term is understood as a part of the means of production, which takes a direct part in the process of manufacturing goods and fully transfers its value to their value. But which balance sheet items relate to them? Consider this question in more detail.
Working capital structure
Any enterprise engaged in the production of any product must invest part of its financial resources in the purchase of objects of labor. At this stage of the organization's work, working capital can be directly involved in the process of manufacturing goods or presented in the form of inventories. These elements are constantly consumed, so they were given the name of revolving production assets (OPF). After the OPF has entered into the production process, they are moved from the stage of stocks to the stage of work in progress.Part of the financial resources of the company sometimes goes to expenses for future periods. These include the costs that the organization bears over a short period of time, but which are attributed to the cost of production over a long period (the cost of buying newspapers and magazines, seasonal purchases of necessary materials, etc.).
After the end of the production process, current assets are transferred to a new stage - the stage of circulation (sales of finished products). Settlements with customers do not occur immediately, in order to fulfill them, a certain period of time is needed, during which money from the customer’s account will be transferred to the contractor’s account. These working capital received the name of funds in the calculations. In addition, in any enterprise, the share of available resources is always represented in cash, in the form of cash on hand or in the form of non-cash money on the account. Current assets of this type are called cash. Together with the funds in the calculations, they constitute the circulation fund.
Working capital movement
During the production process working capital is always in motion.They are not spent and not spent, and turn from one form into another. Circulation of working capital can be represented in the form of three stages.
1. Accumulation - that is, the preservation of working capital in a certain form.
2. Production - transfer of funds from one form to another.
3. Implementation (treatment) - transfer of production results to the customer and receipt of material remuneration for them.
Cash flow in the stages of circulation
At each stage of the working capital cycle, monetary resources are also transformed from one form to another. Express their movement at each stage through a series of formulas.
1. Accumulation: Money - Commodity (D - T).
2. Production: Goods - Production - Other Goods (T - P - T /).
3. Implementation (handling): Other Goods - Other Money (T / - D /).
The more rapidly circulating assets are turned around, the less time they are located at each stage of the production process, the less funds need to be spent on performing a certain amount of work.