In 2026, the cost accumulated in account 8410 should not be closed to account 7210 as a routine month-end closing transaction: production overheads are included in the cost of inventories, while employee benefit expenses included in that cost are deductible through the cost of inventories (Articles 220 and 270 of the Tax Code of the Republic of Kazakhstan). If account 8410 correctly reflects the payroll of personnel associated with production, it is allocated in accordance with the organisation’s adopted costing methodology. If the payroll of administrative personnel was erroneously posted to account 8410, the expense classification must be corrected on the basis of source documents and the accounting policy.
How accounts 8410 and 7210 differ
Accounts 8410 and 7210 have different purposes in the organisation’s working chart of accounts. The specific use of accounts and analytical accounting must comply with the approved working chart of accounts and the organisation’s accounting policy.
- 8410 “Overheads” is used to summarise production overheads. These may include costs associated with servicing production or performing work if such classification follows from the nature of employees’ duties, source documents and the adopted allocation methodology. Production overheads form part of an individual entrepreneur’s inventory conversion costs (Article 220 of the Tax Code of the Republic of Kazakhstan).
- 7210 “Administrative expenses” is used for expenses related to managing the organisation as a whole. Payroll may be charged to this account based on the employee’s functions, department, terms of the employment contract, timesheets and other supporting documents.
If an amount is transferred from account 8410 to account 7210 without justification, production costs will be recognised as administrative expenses. This changes the presentation of cost and administrative expenses. If there is work in progress or finished goods on hand, an unjustified reclassification may also affect their measurement.
For tax accounting purposes, the substance of the expense is important, rather than merely the accounting account number. An employer’s expenses relating to employee income that are included in the cost of inventories are deductible through the cost of such inventories, as determined in accordance with accounting and financial reporting rules (Article 270 of the Tax Code of the Republic of Kazakhstan).
How to close account 8410 correctly
The closing procedure depends on the working chart of accounts, the type of activity and the established costing methodology. The following sequence may be used by an organisation that performs work or provides services.
- Production overheads are accumulated in account 8410 during the period. For example, if repairs to auxiliary equipment relate to production and are supported by documents, the entry may be recorded as Dr 8410 Cr 3310.
- At the end of the period, the accumulated amounts are allocated to cost objects using the allocation basis established in the accounting policy. If the working chart of accounts provides for recording core production in account 8110, the entry Dr 8110 Cr 8410 is used.
- After the work, services or products have been completed and sold, their cost is written off in accordance with the adopted accounting procedure. If accounts 8110 and 7010 are used, this may be recorded as Dr 7010 Cr 8110.
This sequence does not provide grounds for mechanically charging all amounts accumulated in account 8410 to cost. Before closing the account, it is necessary to verify the economic substance of each expense, its relationship to production and the accuracy of analytical accounting.
The payroll of personnel engaged in production or servicing production may be included in production costs. For an individual entrepreneur, inventory conversion costs include direct labour costs and production overheads (Article 220 of the Tax Code of the Republic of Kazakhstan). An employer’s expenses relating to employee income that are included in the cost of inventories are deductible through that cost (Article 270 of the Tax Code of the Republic of Kazakhstan).
If accounting is maintained by order, contract, product type or department, allocation should be performed using the relevant analytical accounting. The selected allocation basis must be applied consistently and make it possible to substantiate the amount allocated to each cost object.
When payroll should nevertheless be posted to account 7210
The question of transferring an amount from account 8410 to account 7210 usually arises when the payroll of employees not associated with the production process was initially recognised as overheads. The decision is made based on the specific employee’s functions and supporting documents.
1. The employee performs administrative functions. If the employee manages the organisation as a whole, maintains accounting records or performs general office functions, their payroll is recognised as an administrative expense in accordance with the working chart of accounts and the accounting policy. If the amount has already been posted to account 8410, the original entry must be corrected using the method established by the organisation. The entry Dr 7210 Cr 8410 is permissible as a reclassification when supported by documentary evidence, but it should not be recorded as a standard closing entry for account 8410.
2. The employee is engaged in or services production. If the employee’s duties are related to the production process, their payroll is recognised as direct or indirect production costs in accordance with the adopted methodology. It may not be transferred to account 7210 solely to change the amount of cost: the classification must correspond to the actual purpose of the expense.
3. The employee performs different functions. If part of the employee’s working time relates to production and another part to administrative activities, the expenses are allocated on the basis of documents that make it possible to determine their actual activities. The procedure for such allocation and the analytical accounting used must be established in the accounting policy.
Production overheads that, under the applicable financial reporting rules, are not fully included in the cost of inventories must be considered separately. The mere recognition of part of such costs as period expenses does not mean that they may automatically be treated as administrative expenses: their classification must reflect the nature of the costs and the accounting methodology applied by the organisation.
What to check and how to make corrections in 1C
Before closing the month, the accounting settings and the documents on the basis of which payroll was charged to a particular account should be checked.
- Accounts and methods for recording accruals. Check which cost account is specified for each department, position and type of accrual. Using the same setting for production and administrative personnel may result in incorrect classification.
- Employees’ functions. Compare the selected account with employment contracts, job duties, the department and the employees’ actual work. The job title alone does not always reveal the purpose of the expense.
- Analytical accounting for account 8410. Generate a trial balance and an analysis of account 8410 by department, cost item and other dimensions used. The presence of administrative personnel payroll in this account indicates that the original accrual must be checked.
- Allocation methodology. Make sure that expenses in account 8410 have been allocated using the basis provided for in the accounting policy and charged to the appropriate cost objects. The result of automatic closing must correspond to the adopted methodology.
- Source documents. A correction must be based on documents confirming the employee’s functions, the period, the amount and the purpose of the expense. An accounting certificate alone, without analysing the source data, is insufficient to select the correct classification.
- Closed period. If the accrual was generated in the payroll database and the period has been closed, the correction must be recorded using an adjustment document available in the configuration being used, while preserving the link to the original accrual. After recording the correction, reconcile the accounting and payroll databases, cost analytics and final reports.
The names of documents and the procedure for processing them depend on the configuration and information database settings. Therefore, first determine the correct economic substance of the transaction and then select a technical correction method that preserves the change history and ensures that the accounting data is consistent.
Accounting policy and time frames
In its accounting policy, the organisation establishes the composition of direct costs and overheads, cost objects, the allocation basis and the procedure for recognising expenses relating to several types of activity. These rules make it possible to substantiate why a particular employee’s payroll is included in cost or recognised as an administrative expense.
An individual entrepreneur engaged in the production of goods records inventory receipts and disposals in independently developed tax registers. The selection of the weighted average cost method is also reflected in the tax accounting policy (Article 220 of the Tax Code of the Republic of Kazakhstan).
A classification error should be corrected in the period and in accordance with the procedure prescribed by the applicable financial reporting rules and accounting policy. Before making the correction, it is necessary to determine whether the error affected only the presentation of expenses or also the value of inventories, work in progress, and products, work or services sold. After the correction, the closing of accounts and reporting figures must be checked again.
Frequently asked questions
Can account 8410 be closed directly to account 7010, bypassing account 8110? — The accounting entries depend on the working chart of accounts and accounting methodology. A direct write-off is permissible only when it corresponds to the economic substance of the transaction and the adopted costing procedure and does not exclude work in progress or product balances from the calculation.
Can a director’s payroll be recorded in account 8410? — The payroll of the head of the organisation as a whole is usually recognised as an administrative expense. If the employee directly manages a production department, the classification is determined based on their actual functions and documents, while the production-related portion of the expenses is allocated in accordance with the adopted methodology.
What should be done if account 8410 has already been closed to account 7210? — Check the composition of the transferred amounts. The production-related portion must be returned to the adopted costing procedure, while the administrative portion may remain in account 7210 if there are grounds for doing so. The correction must be documented and the necessary closing operations must be performed again.
Should account 8410 have a balance at the end of the month? — The answer depends on the adopted accounting model and closing settings. An unexplained balance requires analysis: unallocated amounts, the allocation basis, analytical accounting, documents and completion of routine operations must be checked.
Can the error be corrected with a single entry, Dr 7210 Cr 8410? — A reclassification may be recorded if documents confirm the administrative nature of the expense and the entry complies with the rules for correcting errors. Such an entry must not be used to transfer all production overheads to account 7210.
How can payroll be corrected in a closed period in the payroll program? — First identify the original document and the correct method for recording the accrual, and then record the adjustment using a document available in the configuration being used. After posting the correction, reconcile the amounts, accounts and analytical accounting with the accounting database.
Sources
- Tax Code of the Republic of Kazakhstan, Article 220 “Specific aspects of tax accounting”.
- Tax Code of the Republic of Kazakhstan, Article 270 “Deduction of expenses relating to accrued employee income and certain employer expenses that are not an individual’s income”.