Professional Documents
Culture Documents
Decision 15/2006/QD-BTC
PREFACE
Accompanying with twenty-two Vietnamese Accounting Standards that have been released, the
Ministry of Finance issued a comprehensive set of accounting system the Decision
15/2006/QD-BTC (the Decision 15) applied for all business entity including the foreign
invested companies doing business in Vietnam.
Wishing to convey these regulations to foreign investors (existing and future) in Vietnam and also
the interested professionals abroad, we, KTC Assurance & Business Advisors, have obtained
approval and assistance from the Department of Accounting and Auditing Policy of the Ministry
of Finance to make an unofficial translation of these regulations into English.
KTC Assurance & Business Advisors is a professional accounting firm committed to providing
high quality service to our clients. At KTC, we are focusing on providing value added services
which bring to our client practical and cost-effective
cost-effective solutions to their business issues. We have
office in Hanoi and a representative office in Ho Chi Minh City.
Our translation and edition team is led and reviewed by highly qualified specialists, including
Noli Encarnacion, Long Duc Ngo, Hung Duy Pham, Linh Thuy Do and Anh Van Thai who have
practices in Vietnam and overseas. Since this is
from ten to twenty years experience in accounting practices
the first edition being published, we would be much appreciated to receive any advice or
comments from our readers for our continuous improvements.
KTC Assurance & Business Advisors would like to express sincere thanks to the Department of
Accounting and Auditing Policy y of the Ministry of Finance, especially Professor Bui Van Mai
for his kind assistance and encouragement.
Our sincere thanks are also expressed to our other committed and hard-working team members,
namely Tam Thanh Hoang, Huong Dieu Le, Hong Bich Nguyen, Toan Duy Nguyen, Hien Luong
Thu, Tam Thanh Phan, Mai Anh Phan and Lan Thi Van.
While every effort has been made to ensure that the translation reflects the form and spirit of the
Decision 15, KTC accepts no responsibility for any loss and/or damage resulted from your
reliance on this translation. Further inquiries and/or advice on this publication should be
addressed to:
KTC Assurance & Business Advisors
Suite 237, 33A Pham Ngu Lao
Hoan Kiem, Hanoi, Vietnam
URL: www.ktcvietnam.com.
Telephone: +84-4-933 4057
Email: ktc@ktcvietnam.com
Att: Linh Thuy Do (Mrs)
DECISION
on promulgation of the Corporate Accounting System
- Pursuant to the Accounting Law No. 03/2003/QH11 dated 17 June 2003 and Decree No.
129/2004/N -CP dated 31 May 2004 of the government detailed stipulating and guiding the
implementation of some regulations of Accounting Law on business activities;
- Pursuant to the Decree No. 77/2003/N -CP dated 1 July 2003 of the Government stipulating
the function, responsibility, right and organizati
organizational
onal structure of the Ministry of Finance;
DECIDES
Article 1:: Promulgate the Enterprise Accounting System applicable to enterprises in all fields
of business and economic sectors. The Enterprise
Enterprise Accounting System includes:
Article 2:: Entrepreneurs, companies, corporations based on the Corporate Accounting System
study, tailor and set up their accounting system with detailed contents and application met the
business features as well as management requirements of each business field, economic sector.
Any amendment or supplement to class 1 and class 2 sub-accounts or amendment on presentation
of financial statements should be allowed by the Ministry of Finance in official documents.
Article 3: This Decision comes in to effect 15 days from the gazette day. Only the regulation of
Preparation of interim consolidated financial statements in the Point 4 Responsibility of
preparing and disclosure of financial statements, Item I/A Part Two is applicable from the year
of 2008.
This Decision replaces the Decision No. 1141TC/QDD/C KT dated 1 November 1995 of the
Minister of Finance promulgating the Corporate Accounting System, Decision No.
167/2000/Q -BTC dated 25 October 2000 of the Minister of Finance issuing Enterprise
Financial Statements System and Decrees of No. 10TC/C KT dated 20 March 1997 Guidance
on amendment, supplement of Corporate Accounting System; Decree No. 33/1998/TT-BTC
dated 17 March 1998 Guidance on making and using of provision for obsolete stock, provision
for doubtful debt, provision for price reduction of securities in State owned enterprises; Decree
Article 5:: Ministries, ministry-like offices, Peoples Committees of provinces and centrally
controlled cities are responsible for guiding; developing the application of Corporate Accounting
developing
System promulgated in compliance with this D ecision in dependent units or authorized area.
Decision
Article 6:: Director of Accounting and Auditing Policy Department, Chief of Ministrys Offices,
Director of the Enterprise Finance Department, Di rector of the General Department of Tax and
Director
Head of related Departments of Ministry of Fi nance are responsible for guidance, monitor and
Finance
implementation of this Decision.
Tran Van Ta
PART I
CHART OF ACCOUNTS
I. GENERAL REGULATIONS
1. Chart of accounts is used to classify and systemize the economic transactions by their nature.
Chart of accounts applied for business entities consists of class 1 and class 2 sub-accounts,
balance sheet accounts and off balance sheet accounts.
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
CATEGORY 1
CURRENT ASSETS
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
CATEGORY 2
NON-CURRENT ASSETS
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
2113 Transportation and facilities
2114 Office equipment
Perennial trees, working and producing
2115 animals
2118 Other tangible assets
26 212 Finance lease assets
27 213 Intangible assets
2131 Land Use rights
2132 Mastheads and publishing titles
2133 Copy rights, patents
2134 Brand names
2135 Computer software
2136 Licenses and franchises
2138 Other intangible assets
Accumulated depreciation and
28 214 amortization
2141 Accumulated depreciation on fixed assets
Accumulated depreciation on finance lease
2142 assets
2143 Amortization of intangible assets
2147 Amortization of investment property
29 217 Investment property
30 221 Investment in subsidiaries
31 222 Shares in joint ventures
32 223 Investment in associates
33 228 Other long-term investments
2281 Equity securities
2282 Debt securities
2288 Other long-term investments
34 229 Provision for long-term investments
35 241 Construction in progress
2411 Acquisition of fixed assets
2412 Construction in progress
2413 Extraordinary repairs
36 242 Long-term prepaid expenses
37 243 Deferred tax assets
38 244 Long-term deposits
CATEGORY 3
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
LIABILITIES
39 311 Short-term loan
40 315 Current portion of long-term loan
41 331 Trade payables Maintain in details
42 333 Tax and statutory obligations
3331 VAT
33311 Output VAT
33312 Import VAT
3332 Special consumption tax
3333 Import, export duties
3334 Profit tax
3335 Personal Income tax
3336 Natural resource tax
3337 Land and housing tax
3338 Other taxes payable
3339 Fees, duties and other obligations
43 334 Payables to employees
3341 Payable to employee salary
3342 Other payable to employees
44 335 Accruals
45 336 Inter-company payables
For construction
contract in which
Contraction contractor payables based on payment made by
46 337 agreed progress billing progress
47 338 Other payables
3381 Surplus of assets waiting for resolution
3382 Trade union fees
3383 Social insurance payable
3384 Health insurance payable
Payable from equitization (applicable to
3385 privatized SOEs only)
3386 Receipt of deposits and pledges
3387 Deferred income
3388 Other payables
48 341 Long-term loans
49 342 Long-term payable
50 343 Bond issued
3431 Bond cost
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
3432 Bond discount
3433 Bond premium
51 344 Long-term deposits received
52 347 Deferred tax liabilities
53 351 Provision for severance allowance
54 352 Provisions
CATEGORY 4
OWNERS EQUITY
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
66 466 Sources for acquisition of fixed assets
CATEGORY 5:
REVENUES
67 511 Sales
5111 Sales of merchandise
Maintain in details
upon management
5112 Sales of products requirement
5113 Service revenues
5114 Revenue from subsidies
5117 Sales from property investment
Sales to
68 512 Inter-company revenue subsidiaries
5121 Sales of merchandise
5122 Sales of products
5123 Service revenues
CATEGORY 6
PRODUCTION COSTS AND COST
Applied for
periodic inventory
73 611 Purchases method
6111 Purchases of raw material
6112 Purchases of merchandise
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
6234 6234 Depreciation
6237 6237 Service rental
6238 Sundry cash expenses
77 627 Factory overhead costs
6271 Indirect labour
6272 Use of auxiliary materials
6273 Use of tools and supplies
6274 Depreciation
6277 Services rendered
6278 Sundry cash expenses
Periodic inventory
78 631 Cost of products manufactured method
79 632 Cost of goods sold
80 635 Financial expenses
81 641 Selling expenses
6411 Sales salary expenses
6412 Packaging and indirect materials
6413 Consumable and office supplies
6414 Depreciation
6415 Warranty expenses
6417 Rendered services
6418 Sundry cash expense
82 642 General and administration expenses
6421 Office salaries
6422 Consumable and office supplies
6423 Office supplies
6424 Depreciation
6425 Taxes, fees and charges
6426 Expenses from provisions
6427 Services rendered by outsiders
6428 Sundry cash expenses
CATEGORY 7
OTHER INCOME
CATEGORY 8
OTHER EXPENSES
Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
CATEGORY 9
INCOME SUMMARY
CATEGORY 10
OFF BALANCE SHEET ACCOUNTS
Maintain in details
upon management
002 Goods held under trust or for processing requirement
CATEGORY I
CURRENT ASSETS
This account records both the balance and movements of the current assets in a business.
Current assets are those assets owned by the enterprise and their benefits are fully realised within
one year or within the companys business cycle. Current assets may be cash, inventory, short
term investments and other receivables.
Current assets of the business include: cash, short term investments, receivables, inventories, and
itures from subsidies of the State Budget.
other current assets. It also includes expenditures
1. When accounting for current assets, the accountant must comply with those regulations stated
for each individual current asset including cash, short term investments, receivables, short
term deposit, inventories.
2. Short term investments, receivables and inventory should be recorded at cost. However, at the
end of the fiscal year these accounts must be re -valued at the lower of cost or market value
re-valued
(net realisable value).
Current assets have 24 accounts which are classified into six groups:
GROUP 11
CASH
The cash account records both the balance and movements of cash of the entity including: cash on
hand, cash in banks and cash in transit.
1. Cash must be accounted for in VND, except for being authorized to use another common
currency.
2. For entities which enter into foreign currency transaction, the foreign currency must be
converted into VND using the exchange rate at the date of transaction (either the actual
exchange rate or the average inter-bank exchange
exchange rate ruling on the foreign currency market
stipulated by the State Bank of Vietnam at the date of transaction) for recording.
If the entities buy foreign currency for cash on hand or to deposit at the banks or to settle
payment by using VND, the foreign currency must be converted into VND using either
buying exchange rate or exchange rate at the the date of payment. The entities should record in
those foreign currencies into VND in the credit side of accounts 1112, 1122 at the stipulated
exchange rates on account 1112, 1122 using one of following methods: average cost; first in -
first out; last in - first out; actual cost (foreign currency is treated as a special product).
converted
Foreign currency transaction needs to be convert ed into VND and also recorded in original
currency individually. Differences due to changes in the exchange rate are to be recorded in
financial income/ expenses account (applying in construction stage and also for enterprise
which is operating in construc
construction)
tion) or account 413 (applying for enterprise in pre-operating
construction stage). The period end balances of foreign currency cash accounts are to be
retranslated at the average inter-bank foreign currency rates stipulated by the State Bank of
Vietnam as at the balance sheet date.
Foreign currencies are also recorded individually in account 007 Multi-foreign currencies
recorded
(Off balance sheet accounts).
3. Gold, silver, precious metals and gemstones may be recorded in the cash account only for the
entities that are not in the business of dealing
dealing/trading in gold, silver, precious metals and
gemstones.
A company should maintain detailed records of gold, silver and gemstones and for each item
the quantity, weight, quality and value should be maintained. Gold, silver, precious metals
and gemstones should be recorded at market price (billing price or purchase price).
One of four inventory methods may be applied when gold, silver, precious metals and
gemstones are sold.
ACCOUNT 111
CASH ON HAND
This account records the cash receipts, cash payments and cash balance of the entity including:
cash on hand in VND and foreign currencies, gold, silver, precious metals and gemstones.
1. Only records cash receipts and cash payments of cash on hand and foreign currencies on
hand. Receipts are being deposited directly into the bank (not through the safe of the entity)
should not be recorded in debit side of account 111 Cash on hand. Such amounts should be
debited to account 113 Cash in transit.
2. Other cash deposits from other entities and pepersonal mortgages and collateral must be
managed and recorded in the same way as assets of the entity.
3. Upon cash receipts or payments, accountant must issue the official receipt or payment
and authorized person according to relevant
voucher with signature of receiver, payee and
regulations on supporting documents. In special cases, approval for transferring or receiving
must be attached.
5. The cashier is responsible for managing and controlling cash in and cash out. The cashier
compare the results of the count to the balance
must perform a cash count on a daily basis and compare
per cash book and cash ledger. Any differences mu st be investigated for reasons by the cash
must
accountant and cashier and a solution is proposed to resolve the differences.
proposed
6. For entities which enter into foreign currency transaction, the foreign currency must be
converted into VND using the exchange rate at the date of transaction (either the actual
exchange rate or the average inter-bank exchange
exchange rate ruling on the foreign currency market
stipulated by the State Bank of Vietnam at the date of transaction) for recording.
If the entities buy foreign currency for cash on hand or to deposit at the banks or to settle
payments by using VND, the foreign currency mu must be converted into VND using either
buying exchange rate or exchange rate at the date of payment. The credit side of account
1112 should be converted into VND using the rate in account 1112 using one of following
methods: average cost; first in - first out; last in - first out; actual cost (foreign currency is
treated as a special product).
Foreign currencies are recorded individually in account 007 Multi-foreign currencies (Off
balance sheet accounts).
7. Gold, silver, precious metals and gemstones may be recorded in the cash accounts for entities
which are not in the gold, silver, value metals and gemstones trading/dealing business. For
those companies in the business of dealing/trading in gold, silver, precious metals and
gemstones, the receipts and dispatches are recorded as inventories. When they are used for
payment purpose, they can be recorded as foreign currency.
Debit:
- Receipts of cash on hand, foreign currency, gold, silver, value metals and gemstones on hand
at the company premises.
- Surplus of cash, foreign currencies, gold, silver, precious metals and gemstones following the
stock count and the cash count minute.
- The gain on foreign exchange difference resulted from revaluation of foreign currencies at the
end of period (foreign currencies on hand).
Credit:
- Payment of cash on hand, foreign currency, gold, silver, precious metals and gemstones on
gold,
hand at the company premises.
- Shortage of cash on hand, foreign currencies, gold, silver, precious metals and gemstones on
hand following the cash count and stock taking minute.
- The loss on foreign exchange difference resulted from revaluation of foreign currencies at the
end of period (foreign currencies on hand).
Debit balance:
- Cash on hand, foreign currency, gold, silver, precious metals and gemstones on hand at the
premises.
Account 1111 Cash in VND: to record the receipts, payments and balance of cash on hand in
VND including bank notes at the company's premises.
Account 1112 - Cash in foreign currencies: to record the receipts, payments and balance of cash
in foreign currencies at the company's premises at equivalent VND
Account 1113 Gold, silver, precious metals and gemstones: to record the issued in/out and
balance of gold, silver, precious metals and gemstones.
MAJOR TRANSACTIONS
- If goods and services are subject to subtraction method VATand the entity pays VAT in
subtraction method, the accountant records receipts from sale of goods and rendering of
services at price excluding VAT:
- If goods and services are not subject to VAT or subject to VAT using direct method, the
accountant records receipts from sale of goods and rendering of services at total receipts:
3. Cash receipts from other financial activities, other incomes which are subject to subtraction
method VAT and the entity pays VAT in subtraction
subtrac method (for example receipts of interest
from short term investment, long term investment, receipts from disposal and transfer of fixed
assets):
4. Cash receipts from financial activities, other incomes subject to subtraction method VAT or
not subject to VAT and the entity pays VAT using direct method:
5. Cash receipts from withdrawals from the bank accounts; from long term loans, short term
loans, other (in VND or foreign currencies):
7. Cash receipts from short term investments, deposits, collateral or mortgage or receipts of
repayment of investment:
8. Cash receipts of deposits, mortgages and collaterals in VND or foreign currencies from other
entities:
9. Surplus of cash on hand resulting from cash count waiting for resolution:
14. Cash payments for fixed assets acquisition for immediate uses:
- Acquiring fixed assets using in producing goods and services which are subject to subtraction
method VAT:
- Acquiring fixed assets used for production of goods and services which are subject to VAT
using direct method; or not subject to VAT; or for administration activities, projects funded
by State Budget; or in cultural and welfare activities funded by bonus and welfare fund:
If the fixed assets acquired by fixed assets fund or investment and development fund are used
for production, the accountant records an increase in capital contribution. At the finalization
of the fixed assets funds, the record should be:
15. Cash payment for construction costs, large repair or purchase of fixed assets that needs
installation process before being used in the production of goods and services which are
subject to subtraction method VAT:
16. Cash payments for purchases of materials, tools and supplies and merchandises using in
production of goods and services which are subj
subject
ect to subtraction method VAT (perpetual
inventory method):
19. Cash payment for materials purchased for immediate use in production of goods and services
which are subject to subtraction method VAT of which the entity pays VAT in subtraction
method:
22.1 Recording cash on hand transactions in fore ign currency of production and trading period
foreign
(applying for production and trading entities under construction stage)
- If foreign exchange loss arisen as result of external purchase of merchandise, goods, fixed
assets and services:
Dr. 151, 152, 153, 156, 157, 211, 213, 241, 623, 627, 641, 642, 133
(using exchange rate at the date of transaction)
Dr. 635 Financial expenses (loss on foreign exchange difference)
Cr. 111 (1112) (using the entitys current exchange rate)
- If foreign exchange gains arisen as result of external purchase of merchandise, goods, fixed
assets and services:
Dr. 151, 152, 153, 156, 157, 211, 213, 241, 623, 627, 641, 642, 13
(using exchange rate at the date of transaction)
Cr. 111(1112) (using the entitys current exchange rate)
Cr. 515 Financial incomes (gain on foreign exchange difference)
At the same time, single entry is credited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
- If the entities receive materials, merchandises, fixed assets from suppliers; or borrow short
term or long term loans, long term liabilities, or inter-company payable etc in foreign
currencies, by using the exchange rate at the date of transaction, the record should be:
b. Cash payment to creditors (trade payable, short-term loans, long term loans, long term
liabilities, inter-company payable etc.)
Dr. 311, 315, 331, 336, 341, 342
(using the entitys current exchange rate)
Dr. 635 Financial expenses (loss on foreign exchange difference)
Cr. 111 (1112) (using the entitys current exchange rate)
At the same time, single entry is credited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
Dr. 311, 315, 331, 336, 341, 342
(using the entitys current exchange rate)
Cr. 515 Financial income (gain on foreign exchange difference)
Cr. 111 (1112) (using the entitys current exchange rate)
Dr. 111 (1112) (actual exchange rate or average inter-bank exchange rate stipulated by SBV)
Cr. 511, 515, 711... (actual exchange rate or average inter-bank exchange rate stipulated
by SBV)
At the same time, single entry is debited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
22.2 Cash transactions during the period relating to foreign currencies in construction investment
period (pre-operating stage):
a. External purchase of materials, services, fixed assets, equipments and construction and
installation volume from suppliers or contractors:
- Foreign exchange loss resulted from payment to suppliers and contractors in acquiring
materials, services, fixed assets, equipments and construction and installation volume:
Dr. 151, 152, 211, 213, 241
(using exchange rate at the date of transaction)
Dr. 413 Foreign currencies difference (4312) (loss on foreign exchange difference)
Cr. 111 (1112) (using the entitys current exchange rate)
At the same time, single entry is credited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
- Foreign exchange gain resulted from payment to suppliers and contractors in acquiring
materials, services, fixed assets, equipments and construction and installation volume:
Dr. 151, 152, 211, 213, 241
(using exchange rate at the date of transaction)
Cr. 111 (1112) (using the entitys current exchange rate)
Cr. 413 Foreign currencies difference (4132) (gain on foreign exchange difference)
Dr. 311, 315, 331, 336, 341, 342
(using the entitys current exchange rate)
Dr. 413 Foreign currencies difference (4132) (gain on foreign exchange difference)
Cr. 111 (1112) (using the entitys current exchange rate)
Dr. 311, 315, 331, 336, 341, 342
(using the entitys current exchange rate)
Cr. 111(1112) (using the entitys current exchange rate)
Cr. 413 - Foreign currencies difference (4132) (Gain on foreign exchange difference)
At the same time, single entry is credited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
c. Annually, realized foreign exchange difference arisen in construction investment period (pre-
operating stage) are accumulated in account 413 Foreign exchange difference (4132) until
the construction is completed and brought in use. The foreign exchange difference is treated
in accordance with the current regulations (refers to guidance of account 413 Foreign
exchange difference).
22.3. Accounting for foreign currencies difference due to revaluation of cash balance in foreign
currencies at the end of fiscal year.
At the end of fiscal year, the entity must revalue the balance of account 111 Cash on hand
in foreign currency using the exchange rate of the fiscal year end date (the average inter-bank
exchange rate ruling by the SBV at the closing date of the financial statements). This
revaluation may result in foreign currencies difference. The entity must keep track details of
the foreign currencies difference arising from revaluation foreign currencies in construction
investment period (pre-operating stage) (account 4132) and in normal business operation
stage (account 4131).
ACCOUNT 112
CASH IN BANK
1. Recording in account 112 Cash in bank is based on the following documents: debit notes,
credit notes, copies of deposit acknowledgements and enclosed original evidence from the
bank (authorized payment and receipt vouchers, bank transfers and bank notified cheques,
etc.).
2. When receiving bank documents, accountant must check and compare these with the original
evidences. If there is a difference between thee account balance per the bank reconciliation and
the amount omen the original evidence, the accountant should inform the bank in order to
ensure the matter is investigated ed and resolved with mutual agreement. At the end of the
month, should resolutions of the matter still be outstanding, the balance per the bank
documents such as debit notes, credit notes or copies of deposit acknowledgement
acknow should be
recorded. The difference is debited to account 138 Other receivable (1388) (if the balance
per accounting records is greater than the bank documents); or credited to account 338 Other
payable (3388) (if the balance per accounting bo ok is less than the bank documents). The
book
difference should be followed up for examining, reconciling and investigating for resolution
in the next month.
3. For entities which have related organizations, departments without using separate accounting
system, separate bank accounts can be opened to facilitate the payment and receipt
transactions process. The accountant should kkeep
eep a sub-ledger for each account for each
currency (in VND or foreign currencies).
Cash deposited into bank in foreign currencies is converted into VND using the actual
exchange rate or the average inter-bank exchange rate ruling by the State Bank of Vietnam at
the date of transaction (the average inter-bank exchange rate of SBV).
inter-bank
Withdrawing foreign currencies from the bank should be converted into VND using the
exchange rate which is being used in the sub-ledger of account 1122 applying one of
following methods: Average cost, First in - first out, Last in - first out, Actual cost.
5. At the stage of production and business (applying for both entity in construction stage and
enterprise operating in construction industry), the transactions relating to foreign currency
difference arisen from foreign currency deposits into bank accounts is credited in account 515
Financial income (foreign exchange gain) or debited in account 635 Financial expenses
(foreign exchange loss).
6. In case there is foreign exchange difference resulted from the transactions in foreign
currencies occurred in construction investment period (pre-operating stage), the difference
should be recorded in account 413 Foreign exchange difference (4132).
Debit:
- Cash in VND, in foreign currencies, gold, silver, precious metals and gemstones deposited
into the banks.
- Gain on foreign exchange difference resulted from revaluation of the bank balance in foreign
currencies at the end of the period.
Credit:
- Cash in VND, in foreign currencies, gold, silver, precious metals and gemstones withdrawn
from the banks.
- Loss on foreign exchange difference resulted from revaluation of the bank balance in foreign
currencies at the end of the period.
Debit balance:
Account 1123 Gold, silver, precious metals, gemstones: to record the value of gold, silver,
precious metals and gemstones deposited in the bank.
MAJOR TRANSACTIONS
2. Receipt of credit notes from bank advising cash in transit deposited to the bank account of the
entity:
3. Receipt of deposit from customer or collection of receivables made through bank account.
Based on credit notes, the accountant records:
5. Receipt of capital contribution, shares in join ventures from investors through bank account:
17. Payment of sales discounts, sales returns, sales allowances which are subject to subtraction
method VAT and the entity paid subtraction method VAT by bank transfer:
19.1 Recording foreign currency transactions arisen in the period related to the business
activities, including construction activities of the production and business entity
a. Purchase materials, tools and supplies, merchandises, fixed assets, services in foreign
currencies through bank:
- If foreign exchange loss resulted from external purchase of materials, merchandises, fixed
assets and services:
Dr. 151, 152, 153, 156, 211, 213, 241, 623, 627, 642, 641, 133
(using exchange rate at the date of transaction)
Dr. 635 Financial expenses (loss on foreign exchange difference)
Cr. 112 Cash in bank (using the entitys current exchange rate)
At the same time, single entry is credited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
- If foreign exchange gain resulted from external purchase of materials, merchandises, fixed
assets and services:
Dr. 151, 52, 153, 156, 211, 213, 241, 623, 627, 641, 642, 133
(using exchange rate at the date of transaction)
Cr. 112 (1122) (using the entitys current exchange rate)
Cr. 515 Financial income (gain on foreign exchange difference)
- Payment to creditors (trade payable, short term loans, long term loans, long term liabilities,
inter-company payable etc.)
Dr. 311, 315, 331, 336, 341, 342 (using the entitys current exchange rate)
Dr. 635 Financial expenses (loss on foreign exchange difference)
Cr. 112 (1122) (using the entitys current exchange rate)
Dr. 311, 315, 331, 336, 341, 342 (using the entitys current exchange rate)
Dr. 515 Financial income (gain on foreign exchange difference)
Cr. 112 (1122) (using the entitys current exchange rate)
At the same time, single entry is credited to account 007 (Off balance sheet accounts).
At the same time, single entry is debited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
At the same time, single entry is debited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
At the same time, single entry is debited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
Dr. 151, 152, 211, 213, 241
(using exchange rate at the date of transaction)
Dr. 413 Foreign currencies difference (4312) (loss on foreign exchange difference)
Cr. 112 (1122) (using the entitys current exchange rate)
At the same time, single entry is credited to account 007 - Multi-foreign currencies (Off
balance sheet accounts).
Dr. 151, 152, 211, 213, 241
(using exchange rate at the date of transaction)
Cr. 112 (1122) (using the entitys current exchange rate)
Cr. 413 Foreign currencies difference (4132) (gain on foreign exchange difference)
At the same time, single entry is credited to account 007 - Multi-foreign currencies (Off
balance sheet accounts).
b. Payment to creditors (account payables, long term loans, inter-company payable (if any), etc.)
in foreign currencies
Dr. 311, 315, 331, 336, 341, 342
(using the entitys current exchange rate)
Dr. 413 Foreign currencies difference (4132) (gain on foreign exchange difference)
Cr. 112 (1122) (using the entitys current exchange rate)
At the same time, single entry is credited to account 007 Multi-foreign currencies (Off
balance sheet accounts).
Dr. 311, 315, 331, 336, 341, 342
(using the entitys current exchange rate)
Cr. 112 (1122) (using the entitys current exchange rate)
Cr. 413 - Foreign currencies difference (4132) (gain on foreign exchange difference)
At the same time, singer entry is credited to account 007 - Multi-foreign currencies (Off
balance sheet accounts).
c. Annually realized foreign exchange difference arisen in capital construction stage (pre-
operating stage) are accumulated in account 413 Foreign exchange difference (4132) until
the construction is completed and put in use. The foreign exchange difference is treated
according to the current regulations (refers to instruction of account 413 Foreign exchange
difference).
19.3 Accounting for foreign currencies difference due to revaluation of cash balance in foreign
currencies at the end of fiscal year
At the end of fiscal year, the enterprise must revalue the balance of account 112 Cash in
bank in foreign currency using the exchange rate of the fiscal year end date (the average
inter-bank exchange rate ruling by the SBV at the the closing date of the financial statements).
This revaluation may arise foreign exchange difference.
difference. The enterprise must keep track in
details the foreign currencies difference arising
arising from revaluation foreign currencies in capital
construction stage (pre-operating) in account 4132 and in business operation stage in account
4131.
ACCOUNT 113
CASH IN TRANSIT
This account records cash transferred to the bank, the State treasury for which the bank/State
treasury credit notes have not been received or cash payment to other enterprise from bank
account with completeness of procedures for transferring but has not received debit notes or bank
statement.
Cash in transit includes VND and foreign currency in the following cases:
- Cash receipts from sales are being used to pay tax at the same time (cash transactions
between three parties: the enterprise, the buyers and the State Treasury).
Debit:
- Cash in VND, foreign currency or by cheque is deposited into the bank or transferred into the
bank by the post office for which the bank credit notes have not been received.
- Gain on foreign exchange difference resulted from revaluation of cash balance in foreign
currencies in transit at the end of the period.
Credit:
-
.
Debit balance
113 sub
MAJOR TRANSACTIONS
1. Cash receipts from sales, receivable or other income in cash or by cheque deposited directly
to the bank (not through companys premises) for which the bank advice has not been
received confirming the transactions:
2. Deposit cash on hand into bank for which bank advice confirming deposit is not yet received:
3. Payment to creditors from cash in bank for which bank advice confirming payment is not yet
received:
4. Cheques received from customer and deposited to bank for which bank advice confirming the
transaction not yet received:
7. At the end of the period, the enterprise must revalue cash balance of foreign currencies in
aver
account 113 Cash in transit based on the average inter-bank exchange rate ruling by the
State Bank of Vietnam:
ACCOUNT 121
This account records investments which will mature or be sold within one year.
- Other shares.
1. Short term investments should be recorded at th eir actual cost (historical cost). This cost
their
includes: purchase price plus other expenses (if any) such as broker's expenses, taxes, bank
charges.
2. Short term investments include long term investments which are to be sold or matured within
investments
a year.
4. The accountant should maintain details with regards to each individual investment. The
investment categories, investment
details which should be maintained are: the investment invest partner, the par
value and market value of the stock.
Debit:
Credit:
The value of the short-term investments which have been sold, matured or liquidated.
Debit balance
Account No. 1211 Shares: to record shares being purchased and sold.
Account No. 1212 – Bonds, bills, promissory notes: to record bonds, bills, promissory notes being
purchased and sold.
MAJOR TRANSACTIONS
1. Purchase short term investments based on the actual price (i.e. including purchase price,
brokerage expenses, taxes, bank charge, etc.):
a) Earned interest is reinvested into bonds, bills (i.e. money is not through the entitys premise)
c) Earned interests including accumulated inter ests generated before being purchased by the
interests
company should be recorded separately. Interests generated since being purchased by the
company is recorded in financial income. Accumulated
Accumulated interests generated before being
purchased by the company is deducted against
against the value of the investment.
a) Gain:
b) Loss:
ACCOUNT 128
This account records the balance and movements of other short term investments including loans
and borrowings which will mature or be sold within one year.
When investments are made in cash or in commodities (e.g. fixed assets, raw materials, goods,
etc.), the value of the commodities must be agreed by the parties. Any difference between the
book value and the agreed upon value should be either debited to account 811 or credited to
account 711.
The accountant should maintain a sub-ledger for individual investment and loans and borrowings.
Debit:
Credit:
Debit balance:
The value of the short term investments at the end of the period.
Account No. 1281 – Short term deposits: to record movements and balance of short term deposits
Account No. 1288 – Other short term investments: to record movements and balance of other
short term investments.
MAJOR TRANSACTIONS
2. Short-term investments made through the contribution of raw materials, finished and
merchandise goods which will be held within one year:
a. If the accepted value of the materials and goods is higher than the book value:
and goods).
b. If the accepted value of materials and goods is less than the book value:
ACCOUNT 129
This account records balance and movements of provisions for short tem investments.
The provision for short term investments is used to write down the value of short tem investments
when its market value is less than cost.
1. The provision/reversal of provision for short term investments can be made at the end of the
fiscal year when the accounting records are closed for financial year end. For entities issuing
the interim financial statements, provision/reverses
provision/reverses on provision will be adjusted if there is
significant movement in the value of the investments
2. The provision for short term investments is provided upon the difference between the net
realizable value (market price) and the historical cost in the accounting book. If the provision
period is greater than the provision required in the
for short term investments required in this period
increase in the financial expenses of the period.
prior period, then the difference should be an increase
required in this period is less than the provision
If the provision for short term investments required
required in the prior period, the difference should be deducted from to the financial expenses.
- Those securities are freely traded in the market and their market prices are lower than their
book value at the time of stock-taking or financ
financial
ial statements are issued (provisions should
not be made for securities which are not freely traded in the market).
4. The provision for short term investments should be made for each individual investment with
a price decreased at the end of the financial
financial year in the following formula:
The entity must quantify the provisions required for each individual investment that is
diminuted in value and a list of provisions for diminution in value of short term investments
are summarized and compared with those of prior period in order to quantify the figure to
adjust in the financial expenses.
Debit:
Reversal of provisions for short term investments due to the provision required in this period is
lower than the provision provided in prior period.
Credit
Provisions for short term investments (initial provision required and the difference between
provision required in this period and the provision provided in the prior period).
Credit balance
MAJOR TRANSACTIONS
1. At the end of the accounting period, the account ant should provide initial provision for the
accountant
diminution in value of short term investments:
- If the provision for short term investments required in this period is greater than the provision
required in the prior period, the difference sshould
hould be added to financial expenses as follows:
ACCOUNT 131
ACCOUNTS RECEIVABLE
This account records the balance and movements of receivables from customers from the sales of
products, goods, services of the entities
This account also records the amounts receivable from contractors on construction work
completed.
1. The accounts receivable should be recorded in details for each customer, nature of the amount
receivable, short term and long term receivables and for each time of receipt.
Trades receivable are receivables from customers who purchase products, goods, or services
and also include fixed assets and investment properties.
Debit:
- Amounts receivable from customers on the sale of products, goods, investment properties,
fixed assets and rendering of services.
Credit:
- Price discounts allowed due to complaints by customers on the basis that the supplied goods
do not comply with the sales agreement.
Debit balance:
Accounts receivable may have credit balances. These credit balances represent deposits or excess
amounts received from customers. The debit and credit balances of each individual customer
should be presented separately in assets or liabilities in the balance sheet respectively.
MAJOR TRANSACTIONS
1. Recognize the sale of products, goods, investment properties and rendering of services:
- With respect to goods, services and investment properties which are subject to subtraction
method VAT and the entity pays subtraction on method VAT. Sales are recorded at VAT-
exclusive price as follows:
- With respect to goods, services and investment properties which are not subject to VAT or
subject to subtraction method VAT, sales are recorded at total amount:
With respect to goods and services are subject to subtraction method VAT and the entity pays
subtraction method VAT
With respect to goods which are not subject to VAT or subject to credit VAT in direct
method
If the goods/services supplied to the customer do not comply with the economic contract,
they may be discounted on the price. If the customers have not paid for the receivables, based
on documents which confirmed the discount, the accountant can write down receivable to
discounted amount as follows
In the case, goods and services are not subject to VAT or subject to direct subtraction method
VATor subject to indirect subtraction method VAT while entity pays VAT using the direct
method
Cash receipts from sale of goods, products, rendering of services and sales of investment
properties (including interest charged on receivable, if any):
7. Record deposits received from the customers from sale contracts or service contracts:
8.1 If the term of the construction contract stipulates that the contractor is allowed to make
payments according to an agreed process billing, the construction contract performance result
is reliably estimated, by referencing to the completed volume determined by the contractor
regardless of whether invoices according to the set schedule have been billed, the accountant
records the following:
Based on invoice issued according the agreed progress billing, the accountant records:
8.2 If the construction contract stipulates that the contractor is allowed to make payments
according to the value of work volume performed, the contract performance result is reliably
determined and certified by customers, the accountant should issue invoice based on the
completed work volume certified by the customers in the period and records based on the
issued invoice:
8.3 Bonuses received from customers that are additionally paid to contractors due to completion
of contracts beyond contractual requirements:
8.4 Additional receivables from the customer or other parties to offset extra costs which are not
covered in the contractual price (e.g. delay caused by the customers, errors in technical or
designing specifications, and disputes over changes in the contract performance):
8.5 When receiving cash payments for completed work or cash deposit from customer, the
accountant records:
9.2 When transferring money or using bank loans to open LC (payment made in Letter of Credit),
based on the supporting documents, record as:
9.3 When importing materials, equipments and products, the entity needs to reflect the
followings:
- If consignee pays the seller total amount of mechandise on behalf of the consignor, based on
related documents, the accountant records:
- If the merchandises received and transfered directly to the consignor without going through
the consignees premises, the accountant records:
- If import tax is paid on behalf of the consignor, based on related documents, the accountant
records:
In the case, the merchandises received and transfered directly to the consignor without going
through the consignees premises:
- If import VAT is paid on behalf of the consignor, based on related documents, record as:
In the case, the merchandises received and transfered directly to the consignor without going
through the consignees premises:
- If special consumption tax is paid on behalf of the consignor, based on related documents,
the accountant records:
In case the merchandises received and transfered directly to the consignor without going
through the consignees premises, the accountant records:
- When transfering the merchandises to the consignor, based on VAT invoice and related
documents, the accountant records:
9.4. With respect to consigment charge and VAT on the service charge, based on the VAT
invoice and other related documents, the accountant records the revenue from consignment fees:
9.5. With respect to surcharges paid on behalf of the consignor (e.g. bank charge, customer
research fees, storages, handling fees or delivery fees...), based on related documents, the
accountant records:
9.6. With respect to receipts from the consignor for mechandise value, import tax, import VAT,
se taxes to the State Treasury on behalf of the
special consumption tax (if the consignee paid those
consignor), and charges araising from import consignment services, the accountant records:
9.7. When making payment for mechandise to the seller on behalf of consignor:
9.8. When making payment for import tax, VAT, special consumption tax to State Treasury on
behalf of the consignor, based on related documents, the accountant records:
related
9.9. In case the import consignee performs custom and tax application but the consignor pays
taxes itself, the amount of taxes that are paid by the consignor should be recorded as follows:
10. If the consignor pays seller by merchandise rather than in cash (bartering transactions), a
deduction to account receivable is made based on the value of bartered merchandise (fair
value on VAT invoice or official invoice issued by consignor), the accountant records:
11. In case the receivable is definitely unrecoverable, the accountant must write off bad debts by:
Dr. 139 Provision for doubtful debts (amount of provision already provided)
Dr. 642 General and administration expenses (amount of provision not yet provided)
At the same time, a debit must be recorded to account 004 "Bad debts written off" (Off
balance sheet accounts) so that they can be followed up within the regulated timeframe for
future collectibles from these customers.
12. At the end of fiscal year, accounts receivable in foreign currency must be revalued at average
inter-bank exchange rate on foreign currency market stipulated by the State Bank of Vietnam
ruling at the date of financial statements preparation.
- If the average inter-bank exchange rate in foreign currency market stipulated by the State
Bank of Vietnam ruling at the date of financial statements preparation is greater than the
booking exchange rate of account 131, the resulted difference will be recorded as follows:
- If the average inter-bank exchange rate in fo reign currency market announced by the State
foreign
Bank of Vietnam ruling at the date of financial
financial statements preparation is lower than the
booking exchange rate of Account 131, the resulted
resulted difference will be recorded as follows:
ACCOUNT 133
VAT DEDUCTIBLE
This account records VAT amount that is deductible, deducted and to be deducted of the entity.
VAT deductible input is the VAT on goods and services used in the business, in the production of
goods and services that are subject to VAT.
VAT input equals (=) total VAT on the VAT invoices of goods and services (including fixed
assets) used in production of goods and services subject to VAT, the amount of import VAT
recorded on the tax dossier documents of imported goods, or tax payment dossiers on behalf of a
foreign party as the Ministry of Finances regulation for foreign organizations, individuals doing
business in Viet nam not belonging to investmentment forms under the Vietnam law on foreign
investment.
1. Account 133 only applies for entity subject to subtraction method VAT, not applicable for
entity of which goods and services are subject to VAT in direct method or goods and services
are not subject to VAT.
2. For goods and services purchased for production of goods and services both subject to and
not subject to VAT, entities have to independe
independently
ntly record VAT deductible input and non-
deductible VAT input.
When it is impossible to independently record, the amount of VAT input should be recorded
to account 133. At the end of the accounting period, the accountant must define the amount of
VAT deductible based on the percentage of th thee sales from goods and services subject to VAT
in the total sales from goods and services in that period. The amount of non-deductible VAT
input is included in the cost of goods sold or production costs, overhead on each specific
case.
When the amount of non-deductible VAT is high high costly, a proportion of the amount should
be allocated in cost of goods sold in correspondence
correspondence with the revenue in the current period.
The rest should be charged to cost of goods sold in the next period.
3. When an entity buys goods and services used for production of goods and services not subject
to VAT or subject to direct VAT; used in adminisation and services activities; used in
projects whose expenditure is covered by Stage Budget; in benefit and fringe activities which
are covered by social and welfare fund, the VAT input should not be deductible and not
recorded to account 133. The amount of non-deductible VAT should be recorded into the
purchasing cost of those mechandises, fixed assets and services.
4. When purchased goods and services are used specific documents (such as post stamp,
transportation ticket, etc.) showing that the paying prices have been included VAT; based on
those documents, the entity must define the non-tax price. The VAT input is deducted as the
regulation at point b, article 1.2, item I, part III Circular 120/2003/TT-BTC dated December
12, 2003 of the Ministry of Finance.
5. When agricultural, forestry, fishery enterprises export products that they directly feed, plant
and catch, they will be only deducted the VAT input on goods and services directly used in
the period of feed, catch and plant.
6. Purchased goods being lost or damaged by natural calamities, fire because of organisations,
individuals responsibility and these people have to compensate, the VAT input of these
goods should be recorded into the value of damaged goods that being compensated. They
should not be recorded as VAT deductible input in the monthly VAT declaration.
7. The VAT occurred in one month should be declared in the monthly VAT declaration of that
month. If the amount of VAT deductible input is greater than the amount of VAT output, the
deducted VAT is the amount of VAT output of that month. The rest amount of VAT input
will be deducted in following month or considered to be refunded as laws and regulations on
VAT.
When VAT invoices or documents of paying VAT input of purchased goods, services in a
month and have not been declared in the monthly VAT report of that month, that VAT will
be deducted in the following months as laws and regulations on VAT.
When the head offices of general corporations produce, sell goods and services
serv subject to VAT,
the head offices must register and declare the VAT for each these activities independently.
9. When an entity paying VAT in direct method changes to pay subtraction method VAT, the
amount of VAT input will be deducted since the month applying VAT deduction method.
before the that month will not be deducted.
The VAT input of goods and services purchased before
10. According to the law on VAT, the VAT deductible input is determined based on the amount
of VAT recorded on VAT invoices of purchased goods and services or documents of paying
VAT for imported goods; or documents of payingpaying VAT on behalf of foreign contractors as
stipulated. The entitys VAT input will not be deducted In the case of purchasing goods and
services without VAT invoices or with illegal ones. The entitys VAT input will not be
deducted when VAT invoices do not note the VAT amount (excluding of specific cases using
included VAT); do not note or note incorrectly
the VAT invoices noting the total value has included
therefor it is unlikely to verify the seller; fake VAT
the name, address, tax code of the seller therefore
invoices, documents; corrected or erased invoices, blank invoice (goods and services actually
not sold); invoices noted the value higher than th
the real value of the sold goods and services.
Debit:
Credit:
- VAT input on goods purchased but then was returned, reduced the price;
Debit balance:
VAT input will be deducted, VAT input was refunded but the State Budget has not yet returned.
- Account 1331 - VAT deductible on goods and services: to record VAT deductible input on
raw materials, goods, services purchased for producing, selling goods, services subject to
subtraction method VAT.
- Account 1332 - VAT deductible on fixed asset: to record VAT input on investing, purchasing
fixed assets for producing, selling goods and services subject to subtraction method VAT.
MAJOR TRANSACTIONS
1. When purchasing raw materials, goods and ser vices subject to subtraction method VAT;
services
purchasing investment property subject to subtraction method VAT, the accountant records
the value of materials, merchandise goods, costs of purchasing, transit, loading, renting
warehouse lease etc. at the actual cost including
including the price excluding VAT and then records
the VAT deductible:
2. When purchasing raw materials, goods, tool toolss and services for producing, selling goods,
services, repairing fixed assets, investing in construction subject to subtraction method VAT,
the accountant records the value of raw materi materials, goods, tools, services into the price
excluding VAT, and then records VAT input:
Dr. 621, 623, 627, 641, 642, 241, 142, 242,... (purchased price excluding VAT)
Dr. 133 VAT deductible (1331)
Cr. 111, 112, 331,... (total payment)
3. When credit VAT payer purchased goods subject to subtraction method VATwhich are sold
right away (not through the companys premises):
4. When importing raw materials, goods and fixed assets, the accountant records the value of
imported raw materials, goods and fixed assets including total amount payable to the seller
(using the actual exchange rate or the average inter-bank exchange rate on the foreign
currency market announced by the SBV at the transaction date), import duties and special
consumption tax (if any) and transportation costs:
- When imported goods for producing, selling goods and services subject to subtraction
method VAT, the VAT on imported goods will be deducted:
- If imported merchandises are used for productio n of goods and services not subject to VAT
production
or subject to VAT in direct method or used in State activities, projects, cultural and welfare
activities etc. funded by State Budget, project budget or bonus and welfare funds, the VAT
payable of imported merchandises should be recorded into value of that purchased
merchandise:
Dr. 152 Raw material (Price including import VAT and import duties)
Dr. 156 - Goods (Price including import VAT and import duties)
Dr. 211 Tangible assets (Price including import VAT and import duties)
Cr. 333 - Tax and statutory obligations (33312).
5. When purchased goods returned or reduced the price because of poor quality subject to
returning the goods to the seller and related
Subtraction method VAT, based on documents of returning
documents, the accountant records the value of goods being purchased and then returned or
reduced the price and the non-deductible VAT input:
6.2. At the end of the accounting period, the accountant must define the amount of deductible, non-
deductible VAT input based on the proportion rate of revenue. The amount of non-deductible
VAT input is deducted based on the rate (%) of sales from goods and services subject to VAT on
the total sales from goods and services in the period. The amount of non-deductible VAT input in
the period is recorded as following:
The amount of non-deductible VAT input in the period is recorded into cost of goods sold:
When the amount of non-deductible VAT input is with high value, therefore allocated into
the cost of goods sold of several periods. The accountant transferrs the amount of non-
deductible VAT input to the cost of goods sold of the next period:
- The amount of non-deductible VAT input is recorded into production costs relating to the
usage of fixed assets:
When the amount of non-deductible VAT input is great and has to be allocated:
Periodically, the accountant allocates the amout of non-deductible VAT input into cost:
8. Purchased raw materials, goods, services and fixed assets are damaged by natural disaster,
fire, lost due to the the responsibility of an organization, individual who have to compensate.
The VAT input on these goods will not be recorded into VAT deductible input when
declaring the VAT:
- Purchased raw materials, goods, services, fixed assets are damaged and have not been found
out the reasons:
- Purchased raw materials, goods, services, fixed assets are damaged, when there are decisions
of the authority to deal the compensation of the organization, individual:
9. Goods, services purchased for exporting are deducted, refunded VAT input when they meet
the conditions, proceduces and records forfor being refunded VAT input as the current
regulations:
- VAT input on purchased raw materials, goods, services, fixed assets involving the export of
goods, services being deducted, refunded as the cu rrent regulations is recored as purchasing
current
domestic raw materials, goods, services, fixed asset
assetss (Refer to guidance on items 1, 2, 3).
- When being refunded VAT input on exported goods, services (if any):
10. At the end of a month, the accountant defines VAT deductible input and VAT output when
defining the amount of VAT payable in that period:
11. When an entity subject to subtraction method VAT frequently has amount of VAT input
greater than amount of VAT output, the entity will be refunded VAT as regulated by the tax
law.
ACCOUNT 136
INTER-COMPANY RECEIVABLE
This account records the balance and movements of amounts receivable from parent companies,
subsidiaries, divisions and affiliated companies.
1. This account records receivables between the parent company and its subsidiaries or between
subsidiaries. The holding companies should be trading/manufacturing entities and not just
holding parent companies. The subsidiaries should have their own accounting system.
- Parent companies allotment of the subsidiaries business capital which has not been refunded
subsidiaries
or liquidated;
- Other receivable;
b. In the subsidiaries:
- Allotment of the parent companies busin ess capital which has not been received yet;
business
- Lending;
- Amounts received on the subsidiaries behalf by the parent company or other subsidiaries;
- Other receivable.
3. This account is not used to record the investment of the parent company into its subsidiaries
and the payment between the parent company and its subsidiaries.
4. Account 136 should be maintained in detail with respect to the amount of the receivable and
who it is from. Each of the entities should have their method with regards to collecting the
inter-company receivables during the fiscal year.
5. At the end of the fiscal year, reconciliations and confirmations on the transactions and the
balances of account 136 Inter-company receivables should be prepared. The offset of
account 136 Inter-company receivable and account 336 Inter-company payable shall be
applied for each item of the same entity.
Debit:
- Amount to be received from the parent company or the subsidiary of the company;
Credit:
Debit balance:
MAJOR TRANSACTIONS
2. Calculation of the fundable bonus allowance business development fund in the fiscal period
3. In the case where the subsidiaries receive the business capital directly from the State Budget
with the authorization of the parent companies:
4. Increase of business capital in the subsidiaries due to the receipt of non-refundable aid or the
purchase of fixed assets by basic construction capital and the business development fund:
5. At the end of the fiscal period, based on the approved financial statements of the subsidiaries,
the accountant records the addition of the business capital from operating results:
In the case where the State Budget is withdrawn to transfer to the subsidiaries for business
capital, the accountant records simultaneously to credit account 008 Subsidies of State
Budget (off balance sheet accounts).
7. In the case where the subsidiaries submit the business capital to the State Budget with the
authorization of the parent companies:
8. Amounts receivable from the subsidiaries for ma nagement fees of the holding company:
management
9. Amount receivable from the business profit of the subsidiaries during of the fiscal period:
10. The amount receivable from the subsidiaries with regards to the investment and development
fund, financial reserve fund, the bonus and welfare fund and other funds:
11. Receipt of the amounts collected from the subsidiaries including profit earned, investment
and development fund, financial reserve fund, bonus and welfare fund, and other funds:
ACCOUNT 138
OTHER RECEIVABLE
This account records the balance and movements of receivables and receipts other than those
mentioned in account 131, 133 and 136.
2. Compensation receivable from individuals and groups (both inside and outside the enterprise)
for losing or damaging materials, merchandise, cash, etc. that are resolved.
3. Receivables from short-term loans or leased materials temporarily that no interest is earned.
4. Payments for non-profit operations, constructi on and business expenditures that are not
construction
approved by the authority and should be recollected or suspended.
5. Such payment as bank charge, custom checking duty, transportation fee, handling fee, etc
made by the export consignees on behalf of the export consignor.
8. Other receivable.
Debit:
- Other receivable.
Credit:
- Transfer of the amount of the asset shortage into the relevant accounts according to the
reason for the difference;
Debit balance:
This account could also have a credit balance when the amount received is greater than the
receivable (in special cases and should be show in detail for staff).
- Account 1381 Shortage of assets awaiting resolution: to record shortage in assets where no
reason has been found.
In principle, shortage of asset should be solved by the person responsible for the shortage and
the reason should be determined.
Account 1381 is used when the reason for lost or damaged property has not been determined.
When both the person responsible and the reasons for the differences is determined at the
differences should be directly booked to the relevant
time the differences are discovered, the differences
accounts, not to account 1381.
- Account 1385 – Receivable from equitization: to record equitization receivable that entity
paid, such as equitized expenses, unemployment allowance and training expenses in equitized
entity, etc.
This tangible asset must also be removed from the fixed assets register.
2. Shortage of tangible assets used for administrative activity, project or welfare activity has
been discovered and no reason yet determined awaiting to solve:
- At the same time, the accountant records the net book value of shortage assets waiting for
resolution:
Cr. 338 Other payable (tangible assets used for administrative activity, project)
3. Shortage in materials, goods and cash on hand was found during the physical inventory count
and no reason has yet been determined, awaiting to solve, as follows:
4. Based on the solving reports issued by the authorized body for the shortage of assets, the
accountant must record shortages into the relevant accounts:
7. Export consignee pays bank charge, custom checking fees, transportation fee, handling fee on
behalf of the export consignor:
8. Periodically, receipts of earned interest, dividend and gains from shared investment:
9. When the export consignees clear the amount of payment on behalf, the accountant of the
export consigner record as follows:
At the same time, the accountant debits to account 004 Bad debts written off - Off balance
sheet account.
12. The enterprise uses factoring with a debts and assets trading company for the other
receivables (represented on balance sheet).
14. Records payments made to unemployed staff due to the transition from a SOE to a joint stock
company:
15. Records payments for training employees who are moved from equitized company:
16. When equitization process is finished, the enterprise must prepare the finalization report on
expenditure araising from the equitization and submit this report to authorized agency. Total
expenses for equitization, compensation for unemployed staff, training expenses etc. are
deducted from the receipts from sales of State-owned securities after equitization of SOEs.
Dr. 3385 Payables from equitization (details of receipt from selling of securities belonging
to State capital)
Cr. 1385 Receivable from equitization
17. Payment for funded projects, construction, production are not approved and must be
recollected:
ACCOUNT 139
This account records the balance and movements of provision for doubtful debts.
1. At the end of the fiscal year or the end of interim period (for enterprises issued the interim
financial statements), the accountant should identify doubtful debts or uncollectible amount
to make/or reverse provisions for bad debts as general and administration expenses of the
reporting period.
2. In principle, the provision for doubtful debts should be based on concrete evidence
(customers went bankrupt or their properties were damaged, lost etc. therefore they are
requests for payments but the amount remains
unable to pay; the entity has sent many requests
receivables are considered as bad debts once
uncollected). Under current regulations, receivables
following evidences are provided:
3. The provision for doubtful debts should be made based on the following:
- The receivables are overdue following the signe d contract, promissory note, engagement
signed
contract or bill. The entity has sent many requests for payments but the amount remains
uncollected;
- The receivable is not due yet however customers went bankrupt or are in process of
resolution or disappeared or run away.
4. The provision for doubtful debts should be made in accordance with current regulations on
financial management for enterprises.
5. The bad debts have been followed up in a few years. The entity has attempted to collect
money but still not receive and the customers can still not pay. The entity could use factoring
service from the debt and asset trading company or write off bad debts.
If writing off bad debts, the accountant must also record in details in account 004 Bad debts
written off (Off balance sheet accounts). Writing off of bad debts must be approved by the
board of management and the financial management committee (in SOEs) or authorized
agency under the Company Charter.
These bad debts should be followed up within period of time regulated by financial
management regime to ensure whether the customers are able to pay. After writing off bad
debts, these bad debts are recovered. The accountant records the recovered amount in account
711 Other income.
Debit:
Credit:
Credit balance:
MAJOR TRANSACTIONS:
1. At the end of the fiscal year or the end of the interim period (for enterprise issued interim
financial statements), if debts seem hardly collected (bad debts),
debts), the accountant identifies the
amount of bad debts that requires provision. If the provision required in this period exceeds
the unused provision from the prior period, th
thee difference should be recorded as expenses:
2. If the provision for doubtful debts required in this period is less than the unused provision for
doubtful debts in the prior period, the accountant reverses the difference into expenses:
accountant
3. The entity should write off the bad debts that are unrecoverable. Writing off bad debts must
comply with the current regulations of financial systems. Based on the report of writing off
bad debts approved by authorized body, the accountant records:
Dr. 139 Provision for doubtful debts (if provision already made)
Dr. 642 General and administration expenses (if provision not yet made)
Cr. 131 Accounts receivable
Cr. 138 Other receivable
At the same time the accountant debits account 004 - Bad debts written off (Off balance sheet
account).
4. Bad debts which have been written off and subsequently recovered, the accountant records
the receipt amount:
At the same time, the accountant credits account 004 Bad debts written off (Off balance
sheet accounts).
5. The entity can use factoring services provided by the debt and asset trading company. The
factoring service is completed (receivables presented on the balance sheet) and money is
collected, the accountant records:
ACCOUNT 141
ADVANCES
This account records advances to staff, employees and liquidation of these advances.
1. An advance is money or materials given to an employee to carry out their trading and
production duties or to finish approved work. Advances should be given to a companys staff
or employees. Employees who receive advances on a regular basis (material supply
department, administration department, etc) should be appointed by the general director in
writing.
2. Person receiving advances (personally or on behalf of a group) should be responsible for the
advances and should use them for approved purposes only. Advances not used should be
returned to the cashiers. The receiver could not transfer advances to other person.
Debit:
Credit:
Debit balance:
MAJOR TRANSACTIONS
2. After finishing the works, the receiver of the advance should prepare an advance settlement
voucher and attach all original receipts and approved documents to submit the accountant.
Dr. 152, 153, 156, 241, 331, 621, 623, 627, 642
Cr. 141 Advances
3. The unused advance returned to the cashier or the store or net off against salary of the
receiver:
4. Where the actual approved payments exceed the amounts advances, the accountant should
prepare a payment voucher to pay the addition to the receiver:
ACCOUNT 142
PREPAID EXPENSES
This account records payments which have not been expensed in the income statement of the
current period and the allocation of this payment in the income statement in the periods that they
relate within the fiscal year or the business cycle.
Prepaid expenses are expenses which relate to several fiscal periods and they therefore can not be
charged wholly to the current period but should be allocated to the coming periods in which they
relate.
- Expenses for renting services for one fiscal year or one business cycle.
- Insurance expenses (fire insurance, transportation insurance, life insurance, etc.) and fees paid
for one fiscal year or one business cycle
cycle.
- Expenses for purchase technical documents and other prepayment which are allocated to
income statement within one fiscal year or one business cycle.
- Other prepaid expenses (i.e. prepayment of loan interest, prepayment of interest on instalment
purchase, instalment payment).
2. Account 142 is only used for expenses which relate to several fiscal periods with high value
and occur only once and can not be allocated to one period. Enterprise must identify and
strictly stipulate the contents of account 142 Prepaid expenses.
3. Based on the nature of the expenses, the methods and criteria of calculation along with the
allocation of prepaid expenses into manufacturing and trading expenses would be chosen.
The accountant should record the details of prepaid expenses; the amount allocated into
overhead, selling and administrative expenses; and the remaining unallocated balance.
4. Repair expenses for fixed assets with large value, can be allocated in several periods within a
fiscal year. Some specific fixed assets that the repair occurs on regular basis can be allocated
in general and administration expenses.
Debit:
Credit:
Debit balance:
Prepaid expenses which have not been taken into general and administration expenses.
MAJOR TRANSACTIONS
b. Prepaid expenses is for production of goods and services which are either subject to VAT in
direct method or not subject to VAT:
2. Fixed assets are operating lease (office, manufactory, shop, etc.). Enterprises prepaid leases
for several periods in the fiscal year.
- Leased assets are used in production of goods and services which are subject to subtraction
method VAT:
- Leased assets are used in production of goods and services which are subject to VAT in direct
method or not subject to VAT:
4. Tools and supplies are with high value and their useful
useful life is within one year that should be
allocated in several periods (monthly, quarterly) in one fiscal year:
- Tools and supplies are put in use. Based on goods dispatch notes, the accountant records:
- Periodically tools and supplies should be allo cated following reasonable criteria. The number
allocated
of allocations for tools and supplies should be based on the time used or the volume of
production in which tools are used in the accounting period:
5. When a large amount of money has been spent to repair fixed assets which will be allocated
into several operating periods, the following entry is made when the repair is completed:
entry
6. Calculation and allocation of the repair eexpenses into the manufacturing and business
expenses in several accounting periods:
7. When the initial direct expenses relating to financial lease assets occur in negotiation, signing
the contract, etc. before lease assets received, the accountant records:
8. The initial direct expenses relating to financial lease assets is recorded into the historical cost
of financial lease assets:
Dr. 635 Financial expenses (If borrowing costs are recorded into production and business
expenses)
Dr. 241 Construction in progress (If borrowing costs are capitalized in the value of
construction investment assets)
borrowing costs is capitalized in the value of
Dr. 627 Factory overhead expenses (If borrowing
uncompleted assets)
Cr. 142 Prepaid expenses
ACCOUNT 144
This account records the entity's assets and capital which are mortgaged, deposited and used as
short-term collateral (within one year or a normal production and business cycle) at the banks,
financial companies, State Treasury, credit institutions.
Mortgages are that the entity brings its assets to lender to borrow money or to gain the guarantees.
The mortgages can be gold, silver, gemstones, precious metals, bonds, stocks, cars, motorbikes,
etc. or ownership certificates of a house, land or other assets. During the mortgaging period, the
entity may not use these assets. After paying off the loan the entity may take back the assets.
Deposit is that entity paid an amount of money or gemstones, precious metals or any documents
with value into the block account at bank to ensure guarantee for the enterprise.
Short term deposits, mortgages and collateral are re corded in account 144 Short term mortgages,
recorded
deposits and collateral at the book value. The valu
valuee recorded when the assets
assets are given and when
they are returned is the same.
Debit:
The value of assets mortgaged, and the value of assets or money deposited or used as short term
collateral.
Credit:
Receive back the mortgaged assets, assets or deposits or used as short term collateral.
Debit balance:
MAJOR TRANSACTIONS
1. Use cash, gold, silver, precious metals, gemstone, or cash in bank to make a deposit or use as
collateral:
Dr. 144 Short term deposits, mortgage and collateral (recovered value)
Dr. 214 Accumulated depreciation (depreciation value)
Cr. 211 Tangible assets (historical cost)
Documentation of assets mortgaged (ownership certificates of land, houses, assets) are not
recorded in this account but in the detail ledger.
3.2 Take back the money, gold, silver, precious metals and gemstones from
fro the deposit, and short
term collateral:
4. As the entity broke commitment, the fine should be deducted into the value of the short term
deposit:
5. The entity does not pay the good consignor. The consignor asks to deduct the payable into the
the consignor, the accountant records:
deposit. When getting the advice from the
GROUP 15
INVENTORIES
These accounts represent the current value and movement of the entities inventory (if applying
the perpetual method) or the opening balance and closing balance of the entities inventory (if
applying the periodic method).
Inventory is classified as current assets which are held for sale in the normal production and
business period; in the on-going process of production and business; raw materials, materials,
tools and supplies for use in production of goods and services.
Inventories consist of goods purchased for trading (merchandises, property, goods in transit,
goods on consignment, goods for further processing); finished goods and finished goods on
consignment, work in progress (incomplete products and completed products not yet going
through the procedures for being put into stores of finished products); raw materials, materials,
tools and supplies in stock, sent for processing, and already purchased but being transported en
route.
Accounting inventories is reflected in group 15. It must comply with the following
regulations of Vietnamese Accounting Standa rd No. 2 Inventories determination of the
Standard
original price of inventories, the method of the calculating value of inventories, the marking-
down of inventories to suit the net realizable value,
value, determination of the provision for decline
in inventory and accounting it as expenses
The principle of determination of the original price of inventories is regulated specially for
each material, merchandise; as well as each the source and the time of the calculating value
Entity pays VAT in direct method, goods and services which are not belong to VAT payer; or
are used for the administrative, welfare activ
activity, and project activities; the value of the
purchasing goods, services is total payments (including VAT
5. The value of inventories shall be calculated according to one of the following methods:
The specific identification method is based on the actual value of the each purchasing
merchandise, each product so this method shall apply to enterprises having a few goods items
or stable and identifiable goods items.
c. The First-in, First-out method (FIFO) shall apply upon the assumption that the first
inventories purchased or manufactured is the first inventories delivered, and the inventories
left at the end of the period are those purchased or produced at a time close to the end of the
period. By this method, the value of the delivered goods shall be computed according to the
price of the lot of goods warehoused at the beginning of the period or at a time shortly after
the beginning of the period, the value of the inventories shall be computed according to the
price of the goods warehoused at the end of the period or at a time shortly before the end of
the period.
d. The Last-in First-out method (LIFO) shall apply upon the assumption that the most recently
purchased or manufactured inventories are delivered first, and the inventories left at the end
of the period are those which are purchased or produced earlier. By this method, the value of
the delivered goods shall be computed according to the price of the lot of goods warehoused
most recently or shortly earlier; the value of the inventories shall be computed according to
the price of the goods warehoused at the beginning of the period or shortly after the
beginning of the period, which still remain in stock.
6. For materials, merchandises purchase in foreign currency, the enterprise must be based on the
spot exchange rate or the average exchange rate on ruling the Vietnam State Bank at the time
currency should be converted in to Vietnam dong to
of the transaction is made, the foreign currency
record inventory.
7. At the end of the accounting period of the year, if the value of inventories can not be fully
outmoded, as well as their selling prices fall or the
recovered because of being damaged, outmoded,
finishing and/or sale costs rise, the marking-down of inventories has to the level equal to the
net realizable value. The net realizable value is the estimated selling price of inventories in a
normal production and business period minus (-) the estimated cost for completing the
products and the estimated cost needed for their consumption.
8. When selling inventories, the original price of goods sold shall be recorded as cost of
production and business in the period in consistence with the recognized turnover related
thereto. All the difference between the higher inventory price decrease reserve to be set up at
the end of the current years accounting period and the lower inventory price decrease reserve
already set up at the end of the previous years accounting period, volumes of damaged and
lost inventories, after subtracting the compensations paid by individuals due to their
liabilities, and unallocated factory overhead expenses, shall be recognized as production and
business expense in the period. Where the inventory price decrease reserve to be set up at the
end of the current years accounting period is lower than the inventory price decrease reserve
already set up at the end of the previous years accounting period, the difference there of must
be added and recorded as decrease in production and business expense.
9. An entity must keep detailed records of both the value of inventory as well as the inventories
physical characteristics, inventory specifications and model numbers and where the inventory
is being used; must also keep track of the value and quantity of actual inventory and recorded
inventory in general ledger and sub-ledger.
2. An enterprise only uses one of two inventory methods: perpetual method or periodic method.
The choice of inventory accounting method depends on the characteristics of the enterprise s
inventory, type of inventory, specifications of the inventory and managements demands for
applying consistently during the accounting period.
a. Perpetual method
The perpetual method is the method for reco rding and reflecting of the movement of
recording
inventory perpetually, continuously and systematically on the accounting ledger.
At the end of the period, the enterprise bases on the actual value of inventories to compare
and investigate with the recorded inventories. Theoretically, the physical count should always
agree to the accounting records. If having any variance, the enterprise must find reason and
resolved on a timely basic.
b. Periodic method
The periodic method is the record method based on the physical inventory count for
reflecting of the balance of inventories in the general accounting ledger at the end of the
period and from there calculating of the output value of inventories during the period
following the formula below:
According to the method, the movement of inventory (stock-in and stock-out) is not recorded
in the inventory accounts. The value of stock-in inventories in the period is recorded to a
specific account (account 611 Purchases).
The stock-taking must be taken at the end of the fiscal period in order to determine the actual
balance of inventory, the value of stock-out (used for production or selling). It is also used as
a base to record account 611 Purchases.
Hence, when enterprise applies the periodic method, inventory accounts is only used at the
beginning of the accounting period (to reallocate the opening balance) and at the end of the
accounting period (to record the ending inventory balance).
The periodic method is applied in those entities which have many types of raw materials and
merchandise with very different specifications, low value and used or sold perpetually (retail
shop, etc).
The advantages of the periodic method are simple and greatly reduce the amount of
accounting work required. However, the accuracy of inventory used/sold during the period is
affected by the quality of management in the warehouse and at the counter or at the port.
ACCOUNT 151
GOODS IN TRANSIT
This account records the value of goods and materials (raw material, tools and supplies,
merchandise) purchased that title has been transferred, however the goods are still in transit, at
the port or arrived to the entitys premise yet waiting for being taken into store.
1. Goods and materials which have not been received but are considered as belonging to the
entity include:
- Goods and materials which have been purchased and paid for, or the company has accepted
to pay for, but goods and materials are still in the supplier's warehouse, port or in transit;
- Goods and materials are in the entitys warehouse but they have not been inspected and the
warehouse
receiving notes has not been prepared
3. Every day when purchase invoices are received received before the goods are delivered, the
accountant will not record into book, but perform
perform reconciliation between the invoice and the
contract and file the invoice in the "purchased goods in transit" file.
During the month, upon receiving the goods, based on the receiving notes and selling invoice
the accountant records directly to account 152 Raw materials, account 153 Tools and
supplies and account 156 Merchandise goods, account 158 Goods in bonded warehouse.
At the end of the month, if the goods have still not been received, based on the invoice the
accountant records the amount of purchase to account 151 Goods in transit.
4. The accountant must record details and keep track of goods in transit by type, by shipment, or
by economic contract.
Debit:
- Allocation of the closing balance of goods in transit at the end of the period (if the entity
applies the periodic inventory method).
Credit:
- Reallocation of the beginning balance of goods in transit to purchases (if the entity applies the
periodic inventory method).
Debit balance:
Goods have been purchased but are still in transit (have not been put into the enterprise
warehouse).
MAJOR TRANSACTIONS
1. At the end of the period, based on selling invoice of goods in transit used for production of
goods and services subject to subtraction method VAT to record:
2. Upon receiving the goods in the subsequent month, based on invoice and receiving notes to
record:
3. In the case where the goods do not go through the companys warehouse but are directly
warehouse, from the port, or directly shipped to
delivered to the customer from the suppliers warehouse,
the agent on consignment:
4. In the case where goods in transit are damages or losses detected immediately or when stock
count, based on the minute of damages and losses, the accountant records the losses as
follows:
1. At the beginning of the fiscal period, the opening balance of goods in transit is reallocated to
purchases:
2. At the end of the period, based on count results of goods in transit to record:
ACCOUNT 152
RAW MATERIALS
This account records the current value and movement of the raw materials in the enterprises
warehouse.
Raw materials owned by the enterprise are used in the manufacturing process and can be
purchased or produced. Raw materials recorded in this account are classified as follows:
- Raw materials;
- Supplies;
- Fuel oil;
- Spare parts;
1. Raw materials:: Raw materials are the major element used during manufacturing process to
produce main products. The definition of raw raw materials depends on each specific
entity, there is not definition for raw materials
manufacturing entity. In trading and services entity,
semi-finished goods purchased from outside for
or supplies. Raw materials also include semi-finished
continuing of manufacturing process.
2 Supplies:: Supplies are not a major element in manufacturing process, therefore do not form
the main products. Supplies are used to cha nge the product colour, taste, appearance of
change
products, higher the products quality, or facilitate
facilitate the processing, or serve the technical
needs, preservation and packaging in manufacturing process.
3. Fuel oil:: This is used to provide heat energy in manufacturing process and to facilitate
processing. Fuel oil can be in the form of liquid, air or solid.
4. Spare parts:: Spare parts are used to repair or replace machines, equipments, tools and
supplies, vehicles, etc.
1. Raw materials input and output are recorded in account 152 at cost as regulated in
Vietnamese Accounting Standard No. 2 Inventories. The cost of raw materials is
determined according to each source.
1.1 The cost of raw materials purchased consist of: the buying price on invoice, import duty,
special consumption tax (if any), expenses for transportation, loading and unloading,
preservation, classification and insurance, etc. incurred in the buying process of materials, per
diem of purchasing officers, expenses of the purchasing department and other costs directly
relating to the purchase and losses within norm (if any).
- If the entity purchases raw materials used for production of goods and services subject to
subtraction method VAT, the value of materials purchased is recorded at buying price
excluding VAT. VAT inputs of materials purchased and of transportation, handling,
preservation, processing, etc. are deducted and record to account 133 VAT deductible
(1331).
- If the entity purchases raw materials used for production of goods and services not subject to
VAT or subject to subtraction method VAT, or used for social and welfare activities, the
value of materials purchased are recorded at total amount including non-VAT deductible (if
any).
- If raw materials are purchased in a foreign currency, the purchase must be converted into
VND using the actual exchange rate or the average inter-bank exchange rate ruling by the
ansaction and recorded to the value of raw
State Bank of Vietnam at the time of the transaction
materials.
1.2 The original price of raw materials processed consists of the actual raw materials cost and
processing cost.
1.3 The original price of raw materials sent for processing consists of the materials cost,
transportation fee to and from the processing plant
plant and the processing fee paid to the processor.
1.4 The original price of raw materials contributed to an joint venture is the actual cost accepted
by the parties and shareholders.
- Weighted average method after each input or at the end of the period;
The enterprise must apply one of the above methods consistently during the accounting
period.
3. Detailed records of raw materials must be maintained for each stock, each group and each
type of raw materials.
4. If raw materials are recorded in the accounting books at their recorded cost, the actual cost of
raw materials used will be calculated at the end of the accounting period based on the
following formula:
Actual cost of raw = Recorded cost of raw X Index of the between actual cost
materials issued in materials issued in period and recorded cost of raw
period materials
Debit:
- Allocation of the closing balance of raw materials (if the company uses the periodic inventory
materials
method).
Credit:
- The actual value of raw materials used in the production, sold, sent for outside processing, or
raw materials contributed to a joint venture;
- Reallocation of the opening balance of raw materials (if the company uses the periodic
inventory method).
Debit balance:
MAJOR TRANSACTIONS
1. When purchasing raw materials and putting into the enterprises warehouse, the value of raw
materials is recorded based on the invoice, received note and related documents:
- Where raw materials used for production of goods and services subject to subtraction method
VAT:
- Where raw materials used for production of goods and services subject to subtraction method
VATor not subject to VAT, or used for social and welfare activity:
3. If raw materials purchased do not agree to the raw materials particulars in the signed contract,
they will either be returned to the supp lier or the supplier will offer a discount. The
supplier
accountant will record the materials re turned or at discounted price:
returned
4. Invoices in which the raw materials have not yet been received by the enterprise are filed in a
separate purchased goods in transit folder.
4.1. Upon receiving the raw materials during the month, the accountant records to account 152
Raw materials based on the invoice and receiving note.
4.2. At the end of the month, if raw materialss have still not been received, based on the invoice
(where raw materials used for production of googoods and services subject to subtraction method
VAT) the accountant records:
- In the following month, upon receiving the materials, based on the invoice and receiving note
the accountant records:
5. Actual discounts given by the supplier are recorded upon payment as follows:
- If imported materials are used for production of goods and services subject to subtraction
method VAT, the original price of import raw materials is recorded according to the price
including import duty as follows:
- If imported materials are used for production of goods and services subject to subtraction
method VATor not subject to VAT, or used to administration and project activities; the
original price of import raw materials according to the price including import duty and VAT
of import goods:
Dr. 152 Raw materials (including import duty and VAT of import goods)
Cr. 331 Account payable
Cr. 3333 Import, export duties
Cr. 3331 VAT payable (33312)
- If imported materials are subject to special consumption tax, the tax payable must be included
consumption
in the original price.
Dr. 152 Raw materials (the price includes special consumption tax of import goods)
Cr. 331 Trade payable
Cr. 3332 Special consumption tax
7. In the case, raw materials purchased for use in production of goods and services subject to
subtraction method VAT, the cost incurred from purchasing, handling and transportation
from suppliers place to the enterprisess warehouse is recorded as follows:
- When the entity sent raw materials out for further processing:
10. The surplus of raw materials detected during the physical inventory count. If the entity has
found reason, the surplus will be recorded based on the result. If the entity has not found
reason, the surplus will be recoded as follows:
- Where the resolution on the surplus detected in physical count is given, based on the
resolution the following is recorded:
- If the surplus is determined as belong to other parties immediately after the physical
inventory count that has not been recorded in account 152, the surplus is debited to account
002 Goods held under trust or for processi
processing not to account 338 (3381). Where the
materials returned to those parties, a single entry is credited into account 002 (Off balance
sheet accounts).
12. Where raw materials used for construction or for repair of fixed assets:
b. When jointly controlled entities sell finished goods which are produced from contributed raw
materials, or sell contributed raw materials to an independent third party, the contributors
allocate deferred income to other income in the period:
15. Shortage of raw materials detected during the physical inventory count:
When shortage of raw materials in store or preservation place is detected in the physical
the solution and the person in charge must be
inventory count, report must be prepared and the
found out. Based on the physical inventory count and resolution made by authorized person,
the accountant records the followings:
- If the shortage is due to an error or not yet recorded, an adjustment should be made in the
accounting records.
- If the shortage is resulted from damage within permitted range (damage in norm):
- If the reason for shortage has not yet been identified and awaiting for resolution, the damage shall
be recorded as follows:
- Where the resolving report is issued by the authorized person, basing on the resolving report
should be recorded:
Dr. 111 - Cash on hand (if the person in charge paid the compensation for the loss)
Dr. 138 Other receivable (compensation must be paid by the person in charge)
Dr. 334 Payable for employee (compensation deducted into the salary of the person in
charge)
Dr. 632 Cost of goods sold (the remained damages should be charged to cost of goods sold)
Cr. 138 Other payable (1381 Shortage of assets awaiting resolution)
1. At the beginning of the period, the opening balance of raw materials is allocated to the
purchases account:
2. At the end of the period, based on the result of the physical inventory count, the closing
balance of raw materials is recorded as follows:
ACCOUNT 153
This account records the current value and movement of tools and supplies of the enterprise.
Tools and supplies are materials which are not valuable and durable enough to be considered as
fixed assets. Therefore, tools and supplies are accounted for as materials.
According to the current regulations, the following materials are not considered as fixed assets
but tools:
- Temporary tents, tools and supplies and special assembled tools used for the construction;
- Packing materials which are attacheded to the goods but their value is not included in the value
ng preservation, transportation and usage;
of the goods that is depreciated during
1. Accounting for tools and supplies in account 153 is recorded at cost. The cost of tools and
supplies should be determined as regulated for raw materials (see guidance in account 152).
3. Detailed records for tools and supplies must be maintained by group, store or type.
4. Tools and supplies which are issued for production, trading or rental must be kept track in
value and quantity in accounting book, location of the tools and supplies are to be used; the
name of the lessee and the person in charge. High
High value or valuable tools and supplies must
be preserved in a special way.
5. Low value tools and supplies which are issued for production must be recorded all in one
time in production and business expense.
6. Where high value tools and supplies which are issued for production within one year shall be
recorded into account 142 Prepaid expenses and allocated to production and business
expense for several periods in the year.
7. Where high value tools and supplies which are issued for production over one year shall be
recorded into account 242 Long term prepaid expenses and allocated to operating and
business expenses.
Debit:
- The actual value of tools and supplies purchased, produced, sent out for processing, or
contributed;
- The actual value of tools and supplies received back from the lessee.
- Surplus of tools and supplies detected during the physical inventory count.
- Allocation of the closing balance of tools and supplies (if the entity uses the periodic
inventory method).
Credit:
- The actual value of tools and supplies used for production, trading, leasing or contribution to
a joint venture;
- Purchase discounts received from supplier when the entity purchased tools and supplies;
- Shortage of tools and supplies detected during the physical inventory count;
Debit balance:
Account 1531 - Tools and supplies: to record the current value and movement in tools and
supplies.
Account 1532 - Reusable packaging material: to record the current value and movement in
reusable packaging materials used in the course of operations in which reusable packaging
materials are used several times. The used value of reusable packing material will be charged
gradually into operating and business expense over several periods.
Account 1533 - Tools for leasing: to record the current value and movement in tools and supplies
for leasing.
Only tools and supplies purchased for leasing are recorded into this account. Other tools and
instruments that are not classified as above will be recorded into account 1531 Tools and
supplies which were used in the operations of the entity but are now being leased should be also
recorded into this sub-account.
MAJOR TRANSACTIONS
1. Value of tools and instruments purchased for production of goods and services subject to
subtraction method VAT will be recognized at the buying price excluding VAT. The
accounting entry is recorded based on invoices, received note and related documents:
- Value of tools and supplies purchased for production of goods and services subject to VAT in
direct method or not subject to VAT, or for social and welfare activities:
3. Where tools and instruments purchased are given discounted due to not comply with
specification, quality in the contract:
6.1 If the value of tools and supplies issued is not very high, the tools and supplies should be
expensed immediately:
6.2 If the tools and supplies issued have a high value and will be used in several periods or
reusable packaging issued that will be allocated to operating and business expense, the accountant
records as follows:
Dr. 142 Prepaid expenses (Tools and supplies have high value and useful life within one
year)
Dr. 242 Long term prepaid expenses (Tools and supplies have high value and useful life
over one year)
Cr. 153 Tools and supplies (1531, 1532)
- Entity pays VAT in subtraction method, the income from the rental of tools and supplies is
recorded as follows:
8. After the physical inventory count, the surplus, shortage or damage of raw materials is
detected, the accounting records should be adjusted based on the reasons or decisions of
management or an authorized body:
8.1 If the surplus (shortage) is due to error or not yet recorded, an adjustment must be made.
8.2 If the shortage is detected and the reasons and the person in charge has not yet been
identified:
- If the reason is identified and the person in charge must compensate for the loss:
8.3 If the reason of the surplus has not yet been identified:
1. At the beginning of the accounting period, the opening balance of tools and supplies is
reallocated to purchases account:
2. At the end of the accounting period, the closing balance of tools and supplies is allocated to
tools and supplies account:
ACCOUNT 154
WORK IN PROGRESS
This account summaries production cost in order to compute the cost of products and services in
industry, construction, poultry, planting and processing products of agriculture, forestry and
fishery for those entities using the perpetual inventory method.
If the entity uses the periodic inventory method, account 154 will only record the value of work in
progress at the end of the period.
4. Where raw materials costs and labour costs are hi higher than the normal level and fixed factory
overhead expenses have not been allocated, they should not be computed into inventory. Those
expenses shall be recognized in cost of goods sold in the period.
5. At the end of the period, the fixed factory overhead expenses shall be allocated into the processing
cost of each product unit only according to the normal capacity (credit 627, debit 154). When the
quantity of actually-manufactured products is lower than the normal capacity, the accountant must
compute and determine the factory overhead costs which shall be allocated into the processing
cost of each product unit only according to the normal capacity. The unallocated amount of
factory overhead costs (not recorded in cost of finished goods) shall be recognized as cost of
goods sold in the period (credit 627, debit 632).
The variable indirect factory overhead costs shall be allocated one time into the processing cost of
each product unit according to the actual costs incurred.
6. For construction contractor, account 154 Work in progress is used to summarise production
expenses and compute construction costs in the following categories: raw materials costs, direct
labour costs, machine costs, overhead costs. For production of other finished goods, account 154
is used to summarise the production cost of workshop, or production department, manufacturing
team.
7. For industrial entity rendered outside services for further processing, or outsourced apart of
production, those expenses are also recorded in account 154.
- Selling expense;
- Financial expenses;
- Other expenses;
- Construction in progress;
Debit:
- Raw materials costs, direct labour costs, machine costs and factory overhead costs incurred
relating to production of finished goods and services in the period;
- Raw materials costs, direct labour costs, machine costs and factory overhead cost incurred relating
to construction or of internal all-inclusive price;
Credit:
- Actual cost of finished goods put into warehouse or transferred for sale;
- Cost of completed construction handed over partially, or entirely in the period, or transferred to
the contractor (higher level or inter-company); or cost of completed construction waiting for sale;
- Where raw materials costs, labour costs are higher than the normal level and fixed factory
overhead costs have not been allocated, those cost shall not be computed into inventory, but into
cost of goods sold in the period. In the case, entity producing upon orders, or entity which has
long business cycle and the accountant allocates fixed factory overhead costs into account 154 at
the end of each accounting period until goods finished, those fixed overhead costs shall not
computed in inventory but in cost of goods sold (credit 154, debit 632).
- Reallocation of the opening balance of work in progress (if the entity applies the periodic
inventory method).
Debit balance:
INDUSTRY
The account 154 Work in progress applying to industry summarizes the production costs and
calculate the cost of products by cost centre (i.e
(i.e.. plant and production unit). This account also records
costs from sending materials out for processing, outsourced services to other companies, or costs for
manufacturing.
2. This account will keep track costs by cost centre (plant and production unit), type of product and
product parts.
1. At the end of the period, direct materials expenses are allocated by cost centre:
2. At the end of the period, direct labour expenses are allocated by cost centre:
3. Where the quantity of actually-manufactured products is higher than or equal to that of the normal
capacity, the accountant must compute, allocate those costs to factory overhead expenses
(variable and fixed costs) by cost centre:
4. When the quantity of actually-manufactured products is lower than that of the normal capacity,
the accountant must compute and determine fixed factory overhead costs. The fixed factory
overhead costs shall be allocated into the processing cost of each product unit only according to
the normal capacity. The unallocated fixed overhead costs (the difference between the actual fixed
factory overhead costs incurred higher than the fixed factory overhead costs computed in the cost
of products) shall be recorded into cost of goods sold in the period. The accounting entry is
recorded as follows:
6. Since value of products is non-repairable, the compensation must be charged to the person in-
charge:
7. In the case, the entity has a long production and business cycle and during the accounting period,
costs and overhead costs have been recorded in account 154 but it is
materials costs, direct labor costs
exceeded normal rates (abnormal), such
determined that such costs exceeded su abnormal costs should be
recorded in the cost of goods sold (not allocated into the inventories):
9. Finished goods directly transferred to customers, not through the warehouse (i.e. water, electricity,
etc.):
1. At the end of the period, based on the physical inventory count, the closing balance of work in
progress is allocated as follows:
2. At the beginning of the period, the opening balance of work in progress is reallocated as follows:
AGRICULTURE
Account 154 Work in progress is used in agriculture to summarise production cost and compute the
cost of products in activities such as raising, planting and processing the agriculture products.
2. The actual cost of agriculture products will be determined at the end of the crop, or the year.
incurred shall be recognised in that year. That
Products are harvested in one year, the actual cost incurred
means the cost incurred in the current year while the products are not going to be harvested until
the next year, the actual cost shall be computed in next year.
Plants that are harvested two or three times in one year, or planted this year then harvested in the
coming year, or planted and harvested in the same same year in a different area must have costs
vidual situation. The accountant
assigned according to their individual accountan must take into account seasons,
ears, and areas when determining the cost of plants.
4. This account does not record such expenses as land renovation expenses, expenses incurred in
ng expenses, management expenses,
planting perennial plants, selling expen financial expenses and other
expenses.
5. In principle, production expenses with regards to agriculture are debited into account 154 Work
in progress by cost centre. Expenses relating to several cost centres, seasons and periods must be
recorded into a separate account and then allocated into the cost of the relevant products such as
irrigation expenses, land preparation, planting expenses for newly long time plants which can be
harvested one time or several times (the expenses are not classified as capital investment).
6. If there are more than two types of short-term plants in the same area, expenses must be allocated
to each type of plant (i.e. seeding, sowing, harvesting, etc.) and general expenses relating to many
plants, (i.e. land preparation, watering, etc.) must be recorded into a separate account and
allocated to each type of plant according to occupied area, or any suitable criteria).
7. For perennial plants, expenses incurred from land preparation to the first harvest are considered as
capital investments and are recorded into account 241 Construction in progress.
8. Expenses for perennial plants include expenses for caring for and harvesting the plants.
9. Attention should be paid when recording the poultry raising expenses into account 154:
- Poultry raising expenses should be recorded in details for each raising activity (buffalo, ox, pig,
etc.) and for each type of animal and livestock.
- New born livestock produced from breeds or from animals raised for meat is recorded into a sub-
ledger according to actual cost;
- Only the remaining value of breeds that were transferred to raise for meat shall be recorded into
account 154;
- The unit cost in poultry raising is calculated per kilogram of fresh milk, number of cow, cost per
eeding an animal a day, etc.
one kilogram of pork, cost of breeding
10. The raw materials costs, direct labour costs hi gher than that of the normal level, and the
higher
unallocated fixed factory overhead costs should not be recorded in products cost but into cost of
goods sold in thee current period.
4. To record the value of any by-products collected (i.e. animal manure, straw, stubble, etc.):
5. To record the value of wastage, materials received back from an outside processor:
6. To record the value of new born animals and animals which were being bred for meat but are now
working animals or reproducing animals:
7. To record the actual cost of finished goods put into warehouse or directly shipped to customers:
TRADING SERVICES
Account 154 Work in progress is applied to trading and servicing enterprises, such as transportation,
post office, tourism, servicing, etc. This account is used to summarize cost
costs (raw material, direct
labour and factory overhead expenses) and compute service cost rendered.
1. In transportation companies, this account is used to summarize production cost and calculate the
cost of transportation by land (i.e. car, train and other simple transportation means), railway, sea,
air and pipe, etc.
2. The raw materials, direct labour costs higher than the normal level, and the unallocated fixed
factory overhead costs should not be recorded in cost products but in cost of goods sold in the
current period.
3. In tourism companies, this account must be detailed by each type of activities, such as tour-guide,
hospitality and tourist transportation.
4. In hotel companies, this account must be track in detail for each type of activity, such as food,
rooms, entertainment and others (laundry, hair dressing, telegram, sport, etc.).
The accounting treatment for major transportation and service entities is similar to the industry
entity. However, the following entry is recorded when the service has been provided:
CONSTRUCTIONS
Construction companies only apply the perpetual inventory method, not the periodic inventory
method, therefore, account 154 is used to summarize production costs and track the cost of
construction work and other services.
The raw materials, direct labour costs which is higher than the normal level, and the unallocated fixed
factory overhead costs should not be recorded in the cost of construction work but in cost of goods
sold in the current period.
Account 1541 – Construction:: to summarize costs, compute the cost of construction work and
construction in progress at the end of the period;
Account 1542 – Other products:: to summarize costs, compute the cost of other products and work in
progress at the end of the period (finished goods, building components, etc.);
building
Account 1543 – Services:: to summarize costs, compute the cost of services and work in progress of
services at the end of the period;
I. Accounting treatment for produc tion costs of construction work (also applied for entities
production
having internal lump-sum construction contract of which a separate accounting book is used)
Summary of production costs of construction work must be kept track by construction project, each
category in construction project and cost item regulated in setting construction budget including:
- Labour cost;
- Machine costs;
- Overhead.
The overhead are debited in account 154 Construction including overhead incurred in sub-
contracting department, or construction site. The administration expenses in construction companies
are debited in account 642 General and administration expenses. Those expenses shall be
transferred to debit side of account 911 Income summary assigned for the cost of completed
construction work that was sold in the period.
1. The accounting treatment for construction costs (the debit side of account 1541 Construction)
Raw material costs include actual value of raw materials, materials, components or rotational
materials that make construction products (excluding secondary materials for machine, machine
Accounting principles of direct raw materials: if raw materials are used for any construction work
that must be directly computed for this construction work based on the actual used quantity and
the actual cost of materials paid out (average cost; first in, first out, etc).
At the end of the accounting period, or when construction completed, the physical count for
remaining materials (if any) at the production site must be taken. Based on that, the accountant
shall record a decrease in raw material costs used in construction.
In reality, if it is unlikely to allocate raw material costs to each construction project or construction
category, the enterprise can allocate according to suitable criteria (in relation with the material,
fuel use , etc.)
- Based on the list of allocated materials for each construction project and construction work:
Regular expenses include labour costs of machine workers, raw materials, tools and supplies,
depreciation, services rental (small repair, electricity, water, insurance fee, etc.), other
expenses in petty cash.
Temporary costs include machine repair with high value (overhaul repair) not met criteria to
increase historical cost of machine, temporary costs for machine (canvas, tent, platform, rails
etc.). If the temporary costs occurred ahead of time (debited into account 142 or account 242),
they are then allocated in the debit side of account 623 Machine costs. If the temporary costs
occurred later, they should be accrued into construction cost in the current period (due to machine
actually used in the period). In this case, the enterprises should accrue the expenses by credit
account 335 Accruals and debit account 623 Machine costs.
Summary and computation of machine costs must be separately accounted for each machine
(refer to accounting treatment in account 623 Machine costs).
- Based on the list of machine costs (actual costs) allocated to each project and project items:
- Factory overhead costs constitute production costs of the team and of construction site including
salary of factory manager, team leader, group leader, social insurance, health insurance and trade
union fees which is calculated based on a regulated ratio of employees salary, machinery
controllers and manager of workshop, group, team, depreciation allocated for teams
activities and other costs. When the costs incurred in the period:
- At the end of the period, the enterprise should transfer actual costs of raw material, direct
labour, machine costs, factory overhead relating to repair and maintenance incurred in the
period to summarise expenses of repair
repair and maintenance activities:
- Record completed repair and maintenance of construction handed over to the customer:
- When the warranty period is over, construction does not need to repair or warranty provisions
made was higher than the actual costs, the difference should be reversed:
- At the end of the period, based on the list of factory overhead cost to allocate to related
construction work and construction items (in ratio of labour cost):
2.1. Irrecoverable costs relating to the construction contract (i.e. insufficient legal conditions for
continuing the contract performance, or contracts when the customers cannot perform their
obligations) must be recognized as costs in the current period:
2.2. Costs directly relating to each contract can be net off against the production cost if other
incomes generated not included in the contractual revenue. For example, proceeds from the sale
of unused raw materials and wastage and of construction machines and equipment upon the
liquidation of contract:
c. If unused raw materials and wastage are recolle cted and directly sold, not through the
recollected
enterprises warehouse, the accountant should recognize income from sales of unused raw
materials and wastage by decreased costs:
d. Disposals of machines, equipments used for construction contract and the fixed assets fully
depreciated upon liquidation of the contract :
2.3 At the end of the period, the actual cost of the completed construction considered as sold
(handed over some items or all to the customer Party A, or to internally official contractor) is
treated as follows:
a. In the case, the construction handed over to the Party A (including the volume of completed
construction work according to internal fixed contract for contractor):
b. In the case, completed construction waiting for sale (building for sale) or not been handed
over, based on the cost of completed construction work to record:
II. Accounting treatment for production cost and computation cost of industrial products
and services in construction companies is similar to that under industry.
ACCOUNT 155
FINISHED GOODS
This account records the current value and movement of the enterprises finished goods.
Finished goods are those which have gone through all the stages of the production process and are
tested for technical qualification to store.
1. Accounting for stock-in, stock-out and outstanding balance of finished goods in account 155
should be recorded at cost as regulated in Vietnamese Accounting Standard No. 02 Inventories.
Fixed factory overhead costs shall be allocated into the processing cost of each product unit on the
capacity of machinery. Normal capacity
basis of the normal production capacity capacity is the average quantity of
products turned out under normal production conditions.
3. Costs not permitted to be incorporated into the original price of inventories are:
a. Costs of raw materials, materials, labour and other production and business costs incurred at a
level higher than normal;
b. Costs of inventories preservation minus the inventories preservation cost needed for subsequent
production processes and the preservation cost prescribed in paragraph 06 of Vietnamese
Accounting Standard No. 02 Inventories;
c. Selling expenses;
4. Finished goods sent out for further processing must be valued at the actual processing cost
including direct raw materials, processing cost and other costs directly related to the processing of
finished goods.
5. The value of finished goods shall be calculated according to one of four methods that are
regulated in Vietnamese Accounting Standard No. 02 Inventories.
6. Where the enterprises apply the perpetual inventory method, the inventory accountant keeps track
the records of daily finished goods in and out at a pre-determined cost (estimated or pre-
determined cost). At the end of the month, the accountant shall compute the actual cost of finished
goods and determine the difference between the actual cost and the pre-determined cost (and also
the difference resulted from the opening balance). This is a base to determine the actual cost of
finished goods in and out during the period (refer to the formula instructed in account 152 Raw
materials).
7. Accounting for finished goods must be detailed under each store, each type and kind of products.
Debit:
Credit:
- Reallocation the beginning balance of finished goods at the end of the period (if the company uses
the periodic inventory method).
Debit balance:
MAJOR TRANSACTIONS
1. Finished goods produced by the company itself or sent out for further processing put into
warehouse:
2. Finished goods shipped to the customers, the accountant records the cost of goods sold as follows:
3. Finished goods sent on consignment, sales agents or subsidiaries (if using goods dispatch note
4. Where the finished goods are returned by the buyers: in the case, the finished goods returned are
subject to VAT in subtraction method, sales returns should be recorded at VAT-exclusive selling
price:
5. Where the finished goods used internally for production and business operation:
b. When jointly controlled entity sold this finished goods for third party, the venture parties should
reallocate the deferred income to other income:
8. When the enterprise detected the surplus or shortage of finished goods during the physical
inventory count, the report must be prepared and the reason and also the person in-charge must be
based on the counting minutes
identified. The accounting treatment is made based mi and the resolving
report issued by authorized person.
- If surplus or shortage is made by mistake or has not yet recorded, the accountant shall make
adjustment in the accounting books;
- If enterprise has not yet determined the reason and waiting for resolution:
If surplus:
If shortage:
Dr. 111, 112
(if the person in-charge paid compensation in cash)
Dr. 334 Payable employees (if the compensation deducted in employees salary)
Dr. 138 Other receivable (1388) (the compensation to be paid by the person in-charge)
Dr. 632 Cost of goods sold (remaining amount after deducted into compensation)
Cr. 138 Other receivable (1381)
1. At the beginning of the period, based on the inventory physical count the accountant reallocates
the opening balance of finished goods to account 632 Cost of goods sold:
2. At the end of the period, based on the inventory physical count, the accountant allocates the
closing balance of finished goods:
ACCOUNT 156
MERCHANDISE GOODS
This account records the current value and movement of merchandise goods including items in stock,
in the store as well as property.
Merchandise goods are materials, products purchased by the entity for resale (either wholesale or
retail). The cost of inventory includes the purchase price as well as all expenses relating to the
purchase. In the case where the materials or products must be further processed, refurbished or
categorized to bring higher value or saleability before they can be sold, the value of goods purchased
consist of the purchase price plus (+) processing cost. For imported goods, such costs as import tax,
special consumption tax (if any), VAT (if not deductible), insurance, etc. will be added to the cost of
imported goods.
The account 156 Merchandise goods is still used in those cases where the merchandise goods is
purchased for both resale and production and the company is unable to separate the two.
1. Merchandise inventory held on consignment or kept for another party (in this case the entity
unt 002 Goods held under trusts or for processing, or account 003 Goods
should use account
received on consignment for sale (Off balance sheet accounts).
- The cost of merchandise goods consists of the purchase price, import tax, special consumption tax
(if any), VAT (if not deductible) and costs incurred in process of purchasing, handling required to
deliver the goods from the supplier to the enterprises stock.
- Goods purchased for the entitys production of goods and services subject to VAT in subtraction
method, the cost of goods is recorded at the purchase price exclusive VAT.
- Goods are purchased for the entitys production of goods and services which are subject to VAT
in direct method or not subject to VAT, the cost of goods is recorded at total amount (including
VAT).
2. The cost of goods is computed according to each type of item purchased and must be separately
recorded at the purchase price and additional expenses incurred to purchase that item.
3. The value of merchandise goods shall be calculated according to one of the four inventory
methods as regulated in Vietnamese Accounting Standard No. 02 Inventories.
4. Purchasing cost incurred during period should be calculated for goods sold in period and goods
still in stock. The method for expenses allocation should be selected in accordance with the
companys features and should be consistently applied during the accounting period.
5. At each store, the records should be kept track of the amount and type of merchandise inventory
on hand.
Debit:
- Purchasing expenses;
- Value of goods sent for further processing (including the buying price and processing cost);
- Allocation of the year end balance of stock (where the company uses the periodic inventory
method);
Credit:
- Value of merchandise sold, shipped to agents and divisions on consignment, send out for further
processing or to be used in production process;
- Purchasing discounts;
Debit balance
- Account 1561 – Original costs: To record the current value and movement of goods purchased
and goods on hand (at the buying price).
- Account 1562 – Purchasing expenses: To record the purchasing expenses incurred in order to
purchase merchandise goods and allocation of those expenses to cost for goods sold and
merchandise on hand (including goods in stock and on consignment). This account will record
expenses directly involved in the buying process such as merchandise insurance, store rental,
transportation, handling required to deliver goods from the supplier to the enterprises stock and
losses within a reasonable limit incurred from the purchase of merchandise.
Account 157 – Property: To record the current value and movement of property of the entity.
Property includes land used right, a building, or a building and land used right, infrastructure
purchased by the entity for resale in the normal business cycle, or investment property changed as
inventory for sale purpose.
Debit:
- Import duty or special consumption tax of imported goods or import VAT, VAT input if not
deductible for merchandise purchased;
- Value of goods sent for further processing and completed goods put into warehouse including
completed
buying price and processing cost;
- Allocation of merchandise goods at the end of period (where the company uses the periodic
inventory method).
Credit:
- Value of merchandise goods used during period (sold, exchanged, presented, shipped to an agent
on consignment, divisions, used internally, contributed in a joint venture, in associates);
- Purchase discounts;
- Opening balance of merchandise goods (if the enterprise uses the periodic inventory method).
Debit balance:
Debit:
Credit:
Debit balance:
Debit:
- Cost that is added to the original price of property incurred from repairing and upgrading the
property waiting for sale.
Credit:
Debit balance:
MAJOR TRANSACTIONS
1. Based on invoices, received notes and related documents to record merchandise goods purchased
and put into the warehouse:
1.1 Goods purchased for production of goods and services subject to subtraction method VAT:
Dr. 156 Merchandise goods (1561) (buying price plus (+) import duty)
Cr. 111, 112, 331
Cr. 3333 Import, export tax payable (taxes by details)
At the same time, record VAT payable of import goods to the State Budget:
- In the case, the entity imports merchandise that is subject to special consumption tax:
Dr. 156 Merchandise goods (1561) (buying price plus (+) import tax and special consumption
tax)
Cr. 111, 112, 331
Cr. 3333 Import, export taxes payable
Cr. 3332 Special consumption tax
- Where the entity imports merchandise from an agent shall be followed the guidance of account
agent
331 Trade payable.
1.2 Goods purchased for production of goods and services subject to subtraction method VAT or not
subject to VAT:
Dr. 156 Merchandise goods (1561) (buying price plus (+) import tax (+) VAT (+) special
consumption tax (if any)).
Cr. 111, 112, 331
Cr. 3333 Import, export duties (taxes by details)
Cr. 3331 VAT payable (33312)
Cr. 3332 Special consumption tax (if any)
2. In the case where the invoice has been received but the merchandise goods has not yet arrived at
the end of the period, based on the invoice to record:
4. Cost of merchandise returned to supplier because of interior quality or for not being what was
ordered as stipulated in the contract that may lead to reduction in price:
5. Purchasing expenses for goods used in production of goods and services subject to subtraction
method VAT:
8. In the case where the property is transferred to inventory when owner decided to repair and
upgrade the property for sale:
- Allocation of all expenses incurred from repairing and upgrading to the value of property when
the work is completed:
9. Based on VAT invoice and selling invoice and goods dispatch note to record the value of goods
that is determined as sold:
- Where the company pays VAT in subtraction method and goods sold subject to subtraction
method VAT:
10. Where the company sent goods to subcontractor for further processing:
- If the company used good dispatch note cum internal transport note:
- If the company used VAT invoice or selling invoice as evidence of shipment, the accountant
determines cost of goods sold:
a. Where goods used internally for production of goods and services subject to subtraction method
VAT, the accountant records inter-company sales at cost:
Dr. 623, 627, 641, 642
(cost of goods used plus (+) VAT output)
Cr. 3331 VAT payable (33311)
Cr. 512 Inter-company sales (cost of goods used)
a. Where goods used for presents (s pending from bonus and welfare fund), or payment to employees
(spending
for production of goods and services subject to subtraction method VAT, the accountant
recognizes sales at selling price exclusive VAT:
Dr. 431 Bonus and welfare fund (if used for present)
Dr. 334 Payable for employees (if used for payment to employees)
Cr. 512 Inter-company sales
Cr. 3331 VAT payable (33311)
b. Where goods used for presents (spending from bonus and welfare fund), or payment for
employees for production of goods and services subject to subtraction method VATor not subject
to VAT, the accountant records inter-company sales at total amount:
Dr. 431 Bonus and welfare fund (if used for present)
Dr. 334 Payable for employees (if used for payment to employees)
Cr. 512 Inter-company sale
15. Merchandise subject to subtraction method VAT or not subject to VAT when goods used for
present or internally, sale is recorded as total amount:
b. When jointly controlled entity sold the goods for third parties, the contributor should transfer
deferred income to other income of the period:
18. At the end of the period, purchasing expenses are allocated to goods sold during period:
19. Surplus of merchandise detected should be investigated and recorded in the minutes. Based on the
reason, an appropriate adjustment must be made:
a. If the surplus is due to an error or not yet recorded, an adjustment should be made in the
accounting records.
b. If the surplus is owned by other entity, the surplus shall be debited to account 002 Goods held
under trust or for processing (Off balance sheet accounts). After returning the surplus of
merchandise to the owner, account 002 is credited.
20. Shortage of merchandise detected should be investigated and recorded in the minutes. Based on
the decision on resolution issued by the authorized person, an appropriate adjustment must be
made:
a. Record of the shortage where reason is not yet known and awaiting resolution:
21. When the property is determined as sold in period, based on VAT invoice, or selling invoice,
handover minute of property to record:
1. At the beginning of the period, the opening balance of merchandise must be reallocated into
purchases:
The entity must determine the closing balance of both quantity and value of merchandise.
a. Based on the closing balance of merchandise as reported in the inventory physical count to record:
ACCOUNT 157
GOODS ON CONSIGNMENT
This account records goods on consignment or goods which have been shipped to customer, a sale
agent or divisions, or services which have been rendered but customers have not yet accepted them for
payment.
2. Account 157 Goods on consignment is used to record the goods shipped to customer, an agent
on consignment and divisions or services which have been rendered according
acc to economics
der but have not been considered as sold (goods and services that have
contract or the purchase order
been shipped or provided have not been recognized as sale in period yet).
Debit:
- At the end of the period, the merchandise and finished goods shipped which has been determined
as sold shall be transferred (if the enterprise uses the periodic inventory method).
Credit:
- Value of merchandise, finished goods shipped, and services provided which have been
determined as sold;
- Value of merchandise, finished goods, and services shipped but then were returned by the
customer;
- At the beginning of the period, the value of merchandise, finished goods shipped, and services
provided has not been determined as sold (if the enterprise uses the periodic inventory method).
Debit balance:
Value of merchandise, finished goods shipped which have not been determined as sold during period.
MAJOR TRANSACTIONS
1. When enterprise ships merchandise, finished goods to customer, agent on consignment according
to economic contract, based on goods dispatch note and goods on consignment to record:
2. Services rendered to customer but have not been determined as sold during period:
- If merchandise, services are subject to VAT and enterprise pays VAT in subtraction method, sale
goods sold, services rendered is recorded according to the sale price-exclusive
of goods, finished goods
VAT.
4. When the enterprise shipped merchandise, finished goods (subject to VAT in subtraction method
and the enterprise pays VAT in subtraction method) to its divisions, based on the goods dispatch
note cum internal transport note, the accountant of the enterprise records as follows:
Periodically, based on the list of selling invoices prepared by the divisions, the enterprise issues
VAT invoice for goods transferred internally. Based on VAT invoice, the accountant records:
1. At the beginning of the period, the enterprise must transfer the value of merchandise and finished
consignment and the value of services rendered but have
goods shipped to customer, an agent on consignment
The accounting entry is recorded
not yet determined as sold in the period. The recorded as follows:
- At the end of the period, the enterprise must transfer the value of finished goods shipped to
customer or sent out on consignment, and the value of services rendered to customer which have
not been determined as sold at the end of the period:
ACCOUNT 158
This account records current value and movement of goods in bonded warehouse.
Bonded warehouse is only used for foreign invested enterprises to produce exports under special
customs regulation. Imported raw materials for production, which are stored at bonded warehouse, are
not subject to import duty as well as other relevant taxes.
Imported raw materials and finished goods which are stored at bonded warehouse only include raw
materials used in production and finished goods produced owned by the enterprises.
1. Bonded warehouse is only set up at enterprise that is established under the Foreign Investment
Law in Viet Nam (currently replaced by Investment Law) for exports purpose (at least export of
50% of its products).
3. Bonded warehouse should be located in area that is convenient for management and supervision
of customs.
4. Imports transferred in bonded warehouse must no nott be sold in Vietnam market. Under special
circumstances, the Ministry of Trade allowed to sell the imports in Vietnam market, the enterprise
must pay import tax and other taxes under current regulations.
5. If goods in bonded warehouse are damaged or have poor quality not satisfying requirement of
production, the customs shall require to re-export or destroy those goods as regulated by the
General Custom Department under supervision of the customs, tax and environment agency.
6. The enterprise must be kept track in detail to record quantity and value of each raw material,
goods according to each input and output.
Debit:
The value of raw materials, finished goods and merchandises put in bonded warehouse during the
period.
Credit:
The value of raw materials, finished goods and merchandises in bonded warehouse used during the
period.
Debit balance:
The balance of raw materials, finished goods and merchandises in bonded warehouse at the end of the
period.
MAJOR TRANSACTIONS
1. When the raw materials imported for production of goods to export or processing export are
transferred into bonded warehouse, the enterprise has not to pay import duty and VAT:
2. When imported raw materials in bonded warehousee used in production, or processing exports:
3. When finished goods, exports and processing exports transfer to bonded warehouse (if any):
5. If the export ratio is lower than the bonded rate, the enterprise must pay import tax and VAT (if
any) for difference between exports that must be done and the actual exports:
Dr. 133 VAT deductible (1331 VAT deductible of merchandise and services)
Cr. 333 Tax and statutory obligations (33312 Import VAT)
- When the enterprise paid import tax and VAT (if any):
Dr. 333 Tax and statutory obligations (3333 Import, export tax payable)
Dr. 333 Tax and statutory obligations (33312 Import VAT)
Cr. 111, 112
6. In the case, the enterprise is allowed to sell goods in bonded warehouse in Vietnamese market by
the Ministry of Trade, the enterprise must pay import tax and other taxes under current regulation.
- When the enterprise is allowed to use goods in bonded warehouse, the enterprise must transfer
goods in bonded warehouse to the normal warehouse of the enterprise and pay tax for those
goods.
At the same time, the enterprise should record the import tax and VAT payable:
- When enterprise paid import tax and VAT, the accountant shall record:
At the same time, the enterprise must determine import tax and VAT payable of the goods,
products, raw materials in bonded warehouse and record as guided in the entry (5).
- The enterprise should record sales of goods in bonded warehouse sold as follows:
8. If goods in bonded warehouse are damaged or have poor quality not satisfying requirement of
export, the enterprise must import the new ones or destroy the old ones:
At the same time, the enterprise must determine the amount of import tax and VAT payable of the
goods as guided in the entry (6). When enterprise paid taxes:
ACCOUNT 159
This account records provision for obsolete stock made when there is reliable evidence that the net
realizable value of the inventory declined as compared with its cost.
Provision is an estimated amount that is recorded into production and business expenses the value
declined below the book value of the inventory. Provision is made to compensate for losses due to a
decline in the value of materials, merchandise; as well as to reflect the net realizable value of the
inventory on the financial statement at the year end.
Net realizable value of inventory is the estimated selling price of inventories in a normal production
and business period minus (-) the estimated cost for completing the products and the estimated cost
needed for their consumption.
Provision of inventory is recorded in account 159 Provision for obsolete stock to adjust the cost
value in the inventory accounts.
1. Provision for obsolete stock is made when net realizable value of inventory is lower than its cost.
The provision is recorded in co st of goods sold in period.
cost
2. Inventory provision should only be made at the end of the accounting period when the financial
statements are prepared. The inventory provision must be made under regulations of Vietnamese
Accounting Standard I nventories and the current regulations of the financial regime. For
Inventories
enterprises that prepare and issue the interi m financial statement publicly such as listed
interim
companies, the enterprises may consider
consider and adjust the provision made on the balance sheet as
complied with the value principle of inventory of below net realizable value (If the net realizable
value of inventory is lower than its cost).
3. Provision should be computed for each type of inventory. For services provided in progress,
provision should be computed for each type of services.
4. At the end of the fiscal year, based on quality, original price, net realizable value of each material,
merchandise, and service provided in progress, the accountant determines the provision for
obsolete stock required for the following fiscal year:
- If provision for obsolete stock required in the current year is greater than the unused provision for
obsolete stock made in the prior year, the additional provision shall be recorded leading to an
increase in the cost of good sold.
- If provision for obsolete stock required in the current year is lower than the unused provision for
obsolete stock made in the prior year, the difference is deducted into provision leading to a
decrease in the cost of good sold.
Debit:
Credit:
Credit balance:
MAJOR TRANSACTIONS:
1. At the end of the fiscal year (or of the quarter), when enterprise made the initial provision for
obsolete stock:
- If provision for obsolete stock required in the current year is greater than the unused provision for
obsolete stock made in the prior year, the difference shall be recorded as follows:
- If provision for obsolete stock required in the current year is lower than the unused provision for
obsolete stock made in the prior year, the difference shall be recorded as follows:
ACCOUNT 161
This account records expenditures for activities and projects covered by State Budget serving certain
economic, political and social mission assigned by the State or higher authorities from non-business
activities without any profit purpose. The amount spent for non-profit activities, projects is covered by
State Budget, Official Development Assistance or from higher authorities; or aided and non-
refundable.
This account only applies to the entities that have not-profit operations or projects funded by the State
Budget or subsidized by higher authorities or aided, not refundable. Those entities maybe use the
income from not-profit activities to cover its expenses.
1. Enterprise must be recorded in details accordi ng to each expenditure sources, fiscal year, budget
according
year and classification of State Budget items.
2. Accounting for expenditures for not profit operations or projects must be in line with the budget
prepared and consistent and reconciled among the accounting books, supporting documents as
well as the financial statements.
4. At the end of the year, if the expenditures incurred in the current year have not been approved, the
balance of credit side of account 1612 Current year budget will be reallocated to debit side of
account 1611 Prior year budget while waiting for approval.
Debit:
Credit:
- Expenditures not approved and therefore must be paid from another source.
Debit balance:
Expenditures from subsidies and from projects of State Budget which have not been finalized or the
finalized report has not been approved.
Account 161 - Expenditures from subsidy of State Budget has two sub-accounts
Account 1611 - Prior year budget: to record prior years expenditures from subsidies of State Budget
and from projects which have not been approved.
Account 1612 - Current year budget: to record the current year expenditures from subsidies of State
Budget and from funded project.
MAJOR TRANSACTIONS
1. Payment for not-profit activities, programs and projects covered by the subsidy fund and the
project fund:
2. Salary and other payable to employees or suppliers that are funded by subsidy and project fund:
3. Using materials, tools and supplies for state and project activities:
If enterprise withdrawn the forecast from State Budget to spend, at the same time must credited in
account 008 Subsidies of State Budget (Off balance sheet accounts).
6. If enterprise acquired fixed assets or invested construction for State and project activities from
State Budget:
- When the enterprise acquires fixed assets or completed construction investment transferred to use:
If the enterprise withdrawn the forecast from State Budget to acquire fixed assets, the single entry
is credited in account 008 Subsidies of State Budget (Off balance sheet accounts).
7. When the enterprise drawn social insurance, health insurance and trade union fees from salary of
employees who participated in the state and project activities:
8. At the end of year, if the balance-sheet has not been approved, the accountant should transfer the
debits balance of account 1612 Current year budget to account
accoun 1611 Prior year budget:
9. When the balance-sheet is approved, amount of expenditure from subsidies and from projects are
covered by subsidy funds from State Budget:
Dr. 461 Subsidy funds from State Budget (4611 Prior year subsidy funds from State Budget)
Cr. 161 Expenditure from subsidies of State Budget (1611 Prior year budget)
10. Sending from the subsidy fund was not right, they will not be approved by the authorized agency
and must be recovered:
CATEGORY 2
NON-CURRENT ASSETS
A corporations non-current assets constitute tangible assets, intangible assets, finance lease
assets, investment property, investments in subsidiaries, investment in associates, shares in joint
ventures, Other long term investments, construction in progress, long term prepaid expenses,
deferred tax assets.
1. When accounting for non-current assets, the historical cost principle must be followed.
Furthermore, fixed assets must be presented at their net book value.
Net book value equals (=) cost minus (-) accumulated depreciation of fixed assets
3. Fixed assets should be properly classified in accordance with the accounting statistical reports
accordance
for the purpose of management and government authorities.
Non-current assets include fourteen acco unts, divided into three groups:
accounts,
ACCOUNT 211
TANGIBLE ASSETS
This account reflects the current value and movements of all tangible assets of the entity at
historical costs.
1. Tangible assets mean assets in physical form which are possessed by the enterprises for use in
production and business activities in conformity with the recognition criteria of tangible
assets.
2. Tangible assets must have independent structures or many independent components united to
be a system doing one or several certain utilities. All the system w
will not work if any component
of the system is lack. Tangible assets must satisfy all following four recognition criteria:
d. They meet all value criteria according to current regulations (no less than 10 million VND).
Working animals and animals fed for the purpose of getting their products are considered
tangible assets if they independently satisfy simultaneously four recognition criteria of
tangible assets.
Long live trees gardens are considered fixed assets if any part of the garden, or trees satisfies
simultaneously four recognition criteria of fixed assets.
3. Tangible assets are recorded in account 211 at historical cost. The historical cost of each
individual fixed asset should be recorded in detail. Historical cost of tangible assets is
determined as follows:
a. Historical cost of purchased tangible assets: Historical cost of purchased tangible assets
consists of buying price (minus (-) trade discounts and price reductions), taxes (excluding
reimbursed tax amounts) and expenses directly related to the putting of the assets into the
ready-for-use state, such as ground preparation expense; initial transportation, loading and
unloading expense; installation and trial operation expense (minus (-) amounts recovered
from products and wastes turned out from trial operation); expert cost and other directly-
related expenses.
For fixed assets purchased for production of goods and services subject to subtraction method
VAT, the value of fixed assets is recorded at buying price excluding VAT.
For fixed assets purchased for production of goods and services not subject to VAT or subject
to VAT in direct method, or using in State activities, projects or programs or for social
welfare activities, the value of fixed assets is recorded at total amount including VAT.
b. Tangible assets formed from construction investment by contractual mode: The historical
costs of tangible assets formed from construction investment by contractual mode are the
settled costs of the invested construction as current regulations on managing of investment
and construction, other directly related expenses and registration fee (if any).
Fixed assets are working livestock or livestock fed for products, Long term orchard, historical
cost is the actual expenses paid to these livestock, orchards from the beginning to the time of
come into use as current regulations on managing of investment and construction, other
related expenses.
c. Tangible assets purchased in deferred payment mode: The historical cost of tangible assets
purchased in deferred payment mode shall be shown at the buying price promptly paid at the
purchase time. The difference between the payable total amount and the promptly-paid
buying price shall be accounted as expense in the payment period.
d. Self-constructed or self made tangible assets: the historical cost of self-constructed or self
made tangible assets is its actual cost plus (+) installation and trial operation cost. Where the
themselves into fixed assets, the historical costs shall
enterprises turn the products made by themselves
be the production costs of such products plus (+ (+)) the expenses directly related to the putting
of the fixed assets into the ready-for-use state. In these cases, all internal profits must not be
included in the historical cost of these assets.
assets. Unreasonable expenses, such as wasted
materials and supplies, labour or other costs in excess of the normal levels arising in the self-
construction or self-generating process must not be included in the historical cost of tangible
assets.
e. Tangible assets purchased in exchange form: The historical cost of a tangible fixed asset
purchased in the form of exchange for a dissimilar tangible asset or other assets shall be
determined according to the reasonable value of the received tangible assets, or that of the
exchanged ones, after adjusting the cash amounts or cash equivalents which are additionally
paid or received.
The historical cost of a tangible asset purchased in the form of exchange for similar one, or
possibly formed through its sale in exchange for fo the right to own similar ones (similar assets
bus
are those with similar utilities, in the same business field and of equivalent value). In both
cases no profit or loss is recognized in the exchange process. The historical cost of the
received asset shall be the residual value of the exchanged one.
f. Tangible assets granted or received: Historical cost of tangible assets granted or received
consists of the net book value of the fixed assets recorded on the book of the entity that sent
the assets to or the actual value determined by the Handover Committee and expenses for
transporting, loading, for upgrade, assemble, trial test, registration excise (if any) that the
entity received the assets pays to put the assets into use.
Historical cost of tangible assets transferred among divisions in the company is the historical
cost recorded in the entity received following documents of those assets. Based on the
historical cost, accumulated depreciation, the net book value in the accounting book and
documents of the assets, the entity received those assets records into its accounting book.
Expenses related to the transfer assets among divisions of the company is not recorded to the
historical cost of assets but recorded into production, business expenses in the period.
g. Tangible assets augmented from joint venture contribution, recollecting the capital
contribution surplus, donation and present, etc.: Historical cost of assets augmented from
joint ventures, recollecting the capital contribution surplus, donation and present etc., is the
actual value decided by the Handover Committee and the expenses directly related to the
putting of the assets into the ready-for-use state such as expenses for transporting, loading,
assemble, trial test, registration excise (if any).
4. The historical cost of tangible assets is changed only in the following cases:
5. All increases and decreases of fixed assets must be recorded in the minutes and comply with
accountant's responsibility to set-up and complete fixed
the respective regulations. It is the accountant's
assets registers.
7. Tangible assets must be recorded in details for each asset, kinds of fixed assets and location,
time started using and their status for managing fixed assets.
Debit:
Credit:
- Decrease in the historical cost of tangible assets due to transfers to other enterprises, disposals
or contribution to a joint venture;
- Decrease in the historical cost of fixed assets due to disassembling parts of the fixed assets;
Debit balance:
211 - six
- Account 2111 – Architect costs, building: to record the value of construction projects such as
buildings, architect costs, fences, water tower, water tanks, park, decoration, infrastructure
projects such as roads, bridges and locks, railway, quay and wharf, etc.
- Account 2112 - Machinery equipment: to record value of machinery and equipment used in
the business, production activities comprising of specialized machinery, equipment assembly
lines and single machines.
- Account 2113 - Transpor tation and facilities: to record value of transportation facilities
Transportation
consisting of road, railway, waterway, airway, pipe lines and carrying facilities
(communications utilities, merchandi
merchandises/material
ses/material conveyor belt).
- Account 2114 - Office equipment: to record value of equipment and tools used in business
and administrative management (computer, ceiling fans, stand fans, tables and chairs,
measuring equipment, quality testing equipment, vacuum and cleaners, etc.).
- Account 2115 - Long life tree, working and producing animals: to record value of all long life
trees (coffee, tea, rubber, orchid etc.), worki
working
ng animals (elephant, horse, cow,..) and animals
fed for the purpose of getting their products (milk cow, breeding animals etc.).
- Account 2118 - Other tangible assets: to record value of other tangible assets not included
above (art, technical manuals etc.).
MAJOR TRANSACTIONS
Increase in fixed assets due to financing from parent company (SOEs), contributions of fixed
assets, purchasing, and completion of construction activities, donation and aid.
2.1. Acquisitions of tangible assets (new or used) used in producing, selling goods, services
subject to subtraction method VAT, according to documents involved in purchasing fixed assets,
the accountant defines historical cost of fixed assets, prepares the hand-over minute of fixed assets
and records:
2.2. Purchasing fixed assets for producing, selling goods, services not subject to VAT or subject
to VAT in direct method:
- Purchasing tangible assets in deferred, instalment method and immediately used in business
activities:
- Periodically, record into expenses based on the deferred, instalment interest expenses in each
period:
4. Corporation is donated, gifted fixed assets used in business and production activities:
Other costs directly involved in the donated, gifted assets are recorded in historical cost:
- When use products being self-produced to change into fixed assets for business and
production activities:
6.1. When receiving the similar tangible assets as bartering and using in production, business
activities immediately:
Dr. 211 - Tangible assets (historical cost of the assets received based on the net book value of
the assets sent as bartering)
asset (depreciated value of the assets sent as
Dr. 214 - Accumulated depreciation of fixed assets
bartering)
Cr. 211 Tangible assets (historical cost of the assets sent as bartering)
Dr. 811 - Other expenses (the net book value of the tangible assets sent as bartering)
Dr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 211 Tangible assets (historical cost)
Dr. 211 Tangible assets (fair value of fixed assets received as bartering)
Dr. 133 VAT deductible (1332) (if any)
Cr. 131 - Trade payables (total amount)
- Receipt of additional money since the value of the sent assets are higher than the value of the
received assets in exchange:
- Additional payment since the value of the sent assets are lower than the value of the received
assets in exchange:
7. Acquisition of tangible assets such as buildings, architect costs attached to land used rights
and put in to production and business activities:
Dr. 211 Tangible assets (historical cost - detailing in buildings, architect costs)
Dr. 213 Intangible assets (historical cost - detailing in land use rights)
Dr. 133 VAT deductible (if any)
Cr. 111, 112, 331,...
8.1. Construction recorded in the same accounting book system of the company:
- When the construction is completed, finalized and put into production, business:
finalized
- If the assets formed by the investment do not satisfy the recognition criteria of tangible assets
as regulations of the accounting standard:
- If the construction has been funded by construction capital fund or other capital funds, the
accountant will record an increase in paid in capital and a decrease in the funds as approved.
8.2. Construction investment is not recorded in the same accounting book of the entity (the
investor has a separate accounting book to record the investment):
- When the company is handed over the completed construction and the source formed the
assets (including the borrowings for construction projects):
Cr. 136 Inter-company receivable (capital granted from the high authority)
- For SOEs, if the assets (invested for long-term) are completed, finalized and handed over, the
value to be recorded shall be the value at the time of handover (value agreed by the
authority):
The assets completed shall be handed-over accompanying with the long term borrowings and
debts formed those assets.
9. When the construction or its categories is co mpleted and put into use but has not been
completed
finalized and approved yet, based on the actual expenses for construction the company
records the estimated cost to increase the tangible assets (a (as a base to calculate the
depreciation for the assets put in use). After the finalization of the investment is approved,
any difference from the estimated value shall be adjusted.
10. Capital contribution to joint ventures in the form of assets shall be recorded based on the
form
value agreed by parties:
11. Record of fixed assets transferred within the General Corporation (without payment):
12. When use subsidies of State Budget, or of funded project to invest, purchase fixed assets and
then put the purchased ones into State projects or activities:
For budgeted assets acquisition, record a single entry to credit side of account 008 Budget
for expenditures from subsidies of State Budget.
13. Acquisition of fixed assets funded by welfare funds that is completed and then used for
cultural, welfare activities:
14. Expenses created after the initial recognition involving in tangible assets such as expenses for
repair, improvement and upgrade:
- When expenses for repair, improvement of the tangible assets incurred after the initial
recognition:
- When the repair, improvement of fixed assets is completed and put them into use:
If the expenses satisfied the recognition criteria of tangible assets, then an increase to the
historical cost of tangible assets is recorded:
If the expenses satisfied recognition criteria of tangible assets, an increase to the historical
cost of tangible assets is recorded:
Decrease of fixed assets may be due to many different reasons such as disposals, damage,
shortage of fixed assets in physical collation, cont
contributions to a joint venture, transfer to other
enterprises, disassembling some parts of the fixed assets etc. For all decreases in the value of
fixed assets, the accountant must complete all necessary procedures and determine any gains or
losses.
Based on the relevant documents, the accountant would record the following:
1. Sales of fixed assets used in business, production activities, or in State projects and activities:
In most cases, fixed assets are sold because the company no longer uses them or they are
ineffective. When fixed assets are sold, the necessary procedures should be followed (a
committee is set up to value the assets, publicly report and auction organisation, business
contract and document of transferred fixed assets are prepared). Based on the sales
documents or receiving vouchers from the sale of fixed assets to record the following:
- If the company subject to subtraction method VAT, proceeds from the sales of fixed assets
are recorded as follows:
- If the company subject to VAT in direct method, proceeds from the sales of fixed assets are
recorded as follows:
- Based on the sales documents of fixed assets to write off the sold assets:
- Other costs involving in selling the fixed assets are debited into account 811 "Other
incomes".
- Based on the sales documents of fixed assets to reduce the sold fixed assets:
Dr. 466 - Sources for acquisition of fixed assets (net book value)
Dr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 211 Tangible assets (historical cost)
- Income involving in the sale of tangible assets is recorded into related accounts as regulations
of authorised agency.
Dr. 431 - Bonus and welfare funds (4313) (the net book value)
Dr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 211 Tangible assets (historical cost)
Fixed assets are disposed of for the following reasons: they are damaged and can no longer be
used, they are technically obsolete or no longer suitable for business, production demands.
When it has been decided to dispose of fixed assets, the company must select a team of
workers to take care of the disposal. This team is responsible for organizing the disposal in
accordance with process, procedures in the financial management regulations and preparing
Minute of disposal of fixed assets as regulated template.
Minutes are made in duplicate in which one copy goes to the accounting department and the
other copy goes to the department which used the asset.
Based on the fixed asset disposal minute and relevant documents, the accountant will record
the fixed assets disposal as the sale of fixed assets
The surplus or shortage of fixed assets must be specified the reasons. Based on the Fixed
assets physical counting report" and the conclusion of the counting committee, the accountant
should accurately record the surplus or shortage and on a timely basis.
- The surplus in assets due to assets not being recorded, the accountant must record the
increase in fixed assets for each specific case based on the related documents:
- If the surplus of fixed assets are being used, besides recording the increase in fixed assets,
based on the historical cost and depreciation rate, the accountant must calculate the
depreciation amount to provide additional charge for fixed assets or for assets used in welfare
activities or State projects and activities:
Dr. Production, business costs (Fixed assets used in production, business activities)
Dr. 4313 - Welfare funds to form fixed assets (Fixed assets used for welfare)
Dr. 466 - Sources for acquisition of fixed assets (Fixed assets used for State projects,
activities)
Cr. 214 - Accumulated depreciation of fixed assets (2141).
- If the surplus of fixed assets which belong to another entity, that entity should be informed. If
the owner of the surplus asset can not be determined, the situation should be reported to the
higher level authorities or the financial entity (for SOE) to resolve the problem. While
waiting for an explanation, the accountant should temporarily record the assets to account
002 Materials, merchandise goods held under tr trust or for processing" (off balance sheet
accounts) in order to keep track of it based on the Physical counting report.
- If the solution is found out, based on "Report for treatment of fixed assets shortage" and the
fixed assets register, the accountant must determine the historical cost and the accumulated
depreciation of the fixed assets. This is the base to write off the fixed assets and its net book
value. Depending on the solution, the entry is:
(2) The net book value of shortage fixed assets must be collected according to the solution made:
(2) The rest value of shortage fixed assets must be collected according the solution made:
- When the reason for shortage fixed assets has not been found and the solution has not been
determined:
(1) Decrease in fixed assets and write off the net book value of shortage fixed assets:
(2) When a resolution has been made for the net book value of shortage fixed assets:
Simultaneously record the net book value of shortage fixed assets into account 1381
Shortage of assets awaiting resolution:
(2) When a resolution for the net book value of shortage fixed assets has been made:
Simultaneously record the compensation for the net book value of shortage fixed assets into
related accounts as decided by the authority:
Simultaneously record the net book value of shortage fixed assets into account 1381
Shortage of assets awaiting resolution:
(2) When a resolution for the net book value of shortage fixed assets has been made:
5. Assets used in production, business activities do not meet the recognition criteria of tangible
assets must be treated as equipments:
Dr. 623, 627, 641, 642 (If the net book value is low)
Dr. 242 Long term prepaid costs (If the net book value is high and must be allocated)
Dr. 214 - Accumulated depreciation of fixed assets (Depreciated amount)
Cr. 211 Tangible assets (Historical cost)
6. Accounting for the sale and lease of tangible assets under the operating lease is referred to
guidance in account 811 or 711).
ACCOUNT 212
This account reflects the current value and movements of financial lease assets of the enterprise.
- A finance lease is a lease whereby the lessor transfers most of the risks and rewards
associated with the ownership over an asset to the lessee. The ownership over the asset may
be transferred at the end of the lease term.
- Classification of leases as finance leases if they meet one of five following standards:
The lessor transfers the assets ownership to the lessee at the end of the lease term;
If the lessee cancels the contract and pays compensation for damage associated with the
contract cancellation to the lessor;
The lessee is able to continue leasing the asset after the lease contract expires at a rent lower
than market rents.
The lease of assets being the land use right will be usually classified as operating lease.
1. This account is used by the lessee to record the value of the finance lease assets. These assets
do not belong to the enterprise but the enterprise has a legal obligation and responsibility to
keep, manage and use them in the same way as the company's own assets.
Historical cost of finance lease assets is recorded as the fair value of the leased assets or
present value of the minimum lease payment (when the reasonable value is higher than the
present value of the minimum lease payment) and initial direct costs created involving in
finance lease activities.
When calculate the present value of minimum lease payment, the company may use the
implicit interest rate, the interest rate noted in the lease contract or marginal interest rate from
borrowing of the lessee.
Historical cost of finance lease assets does not include the VAT that the lessor paid when
purchasing fixed assets to let others lease (This amount of tax the lessee must return to the
lessor, including when finance lease assets used in production of goods and services subject
to subtraction method VAT and in direct method, or not subject to VAT).
2. This account is not used to record the value of fixed assets under operating leases.
3. Periodically, the lessee has responsibility to determine the depreciation of the assets and
charge into production and business expenses on the consistent basis of depreciation policy
among similar assets of the company.
If the lessee are not certain on possession of lease assets when the leas
lease contract is over, the assets
shall be depreciated over lease period if the lease pe riod is shorter than useful life of the lease
period
assets.
- Finance lease used for production, business activities of goods, services subject to subtraction
activities
method VAT, the amount of VAT in each period is recorded into account 133 "VAT
deductible" (1332);
- Finance lease used for production, business activities of goods, services subject to VAT in
direct method, the amount of VAT in each peri od is recorded into business expenses in the
period
period.
Debit:
Credit:
Decrease of historical cost of finance lease assets due to the asset being returned to the lessor
when the lease contract is over or the asset is purchased.
Debit balance:
MAJOR TRANSACTIONS
1. Record of initial direct costs involving in finance lease assets before receiving the assets such
as negotiation, signing contract expenses:
3. When the amount payable of finance lease is determined at the price excluding VAT that the
lessor paid when purchasing fixed assets.
3.1. When receiving finance lease assets, based on the lease contract and related documents the
accountant records value of finance lease assets using the price excluding VAT input:
assets
3.2. Record of initial direct costs involving in finance lease activities into historical cost of
finance lease assets:
3.3. At the end of the accounting period, based on the lease contract, the accountant determines
the current portion of long term loans in coming period:
3.4.1 When the finance lease asset is used in production, business activities of goods and services
subject to subtraction method VAT:
- Record of payment of principle amount, interest expenses and VAT to the lesse:
- When receiving the invoice but the company does not pay immediately, based on the invoice
the accountant record interest payable and the VAT amount into account 315 - Current
portion of long term loan:
3.4.2 When finance lease assets used in production of goods and services not subject to VAT or
subject to VAT in direct method:
- Record of payment of principle amount, interest expenses and VAT to the lessor:
- When receiving the invoice but the company does not immediately pay, based on invoice the
accountant records interest payable and VAT payable into account 315 "Current portion of
long term loan":
assets, the lessee also bears VAT amount that the lessor paid
4.1. When receiving finance lease assets,
when purchasing the assets. Based on the lease contract and related documents, the
excluding VAT that must be returned to the
accountant records value of assets using price excluding
lessor:
4.2. Record of direct initial costs into historical cost of finance lease assets:
4.3. At the end of the accounting period, based on the lease contract, the accountant determines
the current portion of long term loans in coming period:
Dr. 635 Financial expenses (Interest expenses paid in the current period)
Dr. 315 - Current portion of long term loan (principle amount paid in the current period
including VAT)
Cr. 111, 112,...
- Based on the invoice, record the VAT payable to the lessor in the period:
When finance lease assets is used in production of goods and services subject to subtraction
method VAT:
- When receiving invoice but the company does not pay immediately, based on the invoice the
company records the interest payable in the current period to account 315 Current portion of
long term loan:
- Simultaneously, based on the invoice, the company records the VAT returned
return to the lessee in
the period. The accounting entries are similar to record of payment when receiving the
invoice.
6. When returned the assets to the lessor as agreed in the lease contract, the accountant reduces
the value of assets:
7. The lease contract regulates that the leesee only leases a part of the value of the assets, then
purchases those assets. When received the transfer of the own right of assets, the accountant
records a decrease in the finance lease assets and and increases in the tangible assets owned
by the company. When change from finance lease assets to assets owned by the company:
Cr. 212 Finance leased assets (net book value of finance lease assets)
Cr. 111, 112,... (Additional payable amount)
8. Accounting for the sale and lease back under the finance lease assets:
8.1. Record of the sale and lease back with the price higher than the net book value of the assets:
- Accounting entries for recognition of leased assassets and payables for financial lease, and
periodical payment are similar to item 3 & 4 of account 212.
- Periodically, the accountant determines depreci ation amount and charge to production and
depreciation
business expenses:
- Periodically, the accountant transfers difference between the sale price and the net book
value of fixed assets sold and leased back, and reduces the production, business expenses in
the period following lease period:
- ass
Accounting entries for recognition of leased assets and payables for financial lease, and
periodical payment are similar to item 3 & 4 of account 212.
- differe
Periodically, the accountant transfers the difference between lower (loss) the sale price and
the net book value of fixed assets sold and leased back, and records an increase in
production, business expenses in the period:
ACCOUNT 213
INTANGIBLE ASSETS
This account reflects the current value and the increases, decreases in intangible assets of a
company.
Intangible assets mean assets which have no physical form but the value of which can be
determined and which are held and used by the enterprises in their production, business, service
provision or leased to other subjects in conformity with the recognition criteria of intangible
assets.
1. Historical cost means all costs incurred by th thee enterprises to acquire intangible assets as of
the time of putting these assets into use as expected.
- The historical cost of a separately-purchased in tangible fixed asset consists of the buying
intangible
price (minus (-) trade discounts or price reductions), taxes (excl (excluding reimbursed tax
amounts) and expenses directly related to th
thee putting of the asset into use as planned;
- Where a procured intangible asset is paid by deferred payment mode, its historical cost shall
be shown at the purchasing price which should have been promptly paid at the time of
amount payable and the promptly-paid purchase
purchase. The Difference between the total amount
price shall be accounted into the production and business expense according to the payment
period, except where such difference is included in the historical cost of the intangible asset
(capitalization) under the regulations of the accounting standard Costs of borrowing;
- The historical cost of an intangible asset for a definite term is the right to use land when the
receiving the land use right lawfully transferred
land is allocated or the payment made when receiving
from other persons, or the land use right value contributed to joint-venture capital;
- The historical cost of an intangible assets for indefinite term is the payment made when
receiving the land use right lawfully transferred from other entities (including payment made
to individuals, organisations who transferred the right, compensation for land clearance,
ground preparation, registration fee, etc.).
- The historical cost of intangible assets allocated by the State or presented, donated is
determined according to the initial reasonable value plus (+) the expenses directly related to
the putting of the assets into use as planned.
2. Actual costs incurred related to development stage are recorded into production, business
expenses in the period. Intangible assets created in development stage satisfied recognition
criteria of intangible assets regulated in Vietnamese Accounting Standard 4 Intangible
assets, are recorded into account 241 "Construction in progress" (2412). When finishing
development stage, expenses attributable to historical cost of intangible assets in development
stage must be debited to account 213 Intangible assets".
3. Depreciation shall start from the time the intangible fixed asset is put into use. Depreciation
shall be allocated into production, business expenses in the period as regulation of accounting
standard of intangible assets. In the case of fixed assets is land use rights, depreciation shall
be calculated for land use right for a definite term.
4. Costs related to intangible assets, which are incurred after initial recognition, must be
recognized as production and business expenses in the period. If they meet simultaneously
the two following conditions, they shall be included into the historical costs of intangible
assets:
5. These costs can help intangible assets generate more future economic benefits than the
original operation evaluation;
7. Those costs incurred to generate future economic benefits for the enterprises, including
enterprise establishment cost, personnel-training co st and advertising cost incurred before the
cost
newly-set up enterprises start to operate, costs for the research stage, relocation cost, shall be
recognized as production and business expenses in the period or gradually allocated into
production and business expenses in the maximum period of three years.
8. Costs related to intangible assets, which have been recognized by the enterprises as costs of
determining the business operation results in th thee previous period, shall not be re-recognized
as part of the historical cost of intangible assets.
9. Trademark, distribution right, customers name list and items of similar nature created
internally are not recorded as intangible assets.
10. Intangible assets are kept and recorded in details in the Fixed assets register.
Debit:
Credit:
Debit balance:
- Account 2131 - Land use rights: to record the value of intangible assets constituted actual
costs that have been paid directly involving in the land use including money to have the land
use rights, compensations for land clearance, ground preparation (in the case of land use right
separated from stage of building construction and architectural objects on land), registration
fee (if any). This account does not record expenses for constructions on the land.
When the company receives land from the State without fee, the annual fee is recorded into
expenses. In this case, the land use right is not considered as intangible assets. Therefore, it is
not recorded into account 2131.
- Account 2132 – Trademark and distribution rights: to record the value of intangible assets
including all actual costs that the company paid to have the trademark and distribution rights.
- Account 2133- Copy rights, patents: to record the value of intangible assets including all
actual costs that the company paid to have copy rights, patents.
- Account 2134 - Brand names: to record the value of intangible assets including actual costs
directly involving in purchasing brand names.
- Account 2135 - Computer software: to record the value of intangible assets including all
actual costs that the company paid to have computer software.
- Account 2136 - Licenses and franchises: to record the value of intangible assets including all
actual costs that the company paid to have the licenses or franchises, such as registration
certificates, exploration licence, manufacturing of new products, etc.
- Account 2138 - Other intangible assets: to record value of other intangible assets that have
not been recorded above.
MAJOR TRANSACTIONS
- Purchasing intangible assets for production of goods and services subject to subtraction
method VAT:
Dr. 213 - Intangible assets (Historical cost- At sight price excluding VAT)
Dr. 242 - Long term prepaid expenses (Deferred, instalment interest equals Difference
between total payment minus (-) at sight price and VAT input (if any))
Dr. 133 - VAT deductible (1332)
Cr. 331 - Trade payables (Total amount)
- Purchasing intangible assets used in production of goods and services not subject to VAT or
subject to VAT in direct method:
Dr. 213 - Intangible assets (Historical cost- At sight price including VAT)
Dr. 242 - Long term prepaid expenses (The interest of deferred, instalment payment equals
total amount minus (-) at sight price)
Cr. 331 - Trade payables (Total amount)
When receive an intangible assets and use in production, business activities at once:
Dr. 213 - Intangible assets (Historical cost of re ceived intangible assets recorded based on
received
the net book value of exchanged fixed assets)
Dr. 214 - Accumulated depreciation and amortization
amortization (2143) (Depreciated amount of
exchanged fixed assets)
Cr. 213 - Intangible assets (Historical cost of exchanged intangible assets)
4. Value of intangible assets formed from within the enterprises in development stage:
4.1. When expenses incurred in development stage do not satisfy recognition criteria of
intangible assets, the accountant records those expenses into production, business expenses
in the period or into long term prepaid expenses:
Dr. 242 - Long term prepaid expenses (if the value is high) or
Dr. 642 - General and administration expenses
Cr. 111, 112, 152, 153, 331,...
4.2. When determine the expenses incurred in development stage satisfied recognition criteria of
intangible assets:
a. Record actual expenses created in development stage to form historical cost of intangible
assets:
5. When purchase of intangible assets as land use rights and buildings, architectural objects on
land, the accountant must determine separately the value of land use rights and of buildings,
architectural objects on land as intangible and tangible assets, respectively:
Dr. 211 - Tangible assets (Historical cost of buildings and architectural objects)
Dr. 213 - Intangible assets (Historical cost of land use rights)
Dr. 133 - VAT deductible (1332 - if any)
Cr. 111, 112, 331,...
7. When the company is donated, presented of sponsored intangible assets and put into use for
production, business activities:
- Expenses created involving in intangible assets from sponsorship, present and donation:
8. When the company receives shares in joint ventures by land use rights, based on the
document of transfer land use rights:
9. When there is a decision of change the use purpose of investment property as land use rights
to intangible assets:
10. When invest in associates in the form of contribution by intangible assets, based on the
revaluation price of intangible assets between the company and the associate.
between
10.1. When the intangible assets represented as cont ribution whose revaluation price is lower
contribution
than its net book value:
11.1. When the intangible assets represented as contribution whose revaluation price is lower
than its net book value:
Dr. 222 - Shares in joint ventures (The value agreed by the venturers)
Dr. 214 - Accumulated depreciation and amortization (2143)
Dr. 811 - Other expenses (Difference between the lower revalued price and the net book
value of intangible assets)
Cr. 213 - Intangible assets (Historical cost)
11.2. When the intangible assets represented as contribution is lower than the net book value,
the difference between the revaluation price and the net book value equivalent to the benefit
of other parties in the venture is recorded into account 711 Other income. The difference
equivalent to the benefit of the company in the venture is recorded into account 3387
Deferred income:
Dr. 222 - Shares in joint ventures (The value agreed by the venture parties)
Dr. 214 - Accumulated depreciation and amortization (2143) (depreciated amount)
Cr. 213 - Intangible assets (Historical cost)
Cr. 711 - Other income (Difference between the higher revalued price and the net book
value of fixed assets equivalent to benefit of other ventures in the venture)
Cr. 3387 - Deferred income (Difference between the higher revalued price and the net
book value of fixed assets equivalent to the benefit of the company in the venture is
deferred)
- Periodically, based on the useful life of the fixed assets that the jointly control entity uses, the
accountant allocates the deferred income into other income in the period:
ACCOUNT 214
This account reflects the increases and decreases in depreciation value and accumulated
depreciation value of fixed assets and investment property while they are in use and other
increases, decreases in fixed assets, investment property.
1. In principle, all the current fixed assets, investment property of the company involving in
production, business activities (consist of unused assets, disused assets, assets waiting for
disposal) must be depreciated according to current regulations.
Depreciation and amortization of fixed assets and investment property used in production,
business activities is recorded into production, business expenses in the period. Amortization
of unused, disused and fixed assets waiting for di sposal is recorded into other expenses. In
disposal
some special cases, fixed assets are not depreciated (such as spare fixed assets, fixed assets
used for social purpose, etc.), the company must follow the current financial policy. For fixed
assets used in State activities, funded projects or social welfare activities, the company does
not have to charge the depreciation to expenses
expenses account. The company should only calculate
the accumulated depreciation and amortization.
2. Based on the current financial management policy and accounting standards and based on
management requirement of the company, one of three depreciation methods suitable for each
fixed assets and investment property must be cchosen
hosen in order to encourage the development
of the business and to ensure the quick and ade quate capital recovery which is suitable to the
adequate
company.
Amortization method for each fixed assets and inv estment property must be used consistently
investment
and may be changed when there are significant changes in the method of obtaining the
economic benefit of fixed assets and investment property.
3. It is necessary to review the useful life and method of depreciation of fixed assets at the end
of a fiscal year. If the estimated useful life of assets is much different from the previous
estimates, the useful life must be changed correspondingly. The method of depreciation of
fixed assets is changed when there are significant changes in the method of estimates of
obtaining the economic benefit fixed assets. In this case, the depreciation expenses for the
current year and following years must be adjusted and disclose in the financial statements.
4. Fixed assets which are fully depreciated (capital fully recovered) but still used for production,
business activities will no longer be depreciated.
If fixed assets are not fully depreciated (capital not fully recovered) but are damaged and
need to be disposed of, the reason must be verified and responsibility of group and
individuals must be identified to compensate.
The remaining value of fixed assets which are not fully recovered should be compensated by
the receipts from disposals of those fixed assets. The compensation amount should be decided
by the management of the company.
If the receipt from disposal of fixed assets is not enough to recover the net book value, the
difference will be considered as loss on disposal of fixed assets. This loss is recorded as other
expenses. Especially for state owned enterprises, this issue will be resolved in accordance
with the Governments current financial management regulations.
5. Amortisation of intangible assets depends on the useful life of every intangible assets from
the date first put into use (based on contracts, commitments or usage). For land use right, the
useful life is determined as the term of using the land. In the case of undetermined useful life
of land use right, no depreciation have to be calculated.
6. For finance lease assets, in the rental period, the leasee must charge the depreciation to
production, business expenses to recover the capital.
7. For investment property, in the period of holding the assets for sale or in operating lease, the
depreciation of investment property must be charged to production, business expenses. The
company may based on similar fixed assets that the reporting enterprise use (fixed assets) to
estimate the useful life and the method of depreciation of investment property.
Debit:
Decrease in accumulated depreciation of investment property and fixed assets due to disposals,
sales and transfer to another company or contribute to joint ventures, etc.
Credit:
Debit balance:
MAJOR TRANSACTIONS
1. A charge depreciation of fixed assets into operation and production cost and other expenses
must be made periodically:
2. Receipt of fixed assets which are transferred within a General Corporation or a company:
3. A charge amortisation of investment property held for sales or for operating lease must be
made periodically:
Dr. 632 Cost of goods sold (Details in expenses for investment property)
depreciation and amortization (2147)
Cr. 214 - Accumulated depreciation
5. For fixed assets used in State activities or funded projects, the depreciation is made at the end
of the fiscal year:
6. Fixed assets used in cultural, welfare activities, the depreciation is made at the end of the
fiscal year:
s
7. At the end of the fiscal year, the company should review the useful life and method of
deprecia
depreciation of fixed assets. If the depreciation is changed, the accounting book should be
adjusted as follows:
- If the depreciation of fixed assets increases (higher than the charge in the year) due to the
changes of useful life and method of depreciation, the difference is recorded as follows:
- If the depreciation of fixed assets decreases (lower than the charge in the year) due to the
changes of useful life and method of depreciation, the difference is recorded as follows:
ACCOUNT 217
INVESTMENT PROPERTY
This account reflects the current value and increases, decreases in investment property of the
company using historical cost.
1. This account reflects value of fixed assets that satisfy recognition criteria of investment
property. This account is not used to record property held for sale in the ordinary course of
business or in the process of construction or deve lopment for such sale in the near future,
development
fixed assets used by the owner, fixed assets in the progress to use in the future as investment
property.
Investment property should be recognized as an asset when the following conditions are met:
a. it is probable that the future economic benefits associated with the investment property will
flow to the enterprise; and
2. Investment property is recorded into this account at its cost. Cost is the amount of cash or
cash equivalents paid or the fair value of other consideration given to acquire an asset at the
time of its acquisition or construction.
a. Depend on each cases, the cost of the investment property is calculated as follows:
investment
- The cost of a purchased investment property comprises its purchase price and any directly
attributable expenditure. Directly attributable expenditure includes, for example, professional
fees for legal services, property transfer taxes and other transaction cost.
- If payment for an investment property is deferred, its cost is the cash price equivalent. The
difference between this amount and the total payments is recognized as interest expense over
the period of credit, except when the difference is charged to cost of investment property in
accordance with VAS 16 Borrowing Costs;
- The cost of a self-constructed investment property is the actual costs and other directly
attributable expenditure at the date when the construction or development is complete.
- If the finance lease assets held to be leased out for operating leases meet the recognition
criteria of investment property, the historical cost of the investment property shall be
recorded in compliance with VAS 6 Leases when leases start.
- start-up costs (unless they are necessary to bring the property to its working condition);
- initial operating losses incurred before the investment property achieves the planned level of
occupancy;
4. During the time of holding property for capital appreciation or for rentals, the depreciation
must be charged for investment property. Depr eciation of investment property is recorded
Depreciation
into production, business expenses in the period. The company may based on similar fixed
assets that the company is using to determine the useful life and depreciation method of
investment property,
5. For purchased investment property must be cons tructed, repaired, upgraded before use, the
constructed,
expenses arising from purchase, construction or development of investment property or for
repairs, maintenance or enhancements are recorded into account 241 Construction in
progress. When the construction and development finishes, the cost of investment property
is determined to transfer into account 217 Investment property.
6. Transfers to, or from, investment property should be made when, and only when, there is a
should
change in use, evidenced by:
b. commencement of development with a view to sale, for a transfer from investment property
to inventories;
e. end of construction or development, for a transfer from property in the course of construction
or development (regulated in VAS 3 Tangible assets) to investment property.
Transferring from or to the investment property and owner occupied property or inventories
does not change the book value of transferred assets and the historical cost of assets in
determining its value or for preparation of the financial statements.
7. When a company sells an investment property without repair and maintenance, the company
shall not transfer it to inventory account but retain the assets into account 217 "Investment
property" until that assets are sold.
8. Income from sale of investment property is recorded as total price (price excluding VAT
when the company paying VAT in subtraction method).
Debit:
Credit:
Debit balance:
MAJOR TRANSACTIONS
Dr. 217 - Investment property (Historical cost - at sight price excluding VAT)
Dr. 242 - Long term prepaid expenses (Interest of deferred payment equals total payment
minus (-) at sight price and input VAT)
Dr. 133 - VAT deductible (1332)
Cr. 331 - Trade payables
Dr. 217 - Investment property (Historical cost - at sight price including VAT)
Dr. 242 - Long term prepaid expenses (Interest of deferred payment equals total payment
minus (-) at sight price including VAT)
Cr. 331 - Trade payables
2.3. Periodically, calculate and allocate the interest payable of purchasing investment property in
deferred method:
3.1. When it is created the investment property expenses, based on the related documents, the
accountant records expenses into account 241 Construction in progress (Similar to
construction of tangible assets, see account 211 Tangible assets).
3.2. When finishing construction and transfer it to investment property, the accountant based on
the transfer document to record:
5. Transfer the stock-balance to investment property, based on the document of transfer the use
purpose:
6. When finance lease asset held to be leased out under one or more operating leases meets the
recognition criteria of investment property, based on the finance lease contract and relating
documents, the leasee records as follows:
(The accountant records the payment to leasor leasor when receiving invoice followed the
regulations of account 212 Finance lease assets).
8.2. When repurchase of the finance lease assets classified as investment property for further
investment, the accountant records the additional charge to the historical cost investment
property:
8.3. When repurchase of the finance lease assets classified as investment property for production
of goods and services or management activities of the company, the accountant reclassifies
the assets to owner-occupied property:
9.2. Reduce the historical cost and the net book value of investment property that have been sold
or disposed of:
10. Accounting for investment property transferred to inventories or to owner occupied property:
10.1. When transfer from investment property to inventories, the owner decides to repair,
upgrade for sale:
- When there is decision of repair, upgrade investment property for sale, the accountant
transfers the net book value of investment property into account 156 Merchandise goods:
- When finished the repair and maintenance the property for sale, the company transfers all
actual expenses incurred to merchandise goods of fixed assets waiting for sale:
Simultaneously record:
ACCOUNT 221
INVESTMENT IN SUBSIDIARIES
This account reflects the current value and increases, decreases in investment in subsidiaries. A
subsidiary is an enterprise that is controlled by another enterprise (known as the parent).
Investment in subsidiaries consists of:
1. Shares: Shares are documents or accounting entries or electronic data acknowledged the right
and legal benefit of the mother company in its subsidiaries. Shares include common shares
and preference shares.
The parent company holds common shares of subsidiaries, has the right to attend Share
holders Assembly Meeting, has right to dominate and nominate members of the Board of
management, has the vote right of important problems of repair, add the Charter of the
Company, business strategy, divide profit as regul ation in the Charter of the company. The
regulation
parent company holds equity securities rece ives dividend based on the result of business
receives
activities of subsidiary, but the owners of equity securities are also in risk of loss or
bankruptcy of subsidiary, as the Charter of the Company and the Law on Bankruptcy.
2. Capital investment as contribution in money, other assets to subsidiary operated under form
of State owned company, limited liability company with one member, State Joint Stock
Company and other types of company.
1. Account 221 "Investment in subsidiaries" is only recorded investment when the investor
holds more than 50 % owners equity (more than 50% vote right) and has the right to control
financial policies and business activities of the company
company in order to obtain economic benefits
from that company. When the investor loses the right to control the company, the investor
shall reduce the investment in subsidiaries.
2. The investment of the investor held less than 50% owners equity (less than 50% vote right)
in an entity are still recorded into account 221 "Investment in subsidiaries" when it obtains:
a. Power over more than 50% of the voting rights of the other entity by virtue of an agreement
with other investors; or
b. Power to govern the financial and operating policies of the other entity under a statute or an
agreement; or
c. Power to appoint or remove the majority of the members of the board of management or
equivalent governing body of the other entity; or
d. Power to cast the majority of votes at meetings of the board of management or equivalent
governing body of the other entity.
3. Investment in subsidiaries must be recorded at cost. Cost means purchase price plus (+)
purchase expenses (if any), such as intermediary expenses, transaction expenses, bank fee,
taxation, etc.
4. Accounting for transactions created in the progress of business combination of the company
considered as the purchaser in the business combination leading to the parent-subsidiary
5. The accountant must record in details of investments in each subsidiary in par value, actual
price of securities, actual costs of investment in subsidiaries.
6. It is essential to record correctly, timely incomes from subsidiaries (distributed dividends and
profits) of the fiscal year into the separated financial statements of the parent. Distributed
dividends and profit from subsidiaries are recorded into financial income of the parent
companies.
Debit:
Credit:
Debit balance:
MAJOR TRANSACTIONS
1. When the parent buys shares or makes invest ment in subsidiaries in money as committed in
investment
the agreement of contribution, or purchase the investment in subsidiaries, based on the actual
amount of investment in subsidiaries:
Simultaneously the accountant records in details of each share at its par value (If investment
in subsidiaries through acquiring shares of the subsidiary).
4. When received the acknowledgement of distributed dividend and profit or money from
subsidiary:
6. When collect, dispose of or sell the investment in subsidiaries that made loss:
investment
7. When collect, dispose of or sell the investment in subsidiaries that made profit:
On the acquisition date, the acquirer measures and records the cost of a business combination
as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred
or assumed, and equity instruments issued by the acquirer, in exchange for control of the
acquiree plus (+) any costs directly attributable to the business combination. Simultaneously
the acquirer, the parent, records its shares in the subsidiary as an investment in subsidiaries.
- If the acquirer paid in cash or cash equivalent for its acquisition in the business combination:
- If the acquirer paid for its acquisition in the business combination by issuing shares whose
price (fair value) at the date of exchange is higher than the par value:
- If the acquirer paid for its acquisition in the business combination by issuing shares whose
price (fair value) at the date of exchange is lower than the par value:
- If the acquirer paid for its acquisition in the business combination by exchanging its assets:
Dr. 811 - Other expenses (net book value of tangible assets sent for exchange)
Dr. 214 - Accumulated depreciation andand amortization (depreciated amount)
Cr. 211 - Tangible assets (historical cost)
investment
Simultaneously, increase other income and investment in subsidiaries due to exchange of
fixed assets:
- If the acquirer paid for its acquisition in the business combination by issuing bonds:
ACCOUNT 222
This account reflects all the shares in joint ventures in the establishment of a jointly control entity
and the progress of taking back shares in joint ventures when the joint contract is over.
A joint venture is a contractual arrangement whereby two or more parties undertake an economic
activity which is subject to joint control. Jointly controlled activities referred to herein include
A jointly control entity is established by the contribution of venture parties. A jointly control
operates independently like a company. However, it
entity is a business entity newly established, operates
venture contract. A jointly control entity must organize
is controlled by venture parties in the joint venture
the accounting activity independently as currentcurrent regulations on accounting just like other
responsible for control assets, payable loans, income,
companies. The jointly control entity is responsible
other income and expenses created in the entity. Each contributors receive the income from the
jointly control entity in accordance with agreement of the venture contract.
1. Capital contributions to jointly control entity is recorded into account 222 when the investor
policies and activities of invested entity. When the
has the jointly control right over financial policies
en
investor loses the control right, the share in the jointly control entity shall be recorded into
account of investment in associates.
3. The value of the contribution to the jointly control entity recorded in this account must be
agreed by venturers in the capital contribution minute.
- If the revalued amount of materials, goods is higher than the book value at the time of
contribution, the difference is recorded as follows:
The difference between the higher revalued amount of materials, goods contributed and the
book value should be recorded into other income in the current period in corresponding to the
benefit of others parties in the venture.
The difference between the higher revalued amount of materials, goods contributed and the
book value should be recorded as deferred income in corresponding to the benefit of the
company in the venture. When the jointly control entity sells those materials, goods to the
independent third party, the deferred income shall be transferred into other income.
- If the revalued amount of materials, goods is lower than the book value at the time of
contribution, the difference is recorded into other expenses in the current period.
- If the revalued amount of fixed assets is higher than the net book value at the time of
contribution, the difference is recorded as follows:
The difference between the revalued amount of fixed assets and the net book value fixed
assets should be recorded as deferred income in corresponding to the companys benefit in
the venture. Annually, this deferred inco income
me (benefit from revaluation of fixed assets
contributed to the venture) shall be allocated to other income based on the useful life of the
asset that the jointly control entity uses.
- If the revalued amount of fixed assets is lower than the net book value at the time of
contribution, the difference is recorded into other expenses in the period.
6. When collection of shares in joint ventures, the company reduces the contribution based on
the value of materials, assets and money that the jointly control entity
entit returns. The losses due
to uncollectible of the full contribution are recorded
recorded as financial expenses. If the collection
generated income is recorded to financial income.
value is higher than the contribution, the generated
Expenses from the venture activities incurred in contributors (if any) are debited into account
635 Financial expenses.
8. Contributors in the jointly control entity have right to transfer the contribution in the venture.
If the transfer value is higher than the contribution to the jointly control entity, the difference
is credited into account 515 Financial income. In contrast, if the transfer value is lower than
the contribution to the venture, the difference is debited into account 635 Financial
expenses.
9. For jointly control entity, when venture parties transfer the contribution to each others,
expenses involving in the transfer of venture parties are not recorded in the accounting book
of the jointly control entity. The jointly control entity shall record in details of contribution
and make procedures to change the owner on the Business License or Investment License.
10. Venture parties or other partners acquires contribution of other venture parties in the venture,
the contribution to the venture shall be recorded at actual acquired value (The acquired value
may be higher or lower than the book value of the transferred contribution at the time of
transfer).
11. The accountant must account in details of shares in joint ventures to the jointly control entity
in each partner, each instalment and collection as well as transfer.
Debit:
Credit:
Debit balance:
Shares in joint ventures to jointly control entity at the end of the period.
MAJOR TRANSACTIONS
2. Record of contribution to jointly control entity by materials, goods in which the joint parties
agreed in valuing the materials, goods contributed.
2.1. When the revalued amount is lower than the book value of materials, goods:
2.2. When the revalued amount is higher than the book value of materials, goods:
- When the jointly control entity sells the materials, goods to an independent third party, the
contributor transfers the deferred income to other income in the period:
3. Record of contribution to jointly control entity by fixed assets in which the joint parties
agreed in revaluing the fixed assets contributed:
3.1. When the revalued amount is lower than the net book value of the fixed assets:
3.2. When the revalued amount is higher than the net book value of the fixed assets:
- When the joint ventures contract is over, or the contributor transfers the shares in joint
ventures to another partner, remaining differences resulted from revaluation of the fixed
assets contributed are transferred to other incomes:
Dr. 3387 - Deferred income (details in difference due to revaluation of fixed assets
contributed)
Cr. 711 - Other income
4. A Vietnamese company is authorized by the State to contribute the land used right, sea
surface to foreign invested companies. After the States decision is released and procedures to
contribute to the joint venture are finished, the accountant records:
5. When the contributor is shared the joint venture profit and uses this profit to add up the
contribution in the venture:
6. Record of expenses involving in contribution to the joint venture incurred in the period such
as interest expenses from borrowings for contribution and other expenses:
7.1. When receipt of the acknowledgement of shared profit from jointly control entity:
8.1. When collect shares in the jointly control entity, based on the reporting minutes of venture
jointly
parties to record:
8.3. If the collection amount is higher than the contribution, the difference is considered as
income and recorded into financial income:
9. Accounting for the sales of the contribution to the jointly control entity:
9.1. The company sells the shares in the jointly control entity, based on fair value of assets
transferred from the acquirer:
9.2. A Vietnamese company is authorized by the State to contribute the land used right to the
venture. When transfer the shares in the jointly control entity to the foreign venture parties
and return the land use right to the State:
If the foreign venture parties pay the Vietnamese partner an amount of money as
compensation to the transfer (where the jointly control entity leases the land):
9.3. In the case, the acquirer is a venture parties in the joint venture, after increase its shares in
combine the shares and based on the vote right to
the jointly control entity, the acquirer must combine
determine whether this contribution is investment in subsidiaries or investment in associates:
9.5. In the case, the Vietnamese partner transfers the shares in jointly contro
control entity to the foreign
partners, then returns the land used right to the State and the land is rented by the venture,
the jointly control entity shall reduce land used rights and the contributed capital in
corresponding to the land used rights. Retain or increase the capital depends on the coming
investment of the owners. The land rent shall not be recorded into owners equity but into
production and business expenses in the correspondent periods.
10. When the venture parties in the venture contributes more to the jointly control entity by
assets, the accounting entry is similar to the one for the first contribution.
11. Accounting for transactions between contributor in the venture and the jointly control entity:
11.1. When the contributor sells assets to the jointly control entity:
- When sold products, merchandise goods to the jointly control entity and delivered finished
goods and merchandises:
Dr. 111, 112, 131,... (total amount of finished goods and merchandise sold to jointly control
entity)
Cr. 511 Sales (price excluding VAT)
Cr. 3331 VAT payable (VAT amount)
- When sold fixed assets to the jointly control entity, the accountant reduces fixed assets:
Simultaneously record other income from sales of fixed assets using the actual price sold to
the jointly control entity:
Dr. 511 Sales (deferred income from sale of finished goods, merchandises equivalent to the
venture parties benefit in the venture)
Cr. 3387 - Deferred income
Dr. 711 - Other income (deferred income from sale of finished goods, merchandises
equivalent to the venture parties benefit in the venture)
Cr. 3387 - Deferred income
- In the next accounting period, when the jointly control entity sells finished goods,
merchandises to an independent third party, the venture records:
Dr. 3387 - Deferred income (deferred amount from sale of finished goods, merchandises
equivalent to the venture parties benefit in the venture)
Cr. 511 - Sales
- For the fixed assets sold, periodically, the venture parties transfers gradually the deferred
amount equivalent to the venture parties benefit in the venture to other income based on the
useful life of the fixed assets that the jointly control entity uses:
- When the jointly control entity sells assets acquired from the venture parties in the venture to
an independent third party, the venture parties record:
Dr. 3387 - Deferred income (remaining amount of income in corresponding to the benefit of
the venture parties in the venture not been transferred to other income)
Cr. 711 - Other income
11.2. When the venture parties purchases assets from the jointly control entity:
When purchase assets from jointly control entity, based on related invoice and documents,
the accounting entries for assets, goods purchased from the jointly control entity are similar
to the ones from other suppliers.
A. Basic regulations
1. A joint venture contract in the form of jointly control entity is a venture not setting up a new
business entity. Venture parties have the obligations and rights according to regulations in the
contract. The activity of the joint venture contract is organized by venture parties with other
contract
business activities of venture parties.
3. Venture parties must open accounting books to record and reflect in their financial reports
these contents:
Assets contributed to the venture and kept under control of the venture parties in the venture;
Borrowings;
Expenses.
4. All common expenses incurred in the venture parties must be recorded. Based on agreements
in the venture contract of common expenses allocation, periodically the venture parties
prepare the List of allocation of common expenses confirmed by venture parties and then
send to each parties one copy (original copy). The List of allocation of common expenses
together with legal original documents is the basis for parties to account for common
expenses allocated as agreed in the contract.
5. If the venture regulates about sharing the products, periodically as agreements in venture
contract, the venture parties prepare the List of products to share which is confirmed by the
venture parties on the quantity, characteristics. Then each party keeps one copy (original
copy). The goods received notes (or delivery notes) must be prepared in two copies when the
products are delivered. Each party holds one copy. The goods received notes shall be the base
for parties to record, keep track of and for liquidation of the contract.
B. Major transactions
1.1. Based on related invoices and documents to record expenses created independently that
venture parties have to cover when involved in jointly controlled operations:
Dr. 621, 622, 627, 641, 642 (details in joint ventures contract)
Dr. 133 - VAT deductible (if any)
Cr. 111, 112, 331,
1.2. At the end of the period, transfer the expenses created independently to summarise the
production and business expenses of the joint venture contract:
2. Accounting for common expenses incurred that are charged to all venture parties:
a) When creating common expenses, based on related invoices and documents all venture
parties record:
Dr. 621, 622, 627, 641, 642 (details in joint ventures contract)
Dr. 133 - VAT deductible (if any)
Cr. 111, 112, 331,...
b) If the venture contract regulates the share of common expenses, at the end of accounting
period, based on the regulations of the contract, the accountant prepares the List of
allocation of common expenses agreed by ventur
venturee parties. Based on allocated expenses to
other venture parties to record:
2.2. Accounting for the venture parties not creating common expenses for venture contract:
Based on the List of allocation of common expenses that was agreed by venture parties
(following the acknowledgement of the venture parties created common expenses):
Dr. 621, 622, 623, 641, 642 (details in joint ventures contract)
Dr. 133 - VAT deductible (if any)
Cr. 338 - Other payables (details for venture parties creates common expenses)
3.1. When received shared products from venture contract, based on the received note and related
documents:
Dr. 152 - Raw materials (If the shared product is not finished goods)
Dr. 155 - Finished goods (If the shared product is finished goods)
Dr. 157 - Goods on consignment (If the shared products sent for consignment, not through
the companys premise)
Cr. 154 - Work in progress (Including independent expenses and common expenses that
venture parties have to cover) (Details in joint ventures contract).
3.2. When received shared products from the contract and put into use for production of other
products, based on the received notes and related documents:
3.3. When the venture contract regulates of not sharing products but giving to an entity to sell to
outside, after issuing to the seller of the products, transfer independent expenses and
common expenses that venture parties have to cover to cost of goods sold:
4. Accounting for sales that a venture parties sells products for other parties and shares income
to other venture parties:
- When sell products as regulation of contract, the seller must issue invoice for all products
sold, simultaneously records sales generated:
- When receive invoice issued by venture parties who do not sell products based on income
that those venture parties receive from the contract:
- The venture parties do not sell products of venture. Based on the Report of revenue
allocation confirmed by venture parties and related documents, the venture parties shall
issue invoice for the seller based on income that the company receives:
Dr. 138 - Other receivables (including VAT if share VAT output, details for venture parties
selling products)
Cr. 511 Sales (details for contract and shared amount)
Cr. 3331 VAT (if the VAT input amount is shared also)
- When the venture parties pay for the sales, based on the actual receipt:
A. General regulations
1. Jointly controlled assets contributed by venture parties are assets contributed or purchased by
venture parties, used in ventures purpose and makes profit for venture parties as regulation
of venture contract.
2. Each venture party receives products from using of jointly controlled assets, therefore must
cover a part of the expenses created as agreements in contract.
Borrowings, the common loan that have to bear with other contributor to the venture from the
operation of venture;
Income from sale or use of products shared from the venture and created expenses are shared
from activities of venture;
4. When it is created common expenses, income that venture parties must suffer or receive,
venture parties must account as the case of jointly controlled operations.
B. Accounting for some activities involving in the venture in the form of jointly controlled
assets
1. When the venture parties use their fixed assets to contribute to the venture contract in the
form of jointly controlled assets, the accountant records those fixed assets in account 211 and
only records the changes of purpose, location of use of fixed assets.
2. When the venture parties purchase or use other assets to contribute to the venture contract in
the form of jointly controlled assets, the accountant records the assets based on actual
3. When the venture parties, by themselves or in cooperation with other parties, invest in
construction to have the jointly controlled assets:
Dr. 241 - Construction in progress (details of venture contract of jointly controlled assets)
Dr. 133 - VAT deductible (if any)
Cr. 111, 112, 152, 153, 155, 156,...
Cr. 331, 341,
- Based on capital, fund for investment, construc tion of jointly controlled assets, the accountant
construction
increases the contributed capital and decreases capital, fund according to current regulations.
ACCOUNT 223
INVESTMENT IN ASSOCIATES
This account reflects the value of the direct investment of investor in associates and the increases
and decreases of investment in associates.
1. The investment is considered investment in associates when the investor hold directly from
20% to less than 50% owners equity (from 20% to less than 50% vote right) of the invested
entity without any other regulations.
- When the vote right rate of the investor in thee associate equals the contribution rate of the
investor in that associate:
- When the vote right rate is different from the contribution rate due to other agreements
investors vote right is determined based on the
between the investor and the associate, the investors
agreement document between the investor and the associate.
2. Accounting for investment in associates when make up and explain the own finance report of
the investor in cost basis method. When account the investment in associates in cost basis
change during the time of investment progress,
method, the value of the investment does not change
exempt from the investor purchases more or liquidates all or a part of that investment or get
benefits out of the shared profit.
- Cost basis of investment in associates consists of the contribution or real value of the
investment adds (+) purchasing expenses (if any), such as expenses for intermediary,
transaction...
- When contribute to the associate by fixed assets, materials, merchandise goods, the cost basis
of the investment is recorded based on the value agreed by contributors. The difference
between the noted value of fixed assets, materials, merchandise goods and the revalued
amount is recorded as follows:
The difference between the higher revalued amount than the net book value of materials,
merchandise goods is recorded into other income; the difference between the lower revalued
amount than the noted value of materials, merchandise goods is recorded into other expenses;
The difference (higher) between the revalued amount and the net book value of fixed assets is
recorded all into other income; the difference (lower) between the revalued amount and the
net book value of fixed assets is recorded into other expenses;
4. The accountant must record in details of the value of investment to associates. Record the
- The amount of investment in joint stock companies listed on the stock market of an investor
should be recorded according to the actual payment to buy the securities, including direct
expenses involving in purchasing of securities and official report of the securities trading
centre on the ownership of the investor for those securities.
- The amount of investments in joint stock companies that have not been listed on the stock
market should be recorded according to the document of ownership for those securities and
receipt documents of selling securities of the invested entities or purchasing documents of
those securities;
- For investments in others kinds of company, the record is based on document of contribution,
profit (or loss) sharing report agreed by the parties or purchasing, selling documents of those
investments;
- Investors are only allowed to record the divi dend, income shared from the associate when
dividend,
receive official notice of the associate about the dividend for the investor or the shared
income in the period on accrual principle.
Debit:
Credit:
- Cost of the investment reduces owing to getting back the capital invested or get other benefit
out of shared profit;
- Cost of the investment reduces owing to sale, liquidation of all or a part of the investment.
Debit balance:
MAJOR TRANSACTIONS
1. When invest in associates in the method of buying equity securities or contribute by money,
based on the real payment, the investor records:
2. When the investor holds the investment less than 20% vote right in a specific company, when
the investor buys more equity securities or contributes more to the company to become the
investor having considerable influence on the invested entity, the investor notes:
3. When invest in associates by contributing by materials, goods, fixed assets, based on the
revalued amount of materials, merchandise goods, fixed assets agreed by the investor and the
associate:
Dr. 138 - Other receivables (When receive the official notices of the associate)
Dr. 223 - Investment in associates (If receive the dividend by equity securities)
Cr. 515 - Financial income
5. When receive other benefit from the associate out of dividend, shared profit, the investor
reduces the cost basis of the investment:
6. When the investor buy more the capital or the associate and has the right of control the
associate, the investor transfer the cost basis of the investment to account 221 "Investment in
subsidiaries":
Dr. 221 - Investment in subsidiaries (if the investor becomes the parent company)
Cr. 223 - Investment in associates
Cr. 111, 112,... (if buy more capital to become the parent company)
7. When the investor liquidates a part of investment in associates, so that does not have the
considerable influence on the invested entity, the investor transfers the cost basis of the
investment to other related account:
Dr. 635 - Financial expenses (difference between net book value of the investment and the
sales of that investment)
Dr. 228 - Other long term investments
Dr. 111, 112,... (proceeds from liquidation, sale a part of the investment)
Cr. 223 - Investment in associates
- When liquidate, sell all the investment in a associate, the investor reduces the investment and
records income (profit or loss) from the liquidation, sale of the investment:
ACCOUNT 228
This account records the current value and the increases, decreases of Other long term
investments (except for investment in subsidiaries, shares in jointly control entity, investment in
associates) such as debt securities, equity securities, or investment in other companies that has
less than 20% owners equity (20% vote right), etc and collection period over one year.
1. When lending, the accountant must record in details of each amount of money to each
borrower, borrowing method, borrowing period and interest rate.
2. When the company invests by buying bonds, the accountant must record in details of each
entity issuing debt securities, time and bond interest rate.
4. When the investor contributes to the jointly cont rol entity but has not the jointly control right
control
and has less than 20% vote right in the vent ure, record the contribution into account 228
venture,
Other long term investments using the cost basis.
Debit:
Credit:
Debit balance:
Account 228 "Other long term investments" composes three sub- accounts:
- Account 2281 - Equity securities: to record long term investment by equity securities of the
investor.
- Account 2282- Debt securities: to record long term investment by bond of the investor.
- Account 2288 - Other long term investments: to record other long term investments such as
lends, contribution by money or assets.
MAJOR TRANSACTIONS
5. Record of bond acquisition in another company in the period of more than one year:
company
6.1. When make payment to acquire bond and received interest income in advance:
6.2. Periodically, calculate and allocate the income in the proper period:
- When pay to buy the bond, accounting entry is similar to the one guided in item 7.1.
Dr. 228 - Other long term investments (equal to cost of the investment adds (+) expenses
directly involving in investment activities such as intermediary expenses) (2281, 2288)
Cr. 111, 112, 331,...
11. When the company contributes to another company by assets but only has less than 20% of
vote right and has not the jointly control right, based on the revalued amount of materials,
merchandise goods, fixed assets to record:
12. When the company increases the investment from dividend or distributed profit:
13. When the investor sells a part of the investment in subsidiaries, joint venture, associate and
lose the right of control or the right of jointly control or lose the considerable influence:
14. Sale of equity securities, or liquidation of contribution in other long term investments:
- If profit made:
- If loss incurred:
15. When the investor contributes more to the venture and become a contributor having the
jointly control right in the jointly control entity:
16. When the investors contribute more and become the parent company or have considerable
influence:
ACCOUNT 229
This account reflects the current value and the increases and decreases in provision for long term
investments and loss of other long term investments. Provision for long term investments consists
of:
- Provision for decrease of stock in financial investment activities is the provision for the loss
value due to possible decrease of stocks that the company holds;
- Provision for loss due to decrease of long term investments or loss of the entity receiving
investment and need more capital.
1. Provision and reverse for long term investments are often made at the end of the accounting
period. If the company is accepted by the Ministry of Finance to use the fiscal year different
from solar calendar year (not from 1 January to 31 December), provisions should be made on
the last day of the financial year.
2. Provision for long term investments must be done as regulation of each kind of long term
investment. Provision is determined by the difference between the net realisable value
(market price) or the collectible investment andand historical cost recorded in the accounting
book. If the provision required in the current year is higher than the provision balance in the
into business and production expenses in the year.
prior year, the difference shall be recorded into
If the provisions required in the current year are lower than the provision not yet used in the
prior year, the difference shall be reduced to business and production expenses in the year.
3. Provision for long term investments is done at the end of a fiscal year if the market price of
us
stocks long term investment of the company usually declines as compared to the historical
conditi
cost recorded in the accounting book. The conditions to make the provision for decline in the
long term securities are as follows:
- The securities are tradable in the market. At the balance sheet date, the market value of the
securities declines as compared to its historical cost recorded in accounting book.
4. The company must provide the provision for each kind of long term securities when there is a
decline in price at the balance sheet date in the following formula:
The company must determine the provision required for each kind of long term securities
whose prices decline and combine those provisions in the list of provisions for decline in long
term securities investment. This list should show the comparative figure of prior year that has
not been used up yet in order to determine the additional provision or the reverse into
financial expenses.
5. The provision must be made for the capital of the General Corporation contributed in its
members or of the General Corporation or holding company invested in State limited
liabilities company with one member, limited liabilities companies with more than two
members, joint stock company, partnership, joint venture, associates or other long term
investments. If the investee makes loss, then requires more investment (except for the loss is
planned ahead of time in the business plan), the provision for each investment is made in the
following formula:
The provision for each long term investment shall be made up to the amount invested.
6. The provision for financial investment is al so used to compensate loss of long term
also
investments since the investee is bankrupt or suffers natural disaster, etc., leading to
investments uncollectible or collected at amount lower then its historical cost. This provision
is not used to compensate for loss due to liquidation of investments.
Debit:
- Compensate value of loss of long term investment when there is decision to use the provision
already made to compensate for the loss.
Credit:
Increase of provision for long term investments (provision for the first time and additional
provision for the difference).
Credit balance:
Current provision for long term investments at the end of the period.
MAJOR TRANSACTIONS
1. At the end of the accounting period, based on the decline in the current long term investments
to provide the first provision:
- If the provision required this year is higher than provision for long term investments made in
prior year that has not been used up yet, an addition provision must be made for that
difference:
- If provision required in this year is lower than the provision for long term investments made
in prior year that has not been used up yet, a reverse must be made for that difference:
3. Actual loss occurred (for instance, the investee is bankrupt, or suffers natural disaster, fire,
etc). The investments are uncollectible or th
thee collected amount is lower than the amount
initially invested. The company decides to use the provision for long term investments
already made to compensate loss:
ACCOUNT 241
CONSTRUCTION IN PROGRESS
This account reflects construction expenses (including costs of purchasing fixed assets, construct
or reconstruct, repair, widen, re-equip the construction) and the status of finalization of
construction in companies purchasing fixed assets, construction and renovation of fixed assets.
Fixed asset renovation and construction projects can be performed by the company itself or by
another company. This account is also used for companies performing themselves to records
expenses created in the progress of construction and renovation.
- Construction expenses;
- Equipment expenses;
- Other expenses.
- Expenses for project management and other expenses directly involving in a specific asset,
account for that asset;
- Expenses project management and other common expenses directly involving in many assets,
account in suitable method.
3. When construction is completed and has put into use but the finalization of the construction
has not been approved, the company increases the historical cost of assets using the estimated
price (Estimated price is used based on the actual expenses paid to have the fixed assets). The
company calculates the depreciation amount based on this estimated cost until the cost is
adjusted upon the approved value.
4. Actual expenses for renovation fixed assets could be recorded directly into production,
business expenses in the period of the company. If expenses for renovation fixed assets in the
period has high value and involves in many periods of production, and business, it is
acceptable to allocate gradually into production, business expenses.
- Account 2411 - Acquisition of fixed assets: to record expenses for purchasing fixed assets and
the finalization status of expenses from purchasing fixed assets if assembly, testing is needed
before put into use (including both purchase of new or used fixed assets). If fixed assets
purchased needs more investment, equipment to put into use, all the expenses for more
purchase, equipment are also recorded into this account.
- Account 2413 - Extraordinary repairs:: to record expenses and the finalization status of fixed
assets renovation. General repairs of fixed asset
assets are not recorded into this account but
recorded directly into expenses for production and business.
Debit:
- Expenses for construction, purchasing and renovation of fixed assets (tangible and intangible
assets)
- Expenses for purchasing investment property (If the construction investment is needed);
Credit:
- Value of fixed assets created by completed cconstruction projects, purchasing and have put
into use;
- Value of construction removed and other construction expenses that were not approved when
finalized the construction;
- Transfer expenses created after initial recognition of fixed assets, investment property to
related accounts.
Debit balance:
- Value of construction projects and renovations of fixed asset completed but not come into use
or the fixed asset has not been approved.
MAJOR TRANSACTIONS
1. When the consignee handovers the construction works and fixed assets completed and put
them into production of goods and services that are subject to subtraction method VAT, based
nutes of completed construction projects and
on the consignment contract, finalization minutes
invoices, the accountant records the followings:
2. When purchasing equipments for construction, if the fixed assets formed are used in
subtraction method VAT, based on invoices and
production of goods and services subject to subtraction
goods received notes:
When send the non-assembled equipments directly to the construction site and transfer to the
consignee:
3. Record of payment to the consignee or the supplier of materials, goods, services involving in
construction:
- When the completed construction transferred by the consignee is checked and taken over and
approved for payment, the value of equipments is recorded into construction:
If the noted exchange rate is higher than the exchange rate at the date of transaction, the
exchange
difference is debited into account 413 - Foreign exchange differences (loss from foreign
exchange differences).
- When the construction completed and put into uuse, and the finalization of the investment is
approved, the accountant transfers the outstanding balance of account 413 (4132) the foreign
exchange differences arisen in construction to financial expenses or financial income, or to
account 242 "Long term prepaid expenses" (if the loss is substantial), or account 3387
"Deferred income" (if the gain is substantial) and then allocate it in the maximum period of
five years (for accounting entries, please refer to the guidance in account 413 "Foreign
exchange differences").
Dr. 241- Construction in progress (Using the exchange rate of the date of transaction)
Cr. 111, 112 (Using the book exchange rate)
Cr. 331 - Trade payables (Using the exchange rate of the date of transaction)
Cr. 515 - Financial income (Difference between the book and the date of transaction
exchange rate - gain from foreign exchange differences).
If the book exchange rate is higher than the one in the transaction day, the difference is
debited into account 635 "Financial expenses" (loss from foreign exchange differences).
1. When the construction is completed, the progr ess of check and take over is finished, assets
progress
are transferred and put into use: If the constr uction finalization report is approved, based on
construction
the value of assets (formed from investment) aapproved
pproved to record into the accounting book. If
the draw has not been approved, Increases the value of assets formed from investment using
provisional price (Provisional price is real expe nses paid to have the assets, based on account
expenses
241 to specify the provisional price)
price).. Both cases are recorded as follows:
2. If the finalization of construction investment is approved, the accountant must adjust the
estimation to the approved value:
- If the approved value is lower than the estimation, the reverse entry is made for the above
entry.
- If fixed assets formed from investment in capital construction or investment and development
fund, simultaneously the accountant records:
(In the case, the construction is funded by the contributed capital, the accountant should
not simultaneously record this entry).
3. When the construction is finished but has not yet been put into use, waiting for set up or
approve, the accountant must record in details for Account 241 "Construction in progress" for
the completed construction waiting for transfer and approve.
Dr. 217 - Investment property (if the property meets the recognition criteria of investment
property)
Dr. 156 - Goods (1567 - Property/real estate) (if the fixed assets are held for sale)
Cr. 241 - Construction in progress
4. When expenses created from upgrade, improvement that (1) surely make the investment
property more economically value than initial (2) being the companys ob
obligation to make the
investment property ready for work, the acc ountant increases the historical cost of the
accountant
investment property:
- When the upgrade, improvement of investment property completed, the accountant transfers
and increases the historical cost of investment property:
1. Accounting for construction is recorded into the same accounting book system of the
company:
- If the construction used for production of goods and services subject to subtraction method
VAT, the expenses incurred shall be recorded as follows:
- If the construction used for production of goods and services subject to VAT in direct method
or not subject to VAT, the expenses incurred shall be recorded as follows:
1.2. When the construction is completed and the finalization of construction investment is
approved, the accountant records accounting entri
entries that are similar to the ones guided in
Sections II and III.
a) Fixed assets used in production, business activ ities are funded by construction investment
activities
fund (the State Budget) or investment and development fund, when the finalization of
construction investment is approved, the accountant records the followings
followings:
b) Fixed assets are made from welfare funds and are used in welfare activities, when the
finalization of construction investment is approved; the accountant increases the welfare
funds that make fixed assets:
Accounting for renovation of fixed assets of theth company can be similar to accounting for
constructions performed itself or on consignment procedure.
1.1. Expenses for renovation incurred are debited into account 241 "Construction in progress"
(2413) and recorded in details for each construction, each renovation of fixed assets. Based
on documents of expenses incurred, the company records:
- If renovation of fixed assets used in production of goods and services subject to subtraction
method VAT:
- If renovation of fixed assets used in production of goods and services subject to VAT in
direct method or not subject to VAT:
1.2. When the renovation completes, the accountant must determine the actual cost of each
renovated construction to record these expenses as following cases:
- If expenses for renovation of fixed assets are low value, the accountant transfers all the
expenses to production, business expenses in the period:
- If expenses for renovation of fixed assets are high value and involve in many production,
assets completes, the accountant transfers to
business periods, when the renovation of fixed assets
prepaid expenses account (allocated) or accruals (in the case accruals for renovation expenses
were provided):
- If repair or improvement of fixed assets met recognition criteria, the accountant increases the
historical cost of fixed assets:
- The accounting entries for transferring renovation expenses are similar to the ones in
renovation of fixed assets conducted by the Company itself.
ACCOUNT 242
This account reflects actual expenses created involving in business results of many accounting
periods and the transfer of these expenses to production, business expenses of the next accounting
periods.
- Prepaid expenses for fixed assets under operating lease (Land use rights, buildings, stocks,
offices, showrooms and other fixed assets) for production, business activities in many fiscal
years. When prepayment for land rent in long term periods are granted the certificate of land
used rights, these expenses are recorded into account 213 instead of account 242;
- The expenses for the company establishment, tr aining, advertising incurred in pre-operation
training,
stage that are allocated in not more than three years;
- Expenses in development stage that do not satisfy recognition criteria of intangible assets;
- Expenses for relocation or restructuring of the company with high value that are allocated in
restructuring has not been provided yet;
several years if the provision for restructuring
- expl
Expenses for insurance (insurance for fire, explosion, civil responsibility of the owner of
transporting vehicle, insurance for vehicle, property, etc) and fees that the company purchases
and pays one time for many fiscal years;
- Tools and supplies with high value put in production and business activities one time and
used for more than one year that must be allocated in years;
- The repayment for interest expenses from borrowings for long term periods or from issuing
bonds;
- Expenses incurred from issuing the company bonds with high value that should be gradually
allocated;
- Expenses for renovation of fixed assets incurred once with high value that the company did
not make provisions for and must be allocated in many years;
- The transfer of foreign exchange differences incurred and resulted from revaluation of
monetary items in foreign currencies (if loss) in construction investment period (pre-
operating) when completed;
- The difference between the selling price and the net book value of fixed assets sold and lease back
under financial lease (the selling price is lower);
- The difference between the selling price and the net book value of fixed assets sold or lease back under
financial lease (the selling price is lower);
- Expenses with high value involving in investment property after the initial recognition that
does not satisfy the recognition criteria to increase the historical cost of the assets that should
be allocated in years;
- When the business combination not leading to the parent-subsidiary relationship generated
goodwill or when equitizing the SOEs leading to the business advantage;
- Other expenses.
2. Account 242 should only record expenses incurred in production, business activities for more
than one year;
3. The calculation and allocation of Long term pr epayment into production, business expenses
prepayment
in each accounting period should be based on the
the nature and amount of each kind of expenses
to choose the appropriate method;
4. The accountant should record each Long term prepayment in details of amount incurred,
amount allocated into appropriate periods and th
thee remaining that has not been allocated into
expenses;
5. The company must record in details of fo reign exchange differences (loss on foreign
foreign
exchange differences) for the investment construction incurred in pre-operating period that
construction
have not been allocated into expenses.
Debit:
- Transfer of foreign exchange differences incurred and resulted from revaluation of monetary
items in foreign currencies (if loss) in investment construction investment period (pre-
operating) when completed, then shall be allocated into financial expenses.
Credit:
- Record the allocation of foreign exchange differences incurred and resulted from revaluation
of monetary items in foreign currencies (if loss) in construction investment (pre-operating)
when completed into financial expenses in the period.
Debit balance:
- Long term prepaid expenses have not been recorded into production, business expenses in the
period;
- Foreign exchange differences incurred and resulted from revaluation of monetary items in
foreign currencies (if loss) in construction investment (pre-operating) when completed, that
have not been allocated at the year end.
MAJOR TRANSACTIONS
1. Record of the high-value long term prepaid expenses incurred that must be gradually
allocated into production, business expenses in many fiscal years such as establishment
expenses, expenses for training for employees, adve
advertising in pre-operating stage of the newly
established company, research and reallocation expenses:
Periodically, the long term prepaid expenses must be allocated into production,
production, business expenses:
2. Record of prepayment for lease of fixed assets, infrastructure under operating lease in many
assets,
years:
- If fixed assets leased are used for production of goods and services subject to Subtraction
method VAT:
- If fixed assets leased are used for production of goods and services subject to VAT in direct
method or not subject to VAT:
3. Record of tools and supplies with high value put in production, business activities one time
and used for more than a year that must be allocated in years:
- When the tools and supplies put in use, based on the goods dispatch notes to record:
- Periodically the tools and supplies shall be allocated in suitable method. The allocation can be
determined based on their useful life or the volume of products, services that those tools and
supplies produced in each period:
4. Record the acquisition of fixed assets and investment property in deferred, instalment
method:
- Periodically, the payment of interest expenses created from the deferred and instalment
method are allocated to expenses:
5.2. Periodically, the renovation expenses for fixed assets are allocated to production, business
expenses in the fiscal year:
6. Record of initial direct expenses with high value involving in fixed assets under operating
lease that should be allocated in years:
Periodically, the initial direct expenses involving in the operating lease of fixed assets are
allocated matching with the recognition of revenue:
7. When foreign exchange differences incurred and resulted from revaluation of monetary items
in foreign currencies (if loss on foreign exchange differences is substantial) in construction
investment (pre-operating period) when completed, are transferred to long term prepayment
for gradual allocation into financial expenses:
8. Periodically, record the allocation into financial expenses of foreign exchange differences
incurred and resulted from revaluation of monetary items in foreign currencies in
construction investment (pre-operating) when completed:
- Periodically, record the allocation of the interest expenses for the current period to financial
expenses or capitalize into construction in progress:
Dr. 635 - Financial expenses (If the interest expenses are recorded into production, business
expenses in the period)
Dr. 241 - Construction in progress (If the interest expenses are capitalized into construction in
progress)
Dr. 627 - Factory overhead costs (If the interest expenses are capitalized into construction in
progress)
Cr. 242 - Long term prepaid expenses
10. When the company issues bonds at the face valuvalue to obtain capital and pays the interest on
bonds in advance at the issuance date, the inte
interest expenses shall be debited to account 242
(details by prepayment of interest on each
each bond) and then allocated into expenses.
- Periodically, record the allocation of the prepayment of interest on bond into financial
expenses for the current period:
Dr. 635 - Financial expenses (If recorded into financial expenses in the current period)
Dr. 241 - Construction in progress (If capitalized into construction in progress)
Dr. 627 - Factory overhead costs (If capitalized into value of work in progress)
Cr. 242 - Long term prepaid expenses (details by prepayment of interest on each bond)
(the allocation amount of interest expense in the current period)
- If expenses for issuing bond are low value, the accountant records into expenses in the
period:
- If expenses for issuing bond are highly value, the accountant record for allocation gradually:
Dr. 242 - Long term prepaid expenses (details for expenses of issuing bonds)
Cr. 111, 112,...
Dr. 635, 241, 627 (The allocation amount in the current period)
(Details of expenses for issuing bonds).
Cr. 242 - Long term prepaid expenses (Details
- Record of expenses with high value involving in investment property after the initial
recognition that does not satisfy the recognition criteria to increase the historical cost of the
assets that should be allocated in years:
Dr. 632 - Cost of goods sold (Details in expenses created from investment property)
Dr. 242 - Long term prepaid expenses (If expenses with high value)
Cr. 111, 112, 152, 153, 334,
Dr. 632 (Allocation of expenses involving in the investment property after initial recognition
in the current period)
Cr. 242 - Long term prepaid expenses
13. When the business combination does not lead to the parent-subsidiary relationship (net asset
acquisition) but creates the goodwill at the date of transaction:
If the acquirer makes the payment in cash or cash equivalents for the acquisition:
Dr. 131, 138, 152, 153, 155, 156, 211, 213, 217 (Fair value of acquired assets)
Dr. 242 - Long term prepaid expenses (Details of goodwill)
Cr. 311, 331, 341, 342 (Fair value of payables and contingent liabilities)
Cr. 111, 112, 121 (Amount of cash and cash equivalents that the acquirer paid)
Dr. 131, 138, 152, 153, 155, 156, 211, 213, 217,
(Fair value of acquired assets)
Dr. 242 - Long term prepaid expenses (Details of goodwill)
Dr. 4112 - Capital surplus (Difference between the lower fair value and par value of shares
if the fair value of shares is lower than their par value)
Cr. 4111 - Share capital (Par value)
Cr. 311, 315, 331, 341, 342,
(Fair value of payables and contingent liabilities)
Cr. 4112 - Capital surplus (Difference between the fair value and the par value of the
shares if the fair value of shares is higher than their par value)
ACCOUNT 243
This account records current value and the increases, decreases of deferred tax assets.
1. A deferred tax asset should be recognized fo forr the carry forward of unused tax losses and
probable that future taxable profit will be available
unused tax credits to the extent that it is probable
against which the unused tax losses and unused tax credits can be utilized.
3. The value of deferred tax assets in the year is calculated according to offset of deferred tax
assets incurred in the year and the income tax that has been recorded in previous years but is
returned in the year as follows:
5. At the end of a fiscal year, the company has to revalue deferred tax assets that have not yet
been recorded in previous years to the extend that it is probable that future taxable profit will
be available to record additions into the current year.
- Deferred tax assets created from differences temporarily deductible since depreciation of
fixed assets in accounting purpose is faster than in tax purpose.
- Deferred tax assets created from differences temporarily deductible because of recording an
amount of cost in the current year that is only deducted from taxable income in the next year.
For example, the provision for repairing of fixed assets recorded in the current year shall be
only deducted into taxable income of the year that those expenses actually occurred.
- Deferred tax assets are calculated based on the deducted value of the carry forward of tax loss
and unused tax credits.
Debit:
Credit:
Debit balance:
MAJOR TRANSACTIONS
At the end of the year, based on the Details of deferred tax assets prepared, the accountant
records or reverses deferred tax assets created from transactions recorded into deferred tax assets:
1. If the deferred tax assets created in a year is higher than the deferred tax assets returned in the
higher
year, the accountant records the additional amount of deferred tax assets being the difference
of the deferred tax assets created and the amount returned in the year:
2. If the deferred tax assets created in a year is lower than the deferred tax assets returned in the
lower
year, the accountant reduces the deferred tax assets
assets as the difference between the deferred tax
assets created and the amount returned in the year:
ACCOUNT 244
This account reflects the money or assets which an entity deposits at other entities or economic
organizations in the term of over one year or one normal production, business cycle.
The money or assets deposited should be kept track of and collected when the term expired.
Debit:
Credit:
- The amount being deducted from long term deposits and recorded into other expenses;
deposits
- The value of money or assets used as long term deposits being reduced when being collected;
Debit balance:
Assets or money are reflected on the balance sheet as long term deposits.
MAJOR TRANSACTIONS
3. When the company is fined and deducted from the value of long term deposits:
CATEGORY 3
LIABILITIES
This account records liabilities which occur in the course of doing business. The company must
pay the amount of the liability to its creditors. Liabilities consist of loans and borrowings, trade
payables, taxes payable, payables to employees and other payables.
1. Current liabilities: liabilities which the company must settle within one year or within a
business operation cycle.
2. Non-current liabilities: liabilities that are not due for at least one year.
1. Companies must keep detailed records with respect to their liabilities. Companies must keep
track of the amounts payable to each individual creditor.
3. Liabilities in gold, silver, precious metals or gemstones must be accounted for in detail.
Records must include the individual creditor and such information as the quantity and value.
4. At the end of the fiscal year the balance of the liabilities in foreign currencies must be
revalued using the exchange rate as regulated.
5. With respect to creditors who the company permanently transacts with or have large
balances, the accountant must control and reconcile the liabilities incurred with the individual
creditors and must periodically get written confirmation from the creditors.
6. Usually liability accounts have credit balances. However there may be cases where the
individual creditor balances in the accounts 331, 333, 334, 338 are debits indicating that the
paid amount greater than the payable amount. At the end of the accounting period in order to
prepare the financial statements, it is permitted to report the debit balance as an asset and the
credit balance as a liability in the balance sheet.
Liabilities have been split into four major accounts with sixteen sub-accounts:
ACCOUNT 311
This account records the amount of the short term borrowings and repayments by a company.
Short term borrowings include: borrowings from the bank; borrowings from entities or
individuals both inside and outside the company.
Short term borrowings are liabilities which are due within one year or within a normal business
operation cycle or within a fiscal year.
1. The accountant must keep detailed records with respect to amounts borrowed amounts repaid
(principal and interest) and the outstanding balance
balance which must be repaid to each creditor or
to each borrowing contract.
2. If the funds borrowed are in a foreign currency, the accountant must keep track details of the
original currency. Loan or repayment in fore ign currency should be converted into Vietnam
foreign
Dong using either the actual exchange rate or average inter-bank exchange rate on foreign
currency market announced by the SBV at the da te of transaction or the exchange rate of
date
accounting book (debit balance of account 331 is converted into VND using the exchange
rate of accounting book while credit balance of account 331 is converted into VND using the
average inter-bank exchange rate). Foreign exchange difference resulted
resulted from difference of
exchange rates when loans occurred and when loan payment and foreign exchange difference
resulted from revaluation of loans in foreign cu rrency at the end of the fiscal year (in the
currency
course of doing business) are recorded into fina ncial expenses or financial income of the
financial
reporting period.
Debit:
- Decrease in short term loans due to a decrease in exchange rates (loan is in a foreign
currency)
Credit:
- Increase in short term borrowings due to the increase in exchange rates (loan is in a foreign
currency).
Credit balance:
- The amount of short term loans that have not been paid.
MAJOR TRANSACTIONS
1. To record the loan to buy raw materials, supplies and merchandise goods:
a. Raw materials, supplies and merchandise goods purchased are used in production of goods
and services subject to VAT in subtraction method:
b. If raw materials, supplies and merchandise inventory purchased are used in production of
goods and services not subject to VAT or subject to VAT in direct method, value of raw
materials, supplies merchandise inventory includes VAT (total payment):
2. The company has buying or selling contracts in which payment term is made by Letter of
Credit. Enterprise borrows money from the bank to open Letter of Credit:
3. To record borrowings to repay suppliers, paid long-term loans, paid long-term payable:
a. When actual exchange rate or average inter-bank exchange rate is less than exchange rate of
accounting book:
Dr. 331 Trade payables (using the exchange rate of accounting book)
Dr. 315 - Current portion of long-term loan (using the exchange rate of accounting book)
Dr. 341 - Long-term loans (using the exchange rate of accounting book)
Dr. 342 - Long-term payable (using the exchange rate of accounting book)
Cr. 311 - Short-term loan (using the actual exchange rate or average inter-bank exchange
rate)
Cr. 515 - Financial income (Difference of actual exchange rate or average inter-bank
exchange rate and the exchange rate of accounting book)
b. When actual exchange rate or average inter-bank exchange rate is greater than exchange rate
of accounting book:
Dr. 331 - Trade payables (using the exchange rate of accounting book)
Dr. 315 - Current portion of long-term loan (using the exchange rate of accounting book)
Dr. 341 - Long-term loans (using the exchange rate of accounting book)
Dr. 342 - Long-term payable (using the exchange rate of accounting book)
Dr. 635 - Financial expenses (difference of the actual exchange rate or average inter-bank
exchange rate and the exchange rate of accounting book)
Cr. 311 - Short-term loan (current exchange rate or inter-bank average exchange rate)
6. When borrowing foreign currency in short - term to buy raw materials, merchandise goods to
go warehouse or using or payment for lease services, record:
Dr. Accounts - 152, 156, 627, 641, 642 (using the actual exchange rate or average inter-bank
exchange rate)
Cr. 311 - Short-term loan (using the actual exchange rate or average inter-bank exchange
exchange
rate)
8. To record the repayment of borrowings in cash on hand or cash in bank in local or foreign
currencies in the course of business:
Dr. 311 Short-term loan (using exchange rate of accounting book in the account 311)
Dr. 635 Financial expenses (loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using exchange rate of accounting book in the accounts
1112, 1122)
Dr. 311 Short-term loan (using exchange rate of accounting book in the account 311)
Cr. 515 Financial income (gain of foreign exchange difference)
Cr. Accounts 111 (1112), 112 (1122) (using exchange rate of accounting books in the
accounts 1112, 1122)
9. To record the repayment of short-term loan in cash on hand or cash in bank in local or
foreign currencies in construction stage (pre-operating)
Dr. 311 Short-term loan (using the exchange rate of accounting book in the account 311)
Dr. 413 Foreign exchange differences (4131) (Loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book in the accounts
1112, 1122).
Dr. 311 Short-term loan (using the exchange rate of accounting book in the account 311)
Cr. 413 Foreign exchange differences (4131) (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book in the accounts
1112, 1122).
10. At the end of the fiscal year, the balance of the loan in foreign currency can be revalued using
the average inter-bank exchange rate announced by SBV at end of the fiscal year:
ACCOUNT 315
This account records the current-portion of long-term loans that is due in the accounting period
but have not paid yet; and portion of long-term loan that must be paid in the next fiscal year and
the repayment of these loans.
The current portion of a long tem loan is the amount of the loan that must be paid within the
current accounting period.
2. The accountant must keep track of the Curre Currentnt portion of long term loan in detail by
individual creditor, including the amounts which have been paid and the balance remaining.
They must also keep track of each foreign currency
currency loan by creditor and convert these loans
into VND based on the exchange rate at the da te of transaction (using the actual exchange
date
rate or average inter-bank exchange rate in the foreign currencies market announced by the
SBV at the transaction date). The credit balanc
balancee of the account 315 should be converted into
VND using the exchange rate of accounting book. The realized foreign exchange difference
in the course of business and unrealized fo reign exchange differences resulted from
foreign
revaluation of the balances in foreign currencies at the end of the fiscal year (applying to both
entities in construction stage and entities operati ng in construction) are recorded to the
operating
financial expenses or financial income of the income statement.
Debit:
- Loss of foreign exchange difference resulted from revaluation of balance of long-term loan in
foreign currency at the end of the fiscal year.
Credit:
- Gain of foreign exchange difference resulted from revaluation of balance of long term loan in
foreign currency at the end of the fiscal year.
Credit balance:
The remaining balance of the current portion long term loan that must be paid or is pastdue.
MAJOR TRANSACTIONS
1. At the end of the fiscal year, the accountant determines the Current portion of long term loan
which will be due in the next year:
2. To record payment of the current portion of long term loans in cash on hand or cash in bank:
3. To record the repayment of the current portion of long term loan by foreign currency in the
course of doing business:
- If the exchange rate recorded in account 315 is lower than the exchange rate recorded in
accounts 111, 112:
Dr. 315 Current portion of long term loan (using the exchange rate of accounting book)
Dr. 635 Financial expenses (loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)
- If the exchange rate recorded in account 315 is greater than the exchange rate recorded in
accounts 111, 112:
Dr. 315 Current portion of long term loan (using the exchange rate of accounting book)
Cr. 515 Financial income (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)
4. To record repayment of the current portion of long term loan for capital construction in
foreign currencies in pre-operating stage:
- If the exchange rate recorded in account 315 is lower than the exchange rate recorded in the
accounts 111,112:
Dr. 315 Current portion of long term loan (using the exchange rate of accounting book)
(l
Dr. 413 Foreign exchange differences (loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)
- If the exchange rate recorded in account 315 is greater than the foreign exchange rate
recorded in accounts 111, 112:
Dr. 315 Current portion of long term loans (using the exchange rate of accounting book)
Cr. 413 - Foreign exchange differences (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)
5. To record the repayment of the current portion of long term loan by cash collected from
receivables, or new short term borrowings:
6. At the end of the fiscal year, the balance of the current portion of long term loan in foreign
currency can be revalued based on the average inter-bank exchange rate announced by the
SBV at the end of the fiscal year:
ACCOUNT 331
TRADE PAYABLES
This account records the settlement of the amounts payable by the company to suppliers of raw
materials and merchandises and services according to the economic contracts signed. This
account also records the settlement of amounts payable to construction contractors and sub-
contractors.
1. Payables to suppliers of raw materials, goods, services or construction contractors and sub-
contractors must be recorded in detail by individuals. The records must show the amount due
to each individual supplier and also show the amounts
ounts paid in advance to the sellers, suppliers
or contractors but for which the company has not received the goods, services, or completed
construction work.
2. The accountant would not record the purchase of raw materials, merchandise goods and
services that were paid in cash (e.g. cash on hand, cheque or paid through the bank).
3. In the case, the raw materials, merchandise goods and services were received but the
company has not received the official invoice at the end of the month, the accountant should
record the cost of the purchase in its books at an estimated cost and make adjustment
according to the invoice or official notice from the seller when received.
4. When recording this account, the accountant must keep track of and classify the transactions
into proper accounts such as payment discount s, sales discounts, sales allowances that are
discounts,
offered by the suppliers or sellers.
Debit:
- Amount paid in advance to the sellers, suppliers or contractors but for which the company has
not received the goods, services, or completed construction work;
- The amount of purchase discounts that seller agreed to deduct for credit;
- Value of raw materials and goods that was lost or poor in quality then were returned to the
sellers.
Credit:
- Amount must be paid to sellers, suppliers and contractors for raw materials, goods and
services;
- The adjustments from temporary cost to current cost of raw materials, merchandise and
services when the official invoice or notice has been received.
Credit balance:
This account can have a debit balance. A debit balance (if any) shows the amount of advances to
creditors or the overpayment by details of individuals. When preparing the balance sheet, the
accountant must reclassify these debit balances to an asset account and credit balance to the
liabilities account.
MAJOR TRANSACTIONS
1. To record the receipt of purchased raw materials and goods that have not been paid or
gnment and not through the company's premise
purchased goods that are transferred for consignment
under perpetual inventory method.
- Raw materials and goods purchased are used for production of goods and services subject to
VAT in subtraction method:
- If raw materials and goods purchased are used for production of goods and services not
subject to VAT or subject to VAT in direct method, the value of raw materials and goods
includes VAT (total amount):
1.2. When the enterprise paid VAT in direct method, the value of raw materials and goods
includes VAT (total amount):
2. To record the receipt of purchased raw materials and goods that have not been paid or
purchased goods that are transferred for consignment and not through the company's premise
under periodic inventory method.
- Raw materials and goods purchased are used for production of goods and services subject to
VAT in subtraction method:
- If raw materials and goods purchased are used for production of goods and services not
subject to VAT or subject to VAT in direct method, the value of raw materials and goods
includes VAT (total amount):
2.2. The enterprise paid VAT in direct method. The value of raw materials and goods purchased
is the total amount:
3. For acquisition of fixed assets which have not been paid to sellers and are used for production
payables based on invoice issued by the sellers,
of goods and services, the accountant records payables
handover minute of the fixed assets and other related documents. In the case, the enterprise
paid VAT in subtraction method:
- If fixed asset acquired are used for production of goods and services subject to VAT in
subtraction method:
- If fixed asset acquired are used for production of goods and services not subject to VAT or
value of raw materials and goods purchased includes
subject to VAT in direct method, the value
VAT (total amount):
4. The enterprise has construction in progress and has sub-contractors working in the project.
When the sub-contracted work is completed and the sub-contractor handover the work to the
contractor, the accountant records payables based on the contract, handover minute and the
invoice received.
- If the construction will be used for production of goods and services subject to VAT in
subtraction method, the accountant records as follows:
- If the construction will be used for production of goods and services not subject to VAT or
subject to VAT in direct method, the value of construction includes VAT (total amount):
- When the enterprise paid VAT in direct method, the value of construction includes VAT
(total amount):
5. The enterprise employs services (e.g. transportation, electricity, water, telephone, audit,
consulting, advertisement, other services expenses). The value of these services could include
or not include VAT depending on VAT method that the enterprise applied:
8. To record the collection of an advance from the supplier who could not deliver the goods:
10. To record the received raw materials and merchandises that then were returned due to poor
quality and deducted into payable amount:
11. The seller agreed to reduce the price for of the purchased raw materials and merchandise that
were poor in quality and still in the stock:
12. This would be used to record those trade payables in which the creditors do not want to be
paid or could not be addressed. The accountant should record to other income:
13. The accountant has to determine the completed construction volume that must be paid to sub-
constructor according to the sub-contracting contract that were signed by both parties that the
VAT amount on the completed construction volume is credited or not credited. Based on
invoice, payment request, finalization report of completed construction work and the sub-
contracting contract, the accountant records as follows:
14. The enterprise is an agent that sells goods at nominated price for commission
- When receiving goods for consignment, the accountant debits the account 003 - Goods
received on consignment for sale (Off balance sheet accounts) (at the nominated price given
by the supplier).
Simultaneously, a credit is recorded to account 003 Goods received on consignment for sale
(Off balance sheet accounts) (at the nominated price).
15.1. To record advances made to the import consignee to open Letter of Credit complying
with the consigment contract:
15.2. When receiving goods that were returned by import consignee, the accountant records
cost of imported goods, import duties, import VAT, special consumption tax, if any based on
invoices of the consignee and relevant documents. There are two cases as follows:
a. In the case, imported goods used for production of goods and services are subject to VAT in
subtraction method, the VAT import will be deducted.
- If the import consignee paid taxes to the State Treasury on behalf of the consignor (i.e. import
duties, VAT, special consumption tax):
Dr. 151, 152, 156, 211, 611 (Cost of imported goods not including import VAT)
Dr. 133 VAT dedutible
Cr. 331 Trade payables (detail by consignees)
- If the import consignee performed tax declaration while the consignor paid taxes to the State
itself, the value of imported goods are determined
determined as similar to the case in which the import
consignee paid taxes on behalf of the consignor (as similar to above entry). When payment is
made to the State, the accountant records:
- If the import consignee pays taxes to the State Treasury on behalf of the consignor.
Dr.151, 152, 156, 211 (Cost of imported goods including taxes that must be paid)
Cr. 331 Trade payables (Details by consignees )
- If the import consignee performed tax declaration while the consignor paid taxes to the State
itself, the value of imported goods are determined
determined as similar to the case in which the import
consignee paid taxes on behalf of the consignor (as similar to above entry). When payment is
made to the State, the accountant records:
15.3. To record consignment fee that must be paid to the import consignee:
15.4. To record amount of money that must be paid to the import consignee for its payment
relating to consignment activities on behalf of the consignor.
15.5. To record payment made to the import consignee for the remaining balance, import duties,
special consumption tax (if the import consignee paid to the State Treasury on behalf of the
consignor), consignment fee and other amounts that was paid by the consignee on behalf of the
consignor:
15.6. The import consignee returns the goods on consigment of which VAT havent been paid.
a. When received goods, based on goods dipatch note cum internal transport note of the import
consignee, the accountant shall record cost of goods on consigment at the prices including VAT
of import goods:
Dr. 152, 156, 211 (Cost of import goods including tax that must be paid to State)
Cr. 331 Trade payables (Details by import consignees)
At the same time cost of exported goods are credited to account 003 Goods received on
consignment for sale (Off balance sheet accounts)
17. At the end of the fiscal year, the balance of the trade purchases in foreign currency can be
revalued based on the inter-bank average exchange rate that SBV issued at this time:
- To record foreign exchange difference because inter-bank average exchange rate that SBV
issued at this time is lower than the exchange rate used in accounting book of account 331:
- To record foreign exchange difference because inter-bank average exchange rate that SBV
issued at this time is greater than exchange rate used in accounting book of account 331:
- Foreign exchange difference because of purch ases in foreign currency are revalued based on
purchases
exchange rate at the end of period as guided account 413.
ACCOUNT 333
This account is used to reflect the relation between the company and the State relating to the
taxes, fees, duties and other payables. It also reflects the obligation and its fulfilment by the
company for an accounting period.
1. The company actively calculates and determines taxes and payables to the State based on the
regulations of the current laws and records the amount of the taxes payable into its general
ledger based on the notice of the tax department. Taxes payable are an obligation to the
company.
2. The company must pay its taxes fees, duties to the State in full and on time. Any questions
and claims (if any) about tax rates or taxes stated on the notice of the tax department must be
solved on a timely bases. The State will
will accept no excuses for delayed payment.
3. The accountant must maintain detailed sub-ledgers in order to keep track of taxes paid and
taxes payable to the State.
Debit:
Credit:
Credit balance:
- In special cases, account 333 can have a debit balance. A debit balance (if any) shows that
taxes have been overpaid or reflects the fact that the taxes have been exempted by the
government and they will be refunded but they have not been refunded.
- Account 3331 – VAT payables: to record VAT output, VAT payable on the imported goods,
deducted VAT, paid VAT and VAT payable to the State.
Account 33311 – VAT output: to record the deducted VAT output, deducted VAT input, VAT
on sales returned, VAT on sales with reduced price, VAT payment and VAT payable of
goods, services in the period.
Account 33312 – VAT on imported goods: to record the determined obligation and the
payment for imported goods to the State.
- Account 3333 Import, export duties: to record the determined obligation and the payment
for import and export duties to the State.
- Account 3334 Profit tax: to record the determined obligation and the payment for profit tax
to the State.
- Account 3335 Personal income tax: to record the determined obligation and the payment
for personal income tax to the State.
- Account 3336 - Natural resource tax: to record the determined obligation and the payment
for natural resources tax to the State.
- Account 3337 - Land and housing tax tax:: to record the determined obligation and the payment
for land and housing tax to the State.
- Account 3338 - Other taxes payable: to record the determined obligation and the payment for
other taxes payable which are not recorded into these accounts above such as: business tax,
tax payment on behalf of foreign
gn organizations, indi
individuals doing business in Vietnam. This
account must have sub-ledgers to record in detail.
- Account 3339 - Fees, duties and other obligations: to record the determined obligation and
the payment for fees, duties and other obligations to the State which are not recorded into
accounts 3331 to 3338. This account also records the amounts that the State grants to the
company (if any) such as compensation for prices.
MAJOR TRANSACTIONS
When selling products and services subject to VAT in subtraction method, the company must pay
the VAT as subtraction method and issue VAT invoice. On the invoice, it must be noted the price
has not yet included VAT, charges and surcharges (if any), VAT amount and total value. The
accountant records revenue from selling goods and services (at the price not including VAT) and
VAT amount:
2. The entity has operating lease of tangible, intangible assets or investment property (the
operating lease assets). The entity receives leas
leasee fee in advance for several periods. The
revenue of the current period shall be recognized at the total amount divided by lease terms that
the entity received money in advance. Revenue from operating lease of tangible, intangible assets
is credited to account 5113 Sales from service s. Revenue from operating lease of investment
services.
property is credited to account 5117 Sales from property investment.
- In the next accounting period, the accountant transfers deferred income from assets leased to
income for that period:
- The money that must be returned to the customers because of cancelling the contract (if any):
- When receiving the customers pre-paid for the activities of long-term assets lease:
- At the end of the accounting period, the accountant allocates income from assets leased for the
current period:
- In the next accounting period, the accountant allocates income from assets
a leased for that
period:
- The money that must be returned to the customers because of cancelling the leasing contract of
tangible, intangible assets or investment property (if any):
3. For sales of goods on instalment plan or in deferred payment (goods subject to VAT in
subtraction method and the entity pays VAT in subtraction method), the accountant determines
the revenue at the price of payment at sight excluding VAT and records the VAT amount as
follows:
4. For barter contract, the goods shall be recorded as similar to as the ones in a normal business
contract (the goods and services provided are recorded as sold while goods and services received
are recorded as purchased). Parties shall issue invoices when sending out the goods and services
for barter. Declaration and payment for tax obligations must be implemented as current
regulations.
4.1. When bartering goods and services subject to VAT in subtraction method for other goods and
services that shall be used in production of goods and services subject to VAT in subtraction
method:
- Based on VAT invoices when bartering goods, services, the accountant records the income from
- Based on VAT invoices when receiving materials, goods as barter, the accountant records the
value of materials, goods and the deductible VAT input:
- In the case, the materials and goods received as barter are used for the production of goods and
services not subject to VAT or subject to VAT in direct method, the VAT input of the goods
mputed into the value of goods received:
received as barter will not be deducted but computed received
- When sell investment property on instalment, record the sales from property investment
according to the at sight price, the difference between
between the instalment price and at sight price and
the VAT are recorded into account 3387 Deferred income:
b. In case of selling investment property which are not subject to VAT or subject to VAT in direct
method on instalment:
- When selling investment property on instalment, recorded the sales from property investment of
the period according to the at sight price, the difference between the instalment price and at sight
price (including VAT) is recorded deferred income:
- At the balance sheet date, records the VAT payable in direct method:
6.1. Accounting at the entity sending goods to sale agent. When finalizing with the sale agents,
the accountant records the sales and VAT payable as follows:
7. Enterprise pays VAT in subtraction method and sold goods to its divisions and subsidiaries.
7.1. Where shipped the goods subject to VAT in subtraction method to its divisions and
subsidiaries with the Goods dispatch note cum internal delivery note:
- When its divisions and subsidiaries sold the goods, the enterprise issues the VAT invoice and
record sales and VAT amount based on the list of goods sold prepared by its divisions and
subsidiaries:
7.2. Selling goods subject to subtraction method VATto accounting dependent entities using VAT
invoice. The accountant bases on the VAT invoice to record the sales and VAT payable:
Cr. 512 - Inter-company revenue (Internal sale price not including VAT)
8. In case of sending out products, goods subject to subtraction method VAT for internal use,
promotion, advertising or for production of goods, services subject to subtraction method VAT,
the enterprise must prepare VAT invoices with clear explanation of goods used for internal
purpose of production, promotion, advertising. The VAT invoice is used as accounting document.
The enterprise gets VAT exemption for those transactions.
- When send products, goods for internal purpose, promotion, advertising activities:
9. When sending out goods and merchandise subject to subtraction method VAT for internal use,
promotion, advertising or for production of goods, services not subject to VAT or subject to VAT
in direct method, the enterprise prepares the VAT invoice with clear explanation. The enterprise
is still subject to VAT and record those amount in the production expenses.
Dr. 623, 627, 641, 642,... (Cost of production or cost of goods sold plus (+) the VAT on
goods for internal use); or
Dr. 211 Tangible assets (if finished products used as fixed assets for production, trading
activities) (Cost of production plus (+) the VAT on goods for internal use)
Cr. 333 - Tax and statutory obligations (33311)
Cr. 512 - Inter-company revenue (Cost of production or cost of goods sold)
10. In case of using goods, products subject to subtraction method VAT for grant, donation
purposes which using the bonus and welfare funds, the enterprise must prepare the VAT invoice
with sufficient information of goods, products and VAT amount. In this case, the enterprise must
pay VAT and does not get VAT deduction.
11. When use goods, products subject to subtraction method VAT for bonus or payment instead
of salary for employees and other workforce, the enterprise must prepare VAT invoice (or sales
invoice) with full information of contents and VAT calculation as normal VAT invoice. The
enterprise must pay VAT and does not get VAT deduction.
- When send out products, goods to pay to employees as bonus or replacement of salary:
13. The company pays VAT in subtraction method. When having income from financial activities
and other income (proceeds from disposal or sales of fixed assets) subject to VAT in subtraction
method, the accountant shall record the financial income and other income using price not
including VAT:
14. The company pays VAT in direct method and records the payable amount at the end of the
period:
1. When importing materials, goods, fixed assets, the accountant records the payable import
duties, total payables and the value of imported materials, goods, fixed assets (not including
import VAT):
- When materials, goods, fixed assets are imported for producing, selling goods, services subject
to subtraction method VAT, the deductible import VAT:
- When materials, goods, fixed assets are imported for production of goods and services not
subject to VAT or subject to VAT in direct method, or used in project, welfare activities, the
amount of non-deductible import VAT will be recorded
record into the value of imported materials,
goods, fixed assets:
At the end of the period, the accountant determines the VAT deductible by offsetting VAT output
and input in that period:
- VAT deductible in the period is the amount netting off VAT output and input:
1. If the VAT is reduced and is deducted from VAT payables in that period:
1. When selling goods, services which are subject to both special consumption tax and subtraction
method VAT, the accountant records the income fr om the goods, services at the selling price
from
including special consumption tax but excluding VAT:
2. When selling goods, services which are subject to both Special Consumption Tax and VAT in
direct method, the accountant must record the income from the goods, services including both
special consumption tax and VAT (Total amount):
3. When determining the special consumption tax on goods, services sold in the period:
4. When importing goods which are subject to special consumption tax, the accountant
determines special consumption tax payable on imported goods based on the importing goods
invoices and the tax noticement of special consumption tax payable:
1. When selling goods, services which are subject to import duties, the accountant records sales
including the import duties (total amount):
1. When importing materials, goods, fixed assets, the accountant records import duties payable,
total payables, or paid to the sellers and th
thee purchase of materials, imported goods, fixed assets
(Price including import duties):
1. Based on the amount of Profit tax payable to the State Budget quarterly:
3. At the end of the year, determine the profit tax to the State Budget of the fiscal year:
- If the actual amount of profit tax that the company must pay is lower than the amount that the
company has quarterly paid in advance, the difference is recorded as follows:
- If the actual amount of profit tax that the company must pay is greater than the amount that the
company has quarterly paid in advance, the difference is recorded as follows:
- When pay the difference of the profit tax to the State Budget:
1. Rules for declaring, paying and finalizing the personal income tax for highly-income people
(the Personal Income Tax or PIT):
2. Major transactions:
2.2. When make payment to individuals outside the entity, the entity must determine the PIT
payable based on the taxable irregular
ar income whenever occurred:
- Where payment was made for payables to individuals outside the company who have highly-
income:
2.3. The paying entity withheld PIT will enjoy commission from tax payment services which is
calculated by a percentage (%) on PIT payable on the regular and irregular incomes declared.
When determining the commission:
2.4. When paying PIT to the State Budget on behalf of the taxable person:
2. When pay the land and housing tax to the State Budget:
IX. Other taxes payable (Account 3338), fees, duties and other obligation (Account 3339)
1. When determining registration fee for purchase of assets (when obtaining the owner certificate
or use right on the assets bought):
1. When the entity supplies goods and services following the States requirement or receives the
subsidy from the State, the accountant records the subsidy from the State as follows:
ACCOUNT 334
PAYABLES TO EMPLOYEES
This account records salaries, wages, social insurance and other payables that are due to the
employee, as well as the payment of these liabilities.
Debit:
- Record salaries, wages, bonuses, social insurance and other amounts which have been paid
or advanced to the employees.
Credit:
- Record amounts payable to employees such as salaries, wages, bonuses, social insurance,
and other amounts.
Credit balance:
- Shows amounts payable to employees for salaries, wages, bonuses and other payable to
employees.
- The account 334 can have a debit balance. The de bit balance of account 334 is very special
debit
showing that the amount paid to employees was greater than what was payable.
- The account 334 should be kept track of under two headings: salaries payable and other
payables.
- Account 3341 - Payable to staff: to record salaries, wages, bonuses, social insurance and
other payables that are due to the employee of the entity, as well as the payment of these
liabilities.
- Account 3348 - Other payable to employees: to record wages, bonuses (if any) that are
due to the other employee, as well as the payment of these liabilities.
MAJOR TRANSACTIONS
- Determining bonuses payables that are covered by the bonus and welfare funds:
3. To record social insurance (e.g. sick leave, maternity leave, accidents, etc) which must be paid
to employees:
6. To record the personal income taxes which must been paid to the State:
- For goods subject to subtraction method VAT, the accountant records inter-company revenue at
the price not including VAT:
- For goods subject to VAT in direct method, the accountant records inter-company revenue at
total amount:
10. Determining and making payment the shift meals that must be paid to employees:
ACCOUNT 335
ACCRUALS
This account records expenses which were incurred during the period but have not been paid.
Recorded in this account are expenses that have not yet occurred. However, they are recognized
in this period to ensure that when they do occur in the future they will not cause large fluctuations
to business expenses. Recording these expenses to production and business cost in the period
must be complied with matching principle of revenue and expenses incurred during the period.
3. Expenses during the period in which the comp any interrupts its business operations due to the
company
season, and the company can plan for the interruption. The accountant will calculate and record
the expenses which will be paid during the interruption period.
1. This account should record only those expenses which have been specified above. However, if
expenses other than those stated above arc to be accrued, the company must explain why to the
financial authorities.
2. Accounting for expenses which have not yet bbeen een incurred must be strictly controlled. The
company must prepare an estimate of accrued expenses and have reasonable evidence to prove
that the amount recorded is in the actual expen ses. It is prohibited to record into this account
expenses.
expenses which are not related to doing business.
4. If this account has a balance at the end of the fiscal year, the company must give an
explanation in the notes to the financial statements.
Debit:
- If the amount set up as an accrued expense turns out to be higher than the actual expense,
then the difference should be debited to reduce expenses.
Credit:
Credit balance:
Accruals which are recognized as expenses in the current period but not yet occurred.
MAJOR TRANSACTIONS
Dr. 622- Direct labour cost (if amount payable exceeds accrued amount)
Dr. 335 Accruals (accrued amount)
Cr. 334 Payables to employees (actual salary payable amount)
Cr. 622- Direct labour cost (if amount payables are less than accrued amount).
Dr. 623, 627, 641, 642 (if the paid amount exceeds the accrued amount)
Dr. 335: Accruals (accrued amount)
Cr. 241 Construction in progress (2413) (Total actual expenses incurred)
Cr. 623, 627, 641, 642 (if the paid amount is less than accrued amount)
7. If the interest expenses would be paid late, at the end period interest expenses payables must be
calculated and recorded as follows:
8. When the enterprise issues bonds at par value and interest will be paid later (when bonds are
due), periodically the enterprise must accrue interest that must be paid in the current period to
manufacturing expenses or capitalization:
When bonds are due, the enterprise must pay principal and interest for persons who buy
bonds:
9. When the enterprise issues bonds with discount and interest will be paid
pa later (when bonds are
due), periodically the enterprise must accrue interest payables for the current period to
manufacturing expenses or capitalization:
When bond are due, the enterprise must pay principal and interest for persons who buy the
bond:
10. When the enterprise issues bonds with premium and interest will be paid later (when bonds
are due), periodically the enterprise must accrue interest payables for the current period to
manufacturing expenses or capitalization:
When bonds are due, the enterprise must pay principal and interest for persons who buy those
bonds:
ACCOUNT 336
INTER-COMPANY PAYABLES
This account records the settlement of amounts payable between an independent business entity
or General Corporation and its subsidiaries and divisions or among these subsidiaries and
divisions. The account reflects the amounts payable or the amount that an independent business
entity has paid or collected on behalf of its parent, subsidiaries or other members.
1. The account 336 only reflects the internal economic transactions between the higher authority,
its subordinates and among internal units in which the higher authority is the General
Corporation. The parent must be a separate business entity and it must not be a non-business
organization. Although the subordinates could be subsidiaries or divisions of the General
Corporation or the parent, they must have a separate accounting structure.
2. Investment in subsidiaries, associates and jointly controlled entities and transactions between
jointly
the parent and its subsidiaries or among subsidiaries themselves would not be recorded to the
account 336.
- Amounts that the General Corporation, the pare nt, subsidiaries and divisions have paid or
parent,
collected on behalf of its General Corporation, its parent or its subsidiaries, divisions or other
members and other current accounts.
- With respect to capital that the General Cor poration and the parent company lends to its
Corporation
subsidiaries and divisions, the General Corpor ation and the parent should record the amount
Corporation
advanced into account 1361 Inter-company rreceivables,
eceivables, capital lending. The subsidiaries and
divisions should record the amounts received as an increase in assets and capital and should not
record into account 336 Inter-company payables.
4. The accounting records must show detailed brbreakdowns of the amounts owed to each party,
and whether the amount is receivable or payable.
5. At the end of the accounting period the accountant will reconcile the account 136 and 336 and
prepare a bilateral settlement minute which will allow for the clearance of these accounts. When
reconciling, any differences must be investigated and adjusted on a timely basis.
Debit:
- Amount that the parent has paid to the subsidiary and division.
- Amount that the subsidiary has submitted to the General Corporation and the parent.
Credit:
- Amount payable to a member due to collecting a receivable on the other members behalf, or an
amount payable to a member due to another member paying expenses on the members behalf.
Credit balance:
MAJOR TRANSACTIONS
1. Periodically the subsidiary has to reflect in the general and administrative expenses the amount
that it is liable to remit to the General Corporation, its parent company for management fees.
2. To record the portions of the business deve lopment fund, financial reserved fund and bonus,
development
welfare fund to be remitted according to legislations laid down by the General Corporation or the
legislations
parent company:
3. To record benefit that must be paid to the General Corporation and the parent:
4. To calculate the retained earning refundable to the General Corporation and the parent:
4. Amounts reimbursable to the General Corporation and the parent and other subsidiaries for
expenses that the General Corporation and the parent and other subsidiaries have paid for on the
companies behalf:
5. To record money collected on behalf of the General Corporation and the parent:
6. To record the payment to the General Corporation and the parent relating to amounts payable,
amounts reimbursable, payments made by the parent on behalf of the subsidiary, or collections
made on behalf of the parent.
8. Buying goods from the General Corporation and the parent (or other subsidiaries of the
General Corporation and the parent)
a. When having received goods from the General Corporation, the parent or other subsidiaries, the
accountant records based on goods dispatch note cum internal goods transfer note and relating
documents as follows:
b. When selling goods, the entity must issue VAT invoice. The accountant records revenue and
VAT output based on VAT invoice:
At the same time, a list of invoices for goods delivered within the General Corporation and the
parent (or other subsidiaries of the General Corporation and the parent) is prepared and sent to
these entities to determine inter-company revenue.
c. When the division received VAT invoice for the goods were transferred from the General
Corporation or the parent, the accountant records deductible VAT input based on VAT invoice.
summary)
Cr. 632 Cost of goods sold (if cost of goods sold has been transferred to income
summary)
d. In the case, because of the accounting and management requirement, the entity doesnt use the
internal goods transfer note but the VAT invoice, the entity must issue VAT invoice when
delivering goods to its subsidiaries and divisions in other provinces. Based on the VAT invoice,
the accountant should record inter-company revenue as follows:
- When the divisions received VAT invoice and goods from the General Corporation or the
parent, the accountant should record inventory at internal selling price not including VAT and
deductible VAT input.
a. When the subsidiaries and divisions recei ved goods from the General Corporation and the
received
parent, based on goods dispatch note cum internal
internal goods transfer note and relating document the
accountant should record as follows:
10. Bilateral clearance between accounts payable and receivable of the General Corporation and
the parent and other subsidiaries (only bilateral clearance between accounts receivable and
payable of one subsidiary of the General Corporation and the parent):
1. To record the business development fund that the General Corporation and the parent provides
for its subsidiaries.
2. To record the financial reserve fund that the parent provides for its subsidiaries
3. To record the bonus & welfare fund that the parent provides for its subsidiaries.
5. To record subsidies to the subsidiaries with the purpose of compensating for their losses
6. To record amounts payable to the subsidiary for money that the parent received on behalf of its
subsidiary or what the subsidiary has paid on behalf of the parent.
7. To record the payment to subsidiaries for amounts paid by the subsidiary on behalf of the
parent and for amounts collected by the parent on behalf of the subsidiary.
8. The General Corporation or the parent buy goods from the subsidiaries, please refer to point 8,
section I accounting by the subsidiaries)
ACCOUNT 337
This account reflects amount the customers have to pay according to a set schedule of
construction contract and amount receivables and revenue generated by reference to the
completed volume determined by the contractor in the construction contract.
1. Account 337 Construction contractor payables based on agreed progress billing is used to
record only if the construction contract stipulates that the contractor is allowed to make payments
according to the set schedule. This account is not used to record where the construction contract
stipulates that the contractor is allowed to make payments according to the value of performed
work volume approved by the customer.
Debit:
Amount receivable and revenue generatedrated by reference to the completed volume determined by
the contractor in the construction contract.
Credit:
Amount the customers have to pay according to a set schedule of construction contract.
Debit balance:
Difference between revenue recognized and the amount payables according to set schedule of
construction contract.
Credit balance:
To reflect the difference of lower amount of revenue of construction contract recorded and the
amount receivables from customer according to the set schedule of construction contract.
MAJOR TRANSACTIONS
1. The construction contract stipulates that the contractor is allowed to make payments according
to a set schedule. When work volume of the construction is reliably estimated, the accountant,
based on the documents (not invoice) prepared by the contractor showing that revenue recognized
by reference to the completed work volume, shall record the followings:
2. Based on the invoice issued according to the set schedule, the accountant records the amount
receivables as agreed in the contract:
ACCOUNT 338
OTHER PAYABLES
This account records the changes in other payable which are not included in accounts 33 (from
account 331 to account 337). This account also records revenue advances from customers for
services that has been delivered by the company, differences resulted from revaluation of assets
that were contributed in a joint venture and differences resulted from difference of prices in sale
and leaseback transactions for both operating lease and financial lease.
Content and scope of this account involves the following major transactions:
1. The value of asset surplus for which the reason has not been determined and the company is
awaiting the authority decision.
3. The recognition and payment for social insurance, health insurance and trade union fees.
insurance,
4. Withholdings from employees' salaries based on the court's decision (allowance for children
when divorced, children born out of wedlock, court fees, compensation. etc.)
5. Amount payable as a result of holding deposits of another entity. Receipt of deposits and
pledges by goods would not be reflected in th is account, but followed-up in off balance sheet
this
accounts (account 003 - Goods received on consignment for sale).
8. Amounts received from the import and export consignors or their agents in order to pay export
tax, import tax, duties, import VAT.
10. The difference from late payment price, instalment price and price of payment at sight
according to the contract.
11. Interest income received before money has lent to the borrowers or before buying debts
instruments.
12. Foreign exchange difference and revaluation of balances in foreign currency of construction
activity (pre-operating stage) in which the construction is complete but hasnt been finalized at
the end of the fiscal year.
13. Deferred interest income due to revaluation of assets that were contributed in jointly
controlled entity in correspondence with the interests of the venture parties in the joint venture.
14. Amount payables of collections from sales of State shares, collections on behalf, and
collections from sales of assets that were eliminated in the value of the enterprise.
15. The difference due to difference of higher selling price and net book value of sold assets or
leaseback assets of financial lease.
16. The difference due to difference of higher selling price and fair value of sold assets or
leaseback assets of operating lease.
Debit:
- Value of asset surplus to be reclassified into relevant accounts in accordance with the
authority decision in the written report.
- surance & trade union fees which have been remitted to the
Social insurance, health insurance
authorities.
- Deferred income to be allocated in relating periods; advances returned to customer when the
periods;
enterprise stops leasing asset.
- Allocation amount of foreign exchange differe nce and revaluation of balances in foreign
difference
currency (gain of foreign exchange difference) of construction activity (pre-operating stage)
into financial income when the construction is complete.
- Allocation amount of difference from revalued pr ice and net book value of the asset that were
price
contributed in the jointly controlled entity in correspondence with the interests of the venture
parties in the joint venture.
- Allocation amount of difference from late payment price, instalment price and price of
payment at sight (late payment interest income
income) according to the contract into financial
expenses.
- Transferring the difference of higher revalued amount and book value of materials and goods
that were contributed into the jointly controlled entity in correspondence with the interests of
the venture parties in the joint venture to other income when the jointly controlled entity sold
those materials and goods to the third party;
- Remitting the collections from the accounts receivable and receipts from sales of fixed assets
which were eliminated from the value of the enterprises when equitizing the SOEs to the
Fund of Enterprise Restructuring;
- Transferring expenses resulted from equitization that were deducted against income
generated from equitization of the state owned enterprises;
Credit:
- Value of asset surplus payable to individuals and entities (internal, external) according to the
authorities decision in the written report in which the reason is determined);
- Recognition of social insurance, health insurance and trade union fees to production and
business expenses;
- Recognition of social insurance, health insurance and trade union fees to withhold employees
of income;
Difference of late payment price, instalment price and price of payment at sight according to
the contract;
- The difference due to difference of higher selling price and fair value of sold assets or
leaseback assets of operating lease;
- Amount payables that were recorded in the joint stock company for the collections on behalf
and collections from sales of assets that were withheld for the State (eliminated in the value
of the enterprise for equitization);
- Other payables.
Credit balance:
- Amounts payables;
- Amount of social insurance, health insurance and trade union fees that are calculated but have
been not paid for administration organization or trade union fees which has been not use all,
will be kept for enterprise;
- Difference of higher selling price and fair value or net book value of soled or leaseback fixed
assets that has not been transferred yet;
- Amount payables of collections from receivables, collections on behalf and collections from
sales of assets withheld for the State that the joint stock company must pay;
- Amount payables of collections from selling State shares at the end of accounting period;
This account may have a debit balance. The debit balance reflects the amount paid to the
authorities exceeds the obligation or the company hhas
as not paid social insurance to employees and
trade union fees and the overpayment has not been reimbursed.
Account 3381 – Surplus of assets waiting for resolution: to record the value of asset surplus for
which the reason has not been determined and th
the company is awaiting the authorities decision.
If the cause of the asset surplus has been detected, and the surplus is officially resolved in the
minutes, the value of the asset surplus is then recorded directly into the relevant accounts rather
than account 338 (3381).
Account 3382 – Trade union fees: to record recognition and payment for social insurance to
employees.
Account 3383 – Social insurance payables: to record recognition and payment for social
insurance.
Account 3384 – Health insurance payables: to record recognition and payment according to
regulation
Account 3385 - Payables from equitization: to record the amount payables of collections from
selling the State share, collection of receivables on behalf and collections from selling assets that
were eliminated to the value of enterprise and other payables according to regulations.
Account 3386 – Receipts of short term deposits: to record the amounts that entity received
deposits and pledges of other entities and individuals outside the entity with the term of one year
to guarantee services relating to production and business activities according to the signed
contract.
Account 3387 – Deferred income: to record the balance and movement of deferred income of the
entity in the accounting period. This account would be used to record the amount of money that
the customer paid in advance for lease assets for one or several periods; interest income received
in advance before lending capital or buying debts instrument; difference of late payment price,
instalment price and price of payment at sight as committed; gain of foreign exchange difference
and revaluation of balances in foreign currencies of construction activities (pre-operating stage) to
be allocated when the construction was complete;
complete; difference of higher revalued amount and book
value of assets contributed in joint venture in corr espondence with the interests of venture parties.
correspondence
This account would not be used to record advance from customer for goods and services that have
advance
not been provided.
Account 3388 – Other payables: to record other payable except for those accounts that should be
recorded to accounts: from account 3381 to account 3387.
MAJOR TRANSACTION
1. To reflect the value of fixed asset surplus for which the reason has not been determined and the
company is awaiting the authorities decision:
Simultaneously, an increase in fixed assets register is recorded based on the fixed assets
documents.
2. To record the surplus value of materials, merchandise and cash detected through a physical
count for which the reason has not been determined, and the company is awaiting the authorities
decision:
3. When the company receives the authorities decision the accountant must record to the relevant
accounts:
4. Monthly withholding social insurance, health insurance, trade union fees to production and
business expenses:
5. Calculate health insurance, social insurance, trade union fees deducted from salaries of
employees:
6. To record social insurance, trade union fees submitted to the authorities and buying health
insurance card:
7. Calculate social insurance payable to employees when sick leave, maternity leave, etc.
In case, the depositing party violated the signed economic contract, the entity will be fined as
agreed in the contract:
Dr. 338 Other payables (3386) (the deducted amount) (if any)
Cr. 111, 112,...
11. Calculate the interests must be paid to the venture parties or dividends must be paid to
shareholders according to the made by the general assembly of shareholders:
12. To record deferred income from leasing fixed asset, investment property under operating
lease; and the revenue of the current accounting pe riod that was determined by dividing the total
period
receipt from leasing fixed assets, investment property and the periods of leasing fixed assets and
investment property:
In the case, the leasing asset contract was broken, cash then was returned to the lessee:
broken,
When having received advances from lessee for several years, the accountant records deferred
income at total receipt:
When the leasing asset contract was broken, cash then was returned to the lessee:
13. Accounting for selling goods under late payment or instalment plan:
a. Selling goods under late payment or instalment plan that is subject to Subtraction method
VAT:
When selling goods under late payment or instalme nt plan, the accountant records revenue in the
instalment
current period at the price of payment at sight. Th
Thee difference of late payment price, instalment
price and the price of payment at sight would be recorded to account deferred income:
Periodically, the accountant calculates, determines and transfers the interest income generated
from selling goods under late payment or instalment plan to profit and loss account:
When having received money from selling goods under late payment and instalment plan
including the difference of price of late payment or instalment plan and price of payment at sight:
b. Selling goods under late payment or instalment plan that is not subject to VAT in direct
method:
When selling goods in late payment or instalment plan, the accountant should record revenue in
the current period at the price of payment at sight. The difference of late payment price,
instalment price and the price of payment at sight should be recorded to account deferred
income:
+ Selling goods:
Dr. 632 - Cost of goods sold (net book value of investment property)
Dr .214 - Accumulated depreciation and amortization (2147) (accumulated depreciation)
Cr. 217- Investment property
At the end of the period, VAT payables are determined in direct method:
Periodically, the accountant should calculate, de termine and transfer the interest income
determine
te payment or instalment plan to profit and loss account:
generated from selling goods under late
When having received money from selling goods under late payment and instalment plan
including the difference of price of late payment or instalment plan and price of payment at sight:
14. Sales and leaseback assets of financial lease in which selling price is higher than the net book
value of the fixed assets sold or the assets leased back
back:
When selling asset procedure is completed, based on invoice and relating documents the
accountant records:
Dr. 811 Other expenses (net book value of assets sold or leased back)
Dr. 214 Accumulated depreciation and amortization (depreciation amount) (if any)
Cr. 211 Tangible assets (historical cost)
Periodically, the difference (gain) of selling price and net book value of fixed asset sold and
leased back was transferred to production and business expenses in the current period matching
with leasing period:
15. When the construction was complete (pre-operating stage), the accountant transfers the
foreign exchange difference to profit and loss account. If the account 413 Foreign exchange
difference has credit balance, it will be recorded to financial income or transferred to account
3387 deferred income for allocating in 5 years as maximum:
Allocation of realized foreign exchange gains occurred in construction stage to financial income
when the construction is complete and put in use:
16. When assets contributed into jointly controlled entity that revalued amount is higher than the
net book value of fixed assets, the accountant records the difference of revalued amount and the
records
net book value in correspondence with the interests of other venture parties in the joint venture to
account 711 other income and records the differe nce of revalued amount and the net book value
difference
in correspondence with the entitys interests in the joint venture to account 3387 Deferred
income:
Periodically, based on the useful life of fixed assets that are used by the jointly controlled entities,
the accountant allocates the deferred income to other income of the current period:
- The venture party sold goods to the jointly controlled entity. When goods are delivered, the
accountant records as follows:
At the same time, based on the price of goods sold, the accountant records the revenue as follows:
Dr. 111, 112, 131,... (total value of finished goods and goods sold to jointly controlled entity)
Cr. 511 - Sales (Price not including VAT)
Cr. 3331 - VAT payables (33311)
- The venture party sells fixed asset to jointly controlled entity, the accountant records to decrease
the fixed asset.
At the same, the accountant records other income generated from sales of fixed asset at market
price to the jointly controlled entity.
At the end of accounting period, if the assets, finished goods and goods sold to the jointly
controlled entity have not been sold to the independent third party, the venture party records
deferred income generated from sales of fixed assets, finished goods and goods in correspondence
with its interests in the joint venture:
Dr. 511 Sales (Deferred amount due to sales of finished goods, merchandises
merchandises in correspondence
with its interests in the joint venture)
Cr. 3387 Deferred income
Dr. 711- Other income (Deferred amount due to sales of fixed assets in correspondence with its
interest in the joint venture)
Cr. 3387 Deferred income
In the next accounting period, if the jointly controlled entities sells the merchandise and finished
controlled
goods to an independent third party, the venturer records the following:
Dr. 3387 Deferred income (deferred amount in correspondence with the interests in the joint
venture)
Cr. 511 Sales
- Periodically the venture party allocates the deferred income to the other income in
correspondence with its interests in joint venture based on the useful life of the assets that the
jointly controlled entity is using:
When the jointly controlled entity sells the assets purchased from the venture party to an
independent third party, the venture party records:
Dr. 3387 Deferred income (portion of actual gains attributable to its interests in the joint
venture that has not been allocated to other income)
Cr. 711 - Other income
17.2. Venture party buys asset from the jointly controlled entity:
When buying asset from the jointly controlled entity, based on relating documents, the accountant
records the purchase the same as purchases from other suppliers.
18. Accounting for payables of collections from sales of the State shares:
- During the period of determining the value of the enterprise and the State Owned Enterprise
officially transited to a joint stock company, collections of receivables or collections from sales of
assets that were eliminated from the value of the enterprise, the accountant records these total
receipts to Enterprise Restructuring Fund:
At the same time, a single entry is credited d to account 002 Goods held under trust or for
processing (off balance sheet accounts) at the sold value of merchandise and assets withheld for
the State that were eliminated from the value of enterprise.
- When submitting the collections of receivables or collections from sales of assets that were
eliminated from the value of enterprise to th
thee Enterprise Restructuring
Restructurin Fund, the accountant
records:
When the equitization is complete, the enterprise must report and finalize the equitization
expenses to the agency that made the equiti zation decision. Total expenses arisen in the
equitization
equitization would be deducted into the receipt
receiptss from sales of State shares. The accountant
records the approved expenses resulted from equitization:
Dr. 3385 Payables from equitization (details of receipts from sales of State shares)
Cr. 1385 - Receivables from equitization (details of expenses resulted from equitization).
When submitting the variance of total receipts from sales of State shares and the equitization
expenses to the Enterprise Restructuring Fund, the accountant records:
ACCOUNT 341
LONG-TERM LOANS
Long term loan is a loan that the repayment period is more than one years.
1. At the end of accounting period, the enterprise must calculate and plan long term loan
schedule and also determine the current portion which is due next year. The enterprise must
plan with regards to how they are going to pay the amounts off. The enterprise must keep
track of individual creditors and loan contract.
2. If the funds borrowed are in a foreign currency, the accountant must keep details of the
original currency. Loan or repayment in fore ign currency should be converted to Vietnamese
foreign
Dong using the actual exchange rate or averag
averagee inter-bank exchange rate on foreign currency
market announced by the SBV at the date of transaction or using the exchange rate of
accounting book. Debit balance of account 341 is converted into Vietnamese dong using the
exchange rate of accounting book. Foreign exchange difference (if any) occurred from
repayment of long-term loan in foreign currenc
currencyy in the course of doing business (applying to
both enterprise in construction stage and enterp rise in construction activity) would be treated
enterprise
to financial income or expenses. Foreign exch ange difference occurred in construction stage
exchange
(pre-operating stage) would be recorded to account 413 Foreign exchange difference and
treated according to the current regulations (refer to instruction of account 413).
3. At the end of accounting period, the balance of long term loan must be revalued using
average inter-bank exchange rate announced by the SBV at the date of transaction. Foreign
exchange difference resulted from revaluation of the balance of long term loan in foreign
currency is recorded to account 413 Foreign exchange difference and treated according to
the current regulations (Refer to instruction of account 413).
DEBIT:
- Foreign exchange difference resulted from revaluation of the balance of long-term loan in
foreign currency at the end of the fiscal year.
Credit:
- Foreign exchange difference resulted from revaluation of balance of long-term loan in foreign
currency at the end of the fiscal year.
Credit balance:
Long term loan which have are not due within the current year.
MAJOR TRANSACTIONS
1. Long term loan to acquisition of fixed asset for production of goods and services subject to
subtraction method VAT.
- Acquisition of assets or constructions for production of goods and services subject to subtraction
method VAT:
- Acquisition of assets or constructions for production of goods and services not subject to VAT
or subject to VAT in direct method:
- Purchases of raw materials, equipment and tools for production of goods and services not
subject to VAT or subject to VAT in direct method:
6. Long-term loan for investment in subsidiaries, associates, joint ventures, long term securities
and bonds:
8. Long term loan in a foreign currency must be converted into Vietnam Dong using the actual
exchange rate or average inter-bank exchange rate in the foreign currency market announced by
rate
the SBV at the date of transaction:
9. Long term loan repayment made in cash on hand, cash in bank, or cash receiving from
receivables (in Vietnam Dong):
10. Long term repayment made in cash on hand or cash in bank (in a foreign currency):
Dr. 341 Long term loan (using exchange rate of accounting book of account 341)
Cr. 111, 112 (using exchange rate of accounting book of accounts 111,112)
Cr. 515 Financial income (gain of foreign exchange difference) (loss of foreign
exchange difference would be debited to account 635 Financial expenses)
Dr. 341 Long term loan (using exchange rate of accounting book of account 341)
Dr. 413 Foreign exchange difference (loss of foreign exchange difference)
Cr. 111, 112,... (using exchange rate of accounting book of accounts 111, 112)
Cr. 413 Foreign exchange difference (gain of foreign exchange difference) (loss of
foreign exchange difference would be debited to account 431)
11. At the end of the fiscal year, when preparing financial statement, balance of long term loan in
a foreign currency must be revalued according to average inter-bank exchange rate announced by
the SBV (if there is a change in the foreign exchange rate)
ACCOUNT 342
This account records long-term payables such as obligations under financial lease or other long-
term payables (borrowing tem is greater than one year).
For a financial lease, the total lease obligations to credit to account 342 Long-term payables is
the total amount payable determining by the current cost of minimum lease amount or fair value
of lease asset, minus (-) amount payables in the current period, plus (+) amount of VAT that the
lessee must pay during lease term.
If an obligation under a financial lease is in a foreign currency, then the lessee should calculate
and translate the amount into VND based on the ac actual exchange rate or average inter-bank
exchange rate announced by the SBV at the date of transaction. When payment made in a foreign
currency, the debit side of account 342 must be converted into VND using the exchange rate of
accounting book of account 342.
Debit:
- Loss of foreign exchange difference resulted from revaluation of long term payables in a
foreign currency.
Credit:
Gain of foreign exchange difference resulted from revaluation of long term liabilities in a foreign
currency.
Credit Balance:
MAJOR TRANSACTIONS
1. Amount payable under financial lease is determined at purchased price not including VAT that
the lessor paid when acquisition of leased asset.
- When received financial lease asset, based on lease asset and relating documents to reflect cost
of financial lease asset at price not including VAT input.
- At the end of accounting period, based on the lease contract to determine the Current portion of
long term loan that must be paid in the next accounting period:
2. Amount payable under financial lease is determined at purchased price including VAT that the
lessor paid when acquisition of leased asset.
- When received financial lease asset, the lessee also record the VAT of the asset that the lessor
paid before. Based on the finance lease contract, return the VAT amount to the lessor.
- At the end of accounting period, base on lease contract to determine the Current portion of long term
loan must be paid in the next accounting period:
2. For long term debts that the creditors were not identified, when there is a decision to write off
or not have to pay during equitization of state owned enterprise:
3. At the end of the accounting period, the accountant determines the Current portion of long term
loans for the next accounting period and records the followings:
The balance of long term payables in a foreign currency must be revalued according to average
inter-bank exchange rate announced by the SBV:
ACCOUNT 343
ISSUED BONDS
This account is used to reflect bonds issued and its payment. This account is also used to reflect
discount, premium of bond incurred when issuing bonds and allocation of those discounts and
surplus in order to determine borrowing costs to be charged to manufacturing expenses or
capitalized.
- Bonds issued at value (issued price is equal to par value): where issuing price of bond is equal
to its par value. It is often happened when market interest rate is equal title rate of bonds issued.
- Bonds issued with discount (issued price is lower than its value): where selling price of bond is
lower than its issuing one. The difference between the higher issuing price and selling one is
called bond discount. It is often happened when market interest rate is greater than title rate of
bonds issued.
- Bonds issued with premium: (issued price is higher than its face value): where selling price of
bond is higher than its issuing one. The difference between the lower issuing price and selling one
is called bond premium. It is often happened when market interest rate is lower than nominal rate
of bond issued.
Bond discount and premium should be determined and recorded right at issuing date. The
rate after bond was issued should not have impact
difference between market and nominal interest rate
on the recorded discount and premium.
1. Account 343 is only used for the entity borrowing money by issuing bonds.
- Bond value;
- Bond discount;
- Bond premium.
At the same time, it must be kept track in details by terms of issued bonds.
3. The enterprise must keep track of bond discounts and premium for each type of issued bond
and their allocation in order to determine borrowing costs to be charged to expenses (the profit
and loss account) or capitalized for each period.
- Bond discount is allocated to determine the borrowing cost for each period within bond terms;
- Bond premium is allocated to decrease borrowing cost for each period within bond terms;
- When interest expenses arising from bonds issued meet criteria to be capitalized, those
expenses and allocation of discount or excess of securities for each period must not be higher the
actual interest expenses incurred and the allocation amount of discount and excess in that period.
- Allocation of discount or premium of bonds may apply the actual rate method or straight line
method:
+ Actual rate method: where discount or premium is allocated to each period can be calculated by
the difference of interest expenses payables in each period (equal to opening balance of book
value of bonds multiply with actual rate on the market) and amount payables for each period.
+ Straight – line method: where discount or premium is allocated to the same part for each period
during the duration of securities.
4. In the case, the enterprise pays interest when the bond issued fall due, the enterprise must
periodically calculate interest from bond issued to record to manufacturing expenses or to
capitalize to value of asset in process.
Debit:
Credit:
Credit balance:
MAJOR TRANSACTIONS
Dr. 635 Financial expenses (if posted to financial expenses in the period)
Dr. 241 Construction in progress (if capitalized to value of construction investment
asset in progress)
Dr. 627 Factory overhead cost (if capitalized to cost of asset in process)
Cr. 111, 112,... (Interest paid in the period)
3. If the interest shall be paid in arrear (when bonds fall due), periodically, enterprise must
estimate interest expenses payable in the period to expenses or capitalization:
Dr. 635 Financial expenses (if posted to financial expenses in the period)
Dr. 241, 627 (If capitalized to cost of asset in progress)
Cr. 335 Accruals (the part in interest securities must be paid in the period)
- When bonds fall due, enterprise must pay the principal and interests to bond holders:
4. If bond interests are paid at the issuing date, bond interest expenses are first debited to account
242 (bond interest paid in advance) and will be then systematically allocated to costing objects
-Periodically, bond interests paid in advance are systematically allocated to the borrowing costs in
the period:
Dr. 635 Financial expenses (if charged to financial expenses in the period)
Dr. 241 Construction in progress (if capitalized to cost of construction in progress)
Dr. 627 Factory overhead cost (if it is capitalized to work in process)
Cr. 242 Long term prepaid expenses (details of bond interest paid in advance)
(bond interests allocated in the period)
- If costs for issuing bonds are insignificant, they should be charged to expenses (profit and
loss account) in the period:
Initial entry:
Dr. 242 Long term prepaid expenses (bond issuing expense)
Cr. 111, 112,...
2. If bond interests are paid periodically, they should be charged to expense (the profit and loss
should
account) or capitalized:
Dr. 635 Financial expenses (if charged financial expenses in the period)
Dr. 241 Construction in progress (if capita lized to construction in progress)
capitalized
Dr. 627 Factory overhead cost (if capitalized to work in process)
Cr. 111, 112,... (bond interests must be paid in the period)
Cr. 3432 Bond discount (bond interests allocated in the period)
3. In the case bond interest are in arrear (when bonds fall due)
Dr. 635 Financial expenses (if charged financial expenses in the period)
Dr. 241, 627 (if capitalized to construction in progress)
Cr. 335 Accruals (bond interests must be paid in the period)
Cr. 3432 Bond discount (bond discount allocated in the period)
- When bonds fall due, enterprise must pay principal and bond interests to bond holders:
4. In the case, bond interests are paid at the issuing date, interest expenses will be debited to
account 242 (bond interests paid in advance) and then be allocated systematically to costing
objects:
Dr. 635 Financial expenses (if charged to financial activities in the period)
capitalized into construction in progress)
Dr. 241 Construction in progress (if capitalized
Dr. 627 Factory overhead cost (if capitalized into work in process)
Cr. 111, 112,... (bond interests paid in the period)
- At the same time, bond premium is systematically allocated to decrease borrowing costs in the
period:
3. Where bond interest shall be paid later (when bonds fall due), periodically the entity should
accrue the expenses:
- At the same time, allocate the premium to decrease the borrowing cost in the period:
- Where bonds fall due, the enterprise should pay principal and interest to bond holders:
4. Where bond interests are paid at bond issuing date, the bond interest should be debited to
account 242 (bond interest paid in advance) and will be systematically allocated to costing
objects:
Dr. 635 Financial expenses (if charged to financial expense in the period)
Dr. 241 Construction in progress (if capitalized into construction in progress)
capitalized
Dr. 627 Factory overhead cost (if capitalized in work in process)
Cr. 242 Long term prepaid expenses (details of bond interest paid in advance) (bon
interest allocated in period)
At the same time, allocate the bond premium to decrease the borrowing costs in each period :
ACCOUNT 344
This account records deposits that the company receives from other entities or outside persons
(more than one year term), to ensure business services will be carried out properly with respect to
contracts signed. In case, the enterprise should not record to this account for receipt of deposits in
kind. They should be kept track in off balance sheet accounts (Account 003 - Goods received on
consignment for sale).
Debit:
Credit:
Credit balance:
MAJOR TRANSACTIONS
3. In case, the entity deposited violates the signed contract and is fined according to the contract:
4. Received and returned deposits in asset (Refer to instruction of account 003 Goods received
on consignment for sale).
ACCOUNT 347
This account reflects the balance and movement of deferred tax liabilities. Deferred tax liabilities
are determined based on the taxable temporary differences and the current rate of enterprise
income tax by the following formula:
1. A deferred tax liability should be recognised forr all taxable temporary differences, unless the
deferred tax liability arises from the initial recogn
recognition of an asset or liability in a transaction
which at the time of the transaction affects ne ither accounting profit nor taxable profit (tax
neither
loss).
- If the deferred tax liabilities in this period exceed the amount returned in this period, the
deferred tax liabilities that is the difference of
accountant would record additional amount of deferred
the recoverable amount in the period.
the deferred tax liabilities incurred and the
- If the deferred tax liabilities in this period is lower than the deferred tax liabilities which is
record decrease deferred tax liabilities which is the
returned in this period, accountant will to record
incurred is lower than deferred tax liabilities is
different from the deferred tax liabilities incurred
returned in this period.
4. Deferred tax liabilities incurred during the year not relating to items which are recorded
rded as deferred income tax expense.
directly to owner equity shall be recorded
5. When the taxable temporary differences do not affect taxable profit (when assets are returned
or obligations are paid), the accountant must decrease the deferred tax liabilities.
Deferred tax liabilities incurred from the taxable temporary differences. For example, the
useful lifetime of fixed assets determined by the enterprise is longer than the lifetime
regulated by the tax office. Therefore, the depreciation of fixed asset in accounting book is
lower than the depreciation that is allowed to deduct into taxable income.
Debit:
Credit:
Credit balance:
MAJOR TRANSACTIONS
1. If the deferred tax liabilities incurred during year are greater than the reversed amount in the
year, the accountant records the addition which is the difference of deferred tax liabilities
incurred and the amounts reversed in the year:
2. If the deferred tax liabilities incurred during the ye ar are less than the reversed amount in the
year
year, the accountant decreased (reverse)
(reverse) the difference of the deferred tax liabilities incurred
during year and the reversed amount in the year:
ACCOUNT 351
This account reflects making and using provision for severance allowance of the enterprise.
1. The provision for severance allowance is used for payment severance allowance, vocational
training for the employees in compliance with the current regulations.
2. The provision for severance allowance is provided and recorded to general and administration
expenses in the period. At the year end, the unused amount of provision for severance
allowance would be carried forward to the next year. If the provision for severance allowance
is not sufficient to cover the actual payment
payment to the resigned and unemployed staff, the
difference should be recorded to general and administration expenses in the fiscal year.
3. The provision for severance allowance is made at the time of closing books for preparing
yearly financial statements. In the case, the entity has to prepare the interim financial
statements (quarterly), the provision for severance allowance should be made at the end of the
quarter.
Debit:
Payment made to the employees who are resigned or lost job from the provision for severance
allowance.
Credit:
Credit balance:
The provision for severance allowance has not been used yet.
MAJOR TRANSACTIONS
1. Making the provision for severance allowance following the current regulations:
2. Payment for severance allowance, vocational training for the employees following the current
regulations:
3. If the provision for severance allowance is not sufficient to cover the actual payment to the
resigned and redundant employees, the difference should be recorded to general and
administration expenses in the fiscal year:
4. At the end of the accounting period, the enterprise determines the amount of provision for
severance allowance that should be made. If the provision for severance allowance in the
current year is greater than the unused amount in the accounting book, the difference should
be recorded as follows:
ACCOUNT 352
PROVISIONS
This account is used to reflect the current provision, making and using the provisions of
enterprise.
2. The amount recognised as a provision shall be th thee best estimate of the expenditure required to
settle the present obligation at thee balance sheet date or at the end of interim period.
4. A provision shall be used only for expenditures for which the provision was originally
recognised.
5. Provisions shall not be recognized for future operating loss unless the liabilities are related to
onerous contract and meet the criteria of general recognition for provision.
7. A provision for restructuring costs is recognised only when the general recognition criteria for
provisions set out in paragraph 11 in VAS 18 Provision, contingent asset, contingent liabilities
are met.
a. Has a detailed formal plan for the restructuring identifying at least following five criteria:
- The business or part of a business concerned;
- The principal locations affected;
- The location, function, and approximate number of employees who will be compensated for
terminating their services;
- The expenditures that will be undertaken; and
b. Has raised a valid expectation in those affected that it carries out the restructuring by starting to
implement that plan or announcing its main features to those affected by it.
9. A restructuring provision shall include only the direct expenditures arising from the
restructuring, which are those that are both:
- necessarily entailed by the restructuring; and
- not associated with the ongoing activities of the enterprise.
- Provision for onerous contract in which the unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected to be received under it;
- Other provisions.
Debit:
- Decrease provisions when arising expenses that are relating to provisions were made;
- The difference of the provisions required in the current year and the unused amount of
provision made in the prior year.
Credit:
Credit balance:
MAJOR TRANSACTIONS
2. An enterprise has a contract that is onerous in which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received under it. The
unavoidable costs dedicated in the contract are such costs as compensation and reimbursement
due to failure in implementing the obligations. When it is probable that a provision has to be
made for the onerous contract, the accountant records the following:
5.2. Expenses occurred relating to the provisions for warranty of goods, construction work was
originally recognised such as raw materials, direct labour, fixed asset depreciation, other services
rendered outside, etc.
a. There is no separate unit taking care of warranty of goods and construction work:
- At the end of the period, the accountant transfers the actual expenses for warranty of goods and
construction work incurred during the period:
- When the repairing for goods and construction work completes, the accountant records:
b. There is a separate unit taking care of warranty of goods and construction work. The amount
payables to the warranty agency for repairing goods and construction work shall be recorded as
follows:
- If the provisions required to be made in the current period are greater than the unused amount of
difference shall be recorded into expenses:
provisions made in the prior period, the difference
- If the provisions required to be made in the current period are less than the unused amount of
difference shall be reversed into expenses:
provisions made in the prior period, the difference
7. The warranty period for construction work is passed. There is no requirement to implement the
warranty or the provision for warranty of construction work greater than actual expenses incurred,
the difference shall be reversed as follows:
8. Under certain circumstances, the enterprise can find the third party to pay partial or all
expenses for provisions (for example: insurer, warranty from the manufacturer). The third party
may reimburse all expenses that enterprise paid. When the enterprise receives partial or all
compensation from the third party for the provisions:
CATEGORY 4
OWNERS’ EQUITY
This account is used to reflect the current value, the increase and decrease of the equity of joint
venture, liabilities limited companies, liabilities partnership or share holders in joint stock
companies.
Owners equity is the amount that the company is not liable to pay. Owners equity is comprised
of the contribution of companys owners and investors or the business results. Therefore, owners
equity is not a liability.
A company may have more than one equity owners. In State-Owned enterprises, the equity is
provided by the State, so the State is the owner.r. In joint ventures, public limited companies,
associate companies, capital owners are contributors
contributors or organizations, individuals contributing. In
joint stock companies, capital owners are share holders. In private companies, capital owners are
individuals or families owners.
- Capital contributed by investors to establish or expand the business. The equity owners of
establish
the company may be the government, and individual or an organization that takes part in a joint
venture or share holder, share holders buying and holding securities;
1. The company could actively use its equity and funds according to current financial
regulations In principle that it shall ensure that owners equity and funds are properly
accounted for and recorded in detail for each source of equity and each owner.
Owners equity represents the source of net assets of the company, which do not refer to
a particular property, but is a consideration in general.
2. The transfer of capital from one source to another shall be carried in adherence to
prevailing financial regulations and through required procedures.
3. Where there are changes in accounting policy or significant errors that should be applied
retroactively, the errors should be adjusted to the opening balance of the owners equity
after the impact of the errors and change on the owners equity is identified.
4. In the case where a company is dissolved, the owners (or members who paid in capital)
only receive the residual amount after all the liabilities have been paid.
ACCOUNT 411
PAID-IN CAPITAL
This account is used to reflect the value at present as well as the increase and decrease of
enterprises paid in capital.
In a SOE, paid in capital consists of paid in capital issued from the State, from other internal
companies in the corporate, capital from the parent company to the subsidiaries, asset revaluation
reserves (if being allowed to increase or decrease the paid in capital), or supplement from funds,
from profit after tax of business activities or non-refundable grants from local and foreign
organizations, individuals.
In a joint venture, paid in capital is contributed by the joint venture parties and increased by the
result of business activities.
In a joint stock company, paid in capital is contributed by share holders in type of buying
securities, or supplemented from business profit according
according to resolution of the board of share
holders or regulations in the operation rules of the company, from capital surplus from selling
securities with the price higher than the face value.
In public limited companies and associate compani es, paid in capital is contributed by members,
companies,
supplement from the profit after tax of business activities.
In a private company, paid in capital consists of capitals contributed by the companys owners or
supplemented from the profit after tax of business activities.
1. Record into Account 411 Paid in capital based on the actual capital contributed when
newly established or supplemented to expand the business.
b) For joint ventures, public limited companies and associate companies, paid in capital is
recorded in details as follows:
- Owners equity: is the capital of contributing members;
- Other capitals: is the capital supplemented from profit after tax or donation, gifts.
3. For joint ventures, record in details the paid in capital for each parties of capital
contributors. Each time of capital contributions, capital amount, capital kinds needs
detailed record, such as: initial capital, additional capital from business results.
4. Only decrease the paid in capital when the entity makes a reimbursement of capital to the
State Budget, share holders or joint venture partners, or transfers the capital to another
internal companies in the corporate, or compensates for losses according to the resolution
of the board of share holders, or when the entity dissolves.
5. In the case where an entity receives contribution to joint ventures, joint stock companies
from share holders by foreign currencies, the value is converted into VND using the real
exchange rate or average exchange rate on the inter-bank foreign currencies market
published by the Vietnam State bank at the time of creating. In the operational period, it
is not allowed to revalue the credit balancece Account 411 Paid in capital in foreign
currencies.
6. In the case of contribution capital in-kind, the paid in capital is increased according to the
revalued amount of assets agreed by capital contributors.
Debit:
Credit:
Credit balance:
- Account 4111- Share capital: This account reflects the actual capital contributed by owners
according to the companys regulations. For joint stock companies, capital from issuing stocks is
recorded into this account at the face value.
- Account 4112- Capital surplus: This account reflects the difference between value of stock at
higher actual issuing price and that at the face value; and the difference between value of treasury
shares at actual re-issued price and that at the buy-back price (for joint stock companies).
- Account 4118- Other capital: This account reflects the paid in capital created from operating
profits or gifts, donation and revaluation of assets (if these transactions are eligible for increasing
and/or decreasing the paid in capital).
MAJOR TRANSACTIONS
5. Supplement the paid in capital from the investment and development fund where allowed by
the board of management or the authorities:
6. Supplement the paid in capital from the asset revaluation reserve, when approved:
7. When the construction supported by the funds for capital expenditures is completed or the
fixed assets are purchased and put into use for production, business activities, and the investment
capital is approved, increase the historical cost of fixed assets, simultaneously increase the paid in
capital:
8. When members of a corporation, subsidiaries of a parent company receive the capital from the
corporation, parent company to increase the paid in capital, the accountant of the sub-level entity
should record:
Dr. 111,112
Dr. 211 Tangible fixed assets
Dr. 152 - Raw materials
Cr. 711 - Other income.
After paying duties to the State, if the rest value is allowed to increase the paid in capital (4118):
Dr. 421 - Undistributed earnings
Cr. 411 - Paid in capital (4118).
10. Supplement the paid in capital due to paying the dividend to the share holders by shares:
11. When receiving the paid in capital from joint venture parties:
12. When a joint stock company buy back and cancel its own shares to at the day of repurchase:
15. When member companies, subsidiaries return the paid in capital to the corporation, parent
company in the method of reducing the capital, the accountant of the sub-level should record:
Dr. 411 - Paid in capital
Cr. 111, 112
16. When the paid in capital of a company is asked to transfer capital to another company as the
asked
decision of the authority (if any):
17. Accounting for purchasing and selling (assets/capital) associated with business combination
when purchaser issue shares is governed in the Circular guiding VAS 11 Business
combination.
ACCOUNT 412
This account is used to reflect the current asset revaluation reserve and its treatment in the
enterprise.
1. Re-valued assets are normally fixed assets, investment property. In some specific situations, it
is possible and necessary to revalue the raw materials, tools and supplies, finished goods, and
work in process, etc.
4. The asset is revalued based on the price list regulated by the State or specified by the assets
regulated
valuation committee.
5. Asset revaluation reserve arising from revaluation of assets is recorded and treated in
compliance with the current financial regulations.
Debit:
- The decreased difference due to revaluation;
- The increased difference recorded due to revaluation
revaluation.
Credit:
- The increased difference due to revaluation;
- The decreased difference recorded due to revaluation of assets.
Account 412 Asset revaluation reserve, may have the ending balance in the debit side or credit
side:
MAJOR TRANSACTIONS
1. When the State makes decision to revalue the fixed assets, investment property, raw materials,
merchandise goods, etc or the revaluation is required when privatizing the State-owned
enterprises, the companies conduct verification and revaluation of the assets and record the
difference arisen from asset revaluation into accounting books.
- If the revalued cost is higher than the book value, the increased difference should be recorded as
follows:
Dr. 152 Raw materials
Dr. 153 Tools and supplies
Dr. 155 Finished goods
Dr. 156 Merchandise goods
Cr. 412 Asset revaluation reserve.
- If the revalued cost is lower than the book value, the decreased value should
value, shoul be recorded as follows:
Dr. 412 Asset revaluation reserve
Cr. 152 Raw materials
Cr. 153 Tools and supplies
Cr. 155 Finished goods
Cr. 156 Merchandise goods.
- Based on the result of examination and revaluation of fixed assets, investment property:
Dr. 412 - Asset revaluation reserve (the net book value being decreased)
Dr. 214 - Accumulated depreciation and amortization (the accumulated depreciation
being decreased)
Cr. 211 - Tangible assets (the historical cost being decreased)
Cr. 213 - Intangible assets (land use right The historical cost being decreased)
Cr. 217 - Investment property (the historical cost being decreased).
2. At the end of a fiscal year, asset revaluation reserve is treated in compliance with the decision
of the authority:
- If Account 412 has the credit ending balance and there is a decision of increasing paid in capital:
- If Account 412 has the debit ending balance, there is a decision of reducing paid in capital:
ACCOUNT 413
This account is used to reflect the foreign exchange differences arisen in the process of
construction investment (pre-operating period); foreign exchange differences resulted from
revaluation of monetary items denominated in foreign currencies at the balance sheet date and the
treatment to those foreign exchange differences. Foreign exchange differences are the differences
arisen from the actual exchange or exchange of the same amount of foreign currency into the
accounting currency at different foreign exchange rate.
- Realized foreign exchange differences arisen in the period of construction investment (pre-
operating period);
- Realized foreign exchange differences arisen in the operating period, including construction
investments activities during operating period of a business.
2. Revaluation of monetary items denominated in foreign currencies at the balance sheet date.
Foreign exchange differences arisen due to th thee revaluation of monetary items in foreign
currencies at the balance sheet date includes:
- Foreign exchange differences at the balance sheet date due to the revaluation of monetary items
in foreign currencies during the constructi on investment period (pre-operating period);
construction
- Foreign exchange differences at the balance sheet date due to the revaluation of monetary items
in foreign currencies involving in business operating activities.
For companies using the financial instruments to hedge foreign exchange risk, borrowings and
payables in foreign currencies are recorded at the actual foreign exchange rates (at the transaction
dates). It is not allowed to revalue the borrowings and payables in foreign currencies that have
been hedged for foreign exchange by financial instruments.
1. The principle for recording business activities conducted in foreign currencies and revaluing
monetary items in foreign currencies at the balance sheet date.
1.1. Enterprises must record business transactions in foreign currencies in the accounting books
and prepare the financial statement in VND or the approved accounting currency unit (after
approved by the Ministry of Finance). When converting the foreign currency into the VND or the
approved accounting currency unit, the company has to use the actual exchange rates ruling at the
transaction dates or the inter-bank exchange rates published by the State Bank of Vietnam.
Companies have to simultaneously record the original currencies in details for accounts of cash
on hand, cash at bank, cash in transit, accounts payable and receivables amount and Account 007
Foreign currencies (Off balance sheet account).
1.2. For accounts of revenues, stocks, fixed assets, production costs, other costs, the debit side of
the accounts of cash and liabilities; the credit side of account liabilities: business transactions in
foreign currencies must be recorded in VND or in the approved accounting currency unit at the
exchange rate ruling at the transaction dates (the actual exchange rate or average inter-bank
exchange rates published by the State Bank of Vietnam at the date of transactions).
1.3. For the credit side of cash accounts, business transactions in foreign currencies should be
recorded in the accounting book in VND or in the approved accounting currency unit at the
accounting exchange rates (using one of among specific rate, weighted average rate, FIFO or
LIFO rate).
1.4. For the debit side of liabilities accounts or the credit side of accounts receivable, transactions
in foreign currencies should be recorded in VND or the approved accounting currency unit at the
accounting exchange rates.
1.5. At the end of the accounting period, the company has to revalue all the monetary items in
foreign currencies at the average inter-bank exchange rate published by the State Bank of
Vietnam at end of the accounting period.
- All foreign exchange differences arisen in the period and foreign exchange differences resulted
from revaluation of monetary items denominated in foreign currencies at the balance sheet date
will be recorded immediately into the financial expenses or income in that period.
2.2. Treatments of foreign exchange differences arisen in the period and differences resulted from
revaluation at the end of the construction investment activities (pre-operating period) are as
follows:
- In the period of construction investments, the realised foreign exchange differences and the
foreign exchange differences resulted from revaluation at the balance sheet date of monetary
items denominated in foreign currencies will be accumulated on the Balance sheet (under item
Foreign exchange differences).
- When the construction investment is finished, the accumulated foreign exchange differences
arisen in the construction investment period (foreign exchange gains or losses) are not capitalized
into the value of the fixed assets but (1) (if the differences are insignificant) are low) are
debited/credited all to the financial expenses/incomes of the fiscal year when the fixed assets and
investment properties are completed and put into use or (2) are allocated (to the profit and loss
accounts) over not more than five years (if the differences are significant at the time the
constructed assets put into use).
2.3. Foreign exchange differences resulted from conversion of the financial statements of
integrated foreign business entities are recognised immediately in financial expenses/income in
the period.
3. Enterprises are only allowed to record foreign exchange differences into Account 413 Foreign
exchange differences in the following cases:
- Realized foreign exchange differences and foreign exchange differences resulted from
revaluation of monetary items in foreign currencies at the balance sheet date of construction
investment activities during pre-operating period of newly established enterprises (when the
investment has not yet been completed);
- The foreign exchange differences resulted from revaluation of monetary items denominated in
foreign currencies at the balance sheet date during operating period, including construction
investment activities (business entities that have the construction inv
investment during operating
period).
5. For companies not specializing in selling and purchasing foreign currencies, transactions of
purchases and sales of foreign currencies should be converted into VND at the actual selling or
buying exchange rates. The exchange rate differences
differences between the actual buying and selling rates
of should be recorded into Account 515 Financial incomes or Account 635 Financial
expenses.
Debit:
- Foreign exchange differences resulted from revaluation of monetary items in foreign currencies
(exchange rate losses) at the balance sheet date of business activities, including construction
investment (business entities with the construction investment activities during operating period);
- Foreign exchange differences arisen and revaluation of monetary items in foreign currencies
(exchange rate loss) of construction investment (pre-operating period);
- Transfer the foreign exchange differences resulted from revaluation of monetary items in
foreign currencies at the balance sheet date (exchange rate gains) of business activities into
financial income;
- Transfer all the foreign exchange differences arisen and revaluation of monetary items in
foreign currencies (exchange rate gains) of business activities in construction investment (when
finishing the construction investment period) into financial incomes or deferred income (if
allocated).
Credit:
- Foreign exchange differences resulted from revaluation of monetary items in foreign currencies
(exchange rate gains) at the balance sheet date of the business activities, including the
construction investment activities (business entities with construction investment activities
during operating period);
- Foreign exchange differences arisen or resulted from revaluation of monetary items in foreign
currencies (exchange rate gains) of construction investment (pre-operating period);
- Transfer the foreign exchange differences resulted from revaluation of monetary items in
foreign currencies (exchange rate loss) at the balance sheet date of the business activities into
financial expenses;
- Transfer all the foreign exchange differences arisen or resulted from revaluation of monetary
nge rate loss) of the construction
items in foreign currencies (exchange construc investment (when finishing
the construction investment period) into financia
financiall expenses or into long-term prepaid expenses (if
allocated).
Account 413 “Foreign exchange differences” may have the credit ending balance or debit ending
balance.
Debit balance:
Credit balance:
The foreign exchange differences arisen and revalu ation of monetary items in foreign currencies
revaluation
onstruction investment (pre-operating period, the investment not yet
(exchange rate gains) of the construction
completed) at the balance sheet date.
- Account 4131 - Foreign exchange differences res resulted from revaluation at the balance sheet
date: Reflect the foreign exchange differences resulted from revaluation of monetary items in
foreign currencies (exchange rate gains and losses) at the balance sheet date of business activities;
including the construction investment (business entities with construction investment activities
during operating period).
- Account 4132 - Foreign exchange differences in the construction investment period: Reflect the
foreign exchange differences arisen and exchange rate differences resulted from revaluation at the
balance sheet date of monetary items in foreign currencies (exchange rate gains and losses) of the
construction investment (pre-operating period).
MAJOR TRANSACTIONS
I. Accounting for foreign exchange differences arisen in the period of business activities,
including the construction investment of the production and trading entities
1. When purchase materials, merchandise goods, fixed assets, services and pay by foreign
currencies:
- If exchange rate loss created in the transaction of purchasing materials, merchandise goods,
fixed assets, services:
Dr. 151, 152, 153, 156, 157, 158, 211, 213, 217, 241, 623, 627, 641, 642, 133 (according
to the exchange rate at the transaction day)
Dr. 635 - Financial expenses (exchange rate loss)
Cr. 111 (1112), 112 (1122) (according to the accounting book value).
- If exchange rate gains created in the transaction of purchasing materials, merchandise goods,
fixed assets, services:
Dr. 151, 152, 153, 156, 157, 158, 211, 213, 217, 241, 623, 627, 641, 642, 133 (according
the exchange rate at the transaction day)
Cr. 111 (1112), 112 (1122) (according
(according to the accounting book value)
Cr. 515 Financial income (exchange rate gains).
2. When receive materials, merchandise goods, fixed assets, and services from the supplier but
not yet paid, or when make the short term bo rrowings, long-term borrowings, long-term liabilities
borrowings,
or internal liabilities, etc by foreign currencies, based
based on the exchange rate at the transaction day:
Dr. 111, 112, 152, 153, 156, 211, 627, 641, 642 (according the exchange rate at the
transaction day)
Cr. 331, 311, 341, 342, 336 (according to the exchange rate at the transaction
day).
3. When pay the payables by foreign currencies (payable(payable to the seller, short-term loan, long-term
loan, long-term liabilities, internal liabilities, etc):
4. When it is created income or other income in foreign currencies, based on the exchange rate at
the transaction day:
Dr. 111(1112), 112(1122), 131 (the exchange rate at the transaction day)
Cr. 511, 711 (the exchange rate at the transaction day).
6. When receive the receivables in foreign currencies (receivable from customers, internal
receivables, etc):
- If it is created profit from foreign exchange differences when paying the receivables by foreign
currencies:
Dr. 111 (1112), 112 (1122) (the exchange rate at the transaction day)
Cr. 515 - Financial income (exchange rate gains)
Cr. 131, 136, 138 (accounting book rate).
II. Accounting for foreign exchange differences arisen in the period of construction
investment (pre-operating period)
- If it is created exchange rate loss in transacti on of paying by foreign currencies, the accounting
transaction
entry should be recorded as follows:
Dr. 151, 152, 211, 213, 241... (the exchange rate at the transaction day)
Dr. 413 - Foreign exchange differences (4132) (exchange rate loss)
Cr. 111 (1112), 112 (1122) (accounting book rate).
- If exchange rate gains are arisen in transaction of paying by foreign currencies, the entry should
be recorded:
Dr. 151, 152, 211, 213, 241... (the exchange rate at the transaction day)
Cr. 111 (1112), 112 (1122) (accounting book noted rate)
Cr. 413 - Foreign exchange differences (4132) (exchange rate gains).
2. When paying payables by foreign currencies (payables to sellers, long-term loan, short-term
loan, internal loan (if any)...):
- If it is created exchange rate loss in transac tion of paying payables by foreign currencies, the
transaction
accounting entry should be recorded as follows:
Dr. 311, 315, 331, 336, 341, 342... (accounting book rate)
Dr. 413 - Foreign exchange differences (4132) (exchange rate loss)
Cr. 111 (1112), 112 (1122) (accounting book rate).
- If exchange rate gains are arisen in transaction of paying payables by foreign currencies, the
accounting entry should be recorded as follows:
Dr. 311, 315, 331, 336, 341, 342... (accounting book rate)
Cr. 111 (1112), 112 (1122) (Accounting book rate)
Cr. 413 - Foreign exchange differences (4132) (exchange rate gains).
3. Annually, exchange rate differences done created in the construction investment (pre-operating
period) will be recorded accumulated into Account 413 Foreign exchange differences (4132)
until completing the construction investment.
4. When complete the construction investment (period before operation), transfer the realised
foreign exchange differences (the net value after balance the created value on the debit and the
credit side of Account 4132) of the construction investment (pre-operating period) into Account
413 Foreign exchange differences (Account 4132) immediately into financial expenses (if the
value is low), or transfer (if the value is high) to Account 242 Long-term prepaid (if exchange
rate loss), or transfer immediately (if the value is low) into financial income, or transfer (if the
value is high) to Account 3387 Deferred income (if exchange rate gains) to allocate in the
period of not over 5 years:
- In case of exchange rate losses, the accounting entry should be recorded as follows:
Dr. 635 - Financial expenses (if charged into financial expenses)
Dr. 242 - Long-term prepaid (if allocated)
Cr. 413 - Foreign exchange differences (4132).
5. The treatment to realised foreign exchange differences (exchange rate gains or loss) in the
differences
period of construction investment accumulated to the time of put the fixed assets into use for
business and production activities:
- If the exchange rate gains are allocated, periodically allocate the difference of realised exchange
periodically
rate losses arisen in the period of construction iinvestment
nvestment into financial expenses of the fiscal
year when completing the construction investment period and put the fixed assets into use, the
following entry should be recorded:
Dr. 3387 - Deferred income
Cr. 515 - Financial income (exchange rate gains).
III. Accounting for foreign exchange differences rresulted from revaluation at the end of the
fiscal year of monetary items in foreign currencies
1. Accounting for foreign exchange differences resulted from revaluation of monetary items in
foreign currencies at the balance sheet date:
At the balance sheet date, companies have to revalue monetary items in foreign currencies
(the currency units are different from the approved accounting currency unit) using the
average exchange rate on the inter-bank foreign currencies market published by the State
Bank of Vietnam at the end of the fiscal year, which might result in foreign exchange
differences (gains or loss). Companies have to record details of foreign exchange differences
resulted from revaluation of monetary items in foreign currencies of the construction
investment activities (pre-operating period - Account 4132 and during operating period -
Account 4131):
- If exchange rate gains are arisen, the accounting entry should be recorded as follows:
Dr. 111 (1112), 112 (1122), 131, 136, 138, 311, 315, 331, 341, 342
Cr. 413 - Foreign exchange differences (4131, 4132).
- If created exchange rate loss is created, the accounting entry should be recorded as follows:
Dr. 413 - Foreign exchange differences (4131, 4132)
Cr. 111 (1112), 112 (1122), 131, 136, 311, 315, 331, 341, 342
2.1. Treatment on foreign exchange differences resulted from revaluation of monetary items
in foreign currencies of business operation at the balance sheet date (including the
construction investment of production and business entities with construction investment
activities during operating period):
- Transfer all the foreign exchange differences resulted from revaluation at the balance sheet
date (net of the debit side and credit side of Account 4131) into financial expenses (if
exchange rate losses), or financial income (if exchange rate gains) to determine the business
result:
+ Transfer exchange rate loss from revaluation at the end of the fiscal year into financial
expenses, the accounting entry should be recorded as follows:
Dr. 635 - Financial expenses (if exchange rate loss)
Cr. 413 - Foreign exchange differences (4131).
2.2. Treatment on foreign exchange differences resulted from revaluation at the balance sheet
date of monetary items in foreign currencies of the construction investment (pre-operating
period):
- When finishing the construction investment period and the fixed assets put into use for
production and business activities, the debit balance or credit balance Account 413 Foreign
exchange differences (Account 4132) which reflects the foreign exchange differences
resulted from revaluation of monetary items in foreign currencies at the balance sheet date
(not including the revaluation of monetary items in foreign currencies involved in the
construction investments at the time of putting the constructed assets into use) will be treated
as follows:
+ Transfer the debit balance Account 413 Foreign exchange differences (4132)
to Account 635 Financial expenses or to Account 242 Long-term prepaid
(if significant) to systematically allocate the exchange rate losses of the
construction investment period over the period of not more than five years (from
the completion of the investment period) into financial expenses. The accounting
entry:
ACCOUNT 414
This account is used to record the current value, the increases and decreases of the enterprises
investment and development fund.
The investment and development fund is created from the business profit after tax and used to
expand the business activities of the enterprise both in scale and depth.
The creation and use of this fund must comply with the current financial policy applied to each
kind of business: Limited Liabilities Company, private company, etc
MAJOR TRANSACTIONS
1. In the period, when increase the investment and development fund from undistributed earning:
3. When fixed assets purchased or construction created from the investment and development
fund complete and come into use for production and trading activities:
5. Transfer from the investment and development fund to the holding company or other entities:
Dr. 414 - Investment and development fund
Cr. 111, 112
ACCOUNT 415
This account is used to record the current value, the creation and use of financial reserve fund of
an enterprise. The financial reserve fund is increased from business profit after tax. The increase,
decrease of the financial reserve fund must obey current financial policy.
Debit:
Credit:
Increases of financial reserve fund due from undistributed earnings or given from lower entities.
undistributed
MAJOR TRANSACTIONS
ACCOUNT 418
OTHER FUNDS
This account is used to record the current value, the increase and decrease of other funds
belonging to the owners, such as fund to promote the management, etc.
Other funds is created from business profit after tax and used for promotion purposes or other
purposes of the board of director, board of management.
The transfer and use of other funds must be in compliance with the current financial policy
applied to each type of business: Stated Owned Enterprises, joint stock company, Limited
Liabilities Company, private company, etc.
Debit
Credit
Credit balance
MAJOR TRANSACTIONS
ACCOUNT 419
TREASURY SHARE
This account is used to reflect the balance and movement of the shares that were issued to the
public, yet bought back by the company in order to reissue those shares later on (called treasury
share).
The treasury shares are shares that were issued by a company and then bought back by that
company. However those shares shall not be destroyed but be reissued to the public at a specific
period of time according to laws and regulations on securities. Treasury shares held by the company
shall not get dividends and have the vote right or the right of receiving assets sharing when the
company in dissolution. When distributing dividends to shareholders, treasury shares being kept by
the company are considered as securities not yet sold.
1. The value of treasury share is recorded into this account according to the actual buy-back price,
including the buy-back price and expenses directly related to the buy back of securities, such as
services and information expenses, etc.
3. This account does not reflect the value of shares that the company buys from other joint stock
companies for investment purposes.
4. When the company buys back thethe shares issued by that company in order to destroy them right
away at the time of purchase, the value of those shares shall not be recorded into this account but
directly reduced account of paid-in capital and capital surplus (refer to guidance of account 411-
contributed capital).
Debit:
Credit:
Debit balance:
MAJOR TRANSACTIONS
1. Accounting for buying back shares which were issued by the company:
- When a company completes procedures for buying back the shares issued by that company as
stipulated by laws and regulations, the company shall pay shareholders at the agreed price, the
accounting entry should be recorded as follows:
- Expenses directly related to the buying back of securities shall be recorded as follows:
- When reissuing treasury shares with the pri ce that is higher than the bought-back one, the
price
accounting entry should be recorded as follows:
- When reissuing treasury shares to the public w ith the price that is lower than the bought-back
with
one, the accounting entry should be recorded as follows:
Dr. 411- Paid-in capital (4111- far value of the destroyed shares);
Dr. 411- Paid-in capital (4112 - difference be between the bought-back price and the par
value of destroyed shares)
Cr. 419- Treasury share (bought-back price)
4- When the board of management made the decision of paying dividends by treasury share
(already approved by the shareholders meeting):
- If the issuing price of shares at the day of paying dividends by treasury share is higher than the
bought-back price of those shares, the accounting entry should be recorded as follows:
- If the issuing price of treasury shares at the day of paying dividend by treasury shares is lower
than the bought-back price, the accounting entry should be recorded as follows:
ACCOUNT 421
UNDISTRIBUTED EARNINGS
This account is used to reflect the business results (profit, loss) after tax, income distribution and
loss treatment of the enterprise.
1. Data to record into account 421 is the business profit after tax or business loss.
2. The distribution of the entitys results should be clear and in accordance with the current
financial policy.
3. Business results should be recorded in details for each fiscal year (previous year, current year).
The company should also record in details for each content of profit distribution of the enterprise
(create funds; supplement the paid in capital, sh are dividend and profit to share holders and
share
investors).
Debit:
Credit:
Debit balance
Credit balance
Account 4211 – Previous year undistributed earnings: reflect the previous years results of
business operation, distributions and losses treatment.
Account 4211 is also used to reflect the increase or decrease of the beginning balance of Account
4211 when applying retroactive due to changes of accounting policy or due to material errors
occurred in previous years but only found in the current year.
Account 4212 – Current year undistributed earnings: is used to reflect the current year results of
business operation, distributions and losses treatment.
MAJOR TRANSACTIONS
a. In case of profitable:
b. In case of loss:
2. In the fiscal year, the company pays the temporary dividends, sharing profit to investors, share
temporary
holders and contribution parties:
4. When the company gives out decision or report determining the rest amount of dividend and
profit payable to the investors, share holders and contribution parties:
5. When make the payment of dividend and sharing profit to the investors, contribution parties
and share holders:
6. In the year, the financial reserve fund is created from the business operation profit (income
retained by enterprise) and should be recorded as:
7. In the year, the investment and development fund is determined from the business operation
profit (income retained by enterprise) and should be recorded as:
8. In the year, determine the bonus and welfare are fund and other funds based on the business
operation profit (income retained by enterprise):
9. At the end of the year, determine the additional amount to those funds:
10. Increase the paid in capital from business profit (income retained by enterprise):
profit
13. The losses from business operation supported from the holding company:
15. At the beginning of the fiscal year, transfer the current year undistributed earnings to the
previous year undistributed earnings:
The loss amount of a year is deducted to the taxable profit of the following years as the
regulations of the Enterprise Tax Law or is treated
treated according to regulations of the current
financial policy.
ACCOUNT 431
This account is used to reflect the current value, the increase and decrease of the enterprises
bonus and welfare funds. The bonus and welfare funds is determined from the enterprises
business profit after tax for the purposes of staff bonuses, general benefits, public welfare to
improve the material and mental lives of employees.
1. The increase, decrease and usage of the bonus and welfare funds should be in accordance with
the current financial policy.
2. The bonus and welfare funds should be recorded in details for each kind of funds.
3. When the fixed assets which are created from the welfare funds are put into use for cultural and
welfare activities of the enterprise, increase th
thee fixed assets and simultaneously transfer from the
welfare funds (Account 4312) to the welfare funds to create fixed assets (Account 4313). These
fixed assets are not allowed to record accumulated amortization monthly from expenses but
record once per year to decrease the we lfare funds to create fixed assets.
welfare
Debit:
Credit:
- Increase the bonus and welfare funds from business profit after tax
- Bonus and welfare funds from holding company or subsidiaries
- Increase of welfare funds to create fixed assets when complete the purchasing of fixed
assets by welfare funds and put them into use.
Credit balance:
Account 4311 – Bonus fund: record the current value, creation and usage of the enterprises bonus
funds
Account 4312 – Welfare fund: record the current value, creation and usage of the enterprises
welfare funds
Account 4312 – Welfare fund to create fixed assets: record the current value, creation and usage
of the enterprises welfare funds to create fixed assets.
MAJOR TRANSACTIONS
2. At the end of the year, determine the additional bonus and welfare funds:
4. Use welfare funds to pay to support employees in financial difficulties, for staff vacations and
public campaigns:
7. Use bonus and welfare funds to support for natural disasters, fire, etc notes:
9. Fixed assets purchased by welfare funds are put into use for cultural and welfare purposes:
Simultaneously record:
10. At the end of the accounting period, record the amortization of fixed assets purchased by
welfare funds used for cultural, welfare purposes:
11. Sale, disposal of fixed assets purchased by welfare funds used for cultural, welfare purposes:
- Payment amounts:
- Receipt amounts:
ACCOUNT 441
This account is used to reflect the current value, the increase, decrease of funds for capital
expenditures of the enterprise. Funds for capital expenditures of the company is created from the
companys budget or supported by the holding company.
Funds for capital expenditures of enterprise is used for new construction investment,
improvement, expansion of production and business construction and purchase of fixed assets to
renew technology. The construction investment of enterprise must obey regulations of current
investment and construction management.
When the construction and purchase or fixed assets completes and the assets are put into use for
production, business activities, the accountant must
must complete procedures to draw the capital
investment of each construction, construction parts. When the draw
dr is approved, the accountant
must reduce the funds for capital expenditures and increase the paid in capital.
Debit:
- Complete construction and buying fixed assets, put into use and draw the approved capital;
- Hand back the funds for capital expenditures that not been used all to the holding company, the
State.
Credit:
Credit balance:
The current funds for capital expenditures of the company not yet used or used but the
construction is in progress or completed but not yet been approved.
MAJOR TRANSACTIONS
2. Receive funds for capital expenditures from the bank according to the budgeting.
a. Receive the budgeting for investment in construction; singly debit Account 008 "Subsidies of
State Budget" (off balance sheet accounts).
b- Withdraw the budgeting for use, based on the usage of the budgeting for investment in
construction to record into related accounts; the entry should be recorded as follows:
Simultaneously singly credit Account 008 "Subsidies of State Budget" (off balance sheet
accounts).
3. When an enterprise has not received the budgeting for investment in construction, the
enterprise will be advanced from the Treasury. WhWhenen the enterprise received capital advanced
from the Treasury, the accounting entry should be recorded as follows:
Dr. 111,112
Cr. 338 - Other payables (3388).
4. On receipt of budgeting for construction investment, the company must complete payment
procedures to return the capital advanced fro m the treasury. When the Treasury approves the
from
payment documents, the accounting entr y should be recorded as follows:
entry
5. Receive funds for capital expenditures to pay for short-term borrowings, internal borrowings,
other borrowings; the entry should be recorded as follows:
7. When the construction and purchase of fixed assets by funds for capital expenditures complete
and are put into production and trading activities:
- Increase the value of fixed assets created from construction investment, completion of
purchasing fixed assets, the entry should be recorded as follows:
- When the draw of the completed construction is approved, reduce the funds for capital
expenditures and increase the paid in capital, the entry should be recorded as follows:
8- When return the funds for capital expenditures to the State Budget, holding company, the
accounting entry should be recorded as follows:
ACCOUNT 461
This account is used to reflect the receiving, using and settling of subsidy funds from State
Budget. This account is used only in entities receiving subsidies from the State or from higher
level authorities.
The subsidy funds from State Budget are funds received from the State Budget or higher level,
from domestic and foreign entities, individuals to carry out not-for-profit programs, economic,
political and social functions appointed by State or higher level authorities. The spending of
subsidy funds from State Budget must be in compliance with the approved estimation and are to
be settled with the issuing office. Subsidy funds may be collected from the operation revenues of
aff who use the services of their own branchs
a business, such as hospital fees collected from staff
hospital, tuition fees, etc.
2. Subsidy funds are to be used only for the purpose, content, standard and budget approved
by the State, higher level and in the approved estimation.
- If the State Budget issues funds by means of a cash transfer, when the credit advice has been
received showing the proceeds credited into ththee bank account, the accountant records the entry
for both the cash deposit and the subsidy funds.
- If the State Budget issues funds by means of an expense quota, when receive the notice of
issuing, singly Debit Account 008 Subsidies of State Budget (off balance
State balanc sheet account). When
spending funds, Credit Account 008 Subsidies of State Budget and simultaneously Credit
Account 461 Subsidy funds from State Budget.
4. At the end of the fiscal year, the entity must settle the receipt and usage of subsidy funds from
State Budget with the financial authorities, mana
management authorities and each entity issuing funds
according to the current financial policy. The unused funds are treated in accordance with the
decision of the authority. Only when receive the approval of the authority, the entity can transfer
the unused amount to the following year.
5. At the end of the fiscal year, if the spending by subsidy funds from State Budget has not been
approved, transfer the current year subsidy funds from State Budget to the subsidy funds from
State Budget of the previous year.
Debit:
Credit:
- Actual proceeds received from the State Budget or higher level
- Operation revenues of the business supplementing the subsidy funds.
Credit balance:
Subsidy funds received from the State Budget or higher level having not been spent or settled.
Account 461 – Subsidy funds from State Budget has two sub-accounts:
Account 4611 – Subsidy funds of the previous year: this account records the funds of previous
year both spent and still on hand In the case where the financial statements of the subsidy fund
has not been approved. When the financial statementsents are approved, the approved amount will be
deducted from Account 461 Subsidy funds from State Budget (4611 - Subsidy funds of the
previous year). The amount which has not been uused, sed, according to the decisions of the financial
office, will be returned to the State Budget or transferred to this year funds.
MAJOR TRANSACTIONS
2. Receiving subsidy funds by means of and expense quota, singly Debit Account 008 Subsidies
of State Budget (off balance sheet account).
5. Receiving subsidy funds from State Budget or higher level or non-refundable grant in fixed
assets:
Simultaneously, record:
6. At the end of the year, when the entity pay back the amount of cash retained to the State
Budget or higher level, record:
If the unused amount is kept to the next year funds, do not use the above record.
7. When the financial statements of subsidy funds from State Budget are approved within the
year:
Dr. 161 - Expenditures from subsidies of State Budget (1611 - Expenditures from
subsidies of State Budget of the current year)
Cr. 161 - Expenditures from subsidies of State Budget (1612 - Expenditures from
subsidies of State Budget of the previous year)
- Simultaneously transfer the functional operation expenses of this year to previous year:
Dr. 461 - Subsidy funds from State Budget (4612 - Subsidy funds from State Budget of
the current year)
Cr. 461 - Subsidy funds from State Budget (4611 - Subsidy funds from State
Budget of the previous year)
10. The unused subsidy funds of the previous year is transfer to the current year:
Dr. 461 - Subsidy funds from State Budget (4611 - Subsidy funds from State Budget of
the previous year)
Cr. 461 - Subsidy funds from State Budget (4612 - Subsidy funds from State
Budget of the current year).
ACCOUNT 466
This account is used to record the current value, increase and decrease of the sources for
acquisition of fixed assets. Only increase this account when purchase, construct or improve fixed
assets by sources for acquisition of fixed assets supported from the State Budget or grant, donor
(allowed to increase the historical cost of fixed assets).
Decrease the sources for acquisition of fixed assets for amortization calculation, sale, disposal of
fixed assets, fixed assets lack on physical count, fixed assets turned back to the State or
transferred to another entity according to decision of State, higher level.
Debit:
Credit:
Credit balance:
MAJOR TRANSACTIONS
1. In case of the State Budget or higher level authority give the funds by fixed assets or the
entity uses subsidy funds to purchase, construct fixed assets; when those activities complete
and the assets are put into use, record as follows:
Simultaneously record:
When use the subsidies of State Budget to purchase, construct fixed assets, simultaneously
singly credit account 008 Subsidies of State Budget (off balance sheet account)
2. At the end of the accounting period, calculate the amortization of fixed assets purchased by
sources for purchase of fixed assets:
Dr. 466 - Sources for acquisition of fixed assets (the rest value)
Dr. 214 - Accumulated amortization and depreciation
Cr. 211 Tangible assets (historical cost)
Cr. 213 Intangible assets (historical cost)
- Receipt, payment amounts; differences of payment, receipt on sale, disposal of fixed assets
by sources for purchasing of fixed assets are treated
treated and recorded in accordance with decision
of the authorities.
CATEGORY 5
REVENUE
This category is used to record the revenue of goods sold, property investment, services provided,
interest earned, royalties, distributed dividends and profits, sales discounts, sales allowances and
sales return.
Turnover is the total value of economic benefits the enterprise has gained or will gain in an
accounting period, arising from the enterprises normal production and business operations,
contributing to increase the owners equity. Collections on behalf of a third party that do not
constitute a source of economic benefits and dont increase the owners equity of the enterprise
would not be considered as turnover.
2. Recognition of revenue and expenses must be complied with matching concept. When
revenue is recognized, relating expenses attributable to that revenue must be recorded.
3. Turnover of goods sold shall only be recognized if they simultaneously meet the following
five (5) conditions:
- The enterprise no longer holds the right to manage the goods as the goods owner, or the right
to control the goods;
4. Turnover from service provision transaction shall be recognized when the results of these
transactions are determined reliably. Where a service provision transaction relates to many
periods, turnover shall be recognized in each period according to the results of the work
volume finished on the date of making of such periods accounting balance sheet. The result
of a service provision transaction shall be determined only when it satisfies all the four (4)
conditions below:
- The work volume finished on the date of preparing the balance sheet can be determined;
- The costs incurred from the service provision transaction and the costs of its completion can
be determined.
5. When goods or services are exchanged for goods or services of similar nature and value, such
exchange shall not be regarded as a turnover-generating transaction.
6. Sales revenue must be classified according to each type of activity such as: sales of goods and
services, interests, royalties, distributed dividends and profits. For each activity, it must
further be classified according to the type of products or services sold. This requirement
enables the company to maintain accurate and adequate results of the business operations for
both management purposes and for the preparation of the income statement.
7. Sales discounts, sales returns and sale allowances incurred during the period must be
recorded in their individual accounts. The deduction sales is minus the initial recorded sales
to the determination of net sales, is used as the basic for the determination business results of
the accounting period.
Revenue is comprised of five accounts, which are classified into three groups:
ACCOUNT 511
SALES
This account records sales of goods and services of the enterprise in the accounting period from
following transactions:
- Goods sales: selling products manufactured by the enterprise, merchandise goods and
property investment.
- Provision of services: performing the work agreed upon the contracts in one or many
accounting periods; such as provision of transportation services, tourism, lease fixed assets
under the operating lease etc.
2. For the sales of goods and services in a foreign currency, the enterprise must convert to VND
or a functional currency using the actual exchange rate or the average inter-bank exchange
rate announced by the SBV at the date of the transaction.
3. Net sales may be less than gross sales which initially recorded because of the following
reasons: the enterprise offers discount or allowances
allowances for goods sold or returned (as goods sold
do not meet the quality or specification stated in the contract), and the enterprise must pay
special consumption tax or export duty or VAT in direct method based on the actual revenue
of goods sold in the period.
4. Account 511 Sales of goods and services only reflects sales from goods, property
investment, services which have been determined
determined as earned in the period regardless the
money has received or will receive.
6. For goods and services not subject to VAT or subject VAT in direct method, sales of goods
and services is determined at the total amount.
7. For goods and services subject to special consumption tax or export duty, sales of goods and
services is determined at the total amount (includes special consumption tax and export duty).
8. For enterprise processing materials and goods for other entities, the enterprise should only
reflect the actual fees received as it revenue, not including the value of materials and goods
processed.
b. Increase and decrease amounts in the contract performance, bonuses and other payments,
provided that these amounts are capable of changing the revenue and can be reliably
determined.
- The contractual revenue may be increased or decreased in each specific period. For example:
Contractors and customers may agree upon changes and requirements resulting in the
increase or decrease of contractual revenue in the next period as compared with the initially
agreed contract;
When the fixed price contract sets a fixed price for a finished product unit, the contractual
revenue shall increase or decrease when the
the product volume increases or decreases.
- Bonuses are supplementary amounts to be paid to contractors if they perform the contracts
according to or beyond the requirements. Bonus shall be accounted into the contract revenue
when it satisfies all the two (2) conditions below:
A number of specific standards inscribed in the contract are surely attained or surpassed; and
- Another payment received by the contractor from the customer or another party to offset
costs is not included in the contractual price. For example: delay caused by the customer;
errors in technical or designing specifications, and disputes over changes in the contract
performance. The determination of increased revenue from the above-said payments depends
on numerous uncertain factors and usually depends on the results of many negotiations.
Therefore, other payments shall only be accounted into the contractual revenue when:
Where a construction contract stipulates that the contractor is allowed to make payments
according to the set schedule, and when the construction contract performance result is
reliably estimated, the revenues and costs related to the contract shall be recognized by
reference to the completed volume determined by the contractor on the date of compiling
financial statement, regardless of whether invoices for payments according to the set schedule
have been billed or not and how much money is inscribed on invoices.
Where a construction contract stipulates that the contractor is allowed to make payments
according to the value of performed work volume, and when the contract performance result
is reliably determined and certified by customers, the revenues and costs related to such
contract shall be recognized by reference to the completed work volume certified by the
customers in the period and reflected in the billed invoices.
- Revenue shall only be recognized to match the already arising contract costs, the
reimbursement thereof is relatively sure;
- The value of goods, materials, goods in process deliver to another entity for processing;
- The value of products, goods, services provides between companies, the corporation and
subsidiaries;
- The value of products, goods and services provides between the corporation and member
firms;
- The goods, products are sending, the completed services has provided to customer but have
been yet sold;
- The value of consignment goods under sales agent (have been yet determined selling);
- Financial income and other income are not record as sales of goods and services.
Debit:
- The amount of VAT payable for the enterprise paying subtraction method VAT;
Credit:
Account 5111 - Sales of merchandise: to record sales and net revenue of products which have
been sold during the period.
This account is specifically used for entity trading goods and merchandise.
Account 5112 - Sales products: to record sales and net sales revenue of products (finished
goods, unfinished goods) which have been sold during the period.
This account is specifically used for manufacturing companies such as: industrial,
agricultural, construction, fishery, forestry, etc.
Account 5113 - Service revenues: to record revenue and net revenue from service provided to
customers that have been sold during the period.
This account is specifically used for service companies such as: transportation, post and
telegraphy, tourism, public services, technical and scientific assistant service companies, etc.
Account 5114 – Revenue from subsidies: to record subsidies when the entity provided goods
and services according to the requirement of the State.
Account 5117 – Sales from property investment: to record sales from lease property
investment and sales of selling, liquidation from property investment.
MAJOR TRANSACTIONS
a. For goods, property investment, services subject to subtraction method VAT and the enterprise
paying subtraction method VAT, sales of goods and and services is recorded at selling price not
including VAT:
2. If sales of goods and services in a foreign currency, the accountant must record in details
amount in foreign currency received or being received.
received. In addition, the accountant must convert
the amount into VND or the other functional currency
currency using the actual exchange rate or the
average inter-bank exchange rate announced by the SBVSBV at the date of transaction to record into
the account 511 Sales of goods and services.
3. For enterprise paying subtraction method VAT, when the enterprise exchanged goods and
services for goods and services of dissimilar nature and value that are subject to subtraction
method VAT, the accountant records sales of goods exchanged for other materials, goods and
fixed assets at the selling price not including VAT:
Dr. 152, 153, 156, 211,... (the buying price not including VAT)
Dr. 133 VAT deductible (if any)
Cr. 131 Accounts receivable (Total amount)
- In the case, the reasonable value of the goods and services exchanged exceeds the reasonable
value of goods and services received, when receipts of money, the accountant records:
- In the case, the reasonable value of the goods and services exchanged is less than the reasonable
value of the goods and services received, when payment made, the accountant records:
4. When the goods and service subject to VAT or subject to VAT in direct method, hen the
enterprise exchanged goods and services for goods and services of dissimilar nature and value
that are subject to subtraction method VAT, the accountant records sales of goods exchanged for
other materials, goods and fixed assets at total amount:
- In the case, the entity received or paid supplem ent, accounting treatment is recorded as guidance
supplement,
in point 3.
5. When the enterprise sells goods and property investments on instalment plan that are subject to
investments
Subtraction method VAT, revenue is recorded at price of payment at sight not including VAT:
6. When the entity sells goods on instalment plan that are not subject to VAT or subject to VAT
in direct method, sales is recorded at price of payment at sight included VAT:
Cr. 3387 Deferred income (difference of instalment price and price of payment
at sight)
8. To record for receipts of lease fee of fixed assets and property investment for several periods in
advance.
- Since the operating lease contract of fixed assets and property investments cant be continuously
carried out or the performance period is less than the one lease fee already pre-paied (if any):
9. Accounting for revenue from operating lease of fixed assets and property investment at the
lessor paying VAT in direct method:
- When the invoice is issued for operating lease of fixed assets and property investments:
- In the case, the enterprises receive pre-payment from the customer for several periods for
operating lease of fixed assets and property investments:
+ When received pre-payment from the customer for several periods for operating lease of fixed
assets and property investments:
+ At the end of the period, calculating and reflecting the amount of VAT payable in direct
method:
10. Accounting for sales of goods at the sales agents at price recommended by and received
commission from the consigner
10.1 Accounting by the consigners who have goods on consignment at their sales agents
a. When the enterprise distributes products to the sal es agent, the enterprise issued goods dispatch
sales
notes. Based on goods dispatch notes to record:
b. When goods on consignment are sold, based on the list of issued invoices from the sales agent
sent:
- For goods and services subject to subtraction method VAT, sales are recorded at selling price
not including VAT:
- For goods and services not subject to VAT or subject to VAT in direct method, sales are
recorded at total amount:
- When goods on consignment are sold, the sales agent must issue VAT invoices or the selling
invoices according to the current regulations. Based on the VAT invoices or the selling invoices
and relating documents, the accountant records payables to the consigners for goods on
consignment sold:
11.1 For goods subject to subtraction method VAT and the entity paying subtraction method
VAT:
a. When the entity (parent or higher authority) delivers goods to its divisions (branches,
showrooms), the entity must issue goods dispatch notes cum internal transport notes.
- The parent or higher authority determines cost of goods sold based on goods dispatch notes cum
internal transport to record:
- When the divisions received goods from its company or higher authority, the accountant records
based on goods dispatch notes cum internal transport to record:
b. When the divisions sell goods which are subject to subtraction method VAT and sent by its
company or its higher authority, the divisions must issue VAT invoice according to regulations
- When the divisions received VAT invoice of goods sold internally from its company or its
higher authority, the divisions record deductible VAT based on VAT invoice:
a. When the entity (company or higher authority) delivers goods to its divisions not subject to
VAT or subject to VAT in direct method, the entity should issue goods dispatch notes cum
internal transport notes according to regulations.
- Based on goods dispatch notes cum internal transport notes, to detemine cost of goods delivered
to its divisions:
When the divisions received goods from its company or its higher authority, based on goods
dispatch notes cum internal transport notes and relating documents to record:
b. When the divisions sell goods delivered by its company or higher authority that are subject to
VAT in direct method, they should issue selling invoices.
c. If the company or higher authority uses selling invoices when delivered goods to its divisions.
- When the divisions received goods from its company or its higher authority, based on selling
invoices and relating documents, they shall record value of goods received:
- When the divisions sell goods, they should issue selling invoices and record sales as follows:
- If processing cost for goods subject to subtraction method VAT and the entity paying
subtraction
subtraction method VAT:
- When received goods for processing, the entity should record value of goods processing to off
balance sheet accounts (account 002 Goods held under trust or for processing). When receiving
goods for processing, the accountant debits account 002. When goods are put in processing, or
returned to the partner, the accountant credits account 002.
+ Processing goods subject to subtraction method VAT and the entity paying subtraction method
VAT:
+ Processing goods not subject to VAT or subject to VAT and the entity paying VAT in direct
method:
13.1 Where a construction contract stipulates that the contractor is allowed to make payments
construction
according to the set schedule, and when the cons truction contract performance result is reliably
estimated, based on the supporting documents showing that revenues are referenced to the
completed volume (not invoice) determined by ththee contractor on the date of preparing financial
statements:
- Based on VAT invoice issued according to the set schedule to record amount receivable as
agreed in the contract:
13.2 Where a construction contract stipulates that the contractor is allowed to make payments
according to the value of performed work volume
volume, and when the contract performance result is
reliably determined and certified by customers, the accountant issues VAT invoice based on the
completed work volume certified by the customers:
13.3 Bonuses given by the customers once the contractor performs the contracts according to or
beyond a number of specific standards inscribed in the contract:
13.4 Another payment received from the customer or another party to offset costs is not included
in the contractual price (For example: delay caused by the customer, errors in technical or
designing specifications, and disputes over changes in the contract performance):
13.5 When the contractor received payments for the completed work volume or pre-payments
from customer:
15. At the end of the period, the accounting determines VAT payable in direct method:
18. When the enterprise sells goods and services subject to subtraction method VAT to its parent
company or subsidiaries and paying subtraction method VAT, the sales of goods and services is
recorded to account 511 at selling price not including VAT by details of the parent or
subsidiaries:
19. At the end of the period, the enterprise will transfer sales return, sales allowance and sales
discount arising during the period to sales account in order to determine net sales:
20. At the end of the period, the enterprise will transfer net sales to account 911 Income
summary:
ACCOUNT 512
INTER-COMPANY SALES
This account records revenue of goods sold and services provided within an enterprise. Inter-
company sales is an economic benefit receiving from goods, products sold and services provided
within a group composing subsidiaries controlled by a parent company or a General Corporation
according to internal sales price.
1. Accounting inter-company sales complies with regulations the same recording sales of goods
and services (account 511).
3. Revenue from products, goods sold and services provi ded to parties other than those within
provided
the same group, subsidiaries, parents or Genera
Generall Corporations within the corporation are not
permitted to be recorded in this account.
4. Inter-company sales are the basis for determining inter-company summary of the company,
the corporation and a group composing subsidiaries. Result of business operates of the
corporation includes the part of inter-company as well as revenue generated from external
parties. General Corporation, parent company, subsidiaries and divisions must fully perform
their obligations to the Government in accordan ce with the tax laws imposed on, products,
accordance
goods and services sold inter-company and out side.
5. The account 512 must record in a detail the the inter-company sales from selling goods and
provision of services for each subsidiary within the corporation for preparing the consolidated
financial statements.
Debit:
- The value of sales returns, sales discounts, and sales allowances are based on the volume of
inter-company goods and services sold that transfer at the end of the period;
- The amount payables of special consumption tax of goods, products and services sold inter-
company;
- VAT payable of goods, products and services sold inter-company applying direct method;
Credit:
Account 5121 Sales of merchandise: to record sales of goods sold within subsidiaries or
member companies during the period
This account is specially used for commercial enterprises that trade items such as: materials, food
stuff, etc.
Account 5122 - Sales of products: to record sales of goods sold and services provided within a
group of enterprises in the corporation or in the General Corporation.
This type of account is specially used for manufacturing enterprises such as industrial,
agricultural, forestry, etc.
Account 5123 Services revenue: To record revenue from services rendered to member within a
group of enterprise in the corporation or in the General Corporation.
This account is specially used for business service enterprise such as: post transportation, tourism,
post office, etc.
MAJOR TRANSACTIONS
1.1 Goods subject to subtraction method VAT and enterprises paying subtraction method VAT.
a. When company (parent, higher authority) delivered goods to its divisions (such as branches,
delivered
showrooms), the company must issue goods dispatch notes cum internal transport notes.
Based on the goods dispatch notes cum internal tran sport notes, the company must determine cost
transport
of goods sold for its divisions:
- When the divisions received goods from its company, based on goods dispatch notes cum
internal transport notes the accountant records the following:
b. When divisions (paying Subtraction method VAT) sold merchandises and goods subject to
VAT delivered on consignment by its company (or higher authority), the divisions must issue
VAT invoice according to regulations.
- Based on the list of invoices received from its divisions, the company or the higher authority
must issue VAT invoice reflecting the amount of goods sold internally. Based on VAT invoice,
the accountant records inter-company sales at internal selling price not including VAT:
- When the divisions received VAT invoice for goods sold internally from its company or the
higher authority, the divisions record the VAT deductible:
c. If the company or the higher authority delivered goods to its divisions and doesnt use goods
dispatch notes cum internal transport notes but the VAT invoice, the company or the higher
authority must issue VAT invoice when delivering goods to its divisions.
- Based on VAT invoice issued, the company or the higher authority records sales of goods sold:
rece
- When the divisions sold goods which were received from its company or the higher authority
subject to subtraction method VAT, the divisions must issue VAT invoice according to
regulations and record sales as follows:
1.2 For merchandise, goods not subject to VAT or subject to VAT in direct method:
a. When the company (parent or higher authority) pays VAT in direct method and delivers
products not subject to VAT or subject to VAT in direct method to its divisions, the company
must issue goods dispatch notes cum internal transport notes according to regulations.
- Based on goods dispatch notes cum internal transport notes, the company determines value of
goods delivered to its divisions.
- The divisions received goods from its company. Based on goods dispatch notes cum internal
transport notes and relating documents, the divisions record:
b. When divisions paying VAT in direct method sold consigned goods not subject to VAT or
subject to VAT in direct method, the divisions must issue VAT invoice.
- Based on the list of invoices received from its divisions, the company or the higher authority
must issue VAT invoice reflecting the amount of goods sold internally. Based on VAT invoice,
the accountant records sales:
c. The company or the higher authority used invoices when delivered goods to its divisions.
- Based on selling invoices, the company or the higher authority records revenue:
- When the divisions received goods from its company (higher authority) for trading, based on
selling invoice and relating documents, the divisions record value of goods received:
- When these merchandise goods are sold, the divisions must issue invoices. Based on the
invoice, the divisions record revenue:
2. At the end of the period, sales return, sales discounts and sales allowances (if any) of goods
sold internally are transferred to account Inter-company sales:
3. At the end of the period, enterprises determine the amount of special consumption tax payable
that composed on inter-company sales during the period (if any):
4. At the end of the period, enterprises determine the amount of VAT payable for goods and
services subject to VAT in direct method that are sold internally during the period.
5. At the end of the period, inter-company sales are transferred to account 911 Income
summary.
a. When enterprises reward or pay salary to staffs and employees by products, goods subject to
subtraction method VAT.
b. When enterprises reward or pay salary to st affs, officer and other employees by products,
staffs,
goods not subject to VAT or subject to VAT in direct method:
a. The products and goods subject to subtraction method VAT are internally used to production of
goods and services subject to subtraction method VAT. When internally using, the accountant
must record inter-company sales as follows:
b. The products and goods subject to subtraction method VAT are internally used to production
of goods and services not subject to VAT. The VAT payable of goods and services internally
used is recorded in manufacturing and business expenses. The accountant records inter-company
sales as manufacturing expenses or cost of goods sold:
For goods and services subject to subtraction method VAT and enterprises paying subtraction
method VAT:
- If advertising, promotion is used for production of goods and services subject to subtraction
method VAT, the revenue generated from advertised and promoted goods and services is
recorded as manufacturing expenses or cost of goods sold:
Dr. 641 Selling expenses (manufacturing expenses or cost of goods sold including output VAT)
Cr. 512 - Inter-company sales (manufacturing
(manufacturing or cost of goods sold)
Cr. 3331 VAT payable (33311)
If the enterprises donate goods and services subject to subtraction method VAT that are covered
by bonus & welfare fund, the accountant records sales at selling price not including VAT and
VAT payable (not deductible):
10. For goods and services not subject to VAT or subject to VAT in direct method, when
donating to individuals, organizations that are covered by bonus and welfare fund:
ACCOUNT 515
FINANCIAL INCOME
This account records interests, royalties, distributed dividends and profits and other financial
income of the enterprises.
- Interest income including loan interest, deposit interest, installment interest, profit from
securities investment, payment discount etc. ;
- Income from buying or selling activities of short term and long term securities;
For income gained from buying and selling activities of foreign currencies, the recorded income
is the difference between selling price and buying price of the foreign currency.
For interest income gained from securities and bonds investment, only interest income realized
after the enterprises bought the investment shall be recorded as financial income. The
accumulated interests realized before buying investment are deducted against the cost value of the
securities.
Income gained from the sales of shares in joint venture, investments in associates are recorded to
account 515 as the difference of sales price and cost value.
Debit:
- Transfer net income from financial activities to account 911 Income summary.
Credit:
- Payment discounts;
- Gain of foreign exchange difference from revaluation of monetary items in foreign currency.
revaluation
MAJOR TRANSACTIONS
1. To record income from distributed dividends and profits araising from investment activities:
- When enterprises buy short term and long term securities, based on the actual expenses to
record:
- Periodically calculating and receiving interest income from bills and bonds or acknowledgment
on distributed dividends and profits:
- If the enterprise receives interest income including accumulated interest realized before buying
investments, the enterprise must allocate these interest incomes. The enterprise should only
record the interest incomes realized after bought the investments to the financial income. The
accumulated interest income realized before buying the investments shall be deducted against
their value:
- Accounting for the sales of short term and long term securities:
+ If a profit is realized:
+ If a loss is incurred:
3. Accounting for the sales of foreign currencies (operating activities) when the profit is realized:
Dr. 111 (1111), 112 (1121) (total receipt amount at the actual selling exchange rate)
Cr. 111 (1112), 112 (1122) (accounting book exchange rate)
Cr. 515 Financial income (difference of the selling and accounting book exchange rate)
7. When enterprises sell investment in subsid iaries, jointly control entity, associates, the
subsidiaries,
accountant records the financial income to account 515 as the difference of selling price and
prime cost:
8. Payment for purchase of merchandise, goods, fixed assets and services in a foreign currency:
- If the average inter-bank or the actual exchange rate exceed the exchange rate of accounting
book of accounts 111, 112:
Dr. 151, 152, 153, 156, 157, 211, 241, 623, 627, 641, 642, 133... (using the average inter-bank
exchange rate or the actual exchange rate)
change rate of accounts 111, 112)
Cr. 111 (1112), 112 (1122) (using the exchange
Cr. 515 Financial income (gain of foreign exchange difference)
9. Payment for liabilities (trade payable, short term and long term loans, long term payable, inter-
company payable, etc.) in a foreign currency when the exchange rate of accounts 111, 112 is
less than that of accounts payable:
Dr. 311, 315, 331, 336, 341, 342... (accounting book exchange rate)
Cr. 515 Financial income (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (accounting book exchange rate of accounts 111, 112)
Dr. 111 (1112), 112 (1122) (the actual or the average inter-bank exchange rate)
Cr. 515 Financial income (gain of foreign exchange difference)
11. For difference of foreign exchange resulted from revaluation of balances of monetary items in
foreign currency at the balance sheet date, the accountant must transfer these foreign
exchange differences into financial income (gain of foreign exchange difference) in order to
determine profit and loss:
12. For newly established enterprises not in production yet, when construction is completed,
gains of foreign exchange difference (net value after offsetting debits and credits of account
4132) in construction stage (pre-operating stage) on account 413 Foreign exchange
difference (account 4132) should be transferred to financial income (account 515) or to
account 3387 (gain of foreign exchange difference)
difference) for allocation over the maximum period
of five years.
+ Periodically, gain of foreign exchange difference arisen in construction stage shall be allocated
in financial income of the fiscal year when construction completed and fixed assets are put in
use:
- Periodically, determining and transferring interest income arising from instalment sales:
14. At the end of each period, determining and allocating interest income from lending and bonds
that were received in advance:
15. At the end of the period, determining VAT payable for goods and services applying direct
ACCOUNT 521
TRADE DISCOUNTS
This account records trade discounts that enterprises credited or paid to customers who bought
goods (merchandise and goods), and services in large volumes in accordance with the agreement
that the seller will give trade discount to the buyer (as stipulated in contract or the selling or
buying agreement).
1. This account is only used to record trade discounts given to buyers, arising in the period in
according with the enterprises trade discounts policy. Trade discount means a reduction of
the listed price granted by the seller to the buyers with large volumes of goods.
2. If the buyers have to make several purchases to achieve the volume eligible for trade
discount, the trade discount will be deducted to the price on the last VAT invoice or the last
selling invoice. If customers stop buying, or the trade discount given to the buyer is greater
than the sales amount on the last invoice, the enterprise shall pay the trade discount to the
buyer in cash. The trade discounts in these cases are recorded into account 521.
3. If the buyers are given trade discounts due to purchase of large volumes of goods and selling
prices on invoices are discounted ones (net value),
value), the trade discounts should not be recorded
into account 521. Sales of goods sold are recognized at net value.
4. Trade discounts must be recorded in the relevant customer account and to the relevant items
of goods sold such as merchandises and services provided.
5. Trade discounts arising during the period are debited into account 521 trade discounts. At
the end of the period, all trade discounts are transferred to the account 511 Sales of goods
and services to determine the net sales of goods and services sold and rendered in the period.
Debit:
Credit:
At the end of the period, all trade discounts are transferred to account 511 Sales of goods and
services to determine the net sales.
MAJOR TRANSACTIONS
2. At the end of the period, allowed trade discounts are transferred to sales account:
ACCOUNT 531
SALES RETURN
This account records the amount of goods and services sold which have subsequently been
returned due to the following reasons: breaching the commitment or the economic contract, or
inadequate quality, quantity or specifications. The amount of goods returned recorded in this
account shall be adjusted against the actual sales for calculating the net sales of merchandise and
goods sold in the period.
This account only recognizes the value of goods returned (using sales unit prices recorded in
invoices). Expenses incurred by the enterprises with respect to sales returns will be recorded into
account 641 Selling expenses.
During the period, the value of goods returned is debited into account 531 Sales return. At the
end of the period, total value of goods returned will be transferred to the sales account or the
inter-company sales in order to determine net sal es for the accounting period. Goods returned
sales
must put into the warehouses, and resolve accord ing to the current financial and tax system.
according
Debit:
The sales of goods retuned, given back to the buyers or deducted in receivables.
Credit:
Transfer of sales returned to the debit of account 511 Sales of goods and services or account
512 Inter-company sales in order to determine net sales for the accounting period.
MAJOR TRANSACTION
- For merchandise and goods subject to subtraction method VAT and enterprises paying
Subtraction method VAT:
- For merchandise and goods not subject to VAT or subject to VAT in direct method:
3. Expenses incurred (if any) by the enterprise due to the return of goods sold:
ACCOUNT 532
SALES ALLOWANCES
This account records allowances and resolves allowances during the period. Allowance is a
reduction made in the selling price to the customers for goods sold which have minor defects, or
the goods are not of the same specifications as those mentioned in the economic contracts.
This account is only used to record allowances to customer accepted by the enterprises after the
sales invoice has been issued (reduction off the invoice).
During the period, allowances araising are recognized as debits in account 532 Sales
allowances. At the end of the period, the enterprises must transfer total allowances to account
511 Sales of goods and services or account 512 Inter-company sales before preparing
rmine net sales for the accounting period.
financial statements in order to determine
Debit:
Allowances accepted to buyers for goods sold which have minor defects, or the goods are not of
the same specifications as those mentioned in the economic contracts
mentioned
Credit:
MAJOR TRANSACTIONS
1. When supporting documents showing that allowances to customer for goods sold which have
minor defects, or the goods are not of the sa me specifications as those mentioned in the
same
economic contracts:
a. In the case, merchandise and goods which have been agreed to reduce price subject to
subtraction method VAT and the enterprises paying Subtraction method VAT, the allowances
are recorded as follows:
b. In the case, merchandise and goods which have been agreed to reduce price not subject to VAT
or subject to VAT in direct method, the allowances are recorded as follows:
2. At the end of the period, the enterprises should transfer total allowances araising during the
period to Sales account or Inter-company sales account:
CATEGORY 6
EXPENSES
These accounts record manufacturing expenses and costs of products and services (for enterprises
using the periodic inventory method), purchases of material, merchandises and services and the
cost of goods sold, financial expenses, selling expenses and administrative expenses of enterprise
in various industries.
1. An enterprise may choose its inventory system between either perpetual or periodic system
provided that the chosen inventory system is applied consistently for at least one accounting
year.
2. Enterprises using the periodic inventory system must carry out physical inventory counts at
the end of each accounting period in order to determine the value of merchandise goods,
finished goods and raw materials remaining in the warehouses. Based on the value of the
inventory at the beginning of each accounting period, purchases made during the accounting
period, and the value of inventory at the end
end of the accounting period, the enterprise can
determine the amount of inventory used, and, th erefore, can also determine the cost of goods
therefore,
sold for the period.
3. Accounts that include manufacturing and product costs such as account 154 Work in
Progress (perpetual inventory system), account
account 631 Cost of products manufactured
(periodic inventory system) must maintain subsidiary
subsidiary accounts for each cost centre such as
plant, production team, manufacturing section, etc., for each product, line of products,
services, etc., in addition to maintaining control accounts.
Production and business expenses which cannot be associated to a product such as factory
overhead, water irrigation and draining expenses, floor preparation expenses and first year
planting expenses for trees must first be recorded in control accounts and then allocated to the
relevant products by an appropriate method.
ACCOUNT 611
PURCHASE
This account records the amount of materials, tools and supplies, goods purchased during the
period.
1. Account 611 Purchases is only used in those enterprises using the periodic inventory
system.
2. When recording to this account, the value of materials, hand tools should be stated at cost
(original cost).
3. When using the periodic inventory system, the company must carry out physical inventory counts
determine the quantity and value of each raw materials,
at the end of accounting period in order to determine
tools and supplies, goods remaining in the warehouse. As the result, the amount of inventory
used can be determined and also the cost of goods sold for the period.
5. Sub-ledgers must be maintained in order to keep a record of the costs of each inventory
category such as raw materials, tools and supplies, merchandise goods.
Debit:
- Costs of raw materials, tools and supplies, merchandise goods purchased during the period,
goods returned, etc.
Credit:
- Cost of raw materials, tools and supplies, merchandise goods available at the end of the
accounting period (following the physical inventory count results);
- Cost of raw materials, tools and supplies, merchandise goods used during the period, or cost of raw
materials, tools and supplies, inventory on consignment, merchandise goods sold;
- Cost of raw materials, tools and supplies, merchandise returned to the sellers or discounts
offered by sellers.
- Account 6111- Purchase raw material: to record cost of raw materials, tools and supplies
purchased or used during the period and transfer of cost of raw materials, tools and supplies,
merchandise goods at the beginning and at the end of accounting period.
MAJOR TRANSACTIONS
Dr. 611 Purchases (6111 Purchase raw materials) (price not including VAT)
Dr. 133 VAT deductible
Cr. 331 Trade payables (3311)
3. When purchasing raw materials, tools and supplies are used for production of goods and
services not subject to VAT or subject to VAT in direct method, the cost of raw materials,
tools and supplies including VAT is recorded to account 611.
4. For enterprises paying VAT in direct method, the cost of raw materials, tools and supplies
including VAT is recorded in account 611:
5. Where the enterprise is offered a discount by the seller when paying for purchases, the entry
is:
6. Where the purchases are not the right specifications or do not meet the quality specified in the
economic contract or other commitments leading to goods are returned or discounted:
7. At the end of the accounting period, based on the results of the physical inventory count, the
entity will be able to determine the value of ending inventory, inventory used during the
period and the cost of goods sold for the period.
- Determining the cost of inventory available at the end of the accounting period (following
result of physical inventory count):
- Determining the cost of inventory used for business and production during the period:
1. At the beginning of accounting period, the opening balance of account 611 must be set up
using the result of physical inventory count:
2. During the accounting period, when purchased goods used in production of goods and
services subject to subtraction method VAT, or in direct method, based on invoice and
purchase document to record:
5. When payment after the due date, if the enterprise is offered a purchase discount:
7. Discount since the purchases are not the right specifications and qualify specified in the
contract:
8. At the end of accounting period, based on results of physical inventory count to determine
cost of inventory in the warehouse, cost of goods on consignment, cost of goods sold.
ACCOUNT 621
This account records the cost of material directly utilised for production or for rendering
services in industries such as construction, agriculture, forestry, fishery, transportation,
telecommunication, hospitality, tourist, and other services.
1. This account can only record materials (including main materials and sub-materials) used for
production of goods and services in the period. When the material is used, it must be recorded
in this account at the actual cost.
2. During the accounting period, the actual costs of materials used must be recorded (debit 621)
to each unit that uses materials directly (if the unit can be identified when using the materials
for producing or rendering services) or recorded generally for the whole process of producing
identified when using the materials for producing
and rendering services (if the unit cannot be identified
or rendering services).
3. At the end of the period, the costs of materials will be transferred (if the materials are
unit), or allocated (if it is impossible
recorded separately to each unit), impossible to record subject to each
separate unit) to the account 154 for the purpose of computing the actual costs of products
and services rendered during the accounting period (credit 621). When allocating costs of
relevant allocating criteria, such as criteria of
materials used to manufactured products, relevant
material volume used must be applied.
4. For the enterprise paying subtraction method VAT, if purchase of raw materials for
production and rendering of services subject to subtraction method VAT, or purchase of raw
materials that dont go through warehouse but put in production and business right away, cost
of those raw materials recorded should not be included VAT.
For the enterprise paying VAT in subtraction method, if purchase of raw materials for
production and rendering of services not subject to VAT or subject to VAT in direct method
and enterprise paying VAT in direct method, or purchase of raw materials that dont go
through warehouse but put in production and business right away, cost of those raw materials
should be included VAT.
5. The amount of raw material that is higher than normal level shall not be computed into the
cost of products but transferred to account 632 Cost of goods sold.
Debit:
Actual material used for manufacturing or rendering services during the period.
Credit:
1. Transfer the value of raw material used for production, business during the period to account
154 Work in process or account 631 Cost of products manufactured and detailed by cost
centre for computing the costs of products and services.
2. Transfer of the value of materials exceeded the normal rates (abnormal cost) to account 632.
MAJOR TRANSACTIONS
1. During the accounting period, upon distribution of material for direct use in order to produce
products and render services, the following entry will be made:
2. In the case, purchase of raw material (not through the companys premise) used for
ect to subtraction method VAT:
production of goods and services subject
5. At the end of accounting period, allocate cost of raw material to each cost centre (plant,
construction category, services, etc.):
type of products, construction work, construction
ACCOUNT 622
This account records the direct labour costs directly utilized for producing and rendering of
services in industries such as construction, agriculture, forestry, fishery, transportation,
telecommunication, hospitality, tourist, and other services.
Direct labour costs include accounts payables to employees who is managed by the enterprise and
directly take part in the production of goods or the rendering of services, and those hired from
outside for particular jobs. Payment would include salaries, wages, allowances, and deductions
according to salaries, such as social insurance, health insurance and trade union fee.
1. The payment of salaries and allowances for factory employees, sales clerk and management
staff will not recorded in account 622.
Debit:
Cost for employees directly involved in the operating activities including salary.
Credit:
1. Writing off direct labour cost to account 154 Work in progress or account 631 Cost of
products manufactured;
2. Transfer of direct labour cost higher than normal rate to account 632.
MAJOR TRANSACTIONS
1. Based on the payroll slip to record salary, wages and allowances for direct employees who
directly take part in production of goods and services:
2. Based on payroll slip to compute and record social insurance, health insurance, trade union
fees for direct employees according to current regulations (the amount covered by the entity):
3. Where accruals are made for annual leave of employees in production department:
5. At the end accounting period, direct labour cost must be determined and transferred to
account 154 (debit) or account 631 (credit) by cost centre:
ACCOUNT 623
MACHINE COSTS
This account is to record and allocate costs incurred on motor vehicles and construction machines
used in construction and installation works in a mixed manner, that is, works are carried out both
by hand and by machine.
In the case of the enterprise completed construction work by machines, expenses incurred shall
not be recorded into this account but to accounts 621, 622, 627.
Social insurance, health insurance, trade union fees of direct employees shall not be recorded to
this account. The amount of machine costs that is higher than the normal level shall not be
recorded to cost of construction but transferred to account 632.
Debit:
Expenses incurred by using machines (e.g. auxilia ry materials, salary, allowance, wages for
auxiliary
employees who directly involved in operating construction
construction vehicles and machines, maintenance
expenses, repairing expenses, etc.), other material costs, services rendered expenses for machine.
material
Credit:
- Transfer machine costs to the credit side of account 154 Work in progress;
- Transfer the amount of machine costs that is higher than the normal level to account 632.
- Account 6231 – Labour cost: to record salary and extra paid, allowance payables to
employees who directly involved in operating construction
construction vehicles and machines or serving
the operation, such as catering fuels, supplies etc. for construction vehicles and machines.
Social insurance, health insurance, trade union fees of these employees should not be
recorded in this account. These expenses should be recorded to 627 Factory overhead costs.
- Account 6232 – Use of auxiliary materials: to record fuel fees (gas, oil, lubricant, etc.), other
supplies for construction vehicles and machines.
- Account 6232- Use of tools and supplies: to record tools and supplies related to
machines.
- Account 6237 – External service expenses: to record such expenses as repairing, insurance,
electricity, water, lease assets, expenses for sub-constructor, etc.
- Account 6238 – Sundry cash expenses: to record sundry cost attributable to the running of
vehicles and machines.
MAJOR TRANSACTIONS
Accounting for machine costs depends on the method of the construction vehicles and machines
organized, on the means of the operation of a specialized team of vehicles and machines or
assignment of vehicles and machines to construction units.
1. In the case of a specialized team of vehicles and machines with a separate accounting system,
the practice shall be as follows:
- The machine costs and costing of a work shift are recorded to account 154 Work-in-
progress. Based on the cost (actual costs or lump -sum price) of a work shift provided to each
lump-sum
construction work and with the accounting or ganization and the work relation between the
organization
specialized team and the construction unit taken
taken into account, relevant entries would be
posted.
2. Where such a specialized team is not organized or is organized without a separate accounting
system, the whole machinery running costs (including recurring expenses and non-recurring
expenses: extra-pay, running allowances attributable to construction vehicle and machines)
shall be recorded as follows:
- Base on salary, wage and other payable for employees who directly involved in operating
construction vehicles and machines:
- In the case of purchase of raw material, tools that are put in use for machine (not through the
Companys premise):
Dr. 623 Machine cost (6232 auxiliary materials) (price not including VAT)
Dr. 133 VAT deductible (deducted VAT)
Cr. 331, 111, 112,...
- Based on the list of allocation of machine cost (actual cost of a work shift using machine):
ACCOUNT 627
This account is to record expenses incurred in plants, segments, teams, constructions etc., in
support of the production of goods and rendering of services. These expenses would include
expenses for plant, team or site management personnel; salary-based deductions for such
personnels social insurance, health insurance and trade union fee.
For the construction contractor, such expenses would include deductions for social insurance,
health insurance and trade union fee made based on the salaries of those directly involved in the
construction work and site management personnel (managed by the enterprises); plant
depreciation, borrowing costs that is capitalized during the course of construction, repairing and
warranty expenses and other related expenses.
1. Account 627 is only used for enterprises involved in industry, agriculture, forestry and
fishery, capital construction, transportation, telecommunication, tourism and other services.
3. Factory overhead costs reflecting on account 627 must be recorded into sub-accounts: fixed
overhead costs and variable overhead cost:
- Fixed overhead cost is allocated to work in progress for each product unit based on normal
capacity of machines. Normal capacity is amount of products which is produced at average
level in normal production condition. In the case of actual amount of pr products produced
xed overhead costs
higher than normal capacity, fixed co sts will be allocated for each product unit
according to actual expenses incurred.
- In the case of actual amount of product lowelower than normal capacity, fixed overhead costs
shall be allocated to work in progress for each product unit according to normal capacity. The
amount of fixed overhead costs that has not been allocated, would be recorded to cost of
goods sold during the period.
Variable overhead cost is indirect production expenses. Those expenses usually vary
according to amounts of products produced such as indirect raw material cost, indirect labour
cost. All variable overhead cost is allocated to work in progress of each product unit
according to actual expenses incurred.
4. In the case of one production process having different kinds of products at the same time,
factory overhead cost can not reflect separately for each product. Therefore, factory overhead
cost is allocated to each kind of product based on to suitable criteria and consistently applied
in the accounting period.
5. At the end accounting period, the accountant must calculate, allocate and transfer factory
overhead costs to account 154 (debit) Work in process or account 631 (credit) Cost of
products manufactured.
Debit:
Credit:
- The amount of fixed factory overhead costs that is lower than normal capacity shall be
recorded to cost of goods sold during the period;
- Transfer of factory overhead costs to account 154 Work in process (debit) or account 631
Cost of products manufactured.
- Account 6271 – Indirect labour: to record salary and allowance, meal allowance within
work shift, salary based-deductions for personnels social insurance, health insurance,
trade union fees according to current regula tion for manager of plant,
regulation pl manufacturing
team.
- Account 6273 –Use of tools and supplies: to record tools and supplies costs that is used to
management operation in plant, unit, manufacturing team, etc.
- Account 6274 – Depreciation: to record depreciation for fixed asset which is directly used for
production operation, rendering services and fixed aasset that is generally used for operation of
plant, section, manufacturing team, etc.
- Account 6277 – Services rendered: to record services rendered cost supporting for operations
of plant, manufacturing team such as repairing expenses, rendered expenses, electricity,
water, telephone, leases of asset, payables for sub-contractor (construction company).
- Account 6278 – Sundry cash expenses: to record all expenses paid in cash not mentioned
above attributable to the operation of plant, section, manufacturing team.
MAJOR TRANSACTIONS
1. To record salaries, wages and other allowances for employees, meal allowance during work
shift of supervisors in plant, section, manufacturing team:
2. To record social insurance, health insurance, trade union fees, for factory employees under the
relevant regulations
3. To record material expenses (the perpetual method applied) based on issuance of auxiliary
materials:
- Tools and supplies with low values which are used for plant, manufacturing team, based on
issuance of stock to record:
- Tools and supplies with high values which is used for plant, manufacturing team would be
allocated in the future:
- When tools and supplies are allocated into factory overhead costs, the entry is:
5. Water, electricity, telephone and other expenses paid for outside services supporting to the
production:
6. If the provision for overhaul and maintenance of fixed assets has been made or allocation for
these expenses are done, those expenses should be charged to factory overhead:
Dr. 627 Factory overhead costs (low value recorded into expenses in the current period)
Dr. 142, 242 (high value that will be allocated in a period of time)
Dr. 133 VAT deductible (if any)
Cr. 111, 112, 331,...
- Periodically, allocate depreciation for fixed asset under operating lease to factory overhead
costs:
- At the end, reallocate repair and maintenance expenses for construction work:
- When repair and maintenance of fixed assets for construction has been finished:
9. At the end of accounting period, determine and pay interest expenses in the case of borrowing
costs capitalised into construction work:
10. At the end of accounting period, determine and make accruals of interest expenses in the case
of borrowing costs capitalised into construction work:
13. At the end of the accounting period, based on the list of allocation of factory overhead costs
to related account for each product, group of products or service to cost centre.
- Where the enterprise uses the perpetual inventory method, factory overhead costs are
allocated as follows:
- Where the enterprise uses the periodic inventory method, factory overhead costs are allocated
as follows:
ACCOUNT 631
This account is used to reflect the total expenses with respect to production and to calculate the
cost of finished products and services in the manufacturing company including industrial,
agricultural and construction enterprises). This account is only used by those companies who use
the periodic inventory method.
1. Enterprises using the perpetual inventory method will not use this account.
- Selling expenses;
- Financial expenses;
- Other expenses
3. The following should be recorded in account 63631: expenses relating to the operations of a
supplementary production area that supports th
the principal production areas activities such as
cost of goods, materials, and expenses on products entrusted to other enterprises for
processing.
4. The account will be recorded in detail with respect to where the expenses originated (i.e.
plant, production team, etc.) in product group or type of service.
5. With respect to agricultural businesses, the cost of produce is normally identified by the end
of a crop or a year. Produce is priced in the year in which it is harvested, that is, a cost
incurred in a year is recognized in the subsequent year, or harvesting year.
- In respect of businesses in the cultivation sector, accounting for production costs should be
detailed as follows:
As regards to plants which grow in two or three crops in a year, or which are grown in a year and
yield in the subsequent year or which is both grown and gives yields at the same time etc, records
shall be entered allowing for the current situation, with cost separated for one crop, one planting
area and one year from another.
Expenses for cultivating trees and maintaining the long-term trees should not be posted to account
631.
For expenses attributable to several cost centers, or to a number of crops or years, records shall be
kept in separate accounts, wherefrom costs shall subsequently be allocated to the production cost
of relevant produce, such as irrigation, soil preparation, and new plantation of trees, plants grown
once but harvested many times (such expenses are not capitalized).
Where two or more races of annual plants grow in the same cultivated area, expenses shall be
relevantly allocated to each race of plants (i.e.
(i.e. seeding, sowing, harvesting,
harv etc.) and general
expenses (soil preparing, watering, etc.) shall be recorded in separate ac
accounts and allocated to
each race of plants by cultivated areas.
- With regards to poultry used for breeding, when their breeding duration is over, their value
will be recorded in account 631 Cost of products manufactured according to residual
values.
6. In the transportation sector, account 631 Cost of products manufactured must be detailed
passenger transportation and cargo transportation).
with regard to each kind of activity (e.g. passenger
7. In hotel operations, account 631 must be recorded in detail as to the type of activity, such as
meals, room services, entertainment and other services (e.g. laundry, ironing, barber's,
telecommunication and massage).
Debit:
Credit:
- Value of finished goods and completed services posted into account 632 Cost of goods
sold;
MAJOR TRANSACTIONS
2. At the end of the accounting period, post the direct material cost to cost of production:
3. At the end of the accounting period, post the direct labour cost to cost of production:
ACCOUNT 632
This account is used to record the cost of goods sold and services, investment property, cost of
construction work (for construction contractor) during the period.
Besides, this account is used to reflect expenses related to investment property such as
depreciation, repairing expenses, expenses related to investment property under operating lease
(low value), selling expenses and disposal expenses of investment property.
Debit:
+ Raw materials cost and labour cost used higher than normal level recorded to cost of goods sold in
the period.
+ Shortage or loss of inventory remained after deducted the amount that is charged to the
responsible person;
+ Construction expenses and self-bu ilt assets higher than normal level that are not recorded to
self-built
historical cost of self-built fixed asset;
+ Provision for obsolete stock (a positive difference of provision for obsolete stock in this year
and unused provision for obsolete stock made in the last year).
+ Repairing, upgrading, improving expenses for investment property that did not meet criteria
to record into cost of investment property;
+ Expenses incurred for investment property under operating lease in the period;
Credit:
- Cost of goods and services sold posted to account 911 Income summary;
- Allocate expenses incurred from sales of investment property in the period into income
summary;
- Reverse of provision for obsolete stock in the end of fiscal year (a negative difference of
provision in this year and unused provision made in the last year);
Debit:
- Provision for obsolete stock (a positive difference of provision for obsolete stock in this year
and unused provision for obsolete stock in the last year).
Credit:
- Cost of goods transferred out of the warehouse but not yet sold;
- Reverse of provision for obsolete stock in the end of fiscal year (a negative difference of
provision for obsolete stock in this year and unused provision for obsolete stock in the last
year);
Debit:
- Provision for obsolete stock (a negative difference of provision required in this year and
unused provision made in last year);
Credit:
- Cost of closing inventory transferred to the debit side of account 155 Finished goods;
- Reverse of provision for obsolete stock in the end of fiscal year (a negative difference of
provision in this year and unused provision made in last year);
- Cost of goods and services sold transferred to the debit side of account 911 Income
summary.
MAJOR TRANSACTIONS
- In the case, amount of goods produced are lower than normal level, the accountant must
calculate and determine fixed overhead costs to allocate to production cost of one product
unit according to normal level. Amount of fixed overhead cost not allocated (difference of
actual fixed overhead cost incurred greater than factory overhead costs) would be recorded
into cost of goods sold.
- Record the shortage or loss of inventory af ter deduction of the amount that was already
after
charged to the responsible person:
- Record the expenses incurred from self built fixed assets that are greater than the normal level
therefore should not be recorded into the historical cost of the assets:
3. Record provision or reverse for obsolete stock in the end of fiscal year (provision in this year
greater or lower than provision made in the last year).
At the end of year, based on decrease of cost of inventory in the end of period, the accountant
calculates provision for obsolete stock in this year. After that, the accountant must determine
the difference of provision for obsolete stock in this year and provision made in the last year
in order to provide addition or reverse the entry (if any).
- In the case of provision for obsolete stock required in this year is greater than the one made in
the last year which has not been used all:
- In the case of provision for obsolete stock required in this year is lower than the one made in
the last year which has not been used all:
Dr. 632 Cost of goods sold (details of expenses incurred for investment property)
Cr. 2147 - Amortization of investment property
- After the initial record, expenses incurred related to investment property that did not meet
criteria to record into cost of investment property:
Dr. 632 Cost of goods sold (detail of expenses incurred for investment property), (in the
case of recording to expenses)
Dr. 242 Long term repaid expenses (in the case of allocating)
Cr. 111, 112, 152, 153, 334,
Dr. 632 Cost of goods sold (details of expenses incurred for investment property)
Cr. 111, 112, 331, 334,...
Dr. 214 - Accumulated depreciation and amorti zation (2147 - Amortization of investment
amortization
property)
Dr. 632 Cost of goods sold (net book value of investment property)
Cr. 217 Investment property (historical cost of investment property)
Dr. 632 Cost of goods sold (detail of expenses incurred from investment property)
Dr. 133 VAT (if any)
Cr. 111, 112, 331,...
7. Transfer cost of finished goods, goods, investment property sold in the period to the debit
side of account 911 Income summary:
- At the end of the period the entry to record cost of goods sold is:
- At the end of the period, cost of goods sold must be transferred to account 911 Income
summary, the entry is:
- At the beginning period, transfer opening balance of finished goods to account 632 Cost of
goods sold:
- At the beginning period, transfer the opening balance of goods sent and services rendered but
not yet sold:
- Cost of finished goods that were transferred into the warehouse and services rendered:
- At the end of the period, based on the amount not sold by sales agents:
- At the end of the period, goods actually sold must be transferred to the income summary
account:
ACCOUNT 635
FINANCIAL EXPENSES
This account records the financial expenses including expenses or losses relating to financial
activities, borrowings expenses, expenses for contribution in joint ventures, associates, losses
from short term securities, expenses from securities dealings, etc., provision for decline in price
of securities, losses from selling foreign currencies, losses from foreign exchange difference.
- Selling expenses;
- Construction expenses;
Debit:
- Interest expenses of loans and borrowings, interest expenses for purchase in instalment
method, interest expenses for financial lease of asset;
- Losses of foreign exchange difference incurred during the course of business (loss of realized
foreign exchange difference);
- Losses due to revaluation of monetary items in foreign currency incurred the course of
business (loss of unrealized foreign exchange difference);
- Provision for decline in price of securities (difference of provisions required in this year is
greater than provision made in the prior year that has not been used up);
Credit:
- Reverse of provision for decline in price of securities (difference of provision required in this
year lower than the provision made in the prior year that has not been used up yet);
- At the end of the accounting period, transfer financial expenses incurred the period to
determine the result of operation.
MAJOR TRANSACTIONS
3. When take back the contributions from jointly controlled entities, subsidiaries, associates
which the value of received assets is lower than the contribution cost:
5. At the end of the period, if there is a decline in value of long term or short term investment,
the provision for those investments shall be made.
- Where provision for short/long-term investment that must be made in this year is lower than
provision for short/long-term investment made in the last year that have not been used all:
- Where the provision for short/long-term investments must be made in this year is lower than
provision for short/long-term investment made in the last year that have not been used all, the
reverse entry for the difference of provisions shall be made to reduce financial expenses:
6. The payment discount given to customer because of payment made before due date upon
agreement:
9. In the case of the enterprise made advance for interest expenses to creditors:
At the end of loan period, the enterprise pays the principal and interest expenses:
11. Periodically, the entity pays the leasor for financial lease assets. When the entity receives
invoice of the leasor:
Cr. 315 - Current portion of long-term loan (if not yet paid)
Dr. 211, 213 (cost of fixed asset recorded at price paid at sight)
Dr. 133 VAT deductible (if any)
Dr. 242 Long term prepaid (interest paid in instalment i.e. total amount paid minus cash
sales price minus VAT (deducted VAT)
Cr. 331 Trade payable (total amount)
14. If bond interest is paid laterr (when bond is failed due), periodically
periodically the entity must determine
loan interest that must be paid during the peri od in order to post those to financial expenses:
period
When bond is failed due, the enterprise repays bond and bond interest for the bond holder:
16. When expenses incurred from issuance of bond with low value that shall be posted to
expenses:
17. When expenses incurred from issuance of bond with high value that shall be allocated:
Dr. 242 Long term prepaid expenses (detail of expenses for issued bond)
Cr. 111, 112, ...
Dr. 635 Financial expenses (amount of expenses allocated for the current period)
Cr. 242 Long term prepaid expenses (detail of expenses for issued bond)
18. In the case, enterprise issues bond with discount or surplus for fund raising used for
operation, periodically the accountant calculates interest expenses to record expenses during
the period:
- If enterprise issues bonds with discount, periodically allocate discount to the financial
expenses:
- If enterprise issues bonds with surplus, periodica lly allocate surplus to financial expenses:
periodically
21. When collecting account receivable in foreign currency (account receivables trade, inter-
company receivables), in the case of the accounting rate of accounts receivable greater than
the inter bank average exchange rate:
Dr. 111 (1112), 112 (1122) (Inter-bank average exchange rate or actual rate)
Dr. 635 Financial expenses (Loss of foreign exchange difference)
Cr. 131, 136, 138 (Accounting rate of account 131, 136, 138)
22. If there is difference of foreign exchange rate from revaluation of ending balance of cash
account in foreign currency at the end of fiscal year, the accountant transfers all difference of
exchange rate on above to financial expenses (if account 4131 has debit balance) to income
summary.
In the case of transferring loss of foreign exchange difference resulted from revaluation at the
end of fiscal year to financial expenses:
23. For start-up enterprise who is not in the course of production yet, when construction
completed (pre-operating), the accountant transfers debit balance of account 4132 (if loss of
foreign exchange difference) incurred in construction period to financial expense or transfers
to account 242 Long term prepaid expenses (loss of foreign exchange difference) to
allocate in the maximum times of five years:
25. At the end of the period, transfer all financial expenses incurred in the period to account 911
Income summary:
ACCOUNT 641
SELLING EXPENSES
This account is used to reflect expenses incurred during the selling process or supporting services
including expenses for selling and presentation of products, advertising expenses, commission,
maintenance (except for construction works), packaging, transportation.
Account 641 should be maintained in detail by nature of expenses such as staff cost, materials,
tools, packaging, depreciation, services rendered expenses, other sundry cash expenses. Based on
the characteristics of the business and the management of the industry and the entity, the account
641 may have additional sub-accounts. At the end of the accounting period, the accountant
transfers selling expenses to account 911 Income summary.
Debit:
Credit:
- Account 6411 – Office salaries: To record all payroll for sales staff, packing staff, delivery
and maintenance staff, allowances, social insurance,
insurance, health insurance, trade union fees, etc..
- Account 6413 – Consumable and office supplies: To record expenses for tools and
equipments used for consumption process such as measurement tool, calculators, working
facilitators, etc.
- Account 6415 – Warranty expenses: To record goods warranty. The warranty for construction
which is reflected in account 627 Factory overhead costs will be not recorded in this
account.
- Account 6417 – Rendered services: To record all expenses bought for use in the selling
process such as repairing assets, rentals fee for warehouse, yard, loading and unloading fees,
transportation fees, commission fees for sales agents, consignees, etc.
- Account 6148 - Sundry cash expenses: To record other sundry cash expenses incurred during
the selling process besides the above-mentioned expenses accounts i.e. entertainment
expenses in sales department, expense for presentation of products, advertising expenses,
seminar.
MAJOR TRANSACTIONS
1. Salary and allowances, allowances for meals in shifts, social insurance, health insurance,
trade union fees payables to employees directly involving in selling process:
4. Expenses for electricity, water, telephone, fax, etc.,, repair asset with low value that are
directly charged to selling expenses:
- Record the actual expenses incurred for major repair of fixed asset:
6. For the major repair of fixed asset with high value incurred in one time involving in selling
goods and services of several periods, the enterprise shall record this expense to account 242
Long term prepaid expenses:
7.1 The enterprise sells goods with the certificate of warranty guaranteed that any error made by
the manufacturer detected in the warranty period must be fixed by the enterprise. The
enterprise must determine the amount of maintenance expenses for the warranty.
7.2 At the end of the following period, the enterprise must determine the provisions for repairing
of warranty goods:
- Where the provisions required in this period is greater than provision made in the prior period
ovision shall be made for the difference.
that has not been used up, the additional provision
8. For goods used internally for selling process, based on related documents,
documents, the accountant
records sales and the VAT payable.
- Where goods used internally for selling goods and services subject to Subtraction method
VAT, the VAT amount shall not be recorded:
- Where goods subject to subtraction method VAT internally used for the sales of goods
and services not subject to VAT, the VAT payable fo
for goods internally used shall be recorded
to selling expenses.
9. Based on related documents to record the amount payable to the export consignee for
consignment fee and for the payment on behalf involving to exported goods:
12. At the end of the period, transfer selling expenses incurred to account 911 Income
summary.
ACCOUNT 642
This account records all general and administrative expenses including payroll for management and
administration (salary, wages, allowances), social insurance, health insurance, trades union fees,
office supplies, indirect material for administration, depreciation, land rent, business tax, provision
for doubtful debts, services rendered expenses (utilities, telephone, fax, insurance for fixed asset or
fires, etc.), other sundry expenses (entertainment, customer events, etc.)
Account 642 has sub-accounts in order to keep detailed records of the nature of expenditures as the
regulations.
Depending on the regulatory demands of each industry and entity, account 642 may have
additional sub-accounts. At the end of accounting period, general and administration expenses
shall be transferred to account 911 Income summary.
Debit:
- Provision for doubtful debts and other provisi ons (difference of provisions required to
provisions
provide in this period higher than provisions made in the prior period that has been used up);
Credit:
- Reverse of provision for doubtful debts, other pr ovisions (difference of provisions in this
provisions
period lower than provisions made in the last period that has been not used up);
Account 642 - General and administration expenses have eight sub- accounts:
- Account 6422-Consumable and office supplies: To record consumable and office supplies
that are used for administration such as stationary, materials used for repairing fixed assets,
tools and supplies, etc. (price including VAT or not including VAT).
- Account 6423-Office supplies: To record the cost of office supplies consumed for
administration (price including VAT or not including VAT).
- Account 6424 - Depreciation: To record general depreciation of the enterprise for assets such
as buildings, fixtures, transportations and machinery and equipments which are used for
administration.
- Account 6425 – Taxes, fees and charges: To record expenses such as business tax, land rent,
etc., and other fees and charges.
- Account 6426 – Provision: To record the provision for doubtful debts and other provisions
which are charged to production cost.
- Account 6427 – Services rendered by outsiders: To record services rendered by outsider for
administration, for using technical documents, patent, etc., (not meet recognition criteria of
tangible asset) that then are allocated to general and administration expense, assets lease,
payable to sub-contractor.
- Account 6428 – Sundry cash expenses:: To record other general and administrative expenses
of enterprise such as expenses forr conferences, entertainment, per diem, travelling, woman
employees, etc.
MAJOR TRANSACTIONS
2. Raw materials is used for administration such as gas, oil, lubricants for driving car, material
for repairing fixed assets:
3. Tools and office supplies used or purchased then put in use not through the companys
premise that are recorded one time to general and administration expenses:
4. Depreciation for asset which is used for administration such as building, warehouse, fixtures,
and transmitter devices:
7. Provision for doubtful debts charged into production and business expenses in the period:
8. Telephone, utilities, repair expense spent one time for fixed asset with low value.
9. Expenses for conference, entertainment, woman employees, research and training, member
woman
fees and other fees:
10. Periodically, the amount payable to the holding company for management fund at the holding
company:
11. The VAT input not deducted and recorded to the general and administration expenses:
13. Products, goods subject to subtraction method VAT that is internally used for administration:
- If products, goods used for production and business of goods and services subject to
Subtraction method VAT, shall not be charged VAT:
Dr. 642 General and administration expenses (6422, 6423, 6427, 6428)
Cr. 512 Inter-company revenue (manufacturing cost or cost of goods internally used)
- If products, goods used internally for production of goods and services not subject to VAT or
subject to VAT in direct method, the amount of VAT of products, goods internally used will be
recorded to general and administration expenses:
Dr. 642 General and administration expenses (6422, 6423, 6427, 6428)
Cr. 333 Tax and statutory obligations
Cr. 512 Inter-company revenue (manufacturing cost or cost of goods internally used)
14. Reverse of difference of lower provision for doubtful debts required in the current period and
provisions made in the prior period that have not been not used up:
15. Provision for restructuring, provisions for contracts with high risk and other provisions (not
including provision for warranty products)
+ Where provisions required in the current period is greater than provision made in the prior
period that has not been used up yet:
+ Where provision required in the current period is lower than provision made in the prior
period that has not been used up yet:
expen
17. At the end, general and administration expenses shall be transferred to account 911 to
determine income summary of the period:
CATEGORY 7
OTHER INCOME
This account is used to reflect incomes other than sale income. And it is only used to reflect other
incomes incurred during of the period. At the end of the period, all other incomes will be
transferred to account 911 Income summary. This account has no ending balance.
ACCOUNT 711
OTHER INCOME
This account is used to reflect incomes other than sale income of enterprise. It includes:
- Income from the revaluation materials, goods and fixed asset that are used to contribute or
invest into associates or other long-term investment;
- Sales-related tips or awards (if any) offered by customers which are not included in sales;
- Other incomes.
Debit:
- VAT payables for other income in direct method (if any) applied for the entity paying VAT
in direct method;
- Transfer all other incomes to account 911 Income summary at the end of the year.
Credit:
MAJOR TRANSACTIONS
At the same time, write off the historical cost of fixed assets being sold, liquidated:
2. Accounting for other income from revaluation of materials, goods and fixed assets used to
contribute and invest to associates:
- In the case of contribution for associates in fixed assets, the assets should be revalued in
agreement between investors and associates. WherWheree revalued cost of fixed assets is greater
than their book value, thee accountant should record:
Where the investment in jointly controlled entities is made by materials, goods and cost of
materials, goods is greater than their book value, the accounting entry should be recorded as
follows:
- When the jointly controlled entities sell materials, goods to the third party, deferred income
should be transferred to the other income in the period:
Where the investment in jointly controlled entities is made by fixed assets and the revalued
amount is greater than the net book value, the accounting entry should be recorded as
follows:
- Annually, the accountant should allocate deferred income in other income in the period based on
useful life of fixed assets used by jointly controlled entities:
Dr. 3387 - Deferred income (difference from revaluation of fixed asset contributed)
Cr. 711 - Other income (deferred income that is allocated for one year)
- When joint venture contract is finished or inv estors have transferred the shares to other parties,
investors
the accountant should transfer difference resulte d from the revaluation of fixed assets which
resulted
has not been allocated to other income. The accounting entry should be recorded:
Dr. 3387 - Deferred income (the difference from revaluation of fixed asset)
Cr. 711 - Other income
4. Recording other income from the selling fixed asset to jointly controlled entities
- Selling fixed asset to jointly controlled entities, the accountant should writte off fixed asset:
At the same time recording other income from the sales to jointly controlled entities:
- At the end of the period, investors should record gains from sale of fixed assets in
correspondence with benefit of the enterprise in jointly controlled entities basing on fixed
assets which investors sold (those assets used by jointly controlled entities not sold to third
party). The accounting entry should be recorded as follows:
Dr. 711 Other income (Deferred interests from sale of fixed assets in correspondence with
- Periodically, investor should allocate deferred income in correspondence with its benefit in
jointly controlled entities basing on useful life of fixed assets. The accounting entry should be
recorded:
- When jointly controlled entity sells fixed assets, which are bought from investors, to the
third party, the jointly controlled entity should record:
Dr. 3387 Deferred income (unallocated amount in correspondence with its benefit in the
jointly controlled entity)
Cr. 711- Other income
5. Recording other income from contribution of fixed asset to other entity which holds only 20 %
vote right.
6. Recording other income from sale and leasing back of fixed assets under finance lease:
- In the case, the fixed assets are sold and leased back and their revalued amount is greater than
their net book value, the accounting entry should be recorded as follows:
Dr. 811 - Other expenses (Net book value of fixed asset sold or leased back)
Dr. 214 Accumulated depreciation and amortization (if any)
- In the case, the fixed assets are sold and leased back and their revalued amount is lower than
their net book value, the accounting entry should be recorded as follows:
7. Recording other income from sale and leasing back of fixed assets under operating lease:
When selling and leasing back asset under operating lease, the practice will be as follows:
operating
- If selling price is agreed as reasonable, the loss or profit should be recorded into other income in
the period:
At the same time, the accountant should write off fixed asset (as similar to point 6 above)
- If selling price and leased-back price is less than reasonable one and leased-back price is less
than market price, the loss should be suitabl y allocated in relation to lease payment during
suitably
lease period. The accountant should record income
income from sale of fixed assets based on the
invoice and relevant documents as follows:
At the same time, the accountant should write off the fixed asset as similar to point 6 above.
- If selling price and leased-back price is higher than reasonable value, the difference between
sale or lease price and reasonable value should be allocated during estimated useful life of
fixed assets. The difference between reasonable value and net book value will be recorded as
other income in the period.
+ Based on the VAT invoice of sale of fixed assets, the accounting entry should be recorded as
follows:
Cr. 3387 - Deferred income (difference between sale price and reasonable price)
Cr. 3331 - VAT payable (if any)
At the same time, write off fixed assets sold and re-leased (as similar to point 6 above).
+ Periodically, the difference of higher selling price and reasonable one of fixed assets which
were sold or re-leased should be allocated in production costs in relation to lease amount in
estimated useful life of these assets.
8. When the warranty period in construction contract is due, however the assets dont have to be
warranted or provision for warranty of the contract is higher than actually expense incurred,
accoun
the unused provision should be reversed. The accounting entry should be recorded as follows:
- Where the depositor breaks the contract that was signed, it has to pay the penalty as agreed in
the contract.
- If it is unlikely to collect some doubtful debts, they should be written off based on settled bad
debts request:
Dr. 139 - Provision for doubtful debt (if provision already made)
Dr. 642 - General and administration expenses (if provision not yet made)
Cr. 131 Trade receivable
At the same time, the accountant should credit account 004 Doubtful debts written off (Off
balance accounts) in order to follow up those debts.
At the same time, credit account 004 Doubtful debts written off (Off balance sheet
Doubtful
accounts).
12. Amount payable by the company, where the company does not know who the creditor is and
therefore the amount will not be paid:
- To record the VAT reduced that is refunded in cash by the State Budget:
14. Recording refund of import, export tax and special consumption tax:
15. Recording sales-related tips or awards in goods or assets (if any) offered by customers:
16. At the end of the year, the accountant should calculate and record VAT payable in direct
method:
17. At the end of the year, other income arisen should be transferred to account 911 Income
Summary, the accounting entry should be recorded:
CATEGORY 8
OTHER EXPENSES
This account is used to reflect expenses arising from other activities which differ from the
activities generating sales of the business entity. Other expenses are the expenses or losses
incurred from separate events or transactions which are different from the normal activities of the
enterprise.
This account is only used to record other expenses incurred during the period. At the end of the
period, it should be transferred to account 911 Income summary. This account doesnt have
ending balance.
ACCOUNT 811
OTHER EXPENSES
This account is used to reflect expenses incurred from separate events or activities other without
normal activities of an enterprise.
- Expenses from disposal and liquidation of fixed assets and net book value of those assets (is
any);
- Losses from revaluation of materials, goods and fixed asset which are contributed in joint
ventures, in associates, and other long term investments;
- Tax penalty;
- Other expenses.
Debit:
Credit:
At the end of the period, transfer other expe nses incurred during the period to account 911
expenses
Income summary.
MAJOR TRANSACTIONS
2. Accounting for other expenses incurred after revaluation of materials, goods and fixed
assets contributed in associates:
- Contribution made by fixed assets: when investment in associates is made by fixed assets,
and the revalued amount is less than the net book value of this fixed asset, the accounting
entry should be recorded as follows:
3.1. When contribution in jointly controlled entiti es is made by goods and merchandise and book
entities
value of those goods is higher than revalued amount, the accounting entry should be recorded
as follows:
3.2. When contribution in jointly controlled entities is made by fixed assets and the revalued
amount is less than net book value of this asset, the accounting entry should be recorded:
4. Accounting for contribution made by goods, merchandise and fixed asset to other entity for
holding 20 % vote right.
- Where contribution is made by goods and merchandise and the revalued amount that is
agreed among investors is less than book value of these assets, the accounting entry should be
recorded:
- Where contribution is made by fixed assets and if the revalued amount which is agreed among
investors is greater than the net book value of this asset, the accounting entry should be
recorded as follows:
ACCOUNT 821
This account is used to reflect enterprise income tax expense including: current income tax
expense and deferred income tax expense incurred during the year. It is the basis to determine
business results of the enterprise in the current fiscal year.
1. Enterprise income tax expense recorded in this account includes: current income tax and
deferred income tax. It is recorded into this account when determining profit or losses of a
fiscal year.
Debit:
- If immaterial errors relating to current income tax of previous years are discovered, the
enterprise should record addition of current
current income tax in the current year;
- Deferred income tax incurred during the year from recording deferred tax payable (the
difference of the greater deferred income tax payable incurred and deferred income tax
payable reversed in the year);
- Recording deferred income tax expense (difference of higher deferred income tax asset
reversed and deferred tax asset incurred during the year);
- Transferring the difference of higher credit incurred and debit incurred in account 8212
Deferred income tax in the period to account 911 Income summary.
Credit:
- Current income tax payable in the year which is less than temporary income tax paid, should
be deducted in current income tax expense which is alreadyrecorded in the year;
- If immaterial errors relating to income tax payable are discovered, the enterprise should
record a decrease in current income tax expense;
- Decrease of deferred income tax and increase of deferred income asset (the difference of
greater deferred income tax asset incurred in the year and deferred income tax assets reversed
in the year);
- Decrease of deferred income tax expense (the difference of the greater deferred tax payable
reversed and deferred tax payable incurred in the year);
- Transfer of the difference between of greater current income tax incurred during the year and
the year into account 911 Income summary;
deducted current income tax expense in the
ACCOUNT 8211
This account is used to reflect current income tax of an enterprise incurred in the year.
1. Each quarter, based on the tax declaration, the accountant records estimated current income
tax into current income tax expense.
2. At the end of fiscal year, if the estimated income tax is less than the actual current income tax
to be paid, the accountant should record additional tax into current income tax expense. In the
case, estimated income tax is higher than the actua
actual income tax to be paid for this year, the
accountant should decrease the current income ta tax expense by the difference between the
estimated income tax and the actual income tax payable.
3. If the entity detects immaterial errors relating to income tax payables of previous year, the
enterprise should record an increase (or decrease) of income tax payables of previous years in
current income tax of the current year.
4. At the end of the fiscal year, the accountant should transfer current income tax incurred in the
should
year to account 911 Income summary to determine profit made from business and
production activities in the year.
Debit:
- Income tax payable recorded in current income tax incurred in the year;
current
- If immaterial errors relating to current income tax payable of previous years are discovered,
the additional tax payable should be recorded into
into current income tax expense of the current
year.
Credit:
- If the actual income tax payable in the year is less than estimated income tax, the difference
will be recorded in current income tax of the current year;
- If immaterial errors relating to income tax payable are discovered, the entity should record a
decrease in current income tax expense of the current year;
- Transferring current income tax into debit of account 911 Income summary.
ACCOUNT 8212
This account is used to reflect deferred income tax incurred during the period.
1. At the end of the fiscal year, the accountant must determine deferred income tax payable in
order to record into deferred income tax expenses. At the same time, the accountant also
determines deferred income tax asset in order to record into income (a decrease in deferred
income tax expense).
2. The accountant should not record into this account deferred income tax asset and deferred
income tax payable which are incurred from the tr
transactions that are directly recorded into
paid-in capital.
3. At the end of the period, the accountant must transfer the difference between the incurred
debit and credit of account 8212 Deferred income tax into account 911 Income summary.
income
Debit:
- Deferred income tax incurred during the year from recording deferred income tax payable
(the difference of higher deferred income tax payable incurred in the year and deferred
tax
income tax refunded in the year).
- Transferring the positive difference of credit incurred and debit incurred in account 8212
Deferred income tax to credit side
side of account 911 Income summary.
Credit:
- Decreasing deferred income tax expense (difference of the higher deferred income tax asset
incurred in the year and deferred income tax refunded in the year);
- Decreasing deferred income tax expense (difference of higher reversed deferred income tax
expense in the year and deferred income tax payable in the year);
- Transferring the difference of lower credit incurred and higher debit incurred in account 8212
deferred income tax into account 911 Income summary.
I. Method for recording major transactions relevant with the current income tax expense
1. Each quarter, when the accountant determines income tax payable according to the law on
enterprise income tax, the accountant should record estimated income tax payable to the State
Budget into current income tax expense. The accounting entry should be recorded as follows:
When income tax is paid to the State Budget by an enterprise, the following entry should be
recorded:
2. At the end of the fiscal year, basing on the income tax payable according to the income tax
declaration or the amount of tax announced by the tax agency:
If the actual income tax payable in the year is higher than the income tax previously paid, the
accountant must record the additional income tax payable. The accounting entry should be
recorded as follows:
When enterprise income tax is paid to the State Budget, the following entry should be
recorded:
If the actual income tax payable in the year is less than the estimated income tax, the
accountant should record a decrease in current income tax. The accounting entry should be
recorded as follows:
In the case, an enterprise detects immaterial errors of previous years relating to current
income tax, the additional current income tax of previous years should be recorded increasing
current income tax of the current year. The accounting entry should be recorded as follows:
When the enterprise pays enterprise income tax, the following entry should be recorded:
4. At the end of the accounting period, transferring current income tax, the accounting entry
should be recorded as follows:
If the incurred debit of account 8211 is higher than the incurred credit of account 8211, the
difference should be recorded as follows:
If the incurred debit of account 8211 is less than the incurred credit of this account, the
difference should be recorded as follows:
2. Deferred income tax expense incurred in the year from refunding deferred tax asset which
recorded since previous years (it is the difference
difference between deferred tax asset refunded in the
year greater than deferred tax asset incurred in the year), the accounting entry should be
recorded:
3. Decreasing deferred income tax expense (the difference between deferred tax asset incurred
in the year greater than deferred tax asset refunded
refunded in this year), the accounting entry should
be recorded as follows:
4. Decreasing deferred income tax (the difference between deferred tax payable refunded in the
year greater than deferred tax payable incurred in the year):
5. At the end of the accounting period, transferring the difference between the incurred debit
and the incurred credit of account 8212 Deferred income tax:
If the incurred debit is greater than the incurred credit of account 8212, the difference is
recorded as follows:
If the incurred debit is less than the incurred credit of account 8212, the difference should be
recorded:
CATEGORY 9
INCOME SUMMARY
ACCOUNT 911
INCOME SUMMARY
This account is used to determine and record the result of the enterprises business operation and other
activities in the accounting year. The result of the enterprises business operation includes production
result, trading, financial result and other activities.
1. The production and business results is the difference between net sale and cost of goods sold
(finished goods, merchandises, property investment and services, cost of construction products,
ty investment, such as depreciation cost, repair and upgraded cost,
cost related to trading of property
operating lease paid by the lesson,on, liquidation cost of property investment), selling expenses,
general and administration expenses.
3. Other result is the difference of other income and other expenses and enterprise income tax.
1. This account should accurately and fully record the results from the enterprises business operation
enterprises
in compliance with the current financial system.
2. The results from the enterprises business operation must be maintained in detail for each operation
(production, processing activ ity, trading, service provision, and
activity, and financial activit
activity). The individual
product or service should be recorded
recorded in a sub-account,
sub-account, if necessary.
3. The sales and income recorded in this account should be the net sales and the net income.
Debit:
- Transferred profit.
Credit:
- Net sales of finished goods, merchandises, property investment and services sold in the period;
- Transferred loss.
1. At the end of the period, net sales should be transferred into Income summary account:
2. Cost of finished goods, merchandises, services sold in the period, expenses related to trading of
property investment, such as depreciation, repair and upgrading cost, operating lease cost and cost
resulted from liquidation of property investment:
3. At the end of the period, financial income and other income should be transferred:
4. At the end of the period, financial expenses and other expenses should be transferred:
expenses
6. At the end of the period, the difference between the arisen amount in the debit and the arisen
amount in the credit of account 8212 Deferred income tax is transferred:
+ Should the debit of account 8212 is greater than its credit, the difference is recorded as follows:
+ Should the debit of account 8212 is less than its credit, the difference is recorded as follows:
7. At the end of the period, selling expenses should be transferred to income summary:
8. At the end of the period, general and administration expenses should be transferred to income
summary:
CATEGORY 0
Off balance sheet accounts are used to record assets kept by the enterprise which are not their property
such as: operating lease assets; goods held under trust or for processing; goods received on
consignment for sale, deposit and collateral. At the same time, these accounts also include several
economic transactions already recorded in the accounts of the balance sheet, but which are to be
separately followed up for management purpose, e.g. settled bad debts, budget funds, foreign currency
(detailed for each original currency), subsidies.
In principle, these accounts are recorded as s single entry which means that any transaction recorded
on one of these accounts should not be corresponded for on another account.
The value of assets, materials and cash recorded in these accounts is basedb on the contractual cost or
the cost stipulated in receipts, invoices or other supporting documents. The value of leased assets from
outside is recorded at the cost of these assets stipulated in the leasing contract.
ACCOUNT 001
This account is used to record value of all assets (including fixed assets, property investment and tools
and instruments) leased by the enterprise from other entities.
Debit:
Credit:
Debit balance:
This account is used to record the value of lease assets under operating lease agreement (the leased
assets should be returned to the lessor at the termination of the leasing contract). This account is not
used to record financial lease assets.
Accounting for operating lease assets must be maintained in deta il for each lessor (individuals or
detail
organizations) and each type of asset. A receipt note should be prepared and signed by the lessee and
lessor when the lease is undertaken. It is responsibility of the lessee to safeguard and reasonably use
responsibility
the leased assets. Should any supplementary
supplementary equipment be installed or a change made with respect to
the leased assets nature and technical function, the lessors approval must first be obtained. All
expenses which have risen while the lease assets has bbeeneen in use are to be recorded
re in the relevant
accounts in the balance sheet.
ACCOUNT 002
This account is used to record the value of assets, materials and goods held under trust or for
processing. The value of goods held under trust or for processing is accounted at their current
valuation when exchange object on display. Where the valuation is not available, an estimated
valuation must be used.
Debit:
Credit:
- Value of assets, materials, goods delivered to use for processing and returned to their owners;
- Value of assets, materials and goods held under trust returned to their owners.
Debit balance:
Accounting for goods held under trust or for processing should be maintained in detail for each type of
item; each location and each owner. Materials, goods held under trust should not be used and should
be maintained as carefully as the enterprises assets. A receipt note signed by the two parties should be
prepared when receiving or returning consigned assets.
ACCOUNT 003
This account is used to record the value of goods received on consignment for sales, deposits from
other entities or individuals.
Debit:
Credit:
- Value of goods received for deposits that were sold by order of the court because the partner has
breached the contract.
Debit balance:
ACCOUNT 004
This account is used to record receivables which have been written off, but should still be followed up
in order to claim money from the debtors. Although the bad debts have been written off, they should
be followed up to separately in accordance with the existing financial management system in order to
collect them in the case the debtors financial situation has improved.
Debit:
Bad debts are written off the balance sheet that still are followed up in the off balance sheet accounts.
Credit:
- Amount of bad debts that were written off, yet dont have to be followed up according to the
decision made by the authorized body.
Debit balance:
If a bad debt which has been written off is collected, the amount received should be recorded in other
income (balance sheet items), as well as credited to account 004 Bad debts written off. In the case, it
is unlikely to collect the bad debts written off, a report asking for writing off of the off balance sheet
account should be submitted to the authorized body. Upon the decision made by the authorized body,
a credit should be recorded in account 004.
ACCOUNT 007
MULTI-FOREIGN CURRENCIES
This account is used to record cash received, spent and balance in original monetary unit for each
currency.
Debit:
Credit:
Debit balance:
Amount of foreign currency being held by the entity (at original monetary unit).
The foreign currencies should not be converted into VND when they are recorded in this account.
ACCOUNT 008
This account is used to record budget resources received by the entity which have been approved with
administrative budget or project budget from the authorized body.
This account should be kept track in detail: administrative subsidies and project subsidies.
Debit:
Budget to be received.
Credit:
Debit balance:
Budgets to be received.
At the end of the year, the outstanding balance shall be either abolished or carried forward to the
following year according to the decision
decision of authorized body. Since
Since entity has different kinds of
budgets, details of subsidies for administrative budget and for project budget must be kept track by
budget
each kind of budget.