5 ACCOUNTING FOR PAYROLL AND PAYROLL RELATED COMPENSATION AT THE SINGLE MEMBER XUAN HOA PACKAGING LIMITED LIABILITY COMPANY

1.3.4.Accounting for payroll and payroll related compensation in applicationwith accounting software...27 1.3.5.Presentation in financial statement:...28 CHAPTER 2: ACCOUNTING FOR PAYROL

STATEMENT OF ORIGINAL AUTHORSHIP

I assure that this is my own research work, the result data stated in thegraduation thesis are honest and come from the actual situation of the single-member Xuan Hoa Packaging Limited Liability Company

Student

Nguyễn Quỳnh Diệp

Firstly, I am deeply indebted to my supervisor MSc Nguyen Thu Haowhose help, stimulation suggestions and encouragement helped me all thetime of research for and writing of this thesis

I also want to thank Xuan Hoa Packaging Co., Ltd for giving mepermission to commence this thesis in the first instance, to do the necessaryresearch work and to use departmental data

I have furthermore to thank the Chief Accountants as well as all othersstaffs at Xuan Hoa Packaging Co., Ltd who gave and confirmed thispermission and encouraged me to go ahead with my thesis

My friends in the Academy of Finance also supported me with my thesis

I would like to thank them for all their help, support, interest and valuablehints

Especially, I would like to give my special thanks to my family whosepatient love enables me to complete this progress of research

Finally, because of limitation of time and knowledge, mistakes areunavoidable, so I wish to have more opportunities, I also wish to receive morecontribution and suggestions to make my thesis better

TABLE OF CONTENTS

STATEMENT OF ORIGINAL AUTHORSHIP i

ACKNOWLEDGEMENTS ii

TABLE OF CONTENTS iii

LIST OF ABBREVIATIONS vi

LIST OF DIAGRAMS vii

LIST OF TABLES viii

LIST OF IMAGES ix

INTRODUCTION 1

CHAPTER 1: GENERAL THEORY ON PAYROLL AND PAYROLL-RELATED COMPENSATION 5

1.1 Importance of accounting for payroll and payroll related compensation 5

1.1.1 Definition 5

1.1.2.Characteristic of payroll and payroll-related compensation 8

1.1.3.Management’s responsibility for payroll and pay-roll related compensation 9

1.1.4.Importance of payroll and payroll-related compensation 10

1.1.5.Payroll regime 11

1.2 Calculation of payroll and payroll-related compensation 13

1.2.1 Time-based salary system 13

1.2.2 Job-based wages system 15

1.3.Accounting for payroll and payroll related compensation in company

17 1.3.1.Classification of payroll and payroll related compensation 17

1.3.2.Gathering information of salary and payroll related compensation 19

1.3.3.Accounting for payroll and payroll-related compensation 20

1.3.4.Accounting for payroll and payroll related compensation in application

with accounting software 27

1.3.5.Presentation in financial statement: 28

CHAPTER 2: ACCOUNTING FOR PAYROLL AND PAYROLL RELATED COMPENSATION IN XUAN HOA PACKAGING SINGLE-MEMBER LIMITED LIABILITY COMPANY (Xuan Hoa Packaging Co., Ltd) 31

2.1 Overview of Xuan Hoa Packaging Co., Ltd 31

2.1.1 Establishment and development of Xuan Hoa Packaging Co., Ltd 31

2.1.2 Organization of Xuan Hoa Packaging Co., Ltd 32

2.1.3 Accounting department in Xuan Hoa Packaging Co., Ltd 36

2.2 Accounting for payroll and payroll-related compensation in Xuan Hoa Packaging Co., Ltd 39

2.2.1 Accounting for payroll and payroll-related compensation in Xuan Hoa Packaging Co., Ltd 39

2.3.Actual situation of organizing salary accounting and payroll compensation at Xuan Hoa Packaging Co., Ltd 42

2.3.1.Actual situation of accounting for payroll and payroll-related compensation at Xuan Hoa Packaging Co., Ltd 42

2.3.2.Accounting books used in accounting for payroll and payroll related compensation in application with accounting software 76

2.3.3.Process of transferring, printing accounting books and financial statements 83

2.4.Comment on accounting for payroll and payroll related compensation in company Xuan Hoa Packaging Co., Ltd 90

2.4.1.General comments on accounting work at the Company 90

2.4.2.Comments on the accounting for payroll and payroll-related

compensation in Xuan Hoa Packaging Co., Ltd 91CHAPTER 3: RECOMENDATION TO IMPROVE ACCOUNTING FORPAYROLL AND PAYROLL RELATED COMPENSATIONS IN XUANHOA PACKAGING CO., LTD 953.1 The needs of improvements 953.2 Some suggestions for improvement of accounting for payroll and payrollrelated compensation in Xuan Hoa Packaging Co., Ltd 96CONCLUSION 102REFERENCES 103

LIST OF ABBREVIATIONS

SI Social Insurance

HI Health Insurance

UI Unemployment InsurancePIT Personal Income Tax

LIST OF DIAGRAMS

Diagram 1: The main accounting process of the salary of the employee 23Diagram 2: The main accounting process of payroll related compensation 26Diagram 4: Production process 36Diagram 5: diagram of accounting department 38Diagram 6: Diagram of accounting in the form of General Journal: 40

LIST OF TABLES

Table 1.1: Percentage of salary deductions prescribed by law 8

Table 2.1: Department division 43

Table 2.2: Timesheets 49

Table 2.3: Percentage of payroll-related compensation 52

Table 2.4: Payroll calculation of the accounting department 54

Table 2.5: Payroll calculation sheet of printing department 56

Table 2.6: Tax progressive table 58

Table 2.7:Allocation of total salary into account the costs related 63

Table 2.8: Allocation table of payroll-compensation 68

Table 2.9: Allocation table of payroll and payroll-related compensation 69

Table 2.10: General Journal 84

Table 2.11: Extract from Ledger 87

Table 2.12: Extract from subsidiary ledger of 3383 88

LIST OF IMAGES

Image 2.1 Payment voucher 65

Image 2.2 Accounting software screen interface 'Fast Accounting' 78

Image 2.3 Input screen of accounting sheet 80

Image 2.4 Payment voucher 81

Image 2.5 Input screen 83

Image 2.6 Layout view and print financial statements 90

1 The urgency of the subject

In our country, the appearance of a market economy has createdopportunities for companies to develop, but it also forces companies whichwant to stand in the new market have to optimize their businessmanagement In this new trend, companies must mobilize on their own,must conduct production and business activities on the principle ofrevenue and expenditure and profit making without the subsidy of theState as before Since then, the top goal of companies is to increase profitswithin the prescribed legal framework

In the progress of production and business activities, the factor of laborforce plays a very important role Because without workers it is impossible

to make material wealth, to have products whether it is a physical product

or an intellectual product, apart from the cost of materials, the cost of fixedassets Companies must also take into account labor cost This cost is notsmall in the price of finished good but also directly determines the quality

of the product Because employees are the ones who directly decide thequality of the company's products, whether the company operateseffectively or not, how they compete in the market, it is necessary to createproducts with good quality

For employees, the salary has an extremely important meaning because it

is the main source of income to help them ensure the life of themselvesand their families Therefore, salary is a motivation for employees whopay attention to working time and labor productivity if they are paidaccording to the labor power they spend On the contrary, it can alsoreduce labor productivity, slow down the production process, inefficient ifthe salary they receive is not worth the labor power they spent

For the economy as a whole, salary are a more specific distribution ofmaterial goods made by workers Therefore, the construction of the salaryscale, payroll, selecting reasonable payment methods so that salary areincome for employees to work better, have a sense of responsibility totheir jobs is the necessary.

Being aware of the urgency, at the same time, through practical study atXuan Hoa Packaging Limited Liability Company, I was exposed to theaccounting work at my company, which saw the importance of payrollaccounting and payroll deductions should have deep research and choosethe topic for his graduation thesis: "Accounting for payroll and payroll-related compensation at Xuan Hoa Packaging Limited Liability Company

"

2 The purposes of the thesis

- Systematically presenting and clarifying the basic theoretical issuesapplied in accounting of wages and salary deductions at companies ingeneral

- Research the situation of salary accounting and salary deductions at XuanHoa Packaging Limited Liability Company

- Based on theoretical and practical surveys at the Company to proposerecommendations to improve salary accounting and salary deductions atSingle-Member Xuan Hoa Packaging Limited Liability company

3 Research objects and scope of thesis

The object of the study is: Accounting of salaries and salary deductions ofcommercial companies, which delves into the form of salary payment andsalary deductions of Xuan Hoa Packaging Co., Ltd

- The scope of thesis:

+ Find out the situation of accounting of wages and salary deductions atXuan Hoa Packaging Limited Liability Company

+ Research project of salary accounting and salary deductions at XuanHoa Packaging Co., Ltd The time to choose the research topic isDecember 2019, in addition to some 2020 data

4 Research methodology

In order to collect and analyze data for the implementation of my thesis, Iused a combination of different methods such as interview surveyscombined with document research methods Finally, I use the method ofaggregating data to give an overview and systematic view of accountingactivities in general and accounting of payments with employees inparticular at the Company

- Document research method: Understanding the sources of corporatedocuments: information about the establishment history, managementapparatus of enterprises, documents on accounting of payments toemployees in standard regimes, reference books and previous coursepapers

- Direct interview method: The interview questions are mainly focused onthe issue of accounting of payments to employees at Xuan Hoa PackagingLimited Liability Company such as: What are the advantages anddisadvantages of paying workers? What limitations and shortcomings need

to be overcome? The interview was conducted at the accounting department at the Company

administrative Observation method: Make observations on the management andoperation of the accounting system of the enterprise, then make moredetailed observations for the work in the administrative-accountingdepartment such as collecting documents, in the data of related accounts

- Methods of analyzing and processing data: After collecting necessarydata, it is necessary to analyze, compare and compare the figures betweenoriginal documents and distribution tables with detailed lists andaccounting books In order to make accurate and accurate assessments andcomments about the accounting of payments to employees in theenterprise.

5 The structure of the thesis:

Thesis includes 3 chapter:

CHAPTER 1: General theory on payroll and payroll-related

compensation

CHAPTER 2: Accounting for payroll and payroll related compensation in

Xuan Hoa Packaging Limited Liability Company

CHAPTER 3: Recommendation to improve accounting for payroll and

payroll related compensations in Xuan Hoa Packaging Limited LiabilityCompany

CHAPTER 1: GENERAL THEORY ON PAYROLL AND

PAYROLL-RELATED COMPENSATION 1.1 Importance of accounting for payroll and payroll related compensation

1.1.1 Definition

1.1.1.1 Payroll

Payroll structures are an important component of effective compensationprograms and help ensure that pay levels for groups of jobs are competitiveexternally and equitable internally A well-designed salary structure allowsmanagement to reward performance and skills development while controllingoverall base salary cost by providing a cap on the range paid for particularjobs or locations

An use of payroll is the accounting of salaries, wages and other payoutswithin company budgeting and financial reporting Management mustconsider payroll costs within the context of all company expenditures

Payroll is the human resources function of managing processing anddistribution of periodic paychecks to employees Payroll typically involvespayments of regular salary and wages, commissions and bonuses

Payroll pertains to both salary and wages:

+ In order to support the management in production and businessprocess, the accounting for salary in the enterprise devided into the twobasic types:

 The basis salary: Amount of money paid to the employeesduring working time includes salary, bonuses andallowances

 The overtime: Amount of money paid to employees in realtime they do not work but is paid specified as: annualleave, meetings, studies, festivals, ceased production

- Commission: a commission can be the complete or partial means of

getting paid Some salespeople earn their entire salary based on acommissioned salary, which is based on the amount of sales theemployee generates

- Bonus: is a form of compensation that’s not guaranteed and that is

usually paid after the completion of a certain event

1.1.1.2 Payroll related compensation

Including the compensation that the company paid to organization (eg: SI

HI organizations…) for the benefits of employees Those compensation aredetermined on percentage of payroll

- Social insurance: Social insurance means the guarantee to fully or

partially offset an employee’s income that is reduced or lost due to his/her sickness, maternity, labor accident, occupational disease, retirement

or death, on the basis of his/her contributions to the social insurancefund (Rule 58/2014/QH13)

Contributions are based on salary stated in the employment contractand contribution rate

The contribution rates under current regulations are 18% by theemployer and 8% by the employees

- Health insurance: entitles employees to medical examination and

inpatient and outpatient treatments at authorized medicalestablishments It provides employees with health care services (such

as impatient and outpatient services at all health care levels, laboratoryexams, x-ray, etc…)

Contributions are based on salary stated in the employment contractand contribution rate

The contribution rate are 3% by the employer and 1.5% by theemployees

- Unemployment insurance: which takes the place of severance pay, is

paid out to employees in quantities depending on the period of time forwhich they and their previous employers contributed It providesunemployment compensation to an employee when she/he lossesher/his labor contract with the employer

Contribution are based on salary stated in the employment contract andcontribution rate:

The contribution rate are 1% by the employer and 1% by the employees

- Trade union fee: is a source of fund for activities for trade union

organization in enterprises

Contributions are based on entire salary and contribution rate:

The contribution rate are 2% all by employer

Deduction Employer pay Employee pay Total

Table 1.1: Percentage of salary deductions prescribed by law

1.1.2 Characteristic of payroll and payroll-related compensation

The main objective of salary administration is to establish and maintain anequitable wage and salary system This is so because only a properlydeveloped compensation system enables an employer to attract, obtain, retainand motivate people of required caliber and qualification in organization.These objectives can be seen in more orderly manner from the point of view

of the organization, its individual employees and collectively There areoutlined and discussed subsequently

- Salary is an input of the production and business process, an advance andthis is a cost in the cost of products

- During the working process, human labor is gradually worn down with theprocess of creating products To maintain and improve ability to work, it isnecessary to reproduce labor power Therefore, salary is one of the materialpremises capable of regenerating labor force on the basis of offsetting wastedlabor power, paying through satisfying the consumption needs of workers

- For managers, salary is one of the tools for business management Throughthe payment to employees, employers can conduct inspections, monitoringand supervision of employees working according to their organizational plan

to ensure that salaries must be brought to the conclusion high results andefficiency Thus employers strictly manage the quantity and quality of theirlabor to pay them appropriately

1.1.3 Management’s responsibility for payroll and pay-roll related

compensation.

Management is accountable for set up and manage payroll administration

is to establish and maintain an equitable wage and salary system This is sobecause only a properly developed compensation system enables an employer

to attract, obtain, retain and motivate people of required caliber andqualification in his/her organization These objectives can be seen in moreorderly manner from the point of view of the organization, its individualemployees and collectively There are outlined and discussed subsequently

- Salary must ensure legality, that is, salary must comply with the lawsand regulations of the State on the payment of employees as well as inaccordance with the agreement in the contract between the employeeand the enterprise But the salary must always be higher than or equal

to the minimum salary

- Salary must ensure reproducible expansion of labor, family life ofworkers and a part to accumulate

- Salary must be attractiveness and stimulate workers, that is, salariesmust be sufficient to attract employees for businesses and stimulateworkers to work effectively

- Salary must be equal, which the amount commensurate with thequantity, quality of labor, the actual contribution of employees, andmust attach salary to the results of work and activities of the business.

- Salary must ensure affordability for employees in the enterprise’sfinancial capacity, which means that the costs of salaries must bewithin the allowable production costs for the enterprise to compete inthe market

1.1.4 Importance of payroll and payroll-related compensation

1.1.4.1 To enterprise

- Enable an organization to have the quantity and quality of staff it requires

- Retain the employees in the organization

- Motivate employees for good performance for further improvement inperformance

- Maintain equity and fairness in compensation for similar jobs

- Achieve flexibility in the system to accommodate organizational changes

as and when these take place

- Make the system cost-effective

- In order to pay a reasonable salary to employees, the company must meetthe following requirements: In accordance with the State salary regime,associated with the labor management of the enterprise The aboverequirements are closely related to each other and only on the basis of thatrequirement can stimulate employees in improving their skills, raisingtheir sense of discipline, and emulating production workers

1.1.4.2 To Individual workers

- Ensures a fair compensation

- Provides compensation according to employee’s worth.

- Avoids the chances of favoritism from creeping in when salary rates are

assigned

- Enhances employee morale and motivation.

1.1.4.3 To society

- From a macroeconomic perspective, high salaries help workers to have

higher purchasing power and thereby increase the prosperity of a socialcommunity, but as purchasing power increases prices, this reduces theLiving standards of low-income people cannot keep up with prices Inaddition, rising prices may reduce demand for products and servicesand thereby reduce jobs From a macroeconomic perspective, wages are

an important part of national income and an important economic toolfor the state to regulate income between employees and employers Percapita income is an important criterion for assessing a nation'sprosperity and development

1.1.5 Payroll regime

1.1.5.1 Payroll regime based on ranking:

Salary regime applied to ‘blue-collar’ (workers) Salary ranks are based

on the quantity and quality of labor It can be said that the salary system isaimed at determining labor quality, comparing labor quality in differentindustries and in each occupation At the same time, it is possible to comparehard working conditions, which are harmful to health, to normal workingconditions The salary system has a very positive effect that it adjusts salarybetween industries reasonably, it also reduces the average nature of the salarypayment to thoroughly implement the view of labor distribution

The salary regime is promulgated by the State, enterprises rely on it toapply it in practice depending on the production and business characteristics

of their business

Salary hierarchy consists of 3 factors that are closely related: salaryscale, salary structures and technical levels:

- Salary scale is a table that determines the wage relationship between

workers in the same profession or the same group of occupationsaccording to their level and rank Each salary scale consists of anumber of salary rank and the coefficient that match that salaryrank This coefficient was developed and issued by the State

- Salary structure is the amount benefit to pay workers in a unit of

time (hour, day, months) in accordance with the steps in the salaryscale Only the first-rate salary is specified and the high-level salary

is calculated by multiplying the salary level by the salarycoefficient, the prescribed level-1 salary must be higher than orequal to the minimum wage

On November 16, 2018, the Government issues the Decree No.157/2018/ND-CP providing for region-based minimum wagesapplied to employees working under labor contracts

Accordingly, from January 01, 2019, the region-based minimumwages are specified as follows:

+ VND 4,180,000/month, for enterprises operating in localities ofregion I;

+ VND 3,710,000/month, for enterprises operating in localities ofregion II;

+ VND 3,250,000/month, for enterprises operating in localities ofregion III;

+ VND 2,920,000/month, for enterprises operating in localities ofregion IV

The region-based minimum salary increase from VND160,000/month - VND 200,000/month, compared with that of thelast year.

The region-based minimum salary are the lowest salary levels whichserve as a basis for enterprises and employees to reach agreement onand pay wages The salary paid to employees who perform jobswhich must be performed by trained employees shall be at least 7%higher than the above region-based minimum wage

- Technical level standard is a document that regulates the

complexity of the job and the skill requirements of workers at acertain level, so they must understand what is technically and whatcan be done in real terms onions Technical levels reflect skillrequirements of workers Standards of technical grades serve as abasis for determining the skill level of workers

1.1.5.2 Payroll regime based on position:

Salary regime based on position is promulgated by the State, enterprisesrely on it to apply it in practice depending on the production and businesscharacteristics of their business Those pays for people who do not directlycreate products but play an important role in organizational planning,management, control and adjustment of production and business activities.The efficiency of labor management has a great influence on the size of thebusiness

Salary regime are paid over time and based on the position payroll Thedistinction of status in the payroll position is mainly based on the followingcriteria: Politics, education level, professional qualifications corresponding tothe position held

1.2 Calculation of payroll and payroll-related compensation

Monthly salary =

Basic salary + Salary increase + Allowance

Number of working days

as prescribed by month

x

Number of actual working days of employees in 1 month

1.2.1Time-based salary system

 Definition: A form of payment for employees based on working time,

salary level (title) and wage scale (salary coefficient) This form is

mainly applied to indirect workers, stable jobs or maybe even direct

workers without norm of products

In the enterprises, the form of time-based salary is applied to office

workers such as administrative administration, labor organization, statistics,

finance and accounting Time-based payment is a form of payment for

employees based on their actual working time, occupation and professional

and technical proficiency level

Depending on the specific job characteristics of the enterprise, different

salary levels apply Professional and technical proficiency divided into

several wage scales, each salary level has a certain salary, which is the basis

for payment of wage, wages over time can be divided:

- Monthly salary: As the salary paid to employees on a monthly basis,

the salary scale is calculated over a period of 1 month Monthly salary

is the monthly fixed salary based on labor contract

- Daily salary: is the salary paid for a working day based on the monthly

salary divided by the number of standard working days in the month in

accordance with the provisions of law that the company chooses, but

the maximum is not more than 26 days

1.2.2 Job-based wages system

 Definition: determine the wages based on job performance (unit of

products finished) and the rate per job (rate per product manufactured)Depending on the organization of production and business of thecompany, there are many ways to pay for different products Themethods of product salary are usually:

- Pay wages by product directly without restriction

- Pay wages by indirect products

- Pay wage based on a reward product

- Pay wage based on progressive product

- Wages payment (actually wages by product)

1.2.2.1 Pay wages by product directly without restriction.

In this method, wages paid to employees are calculated directlyaccording to the number of finished products in the right specifications,quality and unit price of the prescribed product Applying to employees whodirectly producing products

The wage unit price paid for a unit of product is built based on the jobsalary scale and time norms or output norms for that job In addition, if there

is a regional allowance, the unit wage rate also includes the regionalallowance rate.

Total payables = Actual number of completed products x unit price salary pay

1.2.2.2 Pay by indirect products.

Salary payment for indirect products is determined by multiplying thenumber of products produced by the workers who directly produce theproduct by the indirect wage unit price

Applying to people indirectly serving the production of products

As wages paid to indirect workers in production departments, such asmaintenance of machinery and equipment they do not directly produceproducts but they indirectly affect labor productivity directly so they receivewages Based on the results of the direct labor to calculate the salary forindirect labor

This indirect form of salary is not accurate, has many limitations, and isnot real work

Total payables = Actual number of completed products x Indirect unit

price 1.2.2.3 Pay salary based on a reward product.

In this method, in addition to direct product wages, workers are alsorewarded in production, often for increased labor productivity and materialsavings

This method of calculation wages with bonus products has theadvantage of encouraging employees to work hard, increasing laborproductivity, benefiting businesses as well as improving employee's life

Compared to the form of time-based payment, the form of based payment has more advantages Fully grasping the principle of payment

product-of wages based on quantity and quality product-of labor, closely associating wageincome with production results of workers.

1.2.2.4 Pay salary based on progressive product.

In this form, in addition to direct product wages, the level ofaccomplishment in excess of labor norms is calculated based on theprogressive rate The higher the completion rate, the more the progressiveinterest

Incremental payrolls have a strong stimulus to rapidly increase laborproductivity, but often lead to higher wages growth faster than laborproductivity growth and increase the labor cost in cost of goodsmanufactured

Therefore, this calculation method is used as a temporary solution such

as paying salaries at important stages necessary to speed up production toensure balanced, synchronized or applied in-field production The companymust make an urgent order

1.2.2.5 Contractual salary

In this method, a worker is assigned a job and is solely responsible forthat job until it is completed Often applied in industries such asconstruction,

When contracting, stock norms often include:

- Unit contractual price

- Completion time

- Quality of product or work

Total payables = Contractual wages x Percentage of work completed 1.3 Accounting for payroll and payroll related compensation in company 1.3.1 Classification of payroll and payroll related compensation

Nowadays, no one can deny the role of labor for the socio-economicdevelopment, for the evolution of mankind, it is labor that has broughtmankind to the creation, civilization and development of people increasinglysurpassing themselves through labor Because labor in manufacturingenterprises exists in many different forms and for the convenience ofmanagement and accounting, it is necessary to conduct labor classification.Labor management and accounting are generally classified as follows:

- Classification by working time: According to working time, it is

divided into: Regular employees, list workers (including short-term andlong-term contracts) and temporary, seasonal workers As a result,businesses know their total labor Since then, the enterprise has a plan

of reasonable and effective use, and accurately determines theobligations of employees to the State

- Classification in relation to the production process: Labor is divided

into two types of labor: workers in direct production and indirectworkers in production These labor classifications help businessesassess the appropriateness of the labor structure Since then, we havemeasures to organize and arrange labor in accordance with jobrequirements, streamlining the indirect apparatus

- Classification according to the function of labor in the process of

production and business: Accordingly, all employees in the enterpriseare divided into three categories: Laborers performing manufacturingand processing functions, employees performing sales functions ,workers performing management functions

- Classification by wages scale: Direct and indirect workers in

enterprises have many salaries according to the salary scale, wagescale, usually workers directly produce from 1 to 7 wage levels

Level 1 and 2: include the majority of unskilled labor who have notbeen trained by the school

Level 3 and 4: workers have passed the training process

Level 5 and above: includes workers who have passed the high-techprofessional school

Indirect labor also has many steps divided into sections

Conclusion: Thanks to the classification of labor, helping the labor costcollection in a timely, accurate manner, defining the periodic and productcosts Help businesses have the appropriate plans and policies

1.3.2 Gathering information of salary and payroll related compensation 1.3.2.1 Gathering information of the number of employees

Based on the initial number monthly timesheets at each department,team, the group sends to the accounting department to gather and count thenumber of employees in that month of the enterprise Also based on thedocuments Accountant on payroll can the number of employee who work andwho is absent

The team leader or responsible person check actual working time ofeach team member who participate in production process daily At the end ofthe month, the timesheets of each team, department sent to the accountingdepartment The payroll accountant gathers, summaries and reports

1.3.2.2 Gathering information of labor time

Accounting of labor time is the tracking of working time each worker

in the enterprise, accounting based on the timesheets

To manage the labor time, enterprise uses may different methodsdepend on the organization management characteristics like timekeeping, usefingerprint or employee’s card.,…

1.3.2.3 Calculation of payroll and payroll-related compensation.

Accounting of payment of wages to employees based on accountingrecords of working time (timesheets), labor results (list of completed workvolumes, acceptance certificate ) and accounting payroll conduct salarycalculation after checking the above documents.

The work of calculating salaries, wages, bonuses and other amountspayable to employees according to the form of payment currently applied inenterprises, labor accountants' payroll and wage tables (including policysalary and product wages) , allowances, benefits, insurance for each worker),bonus payment table

Payment table (payroll) is a document used as a basis for payment ofsalary and allowances for employees in the form of payment currently applied

at the enterprise, and the wage and salary accounting makes a salary paymenttable (including basic salary product salaries, allowances, benefits, insurancepaid by employee), bonus payment table On that basis, revenue andexpenditure accountants write payment notes and pay salaries for eachdepartment

Salary payment for employees is usually divided into 2 periods in amonth:

+ Term 1: Advanced payment

+ Term 2: Pay the rest after deducting the deductible amounts from theemployees' salaries according to the prescribed regime

For employees who are still on annual payment leave, this salary willalso be included in production and business costs The leave is often irregularand uneven between months of the year, so it is necessary to make deductionsfrom the leave for workers' wages in the cost of each accounting period Assuch, it will not make the product price suddenly changed

1.3.3 Accounting for payroll and payroll-related compensation

Form 09 – LĐTL: Acceptance CertificateForm 10 – LĐTL: Salary reduction list Form 11 – LĐTL: Allocation table of salary and socialinsurance

Form 03 –TT: Application for advanceForm 04 –TT: Payment demand letter

1.3.3.2 Accounting for payroll and payroll-related compensation

Account mainly used: Account 334, 338, 335, 622, 627, 642, etc…

In which

Account 622 - Direct labor costs and account 627 - General operation costs:

are used for recording payment to each workshop, department, team,operation team

Account 642- General & administration expenses: records salaries of

employees of the enterprise management department (salaries, wages,allowances, ); social insurance, health insurance, trade union funds,unemployment insurance of enterprise management staff;

Account 641 - Selling expenses: Sales staff’s salary and wages

a Account 334: Payable to employees.

- Rules for accounting: This account is used to record payables and

payment of payables to employees of enterprises, including salaries,wages, bonuses, social insurance and other payables included inemployee‘s incomes

- Structure and contents of account 334 – Payables to employees

Debit: Salaries, salary and bonuses, social insurance and other items which

are paid or paid in advance to employees

- Amounts deducted from salaries or salary of employees

Credit: Salaries, salary and bonuses, social insurance and other items

which are paid to employees

Credit balance: Outstanding salaries, salary and bonuses, social insurance

and other items payable to employees

Account 334 may have Debit balance Debit balance of account 334 isparticular recording negative difference between paid amounts andsalaries, salary or other payables to employees (if any)

- Account 334 shall be recorded according to: Salary payment and

other payments

 Account 334 – Payables to employees, comprises 2 accounts: Account 3341 – Payables to staff: This account isused to record payables and payment of payables to staff ofenterprises, including salaries, salary, bonuses, socialinsurance and other payables included in staff‘’s incomes

sub- Account 3348 – Payables to other employees: This account isused to record payables and payment of payables to otheremployees of enterprises, including salaries, salary, bonuses,social insurance and other payables included in employee’s

incomes To record transactions related to salary and payrollrelated compensation payable and payment to employees

- Accounting process:

Diagram 1: The main accounting process of the salary of the employee

Acc 334 (Payable to employees)

Explain

(1)(3)

Acc 3334

(2)Acc 353(1), 622, 627, 641, 642

Acc 338(3)(6)

(4a)Acc 111,112, 511

Acc 138(8)(1a)

(4b)(5)

(1a) First salary payment of the month

(1b) Calculate salary payables

(2) Calculate bonus payables

(3) Calculate payroll related compensation deducted from employee’ssalary

(4a) Calculate social insurance managed by the enterprise

(4b) Social insurance managed by other authorities

(5) Electricity or water expense deducted from employee’s salary

(6a) Personal income tax deducted from employee’s salary

(6b) Personal income tax payment on behalf of employees

(7) Pay salary to employee

(8) Unpaid salary of absence employees

b Account 338: Other payable

- Rules for accounting: This account is used to record payment of

accounts payable other than accounts in group of Account 33 (fromAccount 331 to Account 337) This account is also used for accountingfor unearned revenues from services provided for customers anddifferences in prices incurring in transactions of purchase and leaseback

of assets under finance lease or operating lease

- Structure and contents of account 338

+ Appropriated amount and payment for social insurance, healthinsurance, and unemployment insurance and trade union fees;

+ Amounts deducted from salaries of employees according to thejudgment of the Court;

+ Other payables, such as payables for sale of voluntary pension insurance,life insurance and other grants (other salaries) for employees, etc

Credit:

- Appropriating social insurance, health insurance, unemploymentinsurance and trade union fees into operating expenses or salaries ofemployees;

- Payment with employees on collective housing rents, electricity andwater expenses;

- Overspending trade union fees which are granted additionally;

- Amounts of social insurance given by social insurance agencies whichare paid to employees

This account may have Debit balance: Debit balance shall reflect payment in

excess of accounts payable, or sums of social insurance paid to employeeswho have not yet been settled, and overspending trade union fees not beinggranted additionally

Account 338 – Other payables, comprises 8 sub-accounts, 4 of them related toaccounting for payroll and payroll-related compensation:

- Accounting process

Diagram 2: The main accounting process of payroll related compensation

TK 338(3382,3383,3384,3385)

Explain

(1) Payroll compensation paid by employer

(2) Payroll compensation deducted from employee’s salary

(3) Over expensed trade union fee is compensated

(4) Social insurance paid to employees

(5) The compensation payment to authorities or employees

c Account 3335: Personal income tax

Account reflects the personal income tax amount to be paid, alreadypaid and still have to be paid into the State budget

(5)

TK 334

TK 622, 627, 641, 642Acc 334

(2)

(3)Acc 111, 112

TK 111,112

- Accounting process

Diagram 3: The main accounting process of personal income tax

TK 3335 (Personal income tax)

(1)Calculate the amount of tax deducted from employee’s salary(2)Paid PIT to the State budget

1.3.4 Accounting for payroll and payroll related compensation in

application with accounting software

Enterprise apply technology in tracking and accounting follows:

- This calculation will be the basis accountant to make the correspondingentry into accounting software

- Enterprises can use accounting software, eg: FAST, ERP, MISE… tosupport the accounting of payroll and payroll-related compensation

 Daily work:

- Daily, the accountant shall base on accounting documents or the generalsheet of inspected accounting documents of the same type to serve as a basisfor entries and recognition of Debit and Credit for data entry in order to inputaccounting information according to tables designed in accounting software

- According to the accounting software process, the information isautomatically entered into general accounting books and related accountingbooks and cards

 At the end of each month:

TK 334

TK 112,111,…

- At the end of the month (or at any necessary time), accountants proceed tobook closing (plus the figures) and prepare financial statements Reconcilebetween aggregated figures and detailed figures is done automatically andalways ensures accuracy and truthfulness according to information entered inthe period Accountants can check and compare figures between accountingbooks and financial statements after printing them on paper.

- Perform operations to print financial statements as prescribed

- At the end of the month and year-end general accounting books and detailedaccounting books are printed on paper, bound in books and carried out legalprocedures according to the regulations on manual accounting books

 If the entry is wrong, then the accountant will correct it, then the Chiefaccountant will approve again Also, before approve, Chief accountantwill:

- Reconcile amount on accounting entry with amount on payroll calculation(payroll)

- Reconcile see whether the distribution of salary costs into the account cost isreasonable or not

- Sample check (select and check) some items on the payroll to see if it iscorrect or not

1.3.5 Presentation in financial statement:

The system of accounting books in the form of a general diary according toCircular 133 / TT-BTC dated August 26, 2016 of the Minister of Finance,presents information on the financial statements Presenting informationrelated to salary and payroll compensation on the financial statements:

- Basis of data for making related targets: Ledger of accounts 334, 338,

Income statement of indicators Selling, General and AdministrativeExpenses

- Relevant indicators on financial statements:

+ Item "Payables to employees" (Code 315): This index reflects theamounts payable by enterprises at the time of reporting The data to beinscribed in this index shall be based on the detailed Cr balance ofAccount 334 "Payables to employees"

+ Item: "Other short-term payables" (Entry 318): This index reflects otherpayables with the remaining payment term not exceeding 12 months or in

a production and business cycle Normally, at the reporting time, inaddition to liabilities already reflected in other indicators, such as:Unidentified excess asset value, payable to the social insurance agency,Union trade fund, Data To record in this criterion base on the detailed Crbalance of accounts: Account 338, 138,

+ Tax item and amounts payable to the State (Entry 314): This indexreflects the total amount of enterprises still payable to the State at the time

of reporting, including taxes, charges and fees, fees and other payables.The data to be inscribed in this index shall be based on the detailed Crbalance of Account 333 "Taxes and amounts payable to the State"

+ Indicator of Selling, General and Administrative Expenses: SGAincludes salaries and salary deductions from employees from differentparts of the company such as accountants These expenses are deductedfrom the gross profit ratio and result in net income Interest expense is one

of the remarkable expenses not included in SG&A; It is listed separately

on the income statement

- Accounting book related to salary and payroll related compensation

+ Form S03a - DNN: General Journal

+ Ledger of accounts 334, 338, 335, (Form S03b-DNN)

+ Detailed book of accounts 3382, 3383, 3383, 3384 (Form No DNN)

S20-In addition, businesses also use a number of documents such as laborcontracts, payroll system, payroll regulations, bonus of the enterprise to work

on the accounting for salary and payroll compensation

CONCLUSION

Accounting of salaries and payroll compensation is an integral part of thebusiness, in every salary enterprise is not only the remuneration paid toworkers by workers, it is also a part of the cost basis for determining thebusiness results of an enterprise Therefore, the company must alwayscalculate and determine the exact salary, salary costs, as well as salarydeductions in a way that is reasonable and true to the labor force of theworkers

Chapter 1 has a general overview of salary and salary deductions,presents us most specifically about the concept of salary, deductiondeductions, salary fund through which we can understand money accounting.Salary and salary deductions, find out details about the principles ofaccounting of salarys, how to classify and calculate salary for each form ofsalary in the enterprise It also helps us understand the types of books used,and the salary information presented in the financial statements To learnmore about salary and salary deductions at Xuan Hoa Packaging Co., Ltd, wecontinue to do research in chapter 2