Accounting for sales and business performance at petrolimex retail enterprise sector i

TABLE OF CONTENTS PAGE 2 NATIONAL ECONOMICS UNIVERSITY CENTER FOR ADVANCED EDUCATIONAL PROGRAM ***************************** BACHELOR’S THESIS IN ACCOUNTING ACCOUNTING FOR SALES AND BUSINESS PERFORMAN[.]

ECONOMICS UNIVERSITY

CENTER FOR ADVANCED EDUCATIONAL PROGRAM

*****************************

BACHELOR’S THESIS IN ACCOUNTING

ACCOUNTING FOR SALES AND BUSINESS

PERFORMANCE AT PETROLIMEX RETAIL ENTERPRISE

SECTOR I

Student’s name : Nguyen Khanh Linh Class : Advanced Accounting Intake: : 53

Internship guide: Vu Thi Hoa Instructor : Assoc Prof Dr Pham Thi Bich

Chi

Hanoi, 2015TABLE OF CONTENTS

2.1 Sales and the significance of selling activities at commercial enterprises

2.1.1 The significance of selling activities at commercial enterprises

2.1.2 Method of sales

2.1.3 Functions of Accounting for Sales and Business Performance

2.2 Accounting for Sales

2.2.1 Accounting for Sales Revenue

2.2.1.1 Accounting documentations and vouchers

2.2.1.2 Accounts in use

2.2.1.3 Process of Accounting for Sales Revenue

2.2.2 Accounting for Cost of Goods Sold

2.2.2.1 Accounting documentations and vouchers

2.2.2.2 Accounts in use

2.2.2.3 Process of Accounting for Cost of Goods Sold

2.3 Accounting for Business Performance

2.3.1 Accounting for Selling Expenses

2.3.1.1 Accounting documentations and vouchers

2.3.1.2 Accounts in use

2.3.1.3 Process of Accounting for Selling Expenses

2.3.2 Accounting for Administration Expenses

2.3.2.1 Accounting documentations and vouchers

2.3.2.2 Accounts in use

2.3.2.3 Process of Accounting for Administration Expenses

2.3.2 Accounting for Business Performance

2.3.2.1 Principles of determining Business Performance

2.3.2.2 Accounts in use

2.3.2.3 Process of Accounting for Business Performance

CHAPTER 3: CURRENT SITUATION OF ACCOUNTING FOR SALES AND BUSINESS PERFORMANCE AT PETROLIMEX RETAIL ENTERPRISE SECTOR I

3.1 Overview of Petrolimex Retail Enterprise Sector I

3.1.1 Establishment and Development

3.1.2 Functions and Responsibilities

3.1.3 Organizational Structure

3.1.4 Characteristics of Accounting Department

3.2 Current situation of accounting for sales and business performance at Petrolimex Retail Enterprise Sector

3.2.1 Accounting for Sales

3.2.1.1 Accounting for Sales Revenue

3.2.1.2 Accounting for Cost of goods sold

3.2.2 Accounting for Business Performance

3.2.2.1 Accounting for Selling and Administration expenses

3.2.2.2 Accounting for Business Performance

CHAPTER 4: DISCUSSION AND RECOMMENDTIONS TO IMPROVE ACCOUNTING FOR SALES AND BUSINESS PERFORMANCE AT PETROLIMEX RETAIL ENTERPRISE SECTOR I

4.1 Evaluation of Accounting for Sales and Business Performance at Petrolimex Retail Enterprise Sector I

4.1.1 Strength

4.1.2 Weakness

4.2 Strategy for future development of Petrolimex Retail Enterprise Sector I 4.3 Recommendations and solutions to improve Accounting for Sales and Business Performance at Petrolimex Retail Enterprise Sector I

Bearing in mind previous I am using this opportunity to express my deepestgratitude and special thanks to National Economics University and Center forAdvanced Educational Programs for their organization of this advanced accountingprogram.

I express my deepest thanks to my supervisor, Assoc Prof Dr Pham Thi Bich Chi

for taking part in useful decisions & giving necessary advices and guidance to help mecomplete successfully this project I choose this moment to acknowledge hercontribution gratefully

It is my radiant sentiment to place on record my best regards, deepest sense ofgratitude to Petrolimex Retail Enterprise Sector I for creating a professional yetwelcoming working environment during my internship I would like to express my

gratefulness to Ms Vu Thi Hoa, General Accountant and other, members of

Accounting Department for their careful and precious guidance which were extremelyvaluable for my study both theoretically and practically

I perceive as this opportunity as a big milestone in my career development I willstrive to use gained skills and knowledge in the best possible way, and I will continue

to work on their improvement, in order to attain desired career objectives Hope tocontinue the cooperation with all of you in the future

After joining the World Trade Organization, Vietnam is rapidly becoming an idealcommercial center for foreign corporations to set up their offshore operations due tothe cost benefits, lower attribution and government’s support The open market has led

to many opportunities as well as challenges for both domestic companies and foreignorganizations In this situation, the urgent requirement for all firms is continuouslyseeking the method to improve the quality of products, the expansion of businessmarket together with effective management, especially accounting management.Effective accounting system provides completed, timely and accurate financialinformation for the managers to make the right decisions

In order to apply the basic knowledge that students have learnt in the university,

we should have flexibility and academic understanding of various accountingorganizations in business Based on the scopes, activities and characteristics of eachcompany, its accounting management system will be created with particular features.Thus, the internship program is very essential for me to have a more realistic view ofaccounting in business During the internship period at Petrolimex Retail EnterpriseSector I, I have gained many valuable experiences in the application of Vietnameseaccounting standards in the accounting department of PRESI and particularly theoperation of accounting for sales – a very important accounting cycle of PetrolimexRetail Enterprise Sector I Therefore, I have more specific knowledge of accountingorganization of Petrolimex Retail Enterprise Sector I, especially the actual situation ofaccounting for sales at the enterprise However, I think that we should applyeffectively Vietnamese accounting standard into the process of establishment ofaccounting department at Petrolimex Retail Enterprise Sector I

With the enthusiastic support of the accountants in the accounting department,

particularly the General Accountant and the guidance of the supervisor Assoc Prof.

Dr Pham Thi Bich Chi, I successfully completed the final internship report with the

following contents:

PRESI : Petrolimex Retail Enterprise Sector I

VAT : Value Added Tax

VND : Vietnam Dong

Ac : Account

LIST OF TABLES

Table 1.1:

Table 1.2:

CHAPTER 1: INTRODUCTION

1.1 Rationale

Financial Accounting is an essential system to collect and analyze financialtransactions pertaining to a business This involves the preparation of financialstatements available for public consumption Stockholders, suppliers, banks,employees, government agencies, business owners, and other stakeholders areexamples of people interested in receiving such information for decision makingpurposes Financial Accountancy is governed by both local and internationalaccounting standards The major aim of financial accounting is to prepare accountinginformation for people outside the organization or not involved in the day-to-dayrunning of the company However, financial statements also provide useful accountinginformation to help managers make decisions to manage the business In particular,there are three important indicators related to financial situation of enterprises:Revenue, Expense and Business Performance Therefore, it is really necessary foraccountants to record accurately, appropriately and timely revenue, expense andbusiness performance of the enterprises

As a state enterprise which plays an important role in national economy, VietnamNational Petroleum Corporation has implemented favorably the political tasks, ensuredthe security of energy, played an indispensable part in national petroleum business andcontributed significantly to the development and integration of Vietnam economy aswell as the stability of national politics and society The corporation has proposed togovernment policies of managing petroleum business activities, gradually set up amechanism of petroleum business according to market mechanism governed by theState Most of dependent units have established and implemented successfully thedevelopment strategy, affirmed the prestige of the trade mark PETROLIMEX in themarket

Petrolimex Retail Enterprise Sector I, which is a dependent unit of PetrolimexHanoi Company - Vietnam National Petroleum Corporation, takes charge of receiving,providing and selling petroleum by retail in Hanoi Accounting activities which

involve in financial situation, revenue, expense and business performance, play anessential part in providing operational information of the enterprise This informationnot only helps managers orientate the future business strategy, ensures the stable andpermanent development but also assists investors to make the right decisions As acommercial entity in petroleum business, Petrolimex Retail Enterprise Sector I alwayscopes with difficulty and challenges when competing with other companies However,the issues of recording revenue, expense and business performance in petroleumbusiness in general and in Petrolimex Retail Enterprise Sector I in particular are notconsidered well enough to follow the current trend of social development andeconomic integration It is the fact that financial accounting and managerial accountingstill remain some shortcomings which can influence considerably on the analysis offinancial situation of the enterprise.

Due to the significance and rationale of this problem, I selected “Accounting forSales and Business Performance at Petrolimex Retail Enterprise Sector I” as the theme

of my bachelor’s thesis with the desire of improving the accounting system of theenterprise

Thirdly, this study represents suggestions and recommendations in order toimprove accounting for sales and business performance of Petrolimex RetailEnterprise Sector I

1.3 Research methodology

The research methodology applied in the thesis:

- Method of technological analysis: Comparison, Estimation…,

- Method of statistical analysis

- Method of studying and analyzing documents

These research methods are used to collect and synthesize the data in order tostudy accounting for sales and business performance of commercial enterprises ingeneral and Petrolimex Retail Enterprise Sector I in particular

Chapter 1: Introduction

Chapter 2: Literature review of Accounting for Sales and Business Performance

at commercial enterprises

Chapter 3: Current situation of Accounting for Sales and Business Performance

at Petrolimex Retail Enterprise Sector I

Chapter 4: Discussion and recommendations to improve Accounting for Salesand Business Performance at Petrolimex Retail Enterprise Sector I

Chapter 5: Conclusion

CHAPTER 2: LITERATURE REVIEW OF ACCOUNTING FOR SALES AND BUSSINESS PERFORMANCE AT COMMERCIAL ENTERPRISES

2.1 Sales and the significance of selling activities at commercial enterprises

2.1.1 The significance of selling activities at commercial enterprises

Commercial enterprises which operate in the field of circulation and distribution,perform the function of organizing flow of goods through purchasing, selling andstoring activities Hence, commodity circulation is the primary business and influences

on all economic indicators of the enterprises A good organization of accounting forsales and business performance plays an essential role in the management and alsoenhance business efficiency, contributing to motivate other financial activities of theenterprises

+ Selling directly from warehouse

+ Selling from warehouse with shipping

- Wholesale transported directly: the enterprise purchases goods from theproviders to sell directly to the consumers without using the warehouse of wholesaleenterprise This method is divided into 2 types:

+ Direct transportation wholesale

+ Transportation wholesale in the form of shipping

* For retail:

- Sales and receiving money directly

- Sales and collecting money as a whole

2.1.3 Functions of Accounting for Sales and Business Performance

The main task of accounting for sales is to calculate and reflect accurately, timelyrevenues, cost of goods sold as well as determine business performance It is alsonecessary to supervise the implementation of sales and profit as planned, inspect themanagement of sales revenue, the observance of payment discipline and theimplementation of duty to the State

2.2 Accounting for Sales

2.2.1 Accounting for Sales Revenue

2.2.1.1 Accounting documentations and vouchers

In order to record sales revenue, accountants use several specific books andvouchers below:

Accounts used to record sales revenue include Account 511 “Revenues” The

structure and content of this account are defined by Vietnam accounting regime

Account 511 does not have the closing balance This account is divided into 5subaccounts:

- Account 5112: Revenue from sales of finished goods

- Account 5113: Revenue from service rendered

- Account 5114: Revenue from government grants

- Account 5117: Revenue from investment properties

Apart from Account 511, accountants also apply Account 512 “Intra-company Revenues” in case of recording internal revenue Its structure and content are

determined by Vietnam accounting regime Account 512 does not contain the closingbalance but including 3 subaccounts:

- Account 5121: Revenue from sales of merchandises

- Account 5122: Revenue from sales of finished goods

- Account 5123: Revenue from service rendered

2.2.1.3 Process of Accounting for Sales Revenue

* Accounting for Sales Revenue according to Inventory Perpetual method:

Generally, when accounting department collects sufficiently vouchers such asSales Invoices, VAT Invoices which were liquidated, accountants will record revenueaccording to the process below:

- Particularly, there are some other methods of sales such as installment sales,barter and internal consumption In these cases, accounting for sales revenue followsspecific processes

+ Installment sales:

Bases on this method of sales, when delivering the goods to the customers, theamount of goods is considered as being consumed The customers will pay a part ofprice of goods at the first time to receive the goods, then liquidating the remainingamount of money in a fixed period of time with an interest rate in the contract

The process of accounting for sales revenue in case of installment sales isrepresented by the figure below:

Ac 111, 112, 131…

Ac 333 (33311)

(2)

+ Barter is a system of exchange by which goods and services are directlyexchanged for other goods or services without using a medium of exchange, such

as money The process of accounting for sales revenue according to barter method isillustrated in the below figure:

+ Internal Consumption includes salary and bonus for employees with productsand goods, gifts or souvenirs for workers, welfare and bonus fund to offset customers.The process of accounting for sales revenue from internal consumption:

* Accounting for Sales Revenue according to Inventory Periodic method:

(1b)

Ac 627, 641, 642(3a)

* Presentation of financial statements:

According to the Accounting Standard No.14 “Revenues and other income”, in thefinancial statements, the enterprises must present:

(a) The accounting policies applied in the recognition of revenue include themethod of determining the completed portion of the work in transactions ofproviding service

(b) Sales revenue of each type of transactions and events

- Revenue from selling goods

- Revenue from providing services

- Interest, royalty, dividends and profit are divided

(c) Revenue from the exchange of goods by each activity above

(d) Other income which present specific abnormal earnings

2.2.2 Accounting for Cost of Goods Sold

2.2.2.1 Accounting documentations and vouchers

Vouchers and accounting books are used in Accounting for Cost of Goods Soldinclude:

- Delivery Note

- VAT Invoice

- Sales Invoice

- Other related sheets of sales

2.2.2.2 Accounts in use

In terms of accounting for cost of goods sold, accountants use Account 632 “Cost

of Goods Sold” Account 632 is applied to both enterprises using inventory perpetualmethod and enterprises using inventory periodic method to determine cost of goodssold With both types of the enterprise, the structure and content of Account 632 aredefined by Vietnam accounting regime Account 632 does not have the closingbalance

2.2.2.3 Process of Accounting for Cost of Goods Sold

- Process of Accounting for Cost of Goods Sold according to Inventory Perpetualmethod:

Ac 156, 157, 138

Ac 632

- Process of Accounting for Cost of Goods Sold according to Inventory Periodicmethod:

2.3 Accounting for Business Performance

2.3.1 Accounting for Selling Expenses

2.3.1.1 Accounting documentations and vouchers

Vouchers applied in accounting for selling expenses contain:

- Payrolls for salesmen

- Spreadsheets and allocation of depreciation

- Sheets of selling expenses

2.3.1.2 Account in use

In order to reflect the arising amount of selling expenses, accountants use theAccount 641 “Selling Expenses” The structure and content of Account 641 isgoverned by Vietnam Accounting Regime

Account 641 does not have the closing balance and also being divided into 7subaccounts:

- Account 6411: Staff Expenses

- Account 6412: Materials and packing materials

- Account 6413: Tools and instruments expenses

- Account 6414: Fixed assets depreciation

- Account 6415: Warranty expenses

- Account 6417: External services hired

- Account 6418: Other expenses

2.3.1.3 Process of Accounting for Selling Expenses

The process of accounting for selling expenses is depicted by the figure below:

2.3.2 Accounting for Administration Expenses

2.3.2.1 Accounting documentations and vouchers

Vouchers used in Accounting for Administration Expenses are listed below:

- Payrolls for managers

- Spreadsheets of fixed assets used for the management

- Other sheets and expense synthesis

2.3.2.2 Accounts in use

(1)

Ac 111, 112, 138(8)

Ac 911(10)

Ac 333 (3331)

Ac 331, 111, 112 (7a)

Ac 133(7b)

Administration expenses are reflected on Account 642 “General AdministrationExpenses” The structure and content of the account follow Vietnam AccountingRegime.

Account 642 does not include the closing balance This account is divided into 8subaccounts:

- Account 6421: Staff expenses

- Account 6422: Office supply expenses

- Account 6423: Office equipment expenses

- Account 6424: Fixed assets depreciation

- Account 6425: Taxes, fees and charges

- Account 6426: Provision expenses

- Account 6427: External services expenses

- Account 6428: Other expenses

2.3.2.3 Process of Accounting for Administration Expenses

The procedure of Accounting for Administration Expenses is illustrated by thefigure below:

Ac 642(1)

Ac 111, 112, 138(9)

Ac 139, 352(10)

Ac 911(11)

2.3.3 Accounting for Business Performance

2.3.2.1 Principles of determining Business Performance

Income summary is an indicator reflecting the efficiency of goods circulation.Income of commercial enterprises reflects revenue, income from financial activitiesand other operational result

- Income is the difference between Net Revenue plus Income from financialactivities and the sum of Cost of goods sold, Expense of financial activities, Sellingexpense and Administration expense

Income = (Net Revenue + Income from financial activities) – (Cost of goods sold+ Expense of financial activities + Selling expense + Administration expense)

- Other operational result is the different between other income and other expense

- Operational result of the reporting period (profit or loss before tax) = Income +Other operational result

Operational results can be determined based on each type of functional activities,each business or generality The reporting period can be monthly, quarterly, 6 months

or annual, depending on managerial requirements and the current accounting regime ofthe enterprise

* Principles of determining business performance

Due to the function of financial accounting which provides general information ofthe enterprise for those inside and outside the enterprise, and the purpose of financialaccounting which give information to perform financial functions of the company,business performance in financial accounting is represented by income of theenterprise and defined by generally accepted concepts and principles

Profit in financial accounting is determined based on the assumption of infinitelycontinuous operation or at least not being dissolved in the near future This assumptionforces the determination of profit to comply with the following principles:

- Profit of the enterprises must be determined in accordance with the accountingperiod, which means to be reported in certain periods of the same length Theaccounting period is specified for a period of accounting activities Different countriesmay have different rules of accounting periods Vietnam Law often includes annual,quarterly and monthly accounting period However, due to the specific work andgeneral regulations, companies can provide more rules of accounting period in order tointeract well with national and global systems Therefore, in order to determine theactual profit of the year, accountants have to calculate total income and total expense

of that year

- Expenses used to determine income must be corresponding to the income in theperiod (according to matching principle) This means that expense used to determineincome has to relate directly to the volume of goods and services consumed