NATIONAL ECONOMICS UNIVERSITY SCHOOL OF ADVANCED EDUCATIONAL PROGRAMS BACHELOR THESIS Major Accounting Topic Accounting for finished goods at no 10 Limited company Student’s name Nguyen Vuong Thuy Anh[.]
CHARACTERISTICS OF FINISHED GOODS,
Characteristics of finished goods at No 10 Co., Ltd
Lai Chau is renowned for its abundant limestone resources, thanks to its limestone mountainous topography To leverage this valuable resource, No.10 Co., Ltd was established as a specialized supplier of construction stones and cement production Licensed by relevant authorities, No.10 - Lai Chau Co., Ltd is committed to providing high-quality limestone materials for the construction industry, supporting infrastructure development in the region.
People's Committee of Lai Chau Province for mineral exploitation under Decision
No 735 / QD-UBND dated July 17, 2015, with an exploitation period of 5 years.
After being licensed, the company had carried out public exploitation of quarry and processing of limestone to meet the demand for construction materials in Lai Chau province.
In production field, the prior mission of a company is to produce products to meet the market’s demand The company’s products include finished products and semi-finished products, but finished products play the most important role in the company
Finished goods are goods that have been completed by the manufacturing process, or purchased in a completed form, but which have not yet been sold to customers Finished goods have their values in two sides, quantity and quality. Quantity is identified by measurement units, such as: kg, m3, liter and item Quality is identified by the levels like level 1, level 2 and so on
The company has been operating and doing business mainly in Lai Chau province with many business lines, such as:
- Construction of transportation works and irrigational works;
- Exploitation of rare metal ores, exploiting sand, stone and gravel;
- Planting and caring for flowers and trees;
Supplying hot asphalt concrete, liquid asphalt, ordinary asphalt used in construction of transport works;
- Building pavement by hot asphalt and liquid asphalt;
- Urban sanitation such as collecting and disposing garbage, spraying street with water, managing and operating lighting systems beside roads and traffic lights.
The company consistently maintains its production and business activities on schedule, ensuring high quality and strong economic efficiency Notably, the stone products supply sector contributes approximately 50 to 55% of the company’s total revenue, highlighting its significance to overall business performance.
In the sector of supplying stones, finished goods are stones in many types after being manufactured from natural raw stones.
The company has two quarries for their exploitation They are a quarry of limestone and aggregate that is the main source for making finished goods representing a high revenue in supplying stone sector and a quarry for monolith However, the two has only three-kilometer distance between each other.
The finished stone products in this sector are categorized into 11 types based on size, shape, and manufacturing methods, including limestone varieties such as 1x2, 2x4, 4x6, 4x8, and 5x15, as well as fence stones, crushed aggregates types 1 and 2, limestone powder, block stones, and pavers These diverse product types cater to various construction and landscaping needs, highlighting the sector's extensive manufacturing capabilities Proper classification of these finished goods helps streamline supply chain processes and enhances market accessibility.
The codes for these finished goods are straightforward, reflecting the company's limited product range All products share the same initial two characters, "TP," indicating the product category The subsequent three digits uniquely identify each finished good, as detailed in Table 1.1 This simple coding system ensures easy inventory management and clear product identification.
Table 1.1: Portfolio and codes of finished goods
5 Crushed aggregates type 1 (base course) TP.005
6 Crushed aggregates type 2 (subbase course) TP.006
1.1.2 Some characteristics of finished goods
Natural raw stone, sourced directly from local quarries, serves as the primary material for producing finished goods These stones are unexploited mineral deposits that vary in size from small, gravel-like pieces to large, natural formations As a sustainable and abundant resource, natural raw stone is essential in manufacturing high-quality finished products.
No.10 Co., Ltd utilizes proprietary measuring techniques to accurately estimate mineral volumes in quarries This innovative approach helps determine key insights such as quarry life expectancy and the potential capacity for exploitation, ensuring efficient resource management and sustainability.
After the exploitation and the process of manufacturing of the company, they obtain different types of stones with different sizes and the usage for difference purpose due to their characteristics
The physical characteristics and the usage of these stones are shown as follows.
- Limestone 1x2 is obtained after being processed and is often used in the production of cement concrete, so it is also called concrete stone This type of building stone has many different sizes such as 10 × 16 (mm), 10 × 22 (mm), 10 ×
25 (mm) This type of stone is widely used to pour concrete floors of multi-floor house or for road surface foundation such as national highway, airport highway, wharf area or for hot asphalt or fresh concrete.
Limestone 2x4 is a processed limestone typically measuring 20 to 48mm in diameter, widely used in cement concrete production and commonly referred to as concrete stone It plays a crucial role in manufacturing quicklime (calcined lime) and is essential in the metallurgical industry as a flux, especially in rotary kiln processes.
Limestone 4x6, with a diameter range of 40-60mm, is processed limestone commonly used in construction projects It is primarily employed in transportation infrastructure, serving as a key component in asphalt concrete base courses and building foundations.
- Limestone 4x8 is obtained after processing and used for producing quicklime
Calcined lime is an essential flux in the metallurgy industry, typically used in sizes of 40mm to 80mm in blast furnaces It plays a vital role in slag formation to eliminate impurities such as sulfur (S) and phosphorus (P), ensuring the purity of the final product Additionally, calcined lime creates alkalinity to protect construction materials, enhancing durability and performance.
Features of finished goods supply chain at No 10 Co., Ltd
Based on the process of manufacturing a type of stone, the company classifies its business production strategy into two methods The features of each method is described as follows.
The characteristic of this method is that the quantity, the quality and the size of products are all required by customers They are described by samples, technical drawings and standard sample available in the company
Figure 1.1: The manufacturing process of Made-to-order products at No.10 Co., Ltd
The company adopted this method to meet the diverse requirements of customers seeking complex stone assemblies, such as paving limestone for artistic projects or decorative pavements for parks, resorts, and gardens This approach efficiently addresses market demand for customized stone products while minimizing economic losses from excess inventory, especially for high-volume clients.
Some specific articles of the selling contract of this method are described summarily as follows.
ARTICLE 1: PRODUCTS –PRICE –QUANTITY -QUALITY
Party A accept to sell and Party B accept to buy with the requirements as follows:
- Type, quantity: when having demand, Party B have to send the summary list of products regarding to types and quantity by document like fax and email.
When Party B has a demand, they place an order to Party A via digital documents such as fax or email, clearly specifying details like quality, unit price, transfer conditions, delivery schedule, and payment terms To ensure smooth processing, the order is sent to Party A at least 2 to 3 days prior to the scheduled transfer of goods.
- On the basis of the order, Party A will accept and confirm time of delivery.
In case of changes, two parties will compromise and confirm a specific time The
Propose the sample and size
Production processing (regarding to requirements) and delivery order by digital form like fax and mail is supposed as indispensable to the contract and has its value like contract.
- Place of delivery: Party B notify in detail to Party A before the time of delivery;
- Time of delivery: base on agreement of two sides (not more than 10 days from the ordering time)
- Delivery fee: Party A will bear the cost.
- When receiving, Party B check the products in term of types, quantity and quality If the quantity is wrong, two side prepare a report to confirm the situation.
- Party A supplies documents related to products and VAT invoice If party
B has no request for editing in about 5 days after receiving invoices, it is supposed that Party B accepts with information.
- Payment method: by bank transfer
- Due of payment: Party B pays to Party A up to 5 days after receiving documents (VAT invoice, GRN, receipt of delivery, list of goods volume)
- At the end of the month, two sides reconcile credit balance and debit balance
- Original VAT invoice, List of goods
- Receipt of delivery, Goods receipt notes (from Party B)
The delivered goods meet the required standards for quantity, quality, and types, and are delivered on time as stipulated in the contract If the goods do not comply, Party A is responsible for any necessary returns and bears the additional fees involved.
+ Party A supplies and takes legal responsibilities of invoices and documents related to the sales to Party B
+ Party A has the right to stop supplying products if Party B makes payment overdue or performed not in accordance to the contract.
+ Party B makes favorable conditions for the delivery of Party A like goods unloading.
+ Check on the quantity, quality and types of delivered products.
+ Party B can deliberately make the termination of the contract if Party A makes a breach of contract
+ Party B makes payment in accordance to Article 3 of this contract.
- In case a side violates the articles in this contract, they have to bear the damages for not performing in responsibility They have to bear additional fines against contract violation.
If Party A fails to meet the agreed performance timeline due to their own fault, and not due to any error by Party B or force majeure events, they are obligated to pay a fine of 0.1% of the goods' value for each day of delay These fines can be offset against the overall contract value.
- If Party B is late in making payment overdue, not by any mistake from Party
According to the force majeure clause, Party B is required to pay interest on late payments at the bank’s short-term loan interest rate Any penalties incurred due to late payment will be added to the contract value, with a maximum delay of seven days.
- Each side has a responsibility to keep private information about the content of the contract, the appendices of the contract and the customer information from the other side.
- Excepted for cited on the contract or requests of authority, each side should not reveal to any third party about the information on the contract.
- This is valid even after the contract goes out of validity
- Force majeure: flood, earthquake, landslide and natural disasters; epidemic disease; intervention of government agencies.
- In case of force majeure, each party has to notify to each other by documents about up to 15 days from the day of the event
- When there is force majeure, the responsibility of each party stop being valid
Because the production line is complex and oriented for large-scale production with high volume of one type of product at a specific time, the company organized their production process by Made to Stock more usually than by Made to Order. The Figure 1.2 describes the production process for products from limestone - aggregate quarry, and the Figure 1.3 describes the production process for products from monolith quarry.
The limestone-aggregate quarry covers a total area of 4.9 hectares, with 2.8 hectares designated for mining activities Additionally, the monolith quarry spans 2 hectares, including a 1.5-hectare mining zone The quarry operations have an average extraction capacity of 40,000 cubic meters of natural raw stone annually, resulting in a processed output of approximately 29,500 cubic meters per year.
Our advanced crushing and screening equipment handles stones efficiently with a processing capacity of 120m³/h, ensuring high productivity Made in China, these machines feature an automated control system powered by three-phase electricity for reliable operation Additionally, our sawing machine, capable of processing 90m³/h, is specifically designed for precise sawing and cutting of monolith stones, supporting diverse construction and manufacturing needs.
The Figure 1.2 totally describe the manufacturing process at the limestone and aggregate quarry.
Natural raw stone is extracted through drilling and blasting processes After extraction, the stones undergo quality testing by the quality control team to ensure they meet specifications Eligible stones are then sorted and classified using an excavator, preparing them for crushing and screening These processed stones are transported via excavators to the processing area, where they go through crushing and sieving lines Finally, the sorted stones are stored in the loading ground, awaiting delivery by trucks to the warehouse.
Particularly, the crushed aggregates can also be used for making the concrete for local sites and the company’s projects after being place at warehouse
Similarly, Figure 1.3 characterizes the manufacturing process at the monolith quarry However, the stones are processed by sewing and cutting machines, and this method requires more human labor than the crushing and screening line.
Finished goods are delivered to outdoor warehouses via trucks or reserve bucket excavators, where they are stored and await consumption These warehouses are designed to hold large quantities of finished products and are often divided into designated sections, each dedicated to specific types of goods Proper storage in such versatile warehouses ensures efficient inventory management and timely delivery to meet consumer demands.
The total inbound volume of stones is primarily monitored by counting the number of truck arrivals During loading and unloading operations, the company can accurately determine the volume of finished goods When precise quantities are required, the company utilizes specialized scales and methods to ensure accurate measurement of finished stone products.
After periodical stock-taking, remaining finished goods in the warehouse are measured by leveling the stones into frustum-shaped cubic blocks using a reserve bucket excavator, then calculating their cubic volume This method ensures accurate identification of the volume of leftover finished goods, providing precise inventory data Using volume measurement techniques allows for efficient inventory management and helps maintain optimal stock levels.
* The functions and responsibilities of some individual in the supply chain
The manufacturing department (at the quarries) includes three divisions with a total number of employees is 33; specific numbers are as follows.
Twenty workers are responsible for performing drilling and blasting work with hand-held drilling machines and mining machines.
Two workers are for placing and organizing stones to crushing and screening lines;
A power system operator is for operating the crushing lines.
Three drivers are responsible for controlling reverse bucket excavators in classifying types of stones and loading stones into truck.
Four drivers are responsible for driving intrinsic trucks in delivering finished goods into warehouses or customer places.
Three drivers are responsible for excavators in loading, unloading and delivering in a short distance and in the yard
The company operates extensive, high-value facilities and infrastructure essential for stone exploitation, including advanced drilling equipment, reverse bucket excavators, intrinsic trucks, and excavators Its operations are supported by comprehensive crushing and screening lines, a weight station, and a fleet of mining vehicles Additionally, the company maintains a dedicated operation room, employee accommodation, a mechanical factory, and a power station to ensure efficient and sustainable mining processes.
Therefore, the company has facility and maintenance team for operating complex mechanic, especially when there are any problems relating to facility and infrastructure.
In this department, there are three engineer responsible for checking mechanics and production line daily, operating electricity system and solving any problems if happen.
A specialized mining engineer: to supervise mining act ivies at the quarries; to report to Chief Director about the operational activities and advise about a better mechanical innovation;
Finished goods management at No 10 Co., Ltd
Limestone powder is packaged and stored in the yard but at a small house with roof and has a rigid reservation
Particularly, a volume of fence stone is stored in the exploitation area because they are used for producing other types of limestone
+ Warehouse 2: An in-house warehouse built by tole is for storing Block stones and Paver
The warehouse for finished goods is organized into separate sites based on classification, ensuring efficient management of inventory Finished goods are categorized by groups and arranged systematically to optimize storage and retrieval This strategic division helps prevent stockouts and inaccuracies during stock-taking, enhancing overall warehouse accuracy and operational efficiency Proper organization of finished goods warehouses supports streamlined inventory control and reduces errors in order fulfillment.
The business developed a comprehensive warehouse system equipped with advanced tools for product reservation and precise measurement This system ensures the preservation of quality and quantity of finished goods while minimizing damage and reducing losses.
At the huge outdoor storage (Warehouse 1), stones are only reserved by a coverage by canvas because the nature of stone does not require a require a rigid storing method However, it has fence and a keeper for watching on inventory The in-house warehouse (Warehouse 2) has a lock kept by the stock-keeper The stock issue or stock receipt is totally done by the stock-keeper At the end of each month, the directors proposed a document on directing the stock-taking.
1.3 Finished goods management at No 10 Limited Company
1.3.1 Functions and responsibilities of some departments and individuals in the supply chain of finished goods
The Department of Planning and Investment advises the Chief Director on production planning and business strategies, ensuring alignment with company goals They regularly report on the current production status, including raw material availability, equipment usage, and overall production performance By monitoring these key aspects, they develop effective production plans and control the volume of finished goods to meet market demands.
- Department of Technology: to advise Chief Director about the technology and the production innovation; to operate mechanic lines.
+ Chief accountant: to calculate the cost of receipt finished goods and the cost of issue finished goods; to make entries about finished goods into General books daily and at the end of each month;
+ Finished goods accountant: to inspect and summarize finished goods movements (issue, receipt and inventory).
+ Sales accountant: to inspect on sales situations and summarize turnover and issue VAT invoice.
A cashier is responsible for managing cash, including issuing and receiving money to support daily business operations They perform daily cash inventory counts to reconcile the cash on hand with the cash book, ensuring accurate financial records Additionally, the cashier reports daily cash movements to the chief accountant, maintaining transparency and accountability in cash management.
A stock-keeper is responsible for reconciling accounting vouchers with actual finished goods movements, ensuring accurate inventory records They receive vouchers and transfer relevant information to internal departments such as accounting, while securely saving GRNs and GDNs Additionally, stock-keepers organize and reserve finished goods effectively, ensuring proper storage They are also tasked with reporting work promptly, thoroughly, and accurately to the unit head or Chief Director, maintaining smooth inventory management and accurate financial records.
The QA/QC Department is responsible for inspecting and supervising the quality of natural stones at both the quarry and finished products They ensure that all materials meet industry standards, maintaining high quality and consistency Their role is crucial in upholding product excellence and customer satisfaction by adhering to strict quality control protocols.
- Chief Director: to supervise on work and stimulate workers and employees in the business operation
1.3.2 The finished goods management in term of the storage and the reservation
Effective reservation processes depend on accurately identifying the quantity and value of finished goods, ensuring compliance with reservation norms, and promptly detecting excess inventory, losses, or damage These practices help maintain a seamless supply chain, prevent dead capital, and optimize inventory management for sustainable business operations.
+ Calculate the level of reservation norm
+Inventory reconciliation with stock-keeper
+ Immediately report about inventory quantity with accountants
Effective management of finished goods throughout storage, reservation, and usage stages is crucial for overall business success and remains a key concern for company directors To ensure smooth operations, it is essential to perform specific management tasks aligned with inventory characteristics and accounting functions These tasks help optimize inventory control, improve financial accuracy, and enhance supply chain efficiency, ultimately supporting strategic decision-making and business growth.
- Evaluate and classify inventory in accordance with the principles and the requirements of the state as well as of the business;
Organizing accounting vouchers, accounts, and books according to the company's inventory accounting methods is essential for accurately recording, classifying, and summarizing inventory status and movements This process tracks increases and decreases in inventory during production and consumption, ensuring timely data collection Accurate inventory management supports the calculation of production costs and the cost of finished goods, optimizing financial reporting and decision-making.
- Analyze and assess the current situations of performing plan about using inventory in the producing process.
CURRENT SITUATIONS OF ACCOUNTING FOR
Detailed accounting for finished goods at No 10 Co., Ltd
2.1.1 Detailed accounting for receipt finished goods
No.10 Co., Ltd operates across multiple sectors, offering a diverse range of large-scale production products The company's inventory management system diligently tracks both the physical aspects—such as quantity, types, and quality—and the valued worth of its inventory This comprehensive approach ensures efficient operations and accurate stock control across all business areas.
Each month, numerous stone trucks deliver inventory to the warehouse, where the stock-keeper oversees physical inventory in terms of quantity, types, and quality The finished goods cost is determined at the end of each month, ensuring accurate inventory management and cost allocation in the warehouse.
Detailed accounting for finished goods and general accounting for finished goods in No.10 Co., Ltd are performed by the actual costs method
2.1.1.1 Actual cost of receipt finished goods
An accountant summarizes manufacturing costs for the month by including direct materials, direct labor, and manufacturing overhead At the end of the month, the cost of finished goods is identified, allowing the chief accountant to calculate the total manufacturing costs and allocate expenses to each product type Once these calculations are completed, the chief accountant transfers the information to the finished goods accountant to record and manage inventory costs accurately.
At the end of the month, the company aggregates manufacturing costs and records the finished goods at their actual costs The actual costs are calculated using the following formula, ensuring accurate cost allocation and financial reporting This process helps maintain precise inventory valuation and supports effective cost management strategies.
Total cost of receipt finished goods
Manufacturing costs at the beginning of the month
Manufacturing costs incurred in the month
Manufacturi ng costs at the end of the month
The company uses the coefficient method to accurately calculate the unit cost of finished goods, which is ideal for enterprises producing multiple products with similar processes, raw materials, and labor This approach ensures that costs are apportioned appropriately across different products rather than allocated to a single item The coefficient method is well-suited for the company's manufacturing operations and is implemented through a series of specific steps to determine precise production costs.
Step 1: exchange the quantity of finished goods stock-in into the quantity of standard finished goods by coefficients
FG = Quantity of each type of FG x Coefficient of the type Step 2: identify unit cost of standard finished goods
Unit cost of standard FG =
Total cost of all FG
Quantity of standard FG Step 3: identify unit cost of original finished goods
FG = Unit cost of standard FG x Coefficient of the type Step 4: identify total cost of each types of finished goods
Total cost of FG = Quantity of standard FG x Unit cost of original
In December 2019, the company inputs 6 types of finished goods as follows
Manufacturing cost at the beginning of the month = 39,832,566 VND
Manufacturing costs at the end of the month = 35,063,150 VND
At the end of the month, cost accountant calculates actual cost of finished good by summarizing total manufacturing costs incurred in the period.
Total cost of all FG = 39,832,566 + 370,000,700 - 35,063,150 = 374,770,116 (VND)
Unit cost of standard FG = 374,770,116/5,387.3 = 69,565,481 (VND / m3)
Step 3: Unit cost of each type of original finished goods:
Crushed aggregates type 1: 69,565,4810 x 1,34 = 93,217 VND / m3
Crushed aggregates type 2: 69,565,4810 x 1,03 = 71,652 VND / m3
Step 4: Total cost of each type of finished goods:
Crushed aggregates type 1: 93,217 x 350 = 32,625,950 VND
Crushed aggregates type 2: 71,652 x 520 = 37,259,040 VND
The finished goods accountant records stock quantities for each receipt using the Goods Receipt Notes in the Inventory module of METADATA software At the end of each month, unit costs and total amounts for each type of finished goods are updated automatically once users click the Update button, ensuring accurate inventory valuation.
2.1.1.2 Accounting vouchers and the procedure for receipt finished goods
* Accounting vouchers for receipt finished goods
* The procedure for receipt finished goods
- The procedure for receipt of finished goods is described as Figure 2.1.
After processing, the inspection team evaluates the stones to verify their quality and quantity, ensuring they meet the required standards A Minute of Inspection is then prepared to document the findings and allocate responsibility among team members for any potential errors identified during this phase This thorough inspection process guarantees product quality and facilitates accountability in case of future discrepancies.
The deliverer requests the accounting system to record finished goods, which is confirmed by the accounting department They then prepare and sign a Goods Receipt Note to document the receipt of goods Additionally, the accounting team creates detailed books and a stock summary report based on the Goods Receipt Note, ensuring accurate inventory tracking and record-keeping.
The Goods Receipt Note after signed in will be transferred to Warehouse Department for stock keeper to stock in and prepare Warehouse card.
- The rotation flow of receipt finished goods is characterized by Figure 2.2 The responsibility of each individual is also shown clearly
On December 10 th , 2019, after stones were being manufactured, the driver of the truck delivered stones with the quantity as follows: 120 m3 of Limestone 1x2,
100 m3 of Limestone 2x4, 80 m3 of Limestone 4x6, 50 m3 of Fence stone, 80 m3 of Crushed aggregates type 1 and 100 m3 of Crushed aggregates type 2 The Minute of Inspection and the Goods Receipt Note is prepared as Table 2.1 and Table 2.2.
When creating Goods Receipt Notes, it is essential to clearly record the number, date, name of the person delivering the materials, and the warehouse location After signing, these notes authorize the addition of finished goods to warehouse stocks Daily reconciliation between the three parties ensures inventory accuracy, with video surveillance used to resolve discrepancies The stockkeeper documents the date, item name, product model, and quantity, while the accountant handles unit prices and totals Once the receipt note is fully signed, the stockkeeper updates the warehouse cards for finished goods, maintaining accurate inventory records.
Each goods receipts note has 3 copies as follows.
+ Copy 1: saved at the accounting department for filling in and recording on related accounting books;
+ Copy2: saved at the warehouse department by stock keepers for preparing warehouse cards;
+ Copy 3: kept by deliverers for calculating payroll
This is clearly shown in Figure 2.1.
Figure 2.1: The procedure of finished goods receipt at No.10 Co., Ltd
Warehou se check and receive
Input the quantity of finished goods that meet the standards
Check on system and prepare GRN
Stock-in and warehou se cards
Warehouse card waits for approved
FG accountan t prepare Detailed books and Stock summary report
Production Department Accounting Department Warehouse
Figure 2.2: The rotation flow of receipt finished goods at No.10 Co., Ltd
Finished goods accountant Chief accountant Stock- keeper
Table 2.1: Sample of Minute of Inspection
No.10 Co., Ltd – Lai Chau
Muong Te town, Muong Te District, Lai
E-mail: congtytnhhso10laichau@fmail.com
(Issued under the Circular of the Ministry of Finance No.200/2014/TT-BTC dated on
- Accordance to …… …No.… Inspection team includes:
+ Mr/Ms Nguyen Dinh Cua Title: Team leader Represent: Warehouse
+ Mr/MsNguyen Hoai Nam Title: Team member Represent: Delivery team + Mr/Ms Pham Nhat Manh Title: Team member Represent: QA/QC
N o Item name Model Method of inspection
QA/QC representative Stock-keeper Unit head
(Sign, full name) (Sign, full name) (Sign, full name)
Table 2.2: Sample of Goods Receipt Note
No.10 Co., Ltd – Lai Chau
Muong Te town, Muong Te District, Lai
E-mail: congtytnhhso10laichau@fmail.com
(Issued under the Circular of the Ministry of Finance No.200/2014/TT-BTC dated on
Name of goods deliverer: Giang Van Son Dr 155
Location: KTP1 – Finished goods warehouse No.1
No Item name Model Unit Quantity Unit cost Amount *
Goods deliverer Accountant Stock-keeper Unit head
(Sign, full name) (Sign, full name) (Sign, full name) (Sign, full name)
(*Amount is filled in at the end of the month)
2.1.2 Detailed accounting for issue finished goods
2.1.2.1 Actual cost of issue finished goods
The company applies average cost by month in calculating unit cost of issue finished goods.
For example: Calculating actual cost of issue finished goods (Limestonne 1x2) for December 2019
The Opening Stock in the Stock Summary Report shows an actual opening balance of 0 VND and 0 m3, indicating the company had no inventory at the start of the month During this period, no inventory was carried over from previous months The company recorded a stock-in of 1,520 m3 for the month, with an actual total value of 139,567,180 VND, reflecting the recent procurement activity.
Actual unit cost in average = (0 + 139,567,180) / (0 + 1520) = 91,820 VND/m3
On METADATA software, accountant does the as follows.
Accountants must record all vouchers related to finished goods quantities into accounting software At the end of each period, they calculate the average unit cost of finished goods using the "Calculating Average Unit Cost" feature within the "Inventory" module These calculated figures are then automatically updated in the GRN, GDN, and cost of goods sold sections of VAT invoices attached with GDN, ensuring accurate and efficient inventory management.
Accurately determining the actual cost of finished goods is essential for calculating the cost of goods sold each month, which in turn enables the company to set competitive prices aligned with market value and assess overall business performance effectively.
Actual unit cost in average
Actual cost of FG at the beginning
Actual cost of FG input in the period
Quantity of FG at the beginning
Quantity of FG input in the period
Actual cost of issue FG Actual unit cost in average Quantity of x issue FG
2.1.2.2 Accounting vouchers and the procedure of issue finished goods
* Accounting vouchers of issue finished goods
All finished goods transactions are documented accurately in accordance with current policies, ensuring proper recording These documents facilitate the classification, completion, and input of accounting vouchers into the computer system This process enables accountants to access precise and organized information efficiently.
* The procedure of issue finished goods
The procedure for issue finished goods is illustrated as Figure 2.3.
Customers submit a Purchase Order to specify the goods they wish to buy, initiating the sales process The sales accountant then prepares a Goods Issue Requisition to communicate the required quantities to the warehouse department The warehouse team verifies inventory levels and issues a Goods Dispatch Note based on the purchase order and goods issue requisition, ensuring accurate and efficient order fulfillment.
General Accounting for finished goods at No 10 Co., Ltd
With this types of products, the company do not have detail accounts The accounting for stones is inspected mainly on accounting vouchers, warehouse cards and stock summary report
Structures and content of Account 155 Finished goods
Value of finished goods input
Value of surplus finished goods awaiting for resolution
Transferring of value of finished goods on-hand at the end of month
Actual value of finished goods output
Value of shortage of finished goods awaiting for resolution
Transferring actual value of finished goods at the beginning of the month
Debit balance: Actual value of finished goods at the end of the month
Value of finished goods transferred to consignment agents
Value of service provided to customer but not identified as sold
Transferring the value of finished goods delivered to agents but not sold to customers at the end of the period
Value of sold consignment goods or provided service
Value of consignment goods or provided service returned
Transferring value of consignment goods or provided service not defined as sold at the beginning of the period
Value of consignment goods transferred or services provided but not defined as sold in the period
Acc 632: Cost of goods sold
At the end of each month, accountants gather data from detailed accounting books and vouchers, such as GRN and GDN, to record transactions in the General Journal They categorize these vouchers based on specific accounting codes to ensure accurate financial reporting Additionally, the finished goods accountant prepares a Stock Summary Report, compiling data by codes and actual unit costs provided by the chief accountant, facilitating precise inventory management and financial analysis.
The Stock Summary Report for finished goods consolidates all types of stones used for the same purpose, providing comprehensive data on inventory movements This report includes detailed information such as opening balances, monthly receipts, issues, and closing balances, ensuring accurate tracking of stock levels throughout the period It serves as a vital tool for effective inventory management, offering clear insights into stock activity for better decision-making.
2.2.3 The process of general accounting at No.10 Co., Ltd
2.2.3.1 The organization of accounting books
The company utilizes the General Journal form within its accounting system, as demonstrated in the accompanying table This method ensures all transactions are recorded chronologically and categorized by their economic nature Designed to be user-friendly and straightforward, the General Journal is particularly suitable for small and medium enterprises, facilitating efficient recording and reconciliation processes The company follows a specific schedule for applying this form to maintain accurate financial records.
Daily verification of accounting vouchers is essential for accurate financial records, with entries initially recorded in the General Journal and subsequently posted to the General Ledger The number of General Ledgers utilized each month varies based on the number of accounts in use Properly checking and verifying vouchers ensures the integrity of financial data and maintains compliance with accounting standards.
Transactions incurred during the period are recorded in related detailed books and cards alongside the general journal The accountant summarizes these entries from various detailed accounting books and cards to prepare a comprehensive Detailed Summary, ensuring accurate financial reporting and compliance with accounting standards.
- When some special transactions (credit sales, credit purchases) incurs, entries are made under Specific Journals while not inputted to General Journals.
At the end of the period, the General Ledger is summarized to prepare the Trial Balance, ensuring all financial data is accurately aggregated After verifying and reconciling the general ledgers with detailed summary tables derived from detailed books and cards, the financial statements are then prepared, providing a clear overview of the company's financial position.
To ensure accuracy, the credit balance in the trial balance should match the combined offset of the credit and debit balances recorded in the general journal or between the general journal and specific journals Modern accounting software features a re-check function that enables users to review and edit data across various modules, with the system automatically updating related information This process significantly reduces the likelihood of errors, streamlining accounting workflows and enhancing overall efficiency.
Integrating the General Journal form with computer applications has significantly improved the company's accounting procedures, making them faster and more accurate The accounting software enhances management of cash flow, payables, receivables, and inventory, providing comprehensive oversight Additionally, it offers advanced calculation tools, multitasking capabilities, automatic data processing, and various utilities to streamline financial operations Table 2.8 illustrates the document flow within the accounting software, METADATA, highlighting its efficiency and effectiveness.
For inspecting and reflecting accurately and on time the movement of finished goods, the company applies Parallel card method It simplifies the recording process and accelerate the processing This method on computer comes in handy in inspecting and reconciling the data at the end of the month or whenever needed.
Finished goods accounting involves recording GRN and GDN transactions through the Inventory module, which are then updated into the General Journal, Warehouse Cards, and detailed accounting books These updates subsequently reflect in the stock summary report and the General Ledger, ensuring accurate inventory and financial records.
Figure 2.6: Procedure of accounting entries recording under General Journal form
Figure 2.7: Procedure of accounting entries recording under General Journal form on METADATA software
Summary table of all original documents
Detailed accounting books and cards
Figure 2.8: Procedure of accounting entries recording for finished goods
Recording daily Printing accounting books and reports monthly and yearly Reconciliation Relationship
2.2.3.2 Accounting entries for finished goods and finished goods consumption
Perpetual inventory system is used in the company to inspect and reflect perpetually and systematically inventory movement in accounting books By this system, finished goods accounts, or inventory accounts generally, totally reflect the finished goods movements and inventory movement, so the value of finished goods or inventory can be identified any time in the period This method is suitable with
No 10 Co., Ltd due to the need of managing high value inventory.
When receiving finished goods from production, accountant records the following entry:
Dr 155 - Finished goods Quantity of finished goods x Unit cost
Cr 154 – Work in progress Quantity of finished goods x Unit cost
Detailed accounting ledgers for Account 155 and 632
General accounting ledgers for Account 155 and 632
Finished goods consumption in direct sale
When a company sells goods to clients, the stockkeeper completes a Goods Receipt Note with detailed information about the quantity of goods sold Subsequently, the accountant issues a Value-Added Tax (VAT) invoice based on this receipt, applying the applicable 10% tax rate and using the unit price registered with Lai Chau’s Department of Finance This process ensures accurate record-keeping and compliance with tax regulations, with the corresponding journal entry recorded accordingly.
Cr 5112 - Finished product sale (Quantity of products x before tax price)
Dr 632 - Costs of goods sold Quantity of finished goods x Unit cost
Cr 155 - Finished goods Quantity of finished goods x Unit cost
Finished goods consumption in agent consignment
When stock out finished goods, the GDN for consignment goods is prepared. Based on this GDN, accountants record:
Dr Acc.157 - Goods on consignment
When consignment goods are sold, accountants record the revenue based on the invoice list of sold consignment items prepared by the agents The sales revenue is reflected by an entry that records the sale price excluding VAT, ensuring accurate financial reporting and compliance with tax regulations This process facilitates proper revenue recognition while maintaining transparent and organized accounting records for consignment transactions.
Besides, cost of goods sold is recognized as
Dr Acc.632 - Cost of goods sold
Cr Acc.157 - Goods on consignment
The commission that the company has to pay for the agents is recorded as follows.
Stock-out for other purpose
When a company produces finished goods for internal use, such as construction and project building, the stock-keeper prepares a Goods Dispatch Note detailing the quantity of finished goods allocated for internal purposes Based on this note, the accountant records the corresponding accounting entries to ensure accurate inventory and financial tracking Proper documentation and recording of internal goods movement are essential for maintaining accurate financial records and supporting internal cost management.
Dr 154 - Work in progress Quantity of finished goods x Unit cost
Cr 155 – Finished goods Quantity of finished goods x Unit cost
The company conducts regular stock-taking to ensure the physical inventory matches the recorded accounts, identifying any discrepancies When errors are detected, stock-taking staff prepare detailed reports to identify the causes and recommend appropriate solutions Inventory records are meticulously maintained, with accountants recording transactions accurately to ensure precise financial reporting Regular reconciliation helps maintain inventory accuracy, supporting effective inventory management and financial integrity.
If there is increase difference, then records:
Cr 338 - Surplus assets awaiting for resolution
If there is decrease difference, then records:
Dr 1381 – Shortage of assets awaiting resolution
When obtaining an official decision about the cause, Accountant records related entries based on this decision.
For example: On December 5 th , 2019, the company completed the production of 80 m3 of Limestone 1x2 and 120 m3 Limestone 2x4 and 70 m3 Limestone 4x6, after receiving signed Goods Receipt Notes No NSF00219, accountant recorded: