Completing the accounting of raw materials at fancy creation vietnam co ltd tiếng anh

TABLE OF CONTENT ACKNOWLEDGEMENTS During the internship period, I have received a lot of help, support and encouragement from others in order to complete this report First of all, I would like to expr[.]

TABLE OF CONTENT ACKNOWLEDGEMENTS

During the internship period, I have received a lot of help, support andencouragement from others in order to complete this report First of all, I would like

to express my sincere thanks to Assoc Prof , Ph.D Nguyen Thi Thu Lien, who is anexpert in accountancy field She directed me so carefully and kindly I have learnedprecious things from her In addition, I want to say thank to my family for alwayssupporting and motivating me not only in life but also in studying and working.Thanks to them, I have a great opportunity to study in National Economics Universityand accessing this internship

I also would like to express my gratefulness to the Advanced EducationalProgram The faculty gave me a good chance to get an internship by providingspecific direction and support I really appreciate what they have done to create thebest condition for student during the internship period Finally, I would like to express

my sincere thank to Fancy Creation Vietnam Co.,Ltd for giving me an opportunity towork in practical and professional environment I believe that the knowledge andexperiences I have received from the company will be very useful for me in my futurecareer

The Vietnamese economy is more and more developing, the number ofcompanies increases significantly; then, the competition between enterprises becomesmore fierce Therefore, every business must find their own best solution to be able tosurvive and grow To do that, enterprises need to have a well-performing accountingdepartment and qualified accountants that have sufficient capacity to collect and dealwith problems related to financial activities as well as the operation of the business

In production and business activities, all physical products are made from rawmaterials This is an indispensable element in the production process Therefore,accounting of raw materials plays an important role in any manufacturing company Itenhances the management, storage, timely supply of raw materials and improves theefficiency of using raw materials Aware of this, after researching about the company,

I decide to choose the topic "Completing the accounting of raw materials at FancyCreation Vietnam Co., Ltd” for my thesis

According to the purpose of the internship, the report was divided into fourmain chapters so that the readers can have overall knowledge about the accounting ofraw materials at Fancy Creation Vietnam Co., Ltd The first chapter will introduceabout the rationale of the research, research objective and methodology, and the scope

of the research The second chapter gives theoretical framework including definition,characteristics, classification, process of managing raw materials and relateddocumentation and vouchers The third chapter will focus on the real accountingsituation of raw materials at Fancy Creation Vietnam Co., Ltd including detailed andgeneral accounting method of raw materials The final chapter will discuss about theaccounting of raw materials and give some recommendations in order to improve theeffectiveness of accounting of raw materials at Fancy Creation Vietnam Co., Ltd

Co., Ltd: Limited company

LIST OF TABLES

LIST OF FIGURES

CHAPTER 1 INTRODUCTION 1.1 Rationale

Raw material is one of three basic elements that constitute the productionprocess It is the physical components of the products that decide directly to thequality of the products because its characteristic is once-used and their total valuewere transferred into the finished products Materials including main raw materialsand auxiliary create significant influence to the production processes In terms ofmaterial factors, raw materials constitutes the products entity; in terms of value, rawmaterials account for a large proportion of the price structure; in terms of capital, theamount of money used to buy raw materials accounts for high percentage of the totalworking capital of the business; in terms of administration cost, the cost of managingraw materials takes a relatively large proportion of total administration cost of thebusiness Therefore, every companies want to operate their businesses continuouslyand regularly have to ensure the supply of raw materials in sufficient quantity,appropriate time, sizes and qualities That is the function of the accounting of rawmaterials

Accounting of raw materials in business plays a crucial role It records theentire situation of raw materials in the processes of purchasing, warehousing andusing raw materials A well-performed of accounting of raw materials will reflectsexactly the proportion of cost of raw materials in the total cost of finished products aswell as the usage and storage of raw materials Saving the cost of raw materials is animportant factor in reducing production costs and increasing the profit forbusinesses Recognizing the position, role and importance of raw materials as well asaccounting of raw materials, during the internship period at Fancy Creation VietnamCo., Ltd, I have investigated and chose the topic "Completing the accounting of rawmaterials at Fancy Creation Vietnam Co., Ltd” for this research

- Understanding theoretical framework of raw materials, including definition,

characteristics, role, classification, management, general accountingprocedures and documentation system…

- Evaluating the management and usage of raw materials at the company

- Providing some suggestions and recommendations to improve and completethe accounting of raw materials at the business

1.3 Research methodology

This study is the combination of many research methods:

In terms of application, the study uses applicative approach The informationand findings from the report will provide the readers specific understandings aboutthe accounting of raw materials of Fancy Creation Vietnam Co., Ltd in particular andmanufacturing companies in general Based on that, the author give somerecommendations and suggestions to improve the effectiveness of the management ofraw materials in the business

In terms of method of conducting the research, this study use empiricalresearch method During the internship period, the author approached, studied andresearched in a practical business environment All the data and information werecollected and analyzed from the real data source of the Fancy Creation Vietnam Co.,Ltd Therefore, the findings and results of the analysis provided by the study are verypractical

In terms of the study’s purpose, the author use descriptive method to collectand present information about the role, characteristics, classification, managementprocedure , accounting documentation and vouchers, detailed and general accountingprocedures of raw materials

In terms of data collection method, the study uses qualitative approach in order

to describe the real situation of raw materials and accounting procedures of rawmaterials at Fancy Creation Vietnam Co., Ltd , not based on numerical test orcalculation

1.4 Scope of research

The research focus on the topic “ Completing the accounting of raw materials

at Fancy Creation Vietnam Co., Ltd” in the year 2014

Name of the company : Fancy Creation Vietnam Co., Ltd

Tax code: 0900275053

Address: B4 Street, Block B, Pho Noi A Industrial Zone, Lac Hong, Van LamDistrict, Hung Yen Province

Opening date: 12/9/2007

Business license: 052043000039, dated 21/9/2007

Business field: Producing electronic components

The main content of the research includes the real situation of raw materials( characteristics, grouping, management, accounting documentation system ) anddetailed and general accounting procedures ( account system, accounting method inrecording raw materials, accounting books…) of raw materials at Fancy CreationVietnam Co., Ltd

CHAPTER 2 THEORETICAL FRAMEWORK OF RAW MATERIALS AND

ACCOUNTING OF RAW MATERIALS

2.1 The definition, characteristics and role of raw materials

2.1.1 Definition of raw materials

Raw materials are the labor subject that purchased or produced by thecompanies They are formed from different sources and used for production andbusiness activities of enterprises

2.1.2 Characteristics of raw materials

Raw materials have some basic characteristics as follow:

 The raw materials will change their forms and do not keep their original formand shapes when they are used in the manufacturing process

 The raw materials only involved directly in one production cycle

 The entire value of the materials to be transferred directly into the product, asthe basis for calculating cost basis

Requirement of managing raw materials derives from the role and characteristics

of the raw materials During the production process, raw materials should bemonitored, managed strictly in terms of physical objects and values in all stages of theprocurement, storage, preservation and use

2.1.3 The role of raw materials and accounting of raw materials in the business

Every enterprise want to operate their business have to focus on many factors,

of which inputs is the most important factor In particular, raw material is annoticeable factor because they directly create the products The production processwill be interrupted or delayed with the lack of raw materials Raw materials affectdirectly to the quality of the products as well as the effectiveness of using andmanaging assets and capitals of the company Ensuring the quality, quantity andappropriate type of raw materials is the way to improve the quality of finishedproducts In addition, because raw material is the input of the business cycle, directly

relates to the production and consumption process, so the timely supply withreasonable price of raw material is the key condition for the successful operation ofthe business In summary, in terms of physical object and value, raw material is a vitalpart of manufacturing companies Improving the efficiency of raw materialsmanagement will increases the efficiency of using corporation’s assets and capital.

Accounting of raw materials is the process of recording and reflecting thesituation of purchasing, warehousing, importing and exporting of raw materials duringthe production process Accounting documents of raw materials will provide usefulinformation for managers about the quantity, quality of raw materials; based on thatthe managers can suggest some solution to control the price and quality of rawmaterials

Accounting of raw materials plays a crucial role in monitoring and controlling theimplementation of raw materials management’s plan Besides, accounting of rawmaterials affects to the cost accounting in the business Conducting an effectiveaccounting of raw materials helps the managers control the management and usagesituation of raw material in order to make appropriate adjustments

2.2 Classification and evaluation of raw materials

2.2.1 Classification of raw materials

In the production process, the companies have to use many types of rawmaterials In order to manage the raw materials, they must be classified in areasonable way Classification of raw materials is the process of dividing rawmaterials into different types, groups under specific criteria Based on the functionand management requirement of raw materials in the business activities, they aredivided into three main groups:

 Main raw materials: is the raw materials that directly constitutes the actualproducts in the production process such as iron and steel in the mechanicalcompanies, fabric in the garment…

 Auxiliary raw materials: while not directly constitute physical products buthave an important role in changing the substance of the main raw materials(color, taste ) or used to serve workers and management requirements.

 Other raw materials: are generated from the manufacturing process such asscrap wood, iron, steel …or scarp collected from the liquidation of assets

2.2.2 Evaluation of raw materials

Evaluation of raw materials is the process of determining the value of themunder a specific principle According to the current regulation, the import and export

of raw materials must be recorded by historical cost ( Giá thực tế ) However, in manyenterprises, to simplify and reduce the volume of records, they can use accountingcost ( giá hạch toán) accounting for daily records of raw materials

Therefore, to evaluate raw materials, enterprises often use money to expresstheir values In manufacturing companies, the raw materials were evaluated by twomain methods:

- Historical cost

- Accounting cost

2.2.2.1 Evaluating raw materials by historical cost

Historical cost of imported raw materials:

In the manufacturing enterprises, raw materials were imported from many sources.Their price of each entry is determined as follows:

- For purchased raw materials: The value of imported raw materials includes theprice stated in the purchase invoice, actual purchase expenses (including the cost ofshipping, handling, storage, sorting, protection insurance ) plus import duties (ifany) less the amount of trade discount (if any) The purchase price stated on theinvoice is the price excluding VAT under credit method and the price including VATunder direct method

- For raw materials produced by the company: The value of imported rawmaterials is the historical cost of raw materials, tools and supplies that used in

manufacturing process plus manufacturing costs such as storage cost, handling cost,installing cost (if any)…

- For outsourced processing raw materials ( vật liệu thuê ngoài gia công chế bieens ) : the historical cost of raw materials equal the actual value of the outsourcedraw materials plus shipping, handling and installing costs…

- In the case the enterprise receives venture capital from other entities: the actualvalue of raw materials is the price that set and agreed by venture committee plus othercosts ( if any)

- For recovered scrap and raw materials : the actual value is the estimated sellingprice

- For awarded raw materials: the actual value is determined by the equivalentmarket value plus other expenses related to the admission

Historical cost of exported raw materials:

Raw materials are purchased and imported to warehouses from different sources,

so the historical cost of raw materials each time they are imported or exported are notthe same Especially, for the enterprises liable to pay VAT under the credit method ordirect method and the enterprise are not subject to VAT, the historical cost of rawmaterial for each time they are imported are so diferent Therefore, the accountantshave to calculate exactly the historical cost of exported raw materials for differentrequirements and objectives under registered accounting method and ensure theconsistency of it during the accounting periods There are several ways to evaluate thehistorical cost of exported raw materials as follow:

- Weighted average cost per unit: ( Phuong phap binh quan gia quyen) : underthis method, the historical cost of exported raw materials during themanufacturing process were estimated based on the quantity and average unitprice of exported raw materials:

Historical cost of exported raw materials

= Quantity of exported raw materials * Average unit price

Average unit price can be calculated by different ways:

 Phương pháp giá bình quân cả kì dự trữ :

This method applies for the manufacturing companies that have few types ofproduct but import and export them many times Average unit price wascalculated based on the opening raw material

Average unit price = Actual value(Opening+ purchasing)¿

Quantity(Opening+Purc h asing) ¿

 Phương pháp bình quân cuối kì trước

This method is simple and timely reflect the variation of quantity of rawmaterials However, its accuracy is low because it does not reflect the variation ofprice

Average unit price

= Actual value of openingbalance( Quantity of opening balance(¿¿ending balance of previous period ending balance of this previous period ))

 Phương pháp đơn giá bình quân sau mỗi lần nhập

This method is accurate and timely reflect the status of raw materials.However, it is time consuming and complex Thus, it is not applicable for thecompanies that have many types of product and import, export activities occursregularly

Average unit price = Actual value aftereachimported tr ansaction Quantity after eachimported transaction

historical cost of raw materials at the end of the period is the total historical cost of theearliest imported raw materials

This method is applied to monitor the details of quantity and price of each timeraw materials were imported or exported When the market price of raw materialsfluctuated, the raw materials should be recorded by actual price

 LIFO method:

Under this method, the earliest imported raw materials will be exported firstly.The historical cost of exported raw materials includes the historical cost of rawmaterials at the last import, the remainder is the historical cost of the previous import Like FIFO method, this method is applied to monitor the details of quantity andprice of each time raw materials were imported or exported When the market price ofraw materials fluctuated, the raw materials should be recorded by actual price

 Specific identification:

This method is often used for raw materials that have high value and have specialcharacteristics The historical cost of raw materials were recorded based on the actualquantity and purchased price of each types of products, each import and each exportedquantity for each import In other words, the actual exported cost of materials is theactual imported cost of those materials

This method is used to monitor the actual quantity and cost of each import, exportentry for each purchase invoice The company just use only one pre-estimatedhistorical cost to record the raw materials In the storage process, the raw materialsmust be separated by each import-export entry

2.2.2.2 Evaluating raw materials by accounting cost

Because of the diversity and fluctuation of raw materials during the productionprocess, accounting for raw materials must record timely and accurately the quantityand variation of them Thus, the accountant can use accounting cost method to recorddaily status of raw materials

Under this method, all fluctuation of raw materials are recorded by accountingcost (accounting cost or a stable cost in the period) Every day, accountants use this

cost to record imported-exported raw materials At the end of the period, theaccountants must re-calculate the actual value of exported raw-materials inaccordance with actual purchased cost, based on the ratio between actual purchasedprice and historical purchased price of raw materials transferring during the period.

Price difference ratio= Historical cost of (openingbalance+ purc hasing)

Accounting cost of (opening balance+ purc hasing)

Cost of exported raw materials = Price difference ratio* Quantity of exportedraw materials

2.3 Responsibility of raw materials accounting

Arising from the management requirement of raw materials in manufacturingcorporation in particular and market economy in general, accounting of raw materialhave some responsibilities as follow:

 Recording and reflecting timely the available quantity and transfer situation ofraw materials in terms of both value and quantity

 Calculating historical cost (or price) of imported or exported raw materials inorder to provide timely information for managers in the preparation of financialstatements and administration purpose

 Monitoring and controlling the implementation of raw materials accounting’splan

Instructing other divisions in the enterprise to follow the standard andregulation

in recording raw materials to ensure the consistency of entire raw materialsaccounting system in the business

 Monitoring the compliance of storing and using raw materials requirements todetect, prevent and suggest some solutions to deal with redundant, obsolete or

low quality raw materials; based on that to measure exactly the quantity andvalue of raw material for the production process.

Allocating raw materials reasonably to calculate the price of the finishedproducts

 Organizing the accounting system match with inventory accounting method;providing information for the preparation of financial statements and analyze

of operating activities

 Organizing, recording and aggregating the data about the purchasing,warehousing, evaluating and managing of raw materials in terms of quantity,quality, prices, types, supply sources…

2.4 Management procedure of imported-exported raw materials and related

accounting documentation and vouchers.

2.4.1 Import procedure

Raw materials management committee based on the purchase plans and signedpurchase contracts to carry out the purchases When goods are received, the companycan make a record of raw materials ( bien ban kiem nghiem vat tu) , then evaluatethe quality, quantity and specifications of those goods Management committee willcreate a receipt note based on the actual invoice and recorded the actual importedquantity in the receipt note and hand out to storekeeper to complete the importprocedure Where there is surplus, shortage or wrong specification of raw materials,the storekeeper must report to management committee of raw materials After eachday or each period, the storekeeper transfers the receipt notes to the accountants ofraw materials to record in the accounting books

2.4.2 Export procedure

Based on the goods receipt note, the storekeepers export the raw materials andrecord the actual figure in the goods delivery note, then record the actual exportedquantity and ending balance of raw materials in the bin card After each day or eachperiod, the storekeeper transfers delivery note to the accountants of raw materials inorder to calculate the price of finished goods and record in the accounting books

2.4.3 Accounting documentation and vouchers

Accounting vouchers are prepared under the regulation of Ministry of Financeand other related Decisions, including:

2.5 Detailed accounting of raw materials

Detailed accounting of raw materials is the combination accounting betweenstorekeeper and the accounting department to monitor the import, export and endingbalance of raw materials in terms of quantity, quality and value

Detailed accounting of raw materials at warehouse is implemented bystorekeeper Storekeeper is responsible for storage, import and export of raw materialsbased on valid vouchers Storekeeper has to record the status of raw materials into bincard and relevant accounting books

At the accounting department, the accountants check the validity of originaldocuments and record into detailed accounting books and general ledger Then thoseinformation are reported to director in order to help them control the situation of rawmaterials during the production process

Currently, there are three methods of detailed accounting of raw materialsunder the accounting regime as following:

- Phuong phap the song song

- Phuong phap sổ doi chieu luan chuyen

- Phuong phap so du

Each method has their own advantages and disadvantages The enterprise maychoses one of them under specific condition in order to be succeed in their businessactivities

2.5.1 Phuong phap the song song

 Accounting procedure:

At the warehouse, the storekeeper carry out the import, export of raw materialsbased on the receipt note and delivery note Then the storekeeper records thequantity of imported and exported goods into bin card and calculates the endingbalance after each entry Those imported, exported vouchers will be transferred tothe accounting department with an notice of receiving the documents

At the accounting department, after receiving the accounting vouchers fromstorekeeper, the accountants check the documents, complete and record intodetailed accounting books At the end of the period, the storekeeper and theaccountants will reconcile the information between bin card and detailedaccounting books Based on the detailed accounting books, the accountantsprepare “ Bang tong hop xuat-nhap-ton NVL” and “ So tong hop”

Figure 2.1 So do ke toan chi tiet theo phuong phap the song song

Note: Daily record

Monthly record Reconcile

Bin card

Detailed books of raw materials

Bang tong hop nhap-xuat-ton

So tong hop

Imported

vouchers

Exported vouchers

 Advantages and disadvantages:

- Advantages: Simple, easy to check, reconcile and detect the error during therecording process

- Disadvantages: there is coincidence in recording process between storekeeperand accounting department and high volume of works to be done at the end ofthe period, so it reduces the timeliness of the accounting tasks

 Application: This method is applied for the companies that have few types ofraw materials, low variation of raw materials and the quality of managementand accounting is not high

2.5.2 Phuong phap so doi chieu luan chuyen

 Accounting procedure:

At the warehouse, the storekeeper carry out the import, export of raw materialsbased on the receipt note and delivery note Then the storekeeper records thequantity of imported and exported goods into bin card and calculates the endingbalance after each entry Those imported, exported vouchers will be transferred tothe accounting department with an notice of receiving the documents

At the accounting department, the accountants don’t establish detailed books ofraw materials, they create a “ So doi chieu luan chuyen” to record the quantity andvalue of raw materials in each warehouse Based on the imported, exportedvouchers, the accountant will record the situation of each type of raw materials byone line in the “ So doi chieu luan chuyen” At the end of the period, theaccountants have to reconcile the quantity of raw materials between bin card and “

So doi chieu luan chuyen”, reconcile the value of raw materials between “ So doichieu luan chuyen” and general ledger

Figure 2.2 So do ke toan chi tiet theo phuong phap so doi chieu luan chuyen

Note: Daily record

Monthly record Reconcile

 Advantages and disadvantages:

- Advantages: reducing the volume of records because the recording is carriedout at the end of the month

- Disadvantages: There is a coincidence in recording between storekeeper andaccountants The reconciliation is not implemented during the month, so itreduce the effectiveness of raw materials management

 Application: This method is not popular and applied for the companies thathave large quantity and diverse types of raw materials

2.5.3 Phuong phap so du

 Accounting procedure:

At the warehouse, the storekeeper carry out the import, export of raw materialsbased on the receipt note and delivery note Then the storekeeper records thequantity of imported and exported goods into bin card and calculates the endingbalance after each entry for each group of raw materials The ending balance after

Bin card

So doi chieuluan chuyen

General Ledge

each entry will be recorded into “ So so du” and transfer to the accountingdepartment “ So so du” is established by the accountants for the whole year and

be given to to storekeeper before the end of each month

At the accounting department, the accountants directly receive and check theimported, exported document and aggregate the value of those raw materialsbased on each group Then they record in to “ Bang luy ke xuat-nhap-ton” and use

it as the basis to prepare “ bang tong hop xuat-nhap-ton” Then they reconcilebetween “ So so du” and “ Bang tong hop xuat-nhap-ton”

So do ke toan chi tiet theo phuong phap so du

Note: Daily record

Monthly record Reconcile

 Advantages and disadvantages:

Bin card

Exported vouchersImported vouchers

So so du

Bang tong hop xuat-nhap-ton

- Advantages: reducing the volume of recordings, ensure the accuracy ofaccounting because the storekeeper and accountants record the raw materialsregularly.

- Disadvantages: It is difficult to detect the errors, so it requires well-qualifiedaccountants

 Application: This method is often used for the companies that have many types

of raw materials and the transactions related to raw materials occur regularly

2.6 General accounting of raw materials

2.6.1 Account system

 Account 152: Raw materials

The accountants use this account to record and reflect the current value and thefluctuation of raw materials during the accounting period

Account 152 – Raw materials

Opening balance

- Import raw materials during the

period (purchase, self-produce,

outsourced processing…)

- Total value of surplus raw

materials after physical count

- Ket chuyen actual ending of raw

materials ( In the case the enterprise

use perpetual system for raw

materials)

- Export raw materials during the period ( for production, selling, contribute to venture capital…)

- The value of raw materials return tosuppliers or be discounted

- Total value of shortage raw materials after physical count

- Ket chuyen actual opening balance ( In the case that enterprise use periodically system for raw materials)

Ending balance

 Account 611 – Purchases

The accountants use this account to record and reflect the purchasing of rawmaterials during the period

Account 611 - Purchases

- Ket chuyen actual opening balance

of raw materials ( Based on

physical count)

- Total actual value of purchased

raw materials and returned goods

during the period

- Ket chuyen actual ending balance of raw materials ( Based on physical count)

- Total actual value of exported raw materials ( for production or selling)

- Total value of purchased raw materials that return to suppliers or

be discounted

Account 611 does not have ending balance

Account 611 has two sub-accounts:

Account 6111: Purchases of raw materials

Account 6112: Purchases of goods

2.6.2 Accounting of main transactions related to raw materials

2.6.2.1 General accounting of imported raw materials

 Importing the raw materials with sufficient accounting vouchers, the quantity

of actual imported raw materials are matched with the figure on invoices andvouchers To reflect purchasing cost, VAT and total payment, the accountantsrecord:

Debit 152: Purchased price of raw materials (stated in the invoices)

Debit 133: VAT (if any)

Credit 111, 112, 331 : Total payment

 In the case of trade discount, returns and allowances , the accountants record the decrease of raw materials as follow:

Debit 111, 112, 331: Total amount of money to be discounted or returned

Credit 152: Value of discounted or returned raw materialsCredit 133: VAT (if any)

 For imported raw materials, the import tax, excise tax and non-deductible VATare included in import price, the accountants record as follow:

Debit 152 : Raw materials

Credit 3333 : Import tax payable

Credit 3332: Excise tax payable

Credit 33312 : VAT payable

 For deductible VAT of imported raw materials:

Debit 133: deductible VAT of imported raw materials

Credit 33312: VAT of imported raw materials

 At the time raw materials are imported into the warehouse, there is a shortage

of raw materials, the accountants record:

Debit 152: Actual value of imported raw materials

Debit 133: VAT

Debit 138: Actual value of shortage raw materials

Credit 111, 112, 331: Total payment

 When the accountants determine that the reaon for shortage relates to suppliers,then the suppliers provide extra delivery, the accountants record as follow:Debit 152: Total value of shortage raw materials

Credit 1381: The amount of shortage raw materials

 When the surplus are decided to purchase as an addition, the accountants record:

Debit 3388: Value of surplus raw materials

Debit 133 : VAT relates to surplus raw materials

Credit 111, 112, 331 : Additional payment

2.6.2.2 General accounting of exported raw materials

 Exporting raw materials for managing or producing, the accountants record: Debit 621: Direct raw materials used for manufacturing

Debit 627: Overheads cost

Debit 641: Selling expense

Debit 642: Administration expense

Credit 152: Value of exported raw materials

 Exporting raw materials for venture capital, the accountants record based on agreed price:

Debit 222: Agreed price between related parties

Credit 152: Value of exported raw materials

 Exporting raw materials for outsourced processing, the accountants record:Debit 154: Work-in-progress manufacturing expense

Credit 152: Value of exported raw materials

 Importing raw materials for selling, the accountants record:

Debit 632: Cost of goods sold

Credit 152 : Value of exported raw materials

2.6.2.3 Other cases

 Importing raw materials due to venture capital of other parties:

Debit 152: Agreed price of raw materials

Credit 411: Agreed price of raw materials

 Importing raw materials due to the surplus of raw materials and scarp afterproduction process :

Debit 152: Value of surplus imported raw materials or scrap

Credit 621, 627: Value of surplus imported raw materials

Credit 154: Value of imported scrap

CHAPTER 3

RESULTS AND ANALYSIS OF DATA ABOUT THE ACCOUNTING OF RAW MATERIALS AT FANCY CREATION VIETNAM CO., LTD

3.1 General status of raw materials at Fancy Creation Vietnam Co., Ltd

3.1.1 Characteristics of raw materials at Fancy Creation Vietnam co., Ltd

The main products of the Fancy Creation Vietnam Co., ltd are electriccomponents that were formed by many kinds of raw materials Based on the diversityand function of raw materials in the production process, raw materials are divided intofour main groups: main raw materials, secondary raw materials, fuel and alternativecomponents( Phu tung thay the):

- Main raw materials: are those components that mainly constitute the finishedproduct They includes cushion, tube pipes, plastic tray, electric lines, rubberpipes, PE pipes, rubbers, PVC, porous…

- Secondary raw materials: bandage, decal paper, nylon…

- Fuels: electric, oil, petro

- Bao bì đóng gói : thùng cacton, bao tải, dây buộc, băng keo, giấy nhãn,…

3.1.2 Management of raw materials at Fancy Creation Vietnam co., Ltd

The objective of company in management of raw materials are storaging andusing raw materials, especially main raw materials, in an economic and appropriateway in order to make plans for purchasing and using raw material, reducingmanufacturing cost and bank loans In general, raw materials at Fancy CreationVietnam Co., Ltd has been organized and using appropriately and match withcompany’s target

Specifically, the warehouse system were equipted with sufficient facilities toweigh, count and evaluate exactly the quantity and quality of the raw materials Theraw materials were checked carefully before importing and exporting In addition, thewarehouses were located near to the manufacturing areas so that they were providedtimely to the production

Furthermore, in the warehouse and accounting department, all the export and transferring document procedure were implemented regularly and in

import-accordance with the law and regulation The physical count were conducted regularly

at the end of the month to obtain accurate figure about quality and quantity of rawmaterials In the case that raw materials were redundant or wrong, the storekeeper andaccountants will find out the reason and suggest some solution to improve thesituation Actually, the accounting at the warehouse and the accounting departmentwere implemented comtemporanously ( dong thoi) and well-cooperated, thus there is

no difference between warehouse’s figure and accounting department’s figure

3.1.3 Documentation and vouchers used in accounting raw materials at Fancy Creation Vietnam Co., Ltd

In the accounting of raw materials, the documentation and vouchers wereclassified into four main groups:

- Importing vouchers: VAT invoices, receipt note, …

- Exporting vouchers: delivery note, raw materials request…

- Vouchers that used to adjust the differences of physical count: physical countminute and adjustment to physical count minute…

- Vouchers that relate to the return of raw materials to suppliers: delivery note,invoices, return minutes…

3.2 Detailed accounting of raw materials at Fancy Creation Vietnam Co., Ltd 3.2.1 Accounts system and accounting method of raw materials

3.2.1.1 Accounts system

Because of diversity and regular fluctuation of raw materials, the FancyCreation use perpetual system in recording the raw materials

The company uses some main accounts as follow:

 Account 152: Raw materials

 Account 1521: Main raw materials

 Account 1522: Secondary raw materials

 Account 1523: Fuel

 Account 1527: Alternative components

 Account 1528: Other raw materials

 Account 331: Account payables

 Account 141: Advances

 Account 111: Cash on hand

 Account 112: Cash at bank

- At the accounting department: the accountants open detail books to monitorraw materials in terms of quantity and value For each 3 or 5 days, theaccountants come to warehouse and check the records of storekeeper in the bincard, sign in the bin card and collect receipt note and delivery note to record inthe detail books At the end of the month, the accountants calculate theaggregate figures for each type of raw materials and reconcile withcorresponding figures in the bin card

 Advantages: providing timely and sufficient information about the import,

export and ending balance of each types of raw materials; easy to record, checkand reconcile

 Disadvantages: there is a coincidence about the record at the warehouse and

accounting department and high volume of records

Figure 3.1 So do hach toan chi tiet NVL theo phuong phap ghi the song song

Note: Daily record

Monthly record Reconcile

3.2.2 Detail accounting for import of raw materials

3.2.2.1 Calculating price of imported raw materials

Calculating price of raw materials is the process of using monetary to expresstheir values There are several ways to calculate price of raw materials and theenterprise should choose one of them that match with the practical condition of thebusiness In principle, raw materials should be evaluated based on the actualpurchasing price This is the expense that the company has to pay to acquire thosematerials Historical cost reflects exactly the value of raw materials and it isdetermined by each source of imported raw materials Imported raw materials in theFancy Creation Vietnam Co., Ltd are recorded based on following characteristics andprinciples:

- Main raw materials are mainly bought in domestic market and a part fromforeign markets (Europe, US, Germany…)

Bin card

Detail accounting book

of raw materials

Bang ke nhap-ton

xuat-Generalledger

- Actual purchasing price of domestic raw materials includes price stated ininvoices and related incurred purchasing expenses (if any)

- Actual purchasing price of foreign raw materials includes price stated ininvoices , import tax and other incurred purchasing expenses (if any)

- For raw materials that self-produced by the company, historical cost of rawmaterials equals historical cost of exported raw materials plus conversion cost(if any)

- For recoverable raw materials or scrap , historical cost of those is determined

by fair value or estimated selling price

3.2.2.2 Import procedure and related vouchers

In the Fancy Creation Vietnam Co., Ltd, the Purchase Division of BusinessDepartment is responsible for purchasing and providing raw materials for productiondivision They have to look for the potential suppliers, establish a book to monitor andcontrol the input of raw materials for manufacturing process

Based on the current production status and reverse of raw materials, ProductionDivision plan for purchasing raw materials and send a purchase request to BusinessDepartment After approved by director, the purchasing division will create apurchase order directly to suppliers When the invoices, delivery notes of suppliers arereceived by the Business Department, the purchasing division will check andreconcile those documents to the contract As receiving the raw materials fromsuppliers, the staff of Business Department and the storekeeper will check thequantity, quality and specification of them and establish a Bien ban kiem nghiem vat

tu If the raw materials are qualified, the storekeeper conduct the import based on theactual number The Business Department create receipt note based on invoice,handout minute and Bien ban kiem nghiem vat tu In the case raw materials are notqualified, the storekeeper and deliverer have to make a document to record thoseunqualified raw materials and report to Business Department

Receipt note is created for each import and has 3 copies:

- 1 copy hold by purchasing division

- 1 copy hold by storekeeper

- 1 copy hold by accounting department

The import procedure can be illustrated by the following diagram:

Figure 3.2 Import procedure

Copy 3:

Kept by Accounting Department

Copy 2:

Kept by Storekeeper