Accounting for revenue and business results at hoang phat production, trading and service company limited

Business result is the final result of ordinary production and business activities and other activities of an enterprise in a certain period, expressed in the amount of from financial ac

INTRODUCTION

1 The urgency of the subject:

In the context of international economic integration and trade liberalization, businesses in all sectors of the economy in general, and businesses operating in the trading sector, in particular, always have a big question about how to survive and develop, how to become more competitive or how to increase its strength in the current market economy

It can be seen that, in order for a business to achieve its ultimate goal - profit, it

is necessary for the business itself to effectively manage its production and business activities to maximize revenue and minimize costs Therefore, businesses - especially trading businesses need to promote their initiative and creativity in business activities

to maximize their advantages to achieve the highest efficiency through actions such as: increasing the production and business capacity of the enterprise itself; flexibly grasping and meeting the needs and psychology of consumers, thereby helping to increase sales and achieve the highest possible profit

In addition to finding ways to improve efficiency in their production and business activities, the organization and management of accounting is considered one

of the essential requirements for every business because it will make an important contribution to the management and decision-making of business administrators It can be seen that accounting information, especially accounting information about sales and business results is one of the most effective reference information for managers to understand the business performance of an enterprise More than ever, organizing sales accounting and determining business results is an indispensable requirement in the operation process for every commercial enterprise The completion

of accounting for revenue and determination of business results will contribute to helping businesses improve the quality of financial information, making business decisions more effective, thereby helping the business can survive, develop and compete more

Recognizing the importance of sales accounting and determining business results, combined with the knowledge that has been equipped in the process of studying at school and in practice at the company and under the guidance of Dr Nguyen Tuan Anh and with the help of the Board of Directors and the accounting department of the company, I chose the topic: “Accounting for revenue and business results at Hoang Phat Production, Trading and Service Company Limited" as the subject of my graduation thesis

2 The purposes of the dissertation:

Several purposes which are commonly used in under graduated dissertation is

3 Research objects and scope of the dissertation

3.1 Research objects:

Researching the theoretical background and the reality of accounting for revenue and business results in Hoang Phat Production Trading and Services Company Limited based on some theories, accounting standards, and accounting regimes as follows:

- Vietnamese accounting standards system issued by the Ministry of Finance

- Circular 133/2016/TT-BTC - Accounting for small and medium enterprises of Ministry of Finance dated August 26, 2016

3.2 Research scope:

- Regarding content: Focusing on the actual accounting for revenue and business results in Hoang Phat Production Trading And Services Company Limited regarding financial accounting domain

- Regarding specific address: Hoang Phat Production Trading And Services Company Limited - 53 Hang Dieu, Cua Dong Ward, Hoan Kiem District, Hanoi, Vietnam

- Regarding time: studying theoretical issues and surveying actual situation in the Hoang Phat Production Trading And Services Company Limited for the year 2021 – 2022

4 Research methodology

In order to collect and process data and present research results, the authors could apply a combination of methods of theoretical research, fieldwork, interviews, expert consultation, statistical data, analysis, comparison as follows:

- Collection of primary documents: The author asked and consulted directly

with the accountants and other employees in the company In addition, the author explores research issues through consulting with instructors and accounting experts

- Collection of secondary documents: The author conducted research

theoretical issues through reference textbooks, articles, magazines, academic papers… Collect secondary documents on the situation by observing methods, studying documents, accounting books, financial statements of the company Information could also be collected via the media and other documents

- Summarizing and processing data as evidence for the research results: The author uses descriptive statistical methods, qualitative or quantitative analysis and comparison between the reality and theoretical basis or accounting regime to present research results

5 The structure of the dissertation

In addition to the introduction and conclusion, the dissertation consists of 3 chapters:

Chapter 1: General theory on the accounting for sales and business results determination in the commercial company

Chapter 2: The actual accounting for accounting for sales and business results determination in Hoang Phat Production Trading and Services Company Limited

Chapter 3: Some suggestion on accounting for revenue and business results determination in Hoang Phat Production Trading and Services Company Limited

CHAPTER 1: GENERAL THEORY ON ACCOUNTING FOR SALES AND BUSINESS RESULT DETERMINATION IN THE COMMERCIAL COMPANY

1.1 Importance of accounting for sales and business result determination in a commercial company

1.1.1 Definition of sales and business result determination:

- Sale is the transfer of ownership of goods with benefits or risks to the customer, and at the same time being paid or accepted by the customer

Sales are the final stage in the production and business process of an enterprise This is the process of converting capital from the form of capital products, or goods to the form of money capital or payment capital

- Business results are the final results of normal production and business activities and other activities of the enterprise in a certain period, expressed in profit

1.1.2 Characteristics and importance of sales and business result determination:

1.1.2.1 Characteristics of sales process and business result determination:

Sales process is a process in which:

+ There is an agreement between the buyer and the seller on the quantity, quality and specifications of the goods sold

+ There is a change of ownership and right to use the goods from the seller to the buyer

+ The seller delivers the goods to the buyer and receives the money or accepts payment This amount is called sales revenue

The sales process will determine the financial capacity, the ability to recover capital to reproduce in the enterprise

Business result is the final result of ordinary production and business activities

and other activities of an enterprise in a certain period, expressed in the amount of

from

financial

activities

= Total net revenue from

financial activities - Cost of financial activities

In which:

Net revenue from selling goods and providing services is calculated as total

revenue from selling goods and providing services minus (-) deductions from revenue

Other activities results are results calculated as the difference between other

income and other expenses

1.1.2.2 Importance of sales process and business result determination:

- The sales process is one of the important processes of business activities

When doing good sales, company will quickly increase capital turnover, increase

profits, fulfill their obligations to the State budget through tax payment, develop

investment, improve the lives of laborer

- The determination business results helps business see production and business

activities in the period, thereby company makes appropriate decision policies At the

same time, it is an important basis for the State to assess the ability of business

operations of enterprises, thereby building and examining the implementation of

obligations to the State of enterprises Determining business results helps promote the

use of human resources and the allocation of resources effectively for the entire

national economy in general and for each business in particular

1.1.3 Management requirements for accounting for sales and business

result determination

1.1.3.1 Management requirements for goods for sale, sales and determination of

business results process:

The company should be (1) manage the plan and implementation of the target

consumption plan in each period, each type of product, each economic activity, and each

customer and (2) detailed management by quantity, quality, type, and value of each product

Quantity management:

Reflecting on the value and monitoring the implementation of production plans, the situation of inventory import and export, enterprises temporarily stockpile products and propose measures to handle long-term inventory and avoid outstanding capital

Quality management:

Quality management through the development of product quality standards; preservation and storage of goods; Improving coding and building branded products is the goal for the sustainable development of enterprises in today's increasingly competitive market economy

1.1.3.2 Management requirements for sales and determination of sales results process:

On the basis of comparing the revenue, income and expenses of each company's activities, the results of the enterprise must be distributed and used for the right purposes in accordance with the financial body prescribed for each type of business specific businesses and must adhere to the following basic requirements:

- Capture and closely monitor each sales method, each payment method, each type of goods consumed and each customer, to ensure that the payment situation of each customer is captured, thereby planning Timely recovery of capital

- In addition, the enterprise must develop a sales policy suitable to each period, each market, and each customer in order to promote the sales process of the enterprise and at the same time conduct market exploration to expand the economic relations with new customers

- Accurately calculate and determine the results of each type of activity and closely monitor each sales method, payment method, characteristics of each customer and each type of goods sold to ensure sales activities from which to check the reasonableness and legitimacy of the data to serve as a basis for determining the business results of the enterprise to achieve the highest accuracy and efficiency

1.1.3.3 Requirements for sales accounting and business results determination:

To meet the management requirements of finished products and goods; sales and determination of business results, each sales accountant and determining business results of the company need to fulfill the following requirements well:

- Reflect and record fully, timely and accurately the actual situation and fluctuations of each type of finished product and goods according to the criteria of quantity, quality, type and value

- Reflect and record fully, promptly and accurately the revenue, revenue deductions and expenses of each activity in the enterprise Simultaneously, monitor and urge customers' receivables

- Accurately reflect and calculate the results of each activity and the distribution of business results of the company

- Provide accounting information for the preparation of financial statements and periodic analysis of economic activities related to the sales process, determination and distribution of results

- For the sales accounting and determination of business results, it must be organized closely and scientifically, ensuring the determination of the final results of the business process, reflecting and monitoring and checking the implementation situation obligations of enterprises to the State

1.2 Methods of sales and payment

1.2.1 Methods of sales:

- Based on the product transfer to the buyer:

 Direct selling method: According to this method, when the company delivers goods and to customers, at the same time, customers immediately pay or accept payment to ensure the conditions for recording sales revenue Direct selling methods include:

 Sales with immediately collect payment: Company sells goods and is paid immediately by customers Then the amount of goods is determined to be consumed, while the sales revenue is determined (sales of products coincide with the sale of goods at the time of implementation)

 Sales are accepted immediately by the buyer (there is no deferred payment): The enterprise delivers the goods to be accepted by the customer but has not paid immediately At this time, the sales revenue has been determined but the money has not been collected

 Sales with deferred payment, interest payment installments: Selling goods under this method is a method of collecting money multiple times, the buyer

by the buyer in subsequent periods and subject to a certain interest rate The company recognizes sales revenue at selling price immediately and recognizes revenue from financial activities of interest on deferred payment based on the payable but deferred payment, in accordance with the time of recognition of the certified revenue

 Sales of goods exchange: enterprises bring products, supplies and goods

in exchange for other goods which are not similar in nature

 Transit for sales method: Under this method, company will periodically send goods to customers according to the agreements in the contract Customers can

be agents or regular customers under economic contracts When we deliver the goods

- the finished good is still owned by the company, because it has not satisfied the conditions for recognizing the revenue at the same time When the customer pays or accepts payment, the revenue is recognized because the company has transferred the benefits associated with ownership of the goods - the finished goods to the customer

+ Consignment sales:

This method of sale is applied in case the seller consigns the goods to ask the consignee to sell the goods and pay the agreed remuneration The time when the goods are sent for sale is to transfer the temporary management of the company's assets to the consignee Goods are considered to be consumed only when the consignee confirms that the goods have been sold to the customer The performance of the payment obligation to the consignment agent can be done in one of two ways:

 The consignee is entitled to % of the selling price to the buyer

 The consignee pays the depositor at the price notified by the depositor The actual selling price to the customer is decided by the consignee

- Based on sales scope:

 Selling goods outside company: By this method, company’s products and goods are sold to companies outside the company

 Internal sales: By this method, products and goods of company are consumed by the company itself or sold to internal units (superior units, subordinate units or units of the same level)

1.2.2 Methods of payment

- Pay immediately by cash on hand and cash at bank

Under this method, when the buyer receives the goods from the company, they will pay immediately to the company in cash or bank deposits This method is often used in case the buyer is a small customer, buying goods in small quantities or being able to pay immediately at the time of delivery

- Credit sales with interest

Under this method, the buyer pays the money after the time of receiving a certain time agreed by the two parties, at the end of that time, the buyer will have to pay all the value of the purchased goods plus an additional amount fee called interest from deferred payment

- Pay by installments

The method of payment by installments is essentially a method of lending that, due

to the same repayment periods and interest periods, the repayment amount of each period is equal, the interest is calculated on the outstanding principal balance and the actual number

of days of the repayment period

1.3 Accounting for sales and business result determination in a commercial company

1.3.1 Accounting for sales revenue and revenue deductions:

1.3.1.1 Overview of revenue:

Definition of revenue: Revenue is the gross inflow of economic benefits

during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to

contributions from equity participants (VAS 01 – Framework)

Thus, revenue includes only the total value of the economic benefits received

or will be received by the enterprise Revenues collected on behalf of a third party that are not a source of economic benefits and do not increase the equity of the enterprise will not be considered as revenue

Revenue from sales and service provision is revenue of production and trading activities from the following transactions and operations:

 Sales: Selling products manufactured by business or goods purchased and real estates invested

 Service provision: Performing services agreed in contract for one or more accounting periods such as providing transportation or travel services, leasing of fiaxed assets in ways of operating lease, revenue form construction contract,…

 Other revenue

1.3.1.2 Overview of revenue deduction:

Definition of revenue deductions

Revenue deductions are the amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any trade discounts allowed The sales reported on a company’s financial statement is a net sales number reflecting these deductions

Revenue deductions account is used to record the deducted adjusted amounts in revenue from sales and service provisions incurred in the period, including trade discounts, sales returns and allowances This account does not record the taxes deducted in revenue such as output VAT payable under subtraction method

 Trade discounts are the amount of money that enterprise reduces the listed price for customers who bought goods and services in large volume in accordance with the signed agreement between the two parties

 Sales return is the value of the volume of goods previously determined to be sold that is returned or refused to pay by the customer due to the following reasons: breaching the commitment or the economic contract, or being wrong quantity, quality or specifications

 Sales allowance is a reduction in the selling price made by seller for buyers when the goods are not in the same specification or wrong quantity, quality as those mentioned in the economic contract

1.3.1.3 Accounting principles for revenue and revenue deductions:

Revenue is recorded at the time the transaction arises when the economic benefits are firmly gained that are determined under the fair value of the amount to be received, regardless of having earned money or being going to earn money

Revenue and expense setting up such revenue must be recorded simultaneously under the matching principle However, in some cases, matching principles may conflict with the prudence principle, accountants must base on the nature and accounting standards to record transactions honestly and reasonably

• Revenue must be recorded in accordance with nature rather than the form or the name of the transaction and must be allocated under obligations of providing goods or services

- Time and basis for recording accounting revenue and taxable revenue may vary depending on the specific situation The taxable revenue is only used to determine tax payable as prescribed by law;

- Revenue recorded shall only include revenue of the reporting period For accounts that record revenue without balance, at the end of period, accountants must transfer revenue to determine income statement

(1) Conditions for revenue recognition:

a) An enterprise only recognizes sales revenue when the following conditions are satisfied simultaneously:

- The enterprise has transferred most of the risks and benefits associated with the ownership of products and goods to the buyers;

- The enterprise no longer retains the right to manage the goods as the owner

or the right to control the goods;

- The revenue can be measured reliably When the contract stipulates that the buyer is entitled to return the purchased products and goods under specific conditions, the business is only allowed to recognize revenue when those specific conditions no longer exist and the buyer cannot the right to return goods and goods (except for cases where the customer has the right to return goods in the form of exchange for other goods or services);

- The enterprise has or will receive economic benefits from the sale transaction;

- Can determine the expenses related to the sale transaction

b) An enterprise only recognizes revenue from service provision when the following conditions are satisfied simultaneously:

- The revenue can be measured reliably Where the contract provides that the buyer is granted the right to return services purchased under specific conditions,

revenue is recognized only when those specific conditions no longer exist and the buyer is not granted the right to return payments for services rendered;

- The enterprise has or will receive economic benefits from the transaction of providing such services;

- Can determine the part of the work completed at the time of the report;

- Can determine the costs incurred for the transaction and the costs identified to complete the transaction providing that service

(2) In case an economic contract includes multiple transactions, the enterprise must identify the transactions to recognize revenue in accordance with the standards, for example:

- Where the economic contract stipulates the sale and provision of after-sales services (in addition to the normal warranty terms), the enterprise must separately record sales revenue and service provision revenue;

- Where the contract stipulates that the seller is responsible for installing products and goods for the buyer, revenue shall be recognized only after the installation is completed;

- In case an enterprise is obliged to provide the buyer with free goods, services

or discount, the revenue shall only be recorded from the goods or services that must be provided for free until upon fulfillment of its obligations to the buyer

(3) Net revenue from sale of goods and provision of services performed by the enterprise during the accounting period may be lower than the revenue from goods and provision of services initially recognized due to the following reasons:

The enterprises give trade discounts, sale allowances to customers or goods sold are returned (the conditions of specifications and materials specified in the economic contract are not guaranteed);

In case of products, goods and services consumed from previous periods, to the next period subject to trade discount, sale allowances, or returned goods, revenue shall

be recorded as a decrease according to the principle:

- If products, goods and services that have been consumed from previous periods subject to trade discount, sale allowance or returned, but incurred before the

time of issuance of financial statements, the accountant must consider this as an event arising after the date of preparation of the financial statements and record a decrease

in revenue in the financial statements of the periodical report

- In case products, goods and services are subject to a sale allowance, trade discount, or must be returned after the issuance of the financial statements, the enterprise shall record a decrease in revenue of the period in which they arise

(4) Revenue in some cases is determined as follows:

- Revenue from sale of goods and provision of services does not include indirect taxes payable, such as VAT (including the case of payment of VAT by the direct method),

excise tax, export tax, and environmental protection tax

In case it is not possible to immediately separate the payable indirect tax amount at the time of revenue recognition, the revenue shall be recorded including the payable tax amount and must periodically record a decrease in revenue for the payable indirect tax amount When preparing the income statement, the item "Revenue from sales and services provisions" and the item "Revenue deductions" do not include the amount of indirect tax payable in the period due to the nature of the indirect taxes are not considered part of revenue

- In case the enterprise has written a sales invoice and has collected the sales proceeds but at the end of the period has not yet delivered the goods to the buyer, the value of these goods shall not be considered as sold in the period and shall not be recorded in account 511 “Revenue from sale of goods and provision of services” but only credited

to account 131 “Receivables from customers” about the amount collected from customers When the goods are actually delivered to the buyer, accountants will record to account 511 “Revenue from sales and provision of services” of the value of delivered goods, pre-collected from sales, in accordance with the revenue recognition conditions

- In case of issuing goods for promotion or advertising, but customers are only allowed to receive promotional and advertising goods with other conditions such as having to buy products and goods (for example, buy 2 products, get 1 free) ) then the accountant must allocate the proceeds to calculate revenue for both promotional

goods, the value of promotional goods shall be included in the cost of goods sold (in this case, the nature of the transaction is a sales allowance)

- In case an enterprise has revenue from selling goods and providing services in foreign currencies and has a transaction to receive advances from customers, the revenue corresponding to the amount received in advance is recorded at the actual exchange rate at the time of receiving the advance, the portion of revenue corresponding to the remaining amount is recognized at the actual exchange rate at the time of revenue recognition

- For goods sold by agents or consigned by the method of selling at the right price to enjoy a commission, the revenue is the part of the sales commission that the enterprise

- In case of sale by mode of deferred payment or installment payment, the revenue is determined according to the immediate selling price;

- No revenue from sales or service provision is recorded for:

+ Value of goods, supplies and semi-finished products delivered to outside parties for processing; Value of goods consigned for sale by the method of consignment, agent consignment (not yet determined to be sold);

+ The proceeds from the sale of trial products;

+ Revenues from financial activities;

+ Other incomes

- Accountants must monitor separately the trade discounts that enterprises pay to the

buyer but have not yet been recorded as the deduction from the amount payable on the bill In this case, the enterprise records the initial revenue excluding trade discount (gross revenue)

- Accountants must monitor in detail trade discounts, sales returns and allowances for each customer and each type of goods sold, such as: sales (products, goods), service provisions At the end of the period, enterprises must net off credit balance and debit balance of account 511 - "Revenues from sales and service provisions" to determine the net revenue of products, goods and services actually earned in the reporting period

1.3.1.4 Documents used:

Sale contracts, Sales invoice Inventory issuing notes, Cash receiving vouchers, Credit notes, VAT invoices, VAT declaration, Delivery note, Receiving note, Payment documents, Other documents,…

1.3.1.5 Accounts used:

Acc 511 – Revenues

Acc 3331 – VAT payable

Acc 3387 – Unearned revenue

Other related accounts: Acc 111, 112,131,…

1.3.1.6 Contents and structure of account 511 – Revenue

Contents:

Account revenue (511): Revenues is used to record revenues of business in an accounting period, including revenue of selling goods, products and provisions of services

On the other hand, Circular 133/2016/TT-BTC removed all accounts to track sales deductions such as sales returns, sales allowances and trade discounts When there are deductions for revenue arising in the period will be recorded to the debit side

of account 511

Account 511 comprises these sub-accounts as follows:

Acc 5111 – Revenue from sales of merchandises

Acc 5112 – Revenue from sales of finished goods

Acc 5113 – Revenue form services rendered

Acc 5118 – Other revenue

Structure:

 ACCOUNT 511 – Revenue from selling goods and services provisions

- Payable indirect taxes (VAT, excise,

export, environmental protection);

- Revenue deductions (Trade discounts,

sales returns and allowances)

- Transfer of net revenue to account 911

―Business result determination

Revenues from sales of products, goods, real estates invested and service provision of enterprises performed in accounting period

1.3.1.7 Method of accounting for several major transactions

(1) Revenue recognition:

*In case the enterprise calculates tax by the deduction method:

(1.1) Cash sale or credit sale without interest on late payment

(1.2) Credit sale with interest payment, installment sale:

(1.3) Dissimilar exchange of goods

(1.4) Goods sent on consignment:

(1.5) Sale with cash discount:

 Cash sale with cash discount

 Credit sale with cash discount:

(1.6) For goods processing activities at the processing enterprise:

When determining the revenue from the actually entitled processing amount, accountants shall be recorded:

*In case the enterprise calculates VAT by the direct method:

• When selling products, goods and services, revenue is recognized as below:

(2) Revenue deductions recognition:

Circular 133/2016/TT-BTC removed all accounts to track sales deductions such as sales returns, sales allowances and trade discounts

When there are deductions for revenue arising in the period, the accounting records are as follows:

(3) At the end of the accounting period:

When net revenue is transferred to Account 911 “Income summary”, the following accounts shall be recorded:

1.3.2 Accounting for cost of goods sold:

1.3.2.1 Overview of cost of goods sold:

Definition:

The cost of goods sold is the cost of the merchandise that a retailer, distributor

or manufacturer has sold The cost of goods sold is reported on the income statement and can be considered as an expense of the accounting period

1.3.2.2 Methods of stock evaluating in a commercial company

- In case the goods are bought and sold immediately, without going through the warehouse:

Cost of goods sold = Actual purchase price of goods sold + Actual costs related

to the purchase process

In which:

+ Actual purchase price of goods sold shall be calculated according to one of the

following three methods of inventory evaluating:

(1) Specific identification method: is a method of managing goods in batches, this method is applicable to businesses with few identifiable and stable goods or items According to this method, goods imported in batches at any price will be exported at that price regardless of the time of import and export

(2) Weighted average method (AVCO): is a method that uses a weighted

average to calculate the cost of the units Under this method, the value of each item is calculated according to the average value of the goods that existed at the beginning of the period and were stocked during the period The average value can be calculated by period (weighted average at the end

of the period) or each time a batch of finished products is imported

(weighted average after each import), depending on the actual situation of

the business

(3) First in-first out method (FIFO): According to this method, they assume that the actual cost of finished goods imported first will be used to calculate the actual cost of finished goods sold first

The application of which method to calculate the cost of issued goods is decided by the enterprises themselves However, it is necessary to ensure consistency and disclosure in the financial statements

+ Costs related to the purchase process such as cargo insurance, warehouse rent,

wharf rent, transportation costs, handling cost, preservation of goods cost,

- In case the finished products are sold through the warehouse:

The cost of finished products sold include actual purchase price of goods sold and costs related to the purchase process that are allocated to goods sold

to the customer if there is solid evidence that the customer will not abandon the performance of the contract and excludes inventories used for capital construction, the value of inventories used for producing a product that is made from these inventories

at a selling price equal to or higher than the cost of production of products

- For the value of inventory lost, the accountant must immediately calculate it into the cost of goods sold (after deducting compensation, if any)

- The import tax, special excise tax, environmental protection tax calculated to the value of goods purchased when delivering goods for sale but such taxes are refunded shall

be recorded a decline of the cost of goods sold

- Expenses that are not considered deductible expenses according to the provisions of the CIT Law but have sufficient invoices and vouchers and have been properly accounted for according to the accounting regime shall not be recorded as a reduction in accounting expenses but only adjusted in CIT finalization to increase the payable CIT amount

1.3.2.4 Documents used:

- Good receipt notes

- Good dispatches notes

- The sales contracts

- The purchase contracts

- Sales invoices, VAT invoices

1.3.2.5 Accounts used:

Acc 155 – Finished goods

Acc 156 – Merchandise goods

Acc 157 – Goods on consignment

Acc 632 – Cost of goods sold

1.3.2.6 Contents and structure of account 632 - Cost of goods sold

- This account is used to record the cost of products, goods, services, investment properties; production cost of construction and installation products (for construction and installation enterprises) sold in the period In addition, this account is also used to record expenses related to investment properties business activities such

as depreciation expenses; repair costs; the cost of leasing investment property under the operating lease method; cost of selling and liquidating investment property

 In case business applies perpetual inventory method

ACCOUNT 632 – COST OF GOOD SOLD

- For activities of production and business

activities, this account reflects:

+Costs of products, goods, services sold

during period

+Costs of raw materials, materials, labor

costs in excess of normal level, and

unallocated fixed production overhead

cost are included in costs of goods sold

during the period

+Waste, loss of inventory after deducting

compensation caused by personal

liability

+ Amount of provision for devaluation of

inventories (the difference between the

amount of provision for devaluation of

inventories that must be made this year is

larger than the amount of provision made

in the previous year that has not yet been

used up)

- For investment properties business

activities, this account records:

+Depreciation of investment property

used for operating lease in the period;

+Expenses for repairing, upgrading,

improving investment property which is

not eligible to be charged to historical

cost of investment property

- Transferring cost of products, goods, services sold during period to account 911

― “Business result determination”

- Transferring total costs of investment property business expenses incurred in period to determine business results

- Reversal of provision for devaluation of inventories at the end of the fiscal year (the difference between the amount of provision to be made this year is smaller than the amount made in the previous year);

- Value of returned goods sold;

- Remission of accrued expense for real estate goods that are determined to be sold (the difference between the remaining prepaid expenses is higher than actual costs incurred)

- Trade discounts, sales allowances received after purchased goods have been sold

- Adjustment to increase the historical cost of investment property held for price increase when there is solid evidence that the investment property shows signs of increasing price again;

- Import tax, special excise tax,

+Expenses arising from the leasing of

investment property lease activities

during the period;

+ Residual value of investment property

sold or liquidated during the period;

+ Expenses for selling, liquidating of

investment property, incurred in the

period

+ Amount of loss due to decrease in value

of investment property held waiting for

price increase;

+ Accrued expenses for real estate goods

that are determined to be sold

environmental protection tax calculated to the value of goods purchased when delivering goods for sale but such taxes are refunded

 In case business applying periodic inventory method

ACCOUNT 632 – COST OF GOOD SOLD For commercial businesses:

- Cost of goods sold in period

- Amount of provision for devaluation of

inventories (the difference between the

provision to be made this year is larger

than the amount made in the previous

year that has not been used up)

For commercial businesses:

- Transferring costs of goods consigned for sales but not yet sold definitely

- Reversal of provision for devaluation of inventories at the end of the fiscal year (the difference between the amount of provision to be made this year is smaller than the amount made in the previous year);

- The cost of goods sold is transferred to the debit side of account 911 “Business results determination”

For production and service businesses:

- Costs of beginning inventory of finished

For production and service businesses:

- Transferring costs of ending inventory

goods and services

- Amount of provision for devaluation of

inventories (the difference between the

amount of provision to be made this year

is larger than the amount of provision

made in the previous year that has not

been used up);

- Costs of finished goods have been

stored and services have been

implemented

of finished goods and services to debit side of Account 155 ―Finished goods and Account 154 – Work in progress

- Reversal of provision for devaluation of inventories at the end of the fiscal year (the difference between the amount of provision to be made this year is smaller than the amount made in the previous year that has not yet been used up);

- Transferring costs of finished goods sold, completed services are determined

to be sold during the period to debit side

of Account 911 ―Business result determination

1.3.2.7 Method of accounting for several major transactions

 For business applying perpetual inventory method:

Explanations:

(1) Cost of goods sold incurred during the period

(2) Other costs recorded to account cost of goods sold (to be charged to profit/loss account)

(3) Cost of goods returned

(4) Cost of goods sold transferred to Account 911 at the end of the period (to determine business’s result)

In case business applying periodical inventory method:

(5) At the end of the period, transfer cost of finished/ merchandise goods sold to

account 911 to determine business’s result

1.3.3 Accounting for business administration expenses

1.3.3.1 Overview of business administration expenses:

Business administration expenses include selling expenses and administrative expenses

In which:

- Selling expenses include the actual expenses incurred in the process of

selling products, goods, and providing services, including the costs of offering, introducing products, advertising products, and sales commissions, costs of warranty for product and goods (except for construction and installation activities), costs of preservation, packaging, transportation, salaries of the sales staff (salaries, wages, allowances, .); social insurance, health insurance, trade union funds, unemployment insurance, labor accident insurance of sales staff; costs of materials, labor supplies and tools, depreciation of fixed assets used for the sales department; outsourced services (electricity, water, telephone, fax, ); other monetary expenses

- Administration expenses include general administrative expenses of the enterprise, including expenses for salaries of management department staff (salaries, wages, allowances, ); social insurance, health insurance, trade union funding, unemployment insurance of enterprise management staff; cost of office materials, labor tools, depreciation of fixed assets used for management; land rent, license tax; provision for bad debts; outsourced services (electricity, water, telephone, fax, property insurance, fire and explosion ); other monetary expenses (reception, customer conference )

1.3.3.2 Accounting principles:

(1) Selling and administrative expenses, which are not considered deductible expenses according to the provisions of the CIT Law, but have sufficient invoices and vouchers and have been properly accounted for according to the accounting regime, are not recorded reduce accounting costs but only adjust in the CIT finalization to increase the payable CIT amount

(2) Account 642 - Business administration expense account is opened in detail according to each expense content according to regulations Depending on the

management requirements of each industry and each business, account 642 can be opened in detail according to each type of expense such as selling expenses, administrative expenses In each type of expense, details are tracked according to each cost content such as:

a) For selling expenses:

- Employee expense: Reflecting payables to sales staff, packing, transportation and preserving products and goods staff, etc., including wages, mid-shift meals, wages and social insurance, health insurance, trade union, and unemployment insurance,

- Materials and packaging expense: Reflecting costs of materials and packaging used for the preservation and consumption of products, goods and services, such as costs of packaging materials for products, goods, and services, costs of materials and fuel used for storage, handling and transportation of products and goods in the process of consumption, materials used for repair and preservation of fixed assets, etc for the sales department

- Tools and supplies expense: Reflects the cost of tools and supplies that are served for the consumption of products and goods such as measuring instruments, calculation means, working means, etc

- Depreciation expense of fixed assets: Reflecting the depreciation expense of fixed assets in the storage and sales department, such as warehouses, shops, yards, loading vehicles; transportation, calculating, measuring, checking, quality testing facilities,

- Warranty expense: Reflecting the cost of product and goods warranty Particularly, expenses for repair and maintenance of construction works are recorded

in Account 154 "Work in progress" but not in this account

- Expenses for services purchased from outside: Reflecting costs of services purchased from outside for sales such as costs of outsourcing repair of fixed assets

directly serving the sale stage, warehouse rent, yard rent, porting fee, transportation of products and goods for sale, commissions for sales agents, for export entrustment units,

- Other cash expenses: Reflecting other cash expenses incurred in the sales stage in addition to the above-mentioned expenses such as costs of reception in the sales department, costs of introducing, promotions and advertising products, goods, customer conference costs

b) For enterprise administration expenses:

- Administrative staff expense: Reflecting payables to management staff, such

as salaries, allowances, social insurance, health insurance, trade union, unemployment insurance of the Board of Directors, management staff in departments and divisions of the enterprise

- Management materials expense: Reflecting the cost of issued materials used for business management such as stationery , materials used for repairing fixed assets, tools, supplies, ( prices with or without VAT)

- Office furniture expense: Reflecting the cost of office tools and supplies used for management (prices with or without VAT)

- Depreciation expense of fixed assets: Reflecting the depreciation expense of fixed assets common used to the enterprise such as: offices, warehouses, architectural objects, means of transport, and management machinery and equipment used in office

- Taxes, fees and charges: Reflecting taxes, fees and charges expenses such as license tax, land rent, and other fees and charges

- Provision expenses: Reflecting provisions for doubtful receivables and payables which are included in the production and business expenses of the enterprise

- Expenses for services purchased from outside: Reflecting costs of services purchased from outside for business management; expenses for purchase and use of technical documents, patents, etc (not meeting the criteria for recognition of fixed assets) are calculated by the method of amortization into administrative expenses; fixed asset rent, expenses paid to subcontractors

- Other monetary expenses: Reflecting other expenses under the general management of the enterprise, in addition to the above-mentioned expenses, such as: Conference expenses, receptions, business trips, transportation, femal labor expenses,

(3) For products and goods used for promotion and advertising:

- In case of issuing products and goods for promotion and advertising without collecting money, without other conditions such as having to buy products and goods, the value of promotional and advertising goods shall be recorded to selling expenses

- In case of issuing products and goods for promotion and advertising, but customers are only allowed to receive promotional and advertising goods with other conditions such as having to buy products and goods (for example, buying 2 gifts 1 product ), the value of promotional and advertising goods shall be recorded in the cost of goods sold (in this case, the nature of the transaction is a reduction in the sale price)

- In case an enterprise with commercial activities is entitled to receive goods (without paying) from manufacturers or distributors to advertise and promote for customers to buy goods from manufacturers or distributors:

+ When receiving goods from the manufacturer (without paying) used for promotion and advertising for customers, the distributor must track the details of the number of goods in their internal management system and explain it on the Notes to the financial statements for the goods received and the number of goods used to promote the buyer (such as goods held

on behalf of)

+ At the end of the promotion program, if the unused promotional goods are not returned to the manufacturer, other income shall be recorded as the value of the promotional goods that

do not have to be returned

1.3.3.3 Documents used:

Proposal for advance payment, Salary and social insurance allocation sheets, Material allocation sheet, Depreciation allocation sheet, VAT invoice, Sale invoice, Sale contract, Payment documents, Credit notes from bank,

1.3.3.4 Accounts used:

Acc 642 - Business administration expenses

In which, account 642 - Business administration expenses has 2 sub-accounts:

Acc 6421 – Selling expenses

Acc 6422 – Administration expenses

1.3.3.5 Contents and structures of Account 642 - Business administration expenses

- This account is used to record (1) selling expenses actually incurred in process of selling products, goods and providing services and (2) administration expenses

ACCOUNT 642 – BUSINESS ADMINISTRATION EXPENSES

- Expenses incurred relating to process

of selling products, goods, rendering

services and general administration

expenses incurred in the period

- Provision for doubtful debts, provisions

for payables (The difference between the

provision to be made in this period is

larger than the provision that has not

been used up in the previous period)

- Amounts recorded as a reduction in business administration expenses

- Reversal of provision for doubtful debts and provision for payables (the difference between the provision to be made in this period is smaller than the provision made

in the previous period that has not yet been used up);

- Transferring business administration expenses to account 911 " Business results determination"

1.3.3.6 Method of accounting for several major transactions

(6) Services rendered and other expenses in cash

(7) Reducing selling and administration expenses (Reverse provision,…)

(8) Business administration expenses allocated and transferred to determine business result

1.3.4 Accounting for financial income and financial expenses:

1.3.4.1 Overview of financial income and financial expenses:

(1) Financial income:

Definition: Revenue from financial activities is the total value of economic

benefits obtained by the enterprise from financial activities or capital business during the accounting period Financial income arising from interests, royalties, dividends and profits distributed of an enterprise is recognized only when both of the following conditions are satisfied simultaneously:

(i) It is probable that gain benefits from the transaction

(ii) Revenue can be measured reliably

Financial income includes:

 Interests: interests on loans, interests on cash in banks, on credit sales, installment sales,

 Gains from selling and transferring financial instruments, investing in joint ventures in jointly controlled businesses, investing in associates, investing in subsidiaries

 Distributed dividends and profits

 Gains from difference due to foreign currency trading, gains from foreign exchange rate difference

 Payment discounts are entitled due to purchase supplies, goods, services, and fixed assets

 Other income related to financial activities

(2) Financial expenses:

Definition: Financial expenses are expenses related to capital activities,

financial investment activities and activities of a financial nature of enterprise

Financial expenses include:

- Expenses related to financial instrument investment, joint venture investment, associate investment, investment in subsidiaries (costs of holding, liquidation, transfer

of investments, losses in investment, )

- Expenses related to lending activities

- Expenses related to foreign currency trading

- Non-capitalized business loan interest expense, payment discount when selling products, goods, or providing services

- Loss difference when buying and selling foreign currency, loss on foreign exchange rate difference

- Provision for devaluation of short-term and long-term financial investments

1.3.4.2 Accounting principles:

Financial income:

- Reflection on financial revenues are revenues that considered to be carried out during the period, irrespective of whether the payments are actually paid or not Collections on behalf of the third parties are not considered revenues of enterprise

- Revenue from investment in financial instruments (securities) includes the difference between the selling price greater than the cost of securities and the profit attributable to holding securities

- Interest revenue is recorded on basis of actual time and interest rates Revenue from royalties is recognized on the accrual basis in accordance with the lease agreement Distributed dividends and profit are recognized when the enterprise has the right to receive dividends or profits from the investment Investment gains received from accrued investment interests before the acquisition of such investment by an enterprise are not accounted as financial income but are recorded decrease in the cost

of such investment

- Revenue from financial activities may include VAT if the enterprise pays VAT directly or indirectly or without VAT if the enterprise pays tax by the deduction method

In addition, financial income needs to respect a number of specific principles as follows:

a) For trading securities, revenue is recognized as the difference between the selling price greater than the cost price of securities

In which, cost of securities is the book value determined by the weighted average method or FIFO method; the selling price is calculated at the fair value of the amount received

b) For the revenue from buying and selling foreign currencies, the recorded revenue is the gain from difference between the selling price and the buying price of foreign currency

c) For deposit interest: Revenue does not include deposit interest arising from the temporary investment of loans used for construction of unfinished assets

d) For interest receivable from loans, deferred payment and installment sales: Revenue is recognized only when it is certain to be collected and the loan principal and receivable principal are not classified as overdue that are need to make provision

e) For investment profit received from the investment in stocks and bonds, only the profit of the periods after the enterprise purchases this investment can be recognized as revenue arising in the period, and investment profit received from accumulated profits before the enterprise purchases such investment shall be recorded

as a decrease the original price of such bond or stock investment

g) When an investor receives a stock dividend, the investor only tracks the increased number of shares in the Notes to the financial statements, does not record the value of received shares, does not record financial income, does not record an increase in the value of the investment

Financial expenses account is used to record expenses for financial activities,

including:

- Interest expense on loans, interest on deferred purchases, and interest on leasing financial leased assets;

- Payment discount for buyers;

- Losses due to liquidation or sale of investments; transaction costs of trading securities

- Loss from difference of exchange rate incurred during the period; exchange rate loss due to the period-end revaluation of monetary items denominated in foreign currencies; Loss from sales foreign currency;

- Amount of provision for devaluation of trading securities, provision for loss

of investment in other entities;

- Expenses of other financial investment activities;

- Other financial expenses

In addition, account financial expense must be recorded in detail for each expense item The following expenses shall not be recorded into this account:

 Expenses for the production of products and provision of services;

 Selling expenses;

 Administration expense;

 Real estate business expenses;

 Capital construction investment costs;

 Expenses to be covered by other funding sources;

 Other costs

1.3.4.3 Documents used

- Deposit interest calculation notes

- Loan interest calculation notes

- Receipt, payment notes

- Credit notes, Debit notes…

1.3.4.4 Accounts used

Account 515 – Financial income

Account 635 – Financial expense

1.3.4.5 Contents and structure of account 515 – Financial income and account

635 – Financial expense

ACCOUNT 515 – FINANCIAL INCOME

- VAT payable under direct method (if

any)

Revenues from financial activities incurred in the period

- Transferring net revenues from

financial activities into account 911

―Business result determination

ACCOUNT 635 – FINANCIAL EXPENSE

- Financial expenses incurred during the

period;

- Making additional provisions for

devaluation of trading securities,

provisions for loss of investments in

other entities (the difference between the

provision to be made in this period is

larger than the provision made in the

previous period)

- Reversal of provision for devaluation

of trading securities, provision for loss

of investments in other entities (the difference between the provision to be made in this period is smaller than the provision made in the previous period that has not yet been used up);

- Amounts recorded as a reduction in financial expenses;

- At the end of the accounting period, all financial expenses incurred in the period shall be transferred to account

911 in order to determine business results

1.3.4.6 Method of accounting for several major transactions

Explanations:

1 For financial income:

(1a) Dividends and profits gained

(2a) Gains from selling and disposing financial investments

(3a) Payment discount gained

(4a) Gains from foreign exchange difference incurred from retranslating monetary

items based on foreign currencies at the end of the fiscal year

(5a) Allocating and recognizing pre – received financial income

(6a) Transferring financial income to determine business result

2 For financial expense:

(1b) Expenses related to financial activities

(2b) Make provision for foreign exchange rate difference

(3b) Reversing provisions for foreign exchange rate differences

(4b) Recording payment discounts paid

(5b) Expenses related to foreign exchange incurred

(7b) Financial expenses allocated and transferred to determine business results

1.3.5 Accounting for other income and other expenses:

1.3.5.1 Overview of other income and other expenses:

(1) Other income

Other income is the income that is not the revenue of the business These are income generated from activities other than the normal production, business activities

of the business, including:

 Income from transferring, liquidating fixed assets

 Difference between the fair value of assets divided from Business cooperation contract is higher than the cost of capital investment in assets under joint control

 Gains from revaluation of materials, goods, fixed assets used to contribute capital to joint ventures, investments in associates, and other long-term investments

 Income from sale and leaseback assets

 Fines collected due to customers, other entities violating economic contracts

 Collection of bad debts that have been written off before

 Taxes payable when selling goods or providing services but then being reduced

or refunded (refundable export tax, VAT, special excise tax, environmental protection tax payable but then reduced)

 Collecting third-party compensation to compensate for lost assets (for example, collecting indemnified insurance premiums, business relocation compensation and the like);

 Collecting taxes exempted from corporate income tax by the state

 Collection of payable debts whose creditors cannot be identified;

 Bonuses of customers related to the consumption of goods, products and services are not included in the revenue (if any);