MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIET NAM HO CHI MINH UNIVERSITY OF BANKING UNIVERSITY GRADUATION THESIS ACCOUNTING OF CREDIT OPERATIONS FOR INDIVIDUAL CUSTOMERS
INTRODUCTION
Research background
Vietnam officially joined the World Trade Organization on November 7,
2006, becoming its 150th member (International Trade Administration, 2024) This marks a key milestone in Vietnam's economic reform following the Doi Moi policy in 1986 (Razafindrakoto, Cling, & Roubaud, 2009) WTO access integrates Vietnam into the global economy, fueling growth across various sectors and increasing foreign investment In the first two years, the country saw significant improvements in capital inflows and economic performance (Vo & Nguyen, 2009)
In recent years, Vietnam has demonstrated resilience despite global challenges Following the COVID-19 impact, GDP rebounded by 8.02% in 2022, the highest annual growth in over a decade (Van, 2022; General Statistic Office,
2022) In 2023, growth slowed to 5.05% due to global uncertainties, but the economy expanded to 430 billion USD (Anh P , 2023; General Statistic Office,
2023) this upward momentum, in 2024, Vietnam's GDP grew by 7.09%, surpassing the government's target range of 6 - 6.5% , this robust performance elevated the nation's GDP to 476.3 billion USD (Hai, 2025) Alongside this economic growth, in
2024, the economy of District 8 also developed well by achieving key objectives, including the construction of medical centers, commercial centers, and other infrastructure projects (Le, 2024)
Banks are vital to economic progress, allocating scarce financial resources to efficient businesses and investment projects (Nguyen, 2022) They help manage household consumption through savings and loans (Allen & Gale, 2001) and offer diverse financial products like business and real estate loans (Team, 2025) Serving as secure deposit holders and key credit providers for individuals, businesses, and governments (Allen & Carletti, 2012), banks enhance productivity across multiple sectors
For commercial banks, performance depends partly on the legal environment, including accounting regulations (Hughes & Mester, 2012) Accurate credit reporting ensures compliance, supports financial management, and aids decision- making Accounting monitors all financial activities, providing transparent, timely information essential for governments, businesses, and individuals Emeni (2014) highlights that processed financial statements offer critical insights for planning Also, effective accounting attracts investment by reducing information asymmetry and improving efficiency (Beatty, Liao, & Weber, 2010) Their study shows that accounting information lowers financing frictions, invest investment decisions Furthermore, high-quality financial reporting also reduces uncertainty for stakeholders (Tripp, 2005) Therefore, reliable credit operations impact both individual borrowers and the long-term stability of financial institutions and the economy
Based on the internship experience and exploration of accounting of credit operations (AOCO) for individual customers at Military Commercial Joint Stock Bank, District 5 Branch - District 8 Transaction Office (MB8), the author has gained valuable insights into the critical role of accounting in the bank's business activities Recognizing the significance of accurate and efficient accounting practices in managing credit operations, the author has selected the topic
"Accounting of credit operations for individual customers at the Military Commercial Joint Stock Bank, District 5 branch – District 8 transaction office" as the subject of the university graduation thesis.
Research objectives
Study on the current situation of AOCO for individual customers at MB8
Based on the research results, recommendations about AOCO for individual customers to improve the effectiveness are carried out
1 Analyze the current state of AOCO for individual customers at MB8
2 Assess the advantages and disadvantages in the current state of AOCO for individual customers at MB8
3 Propose solutions and recommendations to improve AOCO for individual customers at MB8.
Research questions
1 What is the current state of AOCO for individual customers at MB8?
2 What are the advantages and disadvantages in the current state of AOCO for individual customers at MB8?
3 What solutions can improve the efficiency and effectiveness of AOCO for individual customers at MB8?
Research subject and research scope
Research subject: AOCO for individual customers at MB8
Research method
Document research method: Collected data on accounting procedures, records, vouchers, and ledgers from various departments, along with academic sources such as textbooks, theses, and online materials
Interview method: Conducted with accounting staff and other employees to gain deeper insights into operational practices
Survey method: Using questionnaires to assess bank employees' evaluation of the AOCO at the organization
Observation method: Documented tasks and workflows of credit officers and accounting personnel for practical insights
Shadowing method: Actively performed credit officer duties to gain firsthand experience in managing individual credit operations.
Research implications
In theory, this study delves into the principles, characteristics, and processes of credit operations and AOCO, with a focus on the accounting methods involved in loan disbursements for customers Additionally, the research examines the current state of AOCO for individual customers at MB8
In practice, an accounting system is essential for risk identification, performance evaluation, informed decision-making, and strategic planning Building on this foundation, this study explores the documentation system, account structure, and regulations governing AOCO for individual customers at MB8 By analyzing these elements, the research draws conclusions and proposes solutions to improve accounting efficiency, reduce risks, and enhance the bank's ability to provide reliable financial services amid economic recovery and growth.
Research structure
Regarding structure, this research classified into 5 chapters, which is:
Chapter 1 Introduction: This chapter establishes the research foundation by presenting its rationale, objectives, key questions, scope, contributions, and overall structure
Chapter 2 Literature review: This chapter reviews literature on bank credit operations and accounting practices, establishing a theoretical foundation, identifying, gaps and situating the study within the academic context
Chapter 3 Theoretical framework and research methodology: This chapter presents the study's theoretical foundation, covering principles of bank credit operations and individual customer accounting It also details the research methodology, including data collection and analysis techniques
Chapter 4 Research result and discussion: This chapter analyzes the study's findings, providing insights into MB8's operations and evaluating its accounting practices for individual credit operations Key discussions highlight the implications of these findings
Chapter 5 Conclusion and implication: The final chapter summarizes the main results, assesses the effectiveness of current accounting practices, and proposes solutions for improvement It also suggests directions for future research and practical applications
Chapter 1 establishes the foundation for this research on AOCO for individual customers at MB8, highlighting the indispensable role of commercial banks in Vietnam’s economic growth, particularly within District 8 As the economy continues to expand, the importance of AOCO in maintaining financial stability and promoting sustainable development becomes increasingly evident This study investigates AOCO by examining its strengths and weaknesses through document analysis, interviews, observations, and data interpretation Additionally, Chapter 1 outlines both the theoretical and practical implications of the research Lastly, it provides an overview of the study’s structure, which is organized into five chapters
The next chapter will review previous studies to identify research gaps and build a theoretical framework for further analysis.
LITERATURE REVIEW
International review
In relation to investment and lending in society, Emeni (2014) explores the influence of accounting information on bank lending decisions Using a combination of cluster sampling and simple random sampling techniques, his study analyzed a sample of 132 companies selected from the Nigerian Stock Exchange Factbook for the year 2012 The data were evaluated using the Ordinary Least Squares (OLS) regression method The results demonstrate a significant relationship between accounting information and bank lending decisions, further supporting the argument that accounting practices within commercial banks play a vital role in promoting transparent and sound lending processes
(2) Managing credit risk to advance decision making
Organizations that excel in generating, acquiring, and managing knowledge are better positioned to make informed decisions, with accounting information serving as a critical resource Effective credit risk management relies heavily on accurate financial data to assess risks and maintain stability
Legass and Roba (2024) examine the relationship between credit risk management strategies and financial performance in Ethiopian commercial banks Analyzing data from 14 banks over 13 years (2011-2023) using correlation and regression analyses, they found that credit interest income and loan ratios positively impact financial outcomes, while non-performing loans reduce profitability Their study underscores the importance of effective credit risk management in sustaining financial health
In addition, Thabet and Aleaddin (2017) investigated the link between credit risk management and management accounting systems in 11 Palestinian commercial banks Their survey, conducted among key risk management personnel, highlighted that integrating management accounting systems with credit risk management enhances overall organizational performance
Synthesizing these insights, it is evident that key credit risk metrics, such as credit interest income, loan ratios, and non-performing loans, significantly influence a bank's financial health To ensure transparency and accuracy in these metrics, effective accounting practices are essential, providing a foundation for sound risk management and long-term financial stability.
Domestic review
Research on accounting for credit operations in Vietnamese commercial banks has provided valuable insights into how accounting practices enhance banking efficiency Various studies have examined specific banking branches, analyzing their accounting processes, identifying challenges, and considering solutions to improve financial management in credit operations
Tram (2021) evaluated AOCO at VietinBank - District 4 Branch Using data collection, staff interviews, and document analysis, she examines loan methods, lending processes, and risk provisioning Her study also analyzed regulatory frameworks, including circulars and accounting policies, identifying both strengths and weaknesses in the credit accounting system and indicative measures to enhance efficiency and compliance
Similarly, Duyen (2022) explored AOCO at the Military Commercial Joint Stock Bank - An Phu Branch - Thao Dien Transaction Office By analyzing the step-by-step credit process and lending transaction accounting, her research highlights both advantages and limitations in credit accounting at the branch, offering practical solutions for improved accuracy and efficiency
In another study, Thao (2022) examined loan accounting for individual customers at Military Commercial Joint Stock Bank – Vung Tau Branch Through qualitative research methods, including data collection, staff interviews, and document analysis, she assessed loan structures, accounting methods, and regulatory compliance Her study emphasized the importance of standardizing loan accounting practices and proposed solutions to enhance operational efficiency
Further expanding on this, Chi (2023) investigated loan accounting at
Vietnam Joint Stock Commercial Bank for Industry and Trade - Saigon East
Branch Her study highlights the complexity of lending activities and highlights the role of credit transaction accounting in capital redistribution and profit generation
By employing qualitative methods such as observation, data collection, and staff interviews, she analyzed credit operations, identified key challenges, and suggested improvements to optimize financial control and reporting
These studies show that while Vietnamese banks have structured accounting of credit operations systems, challenges remain in accuracy, efficiency, and regulatory compliance Strengthening risk management, improving documentation, and integrating technology are key to modernizing practices
Building on these insights, this study identifies research gaps, as there has been no in-depth study on AOCO at MB8 in recent times, and focuses on analyzing AOCO at MB8 while suggesting practical solutions for improved accounting management
The literature review highlights the crucial role of accounting systems in strengthening the efficiency, transparency, and risk management of credit operations in commercial banks Internationally, studies have demonstrated the significant relationship between accounting practices, credit risk management, and financial performance Effective accounting systems enable banks to detect risks early, make informed lending decisions, and support economic growth Meanwhile, domestic research in Vietnam has provided valuable insights into the practical implementation of accounting at various commercial bank branches, highlighting both strengths and areas for improvement Despite the extensive body of research, there remains a gap in the analysis of AOCO at MB8 This study seeks to address this gap by examining the specific challenges faced by the MB8 and supporting solutions to enhance the accuracy and efficiency of its AOCO system By bridging this research gap, the study aims to contribute meaningful insights to the literature on banking operations and offer practical recommendations for improving accounting practices in Vietnam's commercial banking sector
The following chapter will present the theoretical framework related to credit operations and AOCO, as well as the research methodology used to collect the necessary data for this study.
THEORETICAL FRAMEWORK AND RESEARCH
General theoretical framework about bank credit operations
3.1.1 General concept regarding commercial banks
According to the National Assembly of Vietnam (2024), banks in Vietnam are classified as credit institutions, engaging in one or more banking activities Within the banking sector, commercial banks, policy banks, and cooperative banks operate based on distinct objectives The National Assembly of Vietnam (2024) defined that commercial banks conduct all banking operations and other banking activities under Law No 32/2024/QH15 for profit Thus, they must comply with regulatory frameworks set by state authorities
Credit, as defined by the Central Bank of Nigeria's Prudential Guidelines of
1990, includes loans, overdrafts, bills discounted, bank guarantees, commercial papers, and leases (Obiageri & Onodugo, 2019) Credit operations involve providing funds for a specific purpose and duration, with repayment of both principal and interest (Aysan & Disli, 2019) This aligns with definitions in Vietnam, where the State Bank (2016) and National Assembly (2024) define credit as granting or committing to grant funds under repayment terms, covering various forms such as loans, guarantees, and letters of credit
A key component of credit operations is the loan contract, a formal agreement between a credit institution and a borrower, ensuring financial commitments are met (Tam & Thuy, 2024) As credit institutions, Vietnamese commercial banks rely on lending and related activities are core to their operations, supporting profitability and economic growth through efficient capital allocation
In credit operations, loan repayment includes both principal and interest The principal is the original borrowed amount, while interest depends on the rate and loan term, with simple or compound interest affecting the total payable amount Thus, interest rates are a key factor in borrowing costs
Interest represents the cost of capital for borrower rates, who must repay both principal and accrued interest at the loan's end (Tram, 2021) According to the State Bank of Vietnam (2016), loan interest rates are determined through agreements between banks and clients, influenced by market conditions and borrower credibility, except in cases where maximum rates are regulated This highlights the dual role of market dynamics and legal oversight in setting interest rates, which significantly impacts financial and economic stability
3.1.2 Role of credit operations at commercial banks
Commercial banks drive economic growth by facilitating capital formation and providing essential financial services (Anh N T., 2020; Nguyen, 2022; Hang, et al., 2021; Dong & Dung, 2023) They contribute to economic stability and sustainability by supporting businesses and individuals through trade finance, financial inclusion, and tailored financial products (Hang, et al., 2021; qizi, 2024) This role is critical especially in Vietnam's bank-centric financial system, where banks are key to financial intermediation and economic modernization (Nguyen,
Due to limited self-financing options and an underdeveloped bond market, Vietnamese businesses and individuals rely heavily on bank loans (Hanh, 2024), with studies showing rising demand for credit outpacing financing availability
(Minh & Wang, 2012), reinforcing the vital role of credit operations
3.1.2.2 Impact on the commercial banking system
Credit operations are the primary revenue source for commercial banks, ensuring sustainability and growth (Tai & Quoc, 2023) Beyond lending, banks enhance income through cross-selling strategies, offering financial products like insurance and investments to offset declining net interest margins (Nhat & Anh, 2024; Bansal & Bhatia, 2014) This approach involves offering multiple financial products, such as insurance and investment services, alongside traditional banking products (Cabral & Santos, 2001; Azizjon, 2024) Therefore, personal lending, as well as lending activities in general, serves as a significant source of profit for commercial banks, reinforcing their financial performance and market position
Commercial banks provide essential financial resources through credit operations, supporting production, business, and consumption needs (Tam & Thuy,
2024) Loan products, including short-term, long-term, and consumer loans, help customers consolidate capital, reduce costs, and manage repayments (Dinh, 2010)
In cases of financial difficulty, banks offer solutions such as loan extensions or financial assistance, preventing bankruptcy and ensuring debt repayment Through flexible lending, banks foster business growth, financial stability, and economic resilience
3.1.3 Lending methods at commercial banks
Commercial banks employ diverse lending methods to manage risk and optimize financial performance (Truong, 2006) These methods vary based on loan types and borrower characteristics, allowing banks to tailor strategies for different customer segments (Tram, 2021) In Vietnam, lending methods are highly diverse and can be applied across various loan terms, as stipulated in Clause 27 of Circular
No 39/2016/TT-NHNN This regulatory framework enhances financial inclusivity, enabling banks to meet varied borrower needs while promoting sustainable economic growth
A credit institution and client determine the loan term based on business cycles, repayment capacity, and available funds For businesses, the loan term cannot exceed their legal operating period, while for foreign individuals in Vietnam, it must not surpass their permitted residency (State Bank of Vietnam, 2016) According to the State Bank of Vietnam (2016), there are three types of loan terms:
- Short-term loans: Short-term loans have the maximum term of one year
- Medium-term loans: Medium-term loans have a term of between more than one year and five years
- Long-term loans: Long-term loans have a term of more than five years
3.1.3.2 Based on methods of lending
Lending methods vary based on loan structure and fund disbursement to meet diverse client needs According to the State Bank of Vietnam (2016), there are several lending methods such as:
- Single loan: Each loan requires separate procedures and a loan agreement
- Syndicated loan: Multiple credit institutions jointly finance a project
- Loan provided within a line of credit: A pre-approved maximum loan balance is maintained for a set period, with periodic reassessment
3.1.4 Lending principles at commercial banks
According to the State Bank of Vietnam (2016), lending activities must adhere to two key principles:
1 Mutual agreement & legal compliance: Loans are provided based on agreements between banks and borrowers, following legal regulations, including environmental laws
2 Proper use & repayment: Borrowers must use funds as intended and repay both principal and interest on time
3.1.5 Methods of principal repayment and interest calculation in lending operations at commercial banks
Loan repayment structures are flexible, allowing banks to align repayment plans with borrowers' financial conditions and cash flow According to Loan (2017), common repayment methods include:
1 Full repayment of principal and interest at the loan's end
2 Regular payments of principal and interest over time
3 Payments made at unspecified intervals based on agreement
3.1.5.1 Repayment of principal and interest in a single payment upon loan maturity
The lump-sum repayment method is commonly used for short-term loans, offering simplicity for both banks and borrowers Applied mainly in single loans, such as business production and consumer loans, this method requires full repayment of the principal and accrued interest in a single payment at loan maturity (Loan, 2017) specific:
- Loan principal: The total amount disbursed by the bank to the borrower
3.1.5.2 Repayment of principal and interest in fixed periodic installments
Nguyen Thi Loan (2017) stated that banks periodically collect principal and interest per credit agreements, covering short-term loans (eg., commercial and installment consumer loans) and medium/long-term loans (eg., installment, project investment loans, and financial leases) Debt terms are agreed upon based on capital turnover and borrower income The determination of periodic debt and interest repayment amounts can be carried out using the following common methods:
(1) Repayment of principal and interest in equal periodic installments
𝑎: The amount of principal and interest repaid in each period remains equal
- Interest amount𝑖 (𝐿 𝑖 )= Outstanding loan balance at the beginning 𝑖 × Loan term × Loan interest rate
(2) Gradual reduction in debt repayment and interest payments per period
Interest amount 𝑖 (𝐿 𝑖 )= Outstanding loan balance at the beginning 𝑖 × Loan term × Loan interest rate
𝐴 𝑖 : The amount of debt repayment and interest payment 𝑖
𝑉: Fixed debt repayment amount for each period
𝑉 𝑖 : The outstanding loan balance at the beginning 𝑖
3.1.5.3 Repayment of principal and interest in irregular or unspecified intervals
Irregular or unspecified interval repayments offer borrowers flexibility in managing cash flow and debt Banks apply this method in short-term lending, such as overdrafts and credit lines, where loan balances fluctuate, and repayment schedules depend on income streams (Loan, 2017) Typically, banks collect debt and interest as follows:
- Collected immediately when the borrower deposits funds into their bank account
3.1.6 Classification of debts at commercial banks
In Vietnam, debts at commercial banks are classified into five groups based on their risk status According to the State Bank of Vietnam (2024):
- Group 1 (Standard debts): (1) Any outstanding debt, including both principal and interest, that is assessed as highly likely to be fully repaid by the due date; (2) Any debt overdue by fewer than 10 days, where both the overdue amount and the remaining principal and interest are expected to be fully recovered within the agreed timeframe; (3) Any debt classified as Group 1 in accordance with Clause
2, Article 10 of Circular No 31/2024/TT-NHNN
- Group 2 (Debts needing attention) : (1) Any debt that is past due by up to
90 days, excluding those specified in point a(ii) of clause 1 and clause 3 of Article
General theoretical framework about accounting of credit operations for
3.2.1 General concept regarding accounting for credit operations
National Assembly (2015) defines accounting as the collection, processing, inspection, analysis, and provision of economic and financial information in terms of value, objects, and working hours, making it fundamental to financial management In banking, accounting is divided into financial and managerial accounting Financial accounting focuses on processing and reporting financial data through statements for stakeholders, while managerial accounting supports internal decision-making Accounting is classified by user needs, with bank accounting serving both internal management and external stakeholders (Loan, 2017)
Economic and financial data form the basis of accounting information, providing stakeholders with insights for tracking performance, decision-making, and regulatory compliance (Spătărelu & Petec, 2016) High-quality, timely accounting information influences key financial indicators like profitability, liquidity, and stability while supporting risk management, strategic planning, and performance evaluation (Karthikeyan & Saraswathy, 2024) Beyond record- keeping, it enhances transparency, investor confidence, and long-term financial sustainability, reinforcing its strategic role in modern enterprises
The adoption of accounting standards ensures consistency and transparency in financial reporting, enabling commercial banks to provide accurate and reliable information These standards establish principles and procedures for recording, valuing, and disclosing financial data, serving as a benchmark for accounting quality (Loan, 2017) In banking, loan transactions follow specific accounting standards set by the Ministry of Finance, guiding financial reporting on lending activities Key standards include: (1) Accounting Standards No 1: General standards; (2) Accounting Standards No 14: Turnover and other incomes; (3) Accounting Standards No 21: Presentation of financial statements; (4) Accounting Standards No 22: Disclosures in financial statements of banks and similar financial institutions; (6) Accounting Standards No 24: Cash flow statements (Tram, 2021; Thao, 2022; Chi, 2023)
Accounting principles have played a crucial role in Vietnam's transition to a market economy Commercial banks must prepare financial statements that accurately reflect their economic, legal, and financial position, ensuring compliance with key accounting principles: (1) Historical cost principle; (2) Prudence principle (Loan, 2017)
In the specific context of AOCO, the historical cost principle is operationalized in credit-related transactions Loan receivables are initially recognized at their disbursed amount, reflecting the actual cash outflow at the time of loan origination, thereby ensuring objectivity and verifiability in financial reporting Concurrently, the prudence principle underpins the recognition of credit loss provisions, requiring that potential losses be anticipated and accounted for in a cautious and timely manner This conservative approach serves to safeguard the reliability and integrity of the bank’s financial disclosures amid credit risk exposures
3.2.3 Accounts used in accounting for credit operations
The bank accounting system was established under Decision No 479/2004/QD-NHNN, dated April 29, 2004, and later amended by Circular No 27/2021/TT-NHNN Within this system, type II account are used by commercial banks to record credit activities, including lending transactions Since this thesis focuses on loan accounting for individual customers, the analysis will primarily cover Account 21 – Loans to economic organizations and domestic individuals, along with loan interest income account, loan loss provision account, and related off-balance sheet account
3.2.3.1 Accounting accounts related to principle debts
(1) Account 21 - Lending to domestic economic organizations and individuals
• 211: Short-term loans in VND
• 212: Medium-term loans in VND
• 213: Long-term loans in VND
• 214: Short-term loans in foreign currencies and gold
• 215: Medium-term loans in foreign currencies and gold
• 216: Long-term loans in foreign currencies and gold
Each of these Level-2 account (211, 212, 213, 214, 215, 216) is further divided into Level-3 account (Assuming X represents numbers from 1 to 6):
- Loan amount transferred from the appropriate account
- Loan amount transferred to another appropriate account
Loan that is still within the due period
- The disbursed loan results in overdue loan of the customer
- The loan the customer has repaid
- The disbursed loan transferred to another appropriate account
(2) Account 9711 - Principal debt classified as a loss under monitoring
Account 9711 - Principal debt classified as a loss under monitoring
- Uncollectible principal has been written off
- Principal has exceeded the debt term Covered written-off principal needed to be monitored for recovery
3.2.3.2 Accounting accounts related to interests
(1) Account 394 - Interest receivables from credit activities
Account 394 - Interest receivables from credit activities
- Cumulative interest receivable - Interest payments
- Unreceived interest is reclassified as overdue receivables
- Interest income is transferred to the profit AA
- Interest income from credit operations
(3) Account 941 – Uncollected loan interest and fees receivable
Account 941 - Uncollected interest and fees receivable
(4) Account 9712 - Interest losses under monitoring
Account 9712 - Interest losses under monitoring
- Covered uncollectible interest - Recovered interest
- Written-off interest past debt term
Covered written-off interest needed to be monitored for recovery
3.2.3.3 Accounts related to provision for loan losses
(1) Account 219 – Provision for loan losses
Account 219 – Provision for loan losses
- Used provision for loan losses
- Provision for loan losses recorded as an expense
Unused provision for loan losses
(2) Account 8822 – Uncollectible debt provision expense
Account 8822 – Uncollectible debt provision expense
- Receive assets from customers - Return collaterals to customers
(2) Account 387 – Debt settlement assets transferred to the credit institution, pending disposal
Account 387 – Debt settlement assets transferred to the credit institution, pending disposal
- Value of debt settlement assets transferred to the credit institution, pending disposal
- Value of debt settlement assets disposed of
Value of debt settlement assets transferred to the credit institution, pending disposal
(3) Account 4591 – Proceeds from debt sales, collateral liquidation, or collateral exploitation
Account 4591 - Proceeds from debt sales, collateral liquidation, or collateral exploitation
- Amount used by the bank to offset irrecoverable debts
- Amount received by the bank from debt sales or collateral liquidation
Amount received by the bank from debt sales or collateral liquidation
3.2.4 Accounting vouchers in credit operations
Accounting documents provide legal evidence for credit operations and support debt recovery According to Tram (2021), Thao (2022), and Chi (2023), essential documents may include:
- Loan request letter: Specifies loan amount and purpose
- Credit agreement: Legally binding contract outlining loan terms
- Indebtedness certificate: Confirms repayment obligation
- Personal documents: ID card, household registration
- Collateral and pledged asset documents: Ownership proof (land use rights, savings books, vehicle/property certificates)
- Payment documents: Collection/payment orders
3.2.5 Accounting methods in credit operations
The accounting methodologies for credit operations is determined by accounting principles, regulations governing credit activities, and the relevant accounting accounts (Loan, 2017) In banking operations, a wide range of transactions require different accounting methods to ensure compliance with legal regulations However, to maintain focus and relevance to the research topic, this study will primarily examine accounting practices related to credit operations In the context of credit operations in Vietnam, accounting methods can be classified into three main categories: (1) principle and interest, (2) provisioning, (3) disposal of collateral (Tram, 2021; Thao, 2022; Chi, 2023)
3.2.5.1 Accounting for principles and interests
When the accountant receives a payment order or transfer request, the accounting entry will be processed
Credit Account 1011: Principle amount (Cash)
(or Credit Account 4211: Principle amount (Demand deposit))
At the same time, in cases where the customer pledges collateral to secure the loan, the accountant records the off-balance sheet entry:
Debit Account 994: Value of collateral
The commercial bank calculates accrued interest for the month
Subsequently, based on the customer's debt repayment status, the accountant will classify the loan into two categories: current debt and overdue debt
The accountant records the transaction based on the customer's deposit slip or payment order
Debit Account 1011: Principle amount (Cash)
(or Debit Account 4211: Principle amount (Demand deposit))
When the customer repays the principal and interest on time as stipulated, and the collateral was pledged to secure the loan, the commercial bank releases the collateral The accountant records the off-balance sheet entry to reflect this release:
Credit to Account 994: Value of the collateral
(4) Collecting interest payments a Receivable interest is equivalent to accrued interest
Debit Account 1011: Interest paid by the customer (Cash)
(or Debit Account 4211: Interest paid by the customer (Demand deposit)) Credit Account 3941: Interest paid by the customer b Receivable interest is greater than accrued interest
Debit Account 1011: Interest paid by the customer (Cash)
(or Debit Account 4211: Interest paid by the customer (Demand deposit)) Credit Account 3941: Accrued interest
Credit Account 702: Additional interest (Interest paid – Accrued interest)
When the customer fails to repay the debt on time, the commercial bank will assess the debt recovery situation to classify the debt and urge the customer to settle the outstanding amount The accountant reclassifies the overdue debt accordingly
Debit Account 1011: Overdue principle (Cash)
(or Debit Account 4211: Overdue principle (Demand deposit))
Debit Account 809: Uncollectible accrued interest
Credit Account 3941: Uncollectible accrued interest
At the same time, the accountant records the off-balance sheet entry:
Debit Account 941: Uncollectible accrued interest b Unaccrued interest
(8) Overdue interest payment by the customer
Debit Account 1011: Accrued interest (Cash)
(or Debit Account 4211: Accrued interest (Demand deposit))
At the same time, the accountant records the off-balance sheet entry:
(1) Provisioning for credit risk a When the general and specific provisions from the previous quarter are lower than the required provisions for the current quarter, additional provisioning is recorded:
Credit Account 2191: Specific provision amount
Credit Account 2192: General provision amount b When the general and specific provisions from the previous quarter exceed the required provisions for the current quarter, the excess amount is reversed:
Debit Account 2191: Specific provision amount
Debit Account 2192: General provision amount
(2) Utilizing provisions to handle overdue debt
At the same time, the accountant records the off-balance sheet entry:
Debit Account 971: Loss on bad debts
3.2.5.3 Accounting for disposal of collaterals
According to Loan (2017), collateral accounting includes:
- Collaterals are sold to repay the bank loan
(1) Accounting for cases where collaterals are sold to repay the bank loan
- When a decision is made to hold collateral for sale to recover overdue loans
Debit Account 995: Value of collateral
Credit Account 994: Value of collateral
- When the bank receives proceeds from the sale of collateral
Debit Account 1011: Collateral sale amount (Cash)
(or Debit Account 4211: Collateral sale amount (Demand deposit))
Credit Account 4591: Amount received from collateral sale
- Debt recovery from proceeds obtained through the sale of collateral Debit Account 4591: Amount received from the sale or lease of collateral Credit Account 355: Costs incurred in processing collateral disposal
Credit Account 702: Interest income from the loan
- Settle the customer with the remaining balance
Credit Account 1011: Remaining balance (Cash)
(or Debit Account 4211: Remaining balance (Demand deposit))
Simultaneously, Credit Account 995: Value of collateral
(2) Accounting for cases where the bank has the right to generate revenue from the collaterals
Debit Account 1011: Amount from leasing collateral (Cash)
(or Debit Account 4211: Amount from leasing collateral (Demand deposit)) Credit Account 4591: Amount from leasing collateral
Then, continue using the balance in Account 4591 to gradually deduct principal and interest, similarly to collateral sales Credit Account 994 is recorded only after full repayment, including asset management and liquidation costs.
Research methodology
This study used qualitative research methods and the process is visually presented in Figure 3.1
Step 1 Establish the study's research objectives: Identify the research problem, purpose, and key questions, setting clear, measurable goals
Step 2 Build a theoretical framework and do literature review: Review existing studies, theories, and regulatory documents to build a conceptual foundation and identify research gaps
Step 3 Qualitative research: Collect secondary data from documents and online sources on credit accounting Gather primary data through interviews, observations, surveys, and shadowing bank employees to understand workflows and compliance
Step 4 Data assessment and analysis: Assess strengths and weaknesses in credit accounting practices Validate findings through discussions with experts, forming the basis for solutions
Step 5 Conclusion: Propose solutions for identified limitations, acknowledge research constraints, and suggest future research directions
The document research method involved gathering data on the organization's accounting procedures, records, and vouchers from various departments, along with reviewing academic and online sources for supporting evidence
Interview method: Conducted interviews with accounting staff and employees to gain deeper insights into operational practices
Survey method: Data was collected through a survey of employees to understand their evaluation of AOCO The questionnaire was designed with a 5- point Likert scale to measure the level of agreement, where respondents rated their agreement from “1: Strongly disagree, 2: Disagree, 3: Neutral, 4: Agree, 5: Strongly agree.”
Observation method: The researcher closely observed specific tasks and workflows, recording the procedures and actions performed by credit officers, accounting personnel, and other staff members This direct observation provides valuable insight into the practical execution of daily operations
Shadowing method: This approach requires the researcher to actively participate in assigned tasks related to the AOCO for individual customers By assuming the role of a credit officer, the researcher engaged in daily responsibilities and operations, gaining firsthand experience and a detailed understanding of the processes involved in managing credit
Chapter 3 has explored key theoretical frameworks related to commercial banks and AOCO, shedding light on their roles and significance within the banking sector This theoretical foundation serves as a critical reference for assessing the effectiveness of AOCO in practice Additionally, the chapter provides an in-depth discussion of the research methodology, outlining the approaches used to examine
AOCO at MB8 These methods have been instrumental in clarifying the AOCO process, laying the groundwork for the study's findings
In the next chapter, the focus will shift to analyzing the real-world credit operations and AOCO practices at the internship institution By comparing practical observations with the established theoretical framework, the author will identify strengths and weaknesses, offering a comprehensive evaluation of current practices.
RESEARCH RESULT AND DISCUSSION
Chapter 4 will present the findings gathered from the internship institution, including an overview of the organization, insights into its credit operations, and, most importantly, a detailed examination of AOCO practices With this information in hand, the next step is evaluating the strengths and weaknesses of the institution's AOCO framework, providing a critical assessment of its effectiveness in practice
4.1 Overview about the Military Commercial Joint Stock Bank,
District 5 Branch - District 8 Transaction Office
4.1.1 History of formation and development of Military Commercial Joint Stock Bank, District 5 Branch - District 8 Transaction Office
4.1.1.1 History of formation and development of Military Commercial Joint Stock Bank
Founded on November 4, 1994, at 28A Dien Bien Phu, Military Commercial Joint Stock Bank was established under the strategic vision of the Central Military Commission and the Ministry of National Defense, integrating economic growth with national security Initially operating with VND 20 billion in capital and 25 employees, the bank has grown into one of Vietnam's largest commercial banks, operating under the State Bank of Vietnam's regulation
The bank 's growth and market expansion
• 1994: Officially commenced operations with an initial charter capital of VND 20 billion and 25 employees
• 2000: Established Thang Long Securities Company and MBAMC
• 2003: Undertook a comprehensive restructuring of its system and human resources
• 2004: Became the first bank in Vietnam to issue shares through a public auction, with a total face value of VND 20 billion
• 2005: Signed a tripartite agreement with Vietcombank and Viettel to facilitate telecom payment services and established a partnership with Citibank
• 2006: Founded HFM (now MB Capital), and successfully implemented the Core T24 banking system developed by Temenos (Switzerland)
• 2008: Underwent corporate restructuring, with Viettel becoming a strategic shareholder
• 2009: Launched MB247 Customer Service Center
• 2010: Opened its first overseas branch in Laos
• 2011: Successfully listed shares on the Ho Chi Minh Stock Exchange (HSX) and opened its second overseas branch in Cambodia Additionally, the Core T24 system was upgraded from R5 to R10
• 2019: Introduced a new logo and brand identity
• 2020: Recognized as “Vietnam's Outstanding Bank”
• 2021: The “MB Bank” application was named one of the “Most Popular Applications of 2021”, and the bank received the “Outstanding Bank for Community Contribution” award
• 2022: Honored as a “Vietnamese Business Culture Standard Enterprise”
• 2023: Awarded “Asia's Outstanding Enterprise” and recognized for
The bank has transformed into a multi-functional financial group, operating in Vietnam, Laos, and Cambodia Its subsidiary specializes in consumer finance, asset management, investment funds, securities, and life insurance, reinforcing its diversified business model With a national network of 110 branches (including 1 overseas branch), 209 transaction offices, and a workforce of 18,639 employees as of December 31, 2024, the bank continues to lead in financial services, leveraging technology, innovation, and strategic growth to strengthen its position as a trusted financial institution
4.1.1.2 History of formation and development of Military Commercial Joint Stock Bank, District 5 Branch - District 8 Transaction Office
MB8 is headquartered at No 849 Ta Quang Buu Street, Ward 5, District 8,
Ho Chi Minh City Situated in a densely populated area with a high concentration of businesses and manufacturing facilities, the transaction office benefits from significant opportunities for the expansion of banking services in the region This strategic location enhances the bank's ability to cater to the growing financial needs of local businesses and residents, contributing to the bank's overall development
4.1.2 Organizational structure of Military Commercial Joint Stock Bank, District 5 Branch - District 8 Transaction Office
Figure 4.1 Organizational structure of MB8
(Source: Human resources and administration department)
At MB8, the Branch director holds the highest position, followed by various departments, including (1) the Individual customer department, (2) the Small and medium enterprise department, and (3) the Service director Under the Service director, there are three key departments: Human resources and administration department, Customer service department, and Accounting department
The Branch director holds the highest authority within the branch, overseeing operations, and strategic growth The director ensures business alignment with corporate goals By coordinating departments, the director ensures smooth operations and sustained growth
The Individual customer department is the contact point for retail banking, offering account management, savings, investments, consumer loans, and personal credit It builds customer trust through financial advice and supporting promotional campaigns to boost acquisition and retention By providing personalized service and responsive solutions, the department enhances the banking experience
(3) Small and medium enterprise department
Dedicated to fostering business growth, the Small and medium enterprise (SME) department specializes in providing financial solutions tailored to SMEs This department facilitates corporate banking services such as business accounts, enterprise credit lines and loan structuring to support business expansion By conducting thorough financial assessments, it ensures responsible lending and risk mitigation while enabling enterprises to optimize their capital structures
The Service director plays a pivotal role in managing customer service excellence and operational efficiency within the branch Through continuous monitoring of customer feedback, financial transactions and operational processes, the service director identifies areas for improvement and implements innovative strategies to enhance service quality Additionally, the role involves conducting performance evaluations, generating reports for senior management, and promoting initiatives to optimize customer satisfaction
(5) Human resources and administration department
As the backbone of internal operations, the Human resources and administration department manages workforce development, employee relations, and administrative functions It is responsible for recruiting, training, and retaining a skilled workforce while ensuring compliance with labor regulations and corporate policies This department plays a crucial role in structuring employee compensation, benefits, and incentive programs to maintain a motivated workforce Additionally, it oversees general administrative tasks, asset management, and logistical coordination to support efficient branch operations
The Customer service department serves as the frontline of customer interactions, ensuring a seamless banking experience for customers This department is responsible for handling customer inquiries, resolving complaints, and guiding clients in utilizing various banking products and services It plays a key role in promoting digital banking adoption, facilitating customers with mobile banking platforms, online transactions, and credit card services
At MB8, the Accounting department is responsible for recording, managing, and securing all financial transactions and documents within the branch This department ensures compliance with accounting standards and banking regulations by accurately processing financial data and maintaining internal control over all accounting activities
4.1.3 Credit products for individual customers at Military Commercial Joint Stock Bank, District 5 Branch - District 8 Transaction Office
At MB8, credit products are customized to meet various customer needs After disbursement, the bank monitors fund usage to ensure it matches the approved purpose Funds are usually transferred to a new customer account and used for specific expenses like business or vehicle purchases Cash disbursement is limited to cases like agricultural loans Interest is typically paid monthly via bank transfer, so customers must maintain enough balance to cover interest and fees
This credit product is for working-age customers at the time of loan maturity who seek personal financing without collateral It is divided into two groups: (1) Government employees and civil servants, and (2) Non-government workers Loan terms are flexible, ranging from short-term to a maximum of 60 months, with a single disbursement method
Business loans: This product targets customers needing short-term business financing, subject to credit history checks Loan amounts range from VND 3–5 billion, covering up to 90% of needs, depending on location (major cities or other regions) Collateral can include real estate, vehicles, negotiable instruments
Transaction Office
History of formation and development of Military Commercial Joint
4.1.1.1 History of formation and development of Military Commercial Joint Stock Bank
Founded on November 4, 1994, at 28A Dien Bien Phu, Military Commercial Joint Stock Bank was established under the strategic vision of the Central Military Commission and the Ministry of National Defense, integrating economic growth with national security Initially operating with VND 20 billion in capital and 25 employees, the bank has grown into one of Vietnam's largest commercial banks, operating under the State Bank of Vietnam's regulation
The bank 's growth and market expansion
• 1994: Officially commenced operations with an initial charter capital of VND 20 billion and 25 employees
• 2000: Established Thang Long Securities Company and MBAMC
• 2003: Undertook a comprehensive restructuring of its system and human resources
• 2004: Became the first bank in Vietnam to issue shares through a public auction, with a total face value of VND 20 billion
• 2005: Signed a tripartite agreement with Vietcombank and Viettel to facilitate telecom payment services and established a partnership with Citibank
• 2006: Founded HFM (now MB Capital), and successfully implemented the Core T24 banking system developed by Temenos (Switzerland)
• 2008: Underwent corporate restructuring, with Viettel becoming a strategic shareholder
• 2009: Launched MB247 Customer Service Center
• 2010: Opened its first overseas branch in Laos
• 2011: Successfully listed shares on the Ho Chi Minh Stock Exchange (HSX) and opened its second overseas branch in Cambodia Additionally, the Core T24 system was upgraded from R5 to R10
• 2019: Introduced a new logo and brand identity
• 2020: Recognized as “Vietnam's Outstanding Bank”
• 2021: The “MB Bank” application was named one of the “Most Popular Applications of 2021”, and the bank received the “Outstanding Bank for Community Contribution” award
• 2022: Honored as a “Vietnamese Business Culture Standard Enterprise”
• 2023: Awarded “Asia's Outstanding Enterprise” and recognized for
The bank has transformed into a multi-functional financial group, operating in Vietnam, Laos, and Cambodia Its subsidiary specializes in consumer finance, asset management, investment funds, securities, and life insurance, reinforcing its diversified business model With a national network of 110 branches (including 1 overseas branch), 209 transaction offices, and a workforce of 18,639 employees as of December 31, 2024, the bank continues to lead in financial services, leveraging technology, innovation, and strategic growth to strengthen its position as a trusted financial institution
4.1.1.2 History of formation and development of Military Commercial Joint Stock Bank, District 5 Branch - District 8 Transaction Office
MB8 is headquartered at No 849 Ta Quang Buu Street, Ward 5, District 8,
Ho Chi Minh City Situated in a densely populated area with a high concentration of businesses and manufacturing facilities, the transaction office benefits from significant opportunities for the expansion of banking services in the region This strategic location enhances the bank's ability to cater to the growing financial needs of local businesses and residents, contributing to the bank's overall development.