Accounting in collecting production cost and calculating cost of finished goods in Hapro Vodka Joint Stock Company

TABLE OF CONTENT DECLARATION i ACKNOWLEDGEMENT ii ABSTRACT iii LIST OF ABBREVIATIONS vii LIST OF TABLES AND FIGURES viii INTRODUCTION 1 CHAPTER 1LITERATURE REVIEW 5 1.The necessity of realizing importance of accounting in collecting production cost and calculating cost of finished goods. 5 1.1. The necessity of realizing the importance of accounting in collecting production cost and calculating cost of finished good. 5 1.2. Requirements in managing production cost and cost of finished goods. 6 2. Production cost and cost of finished goods 7 2.1. Production cost and the classification of production cost. 7 2.1.1.The nature of production cost. 7 2.1.2.Classification of production cost 8 2.2.Cost of finished goods and the classification of cost of finished goods. 11 2.2.1.The nature of cost of finished good. 11 2.2.2.Classification of cost of finished goods. 11 2.3.The relationship between production cost and cost of finished good. 13 3. Accounting in collecting production cost 13 3.1.The subjects collected in accounting production cost 13 3.2.The methods used in accounting production cost 14 3.2.1.Accounting for production cost in companies applying perpetual inventory method. 14 3.2.2.Accounting for production cost in manufacturing firms applying periodic inventory method. 21 4. Accounting in calculating cost of finished goods 23 4.1. Accounting for cost of finished goods in manufacturing applying perpetual inventory method. 23 4.2. Accounting for cost of finished goods in manufacturing firms applying periodic inventory method. 24 CHAPTER IITHE STUDY 26 1. Some information about Hapro Vodka Joint Stock Company. 26 1.1. The history of company. 26 1.2.The company ’s typical characteristics in production. 27 2. Collecting production cost in the company. 30 2.1.Characteristics of production cost in Hapro Vodka Joint Stock Company. 30 2.2. The charecteristic of manufacturing technological process in Hapro Vodka Joint Stock Company. 31 2.3. Methods used in collecting production cost by company 33 2.3.1.Accounting for direct raw material cost 33 2.3.2Accounting for direct labor cost 40 2.3.3.Accounting for Manufacturing overhead cost . 45 2.3.4.The general sequence of collecting production cost process 51 3.Calculating cost of finished good 52 3.1.The subjects of calculating cost of finished goods 52 3.2.The method used in calculating cost of finished good. 52 CHAPTER IIIRECOMMENDATIONS 58 1.Advantages in collecting production cost and calculating cost of finished good. 58 2.Disadvantages in collecting production cost and calculating cost of finished good in Hapro Vodka Joint Stock Company. 59 3.1.Improving Solutions of used accounting books. 62 3.2. Improving Solutions of accounting methods 62 3.2.1.The direct labor cost 62 3.2.2. Accounting for manufacturing overhead cost 63 CONCLUSION 64

institutions To the best of my knowledge, the thesis does not contain materialpreviously published or another people, except where due acknowledgement

is made in the text

The data and results described in this thesis are derived from the actual situation of the practice company

Hanoi, May 21st , 2014 Student

Dinh Thi Trang

GRADUATION THESIS 2014

ACKNOWLEDGEMENT

This thesis would not have been possible without the support of many people First and foremost, I would like to express my profound gratitude to

my supervisor Cao Xuan Thieu, M.A, who has continuously encouraged me

to develop my savvy of the subject Without his motivation, enthusiasm andintensive expertise, this thesis could not be completed

I also wish to express my sincere thanks all teachers in ForeignLanguage Faculty at Academy of Finance for their directions, correction andcomments during the course of my writing

It would be a shortcoming if I do not mention here the Board ofDirectors and staff in Hapro Vodka Joint Stock Company ,whoenthusiastically provided me with information ,data and materials data to use

in my graduation thesis

Finally, I would like to show my deep gratitude to my parents for theircare, support, encouragement, without which my thesis would not have beenaccomplished

GRADUATION THESIS 2014

ABSTRACT

My thesis with the topic:Accounting in collecting production cost andcalculating cost of finished goods in Hapro Vodka Joint Stock Company ”will point out the current situation and solutions to improve accountingactivity in Hapro Vodka Joint Stock Company The study starts with theintroduction by giving a rationale for the study, pointing out aims, scope andmethods of the study

Chapter I presents the study’s literature review It elaborates on theissues relevant to the study including the nature and classification ofproduction cost and cost of finished goods as well as methods used incollecting production cost and calculating cost of finished goods

Chapter II analyses the reality of accounting in collecting productioncost and calculating cost of finished goods in Hapro Vodka Joint StockCompany

Chapter III summaries the results of study and gives recommendationsfor improving the effectiveness of accounting for production cost

GRADUATION THESIS 2014

TABLE OF CONTEN

DECLARATION i

ACKNOWLEDGEMENT ii

ABSTRACT iii

LIST OF ABBREVIATIONS vii

LIST OF TABLES AND FIGURES viii

INTRODUCTION 1

CHAPTER 1-LITERATURE REVIEW 5

1.The necessity of realizing importance of accounting in collecting production cost and calculating cost of finished goods 5

1.1 The necessity of realizing the importance of accounting in collecting production cost and calculating cost of finished good 5

1.2 Requirements in managing production cost and cost of finished goods 6

2 Production cost and cost of finished goods 7

2.1 Production cost and the classification of production cost 7

2.1.1.The nature of production cost 7

2.1.2.Classification of production cost 8

2.2.Cost of finished goods and the classification of cost of finished goods 11

2.2.1.The nature of cost of finished good 11

2.2.2.Classification of cost of finished goods 11

2.3.The relationship between production cost and cost of finished good 13

3 Accounting in collecting production cost 13

3.1.The subjects collected in accounting production cost 13

3.2.The methods used in accounting production cost 14

3.2.1.Accounting for production cost in companies applying perpetual inventory method 14

GRADUATION THESIS 2014

3.2.2.Accounting for production cost in manufacturing firms applying

periodic inventory method 21

4 Accounting in calculating cost of finished goods 23

4.1 Accounting for cost of finished goods in manufacturing applying perpetual inventory method 23

4.2 Accounting for cost of finished goods in manufacturing firms applying periodic inventory method 24

CHAPTER II-THE STUDY 26

1 Some information about Hapro Vodka Joint Stock Company 26

1.1 The history of company 26

1.2.The company ’s typical characteristics in production 27

2 Collecting production cost in the company 30

2.1.Characteristics of production cost in Hapro Vodka Joint Stock Company 30

2.2 The charecteristic of manufacturing technological process in Hapro Vodka Joint Stock Company 31

2.3 Methods used in collecting production cost by company 33

2.3.1.Accounting for direct raw material cost 33

2.3.2Accounting for direct labor cost 40

2.3.3.Accounting for Manufacturing overhead cost 45

2.3.4.The general sequence of collecting production cost process 51

3.Calculating cost of finished good 52

3.1.The subjects of calculating cost of finished goods 52

3.2.The method used in calculating cost of finished good 52

CHAPTER III-RECOMMENDATIONS 58

1.Advantages in collecting production cost and calculating cost of finished good 58

GRADUATION THESIS 2014

2.Disadvantages in collecting production cost and calculating cost of finished

good in Hapro Vodka Joint Stock Company 59

3.1.Improving Solutions of used accounting books 62

3.2 Improving Solutions of accounting methods 62

3.2.1.The direct labor cost 62

3.2.2 Accounting for manufacturing overhead cost 63

CONCLUSION 64

GRADUATION THESIS 2014

LIST OF ABBREVIATIONS

C: Total current manufactured costs

Ci: Cost allocated to each subject

Cdk:Production cost at beginning of term

Cck:Production cost at ending of term

Ddk: Beginning work in process

Dck: Ending work in process inventory

GAAP: General accepte accounting

GRADUATION THESIS 2014

LIST OF TABLES AND FIGURES

Figure 1: Acounting entries flowchart for production cost 20

Figure 2: Acounting entries flowchart for production cost 22

Figure 3: Organizational structure of the company 29

Figure 4: Manufacturing sequence of Vodka39% acl/vol 32

Table 1: Business situation of company from 2011-2013 28

Table 2: Voucher 36

Table 3: General journal 39

Table 4: General Journal 44

Table 5: General Journal 49

Table 6: General Ledger 50

Table 7: General Ledger 51

Table 8: Calculation For Cost Of Finished Goods 54

Table 9: Calculation For Cost Of Finshed Goods 55

Table 10: Calculation For Cost Of Finshed Goods 56

Table 11: Calculation For Cost Of Finished Goods 57

manufacturing business,production accounting has long been used to help managers understand the cost of running a business Modern cost accounting originated during the industrial revolution ,when the complexility of running alarge scale business led to the development of systems for recording and tracking cost to help business owners and managers make decisions.

Exactly,timely accounting production cost help business come up withsolutions to save expenses and reduce cost of finished goods In the scope of whole economy ,decreasing cost of finished goods can create an increase in the accumulation for the economy Hence,not only is reducing cost of finishedgoods necessary for enterprises but that also is society’s concern

Collecting production cost and calculating cost of finished goods in the accordant way is the base for business in accounting cost of finished goods that is decisive factor for defining business result.In addition,the board

of directors can obtain important information that is really useful for

companies in setting up suitable strategies to make effective use in their

capital

Hapro Volka Joint Stock Company specializes in producing and trading alcohol.After a period of operating time, company has achieved appreciable success ,however,the standing challenge that company has to face

is competition from domestic and foreign products Therefore,reducing cost

of finished goods ,increasing competitive capacity are the two most importanttargets that company should focus on

In the practicing process at company ,with the help of accountants and staff in company and the supervisor ,I have had oppotunity to

study ,analyse and complete thesis: “Accounting in collecting production costand calculating cost of finished good in Hapro Vodka Joint Stock

Company”.However ,because of the limit in practicing time as well as in my knowledge and experience ,there still is deficiency in this thesis.With the desire to complete this thesis ,I hope to see comments from teacher and

accountants from Hapro Vodka Joint Stock Company

2.Aims of study

The main aims of study are:

Firstly,The study is expected to contribute to the background theory of accounting for production cost and calculating cost of finished good,which is done by pointing out characteristics and methods used in accounting

Secondly,It shows achievements and difficulties of accounting for

production cost and calculating cost of finished goods in Hapro Vodka Joint Stock Company as a case for study

Thirdly,it suggests possible solutions and recommendations to improve accounting for production cost and calculating cost of finished goods.

Finally,To become an useful reference for the later generations in order

to support for their reseaches about accounting in general and accounting for production cost in particular

3.Subjects and scope of the study

3.1.Subjects of the study

The study focuses on general understanding of accounting as well as the activity of accounting for production cost in both situation and solutions.3.2.Scope of the study

Research scope only focuses on Accounting for production cost and calculating cost of finished good in Hapro Vodka Joint Stock Company in period 2011-2013

4.Methodology

The main method used in this research is analyzing and summarizing reliable materials to form trustful and concise theoretical background.For stronger support ,I also illustrate with numbers ,figures,chart and facts

The other method applied in this thesis is document review A

textbook of ACCA (F3) and its translation for difficult terms , Academy of Finance will be reviewed and evaluated

5.Organization

The study is divided into three parts:

* The first part is the introduction dealing with the

* The second part is the crucial part of the thesis with three chapters: Chapter 1: LITERATURE REVIEW.This chapter provides the basic theories about accounting in collecting production cost and calculating cost offinished goods in manufacturing companies.

Chapter 2:THE STUDY.This chapter presents the reality of

accounting in collecting production cost and calculating cost of finished goods in Hapro Vodka Joint Stock Company

Chapter 3:RECOMMENDATIONS.This chapter suggests some

solutions to improve accounting in collecting production cost and cost of finished goods in Hapro Vodka Joint Stock Company

CHAPTER 1-LITERATURE REVIEW

THE BASIC THEORIES ABOUT ACCOUNTING IN COLLECTING PRODUCTION COST AND CALCULATING COST OF FINISHED

GOODS

1.The necessity of realizing importance of accounting in collecting

production cost and calculating cost of finished goods.

1.1 The necessity of realizing the importance of accounting in collecting production cost and calculating cost of finished good.

In the current market economy ,there is an equality in business betweenenterprises from economic sector.In other words ,they are competitive in an equal enviroment.Therefore ,if companies want to survice ,develope and make profits ,they have to keep on improving product quality ,saving

production cost and reducing cost of finished goods.To obtain these

goals ,companies have to ensure to have an effective management in

production cost and right calculation in cost of finished goods

Collecting production cost and calculating cost of finished goods play

an important role to company.Basing on important economic information about production cost and cost of finished good that is timely,exactly,fully provided by accountants ,managers can analyse ,evaluate whether the use of capital ,materials and labour is effective From that,companies can make appropriate decision in choosing producing plans which give to them the biggest profit and find the more suitable way in cost management and

use.Hence,exactly collecting production cost and calculating cost of finished goods is inevitable need every companies should have

1.2 Requirements in managing production cost and cost of finished

goods.

In management ,many different methods are used ,however ,accounting

is still considered to be the most effective managing tool.Because ,accounting provides data about cost collected from every parts to

evaluate ,analyse ,estimate expenses incurring in producing process.Under perspective of management ,it is essential for the managers to be conscious about constitutive elements of expense and cost of finished good.Then,they can cut down effects from negative factors as well as simultaneously promote effects from positive factors

Accounting in collecting production cost and calculating cost of

finished good is the most popular method that is widely used by business obtaining advantage in competition.Especially,in the open economy ,with the diversity of products,cost of finished good is the decisive factor for the

manufacturing firms’s survival.Therefore ,to reach the target of cutting down cost of finished good ,accounting needs to meet particular demands:

-Frequently reviewing the progress of carrying out producing plan at everyparts in the firm

-Exactly defining the objects that are collected production cost and cost of finished goods

-Choosing the congruous method to collect and allocate production

expenses for identified objects

-Fully and exactly calculating cost of finished goods and production cost -Continuously supervising the onus implemention of reducing cost of

finished goods

2 Production cost and cost of finished goods

2.1 Production cost and the classification of production cost.

2.1.1.The nature of production cost.

The firms’s primary objective in producing output is to maximize

profits.The production of output ,however,involves certain cost that reduce the profits a firm can make A cost inurred by a business when manufacturing

a good or producing a service.Production cost combine raw material and labor.To figure out the cost of production per unit ,the cost of production is divided

by the number of units produced A company that knows how much it would cost to produce an items or produce a service ,will have a clearer picture of how to better price the item or service and what will be the total cost to the company.If costs are too high,these can be decreased or possibly

eliminated Besides ,production cost can be used to compare the expenses of different activities within the company

Many people use “cost” and “expense” interchangeably and will not make the distinction The difference between cost and expense is a

considerable one and yet the terms are frequently intermingled even in the published works of accounting authors This makes the difference extremely difficult to understand for those people training to be accountants.Cost most closely equates to the term expenditure ,so it means that you have expended resources in order to acquire something,transport it to your location and set it up.However,it dose not mean that you have consumed the item that you

accquired.Thus,an item for which you have expended resources should be classified as an asset until it has been consumed Expense is a cost whose utility has been used up ,it has been consumed Another way of thinking of an

principle ,which was particularly apparent in the last case ,where inventory was converted into an expense as soon as a sale occured Under the matching principle ,you recognize both the revenue and expense aspects of a transaction

at the same time ,so that the net profit or loss associated with the transaction

is immediately apparent Thus ,a cost converts to an expenses,as soon as any related revenue is recognized A key reason why a cost is ,in

practice ,frequently treated exactly as an expense is that most expenditures areconsumed at once ,so they immediately convert from a cost to an

expense This situation arises with any expenditure related to a specific period,such as the monthly ,utility bill ,administrative salaries,rent and so forth

2.1.2.Classification of production cost

2.1.2.1.Classification on the basic of contents or economic

characteristics.

-Material cost:Is defined as the cost of product which only includes the cost of materials and excludes all the indirect cost such as wages ,overhead -Labor cost:the cost of wages paid to worker during an accounting period

on daily ,weekly ,monthly or job basic plus payroll and related taxes and benefits(if any)

-Depreciation expense of fixed asset:is systematic allocation the cost of a fixed asset over its useful life It is a way of matching the cost of a fixed asset with the revenue (or other economic benefits) it generates over its useful life.Without depreciation accounting ,the entire cost of a fixed asset will be recognized in the year of purchase This gives a misleading view of the profitability of the entity

-Other cash cost :The cost besides three kinds of cost above incurring in the producing process

2.1.2.2.Classification by purpose of cost

-Direct materials cost:is the cost of direct materials which can be easily identified with the unit of production For exampe ,the cost of glass is a direct materials cost in light bulb manufacturing The manufacture of products or goods required material as the prime element.In general ,these materials are divided into two categories.These categories are direct materials and indirect materials.Direct material are also called productive materials ,raw

materials,raw stock,stores and only materials without any descriptive title -Direct labor cost :is a part of wage-bill or payroll that can be

specifically and consistently assigned to or associated with the manufacture of

a product ,a particular work order,or provision of a service Also,we can say it

is the cost of the work done by those workers who actually make the product

on the production line We can determine the direct labor cost by planning the work to be performed ,describling the job content of the work by indicating the skill ,knowledge or matching the jobs with the employees

-Manufacturing overhead(Also referred to as factory overhead ,factory burden and manufacturing support cost) refers to indirect factory –related costs that are incurred when a product is manufactured Along with costs such

as direct material and direct labor ,the cost of manufacturing overhead must

be assigned to each unit produced so that inventory and cost of goods sold arevalued and reported accounting priciple (GAAP).Manufacturing overhead includes:Indirect materials,indirect labor ,depreciation on factory buildings and machines insurace ,taxes,maintenance on factory facilities

2.1.2.3.Classification on the relationship between cost and the volume of product.

-Variable cost :is cost that changes in proportion to the good or service

that a business produces.Variable cost and fixed cost made up the two

components of total cost

-Fixed cost:In economics,fixed cost ,indirect cost ,overhead are business expenses that are not dependent on the level of goods or services produced bythe business They tend to be time –related ,such as salaries or rents being paidper month,and are often referred to as overhead cost.In management

accounting ,fixed cost is defined as expense that do not change as a function

of the activity of a business within the relevant period

-Semi-variable cost:( can also be named as semi-fixed cost ).The cost which dose not vary proportionately but simultaneously dose not remain stationary at all times

2.1.2.4.Classification on the way in which cost are allocated to

accounting objects.

-Direct cost :The expenses incurred on material and labour which are

economically and easily traceable for a product ,service or job are considered

as direct costs.In the process of manufacturing of production of

articles,materials are purchased ,laborers are employed and the wages are paid

to them Certain other expenses are also incurred directly All of these take an active and direct part in the manufacture or a particular commodity and hence are called direct cost

-Indirect cost:The expense incurred on those items which are not directlychargeable to production are known as indirect costs.For example,salaries of

timekeepers,storekeepers and foremen.Also certain expense incurred for running the administration are the indirect costs.All of these can not be

conveniently allocated to production and hence are called indirect costs

2.2.Cost of finished goods and the classification of cost of finished goods.

2.2.1.The nature of cost of finished good.

Cost of finished goods is the cost assigned to units either completed orstill in the process of being completed at the end of an accounting period,for that accounting period This cost is most useful when disaggregated into its component parts and examined on a trend line By doing so ,managers can determine the costs that a company is incurring over time to produce a certainmix and quantity of units.The concept is useful for examining the cost

structure of a company’s production operations.The cost of materials used in the manufacturing process during the period,the cost of direct labour used in the manufacturing period,the amount of overhead allocated to manufactured goods during the period

A retail operation has no cost of finished good since it only sells goodsproduced by others Thus,it cost of goods sold is comprised of merchanise that it is selling The cost of finished goods is not the same as the cost of goods sold.Good manufactured may remain in stock for many

months ,especially if a company experiences seasonal

sales.Conversely ,goods sold are those sold to third parties during the

accounting period

2.2.2.Classification of cost of finished goods.

2.2.2.2.Classification on database and time when cost of finished goods

is calculated.

-Planned cost of finished goods:Is product expense that is calculated

with the reference of planned production cost and planned quantity of

products.Calculating planned cost is carried out before manufacturing process

is started.Planned cost of finished goods is considered as target that most of companies want to reach in order to reduce production cost and raise benefit for company

-Norm cost of finished goods:Is cost which is defined basing on recent cost and only in form product unit.Calculating norm cost of finished goods is norm managing tool,appropriate measurement in determining business result that is really useful for companies in evaluating technological economic solutions that business have applied in operating process in order to improve productivity

-Actual cost of finished goods:Is cost that is calculated on the basic of actual volume of product in identified term However,the actual cost of

finished goods can be only determined after producing process has been completed.Actual cost of finished goods is a suitable measurement reflecting companies’s effort in applying lastest achievement of technology and

using ,allocating sources in the whole of manufacturing process

2.2.2.3.The classification by the scope of calculation

-Production cost:includes production expenses such as direct material cost ,direct labour cost ,other expenses that are allocated to finished

products.Production cost is the most important basic to determine cost of goods sold in the producing period of business

-Whole cost of finished goods:consists of producing expense and

selling expense Whole cost of finished goods =Production cost +selling expenses+managerial expenses

2.3.The relationship between production cost and cost of finished good.

Under perspective of the nature ,production cost and cost of finished good are two sides of manufacturing process.They are the same in quality because both of them are the representation of living labour and materialized labour,otherwhile,they are different in quantity.Production cost is determined

in identified term,there is no distinction between finished and infinished products.Cost of finished goods is identified producing expense that is

allocated to finished products Unlike production cost,cost of finished goods has beginning work in process inventory and ending work in process

inventory

Z=Ddk+C-Dck

Z:Cost of finished goods

Ddk:Beginning work in process inventory

C:Total current manufactured costs

Dck: :Ending work in process inventory

3 Accounting in collecting production cost

3.1.The subjects collected in accounting production cost

Production costs in manufacturing firms not only have incurred in different time ,parts but also used in different purposes.Hence,to account production cost companies have to detemine subjects collected in accounting production cost in the right way It means that they have to determine the scope ,limit in which production cost incurred Besides that,companies also should focus on some factors when identifying the subjects:

-Manufacturing technology proess:If company’s manufacturing

technology process is simple ,the subjects collected production cost are total manufacturing process.Otherwhile,if manufacturing technology process is complex ,the subjects may stand in each stage of manufacturing process -Manufacturing features:If firms apply factory producing model,the accounting of production cost is carried out in each factory

-Manufacturing formality:If manufacturing formality is out of order ,thesubjects are each kind of products.However,If manufacturing formality is serial,the subjects are each product and if manufacturing formality is to meet orders ,subjects is each order

Actually,determining subjects to collect production cost is identifying the scope in which production cost incurred.It is very favorable for companiescalculating production cost if they correctly identify the subjects.Hence,the calculation of cost of finished goods is easier

3.2.The methods used in accounting production cost

3.2.1.Accounting for production cost in companies applying perpetual inventory method.

In perpetua method of accounting,inventory records are updated after each purchase or sale,inventory accounts are used to record the balance and the moving of goods,cost of goods sold used are calculated based on units of goods sold

Account used

621:Direct raw material cost

622:Direct labour cost

6271:Indirect labor

6272:Use of auxiliary materials

6273:Use of tools and supplies

632:Cost of goods sold

3.2.1.1 Accounting for direct raw materials.

- Identifying allocation coefficient :

H=C/Ti

C:The total cost need to be allocated

Ti:Allocation standard for subjects: Ci=Ti*H

Ci:Cost allocated to each subject

Direct raw materials cost are the raw materials that become a part of the finished product.Manufacturing adds value to raw materials by applying a chain of operations to maintain a deliverable product Basing on direct

materials delivery vouchers,manufactures can easily calculated the actual cost

of direct materials used

Accounting sequense

1.Material used for directly manufacturing products and supplying services Debit account 621:

Credit account 152,611

2.Purchase of raw material(not through the company’s warehouse ) used for manufacturing product and supplying services.

3.2.1.2.Accounting for direct labour cost.

Direct labor cost is wages that are incurred in order to produce specific goods or provide specific services to customers

The total amount of direct labor cost is much more than wages paid It isalso includes the payroll taxes associated with those wages plus the cost of company –paid medical insurance ,life insurance ,workers compensation insuarance ,any company –matched pension contributions and other company benefits

3.2.1.3.Accounting for factory overhead costs

Factory overhead cost refersn to indirect factory –related costs that are incurred when a product is manufactured Along with costs such as direct material and direct labor ,the cost of manufacturing overhead must be

assigned to each unit produced so that inventory and cost of goods sold are valued and reported accounting to generally accepted accounting principle Fatory overhead cost includes such things as the electricity used to operate the factory equipment and building ,factory supplies and factory personel

Factory overhead cost consists of:

6271:Indirect labor

6272:Use of auxiliary materials

6273:Use of tools and supplies

3.Tools and supplies are used for administrating the factory

mua ngoµi b»ngtiÒn

Direct materials costTransferring cost of raw material

Good sold

Depreciation

Figure 1: Acounting entries flowchart for production cost

3.2.2.Accounting for production cost in manufacturing firms applying periodic inventory method.

Periodic inventory method is system of inventory control in which

no continuous record of changes (receipts and issues of inventory items )is kept.At the end of an accounting period,the ending –inventory is determined

by an actual (physical) count of every item and its cost is computed by using asuitale method such as FIFO,LIFO,weighted averages ,etc This amount is subtracted from the sum of purchases and the beginning –inventory of the new accounting period to arrive at the cost of goods sold.This method is especially suitable for companies that have small sale

Accounts used

631:Cost of product manufactured.(Especially.this account has no ending balance:

Figure 2: Acounting entries flowchart for production cost

334,338 622 632

Direct labor cost Transferring

Direct labor cost

Account 154-Work in progress

Debit :Allocation of the closing balance of work in progress

Credit :Reallocation of the opening balance of work in progress

Debit balance:Work in progress at the end of period

4.1 Accounting for cost of finished goods in manufacturing applying perpetual inventory method.

4.2 Accounting for cost of finished goods in manufacturing firms

applying periodic inventory method.

THE REALITY OF ACCOUNTING IN COLLECTING PRODUCTION COST AND CALCULATING COST OF FINISHED GOOD IN HAPRO

VODKA JOINT STOCK COMPANY

1 Some information about Hapro Vodka Joint Stock Company.

1.1 The history of company.

Hapro Vodka Company is a joint –stock company with independent economic accounting ,financial autonomy,legal status and under the direct management of the Ha Noi Tax Department

- Transaction Name :Hapro Vodka Joint Stock Company

-Headquarter:Hapro Food Industry,Le Chi ,Gia Lam district

-Tel: : 04 38276600 - Fax: 04 38276600-Email:Haprovodka@Haprogroup.vn

-Website:http://www.haprogroup.vn

The company was established in 2003 with the name :Hapro Wine Factory with the main produced commodity are wine and alcohol Throug five years of developement ,instead of being exported company’s products only were consumed in the domestic market because of the privation of

machinery , outdated technology and the difficulty in accessing modern

science Realizing policy in equitization of state enterprises that is to mobilizecapital in whole society to invest and develope business ,carry out

technological innovation ,enhance competitiveness so on 2/2/2007,Hapro Wine Factory was equitized and named Hapro Vodka Joint Stock Company according to the enterprise law number 60/205/QH 11 adopted by National Assembly of the Socialist Republic of Vietnam in 29/11/2005 and documentsguiding the implementation of the enterprise law.Hapro Vodka Joint Stock

Company is a subsidiary of Hanoi Trade Corporation Since 2007, the

company has been strongly developing ,the company’s products are not only presented in domestic market but also in foreign market such

as :China,Hongkong and Singapore

Main line of business:alcohol and wine production.

Charter capital:

-The company’s charter capital :40.000.000.000 vnd

-The number of shares:4.000.000 shares

-Share value :10.000vnd/share

Shareholders and capital structure:

-Hanoi Trade Corporation contributed 20.400.000.000 vnd,reatively 2.040.000 shares ,making up 51 % of the charter capital

-Thang Long Joint Stock Company contributed

4.000.000.000vnd,relatively 400.000 shares ,accounting for 10% of the chatercapital

-Hanoi Investment And Development Joint Stock Company contributed 6.000.000.000 vnd ,relatively 600.000 shares ,accounting for 15% of the charter capital

-Ordinary shareholders contributed 9.600.000.000 vnd ,relatively

960.000 shares making up 24% of the charter capital

1.2.The company ’s typical characteristics in production.

The following table presents business situation of the company in 3 years ago

Table 1: Business situation of company from 2011-2013

Items 2011 2012 2013

Total revenue(vnd) 10,390,288,109 10,990,181,892 11,701,109,294Total business capital