ACCOUNTING FOR PRODUCTION COST AT HANOI URBAN ARCHITECT CONSULTING JOINT STOCK COMPANY UAC

ACKNOWLEDGMENT ABSTRACT ABBREVIATION LIST OF FIGURES LIST OF TABLES ORGANIZATION AND THE MANAGEMENT OF PRODUCING COSTS AT HANOI URBAN ARCHITECT CONSULTING JOINT STOCK COMPANY - UAC .

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I would like to acknowledge many people for their help and assistance with thisinternship However, it is difficult for me to thank all of those fabulous people whohave assisted all thing for this report There are some very memorable people whocannot go without mention

I take this opportunity to express my profound gratitude and deep regards to myguide, Master of Commerce Dang Thi Thuy Hang, for her exemplary guidance,monitoring and constant encouragement throughout the course of this report Theblessing, help and guidance given by her time to time shall carry me a long way in thejourney of life on which I am about to embark

Furthermore, I would like to express my gratitude to the Center for AdvancedEducational Program (AEP) and my school, School of Accounting and Auditing , fortheir patience in helping me complete this internship program

My special thank goes to the respected accountant, Ms Tran Ngoc Dung, inUAC The continuous guidance, important advices and great supports that she gavetruly help me prepare my report Without her help this report might not have been acomprehensive one

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ACKNOWLEDGMENT

ABSTRACT

ABBREVIATION

LIST OF FIGURES

LIST OF TABLES

ORGANIZATION AND THE MANAGEMENT OF PRODUCING COSTS AT HANOI URBAN ARCHITECT CONSULTING JOINT STOCK COMPANY -

UAC 1

1.1 CHARACTERS OF SERVICES PROVIDED BY UAC 1

1.2 THE PRODUCING PROCESS AT UAC 5

1.3 MANAGEMENT OF PRODUCING COSTS AT UAC 7

CHAPTER 2 THE REALITY OF PRODUCTION COST ACCOUNTING AT UAC 9

2.1 ACCOUNTING FOR PRODUCING COSTS IN THE COMPANY 9

2.1.1 Accounting for direct labor costs 12

2.1.2 Accounting for overhead costs 27

2.1.3 Accounting for work in progress and finished services 39

2.2 COMPUTE COST OF FINISHED SERVICES 51

2.2.1 Subjects and method of measuring cost of services manufactured 51

2.2.2 Process of measuring cost of services produced 51

CHAPTER 3 EVALUATIONS AND SOME RECOMMENDATIONS OF PRODUCTION COST IMPROVEMENT IN UAC 54

3.1 EVALUATIONS 54

3.1.1 Advantages 54

3.1.2 Disadvantages 56

3.2 RECOMMENDATIONS 57

CONCLUSION

REFERENCES

COMMENTS

Supervisor: M.Com Dang Thi Thuy HangHa Tien Thanh – Class: Advanced Accounting K52

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As the growth of Vietnam’s economy, accounting’s development seems to be one

of the most essential fields of any companies which want to assure for their progress

In the direction of flourish, maximizing the profits is considered issue so that theinvestors must make profitable decision toward the companies Furthermore, after aperiod of economic crisis, creditors now think more about the efficient of costaccounting system of all corporations as the most censorious elements in evaluatingthe company For illustrating this issue, thesis would analysis the main cost accountingsystems at Hanoi Urban Architect Consulting Joint Stock Company – UAC andsupports some recommendations for this company

The thesis included three chapters following this instruction

ORGANIZATION AND THE MANAGEMENT OF PRODUCING COSTS AT HANOI URBAN ARCHITECT CONSULTING JOINT STOCK COMPANY - UAC

UAC

PRODUCTION COST IMPROVEMENT IN UAC

Because of the limitation of time and knowledge, my report cannot avoid mistake

I look forward to receiving comments from the professors of the National EconomicsUniversity as well as the staffs from UAC firm in order to complete this reportsuccessful

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SI: Social Insurance

HI: Health Insurance

UI: Unemployment Insurance

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LIST OF FIGURES

Figure 1-1 ISO 9001:2008 Certified No HT 1759/1.11.34 on 20/04/2011 by

QUACERT 4

Figure 1-2 The UAC’s process 5

Figure 1-3 The process of managing cost product at UAC 8

Figure 2-1 Announcement of Advances under contract 08/038 10

Figure 2-2 The process of recording Directly labor cost ( Full document of paying back advances of directly labor cost) 12

Figure 2-3 The process of recording Directly labor cost( not enough document cover all cost of using labor) 13

Figure 2-4 TIMESHEETS 15

Figure 2-5 Payroll Sheet Contract: 08/038 18

Figure 2-6 The process of recording detailed book 622 20

Figure 2-7 Detailed account book of account 622 under Contract 08/038 21

Figure 2-8 Detailed account book of account 622 23

Figure 2-9 General account book of account 622 25

Figure 2-10 The process of recording overhead cost(Full document of paying back advances of overhead cost) 27

Figure 2-11 RECEIPTS 28

Figure 2-12 Bill of Value Added Tax 30

Figure 2-13 The List of Advanced Payment Documents under Contract 08/038 31

Figure 2-14 The Detailed Book of account No 6278 under Contract 08/038 33

Figure 2-15 The Detailed Book of account No 6728 35

Figure 2-16 The General account book of account No 6278 37

Figure 2-17 The process of closing entry Work in process 40

Figure 2-18 Summarily table pay back advances documents 41

Figure 2-19 Summarily table of revenue - Expense quarter 4/201 43

Figure 2-20 The detailed account book of account No 154 under contract 08/038 45

Figure 2-21 The detailed book of account No 154 47

Figure 2-22 The general account book of account 154 49

Figure 2-23 Allocation of manufacturing cost 52

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LIST OF TABLES

Table 2-1 Paid Expenses under contract 08/038 51

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Chapter 1 The characters of services, the

management of producing costs at Hanoi Urban Architect Consulting Joint Stock Company - UAC

1.1 Characters of services provided by UAC

* Introduction about the company:

UAC has been privatized from Hanoi Urban Architect Consulting Companyaccording decision no 4133/QĐ-UB of the People's Committee of Hanoi on15/06/2005

Company name: Công ty cổ phần tư vấn kiến trúc đô thị Hà Nội

Trading name: Hanoi Urban Architect Consulting Joint Stock Company Abbreviation: UAC

* Main services:

The main outputs are services that UAC provides for their investors andcustomers Thus, for clear view, the list would illustrate the basic consulting services:

 Advising investors in Vietnam and other countries Management consulting

construction projects: manage and establish organizations of construction

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 Designing total ground area, structure: for civil engineering, industries, urban

infrastructure, industrial zones

 Designing of bridge project and land road

 Planning and designing total ground area: for architecture design interior and

exterior for civil engineering and industries

 Designing interior and exterior architectures overall planning the construction

site: for the civil engineering, industrial and processing zones, hi-tech parks,agriculture, and forestry

 Designing urban planning, rural and industrial zones

 Designing electricity systems: for construction, industrial, urban infrastructure,

export processing zones and industrial parks

 Designing for ground leveling, drainage systems, internal roads for the civil

construction, industrial, export processing zones and hi-tech parks

 Considersing about topographic, geological, ecological environment and

environmental impact assessment for construction projects Socio-economicsurveys and traffic surveys

 Designsing engineering, design technology, technical design of construction,

estimate making the civil construction and industrial, urban andruralinfrastructure

 Examinating of investment projects, the design, the total estimate

 Investing in developing urban areas, industrial zones, eco-tourism parks,

amusement parks, real estate, rental housing, factory, warehouse, businessoffice services

 Researching, applying and implementing of scientific research and surveying

designing of the construction

 Consulting supervision of construction, installation of equipment in the field of

civil and industrial infrastructure

 Drawing up projects and consulting design about phone line system, TV and

camera

 Seting up bidding documentation and analysis and evaluation of bids

 Cadastral cartography, terrain to cater for: urban planning development,

Developmental areas, land management, administrative boundaries, land useplanning; And building surveyor: subsidence, tilt, deformation, linearpositioning, and cadastral documentation serves certificate right of Land Use

 Helding project management, inspection and certification of conformity of

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quality construction.

 Real estate valuation

 Real estate broker

 Managing and administrating of real estate trading floors

The company’s operating avtivities are orcurred both inside and outside ofVietnam

The quality of UAC’s services has recognized by QUACERT, the NationalCertification Body of Vietnam to support the state management over standardization

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Figure 1-1 ISO 9001:2008 Certified No HT 1759/1.11.34 on 20/04/2011 by

QUACERT

The nature of services is quite simple, based on the requirements of thecustomers As illustrated by the list that shows main outputs of UAC, the companywill set up a short period for basic investors with consultant and review Depending onhow long the plans and what they are required advices and consultant belong withthose projects or not, the company understands the customers’ demand as supportsadvanced teams for extended period and professional knowledge

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The service can be long for 3 months, the minimum time for any basic requirebecause the company must have time for analysis carefully and review the result forany unexpected situation Hence, with the complex contract, supporting services formany years is most common, from preparing project to accepting construction Theperiod is enough for following all steps that construction need comment or evaluation,

so that the time base on the contract and characteristics of type services

1.2 The producing process at UAC

The main function of the consulting company is to report pre-feasibility studies,geological survey, and design construction Thus, the company's technology is a closedcycle from receiving project planning to design, organize bidding to constructionsupervision

UAC’s process includes 4 stages:

+ The stage of making investment projects:

- Filing an application for an investment license

- Establishing the technical and economic feasibility study

- Editing application of allowing investment, charter joint venture or 100%foreign capital companies, joint venture agreement

- Helping investors find construction sites for factories and deal with localvenues, land rents, compensation rates and other procedures

- Filing file of investments to MPI and on behalf of investors to explain to theauthorities for approval of the Government of Vietnam

Process of Consultant Services

Making Investment ProjectsBasic Design and Detail Design

Settlement Procedures for the

ConstructionGeneral Construction Contractor

Figure 1-2 The UAC’s process

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+ The stage of basic design and detail design:

- Topographic cartography construction area ratio 1/500; 1/2000 and otherratios

- Geological survey

- Detailed design based on the basic design of the investor

- Building (total ground, architecture, foundation, construction)

- Power supply section for each device in the works outside

- Design lighting for inside and outside

- Supply systems for compressed air, heat, steam, ventilation and airconditioning

- Supplying water system for daily people’s living and firefighting

- Firing alarm systems automatic and semi-automatic

- Radio systems

- Phone systems

- Treatment systems for wastewater and surface water

- Design non-standard equipment Designed productions (by AutoCADprogram from R14 to R2004), which UAC give to investor, included: 01 floppy diskand 09 prints

+ The stage of settlement procedures for the construction:

- Using land right

- Filing an application for design evaluation license

- Filing environment schemes and setting up permits agreements environment(depending on the nature of production)

- Building right

+ The stage of general construction contractor:

- On behalf of investors for project management

- Selecting contractor or construction bidding and procurement organizations

- Outlines the progress of construction, supervision and constructionmanagement of contractors on site in accordance with design plans

- Advising investors to price builders

- Organizing acceptance of partial payment, settlement and transfer all work

- Monitoring the progress of quality comprehensive construction and installingequipment, electricity, water and compressed air

- Permiting the import of equipment and materials for construction, theprocedures for receiving and shipping port to construction

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- Making procedures permits the Lightning, firefighting, making theenvironmental registry boiler equipment, pneumatic, crane.

- Making procedures permits assessment of the quality to bring the plant intoproduction as stipulated by Vietnam government

- Construction and installation

- Conformity assessment of the quality of work

1.3 Management of producing costs at UAC

As specified in the Company’s financial regulations, all costs incurred in thecompany based on financial regulation of Contracting and job search, Operation of theBoard of Directors and Board of Management, assigning responsibilities RegulationDirectorate, and Operation Regulations of the Supervisory Board

Financial Accounting Department and Planning Department in early tradingyear, based on the results of the previous business year to develop business plans toproduce next year The business plan includes plans for revenue, cost of sales, cost ofbusiness management, thereby determining the value of contracts signed and themoney value of that center to be achieved in each year

The value shall be analyzed carefully by both provisions Hence, the report,from the two departments, will be reviewed by General Director After that, GeneralDirector considers and supports to the Board of Directors At this step, the Board ofDirectors establishes a meeting for creating a resolution on the business as plan asshort term and long term strategy

This information above is translated to the map to illustrate the process ofmanaging cost services

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Figure 1-3 The process of managing cost product at UAC

- Every year, the company will be notified of cost accounting regulationsaccording to the cost (if any changes) Based on this, the manager has to gatherevidence base from completion at the rate of advance fee items according withthe regulations

- Department of Accounting and Finance is responsible for checkinglegality and validity of the documents in advance that project manager gatherseach month, according to project details

- In the first quarter of the next financial year, the Supervisory Board shall

be responsible for examining the legality and validity of management cost ofblock administration, tracking the revenue, the expenses and the establishmentfinancial statements of the company

- Along with the inspection and control of the Board of Control, thecompany annual invites an independent auditing firm to audit the financialstatements This audited report is the basis for the Shareholders' Meeting, todecide on the distribution of profits last year as plan to pay dividends next year,and is the basis for the Project Director to join materials tenders seekingcounseling services

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Chapter 2 The reality of production cost accounting at UAC

2.1 Accounting for producing costs in the company

Characteristics of the production costs of the company:

Under the regulations of contracting and looking for work, the process ofrecorded as the circle of procedures of cash in advance is controlled carefully Whenthe money transferred to the account of UAC from the party A, as the investor,Finance and Accounting Division has responsibilities for guiding Project Directorthrough the procedures After receiving the advance payment, Project Director activelyallocates that money into different parts such labor cost, stationery, photocopy,printing, depreciation of machinery and equipment On 10th day of each month,administrative staff of each center will gather and transfer the document costing toFinance and Accounting Division At there, the expenses of production will berecorded The costs of the works are detailed way for each expense item under at thelevels that are included in the Announcement about the cost accounting of theexpenses in UAC

Following the project easily, every examples is considered under the numbercontract 38/2008 between Hanoi Urban Architect Consulting Joint Stock Companyand Hanoi Civil Contraction Investment Joint Stock Company

The Announcement of Advances is a document that Company announces theCenter about name of construction, total cash received and all information related

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Figure 2-4 Announcement of Advances under contract 08/038

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URBAN INFRASTRUCTURE DEVELOPMENT INVESTMENT CORPORATION - UDIC

HANOI URBAN ARCHITECT CONSULTING JOINT STOCK - UAC

25 Bui Ngoc Duong-HBT-Hanoi Tel: 8634648 Fax: 8632882 Email: huac@vnn.vnWeb: www.uac.com.vn

Announcement of Advances Number: 100/13 /TB-TU

1 Based on:

Number business contract: 38/2008

Party A: Hanoi Civil Contraction Investment Joint Stock Company

Content: Designed and released for construction drawings of the low-risebuilding I5 Yên Hòa urban

Form of money transfer: Bank Account Date: 30/11/2013

2 Receiver

Department: Center of plan and development, UAC

Project Director: Phạm Bích Vân

3 Managing Cost Product:

Type of Consultant

Revenue Before Tax (vnd)

After Tax (vnd)

Total cash by word: Three hundred fifty nine million two hundred ninetythousand Vietnam dong

4 Conditions of Advances:

Deadline: at least 05 days

Support documents to Finance and Accounting Division following regulations of UAC

30/11/2013The Establishment Director of Invest and Plan Division General Director

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the cost accountant records all things to the tracking table of pay back advances, and toaccounting software for each expense items and expense accounts.

To simplify the accounting process, the Finance and Accounting Division recordsproduction costs according to two accounts:

Account No.622: labor costs

Account No.6278: overall production costs are detailed by cost items such asphotocopies of printed materials, reception, telephone, equipment, and other expenses

2.1.1 Accounting for direct labor costs

2.1.1.1 Contents

Direct labor costs are expenses relate to employees who directly in one projectincluding architects, project directors, and project managers

2.1.1.2 Accounts

The related used account is Account No.622 – Direct Labor Cost, Account No

33421 – Salaries Payable for Producing Block and Account No 33422 – AdvancesSalaries for Producing Block

When Project director pays back all invoices that cover total amount ofadvances for direct labor cost before the end of each quarter, the accountant recordsthose direct materials cost as:

Recording Closing entry

Direct Labor cost Direct labor cost

Figure 2-5 The process of recording Directly labor cost ( Full document of paying back advances of directly labor cost)

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In the case that the Project Director supports one part of all invoices fordirect labor cost, the accountant designs an adjusting entry under account 33421 and33422.

141(1412) 622 154

33421

Recording Posting Direct labor cost Direct labor cost

Closing entry

33422 Direct labor cost

Advanced Salaries Advanced Salaries

For example under contract 08/038, the accountant record:

Debit: 33421 195,642,000Credit: 1412 195,642,000

Debit: 33422 8,500,000Credit: 1412 8,500,000

Debit: 622 204,142,000Credit: 33421 195,642,000Credit: 33422 8,500,000

Figure 2-6 The process of recording Directly labor cost( not enough document cover all cost of

using labor)

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Figure 2-7 TIMESHEETS

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Form No: 07 – HTU.CC

TIMESHEETS

December 2013 Project Director: PHAM BICH VAN

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Vacation: F Other Vacation: NB Pregnant: TS Labour duties: LĐ

After that, the payroll sheet is calculated based on Timesheet The payroll sheet is the sum total of all compensation that a business must pay to its employees for a set period of time or on a given date

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Figure 2-8 Payroll Sheet Contract: 08/038

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Form No: 07 – HTU.TL

PAYROLL SHEET

31/12/2013 Department: Center of plan and development.

Project Director: PHAM BICH VAN Contract: 38/2008 – Designed and released for construction drawings I5 Yen Hoa

ter Func tion Rate Total salaries and income Total amounts payable under the provisions Total salaries and income receipt

Incom e

Ins (7%)/

month

Health Ins (1.5%)/

month

U Ins (1%)/

month

salaries and income receipt

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2.1.1.4 The process of recording specific accounting books (quoting figures ledger detail to illustrate the unit)

Based on the summary of documents from the cost of administrative staff,cost accountant gathers evidences from thetable tracking pay back advances and put

it in company’s software This cost is controlled follow each contract such as Acc

No 622: 08/038 on each quarter Thus, manager understands situation of project toadjust cash in suitable way At the end of each quarter, the accounting softwareautomatically synthesizes data into detailed book of account No.622

The process of recording detailed accounting:

Input daily dataPrint out books the end of each quarter

SOURCEDOCUMENTS

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transfer to Detailed book account No.622 of each contract For examples, it is in contract 08/038.

Figure 2-10 Detailed account book of account 622 under Contract 08/038

(Đã ký) (Đã ký)

(Đã ký)

2013 12

31

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HANOI URBAN ARCHITECT CONSULTING JOINT STOCK - UAC

Detailed account bookFrom: 01/12/2013 to: 31/12/2013Account No 622: 08/038– Direct labor cost Contract No.08/038

Beginning balance:

Debit: 204,142,000 Credit: 204,142,000

Ending balance:

quarter 4/2013

33422:

08/038

8,500,000

Recorded Accountant Chief Accountant Division Director

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CÔNG TY CỔ PHẦN TƯ VẤN KIẾN TRÚC ĐÔ THỊ HÀ NỘI _ UAC

SỔ CHI TIẾT TÀI KHOẢN

Từ ngày : 01/10/2013 đến ngày: 31/12/2013 Tài khoản 622 – Chi phí nhân công trực tiếp

Phát sinh nợ : 6.069.339.928 Phát sinh có : 6.069.339.928

Figure 2-11 Detailed account book of account 622

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Detailed account bookFrom: 01/10/2013 to: 31/12/2013Account No.622:– Direct labor cost

Debit: 6,069,339,928Credit: 6,069,339,928

10/105 -> 622: 10/105 33421:10/105 21,727,000Allocation Salary 33421:

08/038 -> 622: 08/038 33421:08/038 195,642,000

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2.1.1.5 The process of recording generally accounting books (cited ledger data synthesis unit to illustrate)

Another process that recording this cost is input data to general account No 622 book At the end of each quarter, this bookwould be printed

Figure 2-12 General account book of account 622

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General account bookFrom: 01/10/2013 to: 31/12/2013Account No.622:– Direct labor cost

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2.1.2.1 Contents

General production costs including depreciation costs of machinery,andcomputer components, shift meal costs, working cost, organization meeting,workshops, petrol expense, telephone charges, advertising expense, and brokerage

2.1.2.2 Accounts

The related account is 6278 – detailed base on above items

The figure after shows the process of recording accounts 6278:

Closing entryOverhead cost

Recording entryOverhead cost

Figure 2-13 The process of recording overhead cost(Full document of

paying back advances of overhead cost)

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2.1.2.3 Source of Documents

The total receipt can be collected and sum up by Project Director to support

to Accounting Division

Figure 2-14 RECEIPTS

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Address: 25 Bùi Ngọc Dương Hai Bà Trưng – Hà Nội

Tax code: 0100105221

Accompanied with Decision

No 15/2006-BTC dated 20/03/2006 of MoF

Address: Center of Plan and Development

Subject: Buy Software – Center of Design and Plan

Amounts: 1,990,000 vnd

By word: One million nine hundred ninety thousand Vietnam dong

Attached: … source document

Received enough money (by word) ………

11/10/2013Division Director Chief Accountant The Payer The Preparer The Treasurer

(Signed) (Signed) (Signed) (Signed) (Signed)

The exchange rate (gold, silver, gem):………

Total cash exchange:………

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