Decision 15.2006.MOF.corporate Accounting Regime English Version

PART I: CHART OF ACCOUNTS

GENERAL PROVISIONS

1. The accounts in accounting is used to classify and systemize economic, financial transactions by economic nature.

The chart of accounts under the Vietnamese Accounting System includes First Tier Accounts and Second Tier Accounts, On-Balance Sheet Accounts and Off-Balance Sheet Accounts as regulated by this policy.

2. Enterprises, firms, Corporations, based on the chart of accounts under the Vietnamese Accounting System, shall study, apply and customize a chart of accounts in accordance with their business characteristics, management requirements in each industry and each entity. However, such customized chart of accounts must also be in line with the content, structure and recording method of the corresponding general accounts.

3. For any proposed additions to the First Tier Accounts and Second Tier Accounts or any amendments to the First Tier Accounts and Second Tier Accounts in terms of the account names, account codes, account contents and recording method of typical economic transactions, enterprises, firms or Corporations must obtain approval from the Ministry of Finance prior to realization of such additions, amendments.

4. Enterprises, firms, Corporations can create more Second Tier Accounts and Third Tier Accounts for such accounts not available in the chart of accounts under the Vietnamese Accounting System stipulated in this Decision for their own management purpose without having to obtain prior approval from the Ministry of Finance.

II THE CHART OF ACCOUNTS

NoCodes of accounts

Account name NoteTier 1 Tier 2

CATEGORY 1CURRENT ASSETS

01 111111111121113

Cash on handVietnamese DongForeign currenciesGold, silver, precious metals, gemstones

02 112112111221123

Cash in bankVietnamese DongForeign currenciesGold, silver, precious metals, gemstones

Detailed by banks

03 11311311132

Cash in transitVietnamese DongForeign currencies

04 12112111212

Short term securities investmentsSharesBonds, bills, notes

05 12812811288

Other short term investmentTerm depositsOther short term investments

06 129 Allowance for diminution in the value of short term investments

07 131 Accounts receivable - trade Detailed by customers08 133

13311332

Deductible VATDeductible VAT for goods, servicesDeductible VAT for fixed assets

09 13613611368

Inter-company receivablesOperating capital given to branchesOther inter-company receivables

10 138138113851388

Other receivablesShortage of assets awaiting for resolutionReceivables from equitizationOther receivables

11 139 Allowance for doubtful debts12 141 Advances Detailed by advance

takers

13 142 Short term prepayments

NoCodes of accounts


14 144 Short term deposits15 151 Goods in transit16 152 Raw materials Detailed by management

purposes17 153 Tools and supplies18 154 Work-in-progress19 155 Finished goods20 156

156115621567

Merchandise inventoryPurchase costsIncidental purchase expensesProperties

21 157 Goods on consignment22 158 Goods in bonded warehouse Import-Export entity is

entitled to set up a bonded warehouse

23 159 Allowances for inventories24 161

16111612

Non-business expenditure Non-business expenditure brought forward Non-business expenditure of current year

CATEGORY 2NON CURRENT ASSETS

25 211211121122113211421152118

Tangible fixed assetsBuildings and structuresMachinery and equipmentMeans of transportation and transmissionOffice equipment and furnitureLivestock asetsOther fixed assets

26 212 Finance lease fixed assets

27 2132131213221332134213521362138

Intangible fixed assetsLand use rightsPublication rightsCopyrights and patentsTrademarksSoftwareLicences and franchisesOther intangible fixed assets

28 2142141214221432147

Depreciation of fixed assetsDepreciation of tangible fixed assetsDepreciation of finance lease fixed assetsAmortization of intangible fixed assetsAmortization of investment property

29 217 Investment property30 221 Investments in subsidiaries31 222 Investments in joint ventures32 223 Investments in associates

NoCodes of accounts


33 228 Other long term investments2281 Shares2282 Bonds2288 Other long term investments

34 229 Allowance for diminution in the value of long term investments

35 241241124122413

Construction in progressFixed assets prior to commissioningConstruction worksMajor repairs in progress

36 242 Long term prepayments37 243 Deferred tax assets38 244 Long term deposits

CATEGORY 3LIABILITITIES

39 311 Short term borrowings40 315 Current portion of long term liabilities41 331 Accounts payable - trade Detailed by suppliers42 333

3331333113331233323333333433353336333733383339

Taxes and other payables to State BudgetValue Added Tax (VAT)Out put VATVAT on imported goodsSpecial consumption taxImport and export dutiesCorporate income taxPersonal income taxNatural resource taxes Land and housing tax, land rental chargesOther taxesFees, charges and other payables

43 33433413348

Payables to employeesPayables to employeesOther payables to employees

44 335 Accrued expenses45 336 Inter-company payables46 337 Excess of progress billings over contract work-in-

progressConstruction firms having excess of progress billings over contract work-in-progress

47 33833813382338333843385338633873388

Other payablesSurplus of assets awaiting for resolutionTrade union feesSocial insuranceHealth insurancePayables regarding to equitizationShort term deposits receivedDeferred revenueOthers

48 341 Long term borrowings49 342 Long term liabilities

NoCodes of accounts


50 343343134323433

Bonds issuedBond nominal valueBond discountsBond premiums

51 344 Long term deposits received52 347 Deferred tax liabilities53 351 Provision for severance allowance54 352 Provisions

CATEGORY 4EQUITY

55 411411141124118

Operating capitalContributed capitalShare premiumOther capital

Applied to joint stock entities

56 412 Differences upon assets revaluation57 413

4131

4132

Foreign exchange differencesUnrealized foreign exchange differencesForeign exchange differences during construction in progress

58 414 Investment and development fund59 415 Financial reserves60 418 Other equity funds61 419 Treasury shares Applied to joint stock

entities62 421

42114212

Retained profitsRetained earnings brought forwardRetained earnings of current year

63 431431143124313

Welfare and reward fundsReward fundsWelfare fundsWelfare funds used for fixed asset investments

64 441 Capital expenditure funds Applied to SOEs65 461

46114612

Fund for State administrative activitiesBrought forwardCurrent year

Used by firms, corporations having Fund for State administrative activities

66 466 Fund for State administrative activities used for fixed assets

CATEGORY 5REVENUE

67 5115111511251135114

RevenueRevenue from sales of merchandiseRevenue from sales of finished goodsRevenue from services renderedIncome from grants, price subsidy

Detailed as per management purposes

NoCodes of accounts


5117 Revenue from trading investment property68 512

512151225123

Inter-company revenuesRevenue from sales of merchandiseRevenue from sales of finished goodsRevenue from services rendered

Only used if inter-company sales available

69 515 Financial income70 521 Sales discounts71 531 Sales returns72 532 Sales allowances

CATEGORY 6OPERATING AND PRODUCTION COSTS

73 61161116112

PurchasesPurchases of raw materialsPurchases of merchandizes

For entities applying perpetual method of accounting inventory

74 621 Direct raw material costs75 622 Direct labour costs76 623

623162326233623462376238

Costs of construction machineryLabour costMaterial costsTools and supplies expensesDepreciation expensesOutside servicesOther expenses paid in cash

Applied for construction entities

77 627627162726273627462776278

Production overheadsFactory staff costsMaterial costsTools and supplies expensesDepreciation expensesOutside servicesOther expenses paid in cash

78 631 Production costs For entities applying periodic method of accounting inventory

79 632 Cost of goods cold80 635 Financial expenses81 641

6411641264136414641564176418

Selling expensesStaff costsMaterials and packing materialsTools and supplies expensesDepreciation expensesWarranty expensesOutside servicesOther expenses paid in cash

82 642 General and administrative expense

NoCodes of accounts


64216422642364246425642664276428

Staff costsOffice supply expensesOffice equipment expensesDepreciationTaxes, fees and chargesProvision expensesOutside servicesOther expenses paid in cash

CATEGORY 7OTHER INCOME

83 711 Other income Detailed by activity

CATEGORY 8OTHER EXPENSES

84 811 Other expenses Detailed by activity

85 82182118212

Corporate income tax Corporate income tax – currentCorporate income tax – deferred

CATEGORY 9DETERMINING OPERATING RESULTS

86 911 Determining operating results

CATEGORY 0OFF BALANCE SHEET ACCOUNTS

001 Leased assets002 Goods held under trust or for processing003 Inward consignment goods for sales004 Bad debts written off 007 Foreign currencies008 Budget for non-business, project expenditure

III- INTERPRETATIONS, ACCOUNT STRUCTURE AND RECORDING METHOD

ACCOUNT CATEGORY ICURRENT ASSETS

This type of accounts is used to reflect the current balance and the movement of an entity’s current assets.

An entity’s current assets are those being under its prossession or management which is expected to be used up, circulated and collected in one business period or within one year. Current assets can be in cash, in kind (material, equipment), short-term investments and account receivables.

Current assets of an entity include: cash; short-term investments; accounts receivable; inventories; and other current assets;

Current assets also comprise non-business expenditure out of funds received from the State.

Notes to accounting records of current assets:

1. Accounting of assets being current assets must follow principles of valuation specified to each kind of assets: cash, short-term investments, accounts receivable, advances, short-term deposits, inventories…

2. Current assets being short-term investments, accounts receivable and inventories are measured and reflected at cost. At the balance sheet date, allowance for inventories shall be made if its net realizable value is lower than its cost; allowance for doubtful debts shall be made for accounts receivables having been classified as doubtful debts or unrecoverable.

Allowances for inventories and allowance for doubtful debts shall not be recorded directly to current assets but must be reflected in a separate account (provision account) and shall be documented, treated in accordance with the current financial regime.

Allowances and provisions for current assets shall be used to adjust the carrying value of current assets in order to identify their net realizable values on the balance sheet.

Current asset account category comprises 24 accounts being classified into 6 groups:

Account group 11 – Cash, composed of 3 accounts:- Account 111: Cash on hand- Account 112: Cash in bank- Account 113: Cash in transit

Account group 12 – Short-term investments, composed of 3 accounts:- Account 121: Short term security investments- Account 128: Other short term investments- Account 129: Allowance for diminution in the value of short-term investments

Account group 13 - Accounts receivable, composed of 5 accounts:- Account 131: Accounts receivable –trade- Account 133: Deductible value added tax

- Account 136: Inter-company receivables- Account 138: Other receivables - Account 139: Allowance for doubtful debts

Account group 14 - Prepayments, composed of 3 accounts:- Account 141: Advances- Account 142: Short-term prepayments- Account 144: Short-term deposits and collaterals

Account group 15 - Inventories, composed of 9 accounts:- Account 151: Goods in transit- Account 152: Raw materials- Account 153: Tools and supplies- Account 154: Work in progress- Account 155: Finished goods- Account 156: Merchandise inventory- Account 157: Goods on consignment- Account 158: Goods on bonded warehouse- Account 159: Allowance for inventories

Account group 16 - Non-business expenditure out of funds received from the State, composed of 1 account:

- Non-business expenditure out of funds received from the State

GROUP OF ACCOUNTS 11CASH

This group of accounts is used to reflect the current balance and the movement of an entity’s cash account, including cash on hand, cash in bank and cash in transit.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING CASH ACCOUNTS

1. The currency consistently used for recording cash account is Vietnam Dong, unless another popular currency otherwise permitted.

2. Cash on hand or cash in bank dominated in currencies other than Vietnam Dong are translated into Vietnam Dong at rates of exchange ruling at the transaction date (actual exchange rate or average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam when incurring).

Where foreign currencies are purchased to be cash on hand, cash in bank or liabilities denominated in foreign currencies are settled by Vietnam Dong, foreign currencies are translated into Vietnam Dong using the buying rate or repayment rate. The amount on the credit side of accounts 1112, 1122 shall be translated into Vietnam Dong at the rates carried in the account 1112 or 1122 using one of the following methods: weighted average, first-in-first-out, last-in-first-out; specific identification (as a special commodity).

Economic transactions denominated in foreign currencies being recorded to cash account must be translated into Vietnam Dong and the original currencies must also be recorded. Any foreign exchange differences resulting therefrom shall be recorded to income, financial expense (if arising during the operating period, including business entities being in capital expenditure activities) or reflected in account 143 (if arising during the construction period – pre-operating period). Closing balance of cash dominated in foreign currencies shall be revalued at the average inter-bank rate published by the State Bank of Vietnam at the balance sheet date.

Profiles of foreign currencies shall be recorded individually in Account 007 “Foreign currencies ” (Off- balance sheet account).

3. Gold, silver, precious metals and gemstones recorded to cash accounts are only applicable to entities whose business registration does not cover trading of gold, silver, precious metals and gemstones.

Volume, weight, specifications, quality and value of gold, silver, precious metal, gem stone must be monitored. The value of such valuables being measured based on actual actual (invoiced price or settled price) for determining their export prices can be determined by applying one of the four methods applicable to inventories.

Group of accounts 11 – Cash, composed of 3 accounts:- Account 111 – Cash on hand;- Account 112 – Cash in bank;- Account 113 – Cash in transit.

ACCOUNT 111CASH ON HAND

This account is to record cash received, paid and balanced by an entity in Vietnam Dong, foreign currencies, gold, silver, precious metals and gemstones.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING CASH ON HAND

1. Recorded in Account 111 “Cash on hand” are only actual movements of cash, foreign currencies to/from an entity’s petty cash fund. A receipt transferred directly to the entity’s bank account (not made through the entity’s petty cash fund) shall not be debited to account 111 “Cash on hand” but to account 113 “Cash in transit”.

2. Cash deposited at the entity by other companies or individuals shall be managed and accounted for in the same way as the entity’s cash assets.

3. Any records to “cash on hand” account shall be supported by payment or receipt vouchers duly signed by the receiver, transferor and approver in accordance with regulations on accounting documents. In special cases, a written approval of such receipts or transfers shall be attached.

4. Cash accountant is to open a cash book and keep daily records therein in an orderly manner of receipts and payments or receipts and transfers of cash and foreign currencies and compute their balances at any point of time.

5. Treasurer is to safeguard, pay and receive cash. On the daily basis, treasurer has to perform cash count, reconciles cash count result to the treasurer’s book and the cash book. Where differences arise, the treasurer and the cash accountant shall investgate to find out the cause and propose method for resolution.

6. For an entity receiving foreign currencies to its petty cash fund, translation of the amount so received into Vietnam Dong is required using the actual foreign exchange rate ruling the economic transaction or the average inter-bank rate published by the State Bank of Vietnam at the transaction date for recording purpose.

Where an entity buy foreign currencies for Vietnam Dong for its petty cash fund, translation of the amount so bought into Vietnam Dong using the buying rate or payment rate is permitted. The amount on the credit side of account 1112 shall be translated into Vietnam Dong at the rate defined in ledger account 1112 using one of the following methods: weighted average, first-in-first-out, last-in-first-out; specific identification (as a special commodity).

Profiles of cash fund’s foreign currencies shall be recorded individually in Account 007 “Foreign currencies ” (Off- balance sheet account).

7. Gold, silver, precious metals and gemstones recorded to cash on hand are only applicable to entities whose business registration does not cover trading of gold, silver, precious metals and gemstones. Movements of gold, silver, precious metals and gemstones to/from cash fund shall be recorded as inventories; payments made by such valuables shall be recorded as foreign currencies.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 111 - CASH ON HAND

Debit side:- Cash, foreign currencies, gold, silver, precious metals, gemstones received;- Surplus cash, foreign currencies, gold, silver, precious metals, gemstones identified

during the cash count;- Positive foreign exchange differences due to revaluation of closing foreign currencies

(for cash in foreign currencies).

Credit side:- Cash, foreign currencies, gold, silver, precious metals, gemstones paid out;- Deficient cash, foreign currencies, gold, silver, precious metals, gemstones identified

during the cash count;- Negative foreign exchange differences due to revaluation of closing foreign currencies

(for cash in foreign currencies).

Debit balance:Cash, foreign currencies, gold, silver, precious metals and gemstones on hand at the entity’s cash fund.

Account 111 – Cash on hand, has three second-tier accounts:- Account 1111 – Cash in Vietnam Dong: to record the receipts, payments and current balances

of Vietnam Dong in the entity’s cash fund;- Account 1112 – Cash in foreign currencies: to record the receipts, payments and current

balances of foreign currencies translated into Vietnam Dong in the entity’s cash fund;- Account 1113 – Gold, silver, precious metals, gemstones: to record the value of gold, silver,

precious metals, gemstones received, issued and currently kept in the entity’s cash fund.

METHODS FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS

1. Cash on hand received from sales of goods, provision of labour and rendering of services: - Where sales of products, goods and services are subject to VAT under deduction method and

the entity pays VAT under the deduction method, sales from goods sold and services rendered shall be recorded at the selling price net of VAT, enter:

Dr. 111 – Cash on hand (Total payment)Cr. 3331 – VAT payable (33311)Cr. 511 – Revenue (net of VAT);Cr. 512 – Inter-company revenue (net of VAT).

- Where sales of products, goods and services are not subject to VAT or subject to VAT under direct method, sales shall be recorded at the total payment, enter:

Dr. 111 – Cash on handCr. 511 – Revenue (total payment);Cr. 512 – Inter-company revenue (total payment).

2. Upon receipt of State Budget in cash as for price funding or subsidizing, enter:Dr. 111 – Cash on hand

Cr. 333 – Taxes payable to State Budget (3339).

3. Where financial income and other income, which are subject to VAT under deduction method, are received as cash on hand (such as: gains from short-term and long-term investments; proceeds from disposal and transfer of fixed assets….) and the entity pays VAT under deduction method, enter:

Dr. 111 – Cash on hand (total payment)Cr. 3331 – VAT payable (33311)Cr. 515 – Financial income (net of VAT)Cr. 711 – Other income (net of VAT)

4. Where financial income and other income, which are not subject to VAT or subject to VAT under direct method, are received as cash on hand and the entity pays VAT under direct method, enter:

Dr. 111 – Cash on handCr. 515 – Financial incomeCr. 711 – Other income.

5. Where cash is withdrawn from bank account to cash on hand; long-term borrowings, short-term borrowings and other borrowings in cash (Vietnam Dong or foreign currencies) are received, enter:

Dr. 111 – Cash on hand (1111, 1112)Cr. 112 – Cash in bank (1121, 1122)Cr. 311, 341….

6. Where the entity’s receivables are collected and put to cash on hand, enter:Dr. 111 – Cash on hand (1111, 1112)

Cr. 131 – Accounts receivable –tradeCr. 136 – Inter-company receivablesCr. 138 – Other receivables (1388)Cr. 141 – Advances

7. Collections on short-term investments, deposits or loans and put to cash on hand, enter:Dr. 111 – Cash on hand (1111,1112)

Cr. 121 – Short-term security investments; or Cr. 128 – Other short-term investmentsCr. 138 – Other receivablesCr. 144 - Short-term deposits and collateralsCr. 244 – Long-term depositsCr. 228 – Other long-term investments

8. For deposits received in cash or foreign currencies, enter:Dr. 111 – Cash on hand (1111,1112)

Cr. 338 – Other payables (short-term deposits)Cr. 344 – Long-term deposits received

9. For any surplus of cash on hand detected by a cash count for which no reason is yet identified, enter:

Dr. 111 – Cash on handCr. 338 – Other payables (3381)

10. For capital allocations, capital contributions in cash, enter:

Dr. 111 – Cash on handCr. 411 – Operating capital.

11. For any amounts transferred from cash on hand to cash in bank, enter:Dr. 112 – Cash in bank

Cr. 111 – Cash on hand

12. For any amounts paid out from cash on hand to purchase short-term, long-term securities or to invest in subsidiaries, associates, joint-ventures, enter:

Dr. 121 – Short-term investmentsDr. 221 – Investments in subsidiariesDr. 222 – Capital contributions to JVsDr. 223 – Investments in associatesDr. 228 – Other long term investments


13. For any deposits made from cash on hand, enter:Dr. 144 – Short term depositsDr. 244 – Long term deposits


14. For any amounts paid out from cash on hand to purchase fixed assets for immediate use:

- For fixed assets purchased for production and supply of goods and services which are subject to VAT under deduction method, enter:

Dr. 211 – Tangible fixed assets (purchase price net of VAT)Dr. 213 – Intangible fixed assets (purchase price net of VAT)Dr. 133 – Deductible VAT (1332)

Cr. 111- Cash on hand

- For fixed assets purchased for production and supply of goods and services which are subject to VAT under direct method or not subject to VAT or for non-business activities funded by non-business expenditure out of funds received from the State, for projects or for cultural and welfare activities using welfare and reward funds, enter:

Dr. 211,213… (total payment price)Cr. 111 – Cash on hand (total payment price)

For items purchased out of capital expenditure fund or investment and development fund and used for production and operating activities, the accountant shall credit the operating capital account upon finalization of the approved capital expenditure funds, enter:

Dr. 441,414… Cr. 411 – Operating capital.

15. Cash on hand paid for acquisition of capital items, significant repairs of fixed assets or acquisition of fixed assets that need installation intended for production and supply of goods and services which are subject to VAT under deduction method, enter:

Dr. 241- Construction in progressDr. 133- Deductible VAT (1332)


16. Cash on hand paid for purchase of raw materials, tools and supplies, merchandise inventory intended for production and supply of goods and services which are subject to VAT under deduction method (on the perpetual basis), enter:

Dr. 152 – Raw materialsDr. 153 – Supplies and toolsDr. 156 – Merchandise inventory (purchase costs net of VAT)Dr. 157 – Goods on consignmentDr. 133 – Deductible VAT (1331)


17. Cash on hand paid for purchase of materials, merchandise inventory intended for production and supply of goods and services which are subject to VAT under deduction method (on the periodic basis), enter:

Dr. 611 – Purchases (6111, 6112)Dr. 133 – Deductible VAT (1331)


18. Cash on hand paid out for settlement of liabilities, enter:Dr. 311 – Short-term borrowingsDr. 315 – Current portion of long-term liabilitiesDr. 331 – Accounts payable – tradeDr. 333 – Taxes payable to the State TreasuryDr. 334 – Payables to employeesDr. 336 – Inter-company payablesDr. 338 – Other payables


19. Where an entity paying VAT under deduction method uses cash on hand to purchase raw materials for immediate use in production and supply of goods and services which are subject to VAT under deduction method, enter:

Dr. 621, 623, 627, 641, 642,…Dr. 133 – Deductible VAT (1331)


20. Cash on hand paid out in respect of financial activities, other activities, enter:Dr. 635, 811….Dr. 133 – Deductible VAT (if any)


21. For shortages of cash on hand detected from a cash count without any cause identified, enter:Dr. 138 – Other receivables (1381)


22. Economic transactions involving foreign currencies:Accounting of economic transactions involving foreign currencies being cash on hand during the

business operation period (including construction activities by business entity having construction activities during their operating period).

a) For purchse of goods and services by foreign currencies.- If foreign exchange loss incurred in purchasing raw materials, merchandise inventory,

fixed assets, services, enter:Dr. 151,152,153,156,157,211,213,241, 623, 627, 641, 642, 133,…

(at the ruling exchange rate at the transaction date)Dr. 635 – Financial expenses (foreign exchange loss)

Cr. 111 (1112) (at the book exchange rate).Simultaneously, enter a single credit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- If foreign exchange gains generated in purchasing raw materials, merchandise inventory, fixed assets, services, enter:Dr. 151,152,153,156,157,211,213,241,623,627,641,642,133,…

(at the ruling exchange rate at the transaction date)Cr. 111 (1112) (at the book exchange rate)Cr. 515 – Financial income (foreign exchange gain)

Simultaneously, enter a single credit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- When receiving raw materials, merchandise inventory, fixed assets, services from suppliers or when receiving short-term, long-term borrowings, long-term loans or inter-company loans, …denominated in foreign currencies, based on the ruling exchange rate at the transaction date, enter:Dr relevant accounts (at the ruling exchange rate at the transaction date)

Cr. 331,311,341,342,336,…(at the ruling exchange rate at the transaction date)

b) For settlement of liabilities (accounts payable – trade, short-term borrowings, long-term borrowings, long-term loans, inter-company loans,…):

- If foreign exchange loss incurred in settlement of liabilities, enter:Dr. 311,315, 331, 336, 341, 342, … (at the book exchange rate)Dr. 635 – Financial expenses (foreign exchange loss)

Cr. 111 (1112) (At the book exchange rate)Simultaneously, enter a single credit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- If foreign exchange gains generated in settlement liabilities, enter:Dr. 311,315, 331, 336, 341, 342, … (at the book exchange rate)

Cr. 515 – Financial income (foreign exchange gains)Cr. 111 (1112) (At the book exchange rate)


c) When generating revenue, other income in foreign currencies in cash, enter:Dr. 111 (1112) (actual exchange rate or average inter-bank exchange rate)

Cr. 511, 515, 711, …(actual exchange rate or average inter-bank rate).Simultaneously, enter a single debit entry to Account 007 - Foreign currencies (Off-balance sheet account).

d) For collections of receivables in foreign currencies (accounts receivable – trade, inter-company receivables, …):

- If foreign exchange losses incurred from the collections of receivables in foreign currencies, enter:Dr. 111 (1112) (the exchange rate at the transaction date)Dr. 635 – Financial expenses (foreign exchange loss)

Cr. 131,136,138,…(at the book exchange rate)

Simultaneously, enter a single debit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- If foreign exchange gains generated from the collections of receivables in foreign currencies, enter:Dr. 111 (1112) (the exchange rate at the transaction date)

Cr. 515 - Financial income (foreign exchange gains)Cr. 131, 136, 138,… (the book exchange rate)


Accounting of economic transactions involving foreign currencies being cash on hand during the construction period (pre-operating period).

a) For purchase of raw materials, services, fixed assets, equipments, construction works supplied/handed over by suppliers or contractors:

- If foreign exchange losses incurred in payment of purchased raw materials, services, fixed assets, equipments, construction works supplied/handed over in foreign currencies, enter:Dr. 151,152, 211, 213, 241,… (the exchange rate at the transaction date)Dr. 413 – Foreign exchange differences (4132) (foreign exchange loss)

Cr. 111 (1112) (the book exchange rate)


- If foreign exchange gains generated in payment of purchased raw materials, services, fixed assets, equipments, construction works supplied/handed over in foreign currencies, enter:Dr. 151,152, 211, 213, 241,… (the exchange rate at the transaction date)

Cr. 111 (1112) (the book exchange rate)Cr. 413 – Foreign exchange differences (4132) (foreign exchange gains)


b) For settlement of liabilities in foreign currencies (accounts payable – trade, long-term borrowings, short-term borrowings, inter-company loans (if any),…):

- If foreign exchange losses incurred in settlement of liabilities, enter:Dr. 311, 315, 331, 336, 341, 342,… (the book exchange rate)Dr. 413 – Foreign exchange differences (4132) (foreign exchange loss)

Cr. 111 (1112) (the book exchange rate)Simultaneously, enter a single credit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- If foreign exchange gains generated in settlement liabilities, enter:Dr. 311, 315, 331, 336, 341, 342, …( the book exchange rate)

Cr. 111 (1112) (the book exchange rate)Cr. 413 – foreign exchange differences (4132) (foreign exchange gains)

Simultaneously, enter a single credit entry to account 007 “Foreign currencies” (Off-balance sheet account).

c) All realized foreign exchange differences incurred in the construction period (pre-operating period) are accumulated in Account 413 “Foreign exchange differences” (4132) until the completion of construction and are treated and recorded as regulated (Refer to guidance concerning Account 413 – Foreign exchange differences).

Accounting of foreign exchange differences upon revaluation of cash denominated in foreign currencies at the year end.

At the end of the fiscal year, the entity must revaluate the balance of cash dominated in foreign currencies of Account 111 “Cash on hand” using the exchange rate at year end (average inter-bank rate published by the State Bank of Vietnam at the reporting date), which may result in foreign exchange differences (gains or losses). The entity must detail foreign exchange differences arising upon revaluation in the construction period (pre-operating period) (Account 4132) and in the operating period (Account 4131): - If foreign exchange gains generated, enter:

Dr. 111 (1112)Cr. 413 – Foreign exchange differences (4131, 4132).

- If foreign exchange losses incured, enter:Dr. 413 - Foreign exchange differences (4131, 4132)

Cr. 111 (1112).

ACCOUNT 112CASH IN BANK

This account reflects the current balance and the movement (increase/decrease) of the entity’s cash in bank.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING CASH IN BANK

1. Accounting evidences required for recording a transaction to Account 112 “Cash in bank” are bank credit notes, bank debit notes or bank statements accompanied by source documents (payment orders, collection order, bank transfers, bank certified checks…)

2. Upon receipt of such advice from the bank, the entity’s accountant shall reconcile it with the accompanied source documents. If there is any discrepancies between the entity’s accounting records, source documents and the bank’s advice, the accountant shall inform the Bank thereof for joint reconciliation, verification and prompt resolution. At the month end, if the causes of the differences remains unidentified, the balances on the bank credit notes, bank debit notes or bank statements shall be recorded. Differences (if any) shall be debited to Account 138 “Other receivables” (1388) (where the accounting record’s balance is greater than the bank’s balance) or credited to Account 338 “Other payables” (3388) (where the accounting record’s balance is smaller than the bank’s balance). The differences will be followed up for resolution in the subsequent month.

3. For entities having dependent units with no separate accounting system, separate bank receipt/payment accounts or settlement accounts can be opened for the ease of transactions and payments. The accountants shall maintain a ledger detailed by each currency deposited (Vietnam Dong, foreign currencies)

4. Bankbook must be maintained and detailed by each bank account for easy checking and reconciliation.

5. Cash in bank in foreign currencies shall be translated into Vietnam Dong at the actual exchange rate of the transactions or at the average inter-bank rate published by the State Bank of Vietnam at the transaction date. Purchases of foreign currencies for cash in bank shall be recorded at the actual buying rate.Amounts of cash in bank in foreign currencies withdrawn shall be translated into Vietnam Dong at the rate defined in ledger account 1112 using one of the following methods: weighted average, first-in-first-out, last-in-first-out; specific identification.

6. During the entity’s normal business course (including construction activities by business entity having construction activities during their operating period), any foreign exchange differences arising from economic transactions involving cash in bank in foreign currencies shall be credited to Account 515 “Financial income” (Foreign exchange gains) or debited to Account 635 “Financial expenses” (Foreign exchange losses).

7. Any foreign exchange differences arising from economic transactions involving cash in bank in foreign currencies during the construction period (pre-operating period) shall be recorded to Account 413 “foreign exchange differences”.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 112 – CASH IN BANK

Debit side- Cash in Vietnam Dong, foreign currencies, gold, silver, precious metals and gemstones

deposited to the bank account;- Positive difference due to the revaluation of closing balance of foreign currency cash in

bank.Credit side

- Cash in Vietnam Dong, foreign currencies, gold, silver, precious metals and gemstones withdrawn from the bank account;

- Negative difference due to the revaluation of closing balance of foreign currency cash in bank.

Credit side balanceCash in Vietnam Dong, foreign currencies, gold, silver, precious metals and gemstones currently deposited at the bank account.

Account 112 – Cash in bank, has three second tier accounts:- Account 1121 – Cash in Vietnam Dong: is to record the cash amount deposited at,

withdrawn from and its current balance at bank in Vietnam Dong- Account 1122 – Cash in foreign currency: is to record the cash amount deposited at,

withdrawn from and its current balance at bank in foreign currencies translated in Vietnam Dong

- Account 1123 - Gold, silver, precious stones and gemstones: is to record the values of gold, silver, precious stones deposited at, withdrawn from and their current balance at banks

METHODS

FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS

1. When cash on hand is deposited in the bank, enter:Dr. 112 – Cash in bank


2. Upon receipt of bank credit note concerning the cash in transit having been deposited to the entity’s bank account, enter:

Dr. 112 – Cash in bankCr. 113 – Cash in transit

3. Upon receipt of advances or customer’s payment by bank transfers, based on bank credit note, enter:

Dr. 112 – Cash in bankCr. 131 – Accounts receivable - trade

4. Upon collection of collaterals and deposits made by cash in bank, enter:Dr. 112 – Cash in bank

Cr. 144 – Short term deposits and collateralsCr. 244 – Long term deposits

5. Upon receipt of joint venture capital contribution, share capital contribution by bank transfers, enter:

Dr. 112 – Cash in bankCr. 411 – Operating capital

6. Upon receipt of short term, long term deposits by cash in bank, enter:Dr. 112 – Cash in bank

Cr. 344 – Long term deposit received Cr. 338 – Other payables (3388)

7. Upon collection of short term investments by bank transfers, enter:Dr. 112 – Cash in bank

Cr. 121 – Short term security investments (at cost)Cr. 128 – Other short term investmentsCr. 515 – Financial income (gains)Cr. 3331 – VAT payables (33311)

8. For revenues from goods sold, services rendered or from financial activities or other activities by bank transfers.

For entities paying VAT under deduction method, upon selling products, goods, rendering services and upon generating proceeds from other activities by cash in bank subject to VAT under deduction method, enter:

Dr. 112 – Cash in bank (total payment received)Cr. 511 – Revenues (net of VAT)Cr. 512 – Inter-company sales (net of VAT)Cr. 515 – Financial income (net of VAT)Cr. 711 – Other income (net of VAT)Cr. 3331 - VAT payables (33311)

Upon receipt of payments from selling products, goods, rendering services and upon receipt of proceeds from other activities by cash in bank subject to VAT under direct method, enter:

Dr. 112 – Cash in bankCr. 511 – Revenues (total payment received)Cr. 512 – Inter-company sales (total payment received)Cr. 515 – Financial incomeCr. 711 – Other income

9. For bank interest earned, enter:Dr. 112 – Cash in bank

Cr. 515 – Financial income

10. When cash in bank is withdrawn to cash on hand, enter:Dr. 111 – Cash on hand

Cr. 112 – Cash in bank

11. Where cash in bank is transferred for a deposit or pledge (long term, short term), enter:Dr. 244 – Long term depositsDr. 144 – Short term deposits and collaterals


12. Where cash in bank is transferred for a short term investment, enter:Dr. 121 – Short term securities investmentsDr. 128 – Other short term investments


13. For payments by bank transfers, payment orders, or cheque for purchase of raw material, tools and supplies, merchandise inventories intended for production and supply of goods and services which are subject to VAT under deduction method, enter:+ Under the perpetual method of accounting for inventory, when payments are made, enter:

Dr. 152 – Raw materialsDr. 153 – Tools and suppliesDr. 156 – Merchandise inventoryDr. 157 – Goods on consignmentDr. 133 – Deductible VAT (1331)


+ Under the periodic method of accounting for inventory, when payments are made, enter:Dr. 611 – Purchases Dr. 133 – Deductible VAT (1331)


14. For payments by bank transfer for acquisition of fixed assets, investment property, long term investments, capital items intended for production and supply of goods and services which are subject to VAT under deduction method, enter:

Dr. 211 – Tangible fixed assetsDr. 213 – Intangible fixed assetsDr. 217 – Investment propertyDr. 221 – Investments in subsidiariesDr. 222 – Investments in joint venturesDr. 223 – Investments in associatesDr. 228 – Other long term investmentsDr. 241 – Construction in progressDr. 133 – VAT deductible (1332 – if any), …


15. Upon settlement of liabilities by bank transfers, enter:Dr. 311 – Short term borrowingsDr. 315 – Current portion of long term liabilitiesDr. 331 – Accounts payable - tradeDr. 333 – Taxes payable to State BudgetDr. 336 – Inter-company payablesDr. 338 – Other payablesDr. 341 – Long term borrowingsDr. 342 – Non-current liabilities,…


16. Upon returns of capital contributions received, payment of dividends to capital-contributing parties, spending of the entity’s funds out of bank account, enter:

Dr. 411 – Operating capitalDr. 421 – Retained profitDr. 414, 415, 418, …


17. For entities paying VAT under decduction method, when payment is made from bank account for sales discounts, sales allowances, sales returns, which are subject to VAT under decduction method, to customers, enter:

Dr. 521 – Sales discountsDr. 531 – Sales returnsDr. 532 – Sales allowancesDr. 3331 – VAT payables (33311)


18. For payments out of bank account relating to construction machinery running costs, production overheads, selling expenses, business and administration expenses, financial expenses, other expenses, which are subject to VAT under decduction method, enter:

Dr. 623 – Construction machinery running costsDr. 627 – Production overheadsDr. 641 – Selling expensesDr. 642 – Business and administration expensesDr. 635 – Financial expensesDr. 811 – Other expensesDr. 133 – VAT deductible (1331)


19. Economic transactions involving foreign currenciesAccounting of economic transactions in the period involving foreign currencies from operating

activities, including construction activities of the business entities.a) For purchases of raw materials, inventories, fixed assets, services involving cash in bank in

foreign currencies.- Where foreign exchange losses incur, enter:

Dr. 151, 152, 153, 156, 211, 213, 241, 623, 627, 641, 642, 133,…(At the exchange rates ruling at the transaction dates)

Dr. 635 – Financial expense (Foreign exchange losses)Cr. 112 (1122) (At the book exchange rates)

Simultaneously, enter a single credit entry to Account 007 – Foreign currencies (Off-balance sheet account)

- Where foreign exchange gains generated, enter:Dr. 151, 152, 153, 156, 211, 213, 241, 623, 627, 641, 642, 133,…

(At the exchange rates ruling at the transaction dates)Cr. 112 (1122) (At the book exchange rates)Cr. 515 – Financial income (Foreign exchange gains)

Simultaneously, enter a single credit entry to Account 007 – Foreign currencies (Off-balance sheet account).

- For settlement of liabilities (accounts payable – trade, short-term borrowings, long-term borrowings, long-term loans, inter-company loans,…)+ If foreign exchange loss incurred in settlement of liabilities in foreign currencies, enter:

Dr. 311, 315, 331, 336, 341, 342, … (At the book exchange rates)Dr. 635 – Financial expense (Foreign exchange losses)

Cr. 112 (1122) (At the book exchange rates)Simultaneously, enter a single credit entry to Account 007 – Foreign currencies (Off-balance sheet account).

+ If foreign exchange gains generated in settlement liabilities in foreign currencies, enter:Dr. 311, 315, 331, 336, 341, 342, … (At the book exchange rates)Dr. 515 – Financial income (Foreign exchange gains)

Cr. 112 (1122) (At the book exchange rates)Simultaneously, enter a single credit entry to Account 007 – Foreign currencies (Off-balance sheet account).

b) For revenues, other income generated in foreign currencies, enterDr. 112 (1122) (actual exchange rate or average inter-bank exchange rate)

Cr.s 511, 515, 711, …(actual exchange rate or average inter-bank exchange rate)Simultaneously, enter a single debit entry to Account 007 - Foreign currencies (Off-balance sheet account).

c) For collections of receivables in foreign currencies (accounts receivable – trade, inter-company receivables, …):

- If foreign exchange losses incurred from the collections of receivables in foreign currencies, enter:

Dr. 112 (1122) (At the exchange rates ruling at the transaction dates)Dr. 635 – Financial expense (Foreign exchange losses)

Cr.s 131, 136, 138, … (At the book exchange rates)Simultaneously, enter a single debit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- If foreign exchange gains generated from the collections of receivables in foreign currencies, enter:

Dr. 112 (1122) (At the exchange rates ruling at the transaction dates)Cr. 515 – Financial income (Foreign exchange gains)Cr.s 131, 136, 138, … (At the book exchange rates)


Accounting of economic transactions in the period involving foreign currencies during the construction period (pre-operating period)

a) For purchase of raw materials, services, fixed assets, equipments, construction works supplied/handed over by suppliers or contractors:

- If foreign exchange losses incurred in payment of purchased raw materials, services, fixed assets, equipments, construction works supplied/handed over in foreign currencies, enter:

Dr. 151, 152, 211, 213, 241 … (the exchange rates at the transaction dates)Dr. 413 – Foreign exchange differences (4132) (Foreign exchange losses)

Cr. 112 (1122) (At the book exchange rates)


- If foreign exchange gains generated in payment of purchased raw materials, services, fixed assets, equipments, construction works supplied/handed over in foreign currencies, enter:

Dr. 151, 152, 211, 213, 241 … (the exchange rate at the transaction date)Cr. 112 (1122) (At the book exchange rates)Cr. 413 – Foreign exchange differences (4132) (Foreign exchange gains)


b) For settlement of liabilities in foreign currencies (accounts payable – trade, long-term borrowings, short-term borrowings, inter-company loans (if any),…):

- If foreign exchange losses incurred in settlement of liabilities in foreign currencies, enter:Dr. 311, 315, 331, 336, 341, 342, … (At the book exchange rates)Dr. 413 – Foreign exchange differences (4132) (Foreign exchange losses)

Cr. 112 (1122) (At the book exchange rates)Simultaneously, enter a single debit entry to Account 007 - Foreign currencies (Off-balance sheet account).

- If foreign exchange gains generated in settlement liabilities in foreign currencies, enter:Dr. 311, 315, 331, 336, 341, 342, … (At the book exchange rates)

Cr. 112 (1122) (At the book exchange rates)Cr. 413 – Foreign exchange differences (4132) (Foreign exchange gains)


c) Annually, all realized foreign exchange differences incurred in the construction period (pre-operating period) are accumulated in Account 413 “Foreign exchange differences” (4132) until the completion of construction and are treated and recorded as regulated (Refer to guidance concerning Account 413 – Foreign exchange differences).

Accounting of revaluation of cash in bank in foreign currenciesAt the end of the fiscal year, the entity must revaluate their cash in bank dominated in foreign currencies using the exchange rate at year end being the average inter-bank rate published by the State Bank of Vietnam at the reporting date. The entity must detail foreign exchange differences arising upon revaluation in the construction period (pre-operating period) in Account 4132 and in the operating period in Account 4131:

- If foreign exchange gains generated, enter:Dr. 112 (1122)

Cr. 413 – Foreign exchange differences (4131, 4132)

- If foreign exchange losses incured, enter:Dr. 413 – Foreign exchange differences (4131, 4132)

Cr. 112 (1122)

ACCOUNT 113CASH IN TRANSIT

This account is to record cash transferred to banks, State Treasury, or remitted thereto by post, paid to other entities or available at the bank with related procedures completed for payment to other entities for which no bank advice or statement is yet received.

Cash in transit includes Vietnam Dong and foreign currencies in transit in the following cases:- Receipts in cash or by cheques by deposited directly to the bank account;- Transfers by post for payments to other entities- Sales receipts used to pay tax at the same time to State Treasury (tripartite transfer of

cash among the entity, its customer and the State Treasury)

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 113 - CASH IN TRANSIT

Debit side:- Cash or cheque in Vietnam Dong, foreign currencies deposited into bank account or

transferred thereto by post for which no bank advice is yet received;- Positive difference due to the revaluation of closing balance of foreign currency cash in

transit.

Credit side:- Cash tranferred to Account 112 – Cash in bank, or a relevant account;- Negative difference due to the revaluation of closing balance of foreign currency cash in

transit.

Debit side balanceAll cash in transit at the end of the period.

Account 113 – Cash in transit, has two second tier accounts:Account 1131 – Vietnam Dong: to record cash in Vietnam Dong in transitAccount 1132 – Foreign currencies: to record cash in foreign curriencies in transit


1. Proceeds of sales revenue, trade receivables or other incomes in cash or by cheque deposited directly to the bank (not through cash funds) for which no bank crdit note is yet received, enter:

Dr. 113 – Cash in transit (1131, 1132)Cr. 131 – Accounts receivable – trade (collection of trade receivables)Cr. 3331 – VAT payables (33311) (If any)Cr. 511 – RevenueCr. 512 – Inter-company salesCr. 515 – Financial incomeCr. 711 – Other income

2. Cash on hand is deposited in the bank but no bank credit note is yet received, enter:Dr. 113 – Cash in transit (1131, 1132)

Cr. 111 – Cash on hand (1111, 1112)

3. Payment to creditors out of cash in bank, for which no bank debit note is yet received, enter:Dr. 113 – Cash in transit (1131, 1132)

Cr. 112 – Cash in bank (1121, 1122)

4. Customer’s advance payment by cheques received and transferred to the bank but for which no bank credit note is yet received, enter:

Dr. 113 – Cash in transit (1131, 1132)Cr. 131 – Accounts receivable - trade

5. Receipt of bank credit notes on cash in transit deposited to the entity’s bank account, enter:Dr. 112 – Cash in bank (1121, 1122)

Cr. 113 – Cash in transit (1131, 1132)

6. Receipt of bank debit notes on cash in transit transferred to the entity’s suppliers, enter: Dr. 331 – Accounts payable - trade

Cr. 113 – Cash in transit (1131, 1132)

7. At the end of the financial year, based on the interbank exchange rate published by the State Bank of Vietnam, the entity shall revaluate the foreign exchange balance of Account 113 “cash in transit”:

- Where the exchange rate difference increases, enter:Dr. 113 – Cash in transit (1132)

Cr. 413 – Foreign exchange differences

- Where the exchange rate difference decreases, enter:Dr. 413 – Foreign exchange differences

Cr. 113 – Cash in transit (1132)

ACCOUNT 121SHORT TERM SECURITIES INVESTMENTS

This account is to record purchases, sales and settlement of securities (shares, bonds, bills…) which will mature, bought or sold for profit in upto one year.

Short term securities investments include: - Shares which are tradeable on the stock exchange- Bonds including corporate bonds, government bonds- Other securities as regulated by the law

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING SHORT TERM SECURITIES INVESTMENTS

1. Short term securities investments are stated at their actual cost (historical cost), including: purchase price plus (+) purchasing expenses (if any) such as brokerage fees, transaction costs, information costs, taxes, duties and bank charges…

2. Short term securities investments include long term investments which are purchased for reselling in the stock market for which capital is recoverable within a year.

3. At the balance sheet date, allowance for diminution in value of short term investments is made if the market values of short term securities investments fall lower than their costs.

4. The entity’s accountant shall maintain sub-ledgers for recording each type of short term securities investments held by the entity (by each type of shares, bonds, other valuable securities; by each investee; by each norminal values and actual purchase price)

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 121 - SHORT TERM SECURITIES INVESTMENTS

Debit side: Actual value of short term securities investments purchased

Credit side: Actual value of short term securities investments sold, matured or settled.

Debit side balance: Actual value of short term securities investments held by the entity.

Account 121 – Short term securities investments, have two second tier accounts:Account 1211 – Shares: to record shares purchased and sold for held-for-sale purposeAccount 1212 – Bonds, bills, notes: reflect purchasing, selling and paying for short term bonds, bills, notes of all types.


1. Upon purchase of short term investment securities, based on actual purchase cost (Purchase price plus (+) brokerage fees, transaction costs, information costs, duties and bank charges…), enter:

Dr. 121 – Short term securities investmentsCr. 331 – Accounts payable - tradeCr. 111 – Cash on hand

Cr. 112 – Cash in bankCr. 141 – AdvancesCr. 144 – Short term deposits and collaterals

2. For interests earned periodically on bonds, bills, notes:a) In case, the interests received are used immediately for additional purchase of bonds, bills

(the entity uses the interests received for immediate purchase of bonds without recording such interests to cash accounts), enter:

Dr. 121 – Short term securities investmentsCr. 515 – Financial income

b) In case, interests are received in cash, enter:Dr. 111, 112, …


c) In case, the interests received include the accrued interests recorded from the periods prior to the purchase of the investment, the interest so received shall be allocated accordingly. Only the interests earned during the periods of investment are recorded as financial income; the accrued interests before the purchase are recorded as a reduction to such investment, enter:

Dr. 111, 112, … (the total interests earned)Cr. 121 – Short term securities investments (the accrued interests before the

purchase)Cr. 515 – Financial income (the interests earned during the investment periods)

3. Upon the dividends received/earned periodically (if any), enter:Dr. 111, 112, …Dr. 138 – Other receivables (for dividend declared, not yet received)


4. Sales of short term investment securities, based on the selling price:a) For gains, enter:

Dr. 111, 112, … (total price)Dr. 131 – Accounts receivable - trade (total price)

Cr. 121 – Short term securities investments (at cost)Cr. 515 – Financial income (the difference where the selling price exceeds the

purchase price)

b) For losses, enter:Dr. 111, 112 or 131 (total price)Dr. 635 – Financial expense (the difference where the selling price is lower than the

purchase price)Cr. 121 – Short term securities investments (at cost)

c) For selling expenses, enter:Dr. 635 – Financial expense

Cr. 111, 112,…

5. Upon the collection or payment of short term investment at the maturity date, enter:Dr. 111, 112 or 131

Cr. 121 – Short term securities investments (at cost)Cr. 515 – Financial income

ACCOUNT 128OTHER SHORT TERM INVESTMENTS

This account is to record the position and movement of other short term investments, including loans with maturity term of upto a year...

Where the investments in cash or in kind (e.g. fixed assets, materials, inventories…), their values are determined based on the investors’ agreement on the assets contributed. The differences (if any) between the carrying values of such assets and their values determined upon revaluation shall be debited to Account 811 or credited to Account 711.

The entity’s accountant shll maintain sub-ledgers for detailing each investment, each loan agreement.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 128 – OTHER SHORT TERM INVESTMENTS

Debit side: Increases in other short term investments

Credit side: Decreases in other short term investments

Debit side balance: Current balance of other short term investments.

Account 128 – Other short term investments, has two second tier accounts:Account 1281 – Term deposits: is to record the movement and current balance of term depositsAccount 1288 – Other short term investments: : is to record the movement and current balance of other short term investments.


6. Upon the payment for short term investments in cash, enter:Dr. 128 – Other short term investments (1281, 1288)

Cr. 111, 112, …

7. Where investments are made by contributing materials, products, merchandise inventories with terms of investment of less than 1 year:

d) If the revaluated value of contributed assets exceeds the book value, enter:Dr. 128 – Other short term investments (1288)

Cr. 152 – Raw materialsCr. 155 – Finished goodsCr. 156 – Merchandised inventoriesCr. 711 – Other income (the difference where the revaluated value of contributed

assets exceeds the book value)

e) If the revaluated value of contributed assets falls lower than the book value, enter:Dr. 128 – Other short term investments (1288)Dr. 811 – Other expense (the difference where the revaluated value of contributed assets

is lower than the book value)Cr. 152 – Raw materialsCr. 155 – Finished goods

Cr. 156 – Merchandised inventories

8. Upon the collection of other short term investments, enter:Dr. 111, 112, 152, 156, 211… Dr. 635 – Financial expense (losses)

Cr. 128 – Other short term investments (1281, 1288) (at cost)Cr. 515 – Financial income (gains)

ACCOUNT 129

ALLOWANCE FOR DIMINUTION IN THE VALUE OF SHORT TERM INVESTMENTS

This account is to record the current balance and the movement (increase, decrease) of allowances for diminution in the value of short term investments.

Allowance for diminution in the value of short term investments is made for recognizing potential losses due to possible diminutions in the values of short term investments held by the entity.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ACCOUNT 129

1. Allowance for diminution in the value of short term investments is made and reversed at the cut-off date for preparation of financial statements. For entities preparing interim financial statements, if there are significant movements in allowances made, allowances shall be added or reversed accordingly.

2. Amount of allowance for diminution in the value of short term investment is determined to be the difference between the net realisable value (market value) and its cost recorded in accounting books. If the allowance to be made in the current period exceeds the allowance balance as at the end of previous accounting period, the difference therefrom is recorgnized in the financial expense of the current period. If the allowance to be made in the current period is lower than the allowance balance as at the end of previous accounting period, the difference therefrom is recorgnized as a decrease to financial expense.

3. Conditions for making allowance for diminution in the value of short term investments:

- They are securities invested by the the entity in accordance with law requirements:

- They are freely tradable in the securities market, the value of which, at the date of physical checking, preparing financial statements, their market values fall lower than their costs recodred in accounting books (No allowance is made for non-tradable securities).

4. Allowance shall be made for each type of short term investment securities against negative price movement by the year-end using the following formula:

Level of allowance for diminution in the value of short term investments

=

Number of securities declined at the end of a fiscal year

x

Book value of short-term investment

-

Market value of short-term investment

Allowance shall be made separately for respective categories of declined short-term investments and listed in the detailed schedule of allowance for diminution in the value of short term investments, reconciled with the allowance available as at the end of previous accounting period for making further allowance or reversing allowance with a reduction in financial expense.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 129 - ALLOWANCE FOR DIMINUTION IN THE VALUE OF SHORT

TERM INVESTMENTS

Debit side:

Reversal of allowance for diminution in the value of short term securities investments where the amount of allowance to be made this period is smaller than the allowance made at the end of previous period.

Credit side:

Allowance for diminution in the value of short term securities investments (the initial allowance to be made and the difference where the amount of allowance to be made this period exceeds the allowance made at the end of previous period.

Credit side balance:

Current balance of allowance for diminution in the value of short term securities investments at the year end.


9. At the end of the accounting period, the initial allowance shall be made based on the movements in diminution in the value of short term investments currently in hand, enter:

Dr. 635 – Financial expense

Cr. 129 – Allowance for diminution in the value of short term investments

10. At the end of the following accounting period:

- If the amount of allowance to be made this period is smaller than the allowance made at the end of previous period, the negative difference therefrom shall be reversed, enter:

Dr. 129 – Allowance for diminution in the value of short term investments

Cr. 635 – Financial expense

- If the amount of allowance to be made this period exceeds the allowance made at the end of previous period, an amount of allowance equal to the positive difference therefrom shall be made further, enter:


Cr. 129 – Allowance for diminution in the value of short term investments

ACCOUNT 131ACCOUNTS RECEIVABLE - TRADE

This account is to record trade receivables and movements of the entity’s trade receivables with respect to sales of products, goods, investment properties, fixed assets and provision of services. This account is also used to record amounts due to a contractor from the project owner on capital items completed.


5. Accounts receivable-trade shall reflect in details of respective debtors, receivable items and payments, separately for short term and long term receivables.Debtors are customers having economic relations with the entity by way of purchasing goods and services, including fixed assets and investment properties.

6. This account does not reflect such transactions of selling goods, investment properties, fixed assets and rendering services on cash on delivery basis (payments in cash, by cheque or by bank transfer).

7. In recording this account, the entity’s accountant shall classify debts into current, doubtful or loss, forming bases for determining amount of allowance for doubtful debts to be made or actions to be taken against debts unrecoverable.

8. In relations to sales and purchases of products, goods or services performed on a mutually agreed basis between the entity and a customer, if the products, goods or services supplied are not in compliance with the underlying economic contracts, the customer may claim for a sales allowance or sales returns.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 131 – ACCOUNTS RECEIVABLE - TRADE

Debit side: - Amounts of trade receivables on products, goods, investment properties, fixed assets

handed over and services delivered to customers and determined to be sold and rendered in the period.

- Overpayments refunded to customers.

Credit side: - Payments received from customers- Advances received from customers;- Sales allowances offered to customers after goods delivery and claims are received from

customers.- Sales returns (including VAT or excluding VAT)- Payment discounts and sales discounts to customers

Debit side balance: Current balance of receivables from customers.This account may have a credit side balance. The credit side balance reflects the advances or payments received exceeding the actual amounts due respectively from each customer.

These balances shall be presented separately in details to both “Assets” and “Resources” on the balance sheet.


11. For revenue from products, goods, investment properties sold and services rendered for which payments are not received, the entity’s accountant shall recognise the amounts so receivable.

- For goods, services, investment properties subject to VAT under deduction method and the entity pays VAT under deduction method, revenue from goods sold and services rendered is recognised at selling price net of VAT, enter:

Dr. 131 – Accounts receivable - trade (total price)Cr. 511 – Sales revenue (selling price net of VAT) (5111, 5112, 5113, 5117)Cr. 3331 – VAT payable (33311)

- For goods, services, investment properties not subject to VAT or subject to VAT under direct method, revenue from goods sold and services rendered is recognised at total price paid, enter:

Dr. 131 – Accounts receivable - trade Cr. 511 – Sales revenue (total price) (5111, 5112, 5113, 5117)

12. For sales returns:- For items subject to VAT under deduction method and the entity pays VAT under deduction

method, enter:Dr. 531 – Sales returns (selling price net of VAT) Dr. 3331 – VAT payable (33311) (VAT on sold items returned)

Cr. 131 – Accounts receivable - tradeCr. 111, 112, …

- For items not subject to VAT or subject to VAT under direct method, revenue from sold items being returned is recognised, enter:

Dr. 531 – Sales returnsCr. 131 – Accounts receivable – trade

13. Based on the confirmation of the sales allowances for goods sold to customers not in compliance with the underlying contract in terms of specifications and quality, if this is a credit sale, reduction shall be made from the accounts receivable for such sales allowances.

- For items subject to VAT under deduction method and the entity pays VAT under deduction method, enter:

Dr. 532 – Sales allowances (net of VAT)Dr. 3331 – VAT payable (33311) (VAT on items subject to sales allowances)

Cr. 131 – Accounts receivable - trade (total rebate)

- For items not subject to VAT or subject to VAT under direct method, or for items subject to VAT under deduction method but the entity pays VAT under direct method, the rebate shall be recorded by entering:

Dr. 532 – Sales allowancesCr. 131 – Accounts receivable – trade

14. Upon the receipt of payments from customers (including interest – if any) for products, goods, investment properties sold, services rendered, enter:

Dr. 111, 112, …Cr. 131 – Accounts receivable - tradeCr. 515 – Financial income (interest)

15. Discounts granted to a customer for their early payment will be deducted from accounts receivable from the customer, enter:

Dr. 111 – Cash in handDr. 112 – Cash at bankDr. 635 – Financial expenses (payment discounts)

Cr. 131 – Accounts receivable – trade

16. Sales discounts payable to a customer will be deducted from accounts receivable from the customer, enter:

Dr. 521 – Sales discountsDr. 3331 – VAT payable (33311)


17. For advances and prepayments received from a customer under a sale or service contract, enter:

Dr. 111, 112, …Cr. 131 – Accounts receivable - trade

18. Methods adopted by a contractor for accounting of accounts receivables relating a construction contract.

a. Where it is stated in the construction contract that the contractor is entitled to progress payments, when the outcomes of the construction contract can be reliably estimated, the contractor’s accountant based on supporting documents reflecting the revenue corresponding to the stage of completion (rather than invoices) determined by the contractor, enter:

Dr. 337 - Excess of progress billings over contract work-in-progressCr. 511 – Revenue

- Based on progress invoices respectively reflecting amounts payable by the customer in accordance with the contractual schedule, enter:

Dr. 131 – Accounts receivable - tradeCr. 337 – Excess of progress billings over contract work-in-progressCr. 3331 – VAT payable (33311)

b. Where it is stated in the construction contract that the contractor is entitled to receive payments according to the completed work volume, when the outcomes of the construction contract can be reliably estimated and is confirmed by the customer, invoices shall be prepared respectively to such completed and approved works, based on the invoices, enter:

Dr. 131 – Accounts receivable - tradeCr. 3331 – VAT payable (33311)Cr. 511 – Revenue

c. Extra payments made by a customer to the contractor for rewarding the contractor’s over expected performance compared to the contractual requirements, enter:


d. For compensations received from a customer or other parties covering expenses incurred out of scope of contract (e.g.: delays caused by the customer; errors in technical specifications or design and disputes on variations to contract works), enter:


e. Upon receipt of payments for completion works or advances from a customer, enter:Dr. 111, 112, …


19. Accounting of accounts receivable – trade by an entity acting as an import entrustee:a. Upon receipt of advance from the import entrustor for opening L/C, …, based on relevant

supporting documents, enter:Dr. 111, 112, …

Cr. 131 – Accounts receivable - trade (details by respective import entrustor)

b. Upon making a bank transfer or obtaining a bank loan for an L/C deposit (in case of payment by L/C), based on relevant supporting documents, enter:

Dr. 144 – Short term deposits and collaterals Cr. 111, 112, 311, …

c. For import of materials, equipment, goods, the following transactions shall be reflected:- For payments made to the seller on behalf of an import entrustor under an entrusted import

contract, based on relevant supporting documents, enter:Dr. 151 – Goods in transit (for on-the-way goods)Dr. 156 – Merchandise inventory (for in-stock goods)

Cr. 331 – Accounts payable - trade (details by sellers)

- In case the import goods received from the foreign exporters are not placed in the entity’s warehouse but forwarded directly to the import entrustor, enter:

Dr. 331 – Accounts payable - trade (details by import entrustors)Cr. 3333 – Import and export duties (details by foreign exporters)

- For import tax paid on behalf of import entrustors, based on relevant supporting documents, enter:

Dr. 151 – Goods in transit Dr. 156 – Merchandise inventory

Cr. 3333 – Import - export tax (details of import tax)

In case the import goods received from the foreign exporters are not placed in the entity’s warehouse but forwarded directly to the import entrustor, enter:

Dr. 331 – Accounts payable - trade (details by import entrustors)Cr. 3333 – Import - export tax (details of import tax)

- For VAT on import goods paid on behalf of import entrustors, based on relevant supporting documents, enter:

Dr. 151 – Goods in transitDr. 156 – Merchandise inventory

Cr. 3331 – VAT payables (33312)


Dr. 331 – Accounts payable - trade (details by import entrustors)Cr. 3331 – VAT payables (33312)

- For special consumption tax paid on behalf of import entrustors, based on relevant supporting documents, enter:

Dr. 151 – Goods in transitDr. 156 – Merchandise inventory

Cr. 3332 – Special consumption tax


Dr. 331 – Accounts payable - trade (details by import entrustors)Cr. 3332 – Special consumption tax

- Upon delivery of import goods to import entrustors, based on the VAT invoice issued and other relevant supporting documents, enter:

Dr. 131 – Accounts receivable - trade (details by import entrustors)Cr. 156 – Merchandise inventory (import value including taxes payable)Cr. 151 – Goods in transit

d. With respect to import entrust fee and VAT thereon, based on VAT invoice and relevant documents, enter:

Dr. 131, 111, 112, … (total payment)Cr. 511 – Revenue (5113)Cr. 3331 – VAT payables

e. With respect to other payments made on behalf of import entrustors relating to the import entrust contracts (bank charges, customs inspection fee, warehouse rental, loading yard rental, loading fee, transportation fee…), based on relevant supporting documents, enter:

Dr. 131 – Accounts receivable - trade (details by import entrustors)Cr. 111, 112, …

f. Upon receipt of payments from an import entrustor for the remaining import contract price, import taxes, VAT on import goods, special consumption tax (if the entity is requested by the import entrustor to pay these taxes to State Budget on their behalf), other payments made on their behalf relating to the import entrust and the entrust fee, based on relevant supporting documents, enter:

Dr. 111, 112, …Cr. 131 – Accounts receivable - trade (details by import entrustors)

g. For payments of import contract price making on behalf of an import entrustor to a foreign seller, based on relevant supporting documents, enter:

Dr. 331 – Accounts payable - trade (details by sellers)Cr. – 112, 144, …

h. For payments of import tax, VAT on import goods and special consumption tax making on behalf of an import entrustor to State Treasure, based on relevant supporting documents, enter:

Dr. – 3331, 3332, 3333, …Cr. – 111, 112,…

i. Where the import entrustee arranges all procedures for payment of taxes imposed on the import goods and the import entrustor makes the payment of these taxes to State Treasury by itself, based on relevant supporting documents, payments made by the import entrustor are recorded as follows:

Dr. – 3331, 3332, 3333, …Cr. 131 – Accounts receivable - trade (details by import entrustors)

20. Where a customer makes payments in kind (barter mode) instead of cash, transaction is recorded based on the value of the bartered materials, goods (using the fair value determined in VAT invoices or customer’s sales invoices) and deducted from accounts receivable - trade, enter:

Dr. 152 – MaterialsDr. 153 – Tools and suppliesDr. 156 – Merchandise inventoryDr. 611 – Purchases (where the periodic method of accounting for inventory is adopted)Dr. 133 – Deductible VAT (if any)


21. When a debt becomes obviously unrecoverable, for which write-off is required:- Based on the bad debt write-off minutes, enter:

Dr. 139 – Allowance for doubtful debts (amount provided for) Dr. 642 – General and administrative expense (amount unprovided for)

Cr. 131 – Accounts receivable – tradeThis debt shall be also debited to Account 004 “Bad debts written off” (off-balance sheet account) for follow-up and recovery within a specified period of time.

22. At the balance sheet date, balance of trade receivables denominated in foreign currencies are valuated using the average inter-bank exchange rate published by the State Bank of Vietnam at the date of financial statement preparation:

- Where the average inter-bank exchange rate published by the State Bank of Vietnam at the date of financial statement preparation is higher than the rate defined in Account 131 denominated in foreign currencies, the differences are recorded as follows:

Dr. 131 – Accounts receivable - tradeCr. 413 – Foreign exchange differences (4131)

- Where the average inter-bank exchange rate published by the State Bank of Vietnam at the date of financial statement preparation is lower than the rate defined in Account 131 denominated in foreign currencies, the differences are recorded as follows:

Dr. 413 – Foreign exchange differences (4131)Cr. 131 – Accounts receivable – trade

- Treatment of foreign exchange differences upon revaluation of trade receivables denominated in foreign currencies at the exchange rate ruling at the balance sheet date (refer to guidance of Account 413).

ACCOUNT 133

DEDUCTIBLE VAT

This account is to record input VAT deductible, deducted and to be deducted.

Input VAT deductible is VAT on goods, services used for production and supply of goods and services subject to VAT.

Input VAT is equal to (=) Total VAT amount shown on VAT invoices on goods and services (including fixed assets) purchased for production and supply of goods, services subject to VAT, VAT amount stated on tax payment documents for imported goods, or documents of VAT payment on behalf of foreign parties in accordance with the Ministry of Finance’s regulations applicable to foreign organizations, individuals who perform business activities in Vietnam rather than investment activities provided in the Law on Foreign Investment in Vietnam.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING DEDUCTIBLE VAT

9. Account 133 is applicable to enterprises that pay VAT under deduction method, not applicable to goods and services subject to VAT under direct method and goods and services not subject to VAT.

10. For goods, services purchased for production and supply of goods, services which are subject to VAT and not subject to VAT at the same time, deductible input VAT and non-deductibe input VAT shall be recorded separately.

Where such separate record is impossible, the input VAT is recorded in Account 133. At the end of the accounting period, the entity’s accountant shall determine deductible VAT based on the proportion of revenue from goods, services subject to VAT to total revenue in the period. Non-deductible VAT shall be charged to cost of sales or operating expenses as the case may be.

Where non-deductible VAT is significant, the non-deductible VAT amount shall be recorded in cost of sales corresponding to revenue in the period, the remaining amount shall be recorded in cost of sales in the following period.

11. Where, goods and services are purchased for production and supply of goods and services not subject to VAT or goods and services subject to VAT under direct method; or for non-business activities funded by non-business expenditure out of funds received from the State, for projects or for welfare activities using welfare and reward funds; VAT on such goods and services shall not be deducted and shall not be recorded in Account 133. Non-deductible input VAT shall be expensed as part of materials, goods, fixed assets and services purchased.

12. Where purchased goods and services are supported by special documents (such as portage stamps, transport tickets, etc …) stating in which that the price is inclusive of VAT, the entity is allowed to base on the stated VAT price to determine price net of VAT and deductible input VAT using the method of accounting as regulated in Point b, Clause 1.2, Section I, Part III of Circular No. 120/2003/TT-BTC issued by the Ministry of Finance on December 12, 2003.

13. Agricultural, forestry, fishery entities directly exporting their self-produced, self-raised, self-fished and self-exploited products shall only deduct input VAT on goods which are directly used in the exploitation process.

14. Where purchased goods are damaged due to natural disasters, fire, losses subject to compensation by organization, individuals, VAT on such goods is charged to value of the damaged goods which shall be compensated rather than deductible input VAT upon declaration of VAT payables.

15. Input VAT incurred in a month shall be declared and claimed for deduction upon determining VAT payables of that month. When amount of deductible input VAT exceeds amount of output VAT, the amount of input VAT to be deducted is equal to the amount output VAT in the month, the surplus shall be deducted in the subsequent period or shall be subject to consideration for refund in accordance with the Law on VAT.

Where VAT invoices or input VAT payment documents on goods, services purchased within the month but such VAT has not yet been declared in that month, it shall be claimed in the subsequent months in accordance with the Law on VAT.

16. Non-business Corporation offices, which are not subject to VAT, shall not be entitled to input VAT deduction or refund on goods and services purchased for the office operations.

Where Corporation offices involve into trading goods and services subject to VAT, they shall register, declare only VAT on such goods and services.

17. Business entities that first pay VAT under direct method on the added value and then change to pay VAT under deduction method shall be allowed to deduct VAT on goods and services purchased since the month when the tax deduction method is first applied; input VAT on goods and services purchased before the tax deduction method is applied shall not be deducted.

18. In accordance with the Law on VAT, the bases for determining amount of input VAT deductible is the amount of VAT stated on VAT invoices on goods and services purchased, or VAT payment documents on imported goods, or documents certifying VAT payments on behalf of foreign contractors. Where purchased goods and services are supported by no VAT invoices or by VAT invoices which are not in accordance with the law, VAT on such goods is not deductible. Where VAT invoices do not state amount of VAT (except for special cases that VAT invoices stating that the price is inclusive of VAT are accepted), do not state or misstate name, address, tax code of the sellers and as a result it is impossible to identify the sellers; and where invoices, VAT payment documents are fake, defaced or blank (actually goods and services are not sold); and where it is stated in the invoices amounts higher than actual amounts of goods and services, input VAT is not deductible.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 133 – DEDUCTIBLE VAT

Debit side:

Input VAT deductible.

Credit side:

- Input VAT which has been deducted;

- Transfer of non-deductible input VAT;

- Input VAT on goods purchased but subsequently returned or subject to discounts

- Input VAT which has been refunded

Debit balance:

Input VAT deductible, refundable but not yet refunded from State Treasury.

Account 133 – Deductible VAT, has two second-tier accounts;

- Account 1331 – Deductible VAT on goods, services: to record input VAT deductible on materials, goods and services externally purchased for production and supply of goods and services subject to VAT under deduction method.

- Account 1332 – Deductible VAT on fixed assets: to record input VAT resulting from construction and acquisition of fixed assets for the production and supply of goods and services subject to VAT under deduction method and input VAT resulting from acquisition of investment property


23. Upon purchase of materials, goods, fixed assets for production and supply of goods and services subject to VAT under deduction method and upon purchase of investment property subject to VAT under deduction method, the entity’s accountant shall record cost of materials, goods received, purchase costs, transportation costs, loading and unloading charges, warehouse fees… incurred to bring the purchases into the current condition at the entity as actual costs including the purchase price net of input VAT and record deductible VAT, enter:

Dr. 152 – Raw materials

Dr. 153 – Tools and supplies

Dr. 156 – Merchandise inventory

Dr. 211 – Tangible fixed assets

Dr. 213 – Intangible fixed assets

Dr. 611 – Purchases

Dr. 217 – Investment property

Dr. 133 – Deductible VAT (1331, 1332)

Cr. 111, 112, 331, … (total price)

24. Upon purchase of materials, merchandises, tools and services for immediate production and supply of goods and services, for repair of fixed assets and for construction of capital items subject to VAT under deduction method, the entity’s accountant shall record the value of materials, merchandises, tools, services as the purchase price net of VAT, and record input VAT, enter:

Dr. 621, 623, 627, 641, 642, 241, 142, 242 … (purchase price net of VAT)

Dr. 133 – Deductible VAT (1331)

Cr. 111, 112, 331, … (total price)

25. Upon purchase of goods for immediate resale (subject to VAT under deduction method and the entity pays VAT under deduction method) to customers (not through the entity’s warehouse), enter:

Dr. 632 – Cost of sales (purchase price net of VAT)

Cr. 111, 112, 331, … (total price)

26. Upon import of materials, goods, fixed assets, the entity’s accountant record value of imported materials, goods, fixed assets including total payments made to the seller (at the actual exchange rate or the average inter-bank rate announced by the State Bank of Vietnam at the date of transaction), import duties and special consumption tax payable (if any), transportation costs, enter:

Dr. 152 – Raw materials (the price net of import VAT)

Dr. 156 – Merchandise inventory (the price net of import VAT)

Dr. 211 – Tangible fixed assets (the price net of import VAT)

Cr. 333 – Tax payables to State Treasury

Cr. 111, 112, 331, …

Particularly for VAT on imported goods:

- Where goods are imported for the production and supply of goods and services, which are subject to VAT under deduction method, VAT on imported goods shall be deductible:

Dr. 133 – Deductible VAT (1331, 1332)


- Where goods are imported for production and supply of goods and services, which are not subject to VAT or subject to VAT under direct method, or for non-business activities, projects, cultural, welfare activities… funded by non-business expenditure funds received, project fund or reward and welfare funds, VAT payable on imported goods shall be included into the value of imported materials, goods, fixed assets, enter:

Dr. 152 – Raw materials (price inclusive of VAT and import duties)

Dr. 156 – Merchandise inventory (price inclusive of VAT and import duties)

Dr. 211 – Tangible fixed assets (price inclusive of VAT and import duties)

Cr. 333 – Tax payables to State Treasury (33312)

27. Where the purchased goods, which have been returned or whose prices have been reduced due to poor quality, bad workmanship, are subject to VAT under deduction method, based on the supporting documents on goods issued to return to the sellers and other relevant documents, the accountant shall record the value of purchases returns or purchases with price reduction, non-dedeuctibe input VAT, enter:

Dr. 111, 112, 331… (total price)

Cr. 133 – Deductible VAT (input VAT of purchases returns or purchases with price reduction)

Cr. 152, 153, 156, 211… (purchase price net of VAT)

28. Where materials, goods, services, fixed assets are purchased for production and supply of goods and services both subject to VAT and not subject to VAT but the entity cannot record separately deductible input VAT:

a. Upon purchase of materials, goods, fixed assets, enter:

Dr. 152, 153, 156, 211, 213 (purchase price net of VAT)

Dr. 133 – Deductible VAT (input VAT)

Cr. 111, 112, 331, …

b. At the end of the accounting period, accountant shall calculate and determine deductible input VAT and non-deductible VAT based on proportion of sales allocated. The deductible input VAT is determined at the rate (%) of sales of goods and services subject to VAT and total sales during the period. The non-deductible input VAT in the period shall be reflected as follows:

+ Non-deductible input VAT in a period is charged to cost of sales of the period, enter:

Dr. 632 – Cost of sales

Cr. 133 – Deductible VAT (1331)

+ Where amount of non-deductible input VAT is significant, therefore is charged to cost of sales of the subsequent periods, the non-deductible input VAT of the current period shall be carried forward to cost of sales of the subsequent periods, enter:

Dr. 142 – Short-term prepayments; or

Dr. 242 – Long-term prepayments


Periodically, upon determining non-deductible input VAT to be charged to cost of sales of the subsequent period, enter:


Cr. 142, 242, …

29. Where VAT invoice is issued for purchases of fixed assets for production and supply of goods, services both subject to VAT and not subject to VAT, accountant records the value of fixed assets at the price net of VAT, and debit input VAT to Account 133 so that at the period-end the deductible VAT and non-deductible VAT can be determined based on the rate of sales of goods, services subject to VAT to total sales during the period:

- For input VAT deductible during the period, enter:

Dr. 333 – Tax payables to State Treasury (33311)


- For non-deductible VAT being charged to expense accounts relating to the use of fixed assets:

+ Where non-deductible VAT is significant and needs to be amortized, enter:

Dr. 142 – Short-term prepayments; or

Dr. 242 – Long-term prepayments


+ Periodically, upon amortisation of non-deductible input VAT to expenses, enter:

Dr. 623, 627, 641, 642, …

Cr. 142 – Short-term prepayments

Cr. 242 – Long-term prepayments (if long term amortization)

+ Where input VAT is not deductible, enter:

Dr. 623, 627, 641, 642,…


30. Where purchased materials, goods and services are damaged due to natural disasters, fire, losses which are determined to be subject to compensation by organization, individuals, VAT on such goods is charged to value of the damaged goods which shall be compensated rather than deductible input VAT upon declaration of VAT payables:

- For VAT on purchased materials, goods, fixed assets which are damaged due to unidentifiable cause and are waiting for resolution, enter

Dr. 138 – Other receivables (1381)

Cr. 133 – Deductible VAT (1331, 1332).

- For VAT on purchases of materials, goods, fixed assets which are damaged, when resolution of the competent authorities on the compensation obligations of organization, individuals is available, enter

Dr. 111, 334, … (Compensation amount)

Dr. 632 – Cost of sales (if charged to expenses)

Cr. 138 – Other receivables (1381)

Cr. 133 – Deductible VAT (if the causes have been identified and resolution has been determined).

31. Input VAT on purchased goods and services for export is deductible and refundable if such goods and services are qualified for VAT deduction, refund and documents, applications for VAT claims are available in accordance with the current regulations:

- input VAT incurred from purchases of materials, goods, services, fixed assets relating to exports of goods and services subject to deductible VAT, refundable VAT as regulated is accounted for in the same way as accounting of materials, goods, services, fixed assets purchased locally. (See guidance in sections 1, 2, 3)

- When input VAT on exported goods, services (if any) is refundable, enter:

Dr. 111, 112,…


32. At the month-end, accountant offsets deductible input VAT to output VAT when calculating VAT payables during the period, enter:

Dr. 3331 – VAT payable (33311)

Cr. 133 – Deductible VAT

33. Where the entity that pays VAT under deduction method always has input VAT exceeding output VAT, it shall be entitled to VAT refund by competent agency in accordance with the tax law. Upon the receipt of VAT refund from State Treasury, enter:

Dr. 111, 112, …

Cr. 133 – Deductible VAT (1331, 1332)

ACCOUNT 136

INTER-COMPANY RECEIVABLES

This account reflects the balances and movement of an enterprise’s accounts receivable and payments from the higher level entity, fellow subsidiaries, or dependent accounting units within an independent entity, independent entities within a corporation in relation to amounts borrowed, paid or received on their behalf, and amounts that a subsidiary unit is to pay to the higher-level entity or the higher-level is to allocate to a subsidiary unit.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING INTER-COMPANY RECEIVABLES

1. The contents recorded in account 136 reflect inter-company relations on payment of receivables between the higher-level entity and its subsidiaries or between fellow subsidiaries. The higher-level entity, being corporation or holding company, must be an independent trading/manufacturing entity, not a regulatory authority and lower entities must be direct subsidiaries or dependent entity of the corporation or holding company and must have their own accounting system.

2. Details of the inter-company receivables recorded in account 136 are:

a. At the higher-level entity (an independent holding entity or a corporation)

- Capital, fund or budget allotted, allocated to lower entities;

- Free-interest loans granted to lower entities;

- Amounts to be received from lower entities as statutorily required;

- Amounts received by lower entities on behalf of the higher level entity;

- Payments on behalf of lower entities;

- Amounts granted to subsidiaries for internal piecework implemented and for the volume taken back;

- Other current accounts receivable.

b. At the lower-level entity (a subsidiary or a dependent entity)

- Amounts allotted by the higher-level entity but not yet received (excluding capital and budget)

- Loans granted;

- Amounts received on the enterprise’s behalf by the higher-level entity or other inter- entities.

- Payments on behalf of the higher-level entity or other inter-entities

- Other current accounts receivable.

3. This account does not reflect investments in subsidiaries by parent company and payments between parent company and subsidiaries.

4. Account 136 shall be maintained in details by debtor entity and inter-company amount receivable. Each entity shall take appropriate measure to follow up and definitely clear its inter-company accounts during the fiscal year.

5. At the period end, the enterprise shall perform reconciliation and confirmation of the balances and movements of account 136 “Inter-company receivable” and account 336 “Account payable” with entities entering into the transactions by individual items of settlement. Clearing procedures shall be carried out for respective items of each entity and concurrently entries are made accordingly in account 136 “Inter-company receivable” and account 336 “Account payable” (detailed by individual debtors and creditors).

Any differences noticed during the reconciliation shall be traced for timely adjustment.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 136 - INTER-COMPANY RECEIVABLES

Debit side:

- Capital allotted to the lower entities (direct allotment or in other forms);

- Payments made on behalf of the higher level entity, the lower level entities;

- Amounts receivable by the higher level entity or payable by lower level entities;

- Amounts receivable by subsidiaries or to be allotted by the higher-level entity.

- Amounts receivable from the higher-level entity, the lower-level entities and inter-company entities for goods supplied and services rendered.

Credit side:

- Capital and fund recovered from member entities

- Not-for-profit funds cleared with member entities (the enterprise granted such funds to member entities and they were used)

- Inter-company amounts received;

- Inter-company receivables and payables netted off for the same entity.

Debit balance

- Amounts remaining receivable from inter-companies

Account 136 – Inter-company receivable has two second tier accounts

Account 1362 – Operating capital given to branches: this account is only maintained at the higher-level entity (Corporation, business entities) to record current operating capital allotted to subsidiaries by direct allotment or in other forms. This account does not record investments in subsidiaries by the parent company which is recorded in Account 221 “Investments in subsidiaries”.

Account 1368 – Other inter-company receivables: to record all other inter-company receivables.


I. Accounting at lower-level entity

1. Upon receipt of capital allotted by the higher-level entity:

Dr. 111, 112, 211 …

Cr. 411 - Operating capital

2. Payment made on behalf of the higher-level entity and fellow entities:

Dr. 136 – Inter-company receivables (1368)

Cr. 111, 112 …

3. Amount advised or provided by the higher-level entity for distribution of funds:


Cr. 414, 415, 431 …

4. Operating loss to be covered by the higher-level entity


Cr. 421 – Retained profits

5. Receivables from the higher-level entity and other fellow units for inter-company sales:


Cr. 512 – Inter-company revenues

Cr. 3331 – Value Added Tax (VAT) (33311)

6. Receipt of accounts receivable in cash, materials and assets from the higher-level entity and other fellow units:

Dr. 111, 112, 152, 153 …

Cr. 136 – Inter-company receivables (1368)

7. Inter-company receivables netted off against inter-company payables:

Dr. 336 – Inter-company payables


II. Accounting at higher entity

1. Capital allotted to subsidiaries

Dr. 136 – Inter-company receivables (1361 - Operating capital given to branches)

Cr. 111, 112 …

2. Capital allotted to subsidiaries in fixed assets:

Dr. 136 – Inter-company receivables (net book value of fixed assets) (1361)

Cr. 211 – Tangible fixed assets (cost)

3. Where a subsidiary receives capital directly form the State Budget as authorized by the higher-level entity:


Cr. 411 – Operating capital

4. Increase capital due to purchase of fixed assets by capital expenditure fund or investment and development fund as reported by subsidiaries



5. When subsidiaries’ additional capital from the current period’s operating profit is recorded by the higher-level entity’s accountant as approved by the higher-level entity at the period end:

Dr. 136 – Inter-company receivables (1361 - Operating capital given to branches)


6. Not-for-profit funds allotted to lower-level entity


Cr. 111, 112, 461 …

Concurrently credit entry is made into Account 008 “Budget for non-business, project expenditure” (Off-balance sheet account)

7. Where a subsidiary has returned to operating capital to the higher-level entity:

Dr. 111, 112 …


8. Where capital is paid to the State Budget by a subsidiary as authorized by the higher-level entity and reported by the subsidiary

Dr. 411 – Operating capital


9. Amounts receivable from subsidiaries for their operating profits:



10. Amounts receivable from subsidiaries with regard to investment and development fund, financial reserves, welfare and reward fund, other equity funds:


Cr. 414 - Investment and development fund

Cr. 415 - Financial reserves

Cr. 418 - Other equity funds

Cr. 431 - Welfare and reward funds

11. Amounts received from subsidiaries for their operating profits, with regard to investment and development fund, financial reserves, welfare and reward fund, other equity funds:

Dr. 111, 112 …


12. Payments made on behalf of a subsidiaries:


Cr. 111, 112 …

13. Money received from the subsidiary for payment made on their behalf:

Dr. 111, 112 …


14. Inter-company receivables netted off against inter-company payables of one subsidiary:



15. Management fee receivable

Dr. 136 – Inter-company receivable

Cr. 511 – Revenue (detail of the largest revenue)

ACCOUNT 138

OTHER RECEIVABLES

This account reflects movements and balances of account receivables other than those recorded in accounts 131, 133, 136.

The content and scope of this account cover the following transactions

1. Cost of deficient assets detected and awaiting resolution;

2. Compensation receivable from individuals and groups (both inside and outside the enterprise) for lost and damaged materials, merchandise, cash;

3. Short-term loans or leased materials and capital free of interest;

4. Non-business expenditure, expenditure for projects, construction and operation that are not accepted by relevant authority and therefore be recovered;

5. Amounts transferred to export consignees for payment for bank charges, customs fees, transportation fees, loading and unloading expenses on behalf the enterprise;

6. Amounts receivable from equitization of a state owned enterprise such as equitization fee, severance allowances, and expenses from training staff of the equitized enterprise.

7. Interests, dividends, profits receivable from investments

8. Others

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 136 - OTHER RECIEVABLES

Debit side:

- Deficient assets pending resolution;

- Receivables from individuals and groups (both inside and outside the enterprise) with respect to the deficient assets whose cause has been found and treatment resolved;

- Interests, dividends, profits from investments

- Other receivables

Credit side:

- Deficient assets transferred to relevant accounts as resolved;

- Amounts received from equitization;

- Amounts collected from other receivables.

Debit balance:

Other receivable outstanding

This account could also have a credit balance. This credit balance represents the excessive receipt over the receivable (special cases and detailed by respective debtors).

Account 138 – Other receivables has three second tier accounts:

- Account 1381 - Shortage of assets awaiting for resolution: to record deficient assets for which no causes have yet found.

In principle, all causes of any deficient assets and persons making such causes must be found for resolution.

Only recorded in account 138 are cases for which no cause has yet found and in which loss, deficiency and damage of assets are pending.

Where deficient assets have been accounted for and formally decided upon, entries shall be made in relevant accounts, not in account 1381.

- Account 1385 - Receivables from equitization: to record amounts receivable from equitization for which the enterprise made payments such as equitization fee, severance allowances, assistance in training staff of the equitized enterprise

- Account 1388 – Other receivables: to record accounts receivable other than those entered into account 131, 133, 136 and 1381, 1385 such as interests, dividends, profits; compensation receivable due to lost cash, assets …


1. For deficient tangible fixed assets serving the production and business purpose, for which no cause is yet determined thus pending to resolution:

Dr. 138 – Other receivable (1381) (net book value of fixed assets)

Dr. 214 – Depreciation of fixed assets (depreciation value)


Concurrently, these tangible fixed assets shall be written off from the fixed assets ledger.

2. For deficient tangible fixed assets serving not-for-profit activities or project or welfare purposes, for which no cause is yet determined thus pending to resolution:

Dr. 214 – Depreciation of fixed assets (depreciation value)

Dr. 466 – Fund for State administrative activities used for fixed assets (net book value) (fixed assets used for not-for-profit purpose, projects)

Dr. 4313 – Welfare funds used for fixed asset investments (net book value) (fixed assets used for welfare purpose)


Concurrently, for net book value of deficient assets pending resolution:

Dr. 138 – Other receivable (1381)

Cr. 431 – Welfare and reward funds (fixed assets used for welfare purpose)

Cr. 338 – Other payables (fixed assets used for not-for-profit purpose, projects)

3. For deficient materials, goods, and cash found in an inventory physical count, for which no cause is yet determined thus pending to resolution:


Cr. 111 – Cash

Cr. 152 – Raw materials

Cr. 153 – Tools and supplies

Cr. 155 – Finished goods

Cr. 156 – Merchandise

4. Upon the resolution of relevant authority on deficient assets, entries are made into relevant accounts:

Dr. 334 – Payables to employees (1381)

Dr. 138 – Other receivable (1338 – Other receivable) (compensation)

Dr. 632 – Cost of goods sold (lost, deficient inventory net of compensation as resolved)

Dr. other relevant accounts (as resolved)

Cr. 138 – Other receivables (1381 – Deficient assets pending resolution)

5. When deficient assets are identified as to the person held responsible:

Dr. 138 – Other receivable (1388 – Other receivables) (compensation)

Dr. 334 – Payables to employees (compensation deducted from salary)

Dr. 632 – Cost of goods sold (lost, deficient inventory net of compensation as resolved)

Cr. 621 – Direct raw material costs

Cr. 627 – Production overheads





Cr. 111 – Cash

6. For short-term loans or leased materials and capital free of interest and other receivables:


Cr. 111 – Cash




7. When the export consignee makes payments on behalf the enterprise such as bank charges, customs fees, transportation fees, loading and unloading expenses:

Dr. 138 – Other receivables (1388) (total payment)

Cr. 111, 112 …

8. When the enterprise receives interests, dividends and profits:

Dr. 111, 112... (amounts received)



9. When the enterprise received amounts for payments made on behalf of the export consignor:

Dr. 331 – Accounts payable – trade


10. When the enterprise received other amounts receivable:

Dr. 111 – Cash

Dr. 112 – Cash in bank


11. For state owned enterprises, when there is a decision that unrecoverable debts must be written off:

Dr. 111 – Cash (compensation made by individuals and groups)

Dr. 334 – Payables to employees (compensation deducted from salary)

Dr. 139 – Allowance for doubtful debts (if covered by allowance for doubtful debts)

Dr. 642 – General and administrative expenses (if charged to business costs)


Concurrently, a single debit entry is made in Account 004 - Bad debts written off (off-balance sheet account)

12. When the enterprise completed all procedures to sell other receivables (currently recorded on the balance sheet) to a debt trading company

Dr. 111, 112 (amounts received from sales of accounts receivable)

Dr. 139 – Allowance for doubtful debts (if covered by allowance for doubtful debts)

Dr. relevant accounts (difference between cost of accounts receivable and the amount received from sales of such accounts plus allowance for doubtful debts in accordance with the current regulations)


13. When equitization expenses incurs

Dr. 1385 – Receivables from equitization (detail of equitization)

Cr. 111, 112, 152, 331 …

14. When the enterprise makes severance allowances due to equitization from a state owned company:


Cr. 111, 112 …

15. When the enterprise makes payments for training staff of the newly equitized enterprise:


Cr. 111, 112, 331 …

16. When the equitization process is completed, the enterprise has to report and finalize equitization expenses to the authority that made decision on equitization. Total equitization expenses, severance allowances, training expenses, … shall be deducted from the proceed from sales of shares belonged to the State capital

Dr. 3385 – Payables regarding to equitization (detail of sales of shares belonged to the State capital)

Cr. 1385 – Receivables from equitization

17. Non-business expenditure, expenditure for projects, construction and operation that are not accepted by relevant authority and therefore be recovered:

Dr. 138 – Other receivables

Cr. 161, 241, 641, 642 …

ACCOUNT 139

ALLOWANCE FOR DOUBTFUL DEBTS

This account reflects allowances made, used and reversed for doubtful debts or loss debts at the year end.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ALLOWANCE FOR DOUBTFUL DEBTS

1. At the year end or at the interim end (entities prepare interim reports), the entities identify doubtful debts or loss debts to make allowance for doubtful debts or reverse allowance for doubtful debts or reduce into general and administrative expenses of the reporting period.

2. In principle, allowance is made on reliable evidence about bad debts (bankruptcy or significant damage or loss of properties etc, owing to which customers are unable to make repayments therefor in spite of the enterprise’s repeated requests for repayments). In accordance with the current regulations, doubtful debts are evidenced by the followings:

- Amounts to be collected are detailed by type of debtors, reason of debts and type of debts, amounts of doubtful debts shall be recorded clearly.

- Original documents or debtor confirmation on unpaid amount must be available: including economic contract, loan agreement, contract liquidation, loan commitment, reconciliation…

3. Debts are defined as doubtful debts when:

- Debts are overdue in comparison with the due date stated in the economic contract, loan agreement, contract or loan commitment, the enterprise have requested for repayments many times but still not collected debts yet.

- Debts are not due yet but the debtor goes into bankruptcy or is undertaking procedures of dissolution, disappears, escape.

4. Allowance for doubtful debts is made in accordance with the current finance system.

5. When debts cannot be collected for several years although the enterprise has made all efforts to collect and it is certain that the debtor cannot make repayments, the enterprise may sell those debts to debts and assets trading company or write off those debts in the accounting books. In case debts are written off, relevant entry shall be made in Account 004 “Bad debts written off” (Off-balance sheet account). Writing off debts must be approved by the Board of Management and Financial Management Agency (if the enterprise is a state owned company) or the authority as provided in the enterprise’s Charter. Written debts shall be followed up in the period provided in the finance policy until it is likely to collect some amount of the debts which are written off. In case debts are collected after being written off (recorded in Account 004 “Bad debts written off”, the collected amount shall be recorded in Account 711 “Other income”.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 139 - ALLOWANCE FOR DOUBTFUL DEBTS

Debit side:

- Allowance for doubtful debts reserved

- Allowance for doubtful debts written off

Credit side:

- Allowance for doubtful debts made and charged to general and administrative expense

Credit balance:

Closing allowance for doubtful debts


1. At the year end or at the interim end (entities prepare interim reports), the entities identify doubtful debts to calculate allowance for doubtful debts to be made or reversed. If the allowance for doubtful debts of the current period is higher than the amount made in the prior period but not used up yet, the difference shall be charged to expense.

Dr. 642 - General and administrative expense

Cr. 139 - Allowance for doubtful debts

2. If the allowance for doubtful debts of the current period is lower than the amount made in the prior period but not used up yet, the difference shall be reserved and expense shall be reduced.

Dr. 139 - Allowance for doubtful debts

Cr. 642 - General and administrative expense (detailed by reversal of allowance for doubtful debts)

3. Doubtful debts which are determined to be unable to be collected may be written off. Doubtful debts are written off in accordance with the current finance policy. Based on the decision on writing doubtful debts,

Dr. 139 - Allowance for doubtful debts


Cr. 131 - Accounts receivable – trade

Cr. 138 - Other receivables

Concurrently, a debit entry is made in Account 004 “Bad debts written off” (Off balance sheet)

4. After doubtful debts are written off, they are collected, based on the actual collected amount:

Dr. 111, 112 …

Cr. 711 – Other income

Concurrently, a single credit entry is made in Account 004 “Bad debts written off” (Off balance sheet)

5. Doubtful debts may be sold to a debts trading company. When the enterprise have completed selling doubtful debts (currently recorded in the balance sheet) to the debts trading company:

Dr. 111, 112 …

Dr. 139 - Allowance for doubtful debts (difference covered by allowance for doubtful debts)

Dr. relevant accounts (difference between the original debt amount and the proceeds from selling debts and the amount covered by allowance for doubtful debts in accordance with the current finance regulations)

Cr. 131, 138 …

ACCOUNT 141

ADVANCES

This account is to record advances made by the entity to its staff and the movements of advances made.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ADVANCES

1. An advance is an amount of money or materials which the entity entrust to a recipient to do a business task or deal with an approved assignment. The recipient is an employee of the entity. Those who receive advances on a regular basis (staff in supply department, administrative department) shall be are appointed by Director in writing.

2. Those receiving advances (personally or on behalf of a group) shall be responsible to the entity for the advances and use them for intended purposes and approved assignments only. Unused advances or partly unused advances shall be returned to accountant. Advance recipients are not allowed to transfer the advances to others.

Upon completion of the assignment for which advance is made, the recipient shall prepare an advance clearance form for full clearance purpose (accompanied by original supporting documents) listing in which amounts received, amounts used and any differences (if any) thereof (listing by each advance received, each task assigned). In case unused advances are not returned, such amounts shall be deducted to the recipient’s salary. Spending in excess of the advance received shall be reimbursed by the entity.

3. Outstanding advances must be clear in full before new advances are made.

4. The entity’s accountant maintain an advance sub-ledger for each advance recipient and record the movement of advance receipt and clearance by each advance.

STRUCTURE AND REFLECTED CONTENTS OF

ACCOUNT 141 – ADVANCES

Debit side

- Amount of money or materials advanced to employees

Credit side

- Amount of advances cleared;

- Unused advances returned or deducted from the recipient’s salary;

- Unused advanced materials returned to the warehouse

Debit side balance

Outstanding advances.


1. When making advances in cash or materials to employees, enter:

Dr. 141 – Advances

Cr. 111, 112, 152……..

2. Upon completion of assigned tasks, the advance recipient shall prepare an advance clearance form accompanied by approved original supporting documents for finalization, enter:

Dr. 152, 153, 156, 241, 331, 621, 623, 627, 642……..

Cr. 141 – Advances

3. For unused amounts returned or or deducted from the recipient’s salary, enter:

Dr. 111 – Cash


Dr. 334 – Payables to employees

Cr. 141 – Advances

4. Where the payment approved exceeds the amounts advanced, a payment voucher is prepared for reimbursing the excess amount to the recipient:

Dr. 152, 153, 156, 241, 621, 622, 627...

Cr. 111 – Cash

ACCOUNT 142

SHORT TERM PREPAYMENTS

This account is to record expenses which have actually incurred but not yet recognized in the [period/year] in which they are incurred and to reflect the carry-forward of these expenses to subsequent periods in a financial year or a business circle.

Short term prepayments are the expenses that actually incurred, but relate to production and business activities of several accounting periods in a financial year or a business circle, and thus cannot be charged wholy to the current period, but shall also be allocated to the subsequent periods.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING SHORT TERM PREPAYMENTS

1. Short term prepayments include:

- Prepayments for rental of shops, workshops, factories, warehouses, offices for a financial year or a business cycle.

- Prepayments for outsourcing services for production and business activities for a financial year or a business cycle.

- Prepayments for insurance (fire insurance, transportation insurance, vehicle insurance…) and other fees and charges purchased and paid for once in the year.

- High value supplies and tools categorized as current assets for one-time usage and supplies and tools with less than one year useful life.

- Value of rotational packages, tools and supplies for rent for a maximum period equal to a financial year or a business circle.

- Costs of technical materials and other short-term prepayments being amortized to a financial year or a business circle.

- Expenses incurred during the production/business suspension period (unforeseeable)

- Expenses on repairs of fixed assets which are too significant for one-time recognition and need to be allocated to several accounting periods (months, quarters) in a financial year or a business circle

- Other short term prepayment (prepaid interest expenses, interest on purchases on credit, hire purchases).

2. Recorded in Account 142 are only significant short-term prepayments attributable to operating results of several periods in a financial year or business circle, which cannot be expensed off in the period when expenses incur. Each entity shall define and strictly regulate expenses recorded in Account 142 “Short-term prepayments”.

3. Based on the nature and the value of expenses, the methods and criteria, strict projection for calculating and allocating short-term prepayments to production and business costs in each accounting period is determined. Detailed records shall be kept of prepayments incurred

and allocated to operating expenses and other expenses in each accounting record and unallocated balance.

4. Where expenses on one-time repairs of fixed assets are too significant, they shall be gradually allocated in subsequent period in a financial year. For typical fixed assets, repairs with high costs are cyclical; such significant expenses can be accrued in production and business costs.


ACCOUNT 142 – SHORT TERM PREPAYMENTS

Debit side:

Short term prepayments actually incurred.

Credit side:

Short term prepayments charged to operating expenses during the period

Debit side balance

Short term prepayment that are not yet charged to operating expenses


1. When expenses are prepaid in relation to several periods in a financial year, thus pending to amortization:

a. For short-term prepayments for production and supply of goods, services subject to VAT under deduction method, enter:

Dr. 142 – Short-term prepayments

Dr. 133 – Deductible VAT (If any)

Cr. 111 - Cash on hand

Cr. 112 - Cash in bank


Cr. 153 - Tools and supplies

Cr. 241 - Construction in progress (2413)

Cr. 331 - Account payables – trade

Cr. 334 - Payables to employees

Cr. 338 - Other payables

b. For short-term prepayments for production and supply of goods, services subject to VAT under the direct method or not subject to VAT, enter:

Dr. 142 – Short-term prepayments (total payment)

Cr. 111 - Cash on hand

Cr. 112 - Cash in bank

Cr. 141 - Advances

Cr. 331 - Account payables – trade

2. For lease of fixed assets being operating lease (offices, factories, shops…), if the entity prepay rental for several accounting periods in a financial year:

- For leased fixed assets used in production of goods and services subject to VAT under the deduction method, enter:

Dr. 142 - Short-term prepayment (rental excluding VAT)

Dr. 133 - VAT deductible (if any)

Cr. 111, 112…

- For leased fixed assets used in production of goods and services subject to VAT under the direct method on added value or not subject to VAT, enter:

Dr. 142- Short-term prepayment (total payment)

Cr. 111, 112…

3. Periodically amortize prepayments into operating expenses, enter:

Dr. 241 - Construction in progress

Dr. 623 - Cost of construction machinery

Dr. 627 - Production overheads

Dr. 641 - Selling expenses

Dr. 642 - General and administration expenses

Cr. 142 - Short-term prepayment

4. Prepayments for high value supplies and tools for one-time usage and supplies and tools with less than one year useful life shall be amortized to several periods (month, quarter) in a year:

- When supplies and tools are issued, based on stock issuance note, enter:

Dr. 142 - Short-term prepayment

Cr. 153 - Tools and supplies

- Periodically (monthly, quarterly) amortize supplies and tools in a proper manner. Basis for such allocation for each period during the year is the useful life or the volume of goods, services resulted from usage of such supplies and tools in each accounting period. Upon amortization, enter:

Dr. 623, 627, 641, 642…

Cr. 142 - Short-term prepayment

5. Where prepayments for repairs of fixed assets are too significant for one-time recognition, they need to be amortize to operating expenses of several accounting periods in a financial year, upon completion of repairs, enter:


Cr. 241 - Construction in progress (2413)

6. Upon calculation and amortization of prepayments for repairs of fixed assets into operating expenses, enter:

Dr. 623 - Cost of construction machinery

Dr. 627 - Production overheads



Cr. 142- Short-term prepayment

7. For initial direct costs relating to finance lease assets incurred before the receipt of assets, e.g. negotiation costs, contract-signing costs, enter:


Cr. 111, 112…

8. Initial direct costs relating to finance leases are recorded in cost of finance lease fixed assets, enter:

Dr. 212 - Finance leases fixed assets

Cr. 142 - Short-term prepayment (transferred to the initial direct cost relating to finance lease fixed assets before the receipt of lease assets)

Cr. 111, 112… (The initial direct cost relating to finance leases upon the receipt of lease assets).

9. Where prepayments for interest expenses are recorded to short-term prepayments, enter:

Dr. 142 - Short-term prepayments

Cr. 111, 112…

- Periodically allocate interest expenses in consideration of amount payable for each period, enter:

Dr. 635 - Financial expense (if borrowing costs are recorded in operating expenses)

Dr. 241 - Construction in progress (if borrowing costs are capitalized into the value of the assets under construction)

Dr. 627 - Production overheads (if borrowing costs are capitalized into the value of WIP)

Cr. 142- Short term prepayments

ACCOUNT 144

SHORT-TERM DEPOSITS

This account is to record the entity’s assets and capital which have been used for short-term deposit and pledge (for a period of less than one year or less than a normal business circle) at banks, financial companies, State Treasury, credit institutions in economic relationships.

Pledges mean that the entity allows a pledgee to keep the entity’s assets as collateral for loans and guarantees. Assets pledged can be gold, silver, precious metals, gemstones, cars, motorbikes… or certificate of title to land, house or assets. During the pledge period, the entity may not have the rights to use pledged assets. After full repayment of loans, the entity will take back the assets.

If the entity becomes unable to repay the loan, or goes bankrupt, the lender can sell the pledged assets.

Loan deposit means that the entity places an amount of money or precious metals, gemstones or valuable papers into an escrow account at a bank as security for guarantees.

Lease deposit means that the entity leases assets and gives an amount of money or precious metals, gemstones or other high value assets to the lessor, which ensure that the entity, the lessee shall be responsible for lease assets management, use lease assets appropriately and return lease assets on timely basis. The value of deposit which is determined by the lessor can be equal or higher than the value of the lease assets.

The assets which are used as pledges, collateral and deposits are recorded into Account 144 “short-term deposits, pledges and collateral” at the value recorded in accounting books. The value recorded when the assets are given and when they are returned shall be the same.


ACCOUNT 144 - SHORT-TERM DEPOSITS

Debit side:

The value of assets pledged, deposited or used as short-term collateral

Credit side:

The value of pledged, deposited assets, collateral taken back

Debit side balance

The value of assets being pledged, deposited or used as short-term collateral


1. Where cash, gold, silver, precious metal, precious metals, gemstones, or cash in bank are used as Short-term pledges and deposits, enter:

Dr. 144 - Short-term pledges and deposits

Cr. 111 - Cash on hand (1111, 1112, 1113)

Cr. 112 - Cash in bank (1121, 1122, 1123)

2. Where fixed assets are used as short-term pledge, enter:

Dr. 144 - Short-term pledges and deposits (net book value)

Dr. 214 - Depreciation of fixed assets (depreciation value)

Cr. 211 - Tangible fixed assets (cost)

Where documents (ownership certificate of land, assets) are pledged, the accountant shall not record in account 144 but in sub-ledger.

3. When deposits and pledges are taken back:

When pledged assets are taken back, enter:

Dr. 211 - Tangible fixed assets (pledge value)

Cr. 144 - Short-term pledges and deposits (net book value)

Cr. 214 - Depreciation of fixed assets (depreciation value)

When cash or gold, silver, precious metals, gemstones deposited or used as collateral are taken back, enter:

Dr. 111 - Cash on hand (1111,1112,1113)

Dr. 112 - Cash in bank (1121, 1122, 1123)

Cr. 144 - Short-term pledges and deposits

4. Where the entity breaches commitments, contracts for which fines would apply by deduction from short-term deposits, enter:

Dr. 811 - Other expenses (deducted amount)


5. Where the entity does not make payments to the consignor, the seller, and such payments shall be deducted from the deposited amount. When the deduction is advised by the consignor, the seller, enter:

Dr. 331 - Account payable-trade


ACCOUNT GROUP 15INVENTORIES

This type of accounts is used to reflect the current balance and the movement of an entity’s inventories (if the entity applies the perpetual method of accounting for inventory) or to reflect the opening and closing balances of inventory (if the entity applies the periodic method of accounting for inventory).

Inventories are assets: held for sale during the normal business course; work in progress; raw materials; tool, supplies (together referred to as materials) for production or supply of services.

Inventories of each entity may include: Merchandise inventory (inventory, property, goods in transit, goods on consignment, and goods for processing); Finished goods and finished goods on consignment; Work in progress (uncompleted works and completed works but not yet being placed in the warehouse; Raw materials; Supplies and tools kept in stocks, sent for processing

and goods in transit; Contract work-in-progress; Materials imported for production and processing of goods for export and finished goods, goods kept in the entity’s bonded warehouse.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING INVENTORIES

1. Items under inventories shall be recorded in accordance with VAS 02 “Inventories” in terms of cost determination, method of determining inventory value, net realizable value determination, allowances for inventories and expense recognition.

2. Principle of determining inventory cost is specified for each item under inventories by sources and time of determination.

3. Where the entity pays VAT under the deduction method, value of materials, goods purchased for production and supply of goods, services subject to VAT under the deduction method is recorded at purchase price net of input VAT.

4. Where the entity pays VAT under the direct method, or value of purchased goods, services not subject to VAT, or purchased goods, services for non-business activities, welfares, projects is recorded at total price (including input VAT).

The following methods are applied to determine inventory cost at the period-end.

a. Specific identification:Specific identification is based on actual cost of each goods purchased, and actual cost of each goods issued. Thus, this method is applied only to enterprises having fewer items of inventory or unchangeable and identifiable items.

b. Weighted average basis:Under this method, cost of each inventory is determined from the weighted average of cost of similar inventories at the beginning of the accounting period and cost of similar inventories purchased or produced during the period. The average value may be calculated on a periodic basis, or as each additional shipment is received, depending on the circumstances of the enterprise;

c. First-in-first-out (FIFO):This method is based on the assumption that inventories purchased or produced first shall be issued first; consequently cost of inventories at the period-end is cost of inventories purchased or produced latest. Under this method, cost of issued inventories is determined at cost of inventories received at the beginning or near the beginning of the period; cost of inventories at the period-end is determined at cost of inventories received at the period-end or near the period-end.

d. Last-in-first-out (LIFO):This method is based on the assumption that cost of inventories purchased or produced last shall be issued first; consequently cost of inventories at the period-end is cost of inventories purchased and produced first. Under this method, cost of issued inventories is determined at cost of inventories received last or almost last, cost of inventories at the period-end is determined at cost of inventories received at the beginning or near the beginning of the period.

Each of the above methods has its own advantages and disadvantages. The accuracy and reliance of each method depends on management requirements, accounting competency, and technical equipment and information processing capacity. It also depends on maintenance requirements, the complexity of types, specifications and movements of inventories in the entity.

6. Where materials and goods are purchased by foreign currencies, prices of such materials and goods are translated into Vietnam dong at the actual exchange rate or the average inter-bank rate

announced by the State Bank of Vietnam at the transaction date to record cost of inventories received.

7. At the accounting period-end, if it is considered that inventories is insufficiently recovered enough due to damages, obsoletes, diminution in the value of inventories, or increase in costs of completion, selling expenses, cost of inventories is reduced to the net realizable value of inventories. Net realizable value is the estimated selling price of inventory items during the normal business course, less (-) the estimated costs of completion and selling expenses.

Allowance for inventories is made when cost of inventories is reduced to the net realizable value of inventories. Allowance made is the lower cost of inventories and net realizable value.

8. Upon selling inventories, cost of sold inventories is recorded as business and production costs in the period when revenue from sold inventories is recognized. All the higher of the allowance made in the current period and allowance made in the prior period, all decreases, losses in inventories, net of (-) compensation for personal obligations, and non-attributable manufacturing overheads, are recorded as production and business costs during the period. The lower of the allowance made in the current period and allowance made in the prior period is reversed by decrease in production and business costs. 9. The inventory accountant shall keep records of both cost and physical features of inventories by series, category, and specification and even location of management and usage. The accountant must ensure the agreement between the general ledger and the sub-ledger in respect of value and physical features.

The entity chooses one of the three following detailed records:- Double inventory card system- Inventory movement reconciliation- Inventory balance reconciliation

10. Each entity (an accounting unit) shall apply only one of the two methods of accounting for inventories: Perpetual method and periodical method. The chosen method is based on to apply in the company must based on characteristics, quantity and specification of inventories and management requirements so that the chosen method is applied appropriately and consistently during the accounting period.

Methods of accounting for inventories:

a. Perpetual method

The perpetual method records and controls the balance and movement of inventory in the accounting records on an on-going and systematic basis.

Under the perpetual method, the inventory accounts reflects the current balance and movements of inventory, then the inventory balance can be determined at any point in time during the accounting period.

At the end of the accounting period, reconciliation should be performed between the recorded inventory balance and the physical inventory count. Theoretically, the physical count should

always agree to the accounting records. Difference, if arises, shall be investigated and resolved on a timely basis.

The perpetual method is often applied in manufacturing enterprises (industry, construction, etc.) and trading enterprises with high value merchandise such as machinery, equipment, goods of high quality, and technologically advanced goods…

b. Periodic method

Under the periodic method, the closing balance of inventory is determined based on the physical inventory count at the period end. The value of materials and goods issued during the period is determined using the formula below:

Output value = Opening balance + Total input value – Closing balance

Under this method, no movements of inventory (increase and decrease) are recorded in the inventory accounts. Inventory received during the period is recorded in a separate account (Account 611 – Purchases).

A physical inventory count shall be performed at the end of each accounting period in order to determine the value of current materials, inventory and the value of materials, inventory issued during the period (issued for production or sale), based on which entries are made into account 611 “Purchases”.

Therefore, under the periodic method, the inventory account is only used at the beginning of the accounting period (to transfer the opening balance) and at the end of the accounting period (to record the closing balance of inventory).

The periodic method is often applied in the entity having various categories of materials and goods with different specifications, low value and fast moving (retail shops…)

The advantage of the periodic method lies in the fact that it is simple and greatly reduces the amount of accounting work required. However, the accuracy of inventory used/sold during the period is based inventory management at the warehouse and at the counter.

The inventory group has 8 sub-accounts:

- Account 151 – Goods in transit- Account 152 – Raw materials- Account 153 – Tools and supplies- Account 154 –Work in progress- Account 155 – Finished goods- Account 156 – Merchandise inventory- Account 157 – Goods on consignment- Account 158 – Goods in bonded warehouse- Account 159 – Allowances for inventories

ACCOUNT 151

GOODS IN TRANSIT

This account is to record the cost of purchased materials and goods (raw material, supplies, tools, merchandise) whose ownership has been transferred to the entity but which are on the way, at the port or have arrived at the entity’s premises but still waiting to be inspected and entered into the warehouse.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING GOODS IN TRANSIT

1. Goods and materials whose ownership has been transferred and which are awaiting entry into the warehouse include:

- Goods and materials which have been purchased and paid for, or for which payment has been accepted, are still in the supplier’s warehouse, port or in transit.

- Goods and materials which are at the entity’s premises are waiting to be inspected and entered into the warehouse.

2. Goods in transit are recorded in account 151 on the historical cost principle defined in VAS 02 “Inventories”.

3. When purchase invoices are received before goods are received, the accountant shall perform reconciliation between the invoices and the contracts and store the invoices in a separate file “purchased goods in transit”. At this point of time, no accounting entry is made.

During the month, upon the receipt of the goods, based on invoices and goods receiving notes, the accountant directly records into Account 152 – Raw materials, Account 153 – Tools and supplies and Account 156 – Merchandise inventory, 158 – Goods in bonded warehouses.

At the end of the month goods have still not been received, based on invoices the accountant shall record into Account 151 – Goods in transit.

4. Detailed records shall be opened for goods in transit by type, by shipment, or by economic contract.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 151 – GOODS IN TRANSIT

Debit side:

- Cost of purchased goods and materials in transit.- Goods in transit transferred at the end of the accounting period (for entities applying the

periodic method)

Credit side:

- Cost of purchased goods and materials in transit received or directly transferred to customers.

- Goods in transit transferred at the beginning of the accounting period (for entities applying the periodic method)

Debit balance:

Cost of purchased goods and materials in transit (not received yet).


I. Where the entity applies the perpetual inventory method

1. At the end of the accounting period, based on invoices of goods which have been purchased but not yet received for production and supply of goods and services subject to VAT under the deduction method, enter:

Dr. 151 – Goods in transit (net of VAT)Dr. 133 – Deductible VAT

Cr. 331 – Accounts payable - tradeCr. 111, 112, 141,…

If goods in transit for production and supply of goods and services not subject to VAT tax or subject to VAT under the direct method, enter:

Dr. 151 – Goods in transit (total price)Cr. 111, 112, 331,…

2. Upon the receipt of the goods in the subsequent month, based on invoices and receiving notes, enter:

Dr. 152 – Raw materialsDr. 153 – Tools and suppliesDr. 156 – Merchandise inventory

Cr. 151 – Goods in transit3. Where, in the subsequent month, goods do not go through the entity’s warehouse but are

directly delivered to customers under economic contracts at the transportation means, the supplier’s warehouse, the port, or goods are directly delivered to customers, agents, consignees, enter:

Dr. 632 – Costs of goods soldDr. 157 – Goods on consignment

Cr. 151 – Goods in transit4. Where goods in transit are lost, which is discovered at the time when losses arising or

during the stocktake at the period end, based on reports on losses, enter:

Dr. 1381 – Shortage of assets awaiting for resolution

Cr. 151 – Goods in transit

II. Where the entity applies the periodical inventory method

1. At the beginning of the accounting period, actual costs of goods and materials in transit at the end of the prior period which have been transferred are brought forward to the opening balance of goods in transit at the current period, enter:

Dr. 611 – PurchasesCr. 151 – Goods in transit

2. At the end of the accounting period, based on the stocktake report on goods in transit not yet received (in transit at the period end), enter:

Dr. 151 – Goods in transitCr. 611 – Purchases

ACCOUNT 152RAW MATERIALS

This account is to record the current balance and movements of raw materials in the entity’s warehouse. Raw materials of the entity are materials externally purchased or self-processed for production and business purpose of the entity. Raw materials which are recorded in this account are classified as follows:

- Materials- Sub-materials- Fuels- Spare parts- Construction materials and equipment

1. Materials: materials are used in production to create physical features, core elements of products. The concept of materials is specified by each entity. There is no concept of materials in trade and services entities… Materials also include semi-finished goods purchased for production.

2. Sub-materials: materials are used in production not to create physical features, core elements of products but to combine with materials in changing the product color, taste, and appearance; improving product quality; facilitating production process; or serving technological, storage and packing needs; serving working process.

3. Fuels: are used to provide heat energy for smooth production and business process. Fuels can be in form of liquid, air or solid.

4. Spare parts: are used to replace, repair machinery, transport vehicles, tools…

5. Construction materials and equipment: are used for construction. Construction materials and equipment include installed equipment, non-installed equipment, tools, and other structures for construction.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING RAW MATERIALS

1. Raw materials received, issued and balanced shall be recorded at cost as specified in VAS 02 “Inventories”. Cost of raw materials is determined based on source of raw materials.

Cost of raw materials purchased, includes: purchase price on invoices; import tax payable; special consumption tax of imported goods payable (if any); costs of transportation, loading and unloading, preservation, categorization, insurance which incur from bringing raw materials from purchase location to the entity’s premises; per diem for purchase staff; expenses for independent purchase department, any directly attributable costs relating to purchases and natural losses within tolerable deficiency.

- Where raw materials are purchased for production and supply of goods, services subject to VAT under the deduction method, cost of such raw materials is recorded at purchase price net of VAT. Input VAT on purchased raw materials and input VAT on services of

transportation, loading and unloading, preservation, processing, … is deducted and recorded in Account 133 “Deductible VAT” (1331)

- Where raw materials are purchased for production and supply of goods, services subject to VAT under the direct method; or goods, services not subject to VAT; or for non-business activities; for projects or for welfare activities, cost of such purchased raw materials is recorded at total price including non-deductible VAT (if any)

- Where raw materials are purchased by foreign currencies, costs of such materials shall be translated into Vietnam dong at the actual exchange rate or the average inter-bank rate announced by the State Bank of Vietnam at the transaction date to increase cost of raw materials for accounting entry.

Cost of self processed raw materials, includes: cost of raw materials and processing costs.

Cost of raw materials for external processing, includes: cost of raw materials, costs of transportation from the entity’s premises to the external processor’s location and vice verse, and processing fee.

Cost of raw materials contributed by joint parties or shareholders is cost determined and agreed by all the parties or shareholders.

2. Cost of raw materials is determined in accordance with one of the four methods defined

in VAS 02 “Inventories”:

- Specific identification- Weighted average basis - First in first out - Last in first out

The entity is required to apply one method consistently during the accounting period.

3. Raw materials are recorded by warehouse, type, group in details.

4. Where raw materials are recorded at recorded cost when they are received or issued, at the end of the accounting period, difference coefficient of actual cost and recorded cost shall be determined to calculate actual cost of raw materials issued during the period by the following formula:

Difference coefficient of

actual cost/recorded

cost of RM (1)

=

Actual cost of RM held in the

warehouse at the beginning of the

period

+

Actual cost of RM received in the warehouse

during the period

Recorded cost of RM held in the

warehouse at the beginning of the

period

+

Recorded cost of RM received in the warehouse

during the period

Actual cost of = Recorded cost of x Difference

RM issued during the period

RM issued during the period

coefficient of actual

cost/recorded cost of RM

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 152 – RAW MATERIAL

Debit side:

- Cost of raw materials received from external purchases, self- production, external processing, capital contribution or other sources.

- Cost of surplus RM detected during the physical inventory count- Cost of RM transferred at the end of the period (where the entity applies the periodic

inventory method) Credit side:

- Cost of RM issued for production, sale, external processing, or capital contribution;- Cost of RM returned to suppliers or deducted in purchase price;- Sales discounts of RM;- Cost of RM losses detected during the physical inventory count;- Cost of RM transferred at the beginning of the period (where the entity applies the

periodic inventory method)

Debit side balance

Cost of RM held in the warehouse at the end of the period.


I. Where the entity applies the perpetual inventory method

1. When purchased RMs are received at the entity’s premises, based on invoices, receiving notes and other relevant documents, record cost of RMs received:

- Where RMs are purchased for production and supply of goods, services subject to VAT under the deduction method, enter:

Dr. 152 – Raw materials (purchase price net of VAT)

Dr. 133 - Deductible VAT (1331)

Cr. 111, 112, 141, 331, … (total price)

- Where RMs are purchased for production and supply of goods, services subject to VAT under the direct method, or goods, services not subject to VAT, or for non-business activities, welfare activities, projects, enter:

Dr. 152 – Raw materials (total price)

Cr. 111, 112, 141, 311, 331, … (total price)

2. Where the entity enjoys sales discounts, cost of purchased RM shall be reduced by the discount amount, enter:

Dr. 111, 112, 331, …

Cr. 152 – RM

Cr. 133 - Deductible VAT (1331) (if any)

3. Where purchased RMs do not meet specification, quality requirements under economic contract, they shall be returned to suppliers or their prices are reduced, cost of such RMs returned or rebated is recorded:

Dr. 111, 112, 331, …

Cr. 152 - RM (purchase price net of VAT)

Cr. 133 – Deductible VAT (1331) (if any)

4. When purchase invoices are received before RMs are received, the accountant shall store the invoices in a separate file “purchased goods in transit”.

If RMs are received within the month, based on invoices and receiving notes, RMs are recorded in Account 152 “Goods in transit”At the month end, RMs are still not received, based on invoices (RMs purchased for production and supply of goods, services subject to VAT under the deduction method), enter:

Dr. 151 – Goods in transit


Cr. 331 – Account payable – trade; or

Cr. 111, 112, 141, …

Upon the receipt of RMs in the subsequent month, based on invoices and receiving notes, enter:



5. Payment discounts shall be recorded in financial income, enter:


Cr. 515 – Financial income (payment discount)

6. For imported RMs:

- Where RMs are imported for production and supply of goods, services subject to VAT under the deduction method, cost of RMs is recorded at the price including import tax, enter:

Dr. 152 – Raw materials (price including import tax)

Cr. 331 – Account payable – trade

Cr. 3333 – Import-export tax (detail for import tax)

Concurrently, VAT on imports is deducted, enter:

Dr. 133 – Deductible VAT

Cr. 3331 – VAT (33312 – VAT on imports)

- For RMs imported for production and supply of goods, services subject to VAT under the direct method or goods, services not subject to VAT or non-business activities, projects (cost of import RMs is recorded at the price including import tax and VAT on imports), enter:

Dr. 152 – Raw materials (price including import tax and VAT on imports)

Cr. 331 – Account payables - Trade

Cr. 3333 – Import-export tax (detail for import tax)

Cr. 3331 – VAT payable (33312)

- Where imported RMs are subject to special consumption tax, special consumption tax payable shall be included in cost of imported RMs, enter:

Dr. 152 – Raw materials (price including special consumption tax)

Cr. 331 – Account payables – Trade


7. For expenses incurring from purchasing, handling and transporting raw materials from purchase location to the entity’s premises for production and supply of goods, services subject to VAT under the deduction method, enter:



Cr. 111, 112, 141, 331, …

8. Raw materials externally processed:

- When raw materials are issued for external processing, enter:

Dr. 154 – Work -in-progress


- When process expenses incur, enter:

Dr. 154 – Work -in-progress

Dr. 133 – Deductible VAT (1331) (If any)

Cr. 111, 112, 131, 141 …

- When raw materials are completely processed and received, enter


Cr. 154 – Work -in-progress

9. Raw materials self produced:

- When raw materials are issued for self production, enter:

Dr. 154 – Work-in-progress


- When self produced materials are received, enter:


Cr. 154 – Work -in-progress

10. For surplus RMs detected during the physical inventory count the causes of which are clear, records are entered taking into account the causes; where the causes are unclear, records are entered based on the cost of such surplus:

Dr. 152 – Raw materialsCr. 338 – Other payables (3381 - Surplus of assets awaiting for resolution)

- Upon a resolution on the surplus materials detected during the physical inventory count:Dr. 338 – Other payables (3381)

Cr. Related accounts- Where surplus RMs detected upon the physical inventory count are belonged to other

entities and no increase entry is recorded in Account 152, the surplus shall not be credited

to Account 338 but debited to Account 002 “Goods held under trust or for processing”. When the surplus RMs are returned, the surplus shall be credited to Account 002 (Off-balance sheet account).

11. When raw materials are issued for production and supply:

Dr. 621 – Direct raw material costs

Dr. 623, 627, 641, 642, …


12. When raw materials are issued for constructions or significant repairs of fixed assets, enter:

Dr. 241 – Construction in progress

Cr. 152 - Raw materials

13. For raw materials for capital contribution in joint ventures

a – when raw materials are issued for capital contribution in joint ventures, enter:

Dr. 222 – Investments in joint ventures (revaluated cost)

Dr. 811 – Other expenses (difference between revaluated cost and recorded cost (revaluated cost is lower than recorded cost)


Cr. 771 – Other income (difference between revaluated cost and recorded cost (revaluated cost is higher than recorded cost) relevant to interests of other related parties of joint ventures)

Cr.3387 – Deferred revenue (difference between revaluated cost and recorded cost (revaluated cost is higher than recorded cost) relevant to interests of the entity in joint ventures)

b- when the joint venture who acquires capital contribution in raw materials sell finished goods made from contributed raw materials or sell contributed raw materials to an independent third party, the entity who makes capital contribution shall transfer deferred revenue to other income during the period, enter:Dr. 3387 – Deferred revenue

Cr. 711 – Other income14. when raw materials are issued for capital contribution in associates, enter:

Dr. 223 – Investments in associates (revalued cost)

Dr. 811 – Other expenses (lower of revalued cost and recorded cost)


Cr. 711 – Other income (higher of revalued cost and recorded cost)

15. Deficient materials detected during the physical inventory count:

Any cases of loss or deficiency of raw material in the warehouse or the custodial places detected during the physical count must be documented and investigated to identify people who caused such loss or deficiency. Based on the count minute and resolution made by the authority person, such loss or deficiency shall be recorded:

- where such loss or deficiency is due to misstatements or missing records in accounting books, correction and addition shall be made in to accounting books

- where deficiency of raw materials is tolerable (within permitted level), enter:



- where the causes of loss or deficiency of raw materials are unclear and pending for resolution, based on the value, enter:

Dr. 138 – Other receivable (1381 - Shortage of assets awaiting for resolution)


When the resolution is passed, enter accordingly:

Dr. 111 – Cash (compensation paid by people who cause losses or deficiency)

Dr. 138 – Other receivable (1388) (compensation receivable from people who cause losses or deficiency)

Dr. 334 – Payable to employees (amount netted off salary)

Dr. 632 – Cost of goods sold (the remaining tools and services after net of loss, deficiency of materials is charged to cost of goods sold

Cr. 138 – Others receivable (1381 - Shortage of assets awaiting for resolution)

Where the entity applies the periodical inventory method

1. At the beginning of the period, the opening raw materials is transferred to purchases, enter:



2. At the end of the period, based on the physical inventory count results, materials are recorded as follows:


Cr. 611 – Purchases

ACCOUNT 153

TOOLS AND SUPPLIES

This account is used to reflect the current balance and the movement of an entity’s tools and supplies. Tools and supplies are means of production, which do not meet the standard as fixed assets in terms of cost and useful life. Therefore, tools and supplies are accounted for as materials.

According to the current regulations, the following equipment which does not meet the standard as fixed assets in term of cost and useful life is considered to be tools and supplies:

- Temporary tents, tools and assembled devices (specially used in construction and installation)

- Chargeable packaging supplied together with goods sold, for which wear-out is provided for deduction of its cost during the transport and storage of goods;

- Glass and ceramic instruments and devices;- Management tools and office supplies;- Working clothes and shoes etc.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING TOOLS AND SUPPLIES

1. Inventory of tools and supplies received, issued and balanced are recorded at actual cost. The principle in which the actual cost of tools and supplies is determined is the same as that of raw materials (see note of account 152).

2. The cost of tools and supplies is determined under one of the four methods as stipulated in VAS 02 “Inventories”.

3. Detailed records for tools and supplies shall be maintained by category, group and series.

4. Tools and supplies issued for the production and supply or rental shall be recorded in accounting records in terms of cost and quantity detailed by places where tools and supplies are used, by lessee and person in charge. High value tools and supplies shall be put under exceptional storage and custody.

5. Tools and supplies which have a small value and are used for production and business purposes shall be recorded one-time into business and production costs.

6. Where tools and supplies with large value and with useful life less than one year are issued one-time, cost of such tools and supplies are recorded in Account 142 “Short-term prepayments” and gradually allocated to the business and production costs in accounting months or quarters in the year.

7. Where tools and supplies with large value and with useful life more than one year are issued, cost of such tools and supplies are recorded in Account 242 “Long -term prepayments” and gradually allocated to the business and production costs.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 153 – TOOLS AND SUPPLIES

Debit side

- Actual cost of tools and supplies received from purchase, internal production, external processing, contribution;

- Cost of tools and supplies taken back from the lessee;- Surplus tools and supplies detected during the physical inventory count;- Transfer of closing balance of tools and supplies (for the entity applying the periodic

inventory method)

Credit side

- Actual cost of tools and supplies issued for production, lease, or contribution;- Sales discounts from purchased tools and supplies - Tools and supplies purchase returns and rebates received- Deficient tools and supplies detected during the physical inventory count;- Transfer of opening balance of tools and supplies (for entities applying the periodic

inventory method)

Debit balance

Actual cost of tools and supplies inventory

Account 153 – Tools and supplies has three second-tier accounts:

Account 1531: Tools and supplies: to record the current value and the movement of tools and supplies.

Account 1532: Rotating package: to record the current value and the movement of reusable packaging materials used during the production and business period.

Reuseable packagings are packaging that are used several times over several business cycle. The cost of packaging materials set for use should be expensed over several periods.

Account 1533: Tools for lease: to record the current value and the movement of tools and supplies for rent.

Only tools and supplies purchased for rent are recorded in this account; where it is unclear to clarify their purpose, tools and supplies are recorded in the account 1531. Tools and supplies leased for use in the entity’s operations shall be recorded in the first-tier account and at the same time transfer of tools and supplies is recorded in the second-tier account.


I. Where the entity applies the perpetual inventory method1. When tools and supplies are purchased for production and supply of goods and

services subject to VAT under the deduction method, cost of tools and supplies are purchase price net of VAT, based on invoices, receiving notes and other relevant documents, enter:

Dr. 153 – Tools and supplies (purchase price net of VAT)Dr. 133 – Deductible VAT (input VAT) (1331)

Cr. 111, 112, 141, 331, … (total price)- When tools and supplies are purchased for production and supplies of goods and services

subject to VAT under the direct method or for production and supplies of goods and services not subject to VAT or non-business activities, welfares, projects, enter:

Dr. 153 – Tools and supplies (total price)Cr. 111, 112, 331, … (total price)

2. Where received tools and supplies are given sales discounts, enter:Dr. 111, 112, 331, …

Cr. 153 – Tools and supplies (discount amount)Cr. 133 – Deductible VAT (1331)

3. Where rebates are received because the purchased tools and supplies do not meet specifications according to relevant contracts, enter:

Dr. 111, 112; orDr. 331 – Account payable – trade

Cr. 153 – Tools and supplies (those entitled to rebates)Cr. 133 – Deductible VAT (if any)

4. Where tools and supplies are returned to sellers:Dr. 331 – Account payable – trade

Cr. 153 – Tools and supplies (those are returned)Cr. 133 – Deductible VAT (if any) (Input VAT on tools and supplies returned to

sellers)

5. Recording payment discounts (if any), enter:Dr. 331 – Account payable – trade

Cr. 515 – Financial income (payment discount amount) 6. Tools and supplies issued for production and supply purposes:

Where tools and supplies have not significant value and are expensed one-time, enter:Dr. 623 - Cost s of construction machineryDr. 627 - Production overheadsDr. 641 – Selling expenses (6412, 6413)Dr. 642 - General and administrative expense

Cr. 153 – Tools and supplies (1531, 1532)Where tools and supplies have significant value and are used in several production periods or used as rotating package, cost of tools and supplies are gradually allocated in business and production costs. When such tools and supplies are issued, enter:

Dr. 142 – Short term prepayments (tools and supplies with significant value and useful life less than one year)Dr. 242 – Long-term prepayments (tools and supplies with significant value and useful life more than one year)

Cr. 153 – Tools and supplies (1531, 1532)- when cost of tools and supplies issued for use for each accounting period is allocated,

enter:Dr. 623, 627, 641, 642, …

Cr. 142 - Short term prepaymentsCr. 242 - Long-term prepayments

7. Tools and supplies for rent- When tools and supplies are issued for rent, enter:

Dr. 142 - Short term prepaymentsDr. 242 - Long-term prepayments

Cr. 153 – Tools and supplies- When cost of tools and supplies is expensed, enter:

Dr. 627 - Production overheadsCr. 142 - Short term prepaymentsCr. 242 - Long-term prepayments

- Where the entity pays VAT under the deduction method, rental earned from tools and supplies is recorded as follows:Dr. 111, 112, 131 …

Cr. 511 – Revenue Cr. 3331 – Deductible VAT (33311)

- When tools and supplies are taken back from the lessee, enter:Dr. 153 – Tools and supplies (1533)

Cr. 142 - Short term prepayments (net book value excluded from business and production costs)

Cr. 242 - Long-term prepayments (net book value excluded from business and production costs)8. For deficient, lost and damaged tools and supplies detected during inventory count,

entries are made taking account management’s resolution;where surplus or deficiency is due to misstatements or missing records in accounting books, correction and addition shall be made in to accounting books.where the causes of loss or deficiency of tools and supplies detected during inventory count and persons make such loss or deficiency are unclear, enter:

Dr. 138 - Other receivables (1381 - Shortage of assets awaiting for resolution)Cr. 153 – Tools and supplies

Upon management’s resolution, and the persons who causes loss, deficiency or damage must pay compensations, enterDr. 111 – CashDr. 334 – Payable to employeesDr. 138 – Other receivables (1388) (compensation receivable from people who cause losses or deficiency) Dr. 632 – Cost of good sold (the remaining tools and supplies after net of loss and deficiency are charged to cost of goods sold)

Cr. 138 - Other receivables (1381)where the causes of surplus of tools and supplies are unclear and resolution is awaited, enter:

Dr. 153 – Tools and suppliesCr. 338 – Other payables (3381)

Upon management’s resolution, enter:Dr. 338 - Other payables (3381

Cr. Relevant accounts

II. Where the entity applies the periodical inventory method

1. At the beginning of the period, opening tools and supplies is transferred to purchases account at the beginning of the period:

Dr. 611 – PurchasesCr. 153 – Tools and supplies

2. At the end of the period, closing tools and supplies is determined based on the physical inventory count

Dr. 153 – Tools and suppliesCr. 611 – Purchases

ACCOUNT 154

WORK IN PROGRESS

This account is used to summarize business and production costs in order to compute cost of industrial products; products of construction, raising, planting, processing; agricultural, forestry, fishery products; services in those entities applying the perpetual inventory method.

For entities applying the periodic inventory method, the account 154 is used to record only actual cost of work in progress at the period end.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING WORK IN PROGRESS

1. Account 154 “Work in progress” reflects business and production costs incurring during the period; business and production costs of finished goods and services during the period; opening and closing work in progress of primary and secondary business and production activities and outsourcing activities of manufacturing entities (industry, construction, agriculture, forestry, fishery,…) or of service entities (transportation, post, tourism, hotel, …). Account 154 also reflects business and production costs incurring from production, processing, or service providing activities of commercial entities if these entities have such activities.

2. Business and production costs recorded in Account 154 shall be detailed by cost center (workshop, production division, production team, construction location …); by type, group of products or detail or part of products; type of services or service progress.

3. Business and production costs recorded in Account 154 comprise of:

- Direct materials costs:

- Direct labor costs

- Machinery running costs (construction activity)

- Production overheads

4. Where material costs and labor costs beyond normal costs and unallocated fixed production overheads shall not be recorded in inventory costs but shall be recorded in cost of goods sold during the accounting period.

5. At the period end, fixed production overheads are allocated into and transferred to production cost per product unit at the normal capacity (Cr. 627, Dr. 154). Where the quantity of actual products is lower than the normal capacity, fixed production overheads is computed and determined to allocate into production cost per product unit at the normal capacity. Unallocated fixed production overheads (not included in product price) is recorded in cost of goods sold during the period (Cr. 627, Dr. 632)

Variable production overheads are fully allocated into production cost per product unit as actual cost incurred.

6. For construction activities, account 154 “work in progress” summarizes expenses and calculates cost of construction products and its elements: direct raw material costs; direct labor cost; machinery running cost and overheads. For other production activities, Account 154 shall summarize production expenses and calculate costs incurred from workshops or production divisions.

7. For a manufacturing enterprise having work externally processed or providing services to customers or using them in the course of operations, expenses thereon shall be summarized in Account 154.

8. The following expenses are not recorded in Account 154:

- Selling expenses

- General and administration expenses;

- Financial expenses;

- Other expenses

- Corporate income tax expenses

- Non-business expenses, projects expenses;

- Capital expenditure

- Other expenses funded by other sources.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 154 – WORK IN PROGRESS

Debit side:

- Direct materials costs, direct labor costs, machinery running costs, production overheads incurred from production of goods and rendering of services during the period;

- Direct materials costs, direct labor costs, machinery running costs, production overheads incurred during the period, relating to cost of construction products or cost of internally arranged construction piece works

- Closing business and production costs transferred to work in progress (for entities applying the periodic inventory method).

Credit side:

- Actual costs of finished products put in the warehouse or provided for sales;

- Cost of completed construction partly or wholly handed over as sales or to main contractor (higher-level entity or inter-company); or cost of completed construction held for sales;

- Actual cost of completed services rendered to customers

- Value of scrap materials recovered, non-repairable products, etc…:

- Value of finished goods and materials returned from outside processing;

- Materials costs and labor costs beyond normal costs and unallocated fixed production overheads shall not be recorded in inventory costs but shall be recorded in cost of goods sold during the accounting period. Where the entity produces as purchase orders, or the entity has a long production cycle and fixed overheads are transferred to Account 154 each accounting period, when goods are finished and fixed overheads are defined, then work in progress shall not recorded in inventory but in cost of goods sold (Cr. 154, Dr. 632)

- Opening work in progress transferred (for entities applying the periodic inventory method).

ACCOUNT 154’S APPLICATION IN MAIN INDUSTRIES

Industry

Account 154 – “work in progress” is applied in industry to summarize production expenses and calculate costs incurred from workshops or production divisions. For a manufacturing enterprise having work externally processed or providing services to customers or using them in the course of operations, expenses thereon shall be summarized in Account 154.

Notes

1. Only following expenses are recorded in account 154:

- direct material costs incurred on production of goods or rendering of services;

- direct labor costs incurred on production of goods or rendering of services;

- overhead expenses for production of goods or rendering of services

2. Costs recorded in Account 154 shall be detailed by cost center (workshop, production division, production team, construction location …); by type, group of products, products or part of products.

METHODS FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS IN INDUSTRY

I. Where the entity adopts the perpetual inventory method

1. At the period end, direct material costs are allocated to each cost center, enter:

Dr. 154 – Work in progress

Dr. 632 – Cost of goods sold (the exceed amount of material costs over normal costs)

Cr. 621 – Direct material costs

2. At the period end, direct labor costs are allocated to each cost center, enter:



Cr. 622 – Direct labor costs.

3. Where the quantity of actual products is higher than or equal to the normal capacity, at the period end all (both fixed and variable) production overheads are computed and allocated into each cost center, enter:



4. Where the quantity of actual products is lower than the normal capacity, fixed production overheads are computed and allocated into each cost center as at the normal capacity. Unallocated fixed production overheads (the difference between the actual fixed production overheads higher than the fixed production overheads included in cost of products is not included in cost of products) are recorded in cost of goods sold during the period, enter:


Dr. 632 – Cost of goods sold (fixed production overheads are not allocated in cost of products)


5. Raw materials externally processed now received:

Dr. 152 – Raw material

Cr. 154 – Work in progress

6. Where defective products are non-reparable and compensation therefore has been determined:


Dr. 334 – Payable to employees

Cr. – Work in progress

7. Where the entity has a long production cycle and direct material cost, direct labor cost and production overheads are transferred to Account 154, and direct material cost and direct labor cost are defined as beyond normal costs and fixed production overheads are not included in cost of products, the exceed amount of direct material cost and direct labor cost and unallocated fixed production overheads (not included in cost of inventory) are recorded in cost of good sold during the accounting period, enter:

Dr. 632 – Cost of goods sold

Cr. 154 – Work in progress (in case of transfer from 621, 622, 627 to 154)

8. Costs of goods actually entered into the warehouse, enter:

Dr. 155 – Finished goods


9. When finished goods are not entered into the warehouse but delivered directly to the customer (water, electricity,…) enter:



II. Where the entity adopts the periodic inventory method

1. At the period end, based on the result of the physical inventory count, actual work in progress is determined and transfer entries are made:


Cr. 631 – Production costs

2. At the beginning of the period, the opening work in progress is transferred:

Dr. 631 – Production costs


Agriculture

Account 154 “Work in progress” summarizes production expenses and calculates the cost of agricultural produce raised, farmed and processed.

Notes

1. This account is maintained for records detailed by agricultural business lines (cultivation, husbandry, processing, etc), and by types of trees and animals and kinds of produce.

2. The cost of agricultural produce is normally identified by the end of a crop or a year. Produce is priced in the year in which it is harvested, that is, a cost incurred in a year s recognized in subsequent year, or harvesting year.

3. For cultivation, costs are recorded in details by:

- annual plants (rice, potatoes, …)

- Plants that are raised once but give yields round (pine apple, banana…)

- Perennial cropping: (tea, coffee, rubber, pepper, orchard …)

As regards plants which grow in two or three crops in a year, or which are grown in a year and yield in subsequent year, or which are both grow and give yields at the same time etc, records shall be entered allowing for the current situation, with cost separated for one crop, one planting area and one year from another.

4. No records shall be entered into this account as to costs on reclamation, new plantation or caring long-term plants that are in the nursery period; administrative expenses, selling expenses, financial expenses or other expenses.

5. In principle, cultivation costs are debited to account 154 “Work in progress” detailed by cost center. For expenses attributable to several cost centers, or a number of crops or years, records shall be kept in separate accounts, wherefrom costs shall subsequently be allocated to the production cost of relevant produce, such as irrigation, soil preparation, and new plantation of trees, plants grown once but harvested many times (such expenses are not from capital expenditure fund), etc.

6. Where two or more races of annual plant grow in the same cultivated area, expenses shall be allocated to each race of plant (i.e. seeding, sowing, harvesting, etc.) and shared costs (land preparing, watering, etc.) shall be recorded in separate accounts and allocated to each race of plants by cultivated areas or based on reasonable criteria.

7. For perennial cropping, expenses incurred over the period from cultivation to the first harvest are considered as investments to generate fixed assets, and are thus recorded in account 241 “Construction in progress”.

Expenses for perennial cropping include costs on caring for and harvesting the crop.

8. Attention shall be directed to the following when recording animal raising expenses in account 154:

- Expenses shall be recorded in details by each breeding ranch (buffalo, ox, pig, etc.) by group or type of livestock, poultry;

- Separate records shall be kept for the grown-up of newborn or for those creating new generations;

- Only the remaining value of those animal chosen to breed for meat is recorded in account 154

- The unit cost in breeding ranch is 1kg of fresh milk, 1standard cow, 1 kg meat, 1day/1 animal.

9. Where material costs and labor costs beyond normal costs and unallocated fixed production overheads shall not be recorded in product costs but shall be recorded in cost of goods sold during the accounting period.

METHODS FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS IN

AGRICULTURE


1. At the period end, direct material costs are allocated to each cost center, enter:



Cr. 621 – Direct materials

2. At the period end, direct labor costs are allocated to each cost center, enter:


Dr. 632 – Cost of goods sold (the exceed amount of direct labor costs over normal costs)

Cr. 622 – Direct labor costs

3. At the period end production overheads are computed and allocated into each cost center, enter:


Dr. 632 – Cost of goods sold (fixed overheads are not allocated into product costs)


4. For value of by-products collected (i.e. animal manure, straw, stubble, etc.)

Dr. 152 – Materials


5. For scraps, materials received from external processing:



6. For the value of new born animals and that of those bred for meat and transferred for work or production purposes:

Dr. 211 – Tangible fixed assets (2116)


7. For finished goods transferred to the warehouse or directly delivered to customers.





The accounting method of account 154 applied to agriculture is similar to that for industry for major transactions.

SERVICES

Account 154 “Work in progress” is applied to trading entities of such services as transportation, post offices, tourism, servicing, … This account is summarize expenses (direct materials, direct labor, overheads) and compute the cost of services provided.

Notes

1. For transportation enterprises, the account is to summarize costs and calculate the cost of transportation by land (i.e. vehicle, trams and other simple transport means), railway, sea and air and transmission by pipe.

Account 154 used by a transportation enterprise shall be detailed by activity (i.e. transportation of passengers or goods), section or unit.

For transportation enterprises, tires wear out at a degree greater than vehicles depreciation and accordingly require frequent replacement. Such cost should not be expensed into transportation cost at the time of replacement, but shall be allocated on a monthly basis. Therefore, the entity shall accrue an expense against tire wear-out (accrue expenses) every month according to the prevailing financial regulations.

2. Where material costs and labor costs beyond normal costs and unallocated fixed production overheads shall not be recorded in product costs but shall be recorded in cost of goods sold during the accounting period.

3. For the tourist industry, this account shall be detailed by activities, such as tour-guide, restaurant and tourist transportation.

4. For hotel sector, this account is detailed by activity, such as foods, rooms, entertainment and others (laundry, hairdressing, sports, etc.)

The accounting treatment of Account 154 for major transactions of transportation and services entity is similar to that of the industry entity. However, the following entry is recorded when the service has been provided to the buyer during the period and therefore recognized:


Cr. 154 – Work in progress.

Construction

For construction activities, only the perpetual inventory method is applied (not the periodic inventory method); account 154 is to summarize the production expenses to calculate the cost of construction and installation products and services of the enterprises.

Where material costs and labor costs beyond normal costs and unallocated fixed production overheads shall not be recorded in costs of construction and installation products and services but shall be recorded in cost of goods sold during the accounting period.

Account 154, applied to a construction entity, has 4 sub-accounts:

- Account 1541 – Construction: to summarize expenses, calculate the cost of production or installation and represent the closing balance.

- Account 1542 – Other products: to summarize expenses, calculate the cost of other products and represent the closing balance.

- Account 1543 – Services: to summarize expenses, calculate the cost of services and represent the closing balance.

- Accounting 1544 – Construction warranty: to summarize expenses, calculate the cost of construction warranty incurred and represent the closing balance.

METHODS FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS IN

CONSTRUCTION

I. Accounting for production expenses and construction cost (including inter-company piecework undertaken by an unit maintaining its own accounting books)

The summary if production expenses and calculation of construction cost, detailed by project, work item, and cost center initially estimated shall cover:

- Material costs;

- Labor costs;

- Machinery running costs;

- Overhead expenses

Overheads in particular are debited to account 1541 “Construction”, which includes only overhead expenses incurred by the work team or project, while the enterprise’s administrative expenses (as part of overheads) are debited to account 642 “Administrative expenses”. These expenses shall be transferred to account 911 “Determining operating results” as part of the cost of construction completed and handed-over in the period.

1. Accounting construction expenses (debited to account 1541 “Construction”):

Accounting for direct material costs:

Direct materials costs include actual cost of materials, supplies, structures or separated parts, rotating supplies involved in constituting the product or supporting the realization and completion of the work (excluding supplies used for construction machinery and equipment and others charged to overhead expenses.

In principle, direct materials shall be charged to the project or work item for which they are consumed taking account the source documents relating to the actual amount set for use by its actual cost (average cost, first-in-first-out, etc).

At the period end or upon completion of a project, physical inventory counts shall be conducted on the materials left over at site (if any) for reduction of the direct materials costs attributable to the project.

Where it is impossible to allocate expenses to respective projects or work items, the enterprise should apply allocating materials using appropriate criteria (norms of consumption, etc)

- Based on the schedule of materials allocation for each project or item:

Dr. 154 – Work in progress (material expense) (1541)

Dr. 632 – Cost of good sold (the exceed amount of material costs over normal costs)

Cr. 621 – Direct materials costs

Accounting for direct labor costs: similar to that in industry

Accounting for machinery running costs:

Machinery running costs would include expenses incurred on construction machinery attributed to the work carried out by machines. Construction machines are directly involved in the realization of a project or work item and run by stream, diesel, gas or electricity engines.

Machinery running costs include recurrent and non current expenses.

Recurrent expenses on a construction machine are salaries, wages and other payment to those handling the machine and related services, tools and supplies costs, depreciation expenses; outside services (minor repair, utility, vehicle and machine insurance etc) and other in cash.

Non current expenses on a construction machine are: significant repair of machines (fundamental repair, medium repair, etc) which is not qualified enough to be recorded as increase in cost of construction machine; temporary facilities built for the machine (tents, platforms, rails, etc). Non-current expenses may be advance prepayments (debited to account 142, or account 242) and subsequently debited to account 632 “Construction machinery running costs”; may be arrears payment which must be included in construction costs during the period (because such expenses incurred directly from actual usage of the machine during the period). Such expenses shall be accrued by a credit to account 335 “accrued expenses”, and debit account 632 “Construction machinery running costs”.

Construction machinery running costs are calculated separately by each construction machine (Refer to guidance on Account 632 “Construction machinery running costs”.)

- Based on the schedule of machinery running costs allocation (actual costs) for each project or work item):

Dr.154 – Work in progress (Construction machinery running costs)

Dr. 632 – Cost of goods sold (the exceed amount of construction machinery running costs over normal costs)

Cr. 632 – Construction machinery running cost

Accounting for overhead expenses:

Production overheads represent the production expenses of a work-team or project including: salaries for management team, working team; social insurance, health insurance and trade union fees deducted at regulated percent rate of the salaries payable to management team, workmen who directly involve in construction process and workmen who use construction machines; depreciation of fixed assets used for the whole team or project and other costs. Records on expenses incurred are:

Dr. 627 – Production overheads

Dr. 133 – Deductible VAT (if any)

Cr. 334, 338, 152, 153, 142, 214, 335, 111, 112 …

- When provision for construction work warranty is determined, enter:


Cr. 352 – Provisions

- When repair and maintenance expenses such as direct materials, direct labors, construction machinery running costs, production overheads incurs, they will be recorded in relevant accounts:


Dr. 622 – Direct labor costs

Dr. 623 – Costs of construction machinery



Cr. 112, 152, 153, 214, 331, 334, 338 …

- At the period end, actual expenses incurred during the period such as direct materials, direct labors, construction machinery running costs, production overheads relating to repair and maintenance will be recorded to summarize repair and maintenance expenses and calculate maintenance cost.


Cr. 621 – Direct raw material costs

Cr. 622 – Direct labor costs

Cr. 623 – Costs of construction machinery


- After repair and maintenance, the construction work is handed over to the client, enter:

Dr. 352 – Provisions

Cr. 154 – Work-in-progress

- After warranty period, if maintenance expenses do not incur or provision for warranty is higher than the actual cost incurred, the difference must be written back, enter:



- At the period end, production overheads shall be transferred or allocated to related projects or work items based on the schedule of overheads allocation (comparable to labor costs)


Dr. 632 – Cost of goods sold (unallocated fixed production overheads is excluded from the cost of construction work)


2. Accounting construction expenses (credited to account 1541 “Construction”)

2.1 Expenses incurred from infeasible contracts (e.g. legally impossible for contract execution such as suspicion of the contract validity, or the client is unable to fulfill their obligations…) are recorded:



Direct expenses incurred from each contract can be reduced if other income rather than the contract revenue incurred. E.g. income from sales of scraps, left over materials, disposals of machinery, equipment upon the contract completion, enter:



a) Left over materials are returned to the warehouse upon the contract completion, enter:

Dr. 152 – Materials (at cost)


b) Scraps are returned to the warehouse, enter:

Dr. 152 – Materials (at recoverable costs)


c) Where left over materials and scraps are not returned to the warehouse but are sold at site, expenses will decrease and left over materials and scraps are recorded as follows:

Dr. 111, 112, 131 … (total payments)

Cr. 3331 – Deductible VAT

Cr. 154 – Work-in-progress (purchase prices net off of VAT)

d) When machinery and equipment used for one contract are disposed and such fixed assets are fully depreciated of its cost upon completion of construction contract: , the accountant:

+ Proceeds from disposal of machinery and equipment, enter:

Dr. 111, 112, 131 …

Cr. 3331 – VAT (33311)

Cr. 154 – Work-in-progress (purchase prices net off of VAT)

+ Expenses incurred from disposal of machinery and equipment (if any), enter:



Cr. 111, 112…

+ Decrease in fixed assets, i.e. machinery and equipment used for construction fully depreciated

Dr. 214 – Depreciation of fixed assets

Cr. 211 – Tangible fixed assets

At the accounting period, based on the cost of completed construction product which is sold (partly or wholly transferred to the project management – Party A); or handed over to an inter-company unit as main contractor, entries are recorded:

e) For work handed-over to Party A (including amount of work completed under the internal contract handed over to subcontractor who maintains a separate system books):


Cr. 154 – Work-in-progress (1541)

f) Where work has been completed but is waiting to be sold (construct houses for sales, etc.) or work completed but awaiting hand-over, based on the construction cost, enter:


Cr. 154 – Work in progress (1541)

g) Where work is transferred to main contractor (higher-level entities, inter-company unit, for internally committed and the sub-contractor keeps separate accounts which are limited to cost of construction)


Cr. 154 – Work-in-progress (1541)

II. Accounting for production expenses and construction cost of industrial products and services of construction entities is similar to that in industry.

ACCOUNT 155

FINISHED GOODS

This account reflects the current balance and the movement of the entity’s finished goods.

Finished goods are defined as products manufactured and finished by the entity’s production divisions or externally processed which meet the technical requirements and are received into the warehouse.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED

WHEN RECORDING FINISHED GOODS

1. Finished goods received, issued, and balanced in Account 155 is recorded at cost as regulated in Vietnam Accounting Standard 02 “Inventory”.

2. Finished goods manufactured by the entity’s main and support operations shall be valued at production costs (at cost), including: direct materials, direct labor, production overheads and other expenses directly relating to production of finished goods.

+ For variable production overheads allocated into each product unit based on the actual expenses incurring during the period.

+ For fixed production overheads allocated into each product unit based on the normal capacity of production machinery and equipment. The normal capacity is the average quantity of products manufactured in the normal production conditions.

+ Where the actual quantity of products is higher than the normal capacity, fixed production overheads allocated into each product unit based on the actual expenses incurred.

+ Where the actual quantity of products is lower than the normal capacity, fixed production overheads allocated into each product based on the normal capacity. Unallocated production overheads are recognized as expenses to determine operating results (recorded in cost of goods sold) during the period.

3. Cost of finished goods exclude following expenses:

a. materials costs, labor costs and other business, production costs incurred beyond the normal level;

b. warehouse conservation expenses, except for warehouse conservation expenses necesary for next production processes and preservation expenses as stipulated in paragraph 06 of VAS 02 – Inventory;

c. selling expenses;

d. general and administrative expenses.

4. Finished goods externally processed are valued at the actual processing costs including: direct materials costs, processing costs and others directly relating to the processing.

5. The value of finished goods in the warehouse is calculated in accordance with one of the four methods stipulated in VAS 02 – Inventory.

6. Where the entity applies the perpetual method on inventory and records finished goods delivered, received on a daily basis, finished goods are recorded at accounting cost (either intended cost or defined cost). At the month end, cost of finished goods transferred to the warehouse shall be calculated and the coefficient of difference between the actual cost and the accounting cost (taking account the difference of opening finished goods) so as to determine the actual cost of the finished goods delivered, received during the period (by means of the formula introduced at account 152 “Raw materials”).

7. Finished goods shall be tracked in details by storage, series, group and categories.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 155 – FINISHED GOODS

Debit side:

- Actual cost of finished goods transferred to the warehouse;

- Surplus finished goods detected during the inventory count;

- Transfer of actual cost of closing finished goods (for entities applying the periodic inventory system)

Credit side:

- Actual cost of finished goods delivered

- Deficient finished detected during the inventory count;

- Transfer of actual cost of opening finished goods (for entities applying the periodic inventory system)

Debit balance

Actual cost of finished goods in stock at the period end


I. Where the entity adopts the perpetual inventory method:

1. Upon receipt of finished goods internally produced or externally processed:



2. When finished goods are delivered to customers, cost of good sold is recorded



3. Finished goods consigned or sent to an agent or an subsidiary unit who adopts dependent accounting method (using delivery note and internal transfer note):

Dr. 157 – Goods on consignment


4. For sales returns: where goods returned are taxable under the deduction method, sales returns shall be recorded at selling price net of VAT:

Dr. 531 – Sales returns (selling price net of VAT)

Dr. 3331 – Value Added Tax (33311)

Cr. 111, 112, 131 … (total price of sales returns)

Concurrently, cost of sales returned is recorded:


Cr. 632 – Cost of good sold

5. Finished goods issued for internal business, production: where finished goods issued are subject to VAT under the deduction method for production and trading goods, services subject to VAT under the deduction method:

+ Upon issuance of finished goods:



+ Recording income from finished goods issued for internal use and output VAT,



Dr. 641 – Selling expenses

Dr. 642 – General and administrative expenses


Cr. 512 – Inter-company revenues (production cost)

6. Finished goods issued for investment in joint venture:

a. when finished goods are issued for capital contribution:

Dr. 222 – Investments in joint ventures (revalued cost)

Dr. 811 – Other expenses (the lower of the revalued cost and the book value of finished goods)


Cr. 711 – Other income (the higher of the revalued cost and the book value of finished goods relevant to the interest of the other partner in the joint venture)

Cr. 3387 – Deferred revenue (the higher of the revalued cost and the book value of finished goods relevant to the interest of the entity in the joint venture)

b. When the co-control enterprise sell finished goods contributed by the entity to the interdependent third party, the entity will transfer deferred revenue to other income of that period:

Dr. 3387 – Deferred revenue


7. Finished goods issued for investment in associates

Dr. 223 – Investment in associates (revalued costs)

Dr. 811 – Other expenses (the lower of the revalued cost and the book value of finished goods)


Cr. 711 – Other income (the higher of the revalued cost and the book value of finished goods)

8. Any surplus or deficiency of finished goods during the physical count shall be documented and investigated (causes, people cause). Based on the count minutes and the decision made by the competent persons:

- Where surplus or deficiency of finished goods is due to mistakes or non-recording, correction shall be made:

- Where the cause of such surplus, deficiency is not clear:

+ In case of surplus,


Cr. 338 - Other payables (3381)

Upon management’s resolution

Dr. 338 - Other payables (3381)

Cr. Relevant accounts

+ In case of deficiency:

Dr. 138 - Other receivables (1381 Shortage of assets awaiting for resolution)


Upon management’s resolution

Dr. 111, 112 … (Compensation in cash)

Dr. 334 - Payables to employees (deduct salary)

Dr. 632 – Cost of goods sold (remaining deficiency net of compensation)

Cr. 138 - Other receivables (1381)

II. Where the entity adopts the periodic inventory method:

1. At the beginning of the period, based on the count of brought forward finished goods, opening inventory of finished goods shall be transferred to account 631 “Cost of goods sold”



2. At the end of the accounting period, based on the inventory count of finished goods, closing inventory of finished goods is recorded:


Cr. 632 – Cost of goods sold

ACCOUNT 156

MERCHANDISE INVENTORY

This account reflects the current balance and the movement (increase, decrease) of the entity’s goods of all kinds including goods in the warehouse, in the stores, properties.

Merchandise includes materials and products purchased by the entity for resale (either wholesale or retail). The cost of merchandise includes invoiced purchase price and incidental purchase expenses. In case purchased merchandise require further processing, renewing or improving, selectively classifying for additional value so that it is easier to sell them, the cost of such merchandise includes invoiced purchase price plus processing expenses. For imported goods, import duties, special consumption tax on imported goods (if any), VAT on imported goods (if non-deductible), insurance… are also included.

The following shall not be recorded in account 156 “Merchandise”

1. Merchandise held on consignment or kept for another entity (these shall be recorded in Account 002 “Goods held under trust or for processing” or Account 003 201 “Inward consignment goods for sales” (off-balance sheet accounts)

2. Merchandise purchased for the entity’s production (the purchase is posted in account 152 “Raw materials” or account 153 “Tools and supplies”, etc.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 156 – MERCHANDISE INVENTORY

1. Merchandise sold, purchased and stored is recorded at cost on Account 156 stipulated in VAS 02 – Inventory.

- Cost of purchased merchandise include invoiced purchase price, import duties, special consumption tax on imported goods (if any), VAT on imported goods (if non-deductible) and Incidental purchase expenses, loading, custody, and transport of the goods from the supplier’s premises to the entity’s warehouse.

- Where merchandise is purchased for the production and supply of goods and services taxable under the deduction method, cost shall be purchase price net of VAT.

- Where merchandise is purchased for the production and supply of goods and services non-taxable or taxable under the direct method, cost shall be total payment (including VAT)

2. Cost of merchandise shall be tracked by supplying sources, and recorded separately in terms of purchase price and expenses attributable to the purchase.

3. The four methods provided in VAS 02 – “Inventory” is used to calculate cost of merchandise.

4. Incidental purchase expenses shall be charged to merchandise sold during the period or merchandise in stock. Selecting the method to calculate cost of merchandise depends on the entity’s current conditions and the selected method shall be consistently applied.

5. Records shall keep track of merchandise detailed by storage, group, type and series.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 156 – MERCHANDISE INVENTORY

Debit side:

- Merchandise purchased at invoiced price (including non-refundable taxes)

- Incidental purchase expenses;

- Cost of merchandise externally processed (including purchase price and processing expenses);

- Returns of merchandise from customers;

- Surplus merchandise detected during the inventory count;

- Closing merchandise transferred (for entities applying the periodic inventory method)

- Cost of purchased property or transfer of investment property

Credit side:

- Merchandise delivered to customers, sent to agents, or inter-company units or transferred for external processing or set for the production and supply;

- Incidental purchase expenses allocated to merchandise sold during the period;

- Sales discount received;

- Sales allowances received;

- Returns of merchandise to suppliers;

- Deficient merchandise detected during the inventory count;

- Opening merchandise transferred (for entities applying the periodic inventory method)

Debit balance

- Purchase price

- Expenses attributable to purchase price

Account 156 – Merchandise, has three second tier accounts:

- Account 1561 - Purchase costs: reflects the current balance and the movement of merchandise purchased and received in the warehouse.

- Account 1562 - Incidental purchase expenses: reflects expenses attributable to the merchandise received during the period and the purchased related costs allocated to the amount of goods sold during the period and balanced at the period end (both goods in stock and on consignment, goods sent to agents). Purchase expenses recorded in this account shall be only expenses directly relating to the purchase: insurance, storage, stevedore, custody and transport of the goods from the supplier’s premises to the enterprise’s warehouse; tolerable loss that occurs in relation with the purchase.

- Account 1567 – Properties, reflects the current balance and the movement of the enterprise’s properties

Properties include: land, house use right; or house and land use right; infrastructure purchased for sale during the normal business course. Properties are transferred to inventory when their owner performs selling.


ACCOUNT 1561 – MERCHANDISE INVENTORY

Debit side:

- Purchased merchandise received in the warehouse at invoiced price

- Import duties or special consumption tax on imported merchandise or VAT on imported merchandise, input VAT – if non deductable, on amount of purchased merchandise received in the warehouse;

- Externally processed merchandise received in the warehouse including purchase price and processing expenses;

- Cost of merchandise received as capital contribution;

- Cost of merchandise returned to the warehouse;

- Surplus merchandise detected during the inventory count;

- Closing merchandise transferred (for entities apply the periodic inventory method).

Credit side:

- Merchandise issued from the warehouse during the period (for sale, exchange, presents, agents, or inter-company units, internal use, capital contribution for joint ventures, associates);

- Sales discounts of purchased merchandise;

- Sales allowances of purchased merchandise;

- Merchandise deficiency and loss

- Opening merchandise transferred (for entities apply the periodic inventory method)

Debit balance:

Closing merchandise in stock


ACCOUNT 1562 – PROPERTIES

Debit side:

Expenses attributable to merchandise purchased in the period

Credit side:

Expenses allocated to merchandise sold during the period

Debit balance

Closing incidental purchase


ACCOUNT 1567 – INCIDENTAL PURCHASE EXPENSES

Debit side:

- Actual cost of properties purchased;

- Remaining cost of properties transferred into inventory;

- Costs of repairing, improvement for sale at higher price of properties hold for sales.

Credit side:

- Actual cost of properties sold during the period;

- Actual cost of properties transferred investment property or fixed assets.

Debit balance:

Closing properties.

METHODS

FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS


1. Purchased merchandise received in the warehouse based on the invoice, the receipt note, and other relevant documents:

1.1 For merchandise purchased for the production and supply of goods and services subject to VAT under the deduction method:

- For merchandise locally purchased:

Dr. 156 – Merchandise (1561) (net of VAT)

Dr. 133 – Deductible VAT (1331) (input VAT)

Cr. 111, 112, 141, 331… (total price)

- For merchandise directly imported:

Dr. 156 – Merchandise (1561) (Purchase price plus (+) import duty)

Cr. 111, 112, 331 …

Cr. 3333 – Import and export duties (details of import duties)

Concurrently, import VAT payable to State Treasury


Cr. 3331 – VAT (33312 - VAT on imported goods)

- Where imported goods are subject to special consumption tax

Dr. 156 – Merchandise (1561) (Purchase price plus (+) import duty and special consumption tax on imported goods)

Cr. 111, 112, 331 …

Cr. 3333 – Import and export duties


- Refer merchandise imported by the entrustee to Account 331 – Accounts payable - trade

1.2 For merchandise purchased for the production and supply of goods and services subject to VAT under the direct method or goods and services not subject to VAT;

- For locally purchased merchandise

Dr. 156 – Merchandise (1561) (total price)

Cr. 111, 112, 141, 331 … (total price)

- For imported merchandise

Dr. 156 – Merchandise (1561) (Purchase price plus (+) import duty plus (+) special consumption tax on imported goods plus (+) special consumption tax (if any))

Cr. 111, 112, 331 …

Cr. 3333 – Import and export duties

Cr. 3331 – VAT (33312)

Cr. 3332 – Special consumption tax (if any)

2. Where the invoice has been received but the merchandise does not arrive at the period end:

Dr. 151 – Goods in transit


Cr. 111, 112, 331 …

Upon arrival of the merchandise during the subsequent period

Dr. 156 – Merchandise (1561)


3. Sales discount is recorded

Dr. 111, 112, 331 …

Cr. 156 – Merchandise (1561)


4. Merchandise returned to suppliers or rebates because their quality does not conform with the contract requirements

Dr. 111, 112 …




5. For incidental expenses attributed to the purchase of merchandise subject to VAT under the deduction method

Dr. 156 – Merchandise


Cr. 111, 112, 141, 331 …

6. Purchased properties for sale

Dr. 156 – Merchandise (1567 – Properties – Purchase price net of VAT)


Cr. 111, 112, 331 …

7. For expenses directly attributed to the purchase of properties

Dr. 156 – Merchandise (1567 – Properties


Cr. 111, 112, 331 …

8. Where investment property is transferred into inventory when the owner wants to repair, improve it for sale:

- When the owner decide to repair and improve investment property for sale:

Dr. 156 - Merchandise (1567 – Properties – Net book value of properties)

Dr. 214 - Depreciation of fixed assets ((2147) – depreciated amount)

Dr. 217 – Investment property (at cost)

- When repairing and improvement costs incur:



Cr. 111, 112, 152, 334, 331 …

- When the repairing and improvement for sale is completed , all additional expenses are recorded:

Dr. 156 - Merchandise (1567)


9. For merchandise sold for consumption purpose, entries are recorded based on the VAT invoice or sales invoice, delivery note:



Concurrently, sales are recorded:

- Where the entity pay VAT under the deduction method and merchandise sold subject to VAT under the deduction method

Dr. 111, 112, 131 … (total price)

Cr. 511, 512 (price net of VAT)

Cr. 3331 – VAT (33311)

- Where merchandise sold subject to VAT under the direct method or merchandise sold not subject to VAT

Dr. 111, 112, 131 … (total price)

Cr. 511, 512 … (total price)

10. Merchandise externally processed:

a. when merchandise is issued for external processing



b. For processing expenses incurred



Cr. 111, 112, 331 …

c. When processed merchandise is received



11. When merchandise is consigned to customers or sent to agents on consignment

Dr. 157 - Goods on consignment


12. When merchandise is delivered to a subsidiary unit for sale:

- When a sales invoice/delivered note is prepared:



- When a VAT invoice and sales invoice are sent out, cost of goods sold is identified based on the invoice:


Cr. 156 - Merchandise

13. Merchandise subject to VAT issued for internal use:

a. When merchandise is issued for internal production and supply of goods and services subject to VAT under the deduction method, income from internal sales is recorded cost of merchandise issued:

Dr. 632, 627, 641, 642 … (Cost of merchandise issued)

Cr. 512 – Inter-company revenues (Cost of merchandise issued)

Concurrently cost of merchandise issued



b. When merchandise is issued for internal production and supply of goods and services subject to VAT under the direct method or goods and services not subject to VAT, income from internal sales is recorded cost of merchandise issued. Nondeductible output VAT is charged to expense.

Dr. 632, 627, 641, 642 … (Cost of merchandise issued plus (+) output VAT)

Cr. 3331 – VAT (33311)

Cr. 512 – Inter-company revenues (Cost of merchandise issued)




14. Merchandise subject to VAT issued for gifts or salary payments

a. When merchandise is issued to make gifts (sourced from welfare and reward fund) or to make payments in replacement of salary for labor in production and supply of goods and services subject to VAT under the deduction method, income from merchandise sold is recorded at the selling price net of VAT

Dr. 431 - Welfare and reward funds (for presents, gifts)

Dr. 334 - Payables to employees (for salary payment)





b. When merchandise is issued to make gifts (sourced from welfare and reward fund) or to make payments in replacement of salary for labor in production and supply of goods and services subject to VAT under the direct method, or goods and services not subject VAT to income from merchandise sold is recorded at the total price net

Dr. 431 - Welfare and reward funds (for presents, gifts)

Dr. 334 - Payables to employees (for salary payment)


15. When goods and services not subject to VAT or subject to VAT under the direct method are issued to gifts, internal use, sales income is recorded at the total price

Dr. 641, 642, 431 …





16. Merchandise issued for investments in joint ventures

a. When merchandise is issued for investment in a joint venture:

Dr. 222 – Investments in joint ventures (revaluated cost)

Dr. 811 – Other expenses (difference where revaluated cost is lower than carrying amount)


Cr. 711 – Other income (difference where revaluated cost is higher than carrying amount of merchandise relevant to the interests of other parties in the joint venture)

Cr. 3387 – Defered revenue (difference where revaluated cost is higher than carrying amount of merchandise relevant to the interest of the entity in the joint venture)

b. When the joint venture sell such merchandise to the third party, the entity transfers deferred revenues into other income during the period:



17. Merchandise issued for investments in associates

Dr. 223 – Investments in associates

Dr. 811 – Other expenses (difference where revaluated cost is lower than carrying amount)


Cr. 711 – Other income (difference where revaluated cost is higher than carrying amount)

18. At the period end, incidental purchase expenses are allocated to merchandise sold during the period:



19. Any surplus merchandise detected in any stage of operation shall be documented and accounted for. Upon the cause being found out, accounting treatment is taken:

a. Where it is due to mistakes committed during the measuring, counting, and weighing process or omission errors, adjustment entries are made.

b. Where surplus merchandise is belonged to the other entity, surplus amount shall be debited in Account 002 - Goods held under trust or for processing and when such surplus amount is returned to the owner, credit entry is made in Account 002.

c. Where the cause is not found, surplus merchandise is waiting for solution


Cr. 338 – Other payables (3381)

d. Upon decision on solution to surplus merchandise:

Dr. 338 – Other payables (3381)

Cr. relevant accounts

20. Any deficiency merchandise detected in any stage of operation shall be documented and accounted for. Based on the decision of the authorised person on each cause being found out, accounting treatment is taken:

a. Where the cause is not found, deficiency merchandise is waiting for resolution

Dr. 138 – Other receivable (1381 - Shortage of assets awaiting for resolution)


b. Upon the decision of the authorised person

Dr. 111, 112 … (if a person caused deficiency and had to make compensations in cash)

Dr. 334 – Payable to employees (if a person caused deficiency and his or her salary was reduced)

Dr. 138 – Other receivable (1388) (compensation receivable)

Dr. 632 – Cost of goods sold (Remaining deficiency, loss)

Cr. 138 – Other receivable (1381)

21. When properties are sold during the period, based on VAT of sales invoices, delivery note entries are made:


Cr. 156 – Merchandise (1567 – Properties)

Concurrently income from sales of properties is recorded:

+ Where the entity pays VAT under the deduction method,

Dr. 111, 112, 331 …

Cr. 511 – Revenue (5117) (price net of VAT)

Cr. 3331 – VAT (33311)

+ Where the entity pays VAT under the direct method

Dr. 111, 112, 331 …

Cr. 511 – Revenue (5117) (total price)


1. At the beginning of the period, based on prior closing merchandise, opening merchandise is transferred



2. At the period end,

a. A physical inventory count shall be conducted to determine quantity and value of closing inventory. Based on the total value of closing inventory



b. Based on the total value of merchandise sold



ACCOUNT 157GOODS ON CONSIGNMENT

This account is to record costs of merchandise, finished goods sent or delivered to customers; Merchandise, finished goods on consignment; Merchandise, finished goods held by dependent accounting subsidiaries for sale; value of services rendered, delivered to buyers for which payment is not yet accepted.

This account applies to all manufacturing and trading entities in all industries.


1. Goods on consignment reflected in Account 157 are recorded on the cost basis as regulated in the Vietnamese Accounting Standard 02 – Inventories.

2. Recorded in Account 157 “Goods on consignment” shall be costs of merchandise, finished goods shipped to customers; Merchandise, finished goods on consignment sale; Merchandise, finished goods of an unit consigned to dependent accounting subsidiaries for sale; services completed, handed over to customers in accordance with the economic contracts or purchase orders, but not yet being determined as sales (not yet recorded as sales revenue in the period from merchandise, finished goods shipped or services rendered to customers).

3. Merchandise, finished goods so reflected in this account still belong to the entity and shall thus be followed up in details by category and shipment in accountant’s sub-ledger until they are determined as sold.

4. No record shall be entered in this account for transportation costs, stevedore,…paid on behalf of customers.

5. Account 157 can be made more detailed to follow up each kind of merchandise, finished goods on consignment, service rendered to each customer, each agent.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 157 – GOODS ON CONSIGNMENT

Debit side:- Costs of merchandise, finished goods sent or delivered to customers; merchandise,

finished goods on consignment; merchandise, finished goods held by dependent accounting subsidiaries for sale;

- Value of services rendered to customer, but not yet being identified as sold.- At the end of the accounting period, transfer of costs of merchandise, finished goods on

consignment but not yet being identified as sold as at the end of the accounting period (where the periodic method of accounting for inventory is adopted).

Credit side:- Costs of merchandise, finished goods on consignment, services rendered identified as

sold;- Costs of merchandise, finished goods on consignment, services rendered which are

returned by customers;

- At the beginning of the accounting period, transfer of costs of merchandise, finished goods on consignment but not yet being identified as sold as at the beginning of the accounting period (where the periodic method of accounting for inventory is adopted).

Debit side balance: Costs of merchandise, finished goods shipped, services rendered but not yet being identified as sold in the period.


I. Where the perpetual method of accounting for inventory is adopted1. Upon shipping merchandise, finished goods to customers; consigning merchandise, finished

goods to agents under economic contracts, based on the stock issue notes, consignment stock issue notes, enter:

Dr. 157 – Goods on consignmentCr. 156 – Merchandise inventoryCr. 155 – Finished goods

2. Services rendered to customers but not yet being identified as sold in the period, enter:Dr. 157 – Goods on consignment


3. For goods on consignment and services rendered to customers which have been identified as sold in the period:

- If goods, services are subject to VAT under deduction method and the entity pays VAT under deduction method, revenue from goods sold and services rendered is recognised at selling price net of VAT, enter:

Dr. 131 – Accounts receivable- tradeCr. 511 – Sales revenue (selling price net of VAT)Cr. 3331 – VAT payables (33311)

- If goods, services are not subject to VAT or subject to VAT under direct method, enter:Dr. 131 – Accounts receivable- trade

Cr. 511 - Sales revenue (total payment)

At the same time, reflect cost of merchandise, finished goods and services sold in the period, enter:

Dr. 632 – Cost of salesCr. 157 – Goods on consignment

4. For issuance of stock merchandise, finished goods (subject to VAT under deduction method and the entity pays VAT under deduction method) to dependent accounting subsidiaries, if Stock Issuance and Internal Transfer form is used, accountant of higher level entity enters:

Dr. 157 – Goods on consignment (cost)Cr. 155 – Finished goods; orCr. 156 – Merchandise inventory

Periodically, based on the list of sales invoices prepared and submitted by the subsidiaries, VAT invoices on the inter-company sales are to be prepared and sent to the respective

subsidiaries by the higher level entity. Based on the VAT invoices, accountant of higher level entity enters:

Dr. 111, 112, 136, … (inter-company selling price inclusive of VAT)Cr. 3331 – VAT payables (33311)Cr. 512 – Inter-company sales (inter-company selling price net of VAT)

Simultaneously, to reflect cost of goods sold, enter:Dr. 632 – Cost of sales

Cr. 157 – Goods on consignment

5. For merchandise, finished goods on consignment being returned by customers:a/ If the merchandise, finished goods are still tradable or repairable, enter:

Dr. 156 – Merchandise inventory; orDr. 155 – Finished goods


b/ If the merchandise, finished goods are badly out of repair and can not be sold, enter:Dr. 632 – Cost of sales


II. Where the periodic method of accounting for inventory is adopted

1. At the beginning of the accounting period, to transfer costs of merchandise, finished goods shipped to customers but not yet being determined as sold; merchandise, finished goods consigned to agents (not yet being recorded as sold in the period); services completed, handed over to customers but not yet being determined as sales , enter:

Dr. 611 – Purchases (for merchandises)Dr. 632 – Cost of sales (for finished goods and services)

Cr. 157 – Goods on consignment.

2. At the end of the accounting period, based on results of the inventory physical check, to determine value of goods, products (finished goods, work-in-progress), services rendered to customers; goods held by agents on consignment sale, which are not considered as sold.

- Value of goods shipped to customers for which payments are not yet accepted; goods consigned to agents; goods consigned to dependent accounting subsidiaries but not yet considered as sold, enter:

Dr. 157 – Goods on consignmentCr. 611 – Purchases

- At the end of the accounting period, transfer value of finished goods supplied to customers or held by agents on consignment sales; value of services provided to purchaser but not yet identified as sold at the end of the accounting period, enter:

Dr. 157 – Goods on consignmentCr. 632 – Cost of sales

ACCOUNT 158

GOODS IN BONDED WAREHOUSE

This account is to record movement and current balance of goods in bonded warehouse.

Bonded warehouse only applies to foreign-invested enterprises, who manufacture goods for export and are subject to special customs management regulation based on which imported raw materials for manufacturing purpose of an enterprise stored in bonded warehouse have not yet been subject to import duties and other related taxes.

Imported raw materials and goods stored in bonded warehouse only consist of raw materials used in manufacturing process of an enterprise and output products of such enterprise.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING GOODS IN BONDED WAREHOUSE

1. Bonded warehouse is only established at enterprises which are set up in accordance with Law on Foreign Investment in Vietnam (currently known as Investment Law) mainly for manufacturing goods for export (export at least 50% of its products).

The enterprises must record properly and in a timely manner movements of raw materials, import materials, import and export products to/from bonded warehouse and balance of raw materials, goods stored in the bonded warehouse in accordance with current regulations.

Location of a certain bonded warehouse must be convenient for management and monitoring of Customs Authority.

2. Selling of imported goods stored in bonded warehouse to Vietnam market is not permitted. In special cases where such sales to Vietnam market is approved by the Ministry of Trade, the enterprise must pay import duties and other related taxes as regulated.

3. Goods stored in bonded warehouse, which are damaged or in bad quality, failing to meet production requirements shall be subject to Custom Authority’s procedures of re-export or demolition as regulated by the General Department of Vietnam Customs and under the supervision of Custom, Tax and Environmental Authorities.

4. The enterprise must have a sub-ledger to record amount and value of each raw material and goods by each stock receipt/issuance.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 158 – GOODS IN BONDED WAREHOUSE

Debit side:

Value of raw materials, finished goods, merchandises received to bonded warehouse during the period.

Credit side:

Value of raw materials, finished goods, merchandises issued from bonded warehouse during the period.

Debit side balance:

Value of raw materials, finished goods, merchandises in bonded warehouse as at the end of the period.


1. Where materials being imported for manufacturing or processing products for export are stored in bonded warehouse, enterprises not yet have to pay import duties and VAT on imported goods, enter:

Dr. 158 – Goods in bonded warehouse

Cr. 331 – Accounts payable – trade.

2. Upon issuance of imported materials from bonded warehouse to use for manufacturing or processing products for export, enter:

Dr. 621 – Direct raw material cost

Cr. 158 – Goods in bonded warehouse.

3. Upon stock issuance of finished goods or products for export or processed products for export to place in bonded warehouse (if any), enter:


Cr. 156, 155,…

4. Upon export of goods stored in bonded warehouse (if any):

- To reflect cost of exported goods stored in bonded warehouse, enter:



- To reflect revenue from exported goods stored in bonded warehouse, enter:

Dr. 111, 112, 131, …

Cr. 511 – Total revenue.

5. If the actual export rate is less than the rate required for having bonded warehouse at an enterprise, which has to pay import duties and VAT on imported goods (if any) on the difference between goods required to export and goods actually exported, the enterprise shall have to pay import duties and VAT on imported goods (if any):

- Upon determination of import duties payable (if any), enter:


Cr. 333 – Tax payables to State Treasury (account 3333 – Import, export tax).

- Upon determination VAT payable on imported goods (if any), enter:

Dr. 133 – Deductible VAT (account 1331 – Deductible VAT on goods and services)

Cr. 333 – Tax payables to State Treasury (account 33312 - VAT on imported goods).

- Upon actual payment of import duties and VAT on imported goods (if any), enter:

Dr. 333 – Tax payables to State Treasury (account 3333 – Import, export tax).

Dr. 333 – Tax payables to State Treasury (account 33312 – VAT on imported goods).

Cr. 111,112,…

6. Where selling goods in bonded warehouse to Vietnam market is approved by the Ministry of Trade, the enterprise must pay import duties and other related taxes as regulated.

- Upon obtaining approval for using goods in bonded warehouse, enterprise shall fulfill all procedures to transfer goods from bonded warehouse to its warehouse and pay import duties and other related taxes on these goods, enter:

Dr. 155, 156

Cr. 158 – Goods in bonded warehouse

Simultaneously, to record import duties and VAT on imported goods payables:

- Upon determination of import duties payable (if any), enter:

Dr. 155, 156

Cr. 333- Tax payables to State Treasury (account 3333- Import, export tax).

- Upon determination of VAT on imported goods payable (if any), enter:

Dr. 155, 156 (if non-deductible)

Dr. 133 – Deductible VAT (account 1331 – Deductible VAT on goods and services)

Cr. 333- Tax payables to State Treasury (account 33312- VAT on imported goods).

- Upon actual payment of import duties and VAT on imported goods, enter:

Dr. 333 – Tax payables to State Treasury (33312, 3333)

Cr. 111,112,…

7. Where goods are issued from bonded warehouse for selling to local market:

- To reflect cost of goods in bonded warehouse, enter:



Simultaneously, it is required to determine import duties and VAT on imported goods on these goods, products, raw materials and have the same records as accounting entry (5).

- To reflect revenue of goods in bonded warehouse issued to sell in local market, enter:

Dr. 111, 112, 131, …

Cr. 511 – Total revenue

Cr. 333 – Tax payables to State Treasury (account 33311 – Output VAT).

8. Material, goods stored in bonded warehouse, if being damaged or in bad quality, failing to meet export standards, must be re-imported or demolished:

- In case of re-import, enter:

Dr. 155, 156,…

Cr acccount 158 – Goods in bonded warehouse

Simultaneously, it is required to pay import duties and VAT payable on these imported material, goods; to record taxes payable as entry (6); Upon actual payment of taxes, enter:

Dr. 333 – Tax payables to State Treasury (33312, 3333)

Cr. 111, 112,…

- In case of re-export (return to the seller), enter:

Dr. 331 – Accounts payable –trade

Cr. 158 – Goods in bonded warehouse

- In case of demolition of materials, goods stored in bonded warehouse, enter:

Dr. 632 – Cost of sales (demolished goods, materials)

Cr 158 – Goods in bonded warehouse.

ACCOUNT 159

ALLOWANCE FOR INVENTORIES

This account is to record allowances for inventories to be made when there is a reliable evidence showing a decrease in net realizable value of inventories against their cost.

Allowance is an estimated amount for incorporation in production costs to cover the impaired value below the book value of inventories. Allowance for inventories is made to cover losses actually incurred due to the impairment of materials, merchandises and inventories; allowance for inventories also reflects accurately net realizable value of inventories of an entity when preparing financial reports at the end of the accounting period.

Net realizable value is the estimated selling price of inventory items during the normal business course, less (-) the estimated costs of completion and selling expenses.

Allowance for inventories is reflected in Account 159 “Allowance for inventories” to be used for adjusting the cost of inventories in inventory accounts.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ALLOWANCE FOR INVENTORIES

1. Allowance for inventories is made when net realizable value of inventory is lower than its cost and is recorded in cost of sales in the period.

2. Allowance for inventory is made at the end of fiscal year upon preparation of financial reports. Allowance for inventory is made in accordance with requirements of the Accounting Standards “Inventories” as well as regulations of the current financial regime. Companies who must prepare and disclose the mid-term financial reports such as listed companies, when preparing the mid-term (quarterly) financial reports, can consider and adjust allowance for inventories made in line with the actual situation on a basis that value of inventories reflected as at the balance sheet date is at net realizable value (if the net realizable value is lower than the cost) of the inventories.

3. Allowance for inventories must be calculated by category of materials, goods and products. Allowance for work in progress must be calculated by each type of work with its own price.

4. At the end of the fiscal year, based on amount, cost and net realizable value of each material, goods, work in progress, the company shall make allowance for inventories for the next fiscal year:

- If allowance for inventories to be made at the end of this fiscal year is higher than the unused allowance for inventories made at the end of the prior year, the higher difference shall be recorded as an increase in allowance and cost of sales.

- If allowance for inventories to be made at the end of this fiscal year is lower than the book value of allowance for inventories, the lower difference shall be reversed by reducing allowance and cost of sales.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 159 – ALLOWANCE FOR INVENTORIES

Debit side:

Allowance for inventories reversed, reducing cost of sales during the period.

Credit side:

Allowance for inventories made, charged to cost of sales during the period.


The balance of allowance for inventories as at the end of the period.


1. At the end of a fiscal year (or quarter), when making allowance for inventories for the first time, enter:


Cr. 159 – Allowance for inventories

2. At the end of the next fiscal year (or quarter):

- If allowance for inventories to be made at the end of this fiscal year is higher than the unused allowance for inventories made at the end of the prior year, the higher difference shall be recorded by entering:

Dr. 632 – Cost of sales (details of allowance for inventories)

Cr. 159 – Allowance for inventories

- If allowance for inventories to be made at the end of this fiscal year is lower than the unused allowance for inventories made at the end of the prior year, the lower difference shall be recorded by entering:

Dr. 159 – Allowance for inventories

Cr. 632 – Cost of sales (details of allowance for inventories).

ACCOUNT 161

NON-BUSINESS EXPENDITURE

This account is to record non-business, project spending items incurred to realize not-for-profit economic, political, social tasks assigned by the State or higher-level other than the entity’s business operations. These items are covered by non-business expenditure fund or project fund allocated from State Budget or from the higher level authority or by non-refundable aids.

This account is maintained only in entities having non-business, project activities, which are funded by the State Budget or the higher level or by non-refundable aids or covered by their own non-business income.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING THIS ACCOUNT

1- Sub-ledger shall be opened for recording details of non-business, project spending items by source of fund, accounting period, budget year and in accordance with classification of State Budget Index.

2- Accounting of non-business, project expenditure must be consistent with budgeting and the agreement between accounting book and supporting documents and financial statements must be ensured.

3- Recorded in this account are spending items covered by the entity’s annual non-business expenditure fund, annual project fund including regular and irregular expenses in accordance with the current financial regime.

4- At the end of the accounting period, if the expenditure finalization has not been approved, the total non-business, project expenditure during the year shall be transferred from the credit side of account 1612 “Non-business expenditure of current year” to the debit side of account 1611 “Non-business expenditure brought forward” for following up until the expenditure finalization report is approved.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 161 - NON-BUSINESS EXPENDITURE

Debit side:

Non-business, project expenditure actually incurred.

Credit side:

- Unapproved improper non-business, project expenditure, for which reversal and reclaim are required;

- Approved non-business, project expenditure covered by non-business expenditure fund, project fund.

Debit side balance:

Non-business, project expenditure which has not been finalized or has been finalized but not yet approved.

Account 161 – Non-business expenditure, has two second-tier accounts:

- Account 1611 – Non-business expenditure brought forward: to record non-business, project expenditure covered by non-business expenditure fund brought forward, project fund brought forward which has not been finalized.

- Account 1612 - Non-business expenditure of current year: to record current year’s non-business, project expenditure.


1- When expenditure is incurred for non-business, project activities, programs out of non-business expenditure fund, enter:

Dr. 161 – Non-business expenditure (1612)

Cr. 111, 112,…

2- Salaries and other expenses payable to the employees of the entity, to goods suppliers, service providers, which are charged to non-business, project expenditure, enter:

Dr. 161 - Non-business expenditure (1612)

Cr. 334 - Payables to employees

Cr. 331 - Accounts payable - trade

3- Upon stock issuance of raw materials, tools and supplies to use in non-business, project activities, enter:




4- Upon receipts of funds allocated from the higher-level authorities or upon withdrawal of budget directly for non-business, project expenditure, enter:

Dr. 161- Non-business expenditure (1612)

Cr. 461 - Non-business expenditure funds

In case of withdrawal of budget for non-business, project expenditure, simultaneously enter a single credit entry to account 008 “Budget for non-business, project expenditure” (Off-balance sheet account).

5- Upon completion of a major repair of fixed assets for using in non-business, project activities, transfer the expenses for major repairs by entering:


Cr. 241 – Construction in progress ( 2413 – Fixed assets major repairs in progress)

6- In case of purchase of fixed assets or having construction in progress for non-business, project activities using funds for non–business, project expenditure:

- Upon purchase of fixed assets, completion, hand–over of constructions works for putting into use, enter:


Cr. 111, 112, 331, 241, 461,…

- Simultaneously, enter:


Cr. 466 - Fund for State administrative activities used for fixed assets

In case of withdrawal of budget for non-business, project expenditure to purchase fixed assets, simultaneously enter a single credit entry to account 008 “Budget for non-business, project expenditure” (Off-balance sheet account).

7- Upon payment of social insurance, health insurance, trade union fees for employees involving in non-business, project activities of the entity, enter:


Cr. 338 – Other payables (3382, 3383, 3384).

8- At the end of the accounting period, if the expenditure finalization has not yet been approved, the accountant transfers the debit side balance of account 1612 “Non-business expenditure of current year” to account 1611 “Non-business expenditure brought forward”, enter:

Dr. 1611 - Non-business expenditure brought forward

Cr. 1612 - Non-business expenditure of current year.

9- Upon the approval of the finalization report, the non-business, project expenditure is finalized against non-business, project expenditure funds brought forward, enter:

Dr. 461 – Non-business, project expenditure funds (4611 – non-business, project expenditure funds brought forward)

Cr 161 - Non-business expenditure (1611- Non-business expenditure brought forward).

10- Unapproved improper non-business, project expenditure, for which reversal and reclaim are required, enter:


Cr. 161 - Non-business expenditure (1611- Non-business expenditure brought forward).

ACCOUNT CATEGORY 2

LONG TERM ASSETS

Long term assets of an entity include: tangible fixed assets, intangible fixed assets, finance lease tangible fixed assets, investment property, investments in subsidiaries, investments in associates, investments in joint-ventures, other long term investments, the entity’s capital expenditure, long-term prepayments and deferred tax assets.

Principle for accounting of long term assets:

1. In all cases, accounting of fixed assets must respect the principle of measurement at cost (the actual cost of the fixed asset) and the net book value of fixed assets

2. Accounting of fixed asset must reflect three value criteria of fixed assets : Cost, depreciation and net book value of fixed assets.

Net book value = cost – accumulated depreciation

3. Fixed assets must be classified in accordance with the classification method as regulated in the accounting, statistic reports and for management and summary of State expenditure.

4. For long term financial investments such as: long term securities investments, investments in joint-ventures, investments in trading property,… the entity’s accountant must reflect their current balance, the movement in their actual price (for securities, property,…, investment in joint-ventures). Simultaneously, sub-ledgers should be maintain to follow up each long term financial investment and related expenses (if any), and interest derived from long term investments.

Long term assets account category comprises 14 accounts being classified into 3 groups:

Account group 21: Fixed assets, there are 5 accounts:

- Account 211: Tangible fixed asset;

- Account 212: finance lease tangible fixed assets;

- Account 213: Intangible fixed asset;

- Account 214: Depreciation of fixed assets;

- Account 217: Investment property.

Account group 22: Long term investments, there are 5 accounts:

- Account 221: Investments in subsidiaries;

- Account 222: Investments in joint ventures;

- Account 223: Investment in associates;

- Account 228: Other long term investments;

- Account 229: Allowance for diminution in the value of long-term investments.

Account group 24: Other long term assets, there are 4 accounts:

- Account 241: Construction in progress;

- Account 242: Long term prepayments;

- Account 243: Deferred tax assets;

- Account 244: Long term deposits

ACCOUNT 211

TANGIBLE FIXED ASSETS

This account is to record the current value and movements of all tangible fixed assets of an entity at historical cost.

THE FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING TANGIBLE FIXED ASSETS

1. Tangible fixed assets are assets with physical substance held by entity to use in the production or business activities in accordance with criteria for recognition of tangible fixed assets.

2. A tangible asset , which are both structured independently or combined in a system for one or certain functions and the system is unable to function if lacking any of its components, satisfies all four following criteria shall be deemed to be a fixed asset:

a. It is probably to obtain future economic benefits from the use of tangible fixed assets;

b. The cost of the asset to the enterprise can be measured reliably;

c. The useful life is of more than one year;

d. It meets the value criteria under the prevailing regulations (over VND10,000,000).

If a system formed by a combination of separate asset components where each of such components has different useful life and without any component the system is still able to carry on with its main function, however due to requirements of management and use of fixed assets, each asset component must be separately managed; and if any component that meets all the above 4 criteria shall be recognised as a tangible fixed asset.

With respect to working livestock, livestock for food products, if each of livestock satisfies all the four criteria, it shall be deemed to be one tangible fixed asset.

With respect to perennial orchards, each plot of orchard or tree which satisfies all the four criteria shall be deemed to be one tangible fixed asset.

3. Tangible fixed assets are recorded in account 211 at historical cost.

Cost of each fixed asset should be recorded in detail. Depending on source of generation, cost of tangible fixed assets shall be determined as follows:

(a) Tangible fixed assets purchased: Cost of tangible fixed assets purchased comprises its purchase price (net of trade discount and allowances), taxes (net of refundable taxes) and any directly attributable costs of bringing the asset to its working condition and location for its intended use such as cost of site clearance, initial transportation, loading and unloading, installation, trial production (net of recoveries on materials, scrap from trial production), expert fees and other directly related expenses.

For tangible fixed assets purchased for production and supply of goods and services which are subject to VAT under deduction method, the assets shall be recorded at the purchase price net of VAT.

For tangible fixed assets purchased for production and supply of goods and services which are subject to VAT under direct method or not subject to VAT or for non-business activities funded by non-business expenditure out of funds received from the State, for projects or for cultural and welfare activities using welfare and reward funds, the assets shall be recorded at the total price including VAT.

(b) Tangible fixed assets constructed under capital expenditure commitments realized by contractors: Cost of tangible fixed assets constructed under capital expenditure commitments realized by contractors is the finalised cost of the construction works in accordance with the currently in force Regulation on investment and construction management, other directly related expenses and registration fees (if any). For fixed assets being working livestock, livestock for food products, perennial orchards, the cost shall comprise all actual expenses incurred in relation therewith over the period from their formation to the time they are put to use or exploitation in accordance with the currently in force Regulation on investment and construction management and other related expenses.

(c) Tangible fixed assets purchased on credit: cost of tangible fixed assets purchased on credit is the upfront payment purchase price. Difference between upfront payment price and credit payment price shall be recorded as operating expense of the period when each instalment is due.

(d) Tangible fixed assets self-constructed or self-manufactured: Cost of tangible fixed assets self-constructed or self-manufactured is the actual production cost of such assets plus (+) cost of installation and trial running. In case the enterprise transfers its products to its tangible fixed assets, cost of the tangible fixed asset shall comprise its production cost and any directly attributable cost in bringing the asset to working condition and location for its intended use. Therefore, any internal profits are eliminated in calculating cost of such assets. Improper costs such as cost of wasted materials, labors, or other costs exceeding normal cost in process of self-construction shall not be incorporated to cost of the tangible fixed asset.

(e) Tangible fixed assets acquired under the form of exchange: Cost of a tangible fixed asset acquired in exchange for a dissimilar tangible fixed asset or other asset is measured at the fair value of the asset acquired, or at the fair value of the asset given up after adjusting amounts of cash or cash equivalents paid or received. Cost of a tangible fixed assets acquired in exchange for a similar asset or sold to exchange for ownership rights of a similar asset (a similar asset is an asset with similar use in the same line of business and at similar value). In both cases, no gain or loss shall be recognised in the exchange process. Cost of asset acquired shall be the net book value of the asset given up.

(f) Tangible fixed assets received as grants, transfers: Cost of a tangible fixed asset granted, transferred comprises: the net book value recorded by the grantor/transferor or the value as actually evaluated by the transfer-receipt council and relevant costs such as costs of transportation, loading, unloading, upgrading, installation, trial running and registration tax (if any)…paid by receiver upon the time of bringing such asset to its working condition and location for its intended use. Cost of tangible fixed assets transferred among

entities under dependent accounting system shall be the cost reflected in accounting book of transferor which is suitable with records of such asset. The receiver based on cost, accumulated depreciation and net book value of the asset received on the accounting book as well as records of such asset to record the asset on its accounting book. Expenses derived from transferring fixed assets among entities under dependent accounting system shall not be recorded as cost of the asset but as expenses incurred during the period.

(g) Tangible fixed assets received as joint-venture capital contribution, contributed capital returns, surplus assets, donations…: Cost of tangible fixed assets received as joint-venture capital contribution, contributed capital return, surplus assets, donations… is the value as actually evaluated by the transfer-receipt council and relevant costs such as costs of transportation, loading, unloading, upgrading, installation, trial running and registration tax (if any)…paid by receiver upon the time of bringing such asset to its working condition and location for its intended use.

4. The historical cost of tangible fixed assets is modified in following cases:

- Fixed assets are revaluated according to decisions of the Government;

- Additional parts are purchased or constructed to the asset;

- Capacity or useful life of an asset has been improved or upgraded due to changes in parts of the asset;

-Parts of an asset have been improved to achieve a significantly improvement in quality of the output;

-New production technologies have been adopted enabling a reduction in production costs compared to previous production costs.

- Any parts of the asset are dismantled.

5. Additions or reduction in fixed assets shall all be evidenced by means of receipt-transfer minutes and comply with regulations. The accountant is to prepare and complete asset’s accounting records.

6. Depreciation of operating lease assets must be made in accordance with the prevailing accounting standards and financial policies.

7. Tangible fixed assets shall be detailed by class, category and location of maintenance, use and management.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 211 - TANGIBLE FIXED ASSEETS

Debit side:

- Cost increase from receipt of construction works completed and put into use, acquisition, joint-venture capital contribution, grants, donations, aid, etc;

- Cost adjusted upon additional equipment, construction or improvement of assets;

- Cost adjusted upon upward revaluation.

Credit side:

- Cost decrease due to asset transfer, sales, disposals or contribution to joint – venture…;

- Cost decrease due to dismantling of parts thereof;

- Cost decrease due to downward revaluation.

Debit side balance:

Current cost of tangible fixed assets at the enterprise.

Account 221- Tangible fixed assets has 6 sub-accounts:

- Account 2111- Buildings and structures: to record the cost of construction works such as buildings, structures, fences, water towers, water tanks, yards, decoration works, infrastructure works such as roads, bridges and sewerage, railway, quays and docks, etc.

- Account 2112- Machinery & Equipment: to record the cost of machinery & equipment used in production and operating activities comprising of specialized machinery, equipment, production lines and single machines.

- Account 2113- Motor vehicles and transmission equipment: to record the cost of motor vehicles including road, railway, waterway, airway vehicles, and transmission equipments (communications, utilities, conveyor belt, merchandises).

- Account 2114- Office equipment and supplies: to record the cost of equipment and supplies used in business and administrative management (computers, ceiling fans, standing fans, desks and chairs, equipments, measurement devices and quality testing devices, vacuum, humidifier, woodworm proof devices…)

- Account 2115- Perennial plants, working livestock and livestock for food products: to record the cost of fixed assets being perennial plants (coffee, tea, rubber, orchard, etc.), working livestock (elephant, ploughing oxen, horse…) and livestock for food products (dairy cow, breeding animals, etc).

- Account 2118- Other fixed assets: to record the cost of other fixed assets which are not stated in the above accounts (art works, technical books, etc).


I. Accounting for additions of tangible fixed assets:

Fixed assets increase due to capital allocation (for the State-owned enterprises), receipt of capital contribution by fixed assets, new purchase, construction works completed and put into use, aids or grants, donations of fixed assets.

1. For tangible fixed assets received as for capital allocation or capital contribution, enter:

Dr.211 – Tangible fixed assets

Cr. 411 – Operating capital.

2. For purchased fixed assets:

2.1 For tangible fixed assets purchased (brand-new or second-hand) to use in production and supply of goods and services which are subject to VAT under deduction method, based on supporting documents related to fixed assets acquisition, the entity’s accountant shall determine cost of the asset, prepare accounting records and receipt-transfer minutes, enter:

Dr.211- Tangible fixed assets (purchase price net of VAT )

Dr.113- Deductible VAT

Cr.111, 112,…

Cr.331- Accounts payable - trade

Cr.341- Long-term borrowings

2.2 For tangible fixed assets purchased to use in production and supply of goods and services which are not subject to VAT or subject to VAT under direct method, enter:

Dr.211- Tangible fixed assets (total payment price)

Cr.111, 112…

Cr.331- Accounts payable - trade

Cr.341- Long-term borrowings

2.3 If fixed assets are purchased out of the capital expenditure fund or the investment and development fund for using in operating activities, accounting entries shall be made by the accountant to increase operating capital, decrease capital expenditure fund or investment and development fund upon the approval of the finalisation, enter:

Dr.414- Investment and development fund

Dr.441- Capital expenditure fund

Cr.411- Operating capital

3. Fixed assets purchased on credit or under hire-purchase:

- Fixed assets purchased on credit or under hire-purchase for using immediately in the business operations, enter:

Dr.211- Tangible fixed assets (cost- upfront payment price)

Dr.133- Deductible VAT (1332) (if any)

Dr.242- Long-term prepayments [(interest on credit payment is the difference between the total amount payable less (-) upfront payment price (-) VAT (if any)]

Cr.331- Accounts payable - trade (total payment price).

- For each instalment payment made to the supplier, enter:

Dr.331- Accounts payable - trade

Cr.111, 112 (amount payable for each instalment includes principal and interest on credit payment, hire-purchase payable by each instalment.)

- Periodically, expense off the interest on credit payment, hire-purchase in each period, enter:

Dr.635- Financial expenses

Cr.242- Long-term prepayments

4. For tangible fixed assets received from donation or aid, which are immediately put into business operations, enter:

Dr.211- Tangible fixed assets

Cr.711- Other income

Other expenses directly related to tangible fixed assets funded or donated, granted are included in the cost of the assets, enter:


Cr.111, 112, 331,…

5. For self-constructed tangible fixed assets:

- Self-constructed products transferred to tangible fixed assets for using in business operations, enter:

Dr.632- Cost of sales

Cr.155- Finished goods (upon stock issuance for use)

Cr.154-Work in progress (if the self-constructed assets are put into use right after production without storing)

Simultaneously, to increase tangible fixed assets, enter:


Cr.512-Inter-company revenue (the revenue is the actual production cost)

- Installation cost, trial running expenses, etc. related to tangible fixed assets, enter:


Cr.111,112,331,…

6. Tangible fixed assets acquired under barter mode:

6.1. Tangible fixed asset acquired in the form of exchange for a similar tangible fixed asset:

Upon receipt of similar tangible fixed asset under the form of exchange and putting it into use immediately, enter:

Dr.211- Tangible fixed assets (cost of tangible fixed assets received being net book value of fixed asset given up)

Dr.214- Depreciation (accumulated depreciation of fixed asset given up).

Cr.211 – Tangible fixed assets (Cost of tangible fixed assets given up).

6.2. Tangible fixed asset acquired in the form of exchange for a dissimilar tangible fixed asset:

- Upon handing-over the bartered asset, enter:

Dr. 811 – Other expenses (net book value of tangible fixed assets given up)

Dr. 214 – Depreciation (accumulated depreciation value)


Simultaneously to increase income due to fixed assets exchange, enter:

Dr. 131 – Accounts receivable - trade (total payment price)

Cr.711 – Other income ( fair value of fixed assets given up)

Cr. 3331 – VAT payable (33311) (if any)

- Upon receipt of bartered tangible fixed assets, enter:

Dr.211 - Tangible fixed assets (fair value of fixed assets received from exchange)

Dr.133 – Deductible VAT (1332) (if any)

Cr.131 – Accounts receivable - trade (total payment price)

- Additional money receivable due to fair value of fixed assets given up is greater than the value of fixed assets received from exchange, upon receipt of amount receivable, enter:

Dr. 111,112 (Additional amount received)

Cr. 131 – Accounts receivable - trade

- Additional money payable due to the fair value of tangible fixed assets given up is smaller than fair value of fixed assets received from exchange, upon payment of amount payable, enter:

Dr. 131 – Accounts receivable - trade

Cr. 111, 112,…

7. Fixed assets acquired being buildings, structures accompanied by land use right and to be used right after acquisition, enter:

Dr. 211 – Tangible fixed assets (cost- buildings, structures)

Dr. 213 – Intangible fixed assets (cost- land use right)


Cr. 111, 112, 331,…

8. Tangible fixed assets increase due to completion of construction:

8.1. Where construction work is recorded into the company’s accounting record system:

- When the construction work is handed over and set for use for business purpose, enter:

Dr. 211 – Tangible fixed assets (cost)

Cr. 241 – Construction in progress.

- If assets transferred from construction in progress do not meet criteria for fixed assets recognition as defined in the accounting standard for tangible fixed assets, enter:

Dr. 152, 153 (if being materials, tools and supplies in stock)

Cr. 241 – Construction in progress

- Where the work is constructed with capital expenditure fund or other funds of the company, operating capital shall be increased, the capital expenditure fund or other funds of the company shall be decreased upon approval of finalisation.

8.2. Where construction work is recorded separately from the company’s accounting record system (the project owner holds a separate accounting record system to record the construction expenses):

- When the entity receives fixed assets being construction works completed and commits to the funds out of which the asset is generated (including borrowings for capital expenditure), enter:


Dr. 133 – Deductible VAT (1332) (if any)

Cr. 411 – Operating capital (equity capital)

Cr. 341 – Long-term borrowings (borrowings from credit institutions); or

Cr.343 – Issued bonds (Direct borrowings from bond issuance)

Cr. 136 – Inter-company receivables (The capital allocated by higher level entities)

- For state-owned enterprises, if fixed assets (with the construction process lasts for many years) are inspected and handed over at the value as at the date of hand-over (at the value as approved by the competent authorities), enter:

Dr. 211 – Tangible fixed assets (approved cost)


Cr. 411 – Operating capital (equity)

Cr. 341 – Long-term borrowings

Cr. 136 – Inter-company receivables

The hand-over of fixed assets transferred from construction completed is carried out simultaneoudly with the transfer of long-term borrowings, long-term loans used for formation of the fixed assets.

9. Where a completed construction work or construction part has been put into use, but the capital expenditure finalization has not yet been approved, based on the actual expenses incurred, based on the actual related expenses incurred, cost shall be estimated for accounting purpose (for measurement and depreciation purpose). Upon the approval of capital expenditure finalization, any difference between the approved value and the estimated value of the asset shall be adjusted accordingly.

10. Where capital contributions in a joint venture are received in tangible fixed assets, based on the value of fixed assets agreed by joint-venture parties, enter:


Cr. 411 – Operating capital.

11. For tangible fixed assets received from internal transfer within the corporation (without payment made), enter:


Cr. 214 – Depreciation of fixed assets (depreciation value)

Cr. 411 – Operating capital (net book value)

12. Where fixed assets purchased, invested out of non-business expenditure fund, project fund, upon completion of fixed asset purchased, invested to set for use in non-business, project activities, enter:


Cr. 111, 112


Cr. 331 – Accounts payable - trade

Cr. 461 – Non-business expenditure fund (4612).

Simultaneously, to increase fund for state administrative activities used for fixed assets, enter:

Dr 161 – Non-business expenditure out of fund received from the State (1612)

Cr 466 – Fund for state administrative activities used for fixed assets

Upon withdrawal of budget to purchase fixed assets, simultaneously, enter a single credit entry to account 008 “Budget for non-business, project expenditure”.

13. Where fixed assets purchased, invested out of welfare fund, upon completion of fixed asset purchased, invested to set for use in welfare activities, enter:

Dr.211 – Tangible fixed assets (total payment price)

Cr.111,112, 331, 341…

Simultaneously, to transfer from welfare fund, enter:

Dr. 4312 – Welfare fund

Cr. 4313 – Welfare funds used for fixed assets

14. Expenses arising after initial recognition of fixed assets such as costs of repairs, improvement, upgrade:

- Upon expenses of repairs, improvement, upgrade arising after the initial recognition, enter:


Dr.133 – Deductible VAT (1332)

Cr. 112, 152, 331, 334,…

- Upon completion of repairs, improvement and upgrade of fixed assets to put into use:

+ If meeting criteria to increase cost of fixed assets, enter:

Dr. 211 – Tangible Fixed assets


+ If no longer meeting criteria to increase cost of fixed assets, enter:

Dr. 623, 627, 641, 642 (if the expense is small)

Dr. 242 – Long term prepayment (if the expense is large and needs to be allocated gradually)

II. Accounting for decrease of tangible fixed assets

Causes of a decrease in tangible fixed assets of an enterprise may be sales, disposal, lost, deficiency (inventory count), joint – venture capital contribution, transfer (to other entities), dismantlement of one or some parts of fixed assets …In all cases of decrease in tangible fixed assets, the accountant is to perform required procedures and determine precisely losses and gains (if any).

Based on relevant supporting documents, entries shall be made accordingly to each specific case as follows:

1. For transfer, sale of fixed assets used in business activities, non-business or project activities:

Fixed assets for sales are normally idle items or those considered to be non-productive. All procedures required must be fulfilled upon transfer, sales of assets (formation of valuation council, making public announcement and putting assets to auction, preparing sales agreement, hand-over minutes …). Based on the hand-over minutes and supporting documents relating to the sales of fixed assets:

1.1 For the transfer, sale of fixed assets, which are used in business activities:

- For enterprise pays VAT under deduction method, to record proceeds from sale of fixed assets, enter:

Dr.111, 112, 131 …

Cr 3331 – VAT payables (33311)

Cr 711 – Other income (sales price net of VAT)

- For enterprise pays VAT under direct method, to record proceeds from sale of fixed assets, enter:

Dr 111, 112, 131, …

Cr. 711 – Other income (Total payment price)

- Based on the hand-over minute, to reflect the decrease from the sale of fixed assets, enter:

Dr. 214 – Depreciation (2141) (accumulated depreciation)

Dr.811 – Other expenses (net book value)


- Expenses arising from sales of fixed assets are debited to account 881 “Other expenses”.

1.2. For the transfer, sale of fixed assets, which are used for non-business and project activities:

- Based on hand-over minute, to reflect the decrease from the sale of fixed assets, enter:

Dr. 466 - Fund for state administrative activities used for fixed assets (net book value)

Dr.214 – Depreciation (Accumulated depreciation)


- Proceeds, expenses arising from sale of fixed assets shall be recorded to relevant accounts in accordance with regulations of the competent authorities.

1.3. For the transfer, sale of fixed assets, which are used for culture, welfare activities:

- Based on hand-over minute, to reflect the decrease from the sale of fixed assets, enter:

Dr. 431- Welfare and reward fund (4313) (net book value)

Dr. 214- Depreciation (Accumulated depreciation e)


- Simultaneously, to reflect proceeds from sale of fixed assets, enter:Dr. 111,112,…

Cr. 431 – Reward and welfare fund (4312)

Cr. 333 – Tax payable to State Treasury (3331) (if any)

- To reflect expenses from sale of fixed assets, enter:

Dr. 431 – Reward and welfare fund (4312)

Cr. 111,112,…

2. Disposal of fixed assets:

Fixed assets for disposal normally are those damaged and no longer usable items or those technically outdated or those no longer meeting the production, business

requirements. Where it is required disposals of fixed assets, the enterprise’s decisions regarding the disposal, formation of a fixed asset liquidation council. The liquidation council is responsible for holding the disposal in the manner as regualted in the financial management policy and preparing disposal minute in the required form. Such minute is prepared in duplicate, one for the accounting department and the other for the department which managed and used the fixed assets.

Based on the disposal minutes and relevant documents, the disposed assets shall be recorded in the same manner as sold assets.

3. Capital contribution to a joint business in tangible fixed assets:

3.1. Upon capital contribution to joint business in tangible fixed assets, enter:

Dr. 222 - Investment in joint venture (at the value as agreed by joint venture parties)

Dr. 214 - Depreciation (Accumulated depreciation)

Dr. 811 - Other expenses (Difference of revaluated value being lower than net book value)


Cr. 3387 - Deferred revenue (Difference of revaluated value being higher than net book value shall be deferred with respect to its own share in joint venture).

Cr. 711 - Other income (Difference of revaluated value being higher than net book value of fixed assets with respect to other parties’ share in joint venture).

3.2 Periodically, based on the useful life of fixed assets used by joint-business entity, deferred revenue is to be allocated to other income in the period, enter:

Dr. 3387- Deferred revenue (the difference due to revaluation of contributed fixed assets).

Cr 711- Other income (the amount of deferred revenue allocated in the period).

4. Accounting for surplus and deficience of fixed assets:

All cases of surplus or deficience of fixed assets shall be followed up for resolution. Based on the “Fixed assets physical checking minute” and conclusion from the checking committee, such surplus or deficience shall be recorded accurately in a timely manner according to each case.

4.1 Surplus of fixed assets:

- Where a surplus is found to be from fixed assets being left unbooked (unrecorded), the tangible fixed assets account shall be debited accordingly based on the related fixed assets profile:


Cr.241, 311,338,411,…

- Where a surplus fixed asset is in use, apart from the debit to tangible fixed assets account, based on the cost and the depreciation rate, depreciation of the fixed assets shall be

measured as a base to calculate and make additional depreciation of fixed assets or making additional depreciation of fixed assets used for welfare, non-business, project activities, enter:

Dr. - Operating expense accounts (fixed assets used in business/production activities)

Dr. 4313 - Welfare fund invested in fixed assets (fixed assets used in welfare activities)

Dr. 466- Fund for state administrative activities used for fixed assets (fixed assets used in non-business, project activities)

Cr.214- Depreciation (2141)

- Where the surplus is determined as assets of other entities, that entity should be informed of the case. Otherwise, where the ownership of such surplus is unidentifiable, the case shall be reported to the higher-level entity or the same level financial authorities (if being state-owned enterprises) for resolution. While pending for resolution, based on count documents, the asset shall be recorded to account 002 “Goods held under trust for processing” (off-balance sheet account) for follow up.

4.2 The cause of and the person responsible for the deficience of fixed assets shall be identified and treated according to the current financial regulations.

- Where a resolution is made immediately: based on the approved “Deficience resolution minute” and the fixed asset profile, the asset’s cost and depreciation of fixed asset is accurately identified to write down the fixed assets and determine the physical treatment against its net book value. Subject to the resolution determined, enter:

+ For a deficience of fixed assets used in the business/production activities, enter:

Dr.214- Depreciation (depreciation value)

Dr. 111, 334, 138 (1388) (if the responsible person is subject to compensation)

Dr. 411 - Operating capital (if a reduction in capital is allowed)

Dr. 811 - Other expenses (if the entity bears the loss)

Cr. 211- Tangible fixed assets

+ For a deficience of fixed assets used in the non-business, project activities, enter:

(1) To reflect decrease in fixed assets, enter:

Dr. 214 – Depreciation (depreciation value)

Dr. 466 – Fund for state administrative activities used for fixed assets (net book value)

Cr. 211 – Tangible fixed assets (Cost)

(2) For the net book value of fixed assets which must be recovered according to the resolution made, enter:

Dr. 111 – Cash (for cash collection)

Dr. 334 – Payable to employees (if deducted from the salary of employees)

Credit to the related accounts (subject to resolution made)

+ For a deficience of fixed assets used in cultural and welfare activities:

(1) To reflect decrease in fixed assets, enter:


Dr. 4313 – Welfare funds invested in fixed assets (net book value)


(2) For the net book value of fixed assets which must be recovered according to the resolution made, enter:

Dr. 111 – Cash (for cash collection)


Cr. 4312 – Welfare fund.

- For deficience of fixed assets for which the causes have not been identified and which is pending for resolution:

+ For deficience of fixed assets used in the business activities:

(1) Reflecting the decrease in fixed assets. For the net book value of deficient fixed assets, enter:

Dr. 214 – Depreciation (2141) (depreciation value)

Dr. 138 – Other receivables (1381) (net book value)


(2) When a resolution is made against the deficience of fixed assets, enter:

Dr. 111 – Cash (compensation by cash)

Dr. 138 – Other receivables (1388) (if the responsible person is subject to compensation)


Dr. 411 – Operating capital (if decrease in capital is allowed)

Dr. 811 – Other expenses (if the enterprise bears the loss)


+ For deficience of fixed assets used in non-business, project activities:

(1) Reflecting the decrease in fixed assets, enter:


Dr. 466 – Fund for state administrative activities used for fixed assets (net book value)


Simultaneously, debit the net book value of the deficient fixed assets to account 1381 “Deficience of assets waiting for resolution”, enter:

Dr.1381 – Deficience of assets waiting for resolution

Cr.338 – Other payables

(2) When the resolution for treatment, compensation is made regarding the net book value of the deficient fixed assets, enter:

Dr. 111, 334…

Cr. 1381 - Deficience of assets waiting for resolution

Simultaneously, to reflect the proceeds from compensation for the net book value of deficient fixed assets to relevant accounts according to the decision of competent authorities:

Dr.338 – Other payables

Credit the relevant accounts (333, 461…)

+ For deficience of fixed assets used in cultural and welfare activities:

(1) Reflecting the decrease in fixed assets, enter:

Dr.214 – Depreciation (depreciation value)

Dr. 4313 – Welfare funds invested in fixed assets (net book value)


Simultaneously, debit the net book value of the deficient fixed assets to account 1381 “Deficience of assets waiting for resolution”, enter:

Dr.1381 - Deficience of assets waiting for resolution

Cr. 4312 – Welfare funds

(2) When the resolution for treatment, compensation is made regarding the net book value of the deficient fixed assets, enter:

Dr.111, 334...

Cr.1381 - Deficience of assets waiting for resolution.

5. For the tangible fixed assets used in business/production which have been re-categorized as tools and supplies, enter:

Dr.623, 627, 641, 642 (if the net book value is insignificant)

Dr.242 – Long- term prepayments (for significant net book value required amortization)



6. Accounting for sales and leaseback of tangible fixed assets being operating lease assets (as regulated in account 711 or 811).

ACCOUNT 212

FINANCE LEASE FIXED ASSETS

This account is to record the current value and movements of an enterprise’s finance lease fixed assets.

- Finance lease: Lease assets of which the Lessor transfers substantially all the risks and rewards of ownership to the Lessee. The ownership can be transferred at the end of leasing duration.

- Condition for classification of assets as finance lease: A finance lease contract must meet at least one of the following five conditions:

+ The Lessor transfers ownership of the assets to the Lessee by the end of the lease term.

+ At the inception of the lease, the Lessee has an option to purchase the asset at a price which is expected to be lower than the fair value at the end of the lease term.

+ The minimum lease term is for the major part of the economic life of the asset even if ownership is not transferred.

+ At the inception of the lease, the present value of minimum lease payments amounts to at least substantially all of the fair value of the leased assets

+ The leased assets are of a specialized nature such that only the Lessee can use them without major modification being made.

- A lease could be classified as a finance lease if the lease agrees with one of the following three conditions:

+ If the Lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the Lessee.

+ Gains or losses from the fluctuation in the fair value of the residual fall to the Lessee.

+ The Lessee has the ability to continue the lease for a secondary period at a rent which is lower than market rent.

Particularly the leased asset being land use right is classified as operating lease.


1. This account is used by the lessee to record the cost of the finance lease fixed assets. These are asset items that have not yet belonged to the ownership of the lessee, but for which, the lessee is liable for managing, maintaining, safeguarding and using as if they are the lessee’s own assets.

Cost of finance lease fixed assets is stated at fair value of leased assets or the present value of the minimum lease payment (in case the fair value of the asset is higher than the present value of the minimum lease payment) plus direct expenses initially arising relating to the finance lease.

In calculating the present value of the minimum lease payments, the discount factor is the interest rate implicit in the lease, the interest rate stated in the lease agreement or the lessee’s incremental borrowing rate.

Cost of finance lease fixed assets is exclusive of VAT paid by the Lessor upon their acquisition of the assets for lease (this VAT is to be paid back by the Lessee to the Lessor both in case the finance lease fixed assets are used in production and supply of goods and services subject to VAT under deduction method and in case the finance lease fixed assets are used in production and supply of goods and services not subject to VAT or subject to VAT under direct method).

2. Operating lease assets shall not be recorded in this account.

3. The Lessee is to calculate and record depreciation expenses of finance lease fixed assets to each accounting period using depreciation policy that is consistent with the depreciation policy used for similar depreciable assets owned by the Lessee.

If there is no reasonable certainty that the lessee will obtain ownership by the end of the lease term, the assets should be fully depreciated over the shorter of the lease term or its useful life.

4. The Lessee is to pay VAT to the Lessor in accordance with the billing progress of finance lease payment and such VAT shall be recorded as follow:

- If finance lease fixed assets are used for production and supply of goods, services which are subject to VAT under deduction method, the VAT payable in each period shall be debited to account 133 “Deductible VAT” (1332).

- If finance lease fixed assets are used for production and supply of goods, services which are not subject to VAT or subject to VAT under direct method, the VAT payable in each period shall be charged to operating expense in the period.

5. Account 212 is used to recorded details of each category and each item of leased fixed assets.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 212 - FINANCE LEASE FIXED ASSETS

Debit side:

Increase in the cost of finance lease fixed assets.

Credit side:

Decrease in the cost of finance lease fixed assets resulting from the lessee’s return or purchase of fixed assets to/from the lessor upon contract expiry.

Debit side balance:

Cost of current finance lease fixed assets.


1. Upon incurring initial direct expenses relating to finance lease fixed assets prior to receipt of the assets such as expenses for contract negotiation, contract signing…, enter:

Dr.142 – Short-term prepayments

Cr.111, 112,…

2. Upon making advance of finance lease payment or making deposit for guarantee of the lease, enter:

Dr 342 – Long-term liabilities (pre-paid lease amount, if any)

Dr 244- Long-term deposits

Cr 111,112,…

3. Where the finance lease principal is determined based on purchase price net of VAT that the lessor paid upon their acquisition of assets.

3.1 Upon receipt of finance lease fixed assets, the value of the leased assets recorded shall be the price net of input VAT according to the lease agreement and related supporting documents, enter:

Dr 212 – Finance lease fixed assets (price net of VAT)

Cr 342 – Long-term liabilities (present value of minimum lease payment or fair value of leased assets less (-) current portion of lease principal)

Cr 315 – Current portion of long-term liabilities (current portion of lease principal)

3.2 The initial direct expenses incurred relating to the finance lease are included in the cost of finance lease fixed assets, enter:

Dr 212 – Finance lease fixed assets

Cr 142 – Short-term prepayments, or

Cr 111, 112,… (direct expenses incurred relating to the finance lease upon receipt of the leased assets)

3.3 At the end of the fiscal year, based on lease agreement, the lease principal payables in the next fiscal year shall be determined, enter:

Dr 342 – Long-term liabilities

Cr 315 – Current portion of long-term liabilities

3.4 Periodically, upon receipt of finance lease payment invoice:

3.4.1 Where the finance lease fixed asset is used for production and supply of goods and services which are subject to VAT under deduction method:

- Upon actual payment of lease principal, interest and VAT to the Lessor, enter:

Dr 635 – Financial expenses (interest payable in this period)

Dr 315 – Current portion of long-term liabilities (principal payable in this period)

Dr 133 – Deductible VAT (1332)

Cr 111, 112,…

- If the entity does not make payment right upon receipt of lease payment invoice, based on the invoice, the interest payable and VAT payable shall be recorded in account 315 “Current portion of long-term liabilities”, enter:

Dr 635 – Financial expense (lease interest)

Dr 133 – Deductible VAT (1332)

Cr 315 – Current portion of long-term liabilities.

3.4.2 Where the finance lease fixed asset is used for production and supply of goods and services which are not subject to VAT or subject to VAT under direct method:

- Upon actual payment of lease principal, interest and VAT to the Lessor, enter:

Dr 635 – Financial expenses (interest payable in this period)

Dr 315 – Current portion of long-term liabilities (Principal payable in this period)

Dr 623, 627,641,642 (VAT payables in this period)

Cr 111, 112,…


Dr 635 – Financial expense (interest payable in this period)

Dr 623, 627,641,642 (VAT payables in the period)

Cr 315 – Current portion of long-term liabilities.

4. Where the finance lease principal is determined based on purchase price inclusive of VAT that the lessor paid upon their acquisition of assets.

4.1 Upon receipt of finance lease fixed assets for which the lessee assumes VAT obligation that has been settled by the lessor upon their acquisition of the assets for lease and the lessee is responsible for reimburse such VAT amount to the lessor, according to the lease agreement and related supporting documents, the value of the leased assets recorded shall be the price net of input VAT payable to the lessor, enter:

Dr 212 – Finance lease fixed assets (price net of VAT)

Dr 138 – Other receivables (input VAT of finance lease fixed assets)

Cr 315 – Current portion of long-term liabilities (payable in this period including VAT)

Cr. 342 – Long term liabilities (the present value of the minimum lease payments or fair value of lease assets less (-) lease amount payable in

this period plus (+) VAT payable gradually by the Lessee over the lease term).

4.2 The initial direct expenses incurred relating to the finance lease are included in the cost of finance lease fixed assets, enter:

Dr. 212 – Finance lease fixed assets

Cr. 142 – Short-term prepayment

Cr. 111, 112,… (direct expenses incurred relating to the finance lease upon receipt of finance lease fixed asset)

4.3 At the end of the fiscal year, based on lease agreement, the lease principal payables in the next fiscal year shall be determined, enter:

Dr. 342 – Long term liabilities

Cr. 315 – Current portion of long term liabilities

4.4 Periodically, to reflect payments of lease:

- Upon actual payment of lease principal, interest to the lessor, enter:

Dr. 635 – Financial expense (interest payable in this period)

Dr. 315 - Current portion of long term liabilities (principal payable including VAT in this period)

Cr. 111, 112….

- Based on payment invoice to reflect VAT payable to the lessor in the period, enter:

+ If the finance lease fixed assets are used for production and supply of goods and services which are subject to VAT under deduction method, enter:


Cr. 138 – Other receivables

+ If the finance lease fixed assets are used for production and supply of goods and services which are not subject to VAT or subject to VAT under direct method, enter:

Dr. 623, 627, 641, 642,…

Cr. 138 – Other receivables



Cr. 315 - Current portion of long term debt (interest payable in this period).

- Simultaneously, based on the payment invoice to reflect VAT payable to the lessor in the period in the same manner as for actual lease payment upon receipt of invoice.

5. Upon payment of committed capital use fee to the lessor, enter:

Dr. 635 – Financial expenses

Cr. 111, 112,…

6. When the leased asset is returned to the lessor in accordance with the lease agreement, the finance lease fixed assets shall be written down, enter:

Dr. 214 – Depreciation (2142)

Cr.212 – Finance lease fixed assets.

7. Where the lease contract specifies that the lease term shall cover a certain part of the leased asset and subsequently the asset shall be sold to the lessee, upon receipt of the ownership, the finance lease fixed assets shall be written down and the account “Tangible fixed assets” shall be debited. Upon transfer of finance lease fixed asset to tangible fixed assets, enter:


Cr. 212 – Finance lease fixed assets (net book value of finance lease fixed asset)

Cr. 111, 112, … (Additional amount payable)

Simultaneously, upon transfer of depreciation value, enter:

Dr. 2142 – Depreciation of finance lease fixed assets

Cr. 2141 – Depreciation of tangible fixed assets.

8. Accounting for sale and leaseback of finance lease fixed assets:

8.1 Sale and leaseback of leased assets at price higher than net book value of fixed assets:

- Accounting for sale of leased assets: (See activity 7.3 – Account 711)

- Entries to record leased assets, finance lease liabilities, periodical payments with respect to finance lease assets shall follow activity 3 and 4 of Account 212.

- Periodically, depreciation of leased assets shall be calculated, charged to operating expenses, enter:

Dr. 623, 627, 641, 642,…

Cr. 2142 – Depreciation of finance lease assets

- Periodically, upon transfer of difference between selling price which is higher than net book value of assets sold and leased back to operating expenses in the period in accordance with lease term, enter:


Cr. 623, 627, 641, 642,….

8.2 Sale and leaseback of lease assets at price lower than net book value of fixed assets

- Accounting for sale transactions: (See activity 7.2 – Acct 711)

- Entries to record lease assets, finance lease liabilities, periodical payment with respect to finance lease assets shall follow activity 3 and 4 of Account 212.

- Periodically, upon transfer of difference between selling price which is lower than net book value of assets sold and leased back to operating expenses in the period in accordance with lease term, enter:

Dr.632, 627, 641, 642,…

Cr.242- Long term prepayments.

ACCOUNT 213

INTANGIBLE FIXED ASSETS

This account is to record the current value and movements of an entity’s intangible fixed assets.

assets which have no physical form but the value of which can be determined and which are held and used by the enterprises in their production, business, service provision or leased to other subjects in conformity with the recognition criteria of intangible fixed assets.


1. Historical cost of intangible fixed assets means all costs incurred by the enterprises to acquire intangible fixed assets as of the time of putting these assets into use as expected.

- Cost of an intangible fixed asset separately purchased comprises its purchase price (less (-) trade discount or allowances), taxes (net of refundable taxes) and any directly attributable costs for bringing the asset to its working condition and location for its intended use.

- Cost of intangible fixed assets purchased on credit, hire-purchased shall be the upfront payment price upon the acquisition. Difference between upfront payment price and purchase-on-credit price shall be charged to operating expense over payment period unless such difference is incorporated in cost of intangible fixed assets (capitalized) as regulated by the accounting standard: “Borrowing cost”;

- Cost of intangible fixed assets acquired in exchange for equity instruments of the reporting entity shall be the fair value of the equity instrument issued;

- For intangible fixed asset being land use right with definite period: its historical cost shall be value of the land use right when the reporting entity makes an one-time rental payment for years and obtains land use right certificate or the amount paid upon receiving the land use right legally transferred or the value of land use right acquired as capital contribution;

- For intangible fixed asset being land use right with indefinite period: its historical cost shall be amount paid upon the legal transfer of land use right (including amount paid to the transferor, individuals or costs of land compensation, land clearance, land levelling, registration tax…)

- Cost of intangible fixed assets acquired by way of Government grant or donation shall be measured at initial fair value plus (+) any directly attributable costs for bringing the asset to its working condition and location for its intended use.

2. All expenses actually incurred relating to the development phase shall be charged to operating expenses during the period. When it is possible to demonstrate that development results meet the definition and recognition criteria of intangible fixed assets as stated in the Accounting Standard 04 “Intangible fixed assets”, all expenses arising from the development phase shall be charged to account 241 “Construction in progress” (2412). Upon completion of the development phase, all expenses forming intangible fixed assets during the development phase shall be debited to account 213 “intangible fixed assets”.

3. As required by the accounting standard on intangible fixed assets, intangible fixed assets must be amortized during the useful period and charged to operating expenses. Particularly

for intangible fixed assets being land use right, amortization is only required for land use right with definite period.

4. Subsequent expenditure on an intangible asset after initial recognition should be recognized as an expense when it is incured. If the following 2 conditions are met, the subsequent expenditure should be added to the cost of the intangible fixed asset:

- It is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance; and

- This expenditure can be measured and attributed to the asset reliably.

5. Expenditure that will generate future economic benefits for an entity comprise establishment expenses, employee’ training expenses, advertising expenses incurred in the pre-operating period of a newly established enterprise, research expenses, office moving expenses are recognized as operating expenses in the period or amortized to operating expenses within 3 years.

6. Expenditure on an intangible item that was initially recognized as an expense by a reporting enterprise in previous period for determining operating results shall not be recognized as part of an intangible fixed asset.

7. Internally generated trademarks, copyright, customer list and similar items shall not be recorded as an intangible fixed asset.

8. Intangible fixed assets shall be recorded in details by individual asset in the “fixed assets register”.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 213 – INTANGIBLE FIXED ASSETS

Debit side:

Increase in cost of intangible fixed assets.

Credit side:

Decrease in cost of intangible fixed assets.

Debit side balance:

Cost of current intangible fixed assets.

Account 213 – “Intangible fixed assets” has 7 sub-accounts:

- Account 2131 – Land use right: to record the cost of intangible fixed assets being all actual cost directly attributable to the land used, including: payments for obtaining the land use rights, land clearance and leveling expenses (if the land use right is separated from works construction period), registration tax (if any)… This account excludes costs incurred on works constructed thereon.

In case the entity is entitled to land allotment by the Government without any costs incurred or subject to annual land rental, the annual land rental shall be charged to expenses and the land use right in this case shall not be recognized as intangible fixed assets in Account 2131.

- Account 2132- Copyrights: to record the cost of intangible fixed assets being all actual cost directly attributable to obtaining copyrights.

- Account 2133- Patents and invention: to record the cost of intangible fixed assets being all actual cost directly attributable to obtaining patents and invention

- Account 2134- Trademark: to record the cost of intangible fixed assets being all actual cost directly attributable to acquiring trademarks

- Account 2135- Software: to record the cost of intangible fixed assets being all actual cost directly attributable to the acquisition of software

- Account 2136- License and Franchises : to record the cost of intangible fixed assets being all actual cost directly attributable to obtaining licenses and franchises such as: exploration license, new products license…

- Account 3138- Other intangible fixed assets: to record value of other intangible fixed assets other than those specified above.


1. I. Accounting for purchases of intangible fixed assets:

- For intangible fixed assets purchased to use in production and supply of goods and services which are subject to VAT under deduction method, enter:

Dr. 213 – Intangible fixed assets (net of VAT)


Cr. 112- Cash in bank

Cr. 141- Advances

Cr. 331-Accounts payable - trade

- For intangible fixed assets purchased to use in production and supply of goods and services which are not subject to VAT, enter:

Dr. 213 –Intangible fixed assets (total payment price)

Cr. 112, 331,…. (total payment price)

2. For intangible fixed assets purchased on credit or under hire-purchase:

- For intangible fixed assets purchased to use in production and supply of goods and services which are subject to VAT under deduction method, enter:

Dr.213 – Intangible fixed assets (cost – at upfront payment price inclusive of VAT)

Dr.242 – Long term prepayments (interest expenses being the difference between the total amounts payable less (-) upfront payment price and input VAT (if any))


Cr.331- Accounts payable- trade (total payment price)

- For tangible fixed assets purchased to use in production and supply of goods and services which are not subject to VAT or subject to VAT under direct method, enter:

Dr.213 – Intangible fixed assets (cost – at upfront payment price inclusive of VAT)

Dr.242 – Long-term prepayments (interest expenses being the difference between the total amounts payable less (-) upfront payment price)

Cr.331 – Accounts payable- trade (total payment price)

- Periodically, expense off the interest on credit payment, hire-purchase in each period, enter:

Dr.635 – Financial expense

Cr.242 – Long-term prepayments

- Upon settlement of amount payable to the seller, enter:

Dr.331 – Accounts payable -trade

Cr.111, 112,…

3. Intangible fixed assets acquired under barter mode

3.1 Intangible fixed asset acquired in the form of exchange for a similar intangible fixed asset:

Upon receipt of similar intangible fixed asset under the form of exchange and putting it into use immediately, enter:

Dr.213 – Intangible fixed assets (cost of intangible fixed assets received being net book value of fixed asset given up)

Dr.214 – Depreciation (2143) (accumulated depreciation of fixed asset given up)

Cr.213 – Intangible fixed assets (cost of fixed assets given up).

3.2 Intangible fixed asset acquired in the form of exchange for a dissimilar asset:

- To reduce intangible fixed assets by the amounts attributable to the intangible fixed assets given up, enter:

Dr.214 – Depreciation of fixed assets (accumulated depreciation value)

Dr.811 - Other expenses (net book value of fixed asset given up)

Cr.213 – Intangible fixed assets (cost).

- Simultaneously, to reflect income from exchange of fixed asset, enter:

Dr.131 – Accounts receivable –trade (the total payment)

Cr.711 – Other income (fair value of assets given up)

Cr.3331 – VAT payable (33311) (if any)

- To increase intangible fixed assets by the amounts attributable to the intangible fixed assets received, enter:

Dr.213 – Intangible fixed assets (fair value of fixed asset received)


Cr.131 – Accounts receivable - trade (the total payment).

4. Value of intangible fixed assets formed by the entity itself during the development phase:

4.1 Expenses arising from the development phase results of which do not meet the definition and recognition criteria of intangible fixed assets shall be charged to operating expenses during the period or to long-term prepayments, enter:

Dr. 242 – Long term prepayments (for high value) or

Dr. 642 – General administration expenses

Cr. 111, 112, 152, 153, 331, …

4.2 Expenses arising from the development phase results of which meet the definition and recognition criteria of intangible fixed assets:

a/ To combine expenses actually incurred during the development phase for forming cost of intangible fixed assets, enter:


Dr.133 - Deductible VAT (1332 – if any)

Cr. 111, 112, 152, 153, 331…

b/ Upon completion of the development phase, to measure total actual expenses incorporated in cost of intangible fixed assets, enter:

Dr 213 - Intangible fixed asset

Cr. 241 - Construction in progress

5. When purchasing an intangible fixed asset being land using right together with buildings, structures thereon, to separate value of intangible fixed asset being land using right and value of tangible fixed asset being buildings, structures thereon, enter:

Dr. 211 – Tangible fixed assets (Cost of buildings, structures)

Dr. 213 – Intangible fixed assets (Cost of land using right)

Dr. 133 – Deductible VAT (1332 – if any)

Cr Acc. 111, 112, 331 …

6. Where intangible fixed assets are acquired in exchange for equity instruments of the joint stock entity, cost of such assets shall be the fair value of the equity instrument issued, enter:

Dr.213 – Intangible fixed assets

Cr.411 – Operating capital (4111, 4112).

7. For intangible fixed assets received from donation or aid and are immediately put into business operations:

- Upon receipt of intangible fixed assets under the form of aid, donation, enter:



- To record expenses arising from receipt of intangible fixed asset aided, donated…, enter:


Cr. 111, 112,…

8. For land use right received as for joint venture capital contribution, based on the written commitment on the transfer of land using right, enter:


Cr. 411 – Operating capital (4111).

9. Upon the decision of transferring the land use right incorporated in investment property to intangible fixed asset, enter:

Dr. 213 – Intangible fixed assets (2131)

Cr. 217 – Investment property

Simultaneously, to transfer the accumulated depreciation value of investment property to accumulated depreciation value of intangible fixed assets, enter:

Dr. 2147 – Depreciation of Investment property

Cr. 2143 – Depreciation of Intangible fixed assets.

10. Investments in associates under the form of intangible fixed assets, based on the revaluation value of intangible fixed assets as agreed by the entity and the invested associate.

10.1. Where the revaluation value is smaller than net book value of intangible fixed asset contributed, enter:


Dr. 214 – Depreciation of fixed assets (2143)

Dr. 811 – Other expenses (Difference between revaluation value and net book value)

Cr 213 – Intangible fixed assets

10.2. Where the revaluation value is higher than net book value of intangible fixed asset contributed, enter:

Dr. 223 – Investment in associates

Dr. 214 – Depreciation of fixed assets (2143)

Cr. 213 - Intangible fixed assets

Cr. 711 – Other income (Difference between revaluation value and net book value).

11.For capital contribution under the form of intangible fixed assets to a joint –venture under common control:

11.1 Revaluation value is smaller than net book value of intangible fixed asset contributed, enter:

Dr. 222 – Investment in JV (value agreed by joint venture parties)

Dr.214 – Depreciation of fixed assets (2143) (depreciation value)

Dr. 811 – Other expenses (Difference between revaluation value and net book value of intangible fixed assets)

Cr.213 – Intangible fixed assets (Cost)

11.2. Revaluation value is higher than net book value of intangible fixed asset contributed, the difference between revaluation value and net book value of intangible fixed assets to be recorded to account 711 “Other income” is the amount attributable to other parties corresponding to their share in the joint venture, the remaining corresponding to the entity’s share in the joint venture shall be recorded to Account 3387 – Deferred revenue. Enter:

Dr. 222 – Investment in JV (re-valuated value by joint venture parties)

Dr. 214 –Depreciation of fixed assets (2143) (accumulated depreciation value)

Cr. 213 – Intangible fixed assets (Cost)

Cr. 711 – Other income (Difference due to revaluated value is higher than net book value of fixed assets with respect to other parties’ share in joint venture)

Cr. 3387 – Deferred revenue (part of difference between the re-valuation value and net value of intangible fixed assets corresponding to the entity’s share in the joint venture)

Periodically, based on the useful life of fixed assets used by joint-business unit, to allocate deferred revenue to other income in the period, enter:

Dr. 3387 – Deferred revenue (the difference due to revaluation of contributed fixed assets)

Cr. 711 – Other income.

12.Transfer, disposal of intangible fixed assets shall be treated in the same way as for transfer, disposal of tangible fixed assets (refer to Account 211).

ACCOUNT 214

DEPRECIATION AND AMORTIZATION OF FIXED ASSETS

This account is to record the movements of depreciation and accumulated depreciation of all types of fixed assets and investment properties during their usage and other movements in depreciation of fixed assets, investment properties.


1. In principle, all fixed assets, investment properties currently owned by an enterprise that relate to production and business (including unused assets, redundant assets, assets held for disposal) shall be depreciated under current regulations. Depreciation of fixed assets used in production and business and depreciation of investment properties shall be charged to expense in the period; depreciation of unused fixed assets, redundant assets, assets held for disposal shall be charge to other expenses. In special cases where fixed assets are required no depreciation (reserved fixed assets, fixed assets for public use), prevailing financial policies shall be strictly complied with. Depreciation of fixed assets used in non-business, project or welfare activities shall not be expensed but is calculated for depreciation value.

2. Based on prevailing financial policies applicable to enterprises and based on the entity’s management requirements, the entity shall choose one of three depreciation methods for its own desired development of the business and adequate recovery of the capital so invested within its spending capacity.

Depreciation method for each fixed asset, investment property must be applied consistently and can be changed when there is a considerable change in the approach for recovery of economic benefit of fixed assets and investment property.

3. Depreciation period and depreciation method must be re-considered at least once at year end. Where estimated useful life of fixed assets is considerably different from previous estimates, the depreciation period shall be changed accordingly. Depreciation method can be changed when there is a considerable change in the approach for recovery of economic benefit of fixed assets and investment property. In this case, adjustments in depreciation expense in current year and following years must be made and recorded in the financial statements.

4. Assets which have fully been depreciated (capital fully recovered) but still in use, shall no longer be depreciated.

For assets have not been fully depreciated (capital not fully recovered) but have been damaged, disposed of, it is necessary to identify the reasons and responsibilities of units, individuals for compensation purpose. Net book value of fixed assets that have not been recovered and compensated should be off-set by proceeds from disposal of the fixed assets; compensation amount shall be determined by the entity’s management. If proceeds from disposal and compensation amount is not enough to off-set net book value of fixed assets that have not been recovered and have been loss, the difference shall be considered as loss from disposal of fixed assets and charged to other expenses. For State owned enterprises in particular, this issue shall be in accordance with prevailing financial regulations.

5. For intangible fixed assets, amortization shall be charged on taking account of each item’s efficacy from the date when the asset is put into use (according to the contract, commitment or decision of the competent management). Particularly for intangible fixed assets being land use right, amortization shall be applicable to land use right with fefinite period only. Land use right with indefinite period shall not be amortized.

6. Finance lease fixed assets shall be depreciated and charge to operating expenses by the lessee during the lease term for capital recovery.

7. Investment properties, which are held for price increase or under operating lease, shall be depreciated and charged to operating expenses during the period. The entity can refer to the same type of its owned properties (fixed assets) to estimate depreciation period and determine the depreciation method for the investment properties.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 214 – DEPRECIATION AND AMORTIZATION OF FIXED ASSETS

Debit side:

- Decrease in depreciation and amortization of fixed assets, investment properties due to disposal, sale, transfer of assets to other entities, capital contribution to joint-ventures…

Credit side:

- Increase in depreciation and amortization of fixed assets and investment properties.


- Accumulated depreciation and amortization of fixed assets and investment properties currently held by the entity.

Account 214 – Depreciation and amortization of fixed assets has 4 sub-accounts:

- Account 2141 – Depreciation of tangible fixed assets: to record the depreciation value of tangible fixed assets being charged during their usage and other movements in depreciation of fixed assets.

- Account 2142 – Depreciation of finance lease fixed assets: to record the depreciation value of finance lease fixed assets being charged during their usage and other movements in depreciation of finance lease fixed assets.

- Account 2143: Amortization of intangible fixed asset: to record the amortization value of intangible fixed assets being charged during their usage and other movements in depreciation of fixed assets.

- Account 2147: Depreciation of investment property: to record the depreciation value of investment property being charged during their usage and other movements in depreciation of investment property.


1. Fixed assets are periodically depreciated/amortized and charged to operating expenses, other expenses, enter :

Dr 623 – Costs of construction machinery (6234)

Dr 627 – Production Overheads (6274)

Dr 641 – Selling expenses

Dr 642 – G&A expenses

Dr 811 – Other expenses

Cr 214 – Depreciation/Amortization of fixed assets (appropriate sub-account)

2. For tangible fixed assets received from internal transfer within the corporation:

Dr 211 – Tangible fixed asset (cost)

Cr 411 – Operating capital (Net book value)

Cr 214 –Depreciation of fixed asset (2141) (Depreciation value)

3. For periodic depreciation of investment property which are held for price increase or are under operating lease, enter:

Dr 632 – Cost of goods sold (Details of expenses attributable to investment property)

Cr 214 - Depreciation of fixed asset (2147)

4. In case of a decrease in fixed assets, investment property both the cost and depreciation of fixed assets, investment property shall be debited. ( See the accounting guidelines for accounts 211, 213 and 217 )

5. For fixed asset used in non-business, project activities, when depreciation is calculated at year end, enter:

Dr 466 – Fund for state administrative activities used for fixed assets

Cr 214 - Depreciation of fixed assets

6. For fixed assets used in culture, welfare activities, when depreciation is calculated at year end, enter:

Dr 4313 – Welfare funds used for fixed asset

Cr 214 - Depreciation of fixed asset.

7. In case at the year end, depreciation period and depreciation method of fixed asset is reconsidered and if there is any the change in depreciation rate leading to adjustment of depreciation amount in the accounting books as follows:

- Due to change in depreciation method and depreciation time, depreciation rate of fixed asset is higher than depreciation made during the year leading to difference, enter:

Dr 623, 627, 641, 642 (the difference)

Cr 214 - Depreciation of fixed assets (appropriate sub-account).

- Due to change in depreciation method and depreciation time, depreciation rate of fixed asset is lower than depreciation made during the year leading to difference, enter:

Dr 214 - Depreciation of fixed asset (appropriate sub-account)

Cr 623, 627, 641, 642 (the difference)

ACCOUNT 217

INVESTMENT PROPERTY

This account is to record the current balance and the movement of investment property at its cost.

Investment property: is property being land use right or a building or part of a building or both building and land, infrastructure held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation, rather than for:

a. use in the production or supply of goods or services or for administrative purposes; or

b. sale in the ordinary course of business.


1- This account is to record the value of properties which meet the criteria for investment property recognition. This account does not reflect value of property purchased for sale in the ordinary course of business or property constructed for sale in a foreseeable future, property used by owners, property under construction for future use as investment property.

Investment property should be recognized as an asset when the following conditions are met:

a) it is probable that the future economic benefits associated with the investment property will flow to the enterprise; and

b) the cost of the investment property can be reliably measured.

2- Investment property is recorded to this account at its cost. Cost of investment property: is total expenses (cash or cash equivalents) paid by enterprise or fair value of other considerations given to acquire the investment property at the time of its acquisition or construction.

a) Depending on the circumstances, the cost of investment property shall be determined as follows:

- The cost of an investment property comprises its purchase price and any directly attributable costs such as advisory fee, registration tax and other related transaction costs,…..

- Cost of investment property purchased on credit shall be the upfront payment price upon the acquisition. Difference between upfront payment price and purchase-on-credit price shall be charged to financial expense over payment period unless such difference is incorporated in cost of investment property in accordance with Vietnamese Accounting Standard 16, “Borrowing cost”.

- The cost of investment property self-constructed is its actual costs and directly attributable costs of investment property to the date of construction completion.

- Finance lease property used in operating lease satisfies investment property recognition criteria, its cost at the inception of lease shall be in accordance with the VAS 06 “Leases”.

b) The cost of an investment property is not increased by:

- Start-up costs (unless these costs are necessary to bring the property to its working condition);

- Costs in bringing investment property into first operation prior to its normal working condition as expected;

- Abnormal costs on raw material, labour or other resources incurred in constructing or developing the property.

3. Expenditure incurred after initial recognition of investment property shall be recorded to operating expenses during the period. Such expenditure should be added to the net book value of the investment property when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing investment property will flow to the enterprise.

4. Investment property held for disposal or under operating lease shall be depreciated. Depreciation charge is recorded to operating expenses in the period. The entity can refer to the same type of its owned properties to estimate depreciation period and determine the depreciation method for the investment properties.

5- For the investment property acquired which requires construction, improvement, upgrade prior to its investment, its value, expenditure on its acquisition, construction, improvement and upgrade shall be recorded in Account 241 “Construction in progress”. Upon completion of construction, improvement and upgrade , the cost of investment property shall be determined to transfer to Account 217 “Investment property”.

6- Transfers from owner-occupied property to investment property or transfers from investment property to owner-occupied property or inventories should be made when, and only when, there is a change in using purposes as follows:

a. Investment property shall be transferred to owner-occupied property upon the commencement of the owner’s occupation.

b. Investment property shall be transferred to inventories upon the commencement of development with a view to sale.

c. Owner-occupied property shall be transferred to investment property when the owner ceases using such property and puts it out for operating lease to another party.

d. Inventories shall be transferred to investment property upon the commencement of an operating lease to to another party.

e. Constructed property shall be transferred to investment property when the construction period is completed and the property is handed over and put into investment (During the construction period, its accounting treatment should be comply with VAS 03 “Tangible fixed assets”).

Transfer between investment property and owner-occupied property or inventories do not change the net book value of property transferred and they do not change the cost of that property for measurement or disclosure purposes.

7- When an enterprise decides to dispose of an investment property without repairing, improving and upgrading, the enterprise continues to treat the property as an investment property in Account 217 “Investment property” until it is sold and does not treat it as inventory.

8- Income from sales of investment property shall be recorded at total selling price (selling price net of VAT where VAT is paid under deduction method).

For investment property sold on credit, income shall initially be determined at upfront payment purchase price (VAT excluded if VAT is paid under deduction method). The difference between total payment and upfront payment purchase price shall be recorded as deferred interest income in accordance with VAS 14 “Revenue and other income”.

9- Cost of investment property shall be decreased in the following cases:

- Transfers from investment property to inventories or owner-occupied property;

- Sales of investment property

- Disposal of property;

- Return the investment property to the lesser after the completion of finance leases contract.

10- Investment property are detailed by each item in the “Investment property register” in the same way as for fixed assets.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 217 – INVESTMENT PROPERTY

Debit side:

Increase in cost of investment property in the period

Credit side:

Decrease in cost of investment property in the period

Debit side balance:

Cost of investment property currently held by the entity.


1- Accounting for investment property acquired with upfront payment:

- If the entity pays VAT under deduction method, enter:


Dr. 133 – VAT deductible (1332)

Cr. 111,112,331,…

- If the entity pays VAT under direct method, enter:


Cr. 111,112,331,…

2- Accounting for investment property purchased on credit:

2.1- If the entity pays VAT under deduction method, enter:

Dr. 217 – Investment property (Cost – upfront payment purchase price before VAT)

Dr. 242 – Long-term prepayment (interests being the differences between total payment less (-) the upfront payment purchase price and input VAT)


Cr. 331 – Account payable – trade.

2.2- If the entity pays VAT under direct method, enter:

Dr. 217 – Investment property (Cost – upfront payment purchase price including VAT)

Dr. 242 – Long-term prepayment (interests being the differences between total payment less (-) the upfront payment purchase price including VAT)

Cr. 331 – Account payable – trade.

2.3- Periodically, compute and accrue the interest payable under payment on credit method, enter:


Cr. 242 – Long-term prepayment.

2.4- Upon payment to the seller, enter:

Dr. 331- Account payable – trade

Dr. 515 – Financial income (any discounts received for early payment (if any)

Cr. 111, 112,..

3- In case of investment property transferred from construction in progress:

3.1. When incurred costs for construction of investment property, based on relevant documents and vouchers, all such costs will be debitted to account 241 “Construction in progress” (similar to construction of Tangible fixed assets, refer to explanation of Account 211 “Tangible fixed assets”).

3.2. Upon completion of construction in progress and transfer to investment propoerty, based on the transfer document, enter:



4- Upon transfer of owner- occupied propoerty to investment property, based on the document concerning the change of using purpose, enter:



Simultaneously, to record accumulated depreciation, enter:

Dr. 2141 or 2143

Cr. 2147 – Depreciation of investment property

5- Upon transfer of inventory to investment property, based on the document concerning the change of using purpose, enter:


Cr. 156 – Merchandise inventory (1567 – Property)

6- When an asset acquired under finance lease is used under one or some operating lease contracts, if the asset meets recognition criteria of investment property, based on finance lease contract and other relevant documents, enter:


Cr. 111, 112, 315, 342

(Accounting for lease payment upon receipt of finance lease invoice shall be in accordance with requirements in Account 212 “Finance lease fixed assets”)

7- Expenditure incurred after initial recognition of investment property, if meeting conditions in capitalisation or including in entity’s obligations to bears all costs which shall incur to bring investment property to its intended working condition, the cost of investment property shall be increased:

7.1. To record all costs incurred after initial recognition of investment property (investment property upgrade, improvement), enter



Cr. 111, 112, 152, 331…

7.2. Upon completion of upgrade, improvement,… of investment property, to increase cost of investment property upon its hand-over, enter:



8- When financial lease contract expires:

8.1. Upon return of finance lease investment property which is being classified as investment property, enter:

Dr. 2147 – Depreciation of investment property

Dr. 632 – Cost of goods sold (difference between cost of finance lease investment property and accumulated depreciation)

Cr. 217 – Investment property (cost)

8.2. Upon buying back the finance lease investment property which is being classified as investment property to continue using in the investment , to increase cost of investment property by amount of extra payment, enter:


Cr. 111, 112…

8.3. Upon buying back the finance lease investment property which is being classified as investment property to use in production ,business, or management activities, such investment property shall be classified as owner-occupied property, enter:

Dr. 211 – Tangible fixed assets, or



Cr. 111, 112 (extra payment)

Simultaneously, to record accumulated depreciation, enter:

Dr. 2147 - Depreciation of investment property

Cr. 2141 or 2143

9- Accounting for sale, disposal of investment property

9.1. Recognition of income from sale, disposal of investment property:

- If entity applies deduction method on VAT payment, enter:

Dr. 111, 112, 131 (total payment)

Cr. 511 – Revenue (5117 – Income from selling investment property) (selling/disposal price net of VAT)


- If entity applies direct method on VAT payment, enter:


Cr. 511 – Revenue (5117 – Revenue from selling investment property) (total payment).

9.2. Accounting for decrease in the cost and the net book value of investment property sold or disposed, enter:

Dr. 214 – Depreciation of fixed assets (Depreciation of investment property)

Dr. 632 – Cost of goods sold (Net book value of investment property)

Cr. 217 – Investment property (Cost of investment property)

10- Accounting for transferring investment property to inventory or owner-occupied property:

10.1. In case investment property transferred to inventories when the owner decides to repair, upgrade for sale:

- Upon decision to repair, improve, upgrade for sale of investment property, to transfer net book value of investment property to Account 156 “Merchandise inventory”, enter:

Dr.156 – Merchandise inventory (1567 – net book value investment property)

Dr. 214 – Depreciation of fixed assets (2147) (The accumulated depreciation)

Cr. 217 – Investment property (Cost)

- When repair, improve, and upgrade expenses arising for the purpose of sale, enter:

Dr.154 – Work in progress


Cr. 111, 112, 152, 334, 331…

- Upon completion of repair, improve and upgrade for the purpose of sale, to transfer all expenses to increase the cost of investment property held for sale, enter:

Dr.156 – Merchandise inventory (1567)

Cr.154 – Work in progress

10.2. In case investment property transferred to owner-occupied property, enter:

Dr. 211, 213


Simultaneously, enter:

Dr. 2147 – Depreciation of investment property

Cr. 2141, 2143.

ACCOUNT 221

INVESTMENTS IN SUBSIDIARIES

This account is to record current balance and movements of direct investments in subsidiaries. A subsidiary is an enterprise under control of another enterprise (parent company). Investments in subsidiaries include:

1. Investments in shares: Share is a certificate or an entry or electronic data acknowledging the legal rights and benefits of a parent company in its subsidiary. Shares may include ordinary shares and preference shares.

A parent company being the ordinary shareholder of the Company shall be entitled to attend General Meeting of Shareholders, may self-nominate and elect candidates to the Board of Management. It also has voting right on important issues relating to amendment of and supplementation to Company Charter, business plan, profit distribution in accordance with operating regulations. A parent company is ordinary shareholder shall entitled to dividend based on its subsidiary’s business performance and bears risks of loss, liquidation (or bankrupt) of its subsidiary according to the regulations and Law on the bankruptcy.

2. The capital investment in the form of cash contribution, other assets to a subsidiary operating as a State owned enterprise, one member liability limited company, State-owned joint-stock company or other types of enterprises.


1. Account 221 – “Investment in subsidiaries” shall be recorded only when the investors hold more than 50% of the equity (hold more than 50% of voting rights) and have right to control financial policies and businesses of enterprise in order to obtain the economic benefits from its activities. When the parent company no longer has control over the subsidiary, investment in subsidiaries shall be written down.

2. In the following cases, investments shall still be recorded in 221 – “Investment in subsidiaries” even when the parent company hold less than 50% of its subsidiary’s equity (less than 50% of voting rights), but it has other agreements:

a. Other investors agree to give the parent company more than 50% voting rights.

b. Parent company has right to control financial policies and businesses of the subsidiary according to agreed regulations.

c. Parent company has the right to appoint or remove most of members of the Board of Management or the equivalent management level.

d. The parent company has right to have majority votes in meetings of the Board of Management or equivalent management levels.

3. Investments in subsidiaries must be recorded at cost comprising purchase price plus expenses relating to the purchase (if any) such as brokerage fee, transaction cost, fee, tax and bank charge, etc.

4. Accounting for economic transactions occur during the business combination process of an enterprise being identified as the acquirer if such combination process leads to a parent-subsidiary relationship, shall be in accordance with the Circular guiding the implementation of Accounting Standard 11 “Business combination”.

5. Detailed records must be kept for investments in each subsidiary by par value, actual share price, actual costs for investment in subsidiaries,….

6. Income from subsidiary (dividend, profit) in the fiscal year shall be recorded in the parent company’s separate financial statements. Such dividends, profit shall be recorded in annual financial income of the parent company.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 221 - INVESTMENTS IN SUBSIDIARIES

Debit side:

Increases in actual value of investments in subsidiaries.

Credit side:

Decreases in actual value of investments in subsidiaries.

Debit side balance:

Actual value of investments in subsidiaries currently held by the parent company.


1. When a parent company purchases shares of or makes cash contribution under a capital commitment to the subsidiary or when a parent company acquires an investment in the subsidiary, based on the actual amount invested in the subsidiary, enter:

Dr.221- Investments in subsidiaries

Cr.111, 112, 341,…

Simultaneously, detailed records must be kept for each type of share by their par value (if investment in subsidiaries is made by purchasing its shares).

2. If any expense arising relating to information collection, brokerage, trading transactions during the process of purchasing shares or investing into subsidiaries, enter:

Dr.221- Investments in subsidiaries

Cr.111,112,…

3. In case of increasing investment in subsidiary by transferring investments in associates, joint-ventures and financial instruments to investments in subsidiaries to gain the controlling right, enter:

Dr.221- Investment in subsidiaries

Cr.222- Investments in joint ventures

Cr.223-Investment in associates

Cr.228- Other long-term investments

Cr.121- Short-term securities investments

Cr.111,112 ( additional investment amount in cash)

4. Upon receipt of notice on dividend, profit or upon receipt of dividend, profit from the subsidiary, enter:

Dr.111,112 (amount received)

Dr. 138- Other receivables (1388)

Dr.221- Investments in subsidiaries (when dividend, profit received shall be reinvested in subsidiary – if any).

Cr.515- Financial income

5. Upon transfer of investments in subsidiaries to investments in associates, or investments in joint-ventures or financial instruments due to selling part of investments in subsidiaries and the controlling right no longer exists:

In case of gaining profit, enter:

Dr.111,112 (amount received)

Dr.222- Investments in joint-ventures

Dr.223- Investment in associates

Dr.228- Other long-term investments

Cr.221-Investment in subsidiaries

Cr.515- Financial income (if any).

In case of loss, enter:

Dr.111,112…(amount received)

Dr.222- Investments in joint-ventures


Dr.635- Financial expense (loss amount)

Cr.221- Investment in subsidiaries.

6. Upon withdrawal, disposal and transfer of investments in subsidiaries with loss incurred, enter:

Dr.111,112,131…

Dr.635- Financial expense (for unrecoverable investment losses)

Cr.221- Investment in associates.

7. Upon withdrawal, disposal and transfer of investments in subsidiaries with profit, enter:

Dr. 111,112,131,…

Cr. 221- Investment in subsidiaries

Cr. 515- Financial income (profit)

8. Accounting for costs arising from business combination process of the acquirer if such combination process leading to parent-subsidiary relationship.

At the acquisition date, the purchaser shall determine and reflect costs arising from business combination including fair value of assets given up at transaction date, amounts payable incurred or committed and capital instruments issued by the purchaser for obtaining the controlling right over the acquiree, plus (+) directly costs attributable to the business combination. Simultaneously the acquirer being the parent company shall record the subsidiary as an investment in subsidiary.

-Upon the business combination, the acquirer pays in cash or cash equivalents, enter:

Dr. 221- Investment in subsidiaries

Cr. 111,112,121,..

- If business combination is carried out by issuance of shares from the acquirer, if the issuing price (at fair value) at transaction date is higher than par value of shares, enter:

Dr. 221- Investment in subsidiaries (at fair value)

Cr. 4111- Contributed capital (at par value)

Cr. 4112 - Capital surplus (difference between fair value and par value)

- If the issuing price (at fair value) at transaction date is lower than par value of shares, enter:


Dr. 4112 - Capital surplus (difference between fair value and par value)

Cr. 4111- Contributed capital (at par value)

- To record actual expenses arising from share issuance, enter:

Dr. 4112 - Capital surplus

Cr. 111,112,…

- If business combination is carried out by exchange of assets:

+ In case of exchanging fixed assets, upon exchange of fixed assets, the net book value of fixed assets shall be written down :

Dr. 811 - Other expenses (net book value of fixed assets given up)

Dr. 214 - Depreciation of fixed assets (depreciation value)


Simultaneously, to increase other income and investments in subsidiary due to exchange of fixed assets, enter:

Dr. 221- Investment in subsidiaries (total payment)

Cr. 711- Other income (fair value of the assets given up)

Cr. 3331- VAT payable (33311) (if any).

+ In case of exchanging products, goods, upon issuance of products, goods given up, enter:

Dr.632- Cost of good sold

Cr 155,156,…

Simultaneously, to record revenue and to increase investments in subsidiaries, enter:


Cr. 511- Revenue

Cr. 333- Taxes payables to the State Treasury (if any)

- In case the business combination is carried out by issuance of bonds from the acquirer:

+ Payment by bond at par value, enter:


Cr. 343- Bonds issued (3431 - Bond nominal value)

+ Payment by bond at premium, enter:


Cr. 3431- Bond nominal value (at par value)

Cr. 3433- Bonds surplus (surplus amount)

+ Payment by bond at discounts, enter:


Dr. 3432 – Bonds discount (discount amount)

Cr. 343- Bond nominal value (at par value)

Other directly expenses attributable to business combination such as legal advisory fees , evaluation fees…, shall be recorded by the acquirer as follows:


Cr 111, 112, 331,…

ACCOUNT 222

INVESTMENTS IN JOINT-VENTURE

This account reflects all investments in joint-venture under the form of jointly controlled entity and the recovery of investments in joint-venture upon expiry of the joint-venture contract.

Joint venture is the contractual arrangement whereby two or more parties undertake economic activities which are subject to joint-control. There are three major types of joint- ventures:

- Business cooperation contract under the form of jointly controlled operations (or jointly-controlled operations)

- Business cooperation contract under the form of jointly controlled assets (or jointly-controlled assets)

- Business cooperation contract under the form of jointly controlled entity (or jointly controlled entity).

A jointly controlled entity is established by the venturers. A jointly controlled entity is a newly established entity with independent operations as an ordinary enterprises, however its operations are controlled by venturers. A jointly controlled entity must have an independent accounting system following general accounting principles. A jointly controlled entity bears the responsibility to control its assets, liabilities, revenue, other income and expenses. The venturers share operating results of jointly controlled entity in accordance with the joint-venture contract.

Capital contributed to the jointly controlled entity comprises all types of assets, materials, equity including long-term borrowings used in capital contribution.


1. Investments in jointly controlled entity shall be recorded in Account 222 when the investors have been entitled to joint –control over financial polices and economic operations of the investees. Where the investors no longer have been entitled to joint –control, investments in jointly controlled entities shall be written down.

2. According to the accounting methods and regulations, investments in joint-venture under three forms: jointly-controlled operations, jointly controlled assets, jointly controlled entity shall be in accordance with Vietnamese Accounting Standard 08 “Financial information on investments in joint-venture” (Decision 234/2003/QD-BTC dated 30 December 2003). Account 222 “ Investments in joint –venture” shall be used to record investments in jointly controlled entity only, not investment in jointly controlled operations nor jointly controlled assets.

3. Amount of capital contributed to joint-venture recorded in this account must be amount agreed and accepted by venturers in the capital contribution minutes.

4. Investments in joint-venture under the form of materials, goods.

- If revaluation value of materials, goods is higher than their carrying value at the time of capital contribution, the difference will be treated as follows:

+ Difference where revaluation value of materials, goods determined as contributed capital is higher than their carrying value shall be recorded in other income in correspondence with other parties’ shares in the joint-venture.

+ Difference where revaluation value of materials, goods determined as contributed capital is higher than their carrying value in correspondence with its own share in the joint-venture shall be recorded as deferred revenue. When the jointly controlled entity sells the materials, goods to a third independent party, the deferred revenue shall be transferred to other income.

- If revaluation value of materials, goods is lower than their carrying value at the time of capital contribution, the difference will be recorded to other expenses incurred during the period.

5. Investments in joint-venture under the form of fixed assets:

- If revaluation value of materials, goods is higher than their net book value at the time of capital contribution, the difference will be treated as follows:

+ Difference where revaluation value of materials, goods is higher than their net book value correspondence with other parties’ shares in the joint-venture shall be recorded in other income.

+ Difference where revaluation value of materials, goods is higher than their net book value correspondence with its own share in the joint-venture shall be recorded as deferred revenue. Annually, the deferred revenue (gains due to revaluation of fixed assets contributed to joint-venture) shall be gradually charged to other income based on useful life of the fixed assets used by the jointly controlled entity.

- If revaluation value of materials, goods is lower than their net book value at the time of capital contribution, the difference will be recorded to other expenses incurred during the period.

6. Upon recovery of investments in joint-venture capital, based on value of materials, goods and cash returned by the jointly controlled entity to write down the contributed capital. If loss incurred due to investments in joint-venture are not fully recovered, the loss shall be recorded as financial expenses. If the recovery amount is higher than the contributed capital, the gain shall be recorded as financial income.

7. Profit from the investments in jointly controlled entity shall be financial income and recorded in credit side of Account 551 – “Financial income”. The profit allocated to venturers can be paid in full or in installments or reinvested in joint-venture upon approval of the venturers.

8. Venturers to jointly controlled entity shall be entitled to transfer their share in joint-venture. If transfer value is higher than the contributed capital, gains from such capital transfer shall be recorded in the credit side of Account 515 – “financial income”. If transfer value is lower than the contributed capital, loss incurred in such capital transfer shall be recorded in debit site of Account 635 – “Financial expenses”.

9. For jointly controlled entity, upon transfer of the capital among ventureres, the jointly controlled entity shall not record expenses attributable to the transfer but follow up their breakdown and complete procedures to change ownership in the Business Certificate or the Investment License.

10. Venturers or other partners redeeming other parties’ share in the joint-venture, capital contributed to joint-venture shall be recorded at actual purchase price (the purchase price may be higher or lower than carrying value of contribution capital transferred at the time of transfer).

11. Investments in jointly controlled entity by each partner, each capital contribution installment and each amount of capital recovered, transferred shall be recorded in detail.


ACCOUNT 222 - INVESTMENTS IN JOINT-VENTURE

Debit side:

Increase in investments in jointly controlled entity.

Credit side:

Decrease in investments in jointly controlled entity due to the investments have been recovered, transferred, or the venturers no longer have joint-control over the investments.

Debit side balance:

Closing balance of investments in jointly controlled entity.


I. Accounting for investments in joint-venture under the form of jointly controlled entity

1. Upon capital contribution in cash into the jointly controlled entity, enter:

Dr 222 – Investments in joint-venture

Cr 111, 112,…

2. Upon capital contribution to the jointly controlled entity in materials, goods, value of such materials, goods shall be revaluated by all venturers.

2.1 In case, the revaluation value is lower than carrying value of the materials and goods, enter:

Dr. 222 – Investments in joint-venture (revaluation value)

Dr. 811 – Other expenses (difference between carrying value and revaluation value)

Cr. 152, 153, 155, 156, 611 (carrying value)

2.2 In case, the revaluation value is higher than carrying value of the materials and goods, enter:

- Upon contribution of materials, goods to the jointly controlled entity, enter:

Dr. 222 – Investments in joint-venture (revaluation value)

Cr. 152, 153, 155, 156, 611 (carrying value)

Cr. 3387 – Deferred revenue (difference where the revaluation value is higher than carrying value correspondence with its own share in joint-venture) (Details of difference due to revaluation of materials, goods contributed to the jointly controlled entity).

Cr. 711 – Other income (difference where the revaluation value is higher than carrying value correspondence with other parties’ share in joint-venture)

- When the jointly controlled entity sold the materials, goods to the third independent party, the venturer transfers deferred revenue to other income during the period, enter:



3. Upon capital contribution to the jointly controlled entity in fixed assets, value of such assets shall be revaluated by all venturers:

3.1. In case, the revaluation value is lower than net book value of the fixed assets, enter:

Dr. 222 – Investments in joint-venture (at revaluation price)

Dr. 214 – Depreciation fixed assets (depreciation value)

Dr. 811 - Other expense (Difference due to net book value of fixed assets is higher than their revaluation value)

Cr.211 – Tangible fixed asset (cost)

Cr. 213 – Intangible fixed assets (cost)

3.2. In case, the revaluation value is higher than net book value of the fixed assets, enter:

Dr. 222 – Investments in joint-venture (at revaluation price)

Dr. 214 – Depreciation fixed assets (depreciation value)

Cr. 3387 – Deferred revenue (Difference due to revaluation value if higher than net book value of fixed assets correspondence with its own share in the joint venture)

Cr. 711 – Other income (Difference due to revaluation value is higher than net book value of fixed assets correspondence with other parties’ share in the joint venture)

Cr.211 – Tangible fixed asset (cost)

Cr. 213 – Intangible fixed assets (cost)

- Annually, based on useful life of the fixed asset used by the jointly controlled entity, to gradually allocate the deferred revenue to other income during the period, enter:

Dr. 3387 – Deferred revenue (details of difference due to revaluation of the fixed assets)

Cr. Other income (deferred revenue allocated within 1 year)

- In case the joint venture contract expires, or the venturers transfer their investments in joint-venture to other parties, to transfer all difference due to revaluation of the fixed assets which have not been allocated to other income, enter:

Dr. 3387 – Deferred revenue (Details of difference due to revaluation of the fixed assets)

Cr. 711- Other income.

4. Where a Vietnamese enterprise is granted with land by the State for investments in joint-venture with foreign companies by land, water surface, sea surface use rights, upon decision of the State on land granting and completion of procedures to transfer the land to the joint venture, enter:

Dr. 222 – Investments in joint-venture

Cr. 411 – Operating capital (Details of the State fund)

5. Where the venturer is received profit but reinvested the profit to the joint-venture, enter:



6. Expenses relating to investments in joint-venture during the period such as interest expenses, other expenses, enter:



Cr. 111, 112, 152,….

7. To reflect profits gaining from investments in joint-venture during the period:

7.1. Upon receipt of announcement on profits received from the jointly controlled entity, enter:



7.2. Upon receipt of money, enter:

Dr. 111, 112 (amount received)


8. Accounting for recovery of investments in jointly controlled entity upon expiry of the joint-venture contract or termination of jointly controlled entity’s activities;

8.1. Upon recovery of investments in jointly controlled entity, based on related supporting documents of the venturers, enter:

Dr. 111, 112, 152, 153, 156, 211, 213,…

Cr. 222 – Investments in joint-venture

8.2. Unrecoverable amounts due to failure in business shall be considered as a loss and must be charged to financial expense, enter:


Cr. 222 – Investments in joint-venture.

8.3. Recovery amount which is higher than the amount contributed to the jointly controlled entity shall be considered as income and must be recorded in financial income, enter:

Dr 111, 112, 152, 153, 156, 211, 213,…

Cr 515 – Financial Income.

9. Accounting for transfer of investments in jointly controlled entity.

9.1. For the venturer which transfers its ownership in the jointly controlled entity, based on fair value of asset paid from the transferee, enter:

Dr. 111, 112, 152, 153, 156, 211, 213,…

Dr. 635 – Financial expenses (difference due to value of asset received is lower than the contributed capital)


Cr. 515 – Financial income (difference due to fair value of asset received is higher than the contributed capital)

9.2. Where a Vietnamese enterprise is granted with land by the State for investments in joint-venture, upon transfer of investments in jointly controlled entity to foreign parties and return of the land use right to the State, enter:

Dr 411 – Operating capital

Cr 222 – Investments in joint-venture

If the Vietnamese enterprise receives an amount from the partners as a compensation for the transfer (In this case, the jointly controlled entity shall enter into land leases), enter:

Dr. 111, 112,…


9.3. For the transferee being a venturer in the joint-venture, after addition of its ownership in the jointly controlled entity, the contributed capital must be consolidated and based on the rate of voting right, investments in this entity shall be determined as investments in subsidiary or investments in associates, enter:

Dr. 221 – Investments in subsidiaries


Cr. 111, 112 ( the amount paid for the venturer to obtain the ownership of the investments)


9.4. For the transferee being a new venturer in the joint-venture, investments in joint-venture shall be recorded at cost, enter:


Cr. 111, 112 (the amount paid for the venturer to obtain the join-control)

Cr. Other related accounts

9.5. Where the Vietnamese venturer transfers its investments in the jointly controlled entity to the foreign parties and returns the land use right and enters into land leases, the jointly controlled entity must write down the land use right and write down the operating capital respectively with the land use right. The operating capital shall be remained or increased upon investments of the venturers. Land lease payment made by the jointly controlled entity shall not be counted for equity but for operation costs in respective periods..

10. Where the venturer increases their investments in the jointly controlled entity by assets, this shall be treated similar as the first investments in joint-venture mentioned above.

11. Accounting for transactions between the venturers and the jointly controlled entity:

11.1. Where the venturers sell their assets to the jointly controlled entity:

- In case of selling merchandise goods, finished goods to the jointly controlled entity, upon issuance of finished goods, merchandise goods for sale, enter:


Cr 155 – Finished goods; or

Cr 156 – Merchandise goods

Simultaneously, based on the actual selling price of finished goods, merchandise goods to record sales revenue, enter:

Dr. 111, 112, 131, … (total payment of finished goods, merchandise goods sold to the jointly controlled entity)

Cr. 511 – Revenue ( net of VAT)

Cr. 3331 - VAT payable (VAT)

- In case of selling fixed assets to the jointly controlled entity, upon the sale, the fixed assets shall be written down, enter:

Dr. 811 – Other expenses ( net book value )

Dr. 214 –Depreciation of fixed assets ( depreciation value)

Cr. 211, 213 (cost )

Simultaneously, to record other income due to sale of the fixed assets at actual selling price to the jointly controlled entity, enter:

Dr 111, 112, 131,…

Cr 711 – Other income

Cr 333 – Taxes payable to State Treasury (33311).

- At the end of the accounting period, based on the fixed assets, finished goods, merchandise goods sold to the jointly controlled entity with profit but in the period the jointly controlled entity has not sold its assets to the third independent parties, the venturers shall record the profit gained from sale of fixed assets, finished goods, merchandise goods respectively with their share in the joint-venturer as deferred revenue:

Sale of finished good, merchandise goods, enter:

Dr. 511 – Revenue (deferred profit from sale of finished goods, merchandise goods respectively with their share in the joint-venture)

Cr. 3387 – Deferred revenue

Sale of fixed asset, enter:

Dr. 711 – Other income (deferred profit from sale of fixed assets respectively with their share in the joint-venture)

Cr. 3387 – Deferred revenue.

- In the next accounting period, when the jointly controlled entity sells the fixed assets, finished goods, merchandise goods to the third independent party, the venturer shall record as follows:

Dr. 3387 – Deferred revenue (deferred profit respectively with its share in the joint venture)

Cr 511 – Revenue.

- For fixed assets, periodically, the venturer shall gradually allocate its deferred profit respectively with its share in the joint-venture to other income based on the useful life of the fixed assets used by the jointly controlled entity:


Cr 711 – Other income

- When the jointly controlled entity sells the fixed assets purchased from the venturer to the third independent party, the venturer shall record as follows:

Dr. 3387 – Deferred revenue (profit respectively with its share in the joint-venture which has not been transferred to other income)


11.2. Where the venturers purchases assets of the jointly controlled entity:

Upon purchase of assets from the jointly controlled entity, based on the related supporting documents; assets, goods acquired shall be recorded as assets, goods purchased from other suppliers.

II. Accounting for investments in joint-venture under the form of jointly controlled operations

A. General regulation

1. Business cooperation contract under the form of jointly controlled operations is the operations which don’t lead to a new corporation establishment. The venturers are entitled to benefits and bear obligations in accordance with contractual arrangement. Jointly controlled operations concur with venturers’ own operations.

2. Business cooperation contract stipulates that any specific expenses arising from jointly controlled operations paid by each venturer shall be responsibility of such venturer. General expenses (if any) shall be divided among venturers based on contractual arrangement.

3. Financial statements of the venturers shall comprise following contents:

Assets contributed to the joint venture and controlled by the venturers;

Liabilities;

Revenue from sale of goods or provision of services of the joint-venture;

Incurred expenses.

4. Any general expenses arising from the joint-venture shall be recorded in the accounting book. Periodically, based on agreements in the joint-venture contract on allocation of the general expenses, a Table on allocation of general expenses shall be prepared by the accountant, confirmed by the venturers and held by each venturer (original version). Table on allocation of general expenses together with legal original documents shall be a basis that each venturer uses to record the general expenses allocated from the contract.

5. If the joint-venture contract stipulates regulation on distribution of products, periodically, based on agreements in the joint-venture contract, a Table on products distribution shall be prepared by the venturers, confirmed by these venturers and held by each venturer (original version). Upon delivery of products, deliver-receipt note (issuance note) shall be prepared by the venturers in two copies, and each copy shall be held by each venturer. Deliver-receipt note shall be a basis for the accounting records of the ventures and for finalization of contract.

B. Accounting for economic operations relating to expenses, revenue of jointly controlled operations.

1. Accounting for specific expenses in each venturer

1.1. Based on invoices, related documents, to gather specific expenses borne by the venturers when entering into the jointly controlled operations, enter:

Dr.621,622,627,641,642 (details for the joint-venture contract)


Cr. 111, 112, 331,…

1.2. At the end of the accounting period, to transfer specific expenses to gather operating costs of the joint-venture contract, enter:

Dr. 154- Work in progress (details for joint venture contract)

Cr. 621, 622, 627 (details for joint venture contract)

2. Accounting for general expenses borne by each venturer:

2.1. Accounting at the venturer that bears general expenses:

a) When arising general expenses borne by each venturer, based on the relevant invoices, supporting documents, enter:

Dr. 621, 622, 627, 641, 642 (details for the joint venture contract)

Dr. 133- Deductible VAT (if any)

Cr. 111, 112, 331…

b) If the joint venture contract stipulates that general expenses must be allocated among venturers, at the end of the accounting period, based on agreements in the contract, a Table on allocation of general expenses shall be prepared and upon approval of the venturers, based on expenses allocated to other venturers, enter:

Dr. 138 – Other receivables (details for each venturer)

Cr.133-Deductible VAT (if any)

Cr. 621, 622, 627, 641, 642.

2.2. Accounting at the venturer that does not bear general expenses:

Based on the Table on allocation of general expenses accepted by the venturers (informed by the venturer that bears general expenses), enter:

Dr. 621, 622, 623, 641, 642 (detailed by the joint venture contract)

Dr. 133 - Deductible VAT (if any)

Cr. 338 - Other payables (detailed by venturer that bears general expenses)

3. Accounting for product distribution:

3.1. Upon receipt of products from the joint –venture contract, based on the deliver-receipt note, receiving note and relevant documents, enter:

Dr. 152 - Raw material (if products received are not finished goods)

Dr. 155 - Finished goods (if products received are finished goods)

Dr. 157 - Goods on consignment (if products received are sold without storing)

Cr. 154 - Work in progress (include specific expenses and general expenses borne by each venturer) (details for the joint-venture contract).

3.2. Upon receipt of products from the joint venture contract for immediate use in production of other products, based on deliver-receipt note and relevant documents, enter:

Dr. 621- Direct raw material costs

Cr. 154- Work in progress (include specific expenses and general expenses borne by each venturer) (details for the joint-venture contract)

3.3. If the joint venture contract stipulates that the products shall not divided but be sold by a third party, upon billing for the party that sold the products, to transfer specific expenses and general expenses borne by each venturer into cost of goods sold, enter:

Dr. 632 - Cost of goods sold

Cr.154 - Work in progress (include specific expenses and general expenses borne by each venturer) (details for the joint-venture contract)

4. Accounting for revenue from sale of goods in case one venturer sells products on behalf of other venturers and distribute revenue for other venturers:

4.1. Accounting at venturer selling products:

- Upon sale of products as regulated in the contract, the venturer must issue invoices for all products sold out, and simultaneously reflect total amount received from sale of the products, enter:

Dr. 111, 112, 131, …

Cr. 338- Other payables (detailed by the joint venture contract)

Cr. 3331- VAT payable (if any)

- Based on regulations stated in the joint venture contract and the Table on allocation of revenue, to reflect revenue correspondence with the venturer’s share in the joint-venture, enter:

Dr. 338 - Other payables (detailed by the joint venture contract)

Cr. 511- Revenue (benefit granted for the seller as stated in the contract)

- Upon receipt of invoice issued by the venturer that is not the seller in accordance with revenue granted to such venturer, enter:

Dr. 338 - Other payables (detailed by the joint venture contract)

Dr. 3331-VAT payable (33311) (if output VAT is also divided)

Cr. 338 - Other payables (detailed by the joint venture contract)

- Upon distribution of revenue for joint venture party who is not the seller, enter:

Dr. 338 - Other payables (detailed by joint venture contract)

Cr. 111, 112,…

4.2. Accounting at joint venture party who does not sell product:

- Joint venture party who does not sell products, based on revenue allocation table confirmed by the joint-venturers and relevant supporting documents provided by the venturer selling products, shall issue invoices for the venturer who is the seller in accordance with its share in the joint-venture, enter:

Dr. 138 - Other receivables (include VAT if output VAT is also divided, details for joint venturers).

Cr. 511- Revenue (detailed by the joint venture contract and amount received)

Cr. 3331- VAT payable (if output VAT is also divided)

- Upon allocation of revenue from sale of products, based on actual amount received, enter:

Dr. 111, 112, (amount paid by the venturer in the contract)

Cr. 138 - Other receivables (detailed by the venturer who sell products)

III. Accounting for investments in joint-venture under the form of jointly controlled assets.

A. General regulations

1. Jointly controlled assets of the venturers are assets contributed or purchased by the venturers in order to use in the joint-venture and bring benefits for the venturers as stated in the joint-venture contract.

2. Each venturer shall be eligible to receive products resulting from using jointly controlled assets and to bear part of expenses arising as stated in the contract.

3. The venturers shall have detailed accounting records under the same accounting system to reflect following contents in their financial reports:

- Capital contributed to jointly controlled assets classified by nature of assets.

- Liabilities of each venturer;

- Liabilities arising from joint venture activities shared by the venturers;

- Income from sale or use of the products which are divided from the joint venture as well as expenses arising from joint-venture activities.

- Expenses which related to joint venture capital contribution.

4. In case where expenses, income shared by the venturers, the venturers must follow regulations on accounting as the case of joint-venture under the form of jointly controlled operations.

B. Accounting for some contents relating the joint-venture under the form of jointly controlled assets.

1. In case where the venturers contribute their fixed assets to the joint-venture under the form of jointly controlled assets, such fixed assets shall still be recorded in Account 221 and only recorded changes in the fixed assets’ using purpose, using location.

2. In case where the venturers purchase or contribute other assets to the joint venture under the form of jointly controlled assets, based on actual expenses to obtain the jointly controlled assets, enter:

Dr. 211, 213 (detailed by the jointly controlled assets in the joint venture contract)


Cr. 111, 112, …

Cr. 331 – Trade payables

3. In case where the venturers themselves perform or corporate with other partners to enter into construction contract to develop jointly controlled assets, enter:

- Based on actual expenses paid by the venturers, enter:

Dr. 241- Construction in progress (detailed by the jointly controlled assets in the joint-venture contract)


Cr. 111, 112, 152, 153, 155, 156,…

Cr. 331, 341,…

- When the construction contract is completed, put into use, the contract finalization is approved, to identify value of the jointly controlled assets transferred from construction in progress and any unapproved expenses (if any), enter:

Dr. 211-Tangible fixed assets (detailed by the jointly controlled assets)

Dr. 213- Intangible fixed assets (detailed by the jointly controlled assets)

Dr. 138- Other receivables (1388)(unapproved expenses which are recoverable –if any)



- Based on the capital, funds used in investment, construction of the jointly controlled assets, the accountant shall increase operating capital, and decrease the capital, funds in accordance with current regulations.

- Recording economic transactions relating to expenses, revenue borne or entitled by the venuters of the joint-venture under the form of jointly controlled assets shall be the same as the case of joint-venture under the form of jointly controlled operations.

ACCOUNT 223

INVESTMENT IN ASSOCIATES

This account reflects the direct investments of investors into associates and the movement of these investments.


1. An investment shall be determined as investment in associates when the investor directly holds from 20% to less than 50% of equity (from 20% to less than 50% of voting rights) of the investee without any other agreement.

- In case where the rate of voting rights of investors in associates is equal to rate of capital contribution of the investor in associates:

Rate of voting rights of investor in

associates=

Total contributed capital of investor in

associates x 100%

Total equity of associates

- In case where the rate of voting rights of investors in associates is different to rate of capital contribution due to other agreements between the investors and associates, voting rights of the investors shall be determined upon the agreements between the investors and the associates.

2. Upon preparation and presentation of separate financial statements, investment of the investors in associates shall be recorded at cost. According to this accounting method, value of investments shall not be changed during investment period, except when the investors increase or dispose all or part of such investment or receive benefits other than dividends.

3. Cost of the investment is determined as follow:

- Cost of the investment in associates includes Contributed capital or actual value of investment plus (+) purchase expenses (if any), such as brokerage expense, transaction expense…

- In case where contributed capital in associates is under the form of tangible fixed assets, raw materials, goods, cost of the investment shall be recorded at value approved by the contributed parties. The difference between the carrying value of the fixed assets, raw materials, goods and their revaluated value shall be recorded and treated as follows:

+If revaluated value of raw materials, goods is higher than their carrying value, the difference shall be recorded in other income; If the revaluated value of raw materials, goods is lower than their carrying value, this difference shall be recorded in other expenses.

+ If the revaluated value of fixed assets is higher than their net book value, the difference shall be recorded in other income; If the revaluated value of fixed assets is lower than their net book value, the difference shall be recorded in other expenses.

4. Details of investment in associates shall be recorded accounting book. Basis for recording investment in associates is as follow:

- Investment in a joint-stock companies listed in stock market shall be recorded basing on actual amount paid to purchase shares including any cost directly attributable to share purchase and the official announcement of the stock trading center on ownership of the investor towards the shares purchased.

- Investment in joint-stock companies which have not listed in stock market shall be recorded basing on ownership certificate of purchased shares or money receipt note from sale of shares of investees or supporting document on the share purchase.

- Investment in other forms of companies shall be recorded basing on capital contribution agreement, profit share (loss share) agreed by the parties or supporting documents on sale, purchase of the investment.

- Dividend, profit which investors received from associates shall be recorded upon receipt of official announcement from associates on amount of dividend or profit which the investors are entitled to receive in the period on accrual basis.


ACCOUNT 223 – INVESTMENT IN ASSOCIATES

Debit side:

Increase in cost of investment

Credit side:

- Decrease in cost of investment due to receiving back investment or receiving profit other than dividend.

- Decrease in cost of investment due to sale, disposal of all or part of investment.

Debit side balance:

The closing balance of cost of investment in associates.


1. Investment in associates under the form of share purchase or capital contribution in cash, based on actual amount paid, the investor enters:


Cr. 111, 112…

2. In case where an investor has already held an investment of less than 20% of voting rights in a specific company, upon his increase in share or in capital contribution to such company to become an investor has significant effect over investee, the investor records:


Cr. 228 – Other long term investments (all investments of less than 20%)

Cr 111, 112… (Additional investment)

3. Investment in associates under the form of materials, goods, fixed assets, based on revaluation value of raw materials, goods, fixed assets agreed between the investor and the associates, enter:


Dr. 214 – Depreciation of fixed assets

Dr. 811 – Other expenses (if revaluation value of raw materials, goods, fixed assets is lower than their carrying value)

Cr. 152, 153, 156, 211, 213,…

Cr.711 –Other income (if revaluation value of raw materials, goods, fixed assets is higher than their carrying value).

4. Upon receipt of official announcement of associates on dividend, profits received, the investor enters:

Dr. 138 – Other receivables (upon receipt of announcement from associates)

Dr. 223 – Investment in associates (if dividend received in shares)


Upon actual receipt of money, enter:

Dr 111, 112, …

Cr 138 – Other receivables

5. Upon receipt of other amount other than dividend, profit, to decrease cost of investment, enter:

Dr. 111, 112, 152,…

Cr. 223 - Investment in associates.

6. Upon increase in capital contribution in associates and obtainment of control right over associates of investor, to transfer cost of investment to Account 221 “Investment in subsidiaries”, enter:

Dr. 221 - Investment into subsidiaries (If investor becomes parent company)

Cr. 223 - Investment in associates

Cr 111, 112,... (If investor increases their contributed capital to become parent company)

7. When investors dispose part of their investment in associates leading to they have no significant effects over investees, to transfer cost of their investment to other relevant accounts, enter:

+ In case of gains from disposal, transfer of the investment, enter:

Dr. 228 - Other long-term investments

Dr. 111, 112,... (Proceeds from disposal, transfer of part of the investment)

Cr. 223 - Investment to associates

Cr. 515 – Financial income (difference due to selling price of investment is higher than its carrying value)

+ In case of loss from of disposal, transfer of investment, enter:

Dr. 635 - Financial expense (Difference due to carrying value of investment is higher than its selling price)

Dr. 228 - Other long-term investments

Dr. 111, 112... (Proceeds from disposal, transfer of part of the investment)

Cr. 223 - Investment into associates.

8. Upon disposal, transfer total investment in associates, the investor shall write down their investment and record gains (or loss) from disposal, transfer of investment:

+ In the case of loss from disposal, transfer of investment, enter:

Dr. 111, 112, 131,...

Dr. 635 - Financial expense (Difference due to carrying value of investment is higher than its selling price)

Cr. 223 - Investment in associates.

+ In case of gains from disposal, transfer of investment, enter:

Dr. 111, 112, 131,...

Cr. 515 – Financial income (Difference due to selling price of investment is higher than its carrying value)

Cr 223 - Investment in associates

+ To record expenses from disposal, transfer of investment, enter:

Dr 635 - Financial expenses

Dr 133 - Deductible VAT (if any)

Cr 111, 112...

ACCOUNT 228

OTHER LONG TERM INVESTMENTS

This account reflects current balance, movement of other long term investments (other than investments in subsidiaries, capital contribution to jointly controlled entities, investments in associates), such as: bond investment, share investment, or investment in other entities holding less than 20% of equity (less than 20% of the voting rights),... , which would mature over one year’s time.


1. For lending activities, records shall be kept in details of borrowers, borrowing method, borrowing term and interest rate.

2. For bond investment activities, records shall be kept in details of bond issuers, bond term and interest.

3. For share investment activities with less than 20% of voting rights, the records shall be kept in details of par value, issuer of each type of share.

4. For capital contribution to jointly controlled entities resulting in holding less than 20% of voting rights without controlling right, contributed capital shall be reflected in Account 228 “Other long term investments” at cost.


ACCOUNT 228 - OTHER LONG TERM INVESTMENTS

Debit side:

Increase in value of other long-term investments.

Credit side:

Decrease in value of other long-term investments

Debit side balance:

Current value of other long-term investments.

Account 228 “Other long-term investments” has 3 sub-accounts:

- Account 2281 - Shares: To reflect long-term investment in shares of investor.

- Account 2282 - Bond: To reflect long-term investment in bond of investor.

- Account 2288 - Other long term investments: To reflect other long-term investments such as lending activities, capital contribution in cash or assets, …


1. When loan is granted to other enterprises which would mature over one year’s time, enter:

Dr. 228: Other long-term investments (2288)

Cr. 111, 112,...

2. When interest receivable is calculated periodically based on loan contract, enter:

Dr. 111, 112 (with payment at sight)

Dr. 138 - Other receivables (with deferred payment)

Cr. 515 – Financial income (Details of lending interests)

3. For interest receivables incurred during the period, enter:

Dr. 111, 112,... (with payment at sight)


4. Recovery of principal and interest, enter:

Dr.111, 112 ... (principal and interest)

Cr. 228 - Other long term investments (principal amount)(2288)

Cr. 515 – Financial income (interest amount).

5. Upon purchase of bonds of other enterprises which would mature over one year’s time, enter:

Dr. 228 - Other long term investments

Cr 111, 112, ….

6. In case of purchase of bond of which interest is received in advance

6.1. Upon payment for bond purchase, enter:

Dr. 228 - Other long term investments (2282)

Cr 111, 112,.. (actual payment amount)

Cr 3387 - Deferred revenue (interest received in advance)

6.2. Periodically, to calculate and transfer interest of the accounting period according to interest receivable of each period, enter:

Dr. 3387 - Deferred revenue

Cr. 515 – Financial income.

7. For purchase of bonds of which interest is received periodically.

Upon payment for bond purchase, enter:

Dr. 228 – Other long term investments (2282)

Cr.111, 112,….

To record interest income periodically, enter:

Dr. 111, 112 ( if amount is received)

Dr.138- Other receivables ( If amount is not yet received)

Cr. 515- Financial income.

8. For purchase of bonds of which interest is received in arrear:

- Upon payment for bond purchase, the record shall be the same as 7.1 above

- Periodically, to calculate bond interest and to record revenue according to interest receivable incurred in each period, enter:

Dr.138- Other receivables (1388)

Cr. 515- Financial income

- Upon mature of bond, to recover principal and interest of bond, enter:

Dr.111, 112,….

Cr. 228 – Other long term investments (2282)

Cr. 138- Other receivables ( 1388) (interest amount of previous period)

Cr. 515- Financial income (interest amount of the last payment installment).

9. To recover principal of bond upon due date, enter:

Dr. 111, 112 ,…

Cr. 228 – Other long term investments

10. For shares investment and capital contribution resulting in less than 20% of voting rights, enter:

Dr. 228 – Other long term investments ( at cost of investment + expenses directly contributable to investment activities such as brokerage expenses,..) (2281,2288).

Cr. 111, 112,331,..

11. Upon capital contribution under the form of assets to an enterprise resulting in less than 20% of voting rights without controlling rights, based on revaluation value of raw materials, goods, fixed assets, enter:

Dr.228 – Other long term investments

Dr.214 – Depreciation of FA (depreciation value)

Dr. 811- Other expenses ( Difference where revaluation value of raw materials, goods, FA is lower than their carrying value of raw materials, goods and net book value of fixed assets).

Cr.152, 153, 156, 211, 213,…

Cr.711- Other income (difference where revaluation value of raw materials, goods, FA is higher than carrying value of raw materials, goods and net book value of fixed assets)

12. Upon decision of reinvestment of dividend or profit, enter:

Dr.228 – Other long term investments (2281,2288)

Cr. 515- Financial income.

13. When investors sell part of their investment in subsidiaries, joint-ventures, associates leading to the investors have no controlling right or co-controlling right or significant effect to investee, enter:

Dr.228 – Other long term investments (2281,2282)

Cr.221- Investment in subsidiaries

Cr.222- Investment in joint ventures

Cr.223 – Investment in associates

14. Sale of shares or disposal of other long term investments:

- In case of gains from sale, disposal, enter:

Dr. 111, 112,….

Cr. 228 – Other long term investments

Cr.515- Financial income (difference due to selling price is higher than the cost).

- In case of loss from sale, disposal, enter:

Dr. 111, 112,….

Cr. 635- Financial expenses (difference due to selling price is lower than the cost).

15. When the investor increases their capital contribution to the joint-venture and becomes a venturer having controlling right over the joint-venturer, enter:

Dr. 222- Investment in joint-ventures

Cr. 111, 112….(additional capital contribution)

Cr. 228- Other long term investments ( 2281, 2288).

16. When the investor contributes additional capital to the joint-venture and becomes parent company or has significant effect over the investee, enter:

Dr. 221- Investment in subsidiaries; or


Cr. 111, 112,…. (additional capital contributed)

Cr. 228- Other long term investments (2281,2282).

ACCOUNT 229

ALLOWANCE FOR DIMINUTION IN THE VALUE OF LONG TERM INVESTMENTS

This account reflects the current balance and movement of the provisions for diminution in the value of long term investments and other long term losses. Allowance for diminution in the value of long term investments includes:

- Provision for diminution in the value of investment in securities is provision for possible impairment due to decrease of securities price currently held by the enterprise.

- Allowance for diminution in the value of long term investments or for losses from capital investment.


1. Provision for devaluation in the value of long term investments shall be made and reversed at the end of annual accounting period. In case fiscal year of the enterprise as approved by the Ministry of Finance is different from calendar year (which is from 1 January to 31 December), the provision shall be made at the last day of the fiscal year.

The enterprises which prepare interim financial statements, if there is a significant movement in provision, may increase or write back the provision at the end of the interim accounting period (quarterly accounting period).

2. Allowance for diminution in the value of long term investments shall be made in accordance with regulations on each type of investment. Provision is made at difference between net realizable value (market price) or recoverable amount of investment and its cost stated in the accounting book. If provision made this year is higher than provision recorded in the accounting book, the difference shall be recorded as operating expenses in the period. If provision made this year is lower than provision brought forward from previous year, the difference shall be deducted against operating expenses.

3. Provision for devaluation in the value of long term investments in securities shall be made at the end of fiscal year if market price of long-term investments in securities is regularly lower than their cost recorded in the accounting book. Making provisions for devaluation of investments in securities shall comply with following regulations:

- Securities are invested legally.

- Securities are freely purchased, sold in the market provided that at the time of securities counting, preparing financial statements, their market price is lower than their cost stated in accounting book.

4. Provision for each long-term investment in securities upon their devaluation at the end of fiscal year shall be made in accordance with following formation:

Provision for

diminution in value of long term

investment securities made for following

year

=

Number of

securities devaluated at the time

of preparing

annual financial

report

x

Cost of securities stated in

accounting book

-

Market price of

long term investment securities

Provision required to make for each type of long term securities must be determined and consolidated in schedule of breakdown provisions for investment securities compared to closing balance of previous year carried forward in order to determine provision amount to be added or reversed to financial expenses.

5. The capital which Corporation invests into member companies or Corporation, company invest in one member limited companies, two or more members limited companies, joint-stock companies, partnership, joint-venture companies and other long term investments must be made provision in case the enterprises which received investment capital suffer loss and must call for additional investment capital (except for planned loss as determined in business plan before investing), the provision for each investment shall be made as follows:

Provision for

devaluation in value of long term

investments

=Total actual contribution

of parties -

Actual equity

x

Investment capital

Total actual contribution

of parties

Maximum provision made for each long term investment is equal to capital invested.

At the time of cutting off following year’s accounting book, if the investee gains profit or reduces its loss, the enterprise has to reverse a part of or all provision made and write down financial expenses.

6. The provision for devaluation in financial investment shall be used to cover actual loss of investments caused by bankrupt of investees, natural disasters…resulting in the investment can not be recoverable or recoverable at amount lower than its cost. This provision shall not be used to cover loss due to disposal of investments.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 229

– ALLOWANCE FOR DIMINUTION IN THE VALUE OF LONG TERM INVESTMENTS

Debit side:

- Reverse difference due to the allowance for diminution of long term investment securities made this year is lower than provision made last year which is not fully used.

- Cover loss of long-term investment upon approval of decision to use the provisions made to cover the loss.

Credit side:

Provision for devaluation of long term investment securities made (opening balance and the addition)


Closing balance of provision for devaluation of long term investment securities.


1. At the end of fiscal year, based on diminution of outstanding long term investments to determine the provision made for the first time, enter:


Cr. 229 – Allowance for diminution in the value of long term investments

2. At the end of the following fiscal year:

- If the provisions for diminution in the value of long term investments for the following year is higher than provisions for diminution in the value of long term investments made in previous year which has not been fully used, the provision must be made for the difference, enter:

Dr.635 – Financial expenses

Cr. 229 – Allowance for diminution in the value of long term investments

- If the provisions for diminution in the value of long term investments for the following year is smaller than the provisions for diminution in the value of long term investments made in previous year which has not been fully used, the difference must be reversed, enter:

Dr.229 – Allowance for diminution in the value of long term investments

Cr. 635 – Financial expenses.

3. When loss incurs (the investees go bankrupt, suffers natural disaster, fire…), resulting in the investments can not be recoverable or recoverable at an mount lower than its cost, the enterprise determines to use the provision for diminution in the value of long term investments to cover the loss of long term investment, enter:

Dr. 111, 112… (if any)

Dr. 229 – Allowance for diminution in the value of long term investments (the amount made)

Dr. 635 – Financial expense (the amount has not been provided)

Cr. 222, 223, 228 (cost of the investment)

ACCOUNT 241

CONSTRUCTION IN PROGRESS

This account reflects expenses in implementing construction projects (including payment for additional fixed assets, construction or repair, renovation, expansion or re-equipment of construction works) and finalization of construction projects in the enterprises purchasing fixed assets, investing in construction activities and major repairs of fixed assets.

Construction investment and major repairs of fixed assets of an enterprise can be carried out either on contractual basis or self-constructing basis. For an enterprise realizing the works on a self-constructing basis, this account shall record construction costs incurred in the construction and repairing process.


1. Expenses in implementing construction projects are the total expenses required to newly construct or repair, renovate, extend or re-equip the construction works. Construction expenses are determined based on the work volume, cost norms, economic and technical targets and the State’s policy; construction expenses must also comply with objective factors of market in specific periods and subject to regulations on construction management. The construction expenses include:

- Construction and installation expenses;

- Material expenses;

- Other expenses

Account 241 is opened for each construction works, construction item and accounting for each construction item must be recorded in detail in accordance with construction expenses and shall be kept track of since the commencement of construction till the construction is completed, handed over and put into use.

2. In construction investment activities, construction and installation expenses, material expenses are usually charged directly to each asset item; project management expense and other expenses are overhead distributed. The investor must calculate, allocate the project management expenses and other expenses for each asset item as follows:

- The project management expenses and other expenses directly related to a specific asset shall be allocated directly to such asset.

- The project management expenses and other expenses directly related to various asset items shall be allocated appropriately.

3. In case the project is completed and put into use but the project has not been finalized, the enterprise shall increase the cost of fixed assets according to estimated expenses (the estimated expenses must based on actual cost paid to acquire the fixed assets) for depreciation purpose; after that, the cost of the fixed assets shall be adjusted according to the approve expenses.

4 Actual expenses arising from major repairs of fixed assets can be charged directly to operating expense in the period. If expenses arising from major repairs of fixed assets are large and related to various operating periods, such expenses shall be amortized into operating expenses.

Account 241 – Construction in progress, there are 3 sub-accounts:

- Account 2411 - Fixed assets prior to commissioning: reflects expenses incurred to purchase fixed assets and the finalization of these expenses in case the fixed assets must be installed, trial run prior putting into use (for both new fixed assets and used fixed assets). In case the fixed assets acquired needs to be repaired, re-equipped, repairing, re-equipping expenses shall also be recorded in this account.

- Account 2412 – Construction works: reflects construction expenses and the finalization of these expenses. This account is opened for each construction works, construction item (by each asset item formed from construction investment) and construction expenses for each asset item must be kept track of.

- Account 2413 – Major repairs in progress: reflects expenses for major repairs of fixed assets and the finalization of these expenses. In case, expenses incurred due to frequent repair of fixed assets, such expenses shall not be recorded in this account but directly charged to operating expenses in the period.


ACCOUNT 241 – CONSTRUCTION IN PROGRESS

Debit side:

- Expenses incurred for construction investment, purchase, major repairs of fixed assets (tangible and intangible fixed assets)

- Expenses incurred for renovation, upgrade of fixed assets

- Expenses incurred for property investment (in case the construction investment is needed)

- Investment expenses for construction of investment property

- Expenses incurred after initial recognition of fixed assets, investment property.

Credit side:

- Value of fixed assets formed from completed construction, acquisition activities and put into use

- Value of constructions eliminated and other expenses eliminated upon finalization of expense.

- Value of major repaired constructions which is completed upon finalization of expense.

- Value of investment property formed from completed constructions.

- Transfer of expenses incurred after initial recognition of fixed assets, investment property to related accounts.

Debit side balance:

- Expenses of constructions and major repairs in progress;

- Value of constructions and major repaired fixed assets which are completed but not yet handed over and put into use or the finalization is not yet approved;

- Value of investment property under construction.


A- Accounting for construction expenses on contractual basis

I- Accounting for construction in progress

1- Upon receipt of constructions, major repairs of fixed assets transferred from contractors to put into use for manufacturing and trading goods and services which are subject to VAT under deductible method, based on bidding contract, hand-over minutes and invoices, enter:

Dr.241 – Construction in progress (2412, 2413)


Cr.331 – Accounts payable - trade

2- Upon purchase of construction materials, if fixed assets formed are used in manufacturing and trading goods and services which are subjected to VAT under deductible method, based on invoices, receipt notes, enter:

Dr.152 – Raw materials (purchase price without VAT)


Cr.331 – Accounts payable - trade (total payment)

In case, equipments are directly transferred to contractors without installation, enter:

Dr.241 – Construction in progress



Cr.151 – Goods in transit

3- Upon payment to the contractors, suppliers of materials, goods and services relating to construction, enter:

Dr.331 – Accounts payable - trade

Cr.111, 112,…

4- Upon delivery of construction equipments to the contractors:

a) For equipments which are not required installation, enter:


Cr. 152 – Raw material (equipments in stock)

b/ For equipments which are required installation, enter:

- Upon delivery of equipments to contractors, enter:

Dr. 152 - Raw material (equipments to be installed)

Cr. 152 - Raw Material (equipments in stock)

- Upon checking, testing, accepting the installation and making payment to party B, value of installed equipments shall be charged to construction expenses, enter:

Dr. 241 - Construction in progress (2412)

Cr.152 - Raw material (equipments to be installed)

5. When other expenses incur, enter:

Dr. 241 - Construction in progress (2412)

Dr. 133 - Deductible VAT (1332) (if any)

Cr. 111, 112, 331, 341, …

6. If foreign currencies are used in construction activities, based on period when the construction is performed (pre-operating period or operating period), to enter:

6.1 If construction expenses incur in pre- operating period:

- Arising expenses dominated in foreign currencies, enter:

Dr. 241 - Construction in progress (at exchange rate ruling at transaction date)

Cr. 111,112 (at exchange rate in accounting book)

Cr. 331 - Accounts payable - trade (at exchange rate ruling at transaction date)

Cr. 152, 153,…

Cr. 413 - Foreign exchange differences (4132) (Difference where exchange rate in accounting book is lower than exchange rate on transaction date – foreign exchange gains)

In case, difference due to exchange rate in accounting book is higher than exchange rate on transaction date, we debit account 413 – Foreign exchange differences (foreign exchange loss)

- When the construction is completed , handed over and put into use, expense finalization has been approved, accountant shall transfer foreign exchange differences arising in construction period according to outstanding balance of account 413 (4132) to financial expenses or financial income or transfer to Account 242 “Long-term prepayment” (in case of foreign exchange loss) or Account 3387 “Deferred revenue” (in case of foreign exchange gains) to be amortized in maximum 5 years (detail of accounting entries refers to Account 413 “Foreign exchange differences”).

6.2 If expenses incur in operating period:

- Construction expenses incur in foreign currencies, enter:

Dr. 241 - Construction in progress (at exchange rate ruling at transaction date)

Cr. 111,112 (at exchange rate in accounting book)

Cr. 331 - Accounts payable - trade (at exchange rate ruling at transaction date)

Cr. 515 - Financial income (Difference due to exchange rate in accounting book is lower than exchange rate ruling at transaction date – foreign exchange gains)

In case, exchange rate in accounting book is higher than exchange rate at transaction date, we debit account 635 “Financial expenses” (foreign exchange loss)

II. Accounting for construction works which are completed, handed over and put into use:

1. When the construction is complete, checked and handed over and put into use: If the expense is finalized immediately, based on the value of asset formed from construction to record the entry. If the expense has not finalized, value of fixed assets formed from construction shall be increased according to estimated cost (estimated cost is the actual cost to purchase the assets and shall be calculated based on Account 241). In both cases, we record as follows:

Dr. 211 - Tangible fixed assets

Dr. 213 - Intangible fixed assets

Dr. 152, 153, …

Cr. 241 - Construction in progress (finalized cost or estimated cost)

2. Upon finalization of construction expenses, the estimated cost shall be adjusted according to the finalized costs.

- If finalized cost is higher than the estimated cost, enter:

Dr. 211 - Tangible fixed asset

Dr. 213 - Intangible fixed asset

Dr. 152, 153, …

Dr. 138 - Other receivables (unapproved amount receivable)

Cr. 241- Construction in progress (difference due to finalized cost is higher than estimated cost)

- If finalized cost is lower than the estimated cost, the above entry shall be reversed.

- If fixed assets are invested from capital expenditure funds or investment and development funds, simultaneously enter:

Dr. 441 – Capital expenditure funds

Dr. 414 – Investment and development funds

Cr. 241 – Construction in progress (losses authorized to be eliminated – if any)

Cr. 411 – Operating capital (Value of assets formed from construction)

(If construction investment using operating capital, there is no need to enter this simultaneous entry)

3. In case that the construction is completed, but it is not delivered to put into use or pending for preparation or finalization of expenses, Account 241 – Construction in progress should be opened to reflect this situation.

III. Accounting for construction of investment properties

1- In case investment properties acquired need additional investments before putting into use, enter:



Cr. 111, 112, 331…

2. Upon arising construction expenses for investment property, enter:



Cr. 111, 112, 152, 153, 142, 242, 141, 331,…

3. Upon completion and delivery of construction works, enter:

Dr. 217 – Investment property (if meeting conditions to be investment property)

Dr. 156 – Merchandise Inventory (1567 – Properties) (If properties is held for sale)


4. Expenditure incurred for upgrading, improving investment property, which can be clearly demonstrated that the expenditure have resulted in an increase in the future economic benefits expected to be obtained from the use of investment property beyond their originally assessed standard of performance or included in expenses incurred to put the investment property into use, the expenditure are capitalized as an additional cost of investment property:

- To combine all actual expenses for upgrading, improving the investment property, enter:


Dr. 133 – Deductible VAT (1332 – if any)

Cr. 111, 112, 152, 153, 331,…

- Upon completion of renovation, upgrade and delivery of investment property, the expenditure are capitalized as an additional cost of investment property, enter:


Cr. 241 – Construction in progress .

B. Accounting for construction expenses by self-constructing method

1 – In case accounting system for construction expenses is the same with accounting system of enterprise.

1.1 To reflect actual construction expenses incurred:

- In case the construction is completed for manufacturing and trading goods and services which are subject to VAT under deductible method, upon expenses incurred, enter:

Dr. 241 – Construction in progress (purchase price excludes VAT)


Cr. 111, 112, …(Total payment price)

- In case the construction is completed for manufacturing and trading goods and services which are subject to VAT under direct method or not subject to VAT, upon expenses incurred, enter:

Dr. 241 – Construction in progress (Total payment price)

Cr.111, 112, 152… (Total payment price)

1.2 – When construction is completed and the capital expenditure funds are finalized, the entries shall be made in accordance with guidance in Section II and Section III.

1.3 – Upon finalization of the capital expenditure funds, based on capital expenditure funds and investment purpose to record:

a- In case that fixed assets formed for manufacturing and trading purpose uses capital expenditure funds (budgeted) or investment and development fund, upon approval of capital expenditure fund by the investor, enter:

Dr. 441 – Capital expenditure funds

Dr. 414 - Investment and development fund


b- In case that fixed assets formed from welfare funds are used for welfare purpose, upon approval of capital expenditure fund by the investor, the welfare funds used for fixed asset investments shall be increased:

Dr. 431 - Welfare and reward funds (4312 – Welfare funds)

Cr. 431 - Welfare and reward funds (4313 - Welfare funds used for fixed asset investments)

C – Accounting for major repairs of fixed assets

Major repairs of fixed assets can be carried out by contracting or by self-doing method.

1- Self-doing method:

1.1- When expenses incurred for major repairs are debited in Account 241 “Construction in progress” (2413) and detailed by each construction works or each major repairs, based on supporting documents, enter:

- If major repaired fixed assets are used for manufacturing, trading goods and services which are subject to VAT under deductible method, enter:

Dr. 241 - Construction in progress (2413) (purchase price excludes VAT)

Dr. 133 - Deductible VAT (1332)

Cr. 111, 112, 152, 214… (total payment price)

- If major repaired fixed assets are used for manufacturing, trading goods and services which are subject to VAT under direct method or not subject to VAT, enter:

Dr. 241- Construction in progress (2413) (total payment price)

Cr. 111,112, 152, 334… (total payment price)

1.2-Upon completion of major repairs, actual expenditure for each major repairs must be calculated for finalization as follows:

- In case of major repairs of fixed asset with small value, all expenses shall be transferred to operating expenses in the period, enter:

Dr. 623- Costs of construction machinery

Dr. 627- Production overheads

Dr. 641- Selling expenses

Dr. 642- General and administrative expense

Cr. 241- Construction in progress (2413)

- In case of major repairs of fixed asset with high value relating to various operating periods; upon completion of major repairs, all the expenses shall be transferred to prepaid expenses (amortized) or accrued expenses (in case the expenses had been accrued), enter:

Dr. 142- Short term prepayments

Dr. 242- Long term prepayments

Dr. 335- Accrued expenses

Cr.241- Construction in progress (2413)

- In case major repairs or renovation or upgrade of fixed assets which meets conditions to be capitalized as an additional cost of fixed assets, enter:

Dr. 211- Tangible fixed assets

Cr.241- Construction in progress (2413).

2- Contracting method:

- Upon receipt of major repaired fixed assets handed over by the contractor, enter:

Dr. 241- Construction in progress (2413)

Cr. 331- Accounts payable - trade

- Entries to transfer the expenses of major repairs are recorded in the same way as self-doing method.

ACCOUNT 242

LONG TERM PREPAYMENT

This account reflects actual expenses incurred relating to operating results of various accounting periods, and amortization of these expenses into operating expenses of subsequent accounting periods.


1. Long term prepayment consists of:

- Prepaid expenses for operating lease of fixed assets (Land use right, workshops, warehouses, offices, shops and other fixed assets) used for manufacturing and trading in many fiscal years. In case, prepaid expenses incurred for land rental in a long term with land use right certificate granted, the prepaid expenses for land rental with definite term shall not be recorded in Account 242 but Account 213.

- Prepaid expenses incurred for infrastructure rental in a long term used in business operations in various accounting periods without use right certificate granted.

- Prepaid expenses for operating activities in many fiscal years.

- Expenses for business formation, training, advertising incurred in pre-operating period, which are amortized in 3 years as maximum.

- R&D expenses with high value, which are entitled to be amortized in many years.

- Expenses incurred in implementation period, which are unqualified to be recorded as intangible fixed assets.

- Training expenses for managers and technical staff.

- Expenses incurred for relocation or restructure of enterprise with high value, which are amortized in many years – in case provision of restructure has not been made.

- Insurance expenses (property insurance, fire insurance, civil liability insurance, other insurance,…) and other fees paid by the business to be used for many fiscal years.

- Tools and supplies which are one-time used with high value and contributed to operating performance for more than one fiscal year are amortized into expense items for many years.

- Prepaid expenses for loans such as prepaid interest expenses, or prepaid interest of bonds upon issuance.

- Interest incurred from purchase on credit, hire-purchase.

- Expenses for issuance of bonds with high value which are amortized in many years.

- Expenses for major repairs of fixed assets with high value which are not accrued, therefore such expenses must be amortized in many years.

- Transferred amount of foreign exchange differences and foreign exchange difference due to revaluation of monetary items dominated in foreign currencies (in case of foreign exchange loss) of construction activities (pre-operating period) upon completion of construction.

- Difference where selling price is lower than net book value of fixed assets sold and re-leased being financial lease;

- Difference due to selling price is smaller than net book value of fixed assets sold and re-leased being operating lease;

- Expenses relating to investment property after initial recognition which are unqualified to be capitalized as an additional cost of investment property but the investment property is at high value; the expenses are required to be amortized.

- Business combination which does not result in no parent – subsidiaries relationship but goodwill or equitization of the state-owned enterprises resulting in goodwill.

- Other expenses.

2. Account 242 is used to record expenses relating to operating activities lasting for more than one fiscal year.

3. Calculation and amortization of long term prepayment into operating expenses of each accounting period shall be subject to nature and amount of each type of expenses.

4. Long term prepayment incurred, charged to expenses in each accounting period and the remaining prepayment which have not been amortized into expenses shall be followed up.

5. Foreign exchange difference (foreign exchange loss) of construction activities incurred in pre-operating period which have not been amortized into expenses.


ACCOUNT 242 – LONG -TERM PREPAYMENT

Debit side:

- Long-term prepayment incurred during the accounting period;

- Amount transferred from foreign exchange differences and foreign exchange differences due to revaluation of monetary items dominated in foreign currencies (in case of foreign exchange loss) of construction activities (pre-operating period) upon completion of construction to amortized into financial expenses.

Credit side:

- Long- term prepayment which were charged to operating expenses in the accounting period;

- Amortized amount of foreign exchange differences and foreign exchange differences due to revaluation of monetary items dominated in foreign currencies (in case of foreign exchange loss) of construction activities (pre-operating period), upon completion of construction into financial expenses.

Debit side balance:

- Long- term prepayment which has not been charged to operating expenses in the accounting period;

- Foreign exchange difference and foreign exchange difference due to revaluation of monetary items dominated in foreign currencies (in case of foreign exchange loss) of construction activities (pre-operating period), upon completion of construction which are outstanding at the year end.


1. When incurring long term prepayment in large amount which requires to be amortized to operating expenses of various fiscal years such as: business formation cost, training cost, advertising cost incurred in pre-operating period, R&D expenses, re-location expenses….enter:

Dr. 242 – Long term prepayment

Dr.133 – Deductible VAT (if any)

Cr 111, 112, 152, 331, 334, 338,…

Periodically, upon allocation of long term prepayment to operating expenses, enter:

Dr. 623, 627, 635, 641, 642

Cr. 242 – Long term prepayment

2. Upon pre-payment of fixed asset rental fees, infrastructure rental fees under operating lease and for operating activities in many years, enter:

- If fixed assets leased is used in manufacturing and trading goods and services which are subject to VAT under deductible method , enter:

Dr. 242- Long term prepayment


Cr. 111, 112,…

- If fixed assets leased is used in manufacturing and trading goods and services which are subject to VAT under direct method or which are not subject to VAT, enter:

Dr. 242 – Long term prepayment

Cr. 111, 112…

3. Tools and supplies which are one-time used with high value and contributed to operating performance for more than one fiscal year are amortized into expenses for many years:

- Upon issuance of tools and equipments, based on issuance notes, enter:

Dr.242 – Long term prepayment

Cr.153 – Tools and equipments

- Periodically, value of tools and equipment shall be amortized in an appropriate way. Basis to determine expenses to be amortized each year can be using time or volume of products, services attributable by such tools and equipments in each accounting period. Upon amortization, enter:

Dr.623, 637, 641, 642…

Cr.242 – Long term prepayment

4. In case of purchase on credit or hire-purchase of fixed assets and investment property:

- Upon purchase of tangible and intangible fixed asset or investment property and these assets are used for operating activities or held for sale or for operating lease, enter:

Dr.211, 213, 217 (historical cost- spot price)


Dr. 242 – Long term prepayment (deferred interest is difference between total amount payable less (-) spot price (-) VAT (if any)).

Cr. 331 – Trade payables (total payment)

- Periodically, upon payment for suppliers, enter:


Cr. 111, 112 (amount payable periodically including principal and interest)

- Periodically, deferred interest payable is charged to expenses, enter:

Dr.635 – Financial expenses

Cr. 242 – Long term prepayment

5. In case expenses for major repairs of fixed assets are high and not accrued, therefore such expenses must be amortized in many years upon completion of major repairs:

5.1 To transfer major repairs expenses into long term prepayment, enter:

Dr. 242 - Long-term prepayment

Cr. 241- Construction in progress (2143).

5.2 Periodically, to calculate and amortize expenses for major repairs of fixed assets into operating expenses in the fiscal year, enter:

Dr. 623, 627, 641, 642…

Cr.242 - Long-term prepayment.

6. In case of initial direct expenses relating operating lease of fixed assets, if such expenses are large and required to be amortized for many years, enter:

Dr.242 - Long-term prepayment

Cr.111, 112, 331…

Periodically, to amortize initial direct expenses relating operating lease of fixed assets which is suitable with recognition of income from operating lease, enter:

Dr.627- Production overheads

Cr.242 - Long-term prepayment

7. Upon transfer of foreign exchange difference and foreign exchange difference due to revaluation of monetary items dominated in foreign currencies (foreign exchange loss) of construction activities (pre-operating period) when the construction is completed, fixed assets are handed over and put into use to amortize to financial expenses, enter:

Dr. 242 - Long-term prepayment

Cr. 413 – Foreign exchange difference (4132)

8. Periodically, upon amortization of foreign exchange losses and revaluation of monetary items dominated in foreign currencies of construction activities (pre-operating period when the construction is completed) to financial expenses, enter:

Dr.635- Financial expense (foreign exchange loss)

Cr.242 - Long-term prepayment

9. In case, interest on loans is prepaid for a long term, enter:

Dr.242 - Long-term prepayment

Cr 111,112,…

- Periodically, upon amortization of interest payable in each period into financial expenses or capitalization to value of works in progress, enter:

Dr .635 -Financial expenses (if interest expense is recorded in operating expenses in the period)

Dr.241- Construction in progress (if interest expense is capitalized into value of construction in progress)

Dr. 627 – Production overheads (if interest payable is capitalized to the cost of works in progress)

Cr. 242 - Long-term prepayment.

10. Upon issuance of bonds at par value to raise funds, if interest on bonds is paid by the enterprise upon issuance, the interest expense shall be recorded in debit side of Account 242 (details of prepaid interest), then shall be amortized into expenses:

- At the time of bond issuance, enter:

Dr.111,112 (total actual funds received)

Dr.242 - Long term prepayment (details of prepaid interest)

Cr. 3431- Par value of bonds

- Periodically, to amortize prepaid interest into borrowing expenses of each period, enter:

Dr.635 - Financial expenses (if interest expense is charged to financial expenses in the period)

Dr.241- Construction in progress (if interest expense is capitalized into value of CIP)

Dr.627 – Production overheads (if interest expense is capitalized into costs of WIP)

Cr.242 - Long-term prepayment (details of prepaid interest)

11. Expenses incurred for bond issuance:

- If expenses for bond issuance are small, these expenses shall be directly charged to expenses during the period, enter:

Dr. 635 - Financial expense

Cr. 111,112,…

- If expenses for bond issuance are high and required to be amortized over years, enter:

Dr. 242 - Long term prepayment (details of expenses incurred for bond issuance)

Cr. 111,112,…

- Periodically, to amortize expenses for bond issuance, enter:

Dr .635, 627, 241 (expenses for bond issuance amortized in the period)

Cr. 242 - Long-term prepayment (details in expenses for bond issuance)

12. Accounting for expenses relating to investment property after initial recognition

- Upon arising expenses relating to investment property after initial recognition, if such expenses are unqualified to be capitalized as an additional cost of investment property and the expenses are large which are required to be amortized, enter:

Dr. 632 – Cost of goods sold (details of investment property expenses)

Dr.242 - Long-term prepayment (if expenses are large)

Cr.111,112,152,153,334…

- Periodically, to amortize expenses relating to investment property after initial recognition to operating expenses during the period, enter:

Dr. 632 – (expenses relating to investment property after initial recognition amortized during the period).

Cr. 242 - Long-term prepayment

13. In case of business combination which does not lead to parent – subsidiary relationship (assets acquisition only), at acquisition time, if arising goodwill:

+ Purchaser makes payments in cash or cash equivalents, enter:

Dr .131,138,152,155,156,211,213,217…. (At fair value of assets purchased)

Dr. 242 -Long-term prepayment (details of goodwill)

Cr. 331, 311, 341, 342… (At fair value of liabilities and contingent liabilities)

Cr. 111, 112, 121 (cash or cash equivalents paid by purchaser)

+ Purchaser issues shares to make payments, enter:

Dr. 131,138,152,155,156,211,213,217…. (At fair value of assets purchased)

Dr. 242 - Long-term prepayment (details in goodwill)

Dr. 4112 - Share premium (Difference where fair value is smaller than par value of shares – if issuance cost at fair value is smaller than its par value)

Cr. 4111 – Contributed capital (at par value)

Cr. 331, 311, 341, 342… (at fair value of liabilities and contingent liabilities)

Cr. 4112 - Share premium (Difference where fair value is higher than par value of shares – if issuance cost at fair value is higher than its par value)

ACCOUNT 243

DEFERRED TAX ASSETS

This account reflects outstanding balance and movement of deferred tax assets.

DEFERRED TAX ASSETS shall be determined as follows:

Deferred tax assets

=Deductible temporary differences

+

Amounts deductible

of tax losses carried

forwards and

unused tax

incentive

x

Tax at CIT rate (%)


1. Enterprise shall recognize deferred tax asset for deductible temporary differences, mounts deductible of tax losses and unused tax incentive carried forwards when the enterprise estimates that future taxable profits will be available against which the deductible temporary differences, amounts deductible of tax losses and unused tax incentive can be utilized

2. At year end, the enterprise must prepare “List of deductible temporary differences”, “List of unused deductible temporary differences ”, based on amounts deductible of tax losses and unused tax incentive to prepare “ list of deferred tax assets ” to determine deferred tax assets recognized or reversed during the year.

3. Recording deferred tax assets during the year is performed by netting off deferred tax assets incurred during the year against deferred tax assets recognized in previous years but being reversed this year on basis:

If deferred tax assets incurred during the year are higher than deferred tax assets reversed during the year, the difference shall be recorded as deferred tax assets and deferred tax liabilities shall be decreased.

If deferred tax assets incurred during the year are smaller than deferred tax assets reversed during the year, the difference shall be recorded as deferred tax liabilities and deferred tax assets shall be increased.

4. Deferred tax assets shall be reverted when deductible temporary differences have no effects on taxable profits (when assets are collected or a part or all liabilities are settled).

5. At the year end, the enterprise must revaluate deferred tax assets unrecognized in previous years when the enterprise estimates that future taxable profits will be available for additional recognition in current year.

6. Some major cases resulting in deferred tax assets:

- Deferred tax assets arise from deductible temporary differences as depreciation of assets for accounting purpose is faster than depreciation of assets for CIT purpose.

- Deferred tax assets arises from deductible temporary differences due to the fact that an expense is recognized in current year but deducted against taxable income in following year. For example, accrued expenses on major repairs of fixed assets are recognized in current year but deducted against taxable income only when these expenses actually incurred in following years.

- Deferred tax assets calculated on amounts deductible of tax loss and unused tax incentive carried forwards.


ACCOUNT 243 - DEFERRED TAX ASSETS

Debit side:

Increase of deferred tax assets.

Credit side:

Decrease of deferred tax assets.

Debit side balance:

Outstanding balance of deferred tax assets.


At the year end, based on “list of deferred tax assets ”, accountant shall record or revert deferred tax assets arising from transactions recorded in deferred tax liabilities:

1. If deferred tax assets incurred during the year are higher than deferred tax assets reversed during the year, deferred tax assets shall be increased by difference between deferred tax assets incurred and deferred tax assets reversed, enter:

Dr.243- Deferred tax assets

Cr.8212- Corporate income tax expenses – deferred

2. If deferred tax assets incurred during the year are smaller than deferred tax assets reversed during the year, deferred tax assets shall be decreased by difference between deferred tax assets incurred and deferred tax assets reversed, enter:

Dr.8212 - Corporate income tax expenses – deferred

Cr.243- Deferred tax assets.

ACCOUNT 244

LONG TERM DEPOSITS

This account reflects cash or assets which are long term deposited by enterprise at other enterprises, economic organizations with term of over one year or over one normal business cycle.

Money, assets which are long term deposited should be monitored closely and timely collected upon expiry of deposit term.


ACCOUNT 244 - LONG TERM DEPOSIT

Debit side:

Cash amount or value of assets which are long term deposited.

Credit side:

- Amount deducted against long term deposit amounts;

- Cash amount or value of assets decreased due to withdrawal of deposit amounts.

Debit side balance:

Outstanding balance of cash or assets which are long term deposited.


1. Upon transfer of cash, gold, silver, precious metal, germ stone for long term deposit, enter:

Dr.244- Long term deposit (detailed by each account)

Cr.111 - Cash on hand (1111, 1112, 1113)

Cr.112 - Cash in bank (1121, 1122, 1123)

2. Upon collection of cash or assets deposited, enter:

Dr. 111- Cash on hand (1111, 1112, 1113)

Dr. 112- Cash in bank (1121, 1122, 1123)

Cr. 244 - Long term deposit

3. In case, the enterprise suffers penalty, deposit amounts are deducted, enter:

Dr.811- Other expenses

Cr. 244 - Long term deposit.

ACCOUNT CATEGORIES 3

LIABILITIES

This type of account reflects liabilities incurred in operating process which are payable to creditors including borrowings, trade payable, amount payable to the State, employees and other liabilities.

Liabilities of enterprise includes: short term liabilities and long term liabilities.

1. Short term liabilities: Amounts payable by the enterprise within one year or within one normal business cycle.

Short term liabilities include:

- Short term borrowings

- Current portion of long term liabilities

- Trade payable, amounts payable to sellers, suppliers, contractors;

- Taxes payables to the State;

- Salary, bonus, allowance payable to employees

- Accrued expenses;

- Short term deposits received;

- Other short term liabilities.

2. Long term liabilities: liabilities payable over one year.

Long term liabilities include:

- Long term borrowings for development and investment

- Long term loans payable

- Bond issued;

- Long term deposit received

- Deferred tax liabilities;

- Provision for severance allowance;

- Provision payable.

ACCOUNTING FOR THIS TYPE OF ACCOUNT SHALL COMPLY WITH FOLLOWING REGULATIONS:

1. Liabilities must be followed up by amounts payable, amounts paid to each creditor.

2. Liabilities of enterprise must be classified into short term liabilities and long term liabilities based on settlement term of each liabilities.

3. Liabilities payable in gold, silver, precious metal, germ stone must be recorded by each creditors at amount, value as regulated.

4. At the end of accounting period, the balance of liabilities in foreign currencies must be revaluated according to regulated exchange rate.

5. Creditors with whom the enterprise has frequent transactions or large outstanding liabilities, accountants have to check and reconcile liabilities for each customer and periodically submit written confirmation to the creditors.

6. Liabilities accounts mainly have credit side balance, but subject to relationship with each creditor, Account 331, 333, 334, 338 may have debit side balance reflecting amount paid is higher than amount payable. At period end, upon preparation of financial statements, it’s possible to record balances of these accounts into “Assets” and “Resources” items in the balance sheet.

This type of accounts includes 16 accounts classified into 4 groups:

Group 31- Short term liabilities, there are 2 accounts:

- Account 311- Short term borrowings;

- Account 315- Current portion of long term liabilities.

Group 33- Amounts payable, there are 7 accounts:

- 331- Trade payable;

- 333- Taxes payable to the State Budget

- 334- Payables to employees;

- 335- Accrued expenses;

- 336- Inter- company payable;

- 337- Excess of progress billings over contract work-in-progress

- 338- Other payables.

Group 34- Long term liabilities, there are five accounts:

- 341- Long term borrowings;

- 342- Long term liabilities;

- 343- Bonds issued;

- 344- Long term deposits received;

- 347- Deferred tax liabilities.

Group 35- Provision, there are 2 accounts:

- 351- Provision for severance allowance;

- 352- Provisions payable.

ACCOUNT 311

SHORT-TERM BORROWINGS

This account reflects the enterprise’s short-term borrowings and settlement of these borrowings, including borrowings from bank, from individuals inside and outside the enterprise.

Short-term borrowings are borrowings with due date within one normal business cycle or one fiscal year.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING SHORT-TERM BORROWINGS

1. Amounts borrowed, interest, amount paid (principal and interest), outstanding amount payable for each creditor should be followed up.

2. If short term borrowings are in foreign currencies or settlement of short term borrowings in foreign currencies, original currencies must be followed foreign currencies shall be translated into VND at actual exchange rates or at average interbank rate announced by the State Bank of Vietnam at the time of transaction or at the exchange rate recorded in accounting book (Debit side of Account 311 is translated into VND at the exchange rate recorded in accounting book, credit side of Account 311 is translated into VND at the actual exchange rate or at average interbank rate). Foreign exchange differences at the time of borrowing and the time of settlement arising during the period and foreign exchange differences due to revaluation of borrowings in foreign currencies at the year end (operating period) of monetary items dominated in foreign currencies are directly recorded to financial expenses or financial income during the year.

STRUCTURE AND REFLECTED CONTENT OF

ACCOUNT 311 – SHORT-TERM BORROWINGS

Debit side:

- Short-term borrowings paid

- Decrease in foreign exchange difference (due to revaluation of borrowings in foreign currencies)

Credit side:

- Short-term borrowings;

- Increase in foreign exchange difference (due to revaluation of borrowings in foreign currencies)


Outstanding balance of short-term borrowings


1. Borrowings to purchase materials, goods:

a- If goods and materials purchased are used in manufacturing, trading goods, services, products which are subject to VAT under deduction method, enter:

Dr.152 – Raw materials (excluding VAT)

Dr. 153- Tools and supplies (excluding VAT)

Dr.156- Merchandise inventory (excluding VAT)

Dr.133- Deductible VAT (1331)

Cr. 311- Short-term borrowings (Total payment)

b- If goods and materials purchased are used in manufacturing, trading goods, services, products which are not subject to VAT or subject to VAT under direct method, cost of materials and goods purchased shall include VAT (total payment), enter:

Dr.152- Raw materials (total payment)

Dr. 153- Tools and supplies (total payment)

Dr. 156- Merchandise inventory (total payment )

Cr. 311- Short-term borrowings (total payment)

2. If the purchase contracts are paid in letter credit (LC), the enterprise borrows money from the bank to open LC, enter:

Dr.144- Short term deposits

Cr.311 – Short-term borrowings

3. Upon borrowing money to make payment to suppliers, settle long-term borrowings and long-term liabilities, enter:

Dr.331- Accounts payable - trade

Dr. 315- Current portion of long-term liabilities

Dr. 341- Long term borrowings

Dr. 342- Long term liabilities

Cr. 311 – Short-term borrowings.

4. In case of borrowings in foreign currencies to make payment to suppliers, settle long term borrowings, long term liabilities, foreign currencies must be translated into VND at actual exchange rates or at average interbank rate at transaction date:

a- If actual exchange rates or average interbank rate is lower than the exchange rate recorded in accounting book, enter:

Dr.331- Accounts payable - trade (at the rate in accounting book)

Dr. 315- Current portion of long term liabilities (at the rate in accounting book)

Dr.341- Long term borrowings (at the rate in accounting book)

Dr. 342- Long term liabilities (at the rate in accounting book)

Cr.311 – Short term borrowings (at actual exchange rates or at average interbank rate)

Cr.515- Financial income (Difference where actual exchange rates or average interbank rate is lower than the rate in accounting book)

b- If actual exchange rates or average interbank rate is higher than the exchange rate recorded in accounting book, enter:

Dr. 331- Accounts payable - trade (at the rate in accounting book)

Dr. 315- Current portion of long term liabilities (at the rate in accounting book)

Dr. 341- Long term borrowings (at the rate in accounting book)

Dr. 342- Long term liabilities (at the rate in accounting book)

Dr. 635- Financial expenses (Difference due to actual exchange rates or average interbank rate is higher than the rate in accounting book)

Cr.311- Short-term borrowings (at the actual exchange rate or at average interbank rate).

5. Borrowings to transfer into cash on hand or cash at bank, enter:

Dr. 111, 112

Cr.311 – Short-term borrowings.

6. Short-term borrowings in foreign currencies to purchase materials, goods and services for storage or immediate use or paying service rental fees, enter:

Dr. 152, 156, 627, 641, 642 (at the actual exchange rate or at average interbank rate)

Cr. 311 – Short-term borrowings (at the actual exchange rate or at average interbank rate)

7. Upon settlement of short term borrowings using cash on hand or cash at bank, enter:

Dr.311 – Short-term borrowings

Cr.111,112.

8. Upon settlement of short term borrowings using cash on hand or cash at bank in foreign currencies in operating period, enter:

a- If arising foreign exchange loss in settlement of liabilities, enter:

Dr. 311 – Short –term borrowings (exchange rate in accounting book of account 311)

Dr. 635- Financial expenses (foreign exchange loss)

Cr.111(1112), 112 (1122) (exchange rate in accounting book of Account 1112, 1122)

b- If arising foreign exchange gains in settlement of liabilities, enter:

Dr. 311 - Short term borrowings (exchange rate in accounting book of account 311)

Cr.511 – Financial income (foreign exchange gains)

Cr.111(1112), 112(1122) (exchange rate in accounting book of Account 1112, 1122).

9- Upon settlement of short term borrowings using cash on hand or cash at bank in foreign currencies of construction activities (in per-operating period).

a- If arising foreign exchange loss in settlement of liabilities, enter:

Dr.311 - Short term borrowings (exchange rate in accounting book of account 311)

Dr. 413 - Foreign exchange differences (4131) (foreign exchange loss)

Cr.111(1112), 112(1122) (exchange rate in accounting book of Account 1112, 1122)

b- If arising foreign exchange gains in settlement of liabilities, enter:

Dr.311 - Short term borrowings (exchange rate in accounting book of account 311)

Cr. 413 - Foreign exchange differences (4131) (foreign exchange gains).

Cr.111(1112), 112(1122) (exchange rate in accounting book of Account 1112, 1122)

10. At the end of accounting period, the outstanding balance of short term borrowings in foreign currencies shall be revaluated by average interbank rate announced by the State Bank of Vietnam at the end of fiscal year:

a- If arising foreign exchange gains, enter:

Dr. 311 – Short term borrowings

Cr.413 - Foreign exchange differences

b- If arising foreign exchange losses, enter:

Dr. 413 – Foreign exchange differences

Cr . 311 – Short term borrowings.

ACCOUNT 315

CURRENT PORTION OF LONG TERM LIABILITIES

This account reflects outstanding balance of current portion of long term liabilities in the period, current portion of long term liabilities in the following year and settlement of such liabilities.

Current portion of long term liabilities are long term liabilities that are due to creditors in current accounting year.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING CURRENT PORTION OF LONG TERM LIABILITIES

1. At the end of accounting year, based on long term liabilities repayment schedule, the enterprise shall determine long term liabilities that are due in the following accounting period and transfer into current portion of long term liabilities.

2. The current portion of long term liabilities, amounts paid, outstanding amounts payable to each creditor should be followed up. For current portion of long term liabilities in foreign currencies, each type of foreign currencies must be followed up and translated into VND at the exchange rate at transaction date (at the actual exchange rate or at average interbank rate). Debit side of Account 315 shall be translated into VND at the exchange rate in accounting book. Foreign exchange differences arising during accounting year and foreign exchange differences due to revaluation of closing balance of foreign currencies in operating period (including construction activities), shall be recorded in financial expenses or financial income in income statements.


ACCOUNT 315 – CURRENT PORTION OF LONG TERM LIABILITIES

Debit side:

- Amount paid of current portion of long term liabilities

- The decrease in foreign exchange due to revaluation of outstanding balance of long term liabilities in foreign currencies at the year end.

Credit side:

- Current portion of long term liabilities incurred;

- The increase in foreign exchange difference due revaluation of outstanding balance of long term liabilities in foreign currencies at the year end.


Current portion of long term liabilities that are due or overdue.


1. At the year end, to determine current portion of long term liabilities in the following year, enter:

Dr.342 Long term liabilities

Cr.315 - Current portion of long term liabilities

2. Upon payment of current portion of long term liabilities in cash on hand or cash in bank, enter:

Dr. 315 - Current portion of long term liabilities

Cr.111, 112,…

3. In operating period, upon payment of current portion of long term liabilities in foreign currencies:

- If foreign exchange rate in accounting book of Account 315 is lower than foreign exchange rate in accounting book of Account 111, 112, enter:

Dr.315 - Current portion of long term liabilities (foreign exchange rate in accounting book)

Dr.635 – Financial expenses (foreign exchange loss)

Cr. 111(1112), 112(1122) (foreign exchange rate in accounting book)

- If foreign exchange rate in accounting book of Account 315 is higher than foreign exchange rate in accounting book of Account 111, 112, enter:

Dr . 315 - Current portion of long term liabilities (foreign exchange rate in accounting book)

Cr. 515 – Financial income (foreign exchange gains)

Cr . 111(1112), 112(1122) (exchange rate in accounting book).

4. In pre-operating period, upon payment of current portion of long term liabilities in foreign currencies of construction activities, enter:

- If foreign exchange rate in accounting book of Account 315 is lower than foreign exchange rate in accounting book of Account 111, 112, enter:

Dr .315 - Current portion of long term liabilities (foreign exchange rate in accounting book)

Dr . 413 – Financial expenses (foreign exchange loss)

Cr .111(1112), 112(1122)(exchange rate in accounting book)

- If foreign exchange rate in accounting book of Account 315 is higher than foreign exchange rate in accounting book of Account 111, 112, enter:

Dr.315 - Current portion of long term liabilities (exchange rate in accounting book)

Cr.413 – differences FX (foreign exchange gains)

Cr .111(1112), 112(1122)( exchange rate in accounting book)

5. Upon payment of current portion of long term liabilities using money from collecting liabilities or from new borrowings, enter:

Dr. 315 - Current portion of long term liabilities

Cr . 131, 138

Cr.311 – Short term borrowings

6. At the year end, outstanding balance of current portion of long term liabilities in foreign currencies shall be revaluated at average interbank rate announced by the State Bank of Vietnam at the year end:

- If arising foreign exchange gains, enter:

Dr.315 - Current portion of long term liabilities

Cr. 413 – Foreign exchange differences

- If arising foreign exchange losses, enter:

Dr . 413 - Foreign exchange differences

Cr .315 - Current portion of long term liabilities.

ACCOUNT 331

ACCOUNTS PAYABLE - TRADE

This account reflects settlement of liabilities to suppliers of materials, goods, service providers under signed contracts. This account also reflects settlement of liabilities to main-contractors, sub-contractors.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ACCOUNTS PAYABLE - TRADE

1. Liabilities payable to suppliers, providers of goods, materials, services or liabilities payable to main-contractors, sub-contractors should be recorded as per each creditor. For each creditor, this account reflects amount advanced to suppliers, providers and contractors without receiving products, goods, services and completed construction works.

2. This account does not reflect purchase of goods, materials, services that are paid at sight (in cash, by cheque or bank transfer).

3. For materials, goods, services received without invoice until the end of month, their estimated costs shall be used to be recorded in accounting book; upon receipt of invoice or official quotation of suppliers, the estimated costs shall be revised according to actual costs.

4. Accounting for this account, accountant should clearly records payment discount, sales discount, sales allowances of suppliers which are not stated in the invoices.


ACCOUNT 331 – ACCOUNTS PAYABLE -TRADE

Debit side:

- Amount paid to suppliers of goods, materials, service providers and contractors;

- Amount advanced to suppliers of goods, materials, service providers and contractors without receiving products, goods, services and completed construction and installation works.

- Amount discounted by the sellers for goods, services delivered under the contracts.

- Payment discount and sales discount which the sellers are allowed to deduct against Accounts payable - trade by the suppliers;

- Value of goods, materials that are deficient, unqualified and returned to the sellers.

Credit side:

- Amount payable to suppliers of goods, materials, service providers and contractors;

- Adjustment for differences due to estimated costs are lower than actual costs of goods, services, materials received upon receipt of official invoices or quotations.


- Outstanding accounts payable to suppliers, providers and contractors.

- This account may have debit side balance. Debits side balance (if any) reflects amounts advanced to suppliers or amounts paid are higher than accounts payable for each creditor. Upon preparation of Balance sheet , balance of liabilities payable to each creditor recorded in this account shall be reflected in items “Assets” and “Resources”.


1. Goods, materials purchased without payment to suppliers are stored or sold directly without storage when the enterprise applies the perpetual method of accounting for inventory:

1.1 For enterprises pay VAT under deduction method:

- If goods, materials purchased are used for manufacturing, trading goods, services which are subject to VAT under deduction method, enter:

Dr.152 – Raw materials (excluding VAT)

Dr.153 – Tools and supplies (excluding VAT)

Dr.156 – Merchandise inventory




- If goods, materials purchased are used for manufacturing, trading goods, services which are not subject to VAT or subject to VAT under direct method, costs of materials, goods shall include VAT (total payment), enter:

Dr.152 – Raw materials

Dr.153 – Tools and supplies

Dr.156 – Goods on consignment

Cr.331 – Accounts payable - trade.

1.2 For enterprises pay VAT under direct method, costs of materials, goods purchased shall include VAT (total payment), enter:

Dr.152 - Raw materials


Dr .156 – Goods on consignment

Cr.331 - Accounts payable – trade.

2. Goods, materials without payment to suppliers are stored or sold directly without storage in case the enterprise applies the periodic method of accounting for inventory:

2.1 For enterprises pay VAT under deduction method:

- If goods, materials purchased are used for manufacturing, trading goods, services which are subject to VAT under deduction method, enter:

Dr .611 – Purchases (exclude VAT)



- If goods, materials purchased are used for manufacturing, trading goods, services which are not subject to VAT or subject to VAT under direct method, costs of materials, goods shall include VAT (total payment amount), enter:

Dr .611 – Purchases (exclude VAT)

Cr.331 - Accounts payable - trade (total payment)

2.2 For enterprises pay VAT under direct method, costs of materials, goods purchased shall include VAT (total payment), enter:

Dr.611 – Purchases (total payment)

Cr .331 - Accounts payable - trade (total payment)

3. Purchase of fixed assets without payment to suppliers to use in manufacturing, trading goods and services, based on invoices, hand-over minute and related supporting documents, in case enterprises pay VAT under deduction method:

- If fixed assets purchased are used for manufacturing and trading goods and services which are subject to VAT under deduction method:

Dr.211 – Tangible fixed assets (exclude VAT)

Dr.213 – Intangible fixed assets (exclude VAT)


Cr.311 - Accounts payable - trade (total payment)

- If fixed assets purchased are used for manufacturing and trading goods and services which are not subject to VAT or subject to VAT under direct method, costs of fixed assets purchased shall include VAT (total payment), enter:


Dr .213 – Intangible fixed assets


4. In case the enterprise carries out construction activities under contractual method , upon receipt of construction, installation items, based on the contract, hand-over minute and invoices of completed works:

- If construction works are completed and transfer to fixed assets used for manufacturing and trading foods and services which are subject to VAT under deduction method, enter:

Dr .241 – Construction in progress (exclude VAT)

Dr .133 – Deductible VAT


- If construction works are completed and transferred to fixed assets used for manufacturing and trading foods and services which are not subjected to VAT or subject to VAT under direct method, cost of construction shall include VAT (total payment), enter:

Dr.241 - Construction in progress (VAT excluded)


5. Upon receipt of services provided (transportation fees of goods, electric, gas, water, telephone, audit, consultancy, advertisement, other services) by the suppliers, value of services is VAT included, or input-VAT excluded, subject to method of VAT payable, enter:

Dr .156 – Merchandise inventory (1562)

Dr.241 – Construction in progress

Dr .142 – Short-term prepayment

Dr .242 – Long-term prepayment

Dr .623, 627, 641, 642, 635, 811

Dr .133 – Deductible VAT (1331) (if any)


6. Upon payment of accounts payable to the suppliers of materials, goods or service providers, contractors, enter:


Cr.111, 112, 311, 341,…

7. Upon making advance to suppliers of materials, goods or to service providers and contractors, enter:


Cr.111, 112,…

8. Upon receipt of advances from suppliers or providers because the suppliers or providers fails to provide goods or services, enter:

Dr .111, 112,…

Cr .331 – Accounts payable - trade

9. Payment discount on materials, goods purchased due to early payment, the discounted amounts are deducted against accounts payable to the suppliers, enter:

Dr .331 – Accounts payable - trade

Cr .515 – Financial income

10. In case materials, goods purchased are stored, then these materials, goods must be returned to suppliers due to unqualified and the goods, materials are still in stock, enter:


Cr.133 – Deductible VAT (1331) (if any)

Cr.152, 153, 156, 611, …

11. In case the suppliers approve sales allowance for materials, goods purchased due to they are unqualified and the goods, materials are still in the stock, enter:

Dr .331 –Accounts payable – trade

Cr .152,153,156 (discounted value)

Cr.133 – Deductible VAT (1331) (if any)

12. For accounts payable to suppliers, which can not determine suppliers or the suppliers have no intention in collecting these amounts and increase other income of enterprise, enter:

Dr.331 - Accounts payable - trade

Cr.711 – Other income

13. In determining accounts payable to sub-constructor under the contract between main-contractor and sub-contractor (VAT excluded or VAT included), based on invoices, quotations, hand-over minutes, contracts with sub-contractor, enter:

Dr .632 – Cost of goods sold (VAT excluded)


Cr.331 – Accounts payable - trade (total payment payable to sub-constructor included input-VAT)

14. In case enterprise acts as an agent, selling goods at quoted cost and receiving commission

- When acting as an agent, enter a single entry in debit side of Account 003 – Goods held on consignment for sales (off balance sheet item) (at quoted price of goods received)

- Upon sale of goods received, enter:

Dr .111, 112, 131,…

Cr .331 – Accounts payable - trade (at quoted price of goods received)

Simultaneously enter a single entry in credit side of Account 003 – Goods held on consignment for sales (off balance sheet item) (at quoted price of goods received).

- In determination of commission received to record to income, enter:


Cr.511 – Revenue from goods sold and services provided

Cr.3331 – VAT payable (if any)

- Upon payment to the goods suppliers, enter:


Cr .511 – Revenue from goods sold and services provided

Cr .111, 112,..

15. Accounting treatment of Accounts payable - trade applied for import truster

15.1 Upon making an advance to the import trustee for purchase of goods under the entrusted import contract to open LC…, based on relevant supporting documents, enter:

Dr.331 – Accounts payable - trade (details for each import trustee)

Cr.111, 112,…

15.2 Upon receipt of imported goods delivered by the import trustee, including value of imported goods, import duties, VAT on imported goods or special consumption tax, if any, based on delivery note of the import trustee and relevant supporting documents to reflect relevant act ivies into two cases:

a) In case imported goods are used for manufacturing and trading goods and services which are subject to VAT under deduction method, the VAT shall be deducted and calculated as follows:

- If the import trustee pays the VAT on behalf of the truster (import duties, VAT, special consumption tax) to the State budget, enter:

Dr. 151, 152, 156, 211, 611 (value of imported goods including VAT)

Dr. 133 – Deductible VAT.

Cr. 331 - Accounts payable - trade (details for each import trustee)

- If the import trustee performs tax declaration but the truster pays taxes to State budget, value of imported goods shall be recorded in the same way as the trustee pays the tax on behalf of the truster (above entry). Upon payment of tax to the State budget, enter:

Dr. 331 - Accounts payable - trade (details for each import trustee)

Cr. 111, 112,…

b) In case imported goods are used in manufacturing and trading goods and services which are not subject to VAT or subject to VAT under direct method or used in non-business activities, or in projects funded by non-business funds, project funds, the VAT shall not be deducted and calculated as follows:

- If the import trustee pays taxes on behalf of the truster (import duties, VAT, special consumption tax) to the State budget, enter:

Dr. 151, 152, 156, 211 (value of imported goods including tax payables)


- If the import trustee performs tax declaration but the truster pays taxes to State budget, value of imported goods shall be recorded in the same way as the trustee pays the tax on behalf of the truster (above entry). Upon payment of tax to the State budget, enter:


Cr. 111, 112,…

15.3 To record trust fees payable to the trustee, based on relevant documents, enter:

Dr. 151, 152, 156, 211…


Cr. 331 - Accounts payable - trade (details for each import trustee).

15.4 To record accounts payable to the trustee for amounts paid by on behalf by the trustee, based on the relevant supporting documents, enter:

Dr. 151, 152, 156, 211,…


Cr. 331 - Accounts payable - trade (details for each import trustee).

15.5 Upon payment of remaining accounts payable to purchase of goods, import duties, VAT, special consumption tax (if the trustee paid tax to State budget on behalf of the truster), trust fee and other amounts paid on behalf, based on relevant documents, enter:


Cr. 111, 112,…

15.6 In case the import trustee delivers imported goods without VAT paid.

a. Upon receipt of goods, based on invoices of the import trustee), to record the imported goods as cost with VAT included, enter:

Dr. 152, 156, 211 (value of imported goods including taxes)


b. Upon receipt the VAT invoice for the imported goods, to record input deductible VAT :

- In case the imported goods are in stock, enter:

Dr. 133 - Deductible VAT

Cr. 152, 156, 211,…

- In case the imported goods has been issued for sale, enter:


Cr. 632 - Cost of goods sold.

16. Accounting treatment of Accounts payable - trade applied for export trustee:

16.1 Upon receipt of goods from the export truster, based on relevant documents, enter a single debit entry to Account 003 – Goods held on consignment for sales.

16.2 When the goods are exported, based on relevant supporting documents, enter:

a) To record amounts receivable on goods exported on behalf of the truster, enter:

Dr. 131 – Amounts receivable – trade (details for each foreign customer).

Cr.331 – Accounts payable - trade (details for each export truster).

Simultaneously, record value of the goods exported to credit side of Account 003 - Goods held on consignment for sales (off –balance sheet items).

b) To record import –export tax paid on behalf of the truster, enter:

Dr. 331 – Accounts payable - trade (details for each export truster)

Cr. 338 – Other payables (3388) (detail of import –export tax paid to the State Treasury)

c) To record special consumption tax paid on behalf of the truster, enter:

Dr. 331 – Accounts payable - trade (details for each export truster)

Cr. 338 – Other payables (3388) (detail of special consumption tax paid to the State).

17. At the end of accounting period, balances of Accounts payable - trade dominated in foreign currencies shall be revaluated at inter-bank exchange rate announced by the State Bank of Vietnam at the time of financial report’s preparation and shall be calculated as follows:

- If the inter-bank exchange rate announced by the State Bank of Vietnam at the time of financial report’s preparation is lower than exchange rate recording in the accounting book of Account 331 dominated in foreign currencies, which results in foreign exchange difference, enter:

Dr. 331 – Accounts payable - trade

Cr. 413 – Foreign exchange difference ( 4131, 4132)

- If the inter-bank exchange rate announced by the State Bank of Vietnam at the time of financial report’s preparation is higher than exchange rate recording in the accounting book of Account 331 dominated in foreign currencies, which results in foreign exchange difference, enter:

Dr. 431 - Foreign exchange difference ( 4131, 4132)

Cr. 331 – Accounts payable - trade.

- Accounting for foreign exchange difference due to revaluation of Accounts payable - trade in foreign currencies at the year end according to year end’s exchange rate (refers to accounting treatment for Account 413).

ACCOUNT 333

TAXES PAYABLE TO STATE TREASURY

This account reflects taxes, duties, fees and other amounts paid and to be paid to State Treasury during the accounting year.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING TAXES PAYABLE TO STATE TREASURY

1. The enterprise must actively calculate and determine taxes, duties, fees and other amounts payable to the State according to regulations and timely record tax payable in accounting book. Sufficient, accurate declaration of taxes, duties and fees payable is the responsibility of the enterprise.

2. The enterprise must pay taxes, duties and fees to the State timely and sufficiently. If have any claims on tax rate, taxes payable, this issue should be resolved shortly. In no circumstance, the enterprise should cancel to pay taxes.

3. Accounting book should be opened to follow up details of taxes, duties, fees and other amounts paid and to be paid.

4. Taxes paid in foreign currencies should be translated into Viet Nam Dong at the stated exchange rate for recording (in case of recording in VND).


ACCOUNT 333 – TAXES PAYABLE TO STATE TREASURY

Debit side:

- VAT amounts deducted during period;

- Taxes, duties, fees and amounts payable, paid to State Treasury;

- Deducted amounts in taxes payable;

- VAT of good returns, rebate.

Credit side:

- Output VAT and VAT payable of imported goods;

- Taxes, duties, fees and other amounts payable to State Treasury.


Outstanding balances of taxes, duties, fees and other amounts payable to State Treasury.

In special cases, Account 333 may have debit side balance. Debit side balance (if any) of Account 333 reflects taxes, amounts paid exceeding taxes, amounts payable to State Treasury or reflects taxes paid to the State which are exempted, reduced or refunded, however the refundment has not been carried out.

Account 333 – Taxes payable to State Treasury comprises nine sub-accounts:

- 3331- Value added tax: reflects output VAT, VAT payable on imported goods, VAT deductible, VAT paid and VAT payable to the State Treasury.

Account 3331 has 2 sub-accounts:

+ Account 33311 – Output Value Added Tax: reflects output VAT, input VAT deducted, VAT of goods returns, rebate, VAT payable and paid, outstanding balance of VAT payable for goods, services, products consumed during period.

+ Account 33312 –VAT on imported goods: reflects VAT payable and paid on imported goods, outstanding VAT payable on imported goods.

- Account 3332 – Special consumption tax: reflects special consumption tax payable and paid and outstanding balance of special consumption tax payable to State Treasury.

- Account 3333 – Import and export duties: reflects import and export duties payable and paid and outstanding balance of import and export duties payable to State Treasury.

- Account 3334 – Corporate income tax: reflects CIT payable, paid and outstanding balance of CIT payable to State Treasury.

- Account 3335 – Personal income tax: reflects PIT payable and paid and outstanding balance of PIT payable to State Treasury

- Account 3336 – Natural resources tax: reflects natural resource tax payable and paid and outstanding balance of natural resources tax payable to State Treasury.

- Account 3337: Land and housing tax, land rental charges: reflects land and housing tax, land rental charges paid and payable and outstanding balance of land and housing tax, land rental charges payable to State Treasury.

- Account 3338 – Other taxes: reflects amounts payable and paid on the taxes that are not recorded in the above accounts such as: License tax, taxes paid on behalf of foreign organizations, individuals operating business in Vietnam…This account shall be open for each type of tax.

- Account 3339 – Duties, fees and other payables: reflects amount payable, paid, outstanding amounts payable of duties, fees and other payables to State Treasury other than those reflected in accounts from Account 3331 to Account 3338. This account also reflects grants from the State for the enterprise (if any) such as allowances, subsidies.


I. Value added tax (VAT) 3331

A. Accounting for output VAT (33311)

1. Determine output VAT payable upon sale of products, goods and provision of services:

When selling products, goods and services which are subject to VAT under deduction method and the enterprise paying VAT under deduction method, is required to prepare VAT invoice, which states selling price excluding VAT, additional income and additional expenses other than selling price (if any), VAT payable and total payment price; to record income from sale of products, goods and from provision of services (at selling price excluding VAT) and VAT, enter:

Dr. 111, 112, 131… (the total payment price)

Cr.3331 – VAT (33311)

Cr. 511 – Revenue (selling price excludes VAT)

Cr 512 – Inter-company revenues (selling price excludes VAT)

2. In case of operating lease of tangible fixed assets, intangible fix assets or investment property (referred as to operating lease of assets), rental fees received in advance for many periods, each period’s revenue determined by total rental advances received divided by number of prepayment periods. In which revenue from operating lease of tangible fixed assets, intangible fixed assets is recorded in credit side of Account 5113 –“Revenue from services rendered”; revenue from operating lease of investment property is recorded in credit side of Account 5117 – “Revenue from trading investment property”.

In case VAT is calculated under deduction method:

- Upon receipt of advance from customers for operating lease of assets for many periods, enter:

Dr. 111, 112 (the total amount received)

Cr. 3387 – Deferred revenue (excluding VAT)

Cr.333 – Taxes payable to State Treasury (3331).

- At the end of the accounting period, to calculate and transfer revenue from operating lease of assets in current period, enter:

Dr.3387 - Deferred revenue

Cr .511 – Revenue (5113 – For revenue from operating lease of tangible fixed assets, intangible fixed assets; 5117 – For revenue from operating lease of investment property).

- In the next accounting period, to calculate and transfer revenue from operating lease of assets in the following period, enter:

Dr .3387 - Deferred revenue

Cr. 511 – Revenue (5113, 5117)

- To record amounts returned to customers due to contract on operating lease of tangible fixed assets, intangible fixed assets or investment property are not implemented (if any), enter:

Dr.3387 - Deferred revenue (price excludes VAT)

Dr .3331 – VAT (unrealized VAT on operating lease of assets)

Cr .111, 112 (Total amount returned)

In case VAT is calculated under direct method:

- Upon receipt of advance from customers for operating lease of assets for many periods, enter:

Dr .111, 112 … (total amount received)

Cr .3387 – Deferred revenue (total amount received)

- At the end of the accounting period, to calculate and transfer revenue from operating lease of assets in current period, enter:


Cr .511 – Revenue (5113 – For revenue from operating lease of tangible fixed assets, intangible fixed assets; 5117 – For revenue from operating lease of investment property)

- At the end of the accounting period, to calculate and reflect VAT payable under direct method, enter:

Dr .511 – Revenue (5113, 5117)

Cr .3331 – VAT

- In the next accounting period, to calculate and transfer revenue from operating lease of assets in the following period, enter:

Dr.3387 - Deferred revenue

Cr .511 – Revenue (511, 5117).

- To record amounts returned to customers due to contract on operating lease of tangible fixed assets, intangible fixed assets or investment property are not implemented (if any), enter:


Cr. 111, 112 (Total amount returned)

3. In case goods are sold on credit (goods are subject to VAT under deduction method and VAT is paid under deduction method), revenue from goods sold shall be spot price without VAT and VAT shall be recorded, enter:

Dr 111, 112, 131,… (total payment)

Cr .3331 – VAT (33311)

Cr .511 – Revenue (spot price without VAT)

Cr. 3387 – Deferred revenue (interest on deferred payment)

4. In case goods are bartered with goods, this activity should be accounted for as normal sale, purchase activity (in which goods, services bartered are recorded as sales; goods

and services received are recorded as purchases). Parties have to issue invoices upon delivery of goods, services bartered and complete procedures for tax declaration and payment.

Upon delivery of products, goods, services which are subject to VAT under deduction method to barter for another material, goods for manufacturing, trading goods, services which are subject to VAT under deduction method:

- Based on VAT invoice upon delivery of goods, services for barter, to record revenue from goods sold and services rendered and VAT, enter:

Dr. 131 – Amounts receivables -trade

Cr.511 – Revenue (price excludes VAT)

Cr .3331 – VAT (33311) (VAT of goods, services bartered).

- Based on VAT invoice upon receipt of goods, services bartered, to record value of input materials, goods and input deductible VAT, enter:

Dr. 152, 153, 156,… (price excludes VAT)

Dr.133 – Deductible VAT (VAT of materials, goods received from barter)

Cr. 133 – Amounts receivable - trade

- In case materials, goods received are used for manufacturing and trading goods, services which are not subject to VAT or subject to VAT under direct method, input VAT of goods received from barter shall not be deducted and shall be charged to value of materials, goods received from barter, enter:

Dr.152,153,156,…( total payment)

Cr.131- Amounts receivable - trade (total payment).

5. Accounting for sale, disposal of investment property:

5.1. If VAT is calculated under deduction method, enter:

Dr.111,112,131 (total payment)

Cr.5117- Revenue from investment property (price excludes VAT).

Cr.3331- VAT (33311)

5.2. In case investment property are sold on credit:

a) If VAT is calculated under deduction method:

- Upon sale of investment property on credit, revenue from investment property in the period shall be recorded at spot price; difference between deferred price and spot price and VAT shall be recorded in Account 3387 “Deferred revenue”, enter:

Dr.131- Account payables-trade

Cr.5117- Revenue from investment property (spot price without VAT)

Cr.3387- Deferred revenues (difference between spot price without VAT and deferred price)

Cr.3331- VAT (Output VAT).

b) For investment property sold on credit which are not subject to VAT or subject to VAT under direct method:

- Upon sale of investment property on credit, revenue from investment property in the period shall be recorded at spot price; difference between deferred price and spot price (with VAT) shall be recorded as deferred revenue, enter:

Dr.111, 112, 131

Cr.5117- Revenues from investment property (spot price with VAT)

Cr.3387- Unearned revenue (difference between deferred price and spot price with VAT).

- At the end of the period, based on VAT payable under direct method, enter:

Dr.5117- Revenue from investment property

Cr.333 -Taxes payable to State Treasury (3331).

6. In case goods are sold via agents, which sell goods at fixed price and earn commission:

6.1. Accounting for units which deliver goods for agents : Upon finalization with agents on goods sold, to reflect revenue from goods sold and VAT payable, enter:

Dr. 111,112, 131 (total payment price)

Cr. 3331- VAT (33311)

Cr.511 – Revenue from goods sold and services rendered (price excludes VAT).

6.2.Accounting for agents which sell goods at fixed price and earn commission:

- Upon sale of goods, to reflect proceeds from sale, enter:

Dr.111, 112, 131 (total payment price)

Cr. 331- Account payable- trade (total payment price).

- To record commission earned, enter:

Dr.331- Accounts payable- trade (commission earned)

Cr. 511- Revenue (commission earned on price without VAT)

Cr. 3331- VAT

7. In case VAT is paid under deduction method, upon sale of goods to subsidiaries with dependent accounting system.

7.1. Upon sale of goods which are subject to VAT under deduction method to subsidiaries with dependent accounting system using “ Invoices”:

- Upon delivery of goods to subsidiaries with dependent accounting system for sale, enter:

Dr. 157- Outwards goods on consignment (historical cost)

Cr.155- Finished goods

Cr.156- Merchandise inventory.

- When the subsidiary sold the goods, the enterprise- the higher level entity- based on List of invoices for goods sold of the subsidiary, has to issue VAT invoice on goods sold and reflect revenue from goods sold and VAT, enter:

Dr. 111, 112, 136 (inter-company selling price includes VAT)

Cr. 3331- VAT (33311)

Cr. 512- Inter-company revenues (inter-company selling price excludes VAT).

7.2. Upon sale of goods which are subject to VAT under deduction method to subsidiaries with dependent accounting system for sale, the enterprise – higher level entity- uses VAT invoice. Based on VAT invoice, to reflect revenue from goods sold and VAT payable, enter:

Dr.111, 136 (inter-company selling price with VAT)

Cr.3331 – VAT (33311)

Cr.512 – Intra-company revenues (inter-company selling price without VAT)

8. In case of delivery of products, goods which are subject to VAT under deduction method for internal use, promotion, advertisement for manufacturing goods, services which are subject to VAT under deduction method, the enterprise has to issue VAT invoice which clearly states internal using goods for manufacturing or promoting, advertising without money collection. The enterprise uses invoice as accounting document. In this case, the entity is not subject to VAT:

- Upon delivery of products, goods for internal use, promoting or advertising, enter:

Dr .632 – Cost of goods sold

Cr .155 – Finished goods

Cr .156 – Merchandise inventory

- Simultaneously, to record revenue from inter-company sale, enter:

Dr .621, 623, 627, 641, 642…

Dr.211 – Tangible fixed assets (if the products produced are transferred to tangible FA used for manufacturing)

Cr. 512 – Inter-company revenues (at production costs or cost of goods sold)

9. In case of delivery of products, goods which are subject to VAT under deduction method for internal use, promotion, advertisement for manufacturing goods, services which are not subject to VAT or subject to VAT under direct method, the enterprise has to issue VAT invoice which clearly states items and VAT is calculated as in normal invoice. In this case, the entity is subject to VAT and VAT payable shall be charged to business costs:

- Upon delivery of products, goods for internal use, enter:



Cr .156 - Merchandise inventory

- Simultaneously, to record inter-company revenue, enter:

Dr. 623, 627, 641, 642… (at production costs or cost of goods sold + VAT payable for internal using goods); or

Dr. 211 – Tangible FA (if the products produced are transferred to tangible FA used for manufacturing) (at production cost + VAT payable for internal using goods)

Cr .333 – Taxes payables to State budget (33311)

Cr. 512 - Intra-company revenues (at production costs or cost of goods sold)

10. In case of using products, goods which are subject to VAT under deduction method as gifts for external parties, individuals covered by welfare and reward fund, the enterprise has to issue VAT invoice which clearly states items and VAT is calculated as in normal invoice. In this case, the entity is subject to VAT and output VAT is not deductible:

- Upon issuing products, goods for gifts, donation enter:

Dr.632 – Cost of goods sold


Cr .156 – Merchandise inventory


Dr.431 – Welfare and reward funds (total payment price)

Cr.3331 – VAT (33311) (output VAT)

Cr.512 - Inter-company revenues (price excludes VAT).

11. In case of using products, goods which are subject to VAT under deduction method as rewards or salaries for employees or other labor, the enterprise has to issue VAT invoice (or sale invoice) which clearly states items and VAT is calculated as in normal invoice. In this case, the entity is subject to VAT and output VAT is not deductible:

- Upon using products, goods as rewards or salaries for employees, enter:

Dr.632 – Cost of goods sold

Cr.155 – Finished goods

Cr.156 – Merchandise inventory


Dr.334 – Payable to employees

Cr.512 – Intra-company revenues

Cr.333 – Taxes to State Treasury (33311).

12. In case of sales returns:

- For enterprises of which VAT is paid under deduction method and sales returns are subject to VAT under deduction method, to reflect amounts payables to customer, revenue and VAT on sales returns, enter:

Dr. 531 – Sales returns (selling price excludes tax)

Dr. 3331 – VAT (33311) (VAT on sales returns)

Cr. 111, 112, 131 (total payment price).

- Simultaneously, to record cost of sales returns, enter:


Dr .156 – Merchandise inventory

Cr .632 – Cost of goods sold

13. VAT is paid under deduction method; upon arising financial income and other income (proceeds from sale, disposal of fixed assets,…) which are subject to VAT under deduction method, to reflect financial income and other income without VAT, enter:

Dr. 111, 112, 138… (total payment price)

Cr.3331 – VAT (33311)

Cr.515 – Financial income (exclude VAT)

Cr. 711 – Other income (exclude VAT)

14. VAT is paid under direct method, at the end of accounting period, to record VAT payable under direct method, enter:

- For manufacture, production activities, enter:

Dr. 511 – Revenue

Cr .3331 – VAT

- For the financial activities and other activities, enter:

Dr. 515 – Financial income

Dr. 711 – Other income

Cr .3331 – VAT

15. Upon payment of VAT to State Treasury, enter:

Dr.3331 – VAT

Cr 111, 112…

B. Accounting for VAT on imported goods (33312)

1. Upon import of raw materials, goods, fixed assets, to reflect the import duties payables, total payment, and value of imported raw materials, goods, fixed assets (excluding VAT), enter:

Dr. 152, 153, 156, 211, 611…

Cr .333 – Taxes payable to State Treasury (3333)

Cr .111, 112, 331…

Simultaneously, to reflect VAT payable on imported goods:

- In case that imported raw materials, goods, fixed assets are used for manufacturing, trading goods, services that are subject to VAT under deduction method, VAT of imported goods shall be deducted, enter:

Dr .133 – Deductible VAT

Cr .3331 – VAT (33312)

- In case that imported raw materials, goods, fixed assets are used for manufacturing, trading goods, services that are not subject to VAT or subject to VAT under direct method, or used in administrative, project, welfare activities, VAT on imported goods which is not deducted shall be charged to costs of imported materials, goods, fixed assets, enter:

Dr.152, 153, 156, 211, 611…

Cr.3331 – VAT (33312)

2. Upon actual payment of VAT on imported goods to State Treasury, enter:

Dr .3331 – VAT (33312)

Cr .111, 112,…

C. Accounting for deductible VAT:

At the end of accounting period, to determine deductible VAT on output VAT and VAT payable during the period:

- The deductible VAT is net off against output VAT, enter:

Dr. 3331 – VAT (33311)

Cr .133 – Deductible VAT

- Upon payment of VAT to State Treasury, enter:

Dr. 3331 – VAT (33311)

Cr. 111, 112…

D. Accounting for reducible VAT:

1. If reducible VAT is net off against VAT payable during the period, enter:

Dr .3331 – VAT (33311)

Cr .711 – Other income

2. If reducible VAT is refunded from the State Budget, enter:

Dr.111, 112

Cr.711 – Other income.

II. Special consumption tax (Account 3332)

1. In case of selling goods, providing services which are subject to special consumption tax and subject to VAT under deduction method, to reflect revenue with special consumption tax, but without VAT, included in selling price, enter:

Dr.111, 112, 131 (total payment)

Cr. 511 – Revenues (selling price includes special consumption tax, excludes VAT)

Cr. 512 – Inter- company revenues (selling price includes special consumption tax, excludes VAT)

Cr. 3331 – VAT (33311).

2. In case of selling goods, providing services which are subject to special consumption tax and subject to VAT under direct method, to reflect revenue including consumption tax and VAT (total payment price), enter:

Dr. 111, 112, 131,…

Cr. 511 – Revenues

Cr. 512 – Inter- company revenues

3. To determine special consumption tax payable on goods, services consumed during period, enter:

Dr. 511 – Revenues

Dr. 512 – Inter -company revenues

Cr.3332 – Special consumption tax.

4. Upon import of goods which are subject to special consumption tax, based on invoice and special consumption tax payable on imported goods, to determine special consumption tax payable on imported goods enter:

Dr.152, 156, 211, 611…


5. Upon payment of special consumption tax to State Treasury, enter:

Dr.3332 – Special consumption tax

Cr .111, 112…

III. Export tax (Account 3333)

1. In case of selling goods, providing services which are subject to export tax, to reflect revenue with import tax included in selling price (total payment), enter:

Dr .111, 112, 131,…

Cr .511 – Revenues

2. To determine export tax payable, enter:

Dr. 511 – Revenues

Cr. 3333 – Import and export tax (export tax).

3. Upon payment of export tax to State Treasury, enter;

Dr. 3333 – Import and export tax (export tax)

Cr .111, 112,…

IV. Import tax (Account 3333)

1. Upon import of materials, goods, fixed assets, to reflect import tax payable, total amounts payable, or amounts payable, paid to suppliers and value of imported materials, goods, fixed assets (with import tax included in price), enter:

Dr. 152, 156, 211, 611 (with import tax included in price)

Cr. 3333 – Import and export tax (import tax)

Cr .111, 112, 331…

2. Upon payment of import tax to State Treasury, enter:

Dr.3333 – Import and export tax (import tax)

Cr. 111, 112,…

V. Corporate income tax (CIT) (Account 3334)

1. Based on CIT payable to State Treasury quarterly, enter:

Dr. 821 – CIT expenses (8211)

Cr . 3334 – CIT

2. Upon payment of CIT to State Treasury, enter:

Dr. 3334 – CIT

Cr. 111, 112,…

3. At the year’s end, to determine CIT payable during the year:

- If actual CIT payable is less than CIT temporarily paid quarterly during the year, the difference shall be recorded as follows:

Dr. 3334 – CIT

Cr .821 – CIT expenses (8211).

- If actual CIT payable is higher than CIT temporarily paid quarterly during the year, the difference shall be recorded as follows:

Dr. 821 – CIT expenses (8211)

Cr. 3334 – CIT

- Upon actual payment of difference due to actual CIT payable is more than CIT temporarily paid quarterly during the year to State Treasury, enter:

Dr. 3334 – CIT

Cr .111, 112

VI. Personal income tax (PIT) (Account 3335)

1. Regulations on tax declaration, tax payment and tax finalization for individuals with high incomes (referred to as “personal income tax”):

- Income-paying body is responsible for PIT declaration and payment on basis of withholding PIT at source. Income-paying body is responsible to withhold PIT before income payment to pay PIT to the State Treasury on behalf of tax payers.

- Income-paying body is responsible to compute remuneration, PIT, to withhold PIT and to pay PIT to the State Treasury. Upon withholding PIT, income-paying body has to provide “Certificates of PIT withholding” for PIT payers, manage the use of PIT and finalize PIT invoice as regulated.

2. Accounting for major transactions:

Monthly, upon determination of PIT payable on taxable income of employees, enter:

Dr .334 – Payable to employees

Cr .333 – Taxes payable to State Treasury (3335)

Upon payment of income to external individuals, the enterprise shall have to determine PIT payable on occasional taxable income, enter:

- In case of paying remunerations, outsourced services …to external individuals, enter:

Dr . 623, 627, 641, 642, 635 (total payment); or

Dr .161 – Non business expenditure out of funds received from the State; or

Dr . 431 – Welfare and rewards funds (total payment) (4311)

Cr. 333 – Taxes payable to State Treasury

Cr. 111, 112 (actual amount paid).

- Upon payment of amounts payable to outside high income individuals, enter:

Dr.331 – Amount payable - trade

Cr .333 – Taxes payable to State Treasury (withheld PIT)

Cr. 111, 112 (actual amount paid).

Income-paying body is responsible for deducting to PIT an allowance at ratio (%) on taxable income for both permanent income and occasional income before making payment to State Treasury . Upon determination of allowance entitled from PIT declaration, deduction and payment, enter:

Dr.333 – Taxes payable to State Treasury

Cr .711 – Other income

Upon payment of PIT to State Treasury on behalf of tax payers, enter:

Dr. 333 – Taxes payable to State Treasury

Cr . 111, 112,…

VII. Natural resource taxes (3336)

1. To determine natural resource taxes payable charged to manufacturing overheads:

Dr.627 – Manufacturing Overheads

Cr.3336 – Natural resource taxes

2. Upon actual payment of natural resource taxes to State Treasury, enter:

Dr .3336 – Natural resource taxes

Cr . 111, 112,…

VIII. Land and housing tax, land rental charges (3337)

1. To determine land and housing tax, land rental charges payable charged to general and administrative expense, enter:

Dr.642 – General and administrative expense (6425)

Cr. 3337 – Land and housing tax, land rental charges

2. Upon payment of land and housing tax, land rental charges to State Treasury, enter:

Dr.3337 – Land and housing tax, land rental charges

Cr .111, 112…

IX. Other taxes (3338), duties, fees and other payables (3339)

1. To determine registration fee on value of assets purchased (upon registration of use rights or property rights), enter:

Dr . 211 – Tangible fixed assets

Cr.333 - Taxes payable to the State Treasury (3339)

2. Upon actual payment of other taxes, duties, fees and other payables, enter:

Dr. 333 - Taxes payable to the State Treasury (3338,3339)

Cr . 111, 112…

X. Accounting for allowances, subsidies granted by Government to enterprise ( 3339)

1. Upon receipt of decision on allowances, subsidies from the State in case the enterprise provides goods and services under the requirement of the State, to record allowances, subsidies granted by the State, enter:

Dr.333 - Taxes payable to State Treasury (3339)

Cr.511 – Revenues ( 5114)

2. Upon receipt of allowances, subsidies from the State, enter:

Dr 111,112…

Cr 333- Taxes payable to State Treasury (3339).

ACCOUNT 334

PAYABLES TO EMPLOYEES

This account reflects amounts payable and payment of amounts payable to employees including the salaries, wages, bonus, social insurance and other amounts payable belonging to employees’ income.


ACCOUNT 334 - PAYABLES TO EMPLOYEES

Debit side:

- The salaries, wages, bonuses which are salary in nature, social insurance and other amounts paid or advanced to employees

- Amounts deducted from employees’ salaries and wages

Credit side:

The salaries, wages, bonus which are salary in nature, social insurance and other amounts payable to employees.


Outstanding balance of salaries, wages, bonus which are salary in nature and other outstanding amounts payable to employees.

Account 334 may have the debit side balance. Debit side balance of Account 334 is very special (if any) which reflects the amounts paid is higher than the amounts payable with regards to salaries, wages, bonus and other amounts payable to employees.

Account 334 must be recorded in two parts: payment of salaries and other amounts payable.

Account 334- Payables to employees, has 2 sub-accounts:

- Account 3341- Payable to employees: This sub-account reflects amounts payable and payment of amounts payable to employees of the enterprise including the salary, bonus which are salary in nature, social insurance, and other amounts payable belonging to the employees’ income.

- Account 3348- Payable to external employees: amounts payable and payment of amounts payable to employees other than the enterprise’s employees regarding to wages, bonus ( if any), which are wages in nature and other amounts payable belonging to the employees’ income.


1. To compute salary, allowances payable to employees according to the law, enter:

Dr .241 – Construction in progress

Dr .622 – Direct labor costs

Dr .623 – Costs of construction machinery (6231)

Dr .627 – Manufacturing overheads (6271)

Dr. 641 – Selling expense (6411)

Dr. 642 – General and administrative expense (6421)

Cr . 334 – Payable to employees (3341, 3348).

2. Bonus payable to employees:

- When determining bonuses payable to employees using welfare and reward fund, enter:

Dr .431 - Welfare and reward funds (4311)

Cr .334 - Payables to employees (3341).

- Upon payment of bonus using welfare and reward fund, enter:

Dr.334 - Payables to employees (3341)

Cr .111,112,…

3. To compute social insurance (sick, maternity, accident…) payable to employees, enter:

Dr.338- Other payables

Cr.334- Payables to employees

4. To compute annual leave compensation payable to employees, enter:

Dr .623, 627, 641, 642

Dr.335 - Accrued expenses (the enterprise accrues annual leave compensation)

Cr .334 - Payables to employees (3341).

5. Amounts deducted from salary and other income of employees and external employees such as outstanding advances, health insurance, social insurance, compensation for assets according to violation handling decision,… enter:

Dr.334 - Payables to employees (3341,3348).

Cr.141- Advances

Cr.338 - Other payables

Cr.138 - Other receivables

6. To compute PIT of employees and external employees payable to State Treasury, enter:

Dr.334 - Payables to employees (3341, 3348)

Cr.333 - Taxes payable to State Treasury (3335)

7. Upon advance or actual payment of salary, wages to employees and external employees, enter:


Cr.111,112,…

8. Payment of amounts payable to employees and external employees, enter:


Cr.111,112,…

9. Salaries, wages or bonus for employees and external employees is paid by products, goods:

- For products, goods which are subject to VAT under deduction method, to reflect inter - company revenue at selling price without VAT, enter:


Cr.3331 - Value added tax (33311)

Cr.512 - Inter-company revenue (selling price excludes VAT)

- For products, goods which are not subject to VAT or subject to VAT under direct method, to reflects intra-company revenue at payment price, enter:


Cr.512 - Inter-company revenue (payment price)

10. Determine and pay shift meal expenses for employees and external employees:

- Upon having determined shift meal expenses payable to employees and external employees, enter:

Dr. 622, 623, 627, 641, 642

Cr.334 - Payables to employees (3341, 3348).

- Upon payment of shift meal expenses to employees and external employees, enter:


Cr.111,112,…

ACCOUNT 335

ACCRUED EXPENSES

This account reflects amounts which are recorded in operating expenses during period but are not paid in the period.

Recorded in this account shall be items not yet actually incurred, but already recognized in the current period’s cost to ensure that when they do occur in the future they will kept overhead expenses from significant changes. For accrued items to be expensed in the current period, the matching principle shall be adhered to.

Accrued expenses include:

1. Accrued employee’s salaries for their annual leave.

2. Expenses for major repair of specialized fixed assets periodically, for which accruals are allowable for the current year or thereafter.

3. Expenses incurred in respect of seasonal operational breaks foreseeable by the enterprise and accrued in the current period.

4. Accrued interest expenses in cases of loans with deferred interests, bonds with deferred interests (when bonds are due)

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ACCRUED EXPENSES

1. Entered into this account shall be the items defined above. Where exceptional expenses are to be accrued in the period, the enterprise is to give an account therefore.

2. Accounting for expenses which have not yet incurred in the period’s expenses shall be strictly controlled with proper estimation and supported with reasonable and reliable assurance on expenses are to be accrued in the period to ensure that the amount recognized is suitable with the actual expenses. It is strictly prohibited to enter into this account unrelated expenses.

3. In principle, at year-end, accrued expenses are to be reconciled with the items actually incurred. Any difference between these shall be dealt with according to prevailing financial regulations.

4. Accrued expenses outstanding at year-end shall be disclosed in the notes to the financial statements.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 335 - ACCRUED EXPENSES

Debit side:

- Actual expenses against accrued expenses.

- Differences due to accrued expenses is higher than actual expenses which are decreased.

Credit side:

- Accrued expenses estimated and recorded as operating expenses in the period.


Accruals already expensed but not yet incurred in the current period.


1. When salaries expenses on employees’ annual leave are accrued, enter:


Cr. 335 – Accrued expenses

2. When actual salaries for employees’ annual leave is computed, enter:

Dr. 622 – Direct labor costs (Actual amount payable is higher than accrued amount)

Dr. 335 – Accrued expenses (accrued amount)

Cr. 334 – Payables to employees (total actual salary payable on employees’ annual leave)

Cr. 622 – Direct labor cost (Actual amount payable is higher than accrued amount)

3. Accrue expenses on estimated major repairs of fixed assets into operating expenses, enter:

Dr. 623 – Cost of construction machinery

Dr. 627 – Manufacturing overheads


Dr. 642 – General and administration expenses


4. When the repairing works for fixed assets are completed and put into use, the costs incurred attributable to the estimated repairs are expensed, enter:

Dr. 623,627,641,642 (If actual expenses are higher than accrued expenses)


Cr. 241 – Construction in progress (2413) (total actual expenses)

Cr. 623, 627, 641, 642 (actual amount is lower than accrued expenses)

5. When costs estimated to incur on seasonal or expected operational breaks are expensed, enter:




6. To record actual expenses incurred on seasonal or expected operational breaks, enter:

Dr. 623,627 (if actual expenses is higher than accrued expenses)



Cr. 112 – Cash at bank



Cr. 331 – Amounts payable – trade

Cr. 334 – Payable to employees

Cr. 623, 627 (if actual expenses is lower than accrued expenses)

7. For loans with deferred interest, interest payable calculated at year - end, enter:

Dr. 635 – Financial expenses (Interest expenses for operating capital)

Dr. 627 – Manufacturing overheads (Interest expenses charged to works in progress)

Dr. 241 – Construction in progress (Interest expenses charged to construction work in progress)


8. In cases the enterprise issues bonds at par value, if interest on bonds is deferred (when bonds are due), in each period, the enterprise has to accrue the interest payable for the period into operating expenses or to be capitalized, enter:


Dr. 635 – Financial expenses (Interest expenses charged to financial expenses)


Cr. 335 – Accrued expenses (Interest payable in the period)

At the maturity date, the enterprise makes payment including the principal and interest for bonds holders, enter:

Dr. 335 – Accrued expenses (total interest)

Dr. 343 – Bonds issued (Acc. 3431 – bon nominal value)

Cr. 111, 112,…

9. In cases the enterprise issues bonds at discount, if interest on bonds is deferred (when bonds are due), in each period, the enterprise has to accrue the interest payable for the period into operating expenses or to be capitalized, enter:




Cr. 335 – Accrued expenses (total interests)

Cr. 3432 – Bonds discounts (the allocated amount of bonds discounts in the period)

At the maturity date, the company makes payment including the principal and interest for bonds holders, enter:

Dr. 335 – Accrued expenses (total interests)

Dr. 343 – Bonds issued (Acc. 3431 – bonds nominal value)

Cr. 111, 112,…

10. In cases the enterprise issues bonds at premium, if interest on bonds is deferred (when bonds are due), in each period, the enterprise has to accrue the interest payable for the period into operating expenses or to be capitalized, enter:



Dr. 241 – Construction in progress (Interest expenses charged to construction work in progress))

Cr. 335 – Accrued expenses (interests payable in the period)

At the maturity date, the company makes payment including the principal and interest for bonds holders, enter:

Dr. 335 – Accrued expenses (Total interests)

Dr. 3431 – Bonds nominal value

Cr. 111, 112,…

ACCOUNT 336

INTER-COMPANY PAYABLES

This account reflects the settlement of amounts payable between an independent entity with branches of an independent enterprise, a holding company, a company in respect of the amounts payable or amounts that units in the independent entity has paid, received on behalf of the higher –level entity, lower-level entity or other member firms.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING INTER-COMPANY PAYABLES

1. The account 336 only reflects internal payment regarding amounts payable between higher-level entity with lower-level entity, among branches of which higher-level is Holding company, company. In this case, the holding company, company shall be a separate business entity and not a not-for-profit or administrative agency; the lower-level entity shall be branch of the Holding company, company but shall remain a separate accounting system.

2. The capital investment of the enterprise into its branches, associates, business entities under common control, and transactions between the parent company and its branches and among its branches shall not be recorded in Account 336.

3. Items which are dealt with in Account 336 : “Inter – company payables ” include:

- Amounts payable by a branch to its Holding company, company; amounts allocable by the Holding company, company to its branches.

- Amounts that the Holding company, company , branch has paid on behalf; or amounts collected on behalf of Holding company, company, branch or other branches and other current accounts.

In particular, working capital of the Holding company, Company allocates to a branch unit shall be recorded into Account 1361: “Working capital given to branches” to reflect working capital given to branches. Upon receipt of the grant, braches shall make relevant entries as an increase in assets and working capital and by no means shall they be posted to account 336: “Inter-company payables”.

4. Account 136 “Inter-company payables” is maintained with records detailed by creditor/debtor with breakdown of amounts due to/from each entity.

5. At the year-end, reconciliation shall be made of accounts 136 and 336 to respective inter-company items in view of a resolution which will allow for account clearing settlement among units. Differences found out during any reconciliation shall be investigated and adjusted on a timely basis.


ACCOUNT 336 - INTER-COMPANY PAYABLES

Debit side:

- Amounts paid to branch;

- Amounts paid to the Holding company, Company;

- Amounts reimbursed as to payment/receipt on behalf of others;

- Bilateral clearance of a receivable against a payable within an unit.

Credit side:

- Amount payable to Holding company, company;

- Amount payable to a branch;

- Amount payable to other internal unit entities for amounts which is paid on behalf by other internal entities or which is received on behalf of others.


Outstanding amounts payable to internal unit entities.

METHODS FOR ACCOUNTING OF SEVERAL KEY ECONOMIC TRANSACTIONS S

I. Accounting by the branch with separate accounting system

1. Periodically , to record management fees payable to Holding company, company into general and administration expense, enter:


Cr .336 - Inter-company payable.

2. To compute amounts payable to investment and development fund, financial reserves, welfare and reward fund as regulated to the Holding company, company, enter:


Dr .415 - Financial reserves

Dr. 431 – Welfare and reward fund

Cr.336 – Inter-company payables

3. For retained earnings refundable to the Holding company, Company, enter:

Dr. 421 – Retained earnings

Cr. 336 – Inter-company payable.

4. Amounts reimbursable to the Holding company, Company and other internal units for payment made on its behalf, enter:



Dr. 331 – Amounts payable-trade


Dr. 642 – General and administration expenses

Cr. 336 – Inter- company payable

5. For proceeds received on behalf of the Holding company, Company or other internal units, enter:

Dr. 111, 112,…

Cr. 336 – Inter-company payables

6. When payment is made to the Holding company, Company and other internal units relating to amounts payable and payments made on behalf and proceeds received on behalf, enter:

Dr. 336 – Inter-company payable

Cr.111, 112, …

7. Upon decision to transfer fixed assets to other entities within the Holding company, Company, enter:

Dr. 411 – Operating capital (net book value)

Dr. 214 – Depreciation of fixed assets (2141) (depreciated value)

Cr. 211 – Fixed assets (at cost)

8. In case of purchase of goods from the Holding company, Company (or other entities within the Holding company, Company):

8.1 For goods which are subject to VAT under deduction method:

a) Upon receipt of goods from the Holding company, Company or other entities within Holding company, Company, based on invoices and related supporting documents, enter:

Dr. 156 – Merchandise goods (internal selling price)

Cr. 336 – Inter-company payable

b) Upon sale of goods, the enterprise must prepare VAT invoice, based on the VAT invoice, to reflect sale revenues and output VAT, enter:

Dr. 111, 131, …


Cr. 3331 – VAT (33311).

Simultaneously, a sales invoice list shall be drawn up and delivered to the Holding company, Company (or other entities in the Holding company, Company) for inter-company revenue recognition.

c) Upon receipt of VAT invoice from the higher-level entity concerning the inter-company sales, based on invoice reflecting input VAT deductible, enter:


Cr. 156 – Merchandise goods (if the costs of goods has not been transferred).

Cr. 632 – Costs of goods sold (if the costs of goods has been transferred).

d) Where, by reason of performance, management and accounting, an entity would use a VAT invoice instead of the invoice; upon delivery of merchandise/goods to branches on different locations, VAT invoice shall be prepared. Based on the VAT, revenue shall be recorded based on the VAT invoice:

Dr. 111, 112, 136 (internal selling price includes VAT)

Cr. 3331 – VAT

Cr. 512 – Inter-company revenues (internal selling price excludes VAT)

- Upon receipt of VAT invoice and the goods from the Holding company, Company for sales, based on the VAT invoice and relevant supporting documents to reflect costs of goods received at internal price net off VAT, deductible input VAT, enter:

Dr. 155, 156 (internal price net off VAT)


Cr. 111, 112, 136 (total internal price).

8.2 For goods which are subject to VAT under direct method.

a) Upon receipt of goods from the Holding company, Company for sales, based on invoices and other supporting documents, enter:

Dr.155 – Finished goods (internal price)

Cr.336 – Inter-company payable

b) Upon delivery of goods, sales invoices are prepared based on which to recognize sales revenues, enter:

Dr. 111, 112, 131,…


9. Upon borrowing money from the higher-level entity (Company, the Holding Company) and internal entities, enter:

Dr. 111, 112,…

Cr. 336 – Inter-company payable.

10. Net off receivables from the Holding company, company, other entities within the Holding company, Company with amounts payable to the Holding company, Company and other entities within the Holding company, Company (only net off amounts receivable and payable with an internal entity in the Holding company, Company), enter:

Dr. 336 – Inter-company receivables

Cr 136 acct – Inter- company payables

II. Accounting by the Holding company, Company

1. For the investment and development fund allocable to branches, enter:

Dr .414- Investment and development fund

Cr .336 – Inter- company payables

2. For the financial reserve allocable to branches, enter:

Dr 415 - Financial reserve

Cr 336 – Inter-company payable

3. For the reward and welfare fund allocable to branches, enter:

Dr 431 - Reward and welfare fund

Cr 336 – Inter-company payables

4. When the Holding company, Company grants these funds for branches, enter:

Dr 336 – Inter-company payables

Cr 111, 112,…

5. For amounts allocable to branches as compensation for losses of branches, enter:

Dr. 421 - Retained earnings

Cr.336 - Inter-company payables.

6. For amounts reimbursable to branches for payments on its behalf, enter:

Dr. 152 - Raw materials



Dr. 331 – Amounts payable –trade

Dr.643 - Cost of construction machinery

Dr. 627 - Manufacturing overheads




7. When the Holding company, Company paid for branches on payments made on its behalf, enter:


Cr. 111, 112,…

8. In case the Holding company, Company purchases goods from branches (see Point 8, Section I – Accounting by the branches with separate accounting system)

9. Upon receipt of money from the lower-level entity for management fees, enter:

Dr 111, 112,…

Cr 136, 511, …

(see instruction at Account 136, 642)

ACCOUNT 337

EXCESS OF PROGRESS BILLINGS OVER CONTRACT WORK-IN-PROGRESS

This account reflects amounts payable by clients over contract work-in-progress and amounts receivable over finished work as confirmed by contractor over contract work-in-progress.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING ACCOUNT 337

1. Account 337 shall be applied only in case the construction contract regulates that the contractor is entitled to payment over progress. This account shall not be applied where the construction contract regulates that the contractor is entitled to payment over finished work confirmed by client.

2. Supporting document to verify revenue over finished work in the period (not invoice) prepared by the contractor, which are not pending for confirmation from client, shall be used as a basis to record in debit side of Account 337. The contractor shall have to select method to determine finished work and allocate responsibilities to relevant authorities to determine value of the finished work and prepare supporting documents reflecting revenue from construction contract in the period.

- The invoice prepared based on excess of progress billings over contract work-in-progress shall be used as a basis to record in credit side of Account 337. Amounts in the invoice shall be basis to record amounts receivable from client by the contractor, shall not be a basis to record revenue during the period.

3. Account 337 must be recorded according to each construction contract.

STRUCTURE AND REFLECTED CONTENT OF ACCOUNT 337- EXCESS OF PROGRESS BILLINGS OVER CONTRACT WORK-IN-PROGRESS

Debit side:

To reflect amounts receivable according to revenue recorded over finished work of contract work-in-progress.

Credit side:

To reflect amounts payable by client over contract work-in-progress.

Debit side balance:

To reflect difference where revenue recognized over the contract is higher than amounts payable by client over the contract work-in-progress.


To reflect difference where revenue recognized over the contract is lower than amounts payable by client over the contract work-in-progress.


1. In case the construction contract regulates that the contractor is entitled to payment over progress, when the result from performance of the construction contract is reliably estimated, based on supporting documents reflecting revenue over finished work (not invoice) prepared by the contractor, enter:

Dr. 337 - Excess of progress billings over contract work-in-progress

Cr. 511- Revenue

2. Based on invoice prepared over progress to record amounts receivable over progress as stated in the contract, enter:

Dr. 131- Accounts receivable -trade

Cr.337 - Excess of progress billings over contract work-in-progress

Cr. 3331- VAT.

3. Upon receipt of payment to the contractor from client, enter:

Dr. 111,112,…

Cr.131- Accounts receivable –trade.

ACCOUNT 338

OTHER PAYABLES

This account reflects settlement of amounts payable other than amounts payable reflected in account group 33 (from account 331 to account 337). This account also reflects Deferred revenue from services provided, difference due to revaluation of assets contributed to join-venture and differences arising from sales, release of assets being operating lease or financial lease.

Content and scope of this account including following transactions:

1. Value of surplus assets whose cause remains unidentifiable, thus pending for resolution of competence authorities.

2. Value of surplus assets payable to individuals, entities (internal and external) subject to decision of competent authorities upon identification of the cause.

3. Accrued amounts and payments for social insurance, health insurance and trade union fees.

4. Amounts withheld from employees’ salaries as judged by the court (post-divorce, out-law child allowance, court fees, compensation,…)

5. Amounts payables to external entities as a result of short- term deposits received. Short term deposits in kind shall not be reflected in this account but in the off balance sheet account (Account 003- Inward consignment goods for sale).

6. Interest payable to joint venture parties, dividends payable to shareholders

7. Temporary borrowings of materials and cash

8. Amounts received from an import-export entrusted entity or commission sales agent for import-export duty, related VAT,…

9. Rentals received in advance for several accounting periods for lease of assets and facilities (Deferred revenue)

10. Difference between forward price and spot price.

11. Interest received in advance upon lending or purchasing debt instruments.

12. Foreign exchange differences arisen and from revaluation of monetary items dominated in foreign currencies of construction activities (pre-operating period) upon completion of outstanding construction activities at the year’s end.

13. Deferred interest due to revaluation of assets contributed to co-controlled joint venture over share of joint venture party.

14. Amounts payable for amounts received from sale of State-owned shares, amounts received from debt collection on behalf and proceeds from disposal of assets which are not included in enterprise’s value.

15. Positive difference between selling price and net book value of fixed assets for sale and release being financial lease.

16. Positive difference between selling price and fair value of fixed assets for sale and release being operating lease

17. Other amounts payable.


ACCOUNT 338 - OTHER PAYABLES

Debit side:

- Surplus assets value transferred to relevant accounts according to violation handling minute;

- Amounts of social insurance payable to employees;

- Amounts of trade union fee spent by the entity;

- Social insurance, health insurance and trade union fees remitted to competent authority;

- Deferred revenue recorded for each period; repayment of advances from customers upon termination of assets rental;

- Amortization of foreign exchange difference arising and due to revaluation of monetary items dominated in foreign currencies (foreign exchange gains) of construction activities (pre –operating period ) upon completion of construction to amortize into financial income;

- Amortization of positive difference between revaluation cost and net book value of assets contributed to co-controlled joint venture over share of the joint –venture party;

- Amortization of difference between forward price with spot price (deferred payment interest) to financial income;

- Transfer of positive difference between selling price and net book value of FA for sale and release being financial lease against operating expenses;

- Transfer positive difference between selling price and fair value of FA for sale and release being operating lease against operating expenses;

- Transfer positive difference between revaluation cost and net book value of materials, goods contributed to co-controlled joint venture over share of joint-venture party which shall be recorded as an increase in other income upon sale of these materials, goods of the joint-venture party.

- Amounts paid to Enterprises Support Funds for amounts collected from debts and proceeds from transfer, disposal of assets which are excluded in value of the enterprise upon equatization.

- Transfer equitization expenses net off with proceeds from equitisation of the enterprises;

- Other amounts already paid.

Credit side:

- Value of surplus asset pending for resolution (whose cause unidentifiable);

- Value of surplus assets payable to individuals, entities (internal and external) according to violation handling minute upon clarification of the cause;

- Social insurance, health insurance and trade union fees expensed in the period

- Social insurance, health insurance withheld from employees’ salaries.

- Amounts to be withheld from employees regarding housing and utilities expenses;

- Reimbursement granted to cover overpayment of trade union fees;

- Amounts of health insurance paid to employees covered by insurance agency;

- Deferred revenues increase in the period;

- Transfer of foreign exchange difference arising from and revaluation of monetary items in foreign currencies (foreign exchange gains) of construction activities (pre-operating activities) upon completion of construction to amortize into financial income;

- Difference between forward price and spot price;

- Positive difference where selling price is higher than net book value of fixed assets for sale and release being financial lease;

- Positive difference where selling price is higher than fair value of fixed assets for sale and release being financial lease;

- Positive difference where revaluation costs is higher than net book value of assets contributed to co-controlled joint venture over share of the joint-venture party;

- Amounts payable for amounts received from debt collection on behalf and proceeds from transfer, disposal of assets which are excluded in value of enterprise upon equitisation;

- Amounts payable for total amounts received from debt collection on behalf and proceeds from transfer, disposal of assets held on behalf of the State (which are excluded in value of enterprise);

- Total amounts received from sale of State-owned shares.

- Others payable.


- Outstanding amounts payable;

- Amounts of social insurance, health insurance and trade union fees collected but not yet paid and retained for spending;

- Surplus assets value pending for resolution;

- Deferred revenue at the period’s end;

- Foreign exchange difference arising from and revaluation of monetary items dominated in foreign currencies (foreign exchange gains) of construction activities (pre-operating period) upon completion of outstanding construction activities at the year’s end;

- Positive difference where selling price is higher than fair value or net book value of fixed assets for sale and release remains untransferred.

- Positive difference where revaluation cost is higher than net book value of assets contributed to co-controlled joint ventures remains untransferred.

- Outstanding amounts payable for amounts received from debt collection on behalf and proceeds from transfer, disposal of assets which are held on behalf and excluded in value of enterprise;

- Outstanding amounts payable by joint-stock company on debt collections on behalf and proceeds from transfer, disposal of assets which are held on behalf of the State at the period’s end;

- Outstanding amounts payable from sale of the State-owned shares at the period’s end;

This account can have debit side balance. Debit side balance reflects amounts already paid which is higher than amounts payable or amounts of social insurance paid to employees which is not refunded and overpayment of trade union fees which are not reimbursed.

Account 338 – This account has 8 sub-accounts

- Account 3381 – Surplus of assets awaiting for resolution: to record value of surplus assets whose cause is unidentifiable and which is pending for resolution;

Where the cause of the surplus assets has been identified for which a resolution is documented, the value of surplus assets is then recorded in relevant accounts other than account 338 (3381).

- Sub-account 3382 – Trade union fees: to reflect recognition and payment of trade union fees.

- Sub-account 3383 – Social insurance: to reflect recognition and payment of social insurance;

- Sub-account 3384 – Health insurance: to reflect recognition and payment of health insurance;

- Sub-account 3385 - Payables regarding to equitization: to reflect amounts payable on amounts received from sale of the State-owned shares, amounts received from debt collection on behalf which are excluded in value of enterprise and others payable as stated.

- Sub-account 3386 – Short-term deposits received: to reflect deposits received from external entities, individual within one year, to ensure services relating to manufacturing, operating activities to be carried out as signed contracts.

- Sub-account 3387 – Deferred revenue: to record the current amount and movement of deferred revenue in the period. Entered into this account shall be advances from customers for one or more accounting periods for lease of assets; interest received in advance upon lending or purchasing debt instruments; difference between deferred payment price and spot price; foreign exchange difference arising from and revaluation of monetary items dominated in foreign currencies of construction

activities (pre-operating period) upon completion of construction for amortization; positive difference where revaluation cost is higher than net book value of assets contributed to joint-venture over share of joint-venture party.

This account shall not record advances from customers of which products, goods, services are not provided.

- Sub-account 3388: Others payable: reflect other amounts payable other than amounts payable reflected from Account 3381 to account 3387.


1. For the value of surplus fixed assets whose cause remains unidentifiable, thus pending for resolution, enter:


Cr. 214 – Depreciation of fixed assets (depreciation value)

Cr.338 – Other payables (3381) (net book value).

Simultaneously, based on fixed asset documents to increase fixed assets in fixed asset registration.

2. For the value of surplus inventory of materials, goods, cash whose cause remains unidentifiable, thus pending for resolution, enter:

Dr. 111 – Cash on hand




Dr. 156 – Merchandise goods


Cr.338 – Other payables (3381).

3. Upon receipt of relevant resolution on the surplus assets, entries shall be recorded into relevant accounts, enter:

Dr.338 – Other payables (3381)

Cr.441 – Working capital; or

Cr.441- Capital expenditure fund;

Cr. 338 – Other payables (3388);

Cr. 642 – General and administration expenses

4. For social insurance, health insurance and trade union fee deducted from operating expenses, enter:






…

Cr. 338 – Other payables (3382, 3383, 3384).

5. For social insurance, health insurance and trade union fee deducted from employees’ salaries, enter:


Cr.338 – Other payables (3384).

6. Upon payment of social insurance and trade union fee to competent authorities, and purchase of health insurance coupon for employees, enter:

Dr. 338 – Other payables

Cr. 111, 112, …

7. Social insurance benefit payables to employees for sick leave and maternity leave, enter:

Dr. 338 – Other payables (3383).

Cr. 334 – Payables to employees

8. For trade union fees spent by the entity , enter:

Dr. 338 – Other payables (3382, 3383)

Cr.111, 112,…

9. For refund of trade union fees overpaid, upon receipt of amounts refunded, enter:


Dr. 112 – Cash at bank

Cr. 338 – Other payables.

10. Accounting for deposits received:

- Upon receipt of short-term deposits in cash, enter:

Dr. 111 (1111, 1113), 112, …

Cr. 338 – Other payables (3386).

- For depositor who breaches the deposit contract and suffers penalty:

+) For penalty amounts deducted from deposited amounts, enter:

Dr. 338 – Other payables (3386) (for short-term deposits)

Cr.711- Other income.

+) Upon actual returns of deposited amount to depositor, enter:

Dr. 338 – Other payables (3386) (less penalty amount – if any)

Cr. 111, 112, …

11. Upon determination of interest payable to joint venture parties, dividends payable to shareholders according to decision of the general meeting of the shareholders, enter:

Dr. 421 – Retained earnings

Cr. 338 – Other payables (3388).

12. Accounting for deferred revenue on lease of assets, investment property under operating lease, revenue in the period is total amounts received from lease of assets, investment property divided by number of periods of which rental fees is received in advance.

a/ For enterprise of which VAT is calculated under deduction method:

- Upon receipt of advances from customer for lease of fixed assets, investment property in many years, to reflect deferred revenue at the price net off VAT, enter:

Dr. 111, 112, …(total amounts received in advance).

Cr.3387 – Deferred revenue (lease price net off VAT)

Cr. 3331 – VAT payable (33311).

- Upon computation and recognition of revenue in each period, enter:


Cr. 511 – Revenue from goods sold and services rendered (5113, 5117).

- In case of lease contract default, advances must be returned to customers, enter:

Dr. 3387 – Deferred revenue (price net of VAT)

Dr. 3331 – VAT payables (refund to lessee concerning VAT)

Cr. 111, 112, …(amounts returned).

b/ For VAT paid under direct method:

- Upon receipt of advances from customers for lease of assets, investment property in many years, Deferred revenue is recorded at the total amounts received, enter:

Dr. 111, 112, …

Cr. 3387 – Deferred revenue (total amounts received in advance)

- For revenue recognized in the period, enter:


Cr. 511 - Revenue from goods sold and services rendered (5113, 5117).

- For VAT payable under direct method, enter:

Dr.511 - Revenue (5113, 5117).

Cr. 3331 – VAT (33311).

- Where the lease contract is default, thus refund the prepayment, enter:


Cr. 111, 112, …( total refund).

13. Accounting for sale of goods on credit.

a. For goods which are sold on credit and subject to VAT under deduction method:

- Revenue from sale of goods on credit is recorded at spot price, difference between spot price and forward price shall be recorded in account “ Deferred revenue”, enter:

Dr.111, 112, 131, …

Cr. 511- Revenue from goods sold and services rendered (at spot price net off VAT)

Cr. 3387 – Deferred revenue (difference between forward price and spot price net off VAT).

Cr. 333 – Taxes payable to the State Treasury (3331).

- Periodically, to calculate, determine and transfer revenue from sale of goods on credit, enter:


Cr. 515 – Financial expenses.

- Upon actual receipt of amounts from sale of goods on credit including difference between forward price and spot price , enter:

Dr. 111, 112, …

Cr. 131 – Accounts receivable – trade.

b. For goods which are sold on credit and are not subject to VAT or subject to VAT under direct method:

- Revenue from sale of goods on credit is recorded at spot price, difference between spot price and forward price shall be recorded in account “ Deferred revenue”, enter:

Dr.111, 112, 131, …

Cr. 511- Revenue from goods sold and services rendered (at spot price net off VAT)

Cr. 3387 – Deferred revenue (difference between forward price and spot price with VAT).

Simultaneously, to record cost of goods sold:

+ For sale of goods, products, enter:


Cr. 154 (631), 155, 156, 157, …

+) For disposal, transfer of investment property, enter:

Dr. 632 – Costs of goods sold (net book value of investment property).

Dr. 324- Depreciation of fixed assets (3147) (accumulated depreciation value)

Cr. 217 – Investment property.

- For VAT payable under direct method in the period, enter:

Dr. 511– Revenue

Cr. 333 – Taxes payable to State Treasury (3331).

- For revenue from sale of goods on credit, enter:


Cr.515 – Financial income.

- Upon actual receipt of proceeds from sales of goods on credit including deferred interest, enter:

Dr. 111, 112, …

Cr.131 – Accounts receivable –trade.

14. In case of sale and release of fixed assets being financial lease of which selling price is higher than net book value of fixed assets sold and released:

- Upon completion of sale of assets, based on invoice and relevant supporting documents, enter:

Dr. 11, 112, …(total payment)

Cr.711 – Other income (by net book value of fixed assets sold and released).

Cr. 3387 – Deferred revenue (positive difference where selling price is higher than net book value of fixed assets).

Cr. 3331 – VAT.

Simultaneously, to decrease fixed assets:

Dr.811 – Other expenses (net book value of fixed assets sold and released)

Dr. 214 – Depreciation of fixed assets (depreciation value) (if any)

Cr.211 – Fixed assets (at cost).

- Periodically, to transfer positive difference where selling price is higher than net book value of fixed assets sold and released against operating expenses in line with lease term, enter:


Cr. 623, 627, 641, 642, …

15. To transfer foreign exchange difference upon termination of construction period (pre-operating period) of investment activities, if Account 413 “Foreign exchange difference” has credit side balance, this shall be credited to financial income or transferred to Account 3387 “Deferred revenue” to be amortized in 5 years as maximum, enter:

Dr. 413 – Foreign exchange difference (4132)


Cr. 3387 – Deferred revenue (foreign exchange gains) (if amortized).

- To amortize realized foreign exchange gains during construction period into financial income of the fiscal year upon termination of construction period and put into use, enter:


Cr. 515 – Financial income (foreign exchange gains).

16. Upon contribution to jointly controlled entity by fixed assets of which revaluation cost is higher than net book value of the fixed assets, the difference where revaluation cost is higher than net book value of the fixed assets over share of other parties in the joint-venture shall be recorded in account 711 “Other income”; the difference where revaluation cost is higher than net book value of the fixed assets over its share in the joint-venture shall be recorded in account 3387 “Deferred revenue”; enter:

Dr. 222 – Investments in joint –ventures

Dr. 214 – Depreciation of fixed assets (2147) (depreciation value).

Cr. 211, 213 (at cost)

Cr. 711 – Other income (the difference between revaluation cost and net book value of the fixed assets over share of other parties in the joint-venture).

Cr. 3387 – Deferred revenue (the difference between revaluation cost and net book value of the fixed assets over its own share in the joint-venture).

- Periodically, based on useful life of the fixed assets used by the jointly controlled entity, to allocate deferred revenue into other income during period, enter:



17. Accounting for transactions between capital contributor and the jointly controlled entity:

17.1. In case the capital contributor sells goods to the jointly controlled entity:

- In case of selling goods, assets to the jointly controlled entity, upon issuance of goods for sale, enter:


Cr.155 – Finished goods; or

Cr. 156 –Merchandise goods.

Simultaneously, based on actual selling price of goods and products to reflect sale revenue, enter:

Dr.111, 112, 131,…(Total payment for products, goods sold to the jointly controlled entity)

Cr.511 – Revenue (selling price net off VAT)

Cr.3331 – VAT (33311)

- In case of selling fixed assets to the jointly controlled entity, the fixed assets shall be decreased, enter:

Dr.811 – Other expenses (net book value)

Dr .214 – Depreciation of fixed assets (depreciation value)

Cr. 211, 213 (at cost).

Simultaneously, to record other income from sale of fixed assets at actual selling price to the jointly controlled entity, enter:

Dr.111, 112, 131,…

Cr.711 – Other income

Cr.333- Taxes payable to the State Treasury (33311).

- At end of period, based on fixed assets, products, finished goods sold to the jointly controlled entity with premium; however in the period these assets have not been sold by the jointly controlled entity to third independent parties, then the capital contributor must reflect deferred revenue from sale of fixed assets, products and finished goods over its own share in the jointly controlled entity:

+ In case of selling products and finished goods, enter:

Dr.511 – Revenue (deferred gains from sale of products and finished goods over capital contributor’s share in the jointly controlled entity).

Cr.3387 – Deferred revenue

+ In case of selling fixed assets, enter:

Dr .711 – Other income (deferred gains from sale of fixed assets in over capital contributor’s share in the jointly controlled entity)

Cr.3387 – Deferred revenue

- In subsequent accounting period, when the jointly controlled entity sells products and finished goods to the third independent parties, capital contributor enters:

Dr.3387 – Deferred revenue (deferred gains over its own share in the jointly controlled entity)

Cr.511 – Revenue

For fixed assets, periodically, the capital contributor allocates deferred gains over its own share in the jointly controlled entity into other income based on useful life of the fixed assets used by the jointly controlled entity, enter:

Dr.3387 - Deferred revenue (gains over its own share in the jointly controlled entity)


- When the jointly controlled entity sells assets acquired from the capital contributor to the third independent parties, capital contributor enters:

Dr. 3387 - Deferred revenue (gains from sale of fixed assets over capital contributor’s share in the jointly controlled entity remains unallocated to other income)

Cr.711 – Other income.

17.2. In case capital contributor purchases assets of the jointly controlled entity:

Upon purchase of assets from the jointly controlled entity, based on relevant supporting documents to record assets, goods acquired as same as assets, goods acquired from other suppliers.

18. Accounting for amounts payable for proceeds the sale of State-owned shares:

- Since valuation of enterprise till official transformation into joint-stock company, in case of receipt of amounts receivable and proceeds from transfer of assets which are excluded in value of the enterprise, to reflect all amount received which are payable to Support Fund of enterprise on behalf, enter:

Dr .111, 112, …

Cr. 3385 – Payables regarding to equitization

Simultaneously, to record value of materials, goods held for the State which are excluded in value of enterprise and which are sold into credit side of Account 002 “Goods held under trust or for processing” (off-balance sheet items).

- Upon refund of proceeds from amounts receivable and proceeds from transfer of assets excluded in value of enterprise to the Support Fund, enter:

Dr. 3385 - Payables regarding to equitization

Cr. 111, 112,…

- Upon sale of the State owned shares to shareholders, enter:

Dr. 111, 112, …

Cr.3385 - Payables regarding to equitization.

- Upon completion of equitization, the enterprise shall have to report and finalize equitization expenses to equitisation agencies. Total expenses will be net off with proceeds from sale of the State owned shares; to transfer approved equitization expenses, enter:

Dr. 3385 - Payables regarding to equitization (proceeds from sale of the State owned shares).

Cr.1385 – Receivables regarding to equitization ( equitization expenses)

- Upon transfer of difference where total proceeds from sale of the State owned shares is higher than equitization expenses to the Support Fund, enter:

Dr . 3385 - Payables regarding to equitization.

Cr. 111, 112…….

ACCOUNT 341

LONG TERM BORROWINGS

This account reflects long term borrowings and settlement of long term borrowings.

Long term borrowings are those with term of more than one years.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING LONG TERM BORROWINGS

1. At the year end, the enterprise shall have to make plans for long term borrowings and determine current portions of long term borrowings in the next accounting period to follow up and prepare settlement plan. The enterprise shall have to account for borrowings by each borrower and borrowing contract.

2. If borrowings are in foreign currencies, original currencies should be followed up. Borrowings in foreign currencies or borrowings which are paid in foreign currencies should be translated into Vietnam Dong at actual exchange rate or at average interbank rate announced by the State Bank of Vietnam at the time of borrowing, debit side of Account 341 shall be translated at the exchange rate recorded in accounting book. Foreign exchange differences (if any) arising from operating activities (including construction activities) regarding payment of long term borrowings in foreign currencies shall be recorded in financial income or financial expenses . Foreign exchange differences arising from construction activities (pre-operating period) shall be recorded into Account 413 – “Foreign exchange difference” and shall be resolved as regulated (details in Account 413).

3. At the year end, outstanding balances of long term borrowings in the foreign currencies must be revaluated at average interbank rate announced by the State Bank of Vietnam at the time of financial statements’ preparation. Foreign exchange differences arising due to revaluation of balances of long term borrowings in foreign currencies shall be recorded in Account 413 “Foreign exchange difference” and shall be resolved as regulated (details in Account 413).


ACCOUNT 341 – LONG TERM BORROWINGS

Debit side:

- Settled amounts for long term borrowings;

- Adverse foreign exchange differences due to revaluation of long term borrowings balance in foreign currieries at the end of fiscal year.

Credit side:

- Long term borrowings increased in the period;

- Favor foreign exchange difference due to revaluation of b long term borrowings balance in foreign currencies at the end of fiscal year.


Outstanding balance of long term borrowings within due date.


1. For long term borrowings used to purchase fixed assets for manufacturing, trading goods and services which are subject to VAT under deduction method, enter:

Dr. 211- Tangible fixed assets (selling price net off VAT)

Dr. 213- Intangible fixed assets (selling price net off VAT)

Dr. 133- Deductible VAT(1332)

Cr. 341 – Long term borrowings.

2. Long term borrowings for construction activities:

- In case fixed assets purchased, constructed are used for manufacturing, trading goods, services which are subject to VAT under deduction method, enter:

Dr. 241- Construction in progress (price net off VAT)

Dr . 133- Deductible VAT (1332)


- In case fixed assets purchased, constructed are used for manufacturing, trading goods, services which are not subject to VAT or subject to VAT under direct method, enter:

Dr. 241- Construction in progress (total payment)

Cr.341 – Long term borrowings.

3. Long term borrowings used to settle expenses incurred to purchase materials, equipments, tools and supplies:

- In case of materials, equipments, tools and supplies purchased are used in manufacturing, trading goods, services which are subject to VAT under deductible VAT, enter:

Dr. 152 - Raw materials (purchase price net off VAT)

Dr. 153 - Tools and supplies (purchase price net off VAT)

Dr. 133- Deductible VAT(1331)

Cr.341 – Long - term borrowings

- In case of materials, equipments, tools and supplies purchased are used in manufacturing, trading goods, services which are not subject to VAT or subject to VAT under direct VAT, enter:

Dr. 152 - Raw material ( total payment)

Dr. 153 - Tools and supplies (total payment)

Cr. 341 – Long term borrowings

4. Long term borrowings used to make payment to supplier, contractor of construction activities, enter:

Dr. 331 – Accounts payable -trade

Cr . 341 – Long term borrowings

5. Long term borrowings used to make advances to contractor, enter:

Dr. 331 – Accounts payable -trade (accounted for the same as the advances to contractors)

Cr .341 – Long term borrowings

6. For long term borrowings used for investment in subsidiaries, associates, joint-ventures; investment in long term shares, bonds, enter:

Dr. 221 - Investments in subsidiaries

Dr. 222 - Investments in joint ventures

Dr. 223 - Investments in associates

Dr. 228 - Other long term investments

Cr. 341 – Long term borrowings

7. Long term borrowings in VND ( transfer to reserve or deposit to the Bank), enter:

Dr. 111 – Cash on hand (1111)

Dr .112 – Cash in bank (1121)


8. Long term borrowings in foreign currencies must be translated into VND at the actual exchange rate or at average interbank rate announced by the State Bank of Vietnam, enter:

Dr .111 – Cash on hand (1112) (transfer to reserve)

Dr .112 - Cash at Bank (1122) (deposit to bank accounts)

Dr . 221, 222, 223 – (borrowings to invest in subsidiaries, associates, joint -ventures)

Dr.331 -Accounts payable -trade ( direct payment to suppliers)

Dr .211 -Tangible Fixed Assets ( borrowing to purchase tangible fixed assets)

Dr .133 -Deductible VAT (if any)

Cr .341 -Long term borrowings

9. Upon payment of long term borrowings in cash on hand, cash in bank, or proceeds from trade receivable (in VND), enter:

Dr. 341 -Long term borrowings.


Cr. 112- Cash in bank

Cr. 131 - Accounts receivable -trade.

10. Upon payment of long term borrowings in cash on hand, cash in bank ( in foreign currencies).

- In case of payment of long term borrowings in foreign currencies within the operating period (including the enterprises with investments into construction activities), enter:

Dr. 341 - Long term borrowings (at foreign exchange rate recorded in accounting book)

Cr. 111, 112 - (at foreign exchange rate recorded in accounting book)


(Foreign exchange loss shall be recorded in debit side of account 635- Financial expenses)

- In case of payment of long term borrowings for construction activities (pre-operating period), enter:

Dr. 341 - Long term borrowings (at foreign exchange rate recorded in accounting book)

Dr. 413 – Foreign exchange difference (foreign exchange loss)

Cr. 111, 112…(at foreign exchange rate recorded in accounting book)

Cr. 413- Foreign exchange difference (foreign exchange gains)

(Foreign exchange loss shall be recorded in debit side of account 413).

11. At end of accounting period, upon preparation of the financial statements, long term borrowings balance (credit side balance of account 341) in foreign currencies shall be revaluated at average interbank rate announced by SBV (in case of foreign exchange fluctuation).

- In case of foreign exchange loss, enter:

Dr. 413 – Foreign exchange difference (4113, 4132)

Cr. 341 – Long -term borrowings.

- In case of foreign exchange gains, enter:

Dr.341 - Long -term borrowings

Cr. 413 – Foreign exchange difference (4113, 4132).

ACCOUNT 342

LONG TERM LIABILITIES

This account is used to record long term liabilities such as finance lease liabilities or other long term liabilities (debt term is more than 01 year).

In case of finance lease, total finance lease liabilities recorded on the Credit side of Account 342 “Long-term liabilities” are total liabilities equal to the present value of the minimum lease payments or the fair value of the leased assets, minus (-) current portion, plus (+) VAT payable during the lease term.

If finance lease is in foreign currencies, it shall be translated into VND at the actual exchange rate or the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam at the transaction date. When finance lease liabilities are paid in foreign currencies, the debit side balance of Account 342 shall be translated into VND at the recorded exchange rate.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 342 - LONG TERM LIABILITIES

Debit side:

- long term liabilities paid due to payment before due date;

- current portion of long-term liabilities transferred to Account 315;

- decrease in liabilities accepted by creditors;

- foreign exchange loss upon revaluation of foreign currency long term liabilities.

Credit side:

- long term liabilities incurred during the current period;

- foreign exchange gain upon revaluation of foreign currency long term liabilities


I. According transactions relating to finance lease

1. Where the principal of the finance lease liability is determined at the purchase price net of VAT at which the lessor paid to purchase fixed assets for lease:

- Upon the receipt of the finance leased fixed asset, based of lease transaction and relevant documents reflecting the value of finance leased fixed asset at the price net of input VAT:

Dr. 212 - Finance lease fixed assets

Cr. 342 – Long term liabilities (the present value of the minimum lease payments or the fair value of the leased assets, minus (-) current portion)

Cr. 315 - Current portion of long term liabilities (the principal payable in the current period)

- At the end of the financial year, based on the lease contract, current portion of long term liabilities of the next year is determined:


Cr. 315 - Current portion of long term liabilities

2. Where the principal of the finance lease liability is determined at the purchase price including VAT at which the lessor paid to purchase fixed assets for lease:

- Upon the receipt of the finance leased fixed asset, the lessee has to pay VAT that the lessor paid upon the purchase of fixed assets for lease, based on the finance lease contract at the price net of VAT repayable to the lessor:

Dr. 212 - Finance lease fixed assets (price net of VAT)

Dr. 138 - Other receivables (Input VAT of Finance lease fixed assets)

Cr. 315 - Current portion of long term liabilities (the principal payable including VAT in the current period)

Cr. 342 – Long term liabilities (the present value of the minimum lease payments or the fair value of the leased assets, minus (-) current portion, plus (+) VAT payable during the lease term).

- At the end of the financial year, based on the finance lease contract, current portion of long term liabilities of the next year is determined.



II. According transactions relating to other long term liabilities

1. Where other long term liabilities incur for construction investment


Cr. 342 – Long term liabilities

2. Where creditors cannot be identified, the enterprise decides to write off relevant liabilities or not make repayments upon the equitization process



3. At the end of the financial year, based long term liability balance, current portion of long term liabilities of the next year is determined



III. At the financial year, at the date of financial statement preparation

Foreign currency long term liabilities are revalued the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam:

1. If the exchange rate increases and loss incurs:

Dr. 413 - Foreign exchange differences

Cr. 342 – Long term liabilities

2. If the exchange rate decrease and gain incurs:


Cr. 413 - Foreign exchange differences

ACCOUNT 343 - BONDS ISSUED

This account is to record bonds issued and paid by the enterprise. This account is also to record discounted bonds and premium issued and allocation of discounts and premium when borrowing costs are included in production and business costs or capitalized in each period.

When the enterprise borrows capital by issuing bonds, there are 3 cases:

- issuing bonds at par value: bonds are issued at the price equal to its par value. This is usually the case where the market interest rate is equal to the normal interest rate of the issued bonds.

- issuing discounted bonds (the issuing price is lower than the par value): bonds are issued at the price lower than the par value. The difference between the issuing price and the par value is a discount. This is usually the case where the market interest rate is higher than the normal interest rate of the issued bonds.

- issuing premium bonds (the issuing price is higher than the par value): bonds are issued at the price higher than the par value. The difference between the issuing price and the par value is a premium. This is usually the case where the market interest rate is lower than the normal interest rate of the issued bonds.

Discounted bonds and surplus bonds are issued only when the enterprise acquires borrowings through bond issuance and at the issuance date the difference between the market interest rate and the normal interest rate is accepted by investors.

Bond discounts and bond premium are determined and recorded at the issuance date. The difference between the market interest rate and the normal interest rate does not have any effect on the recorded discounts and premium.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING BONDS ISSUED

1. Account 343 is applied only to the enterprises who - Bond nominal value.

2. Account 343 reflects all the details of bonds issued

- par value

- bond discounts

- bond premiums

And bonds are also recorded in detail by bond issuance period.

3. Bond discount and bond premium shall be recorded in detail by each type of bond and their allocation shall be recorded borrowing costs are included in production and business costs or capitalized in each period:

- Bond discount is amortized to be added into borrowing costs of each period during the bond period.

- Bond premium is amortized to be deducted from borrowing costs of each period during the bond period.

- Where interest expense is eligible to be capitalized, the interest and bond discount and bond premium capitalized during each period must not exceed actual interest, discount and premium during such period;

- Discount and premium is amortised on an effective interest rate basis or a straight-line basis:

+ effective interest rate: Bond discount or premium amortised in each period is calculated by the difference between interest expense payable of that period (opening bonds multiplied by (x) the effective interest rate of the market) and the amount payable of that period.

+ straight-line: bond discount or bond surplus is amortised during the bond period.

4. Where bond interest is payable on maturity date, bond interest payable in each period is calculated to be included in production and business cost or capitalised into work in progress.

5. When financial statements are prepared, bonds issued are recorded net in liabilities on the balance sheet (bond value is equal to the par value minus (-) discounts plus (+) premium.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 343 – BONDS ISSUED

Debit side:

- Bonds paid upon their maturity;

- Bond discount incurring during the period;

- Bond premium amortised during the period.

Credit side:

- Bonds issued at the par value during the period;

- Bond discount amortised during the period.

- Bond premium incurring during the period.

Credit balance:

Total debts due to bond issuance at the period end.

Account 343 “Bonds issued” has 3 second tier accounts:

- Account 3431: Bond nominal value

- Account 3432: Bond discounts

- Account 3433: Bond premiums


I. Bonds are issued at the par value

1. When the enterprise collects money from bond issuance:

Dr. 111, 112... (money collected from selling bonds)

Cr. 3431 - Bond nominal value

2. Where bond interest is payable periodically, interest is included in production and business costs or capitalized upon payment:

Dr. 635 – Financial expenses (if bond interest is included in financial expenses of the period)

Dr. 241 - Construction in progress (if bond interest is capitalised into construction in progress)

Dr. 627 - Production overheads (if bond interest is capitalised into work in progress)

Cr. 111, 112 (bond interest is paid during the period)

3. Where bond interest is payable on maturity date, bond interest is calculated in each period to be included in production and business costs or capitalised:


Dr. 241, 627 (if bond interest is capitalised into work in progress)

Cr. 335 - Accrued expenses (bond interest is payable during the period)

- At the maturity date, both bond principal and bond interest are paid to bond holders:

Dr. 335 - Accrued expenses (total bond interest)

Dr. 3431 – Bond nominal value (bond principal)

Cr. 111, 112 …

4. Where bond interest is paid on the issuance date, bond expenses are recorded on the debit side of the account 242 (bond interest paid in advance), and then amortised into items subject to expenses:

- at the issuance date:

Dr. 111, 112 … (total money collected from bond issuance)

Dr. 242 - Long term prepayments (bond interest paid in advance)

Cr. 3431 - Bond nominal value

- periodically, bond interest paid in advance is amortized into borrowing costs:

Dr. 635 - Financial expenses (if bond interest is included in financial expenses of the period)



Cr. 242 - Long term prepayments (bond interest paid in advance) (bond interest is amortized during the period)

5. Expense incurring from bond issuance:

- If expense incurring from bond issuance is insignificant, it is charged to expense during the period:

Dr. 635 - Financial expenses

Cr. 111, 112 …

- If expense incurring from bond issuance is significant and is amortised gradually:

Dr. 242 - Long term prepayments (expense incurring from bond issuance)

Cr. 111, 112 …

- Periodically, expense incurring from bond issuance is amortized:

Dr. 635, 241, 627 (expense incurring from bond issuance is amortized during the period)

Cr. 242 - Long term prepayments (expense incurring from bond issuance)

6. Bonds are paid on maturity date:

Dr. 3431 – Bond nominal value

Cr. 111, 112 …

II. Bonds are issued at discount

1. When money is collected from bond issuance:

Dr. 111, 112 … (money collected from bond issuance)

Dr. 3432 - Bond discounts (the difference incurs when bonds are sold at the price lower than the par value)

Cr. 3431 – Bond nominal value.

2. Where bond interest is payable periodically, bond interest is included to production and business cost or capitalised:




Cr. 111, 112 … (bond interest paid during the period)

Cr. 3432 – Bond discounts (Bond discounts amortized each period)

3. Where bond interest is payable on maturity date:

- Borrowing costs payable is calculated in each period


Dr. 241, 627 (if bond interest is capitalised into work in progress)

Cr. 335 - Accrued expenses (bond interest is payable during the period)

Cr. 3432 – Bond discounts (bond discounts amortised in each period

- At the maturity date, both bond principal and bond interest are paid to bond holders:


Dr. 3431 – Bond normal value

Cr. 111, 112…

4. Where bond interest is paid on the issuance date, bond expenses are recorded on the debit side of the account 242 (bond interest paid in advance), and then amortised into items subject to expenses



Dr. 3432 – Bond discounts


Cr. 3431 – Bond nominal value

- Periodically, bond interest paid in advance is amortized into borrowing costs:





Cr. 3432 – Bond discounts (bond discounts are amortised in each period)

5. Bonds are paid on maturity date:

Dr. 3431 – Bond nominal value

Cr. 111, 112 …

III. Bonds are issued at premiums

1. When money is collected from bond issuance:

Dr. 111, 112 … (money collected from bond issuance)

Dr. 3432 - Bond discounts (the difference incurs when bonds are sold at the price lower than the par value)

Cr. 3431 – Bond nominal value.

2. Where bond interest is payable periodically, bond interest is included to production and business cost or capitalised:




Cr. 111, 112 … (bond interest paid during the period)

- Simultaneously, premiums shall be amortized to reduce borrowing costs in each period, enter:

Dr. 3433 – Bond premiums (the amortized amount in the period)

Cr. 635, 241, 627.

3. Where bond interest is payable on maturity date, bond interest payable is calculated in each period:

- Borrowing costs of items is calculated during the period

Dr. 635, 241, 627

Cr. 335 – Accrued expenses (bond interest is payable during the period)

- Bond premiums are amortised to reduce borrowing costs during the period:

Dr. 3433 – Bond premiums

Cr. 635, 241, 627

- At the maturity date, both bond principal and bond interest is paid to bond holders:


Dr. 3431 – Bond normal value (principal)

Cr. 111, 112…

4. Where bond interest is paid on the issuance date, bond expenses are recorded on the debit side of the account 242 (bond interest paid in advance), and then amortised into items subject to expenses




Cr. 3433 – Bond premiums

Cr. 3431 - Bond normal value

- Periodically, bond interest paid in advance is amortized into items subject to borrowing costs:





Bond premiums are also amortised to reduce borrowing costs in each period:

Dr. 3433 – Bond premiums (bond premium amortised in each period)

Cr. 635, 241, 627.

ACCOUNT 344

LONG TERM DEPOSITS RECEIVED

This account is to record amounts of cash received as deposits from outsiders (both organization and individual) for one year or more to ensure that services relating to production and business shall be provided under the signed contract such as deposit received to ensure the implementation of an economic contract, or consignment contract … . Deposits received in kind will be recorded in an off balance sheet account (Account 003 – Goods held on consignment for sales).

Long term deposits shall be recorded in details on respective customers.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 344 - LONG TERM DEPOSITS RECEIVED

Debit side:

- Long term deposits returned

Credit side:

- Long term deposits received

Credit balance:

- Long term deposits held


1. Upon receipt of long term deposits from outsiders (organizations and individuals)

Dr. 111, 112

Cr. 344 - Long term deposits received (details by each customer)

2. When long term deposits are returned to customers:

Dr. 344 - Long term deposits received

Cr. 111, 112

3. Where the deposit entity breaches against the signed economic contract and is consequently fined as initially agreed:

a. Upon receipt of fine for breaches of signed contract:

If deduction is made to deposit received, enter:

Dr. 344 - Long term deposits received


b. When the remaining long term deposit is actually returned:

Dr. 344 - Long term deposits received (deduction has been made by the amount of the fine received)

Cr. 111, 112

4. Deposits received and returned (See the explanation at Account 003 “Goods held on consignment for sales”)

ACCOUNT 347

DEFERRED TAX LIABILITIES

This account is used to reflect the current balance and the movement (increase, decrease) of deferred tax liabilities. Deferred tax liabilities are determined by taxable temporary differences subject to tax during the year and current CIT rate in the following formula:

Deferred tax liabilities = taxable temporary differences x current CIT rate (%)

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING DEFERRED TAX LIABILITIES

1. Deferred tax liabilities are provided for all taxable temporary differences, except for deferred tax liabilities incurring from initial recognition of an asset or a liability of a transaction which has no effect on accounting profit or taxable profits (or tax loss) at the date of the transaction.

2. At the end of the financial year, taxable temporary differences incurring during the year are determined to record deferred tax liabilities.

3. Deferred tax liabilities are recorded on the principle that deferred tax liabilities of the current year is offset by deferred tax liabilities of prior years, deferred tax liabilities is reduced (reserved) on the principle that:

- If deferred tax liabilities incurring during the current year are higher than deferred tax liabilities reserved during the year, only the difference is recorded.

- If deferred tax liabilities incurring during the current year are lower than deferred tax liabilities reserved during the year, only the difference is recorded (decrease, reversal)

4. Deferred tax liabilities incurring during the year, which do not relate to items recognised directly to equity, are recorded as deferred tax expenses during the year.

5. Deferred tax liabilities are decreased when taxable temporary differences have no effect on taxable profits (assets are realised or liabilities are settled).

6. Deferred tax liabilities incur in the following cases:

Deferred tax liabilities incur taxable temporary differences. Eg. the useful life of fixed assets determined by the enterprise is longer than that accepted by the tax authorities under the current finance policy; accordingly fixed asset depreciation recorded in accounting books is lower than that deducted from taxable profits.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 347 - DEFERRED TAX LIABILITIES

Debit side:

Decrease in deferred tax liabilities (reserved) during the period

Credit side:

Deferred tax liabilities recorded during the period

Credit balance:

Closing deferred tax liabilities


At the end of the financial year, based on “Deferred tax liabilities schedule” deferred tax liabilities incurring from transactions during the year are recorded in deferred tax expenses:

1. If deferred tax liabilities incurring during the year is higher than deferred tax liabilities reserved during the year, only the difference is recorded:

Dr. 8212 – Corporate income tax – deferred

Cr. 347 – Deferred tax liabilities

2. If deferred tax liabilities incurring during the year is lower than deferred tax liabilities reserved during the year, only the difference is reserved:

Dr. 347 – Deferred tax liabilities

Cr. 8212 – Corporate income tax – deferred

ACCOUNT 351

PROVISION FOR SEVERANCE ALLOWANCE

This account is used to reflect provision for severance allowance made and used of the enterprise.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING PROVISION FOR SEVERANCE ALLOWANCE

1. Provision for severance allowance is used to pay severance allowances to employees who resign or employees who are retrained at the enterprise under the current regulations.

2. Provision for severance allowance is made and charged to general and administrative expenses during the period. Unused provision for severance allowance shall be carried forward. In case of under provision for severance allowance, difference shall be charged to general and administrative expenses during the period.

3. Provision for severance allowance is made at cut off date when financial statements are prepared. Where interim (quarterly) financial statements are made, provision for severance allowance is made on a quarterly basis when quarterly financial statement is made.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 351 – PROVISION FOR SEVERANCE ALLOWANCE

Debit side:

Provision for severance allowance used to pay for resigned employees

Credit side:

Provision for severance allowance made.

Credit balance:

Unused provision for severance allowance


1. When provision for severance allowance is made under the current finance policy:


Cr. 351 - Provision for severance allowance

2. When provision for severance allowance is used to pay severance allowances to employees or pay training costs

Dr. 351 - Provision for severance allowance

Cr. 111, 112 …

3. In case of under provision for severance allowance, difference shall be charged to general and administrative expenses during the period


Cr. 111, 112 …

4. At the end of the period, the enterprise carries out calculation to make provision for severance allowance. If provision for severance allowance required to be made in the current year is higher than unused provision for severance allowance recorded in the accounting book, the difference shall be recorded as follows:


Cr. 351 - Provision for severance allowance

ACCOUNT 352

PROVISIONS

This account is used to reflect the current balance of provisions, provisions made and used of the enterprises.

FOLLOWING REGULATIONS MUST BE FOLLOWED

WHEN RECORDING PROVISIONS

1. A provision is recognized when the following conditions are met:

- the enterprise has a present obligations (a present legal or constructive obligation) as a result of a past event;

- an outflow of economic benefits may be required to settle the obligation; and

- the value of the obligation can be estimated reliably.

2. A recognized provision amount is a best estimated amount required to settle the present obligation at the end of the financial year or at the end of the interim period.

3. Provisions are made once per year at the end of the financial year. If the enterprise prepares interim financial statements, provisions are made at the end of the interim period. If provisions required to be made in the current accounting period are higher than unused provisions in the prior year, the difference shall be charged to production costs of the current accounting period. If provisions required to be made in the current accounting period are lower than unused provisions in the prior year, the difference shall be reserved from production costs.

Provision for warranty of construction works is made for each construction work at the end of the financial year or at the end of the interim period. If Provision for warranty of construction works is higher than the actual expense arising, the difference shall be reversed to account 711 “other income”

4. Only expenses relating initial provisions made shall be covered by such provisions.

5. Provision for future operating loss is not recognized unless such loss incurs from a highly risky contract and all conditions of provision recognition are met.

6. If the enterprise has a highly risky contract, the present obligation under this contract shall be recorded and valued as a provision and a provision is made for each highly risky contract.

7. A provision for expenses from the enterprise restructure is recognized only when adequate conditions of provision recognition are met in accordance with Paragraph 11, VAS 18 “Provisions, Contingent Assets and Liabilities”.

8. Under the enterprise restructure, constructive obligations will incur when the enterprise:

a. has a official specific plan on restructure, including at least 5 areas:

- The whole or part of the relevant business activities;

- Affected important positions;

- Positions, duties and the number of employees who are expected to receive severance allowances when they are required to resign;

- Expenses payable; and

- When the plan is implemented

b. A probable estimate on affected subjects is made the restructure processes are carried out by the plan implementation or the notice on important issues sent to the restructure-affected subjects.

9. A provision for restructure is estimated for expenses directly incurred from restructure activities which satisfy the following conditions:

- they are necessary for restructure

- they are not related to regular activities of the enterprise

10. A provision for restructure does not include such expenses as:

- training or transferring staff

- marketing

- Investments in new systems and distribution networks

11. Provisions normally include:

- Provision for restructure

- Provision for warranties

- Provision for obligations of highly risky contracts where contractual obligations exceed estimated economic benefits of such contracts.

- Other provisions

12. Provisions are recorded in general and administrative expense, only provision for warranties of goods and services is recorded in selling expense and only provision for warranties of construction works is recorded in production overheads.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 352 – PROVISIONS

Debit side

- Decrease in provisions due to incurred expenses relating to original provisions made

- Decrease in (reversal of) provision as it is probable that no outflow of economic benefits will be required to settle obligations

- Decrease in provisions due to the difference where provisions required to be made in the current year is lower than unused provisions made in the prior year.

Credit side

Provisions made

Credit balance

Closing provisions


1. When provisions are made for restructure expenses

Dr. 642 - General and administrative expense (6426)

Cr. 352 - Provisions

2. If the enterprise has a highly risky contract of which obligations exceed its estimated economic benefits. Contractual obligations such as compensation due to contract default are recorded when it is probable that a provision is required for the highly risky contract:



3. Where goods are sold with warranties for damages due to production errors identified during the warranty period, all repairing expenses shall be determined. When a provision for repairing expenses for sold goods with warranties is determined:

Dr. 641 – Selling expense


When a provision for warranties of construction works:



4. When other provisions are required to be made and charged to general and administrative expense:

Dr. 642 – General and administrative expense (6426)


5. When expenses related to provisions made incur:

5.1 for expenses in cash


Cr. 111, 112, 331 …

5.2 for incurred expenses relating to provisions made for warranties of goods, construction works such as material expense, direct labor costs, fixed assets depreciation, outside services…

a. where there is not any interdependent division in charge of warranties of goods, construction works:

- expenses incurring from warranties of goods, construction works:

Dr. 621, 622, 627…


Cr. 111, 112, 152, 214, 331, 334, 338 …

- At the period end, expenses incurring from warranties of goods, construction works during the period is transferred:

Dr. 154 - Work in progress

Cr. 621, 622, 627….

- When repairing goods and construction works is completed and goods and construction works are handed over to customers:


Dr. 641 – Selling expenses (under provisions for warranties).


b. where there is an interdependent division in charge of warranties of goods, construction works, and amount payable to the warranty division for expenses incurring from warranties of goods, construction works which are handed over to customers is recorded:


Dr. 641 – Selling expenses (difference where provision is lower than actual expenses).

Cr. 336- Inter-company payables

6. At the end of the financial year or at the end of the interim accounting period (together called the accounting period), a provision is required to be made.

- If provisions required to be made in the current period are higher than provisions made in the prior year, the difference, if has not been used, shall be charged to expenses:


Dr. 641- Selling expenses (Provision for goods and services warranty)

Cr. 352 – Provisions.

- If provisions required to be made in the current period are lower than provisions made in the prior year, the difference, if has not been used, shall decrease expenses:

Dr. 352 – Provisions.

Cr. 642 - General and administrative expense (6426)

Cr. 641- Selling expenses (Provisions for goods and services warranty)

- At the year end accounting period or interval, when making the provisions for each construction, recorded:

Dr. 627 – G&A expenses


7. After the warranty period, if the construction work does not need warranty or if the provision for warranty of the construction is higher the actual incurring expenses, the difference is reversed:



8. In some cases, the enterprise may have a third party pay party or wholly expenses relating to provisions (Eg: insurance policy, compensations or warranty certificate of suppliers), the third party shall make payments for expenses paid by the enterprise. Upon receipt of partly or wholly payments by the third party:

Dr. 111, 112…

Cr. 711- Other income

ACCOUNT CATEGORY 4

EQUITY

This type of accounts is used to reflect the current balance and the movement of all equity items of the entity, partners in the joint venture, limited liability company, private enterprise, partnership or shareholders of a joint stock company.

Equity is capital of the entity’s owners that the entity does not have to commit to pay for. As equity is contributed by the owners and shareholders or is sourced from operating result, it is not a liability.

An entity may have one or more owners. Operating capital of a state owned company is transferred or invested by State so the owner of the company is the State. The owners of a joint venture, a limited liability company, a partnership are the members who make capital contributions or the individuals or organizations that make investments. The owners of a joint stock companies are shareholders. The owner of a private company is an individual or householder.

Equity includes:

- Capital contributed by investors to establish a new enterprise or enlarge the existing enterprise. The owners may be the State, individuals or organizations who make capital contributions or shareholders who buy and hold shares;

- Capital surplus due to share issued at the price higher or smaller than par value;

- Presents, gifts or aids (if equity is increased);

- Capital supplemented from operating results in accordance with the finance policy or upon the decision of the owners, the Board of Director.

- Differences upon asset revaluation, foreign exchange differences incurred during the construction period, and funds transferred from profit after tax (investment and development fund, financial reserves, other equity funds, retained profits, capital expenditure funds …)

- Treasury shares which decrease equity.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING THIS ACCOUNT CATEGORY

1. All enterprises are entitled to use present available capital and funds in accordance with the current finance policy to ensure that each equity item and each fund is recorded clearly. Accounting and recording each equity item is performed in detail by each of its sources and each investor (individuals or organizations), each type of capital, fund.

Equity represents the enterprise’s net assets in general, not in particular.

2. One equity item shall be transferred to another equity item in accordance with the current finance policy and required procedures.

3. Where there is any change in accounting policies or significant misstatements which is to be retroactive, the effects of equity items shall be adjusted accordingly to relevant opening equity items of the current year.

4. Where the enterprise is dissolved or goes into bankruptcy, the owners (individuals or organizations) shall be entitled to the remaining assets after all liabilities are cleared.

Account Category 4 – Equity has 12 accounts which are divided into 5 groups:

Group of accounts 41 has 7 accounts:

- Account 411 - Operating capital

- Account 412 - Differences upon assets revaluation

- Account 413 - Foreign exchange differences

- Account 414 - Investment and development fund

- Account 415 - Financial reserves

- Account 418 - Other equity funds

- Account 419 - Treasury shares

Group of accounts 42 has 1 account:

- Account 421 - Retained profits


- Account 431 - Welfare and reward funds


- Account 441 - Capital expenditure funds

Group of accounts 46 has 2 accounts:

- Account 461 - Fund for State administrative activities

- Account 466 - Fund for State administrative activities used for fixed assets

ACCOUNT 411

OPERATING CAPITAL

This account is used to reflect the current balance and the movement of an entity’s current operating capital.

Operating capital of a state owned company includes: operating capital received from the State, the members within the corporation; investments into subsidiaries from the parent company, differences upon assets revaluation (decrease or increase in operating capital); or capital supplemented from funds; transferred from profits after tax or non refundable aids from local and foreign individuals and organizations.

Operating capital of a joint venture includes: capital contributed by the joint venture partners and capital supplemented from profits after tax.

Operating capital of a joint stock company includes: capital raised by shares, stocks purchased by share shareholders, and capital supplemented from profits after tax in accordance with the resolution of the general shareholders’ meeting or the regulations in the enterprise’s charter. It also includes premiums of share issued at the price higher than the par value.

Operating capital of a liability limited company and a partnership is contributed or supplemented from profits after tax.

Operating capital of a private company includes: capital contributed by the owner and capital supplemented from profits after tax.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING OPERATING CAPITAL

1. Actual capital contributed in cash or assets upon the entity’s incorporation or the entity’s operating enlargement shall be recorded in Account “Operating capital”.

2. Operating capital must be recorded in detail by its source. Then, it is detailed by each organization, individual that makes capital contributions.

a. For a state owned enterprise:

- Equity: capital received from the State Budget (including capital is sourced from the State Budget such as: Differences upon assets revaluation…);

- Capital supplemented from profits after tax or presents, gifts, aids….

b. For a joint venture, a liability limited company, a partnership:

- Equity: Contributed capital

- Other capital: capital supplemented from profits after tax or presents, gifts, aids …

c. For a joint stock company:

- Equity: Shares are paid by cash or assets at the par value of the issued shares

- Capital surplus: the difference between the face value and the issuing price

- Other capital: capital supplemented from profits after tax or presents, gifts, aids …but not yet distributed for each shareholder.

3. In a joint venture, operating capital must be recorded in detail by each capital contributor. This must be detailed by each time of capital contribution, amount of capital contribution, type of contributed capital such as: Original capital contribution, capital supplemented from operating results.

4. Operating capital will be decrease only when the enterprise returns capital to the State Budget; contributes capital into other companies within the Corporation; returns capital to make capital contributions in joint ventures; or dissolves, liquidates or settles operating loss upon the decision of the General Shareholder’s meeting.

5. Capital contributions by joint venture partners or shareholders in foreign currencies are translated in to VND at the actual exchange rate ruling at the transaction date or the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam when incurring. Under no circumstances, credit balance of account 411 “Operating capital” in foreign currencies is translated into VND.

6. Capital contribution in assets by individuals or organizations must reflect increase in operating capital upon assets revaluation approved by capital contributors.

7. For joint-stock companies, capital from shareholders shall be recorded at the actual issuing price, but in detail by two separate criteria: share capital and capital surplus. Share capital is recorded at par value. Capital surplus is recorded by the difference where the actual amount received from share issuance is higher than the amount calculated by the par value of the first issuance, or the increase by additional share issuance, or the difference where the actual amount received from share issuance is lower than the amount calculated at the repurchase price upon treasury share issuance.

Only in case, the enterprise repurchases shares to cancel them right at the purchase date, decrease in operating capital at the purchase date is the amount calculated at the actual purchase price and decrease in operating capital is detailed by par value and surplus of the repurchased shares

.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 411 – OPERATING CAPITAL

Debit side:

Decrease in operating capital due to:

- Returning contributed capital to owners;

- Dissolution and liquidation;

- Covering operation loss upon the decision of the General Shareholder’s Meeting (joint stock companies);

- Repurchasing shares for cancellation purpose (joint stock companies).

Credit side:

Increase in operating capital due to:

- Capital contribution (original capital contribution and supplementary capital contribution);

- Supplementing capital from operating profit;

- Issuing shares at the price higher than par value

- Presents, gifts, aids (less taxes payable) that increase the operating capital.

Credit balance:

Current operating capital of the enterprise.

Account 411 – Operating capital has three second tier accounts

- Account 4111- Contributed capital: reflect the actual capital contributed by the owners in accordance with the enterprise’s charter. For joint stock companies, share capital is recorded at par value

- Account 4112 - Capital surplus: reflect the increase difference where shares are issued at the price higher than par value, or the decrease difference incurring from repurchase upon treasury share issuance.

- Account 4118 – Other capital: reflect operating capital supplemented from operating results or presents, gifts, aids or assets revaluation (if these amounts are allowed to be recorded increase and decrease in operating capital).


5. Upon receipt of contributed capital:

Dr. 111, 112


Dr. 213 - Intangible fixed assets

Cr. 411- Operating capital (4111)

6. Upon receipt of cash from shareholders for purchasing shares at issuing price equal to par value

Dr. 111, 112 (par value)

Cr. 411- Operating capital (4111) (par value)

7. Upon receipt of cash from shareholders for purchasing shares at issuing price higher than par value

Dr. 111, 112 (Issuing price)

Cr. 411- Operating capital (4111) (par value) and Account 4112 (difference where the issuing price is higher than par value)

8. Upon receipt of cash from reissuing treasury stock

Dr. 111, 112 (Reissuing price)

Dr. 411 - Operating capital (4112) (difference where the reissuing price is lower than the price stated in the treasury share register)

Cr. 419 - Treasury stock

Cr. 411 - Operating capital (4112) (difference where the reissuing price is higher than the price stated in the treasury share register)

9. Operating capital supplemented from investment and development funds upon the approval of the Board of Management or other competent authorities

Dr. 414 - Investment and development funds


10. Operating capital supplemented from differences upon assets revaluation upon the approval:

Dr. 412 - Differences upon assets revaluation

Cr. 411- Operating capital

11. When the construction works funded by capital expenditure funds have been completed or purchased fixed assets have been used in production and business, or have settle authorized investment capital, cost of fixed assets and operating capital will increase. When funds has been approved, accountant will debit the fixed assets and increase operating capital

Dr. 441 - Capital expenditure funds


12. When members within the Corporation, subsidiaries receive capital from the Corporation, the parent company, to supplement operating capital, records are made at the lower level companies:

Dr. 111, 112


13. Upon receipt of presents, gifts

Dr. 111, 112

Dr. 211 - Tangible fixed asset

Dr. 152 - Raw material

Cr. 711 - Other income

After tax obligations with the State have been fulfilled, the remaining amount is to increase Operating capital (4118)

Dr. 421 - Retained profits

Cr. 411 - Operating capital (4118)

14. Operating capital supplemented from paying dividends by shares to shareholders


Dr. 411 - Operating capital (4112) (difference where the issuing price is lower than the par value)

Cr. 411 - Operating capital (Account 4111 – At the par value and Account 4112 - difference where the issuing price is higher than the par value)

15. Upon receipt of capital contributed by join venture partners

Dr. 111, 112, 211, 213

Cr. 411 - Operating capital (4111)

16. When a joint stock company repurchases shares to cancel them right at the repurchase date:

12.1 Where the actual repurchase price is higher than the par value:

Dr. 411 - Operating capital (Account 4111(par value))

Dr. 411 - Operating capital (Account 4112 (difference where the repurchase price is higher the par value)

Cr. 111, 112

12.2 Where the actual repurchase price is lower than the par value:

Dr. 411 - Operating capital (4111) (At par value)

Cr. 111, 112

Cr. 411 - Operating capital (4112) (difference where the repurchase price is lower than the par value)

17. When cancelling treasury shares:

Dr. 411 - Operating capital (Account 4111 (At par value))

Dr. 411 - Operating capital (Account 4112 (difference where the repurchase price is higher than the par value)

Cr. 419 - Treasury shares (at the repurchase price)

18. When returning contributed capital to contributors:

Dr. 411 - Operating capital (4111, 4112)

Cr. 111, 112

19. When subsidiaries, fellow members within the Corporation return operating capital to the parent company, the Corporation by reducing operating capital:

Dr. 411- Operating capital

Cr. 111, 112 …

20. When the enterprise is required to contribute operating capital to other entities upon the request of by the competent authority:

- Contributing capital by fixed assets:

Dr. 411 - Operating capital

Dr. 214 - Depreciation of fixed assets

Cr. 211 - Tangible fixed assets

Cr. 213 – Intangible fixed assets

- Contributing capital in cash:

Dr 411

Cr 111, 112

21. In case of business combination, the purchaser issues shares, accounting treatment is performed in accordance with VAS 11 “Business Combination”.

ACCOUNT 412

DIFFERENCES UPON ASSETS REVALUATION

This account is used to reflect differences upon assets revaluation and how to deal with them.


WHEN RECORDING ACCOUNT 412

13. Revaluated assets are mainly fixed assets, investment property. It is possible and necessary to revalue some assets such as materials, tools and supplies, finished goods, merchandise, work in progress…

14. Differences upon assets revaluation are recorded in this account in the following cases:

- Upon the decision of the Government on assets revaluation;

- Upon the equitization of a state owned enterprise;

- Other regulated cases (e.g. enterprise transformation)

15. This account does not reflect differences upon revaluation of assets which are used for investments in joint ventures, associates or subsidiaries. Such differences are recorded in Account 711 – Other income (gains) or Account 811 – Other expenses (loss)

16. Assets are revaluated based on the price schedule provided by the State or the Valuation Committee.

17. Differences upon assets revaluation are recorded and dealt with in accordance with the current finance policy.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 412 – DIFFERENCES UPON ASSETS REVALUATION

Debit side

- differences where assets are revalued at lower prices

- differences dealt with where assets are revalued at higher prices

Credit side

- differences where assets are revalued at higher prices

- differences dealt with where assets are revalued at lower prices

Account 412 - differences upon assets revaluation may have debit balance or credit balance

Debit balance

Differences where assets are revalued at lower price not yet be dealt with

Credit balance

Differences where assets are revalued at higher price not yet be dealt with


1. Upon the decision of the Government on revaluation of fixed assets, investment property, materials, merchandise… or upon the valuation of a state owned enterprise when it is equitized: it performs physical counts, revalues its assets and record differences.

a. Revaluing materials and merchandise:

- Where the revaluation price is higher than the carrying value:


Dr. 153 – Tools, supplies



Cr. 412 - Differences upon assets revaluation

- Where the revaluation price is lower than the carry value:


Cr. 152 – Materials

Cr. 153 – Tools, supplies



b. Revaluing fixed assets and investment property:

- Based on the summary report on the results from the physical count, the revaluation on fixed assets, investment property:

+ Cost, net book value, depreciation where fixed assets and investment property are revalued at higher price

Dr. 211 – Tangible fixed assets (increase in cost)

Dr. 213 – Intangible fixed assets (land use right – increase in cost)

Dr. 217 – Investment property (increase in cost)

Cr. 214 - Depreciation of fixed assets (increase in depreciation)

Cr. 412 - Differences upon assets revaluation (increase in net book value)

+ Cost, net book value, depreciation where fixed assets and investment property are revalued at lower price:

Dr. 412 - Differences upon assets revaluation (decrease in net book value)

Cr. 214 - Depreciation of fixed assets (decrease in depreciation)

Cr. 211 - Tangible fixed assets (decrease in cost

Cr. 213 - Intangible fixed assets (land use right – decrease in cost)

Cr. 217 - Investment property (decrease in cost)

2. At the end of the fiscal year, Differences upon assets revaluation are dealt with upon the decision of the management of competent authority

- Where Account 412 has credit balance, operating capital is supplemented upon the decision:



- Where Account 412 has debit balance, operating capital is reduced upon the decision:

Dr 411 - Operating capital

Cr 412 - Differences upon assets revaluation

ACCOUNT 413

EXCHANGE RATE DIFFERENCES

This account reflects exchange rate differences incurred in the construction period (pre-operation period); exchange rate differences upon revaluation of foreign currency monetary items at the end of the financial year and how to write off such differences. Exchange rate differences incur when actual transactions are made in foreign currencies or foreign currency monetary items are translated into the accounting currency.

In general, exchange rate differences incur in the following cases:

1. Actual economic transactions (purchase, selling, payment) incur in foreign currencies during the period (realized exchange rate differences); actual exchange rate differences (realized exchange rate differences) incur during the period, including:

- Actual exchange rate differences incurred from construction (pre-operation period);

- Actual exchange rate differences incurred from business activities, including investments in construction of production and business enterprises that have just finish their pre-operation period.

2. Foreign currency monetary items are revalued at the end of the financial year, based amount in the period end. Differences upon year-end revaluation of foreign currency monetary items include:

- Exchange rate differences at the year end due to revaluation of foreign currency monetary items which is related to the construction period (pre-operation period);

- Exchange rate differences at the year end due to revaluation of foreign currency monetary items which is related to business activities;

Where the entity uses financial instruments to hedge foreign exchange risks, liabilities and borrowings in foreign currencies are recorded at the actual exchange rate when they incur. Liabilities and borrowings in foreign currencies used as financial instruments to hedge foreign exchange risks shall not be revalued.


WHEN RECORDING ACCOUNT 413

1. Principle of recording economic transactions in foreign currencies and revaluing foreign currency monetary items at the end of the financial year.

1.1 Enterprises have economic transactions in foreign currencies shall prepare accounting records and financial statements in Vietnam Dong (VND) or a consistent accounting currency (approved by MOF). In principle foreign currency monetary items are translated into VND, or the official accounting currency at the exchange rate at the transaction date, which may be the actual exchange rate of the transaction incurred or the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam.

Concurrently, sub-ledgers of the following accounts shall be followed up: Cash, Cash at bank, Cash in transit, Receivables, Payables and account 007 “Foreign currencies” (off balance sheet account).

1.2 Accounts: revenue, inventories, fixed assets, production and business costs, other expenses; debit entry of monetary assets, receivables, credit side of liabilities are recorded in VND or the official accounting currency at the exchange rate at the transaction date (the actual exchange rate of the transaction incurred or the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam) when economic transactions in foreign currencies incur.

1.3 Credit entry of monetary assets is made in VND or the official accounting currency at the exchange rate stated in the accounting records when economic transactions in foreign currencies incur (in accordance with one of the following methods: specification method; weighted average method, first in first out method; last in first out method)

1.4 Debit entry of payables or credit entry of receivables is made in VND or the official accounting currency at the exchange rate stated in the accounting records when economic transactions in foreign currencies incur.

1.5 At the end of the financial year, the enterprise shall revalue foreign currency monetary items at the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam at the end of the financial year.

1.6 When the enterprise buys and sells foreign currencies by VND at the actual buy, sell exchange rate.

2. Principle of dealing with exchange rate differences

2.1 Realised and unrealised foreign exchange differences from business activities, including construction activities (entities who have just invested in construction).

- All realised and unrealised foreign exchange differences are recorded in financial income or financial expenses.

- Unrealised foreign exchange gains shall not be used for profit or dividend distribution

2.2 Realised and unrealised foreign exchange differences from construction activities (pre-operation period):

- In the construction period, all realised and unrealised foreign exchange differences of foreign currency monetary items are accumulated in the balance sheet (item “Exchange rate difference”)

- After the construction period, all exchange rate differences incurring from the construction period (foreign exchange losses and gains) shall not be recorded in fixed assets but transferred one-time (if insignificant) to financial expense or financial income of the financial year when fixed assets and other investments are put into use or amortized up to 5 years (if significant, since the construction works are put into use)

2.3 Exchange rate differences from conversion of the financial statements on abroad operations which are an integral part of the reporting enterprise are recorded at once in financial expense or financial income during the period.

3. Only in the following cases, exchange rate differences are recorded in Account 413 “Exchange rate differences”:

- All realised and unrealised foreign exchange differences from construction activities in the pre-operation period of a newly-established enterprise (investment process is not completed yet);

- Exchange rate differences upon revaluation of foreign currency monetary items incurring from business activities, including construction activities (production and business enterprises have construction activities)

4. At the end of the financial year, foreign currency monetary items including “Cash”, “Cash in bank”, “Cash in transit”, cash equivalents, receivables, payables are translated at the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam at the end of the financial year. Exchange rate differences upon revaluation of foreign currency balances of foreign currency monetary items incurring from operation activities are recorded Account 413 “Exchange rate differences”

5. Where the enterprise does not specialized in trading foreign currencies, its transactions relating to trading foreign currencies are translated into VND at the actual buying and selling rate. Diference between the actual buying rate and the actual selling rate is recorded in Account 515 “Financial income” or Account 635 “Financial expenses”.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 413 – EXCHANGE RATE DIFFERENCES

Debit side:

- Exchange rate differences upon revaluation of foreign currency monetary items (exchange rate losses) incurring from business activities, including construction activities (production and business enterprises have construction activities);

- Exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate losses) incurring from construction activities (pre-operation period) at the end of the financial year;

- Exchange rate differences upon revaluation of foreign currency monetary items (exchange rate gains) incurring from business activities transferred to financial income

- Exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate gains) incurring from construction activities (after the construction period) transferred to financial income or unearned revenue (in case of amortization).

Credit side:

- Exchange rate differences upon revaluation of foreign currency monetary items (exchange rate gains) incurring from business activities, including construction activities (production and business enterprises have construction activities);

- Exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate gains) incurring from construction activities (pre-operation period) at the end of the financial year;

- Exchange rate differences upon revaluation of foreign currency monetary items (exchange rate losses) incurring from business activities transferred to financial expense

- Exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate gains) incurring from construction activities (after the construction period) transferred to financial income or long-term prepayments (in case of amortization).

Account 413 (Exchange Rate Different) may have Credit Balance or Debit Balance

Debit balance:

Exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate losses) incurring from construction activities (pre-operation period, construction activities are not completed yet) at the end of the financial year.

Credit balance:

Exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate gains) incurring from construction activities (pre-operation period, construction activities are not completed yet) at the end of the financial year.

Account 413 - Exchange rate different has 2 level-2 sub accounts

- Account 4131 - Unrealized foreign exchange differences: to reflect exchange rate differences upon revaluation of foreign currency monetary items (exchange rate gains, losses) incurring from business activities, including construction activities (production and business enterprises have construction activities) at the end of the financial year

- Account 4132 - Foreign exchange differences during construction in progress: to reflect exchange rate differences incurred or upon revaluation of foreign currency monetary items (exchange rate gains, losses) incurring from construction activities (pre-operation period) at the end of the financial year


I. Accounting exchange rate differences incurred from business activities, including construction activities of the production and business enterprise during the period

1. Upon purchase of materials, merchandise, fixed assets and services and payments made by foreign currencies:

- For exchange rate losses:

Dr. 151, 152, 153, 156, 157, 158, 211, 213, 217, 241, 623, 627, 641, 642, 133 … (at the rate of the transaction date)

Dr. 635 - Financial expense (exchange rate losses)

Cr. 111 (1112), 112 (1122) (at the rate of the accounting records)

- For exchange rate gains:

Dr. 151, 152, 153,156 157, 158, 211, 213, 217, 241, 623, 627, 641, 642, 133… (at the rate of the transaction date)


Cr. 515 - Financial income (exchange rate gains)

2. Upon receipt of materials, merchandise, fixed assets and services from suppliers but payments not made yet, or upon receipt of short-term borrowings, long-term borrowings and

liabilities, or inter-company liabilities … in foreign currencies, based on the exchange rate of the transaction date:

Dr. 111, 112, 152, 153, 156, 211, 627, 641, 642… (at the rate of the transaction date)

Cr. 331, 311, 341, 342, 336 … (at the rate of the transaction date)

3. Upon payments for liabilities by foreign currencies (Accounts payable – trade, short-term borrowings and liabilities, long-term borrowings and liabilities, inter-company payables…):


Dr. 311, 315, 331, 336, 341, 342 … (at the rate of the accounting records)

Dr. 635 - Financial expense (exchange rate losses)




Cr. 515 – Financial income (exchange rate gains)


4. When other income in foreign currencies incurs, base on the exchange rate of the transaction date:

Dr. 111 (1112), 112 (1122), 131 … (at the rate of the transaction date)

Cr. 511, 711 (at the rate of the transaction date)

5. When receivables in foreign currencies incur:

Dr. 136, 138 (at the rate of the transaction date)

Dr. 635 - Financial expenses (exchange rate losses)



6. Upon receipt of debts in foreign currencies (accounts receivable – trade, inter-company receivables)


Dr. 111 (1112), 112 (1122) (at the rate of the transaction date)

Dr 635 – Financial expenses (at the rate of the accounting records)

Cr. 131, 136, 138 at the rate of the accounting records)


Dr. 111 (1112), 112 (1122) (at the rate of the transaction date)


Cr. 131, 136, 138 (at the rate of the accounting records)

II. Accounting exchange rate differences incurred from construction activities (pre-operation period) during the period

1. When materials, equipment, goods, fixed assets, services, construction works, installation works are purchased from external suppliers or handed over by contractors:

- For exchange rate losses incurring from payments made by foreign currencies:

Dr. 151, 152, 211, 213, 241… (at the rate of the transaction date)

Dr. 413 – Exchange rate differences (4132) (exchange rate losses)


- For exchange rate gains incurring from payments made by foreign currencies:

Dr. 151, 152, 211, 213, 241… (at the rate of the transaction date)


Cr. 413 – Exchange rate differences (4132) (exchange rate gains)

2. Upon payments for liabilities by foreign currencies (Accounts payable – trade, short-term borrowings and liabilities, long-term borrowings and liabilities, inter-company payables (if any)…):



Dr 413 – Exchange rate differences (4132) (exchange rate losses)




Cr 111 (1112), 112 (1122) (at the rate of the accounting records)

Cr 413 – Exchange rate differences (4132) (exchange rate gains)

3. Annually, realized exchange rate differences incurring from construction activities (pre-operation period) are recorded accumulatively in account 413 “Exchange rate differences” (4132) until construction is completed.

4. When construction (pre-operation period) is completed, realised exchange rate differences (net amount after netting off debit balance and credit balance of account 4132) of construction (pre-operation period) on account 413 “Exchange rate differences” (Account 4132) are transferred at once to financial expenses (insignificant), or to account 242 “long-term prepayment” (significant) (in case of exchange rate loss); or transferred at once to financial income (insignificant), or to account 3387 “Deferred revenue” (significant) (in case of exchange rate gains) to be amortized in the maximum period of 5 years.

- In case of exchange rate gains:

Dr. 413 – Exchange rate differences (4132)

Cr. 3387 – Deferred revenue (exchange rate gains) (amortization); or

Cr. 515 – Financial income (at once transferred to financial income)

- In case of exchange rate losses:

Dr. 635 – Financial expenses (at once transferred to financial expenses)

Dr. 242 – Long term prepayments (amortization)

Cr. 413 – Exchange rate differences (4132)

5. Dealing with realized exchange rate differences (losses or gains) incurring from construction activities recorded accumulatively to the time when fixed assets are handed over to be put into use for production activities.

- Where foreign exchange losses are amortized, periodically realized foreign exchange losses incurred during the construction period are transferred to financial expenses of the financial year after construction is completed and fixed assets are put into use in operation.

Dr. 635 – Financial expenses (exchange rate losses)

Cr. 242 – Long term prepayments

- Where foreign exchange gains are amortized, periodically realized foreign exchange gains incurred during the construction period are transferred to financial income of the financial year after construction is completed and fixed assets are put into use in operation:


Cr. 515 –financial income (foreign exchange gains)

III. Accounting for foreign exchange differences upon revaluation of foreign currency monetary items at the end of the financial year.

1. Accounting for foreign exchange differences upon revaluation of foreign currency monetary items at the end of the financial year:

At the end of the financial year all foreign currency (other than the official accounting currency) monetary items are revalued the average exchange rate in the inter-bank exchange market announced by the State Bank of Vietnam, and foreign exchange differences (gain or loss) may incur. Foreign exchange differences upon revaluation of foreign currency monetary items incurring from construction activities (pre-operation period – Account 4132 and business activities – Account 4131):

- For foreign exchange gains:

Dr. 111 (1112), 112 (1122), 131, 136, 138, 311, 315, 331, 341, 342…

Cr. 413 – Foreign exchange difference (4131, 4132)

- For foreign exchange losses:

Dr. 413 – Foreign exchange difference (4141, 4132)

Cr. 111 (1112), 112 (1122), 131, 136, 311, 315, 331, 341, 342…

2. Dealing with foreign exchange differences upon revaluation of foreign currency monetary items at the end of the financial year:

2.1 Dealing with foreign exchange differences upon revaluation of foreign currency monetary items incurring from business activities (including construction activities of the production and business enterprise who has just completed its construction activities):

- All unrealized foreign exchange differences from business activities (net amount after netting off debit balance and credit balance of account 4131) are transferred to financial expenses (foreign exchange losses) or financial income (foreign exchange gains) to determine operating results:

+ Foreign exchange gains transferred to financial income:

Dr. 413 – Foreign exchange differences (4131)


+ Foreign exchange losses transferred to financial expense:

Dr. 635 – Financial expense (foreign exchange losses)

Cr. 413 – Foreign exchange differences (4131)

2.2 Dealing with foreign exchange differences upon revaluation of foreign currency monetary items incurring from construction activities (pre-operation period):

- During the construction period of a newly-established enterprise, unrealized foreign exchange differences are recorded accumulatively on account 413 “Foreign exchange differences” (account 4132). Such Debit or Credit entry shall be made in the balance sheet.

- After the construction period, fixed assets are put into use, Debit or Credit balance of Account 413 “Foreign exchange differences” (4132) reflecting unrealized foreign exchange differences (excluding foreign exchange differences upon revaluation of foreign currency monetary items relating to construction activities at the time when fixed assets are handed over to be put into use) shall be dealt as follows:

+ Debit balance of account 413 “Foreign exchange differences” (4132) transferred to account 635 “Financial expense” or account 242 “Long-term prepayments” (significant) to gradually amortize foreign exchange losses during the construction period in the following financial years (up to 5 years from the date when construction is completed):

Dr. 635 – Financial expense (at once recorded in financial expense)

Cr. 242 – Long-term prepayment (amortization)

Cr. 413 – Foreign exchange differences (4132)

+ Credit balance of account 413 “foreign exchange differences” (4132) transferred to account 515 “Financial Income” or account 3387 “Deferred revenue” (significant) to gradually amortize foreign exchange gains during the construction period in the following financial years (up to 5 years from the date when construction is completed):


Cr. 3387 – Deferred revenue (amortization)

Cr. 515 – Financial income (at once recorded in financial income)

ACCOUNT 414

INVESTMENT AND DEVELOPMENT FUND

This account is used to reflect the current balance and the movement of the entity’s investment and development fund.

Investment and development fund is allocated from profit after corporate income tax and is used for scale enlargement purposes or further investments.

Investment and development fund is allocated and used in accordance with the current finance policy applied to enterprises of each type: state owned enterprises, joint stock companies, liability limited companies, private enterprises …

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 414 – INVESTMENT AND DEVELOPMENT FUND

Debit side:

Investment and development fund used

Credit side:

Increase in investment and development fund (allocated from profit after tax)

Credit balance:

The current balance of investment and development fund


1. During the period, investment and development fund is temporarily allocated from profits after tax:

Dr. 421 – Retained profits

Cr. 414 – Investment and development fund

2. At the period end, allocation of investment and development fund is determined, additional allocation is calculated:



3. Investment and development fund is used for purchase of fixed assets. When construction is completed and fixed assets are put into use:


Cr. 241 – Construction in progress (in case of construction)

Cr.111, 112 … (in case of fixed assets purchase)

Simultaneously, operation capital is increased and investment and development fund is decreased:

Dr. 414 – Investment and development fund


4. Upon receipt of investment and development fund from the higher level entity:

Dr. 111, 112…


5. Investment and development fund is given to the higher level entity under the regulations or transferred to other entities:

Dr. 414 – Investment and development fund

Cr. 111, 112…

ACCOUNT 415

FINANCIAL RESERVES

This account is used to reflect the current balance and the movements of the enterprise’s financial reserves. Financials reserves are allocated from profits after corporate income tax. Financial reserves are recorded (decrease, increase) under the current finance policy.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 415 – FINANCIAL RESERVES

Debit side:

- Financial reserves given to the higher level entity.

- Other decrease in financial reserves.

Credit side:

- Increase in financial reserves as allocation from profits after tax or receipt from lower level entities

Credit balance:

Current financial reserves


1. When financial reserves is allocated from profit after tax:



2. Increase in financial reserves as receipts from lower level entities:

Dr. 111, 112, 136…


3. Decrease in financial reserves as transfers to higher level entities:

Dr.415 - Financial reserves

Cr. 111, 112, 336…

ACCOUNT 418-

OTHER EQUITY FUNDS

This account is used to reflect the current balance and the movements of other equity funds such as bonus fund for the Board of Directors …

Other equity funds are allocated from profits after tax and used for bonuses or rewards or other purposes for the Board of Directors and the Board of Management.

Other equity funds shall be allocated and used in accordance with the current finance policies for enterprises of each type: state-owned enterprises, joint-stock companies, limited liability companies and private enterprises.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 418 - OTHER EQUITY FUNDS

Debit side:

Other equity funds used

Credit side:

Increase in other equity funds as allocation from profits after tax

Credit balance:

The current other equity funds


1. When other equity funds is allocated from profits after tax:



2. Upon receipt of other equity funds from the higher level entity:

Dr. 111, 112, 136…


3. Upon transfers to the higher level entity to form other equity funds:

Dr. 418 - Other equity funds

Cr. 111, 112, 336…

4. When the enterprise owners’ representative decides to grant bonuses to the Board of Management and the Board of Directors from the bonuses for management fund:

Dr. 418 - Other equity funds

Cr. 111, 112

ACCOUNT 419

TREASURY SHARES

This account is used to reflect the current balance and the movements of treasure shares which are repurchased from public issued shares by joint-stock companies and subsequently are reissued to the public (called treasury shares).

Treasury shares are shares which are issued and then repurchased by issuing companies. Treasury shares shall not be cancelled and shall be reissued with in the period as stipulated by the law on securities. Treasury shares are hold by the issuing company and are not entitled to dividends, voting rights or residual assets when the issuing company is dissolved. When dividends are distributed to shareholders, treasury shares hold by the issuing company are considered unsold shares.


WHEN RECORDING TREASURY SHARES

1. Treasury shares shall be recorded in this account at the actual repurchase costs including repurchase price and other direct related costs such as transaction costs, information costs …

2. At the end of the accounting period the financial statements are prepared, the actual value of treasury shares shall decrease operating capital in the balance sheet by negative amount (…).

3. This account does not reflect shares that the enterprise purchases for investment purposes.

4. Where the company repurchases its issued shares for cancellation purposes, these repurchased shares shall not be recorded in this account but shall decrease contributed capital and capital surplus. (See Account 411- Operating capital)

5. The costs of treasury shares which are reissued or used to pay dividends or bonuses are calculated under the weighted average method.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 419 - TREASURY SHARES

Debit side:

Actual value of treasury shares purchased

Credit side:

Actual value of treasury shares reissued, used to pay dividends, or for cancellation purposes.

Debit balance

Actual treasury shares held by the company.


1. Upon repurchase of issued shares

- When the company finishes all the procedures to repurchase its issued shares and payments are made at the actual repurchase price:

Dr. 419 - Treasury shares (repurchase price)

Cr. 111, 112.

- During the repurchase, direct related costs are recorded:

Dr. 419 - Treasury shares

Cr. 111, 112.

2. Upon re-issuance of treasury shares

- Where the reissuing price is higher than the repurchase price:

Dr. 111, 112 (total payments received from issuance)

Dr. 419 - Treasury shares (actual repurchase price)

Cr. 411 – Operating capital (4112) (difference where the reissuing price is higher than the actual repurchase price)

- Where the reissuing price is lower than the repurchase price:

Dr. 111,112 (total payments received from issuance)

Dr. 411 – Operating capital (4112) (difference where the reissuing price is lower than the actual repurchase price)

Cr. 419 - Treasury shares (actual repurchase price)

3. Upon cancellation of treasury shares:

Dr. 411 - Operating capital (4111 - par value of cancelled treasury shares)

Dr. 411 - Operating capital (4112 - difference where the actual repurchase price is higher than the par value of the cancelled treasury shares)

Cr. 419 - Treasury shares (actual repurchase price)

4. Upon the decision of the Board of Management (passed at the general shareholders’ meeting) on dividends distribution by shares:

- Where the issuing price at the date of dividend distribution is higher than the actual repurchase price:

Dr. 421 - Retained profits (issuing price) or


Cr. 419 – Treasury shares (The actual repurchase price)

Cr. 411 – Operating capital (4112) (difference where the actual repurchase price is lower the issuing price at the date when dividends are paid by shares)

- Where the issuing price at the date of dividend distribution is lower than the actual repurchase price:

Dr. 421 – Retained profits (the issuing price), or


Dr. 411 – Operating capital (4112) (difference where the actual repurchase price is higher the issuing price at the date when dividends are paid by shares)

Cr. 419 – Treasury shares (The actual repurchase price)

ACCOUNT 421

RETAINED PROFITS

This account is used to reflect operating results (profit, loss) after corporate income tax and profit distributions or loss treatment.


WHEN RECORDING RETAINED PROFITS

1. Operating results reflected in Account 421 is operating profit after corporate income tax or operating loss.

2. The distribution of operating profit must be clear and concise in accordance with the current finance policy.

3. Operating results must be recorded in detail every year (prior year, current year) by each distribution (funds allocation, operating capital supplement, dividends and profits distributions to shareholders and investors)

4. If there are changes in accounting policy, retroactive accounting is required. Upon retroaction material misstatements in prior years cause adjustments in opening retained profits, increase or decrease adjustment shall be made accordingly to Account 4211 “Retained profits in prior year” in the accounting records and increase or decrease adjustment shall be made to item “Retained profits” on the balance sheet under Vietnamese Accounting Standard No. 29 “Changes of accounting policies, accounting estimates and misstatements” and Vietnamese Accounting Standard No. 17 “Corporate Income tax”.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 421 – RETAINED PROFITS

Debit side:

- Operating loss

- Funds allocated

- Dividends, profits distributed to shareholders and investors, partners in joint ventures

- Operating capital supplemented

- Capital paid to the higher-level entity

Credit side:

- Actual operating profits

- Capital received from lower-level entities, losses covered by the higher-level entity

- Operating loss written off

Account 421 can have both Debit and Credit balance

Debit balance:

Operating loss

Credit balance:

Operating profit not yet distributed, used

Account 421 – Retained profits has two second-tier accounts

- Account 4211 – Retained earnings brought forward: to reflect operating results, profits distribution or loss of prior years written off.

Account 4211 is also used to reflect increase or decrease of the opening balance of account 4211 retroaction due to changes in accounting policies and retroactive adjustments of significant misstatements of prior years which are discovered in the current year.

At the beginning of the subsequent year, the opening balance of account 4212 “Retained earnings of current year” is transferred to the account 4211 “Retained earnings brought forward”

- Account 4212 – Retained earnings of current year: to reflect operating results, profits distribution or loss of the current year written off.


1. At the end of the accounting period, operating results is transferred

a. For profits:

Dr. 911 – Determining operating results

Cr. 421 – Retained profits (4212)

b. For loss:

Dr. 421 – Retained profits (4212)

Cr. 911 – Determining operating results

2. During the year, dividends, profits are distributed to shareholders, investors, capital contributors:


Cr. 111, 112… (actual payments)

3. At the end of the financial year, preference dividends to be paid to preference shareholders are determined and recorded:



When preference dividends are paid:



4. Upon the decision or the notice on dividends and profits payables to investors, capital contributors and shareholders:



5. When dividends, profits are paid to investors, capital contributors and shareholders:



6. During the year, financial reserves are temporarily allocated from operating profits (retained profits):


Cr. 415 – Financial reserves

7. During the year, investment and development fund is temporarily allocated from operating results (retained profits):



8. During the year, welfare and reward fund and other equity funds are temporarily allocated from operating results (retained profits):


Cr. 431 – Welfare and reward funds

Cr. 418 – Other equity funds

9. At the year end, additional amounts to funds are calculated and determined:



Cr. 415 – Financial reserves

Cr. 431 – Welfare and reward fund

Cr. 418 – Other equity funds

10. Operating capital is supplemented from operating profits (retained profits):



11. The profit has to be handed in to higher levels, record:



12. Profits receivable from lower level entities:

Dr. 136 – intra-company receivables


13. Operating loss covered by the higher level entity:

Dr. 136 – inter-company receivables


14. Operating loss payable to lower level entities:



15. At the beginning of the financial year, retained earnings of current year is transferred to retained earnings brought forward

+ In case Account 4212 has Credit balance (Profit):

Dr. 4212 – retained earnings of current year

Cr. 4211 – retained earnings brought forward

+ In case Account 4212 has Debit balance (Loss):

Dr. 4211 – retained earnings brought forward

Credit 4212 – retained earnings of current year

One year loss is dealt by taxable income of subsequent years under the CIT law or the current finance policies.

ACCOUNT 431

WELFARE AND REWARD FUND

This account is used to reflect the current balance and the movement of the enterprise’s welfare and reward fund. The welfare and reward fund is allocated from profit after corporate income tax for rewards, public welfare, material benefits, improvement of employees’ physical and metal life.


WHEN RECORDING WELFARE AND REWARD FUND

1. Welfare and reward fund should be allocated and used in accordance with the current finance policies

2. Welfare and reward fund should be recorded in detail by each type of funds.

3. When the fixed assets purchased by welfare fund are completed in the production and business period, fixed assets and operating capital are increased and welfare fund is decreased.

4. When the fixed assets purchased by welfare fund are used for the enterprise’s cultural and welfare demands fixed assets are increased and at the same time welfare funds (4312) are transferred to welfare funds used for fixed asset investments (4313). Depreciation of such fixed assets is not charged to expenses on a monthly basis, but recorded one-time at the year end and welfare funds used for fixed asset investments is decreased.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 431 – WELFARE AND REWARD FUND

Debit side:

- Expenses from the welfare and reward fund

- Decrease in welfare funds used for fixed asset investments due to fixed assets depreciation from transfers, disposals, deficiency during the physical count of fixed assets;

- Fixed assets purchased by welfare funds, which will be used for cultural and welfare demands;

- Welfare and reward fund granted to lower-level entities or sent to the higher-level entities;

Credit side:

- Welfare and reward fund allocated from profits after CIT

- Welfare and reward fund received from the higher-level entities or lower-level entities;

- Increase in welfare funds used for fixed asset investments as fixed assets purchased by welfare are used for cultural and welfare demands;

Credit balance

Current welfare and reward fund balance

Account 431 - Welfare and reward funds have 3 second tier accounts:- Account 4311: Reward funds: to reflect the current balance, provision and usage of reward funds.

- Account 4312: Welfare funds: to reflect the current balance, provision and usage of welfare funds.

- Account 4313: Welfare funds used for fixed assets investments: to reflect the current balance and movements of welfare funds used for fixed assets investments.


1. When reward funds are provided during the year:


Cr. 431- Welfare and reward funds (4311, 4312)

2. When additional reward funds are provided at the year end:


Cr. 431- Welfare and reward funds (4311, 4312)

3. When bonuses are given to employees and other staff:

Dr. 431 - Welfare and reward funds

Cr. 334 - Payable to employees

4. When welfare funds are used to support disadvantages, make payments for employees’ summer holiday trip, public cultural and social activities:

Dr. 431- Welfare and reward funds

Cr. 111, 112...

5. When enterprises who pay VAT under the deduction method present their products subject to VAT under the deduction method by welfare and reward funds, revenue from products presented is recorded at the price net off VAT:

Dr. 431- Welfare and reward funds (total price)

Cr. 3331 - VAT payable (33311)

Cr. 512 - Inter-company revenues (price net off VAT)

6. When welfare and reward funds are sent to the higher-level entities:


Cr. 111, 112...

7. When welfare and reward funds are used to support in case of natural disasters, fires or for charity purposes:


Cr. 111, 112...

8. When welfare and reward funds are received from the lower-level entities:

Dr. 111, 112...

Cr. 431 - Welfare and reward funds (4311, 4312)

9. When fixed assets purchased by welfare funds are used for cultural and welfare activities:

Dr. 211 - Tangible fixed assets (History cost)

Cr. 111, 112, 241, 331...

Concurrently,

Dr. 4312 - Welfare funds

Cr. 4313 - Welfare funds used for fixed assets investments

10. At accounting period end depreciation of fixed assets purchased by welfare funds for cultural and welfare activities is calculated:

Dr. 4313 - Welfare funds used for fixed assets investments:

Cr. 214 - Fixed assets depreciation

11. Upon transfer, disposal of fixed assets purchased by welfare funds for cultural and welfare activities:

a. Decrease in fixed assets transferred and disposed:

Dr. 4313 - Welfare funds used for fixed assets investments

Dr. 214 - Fixed assets depreciation (depreciation)

Cr. 211 - Tangible fixed assets (historical cost)

b. income and expenses from transferring, disposing fixed assets:

- Expenses:

Dr. 431 - Welfare and reward funds (4312)

Cr. 111, 112, 334...

- Income:

Dr. 111, 112...

Cr. 431 - Welfare and reward funds (4312)

Cr. 3331 - VAT payable (If any)

ACCOUNT 441

CAPITAL EXPENDITURE FUNDS

This account reflects the current balance and the movement of the company’s capital expenditure funds. The company’s capital expenditure funds are financed using State Budget or fund allocation from higher level entity.

Capital Expenditure Funds are used by a company to build, upgrade or expand production, business facilities and acquire fixed assets for the purpose of technology innovation. The company’s construction of fixed assets must abide by and observe the applicable rules on capital expenditure management.

When the construction and procurement of fixed assets have been completed and the assets have been put into use, the company accountant must proceed with the accounting procedures for the capital costs relating to each construction work, construction items. Upon the finalization of the approved construction costs, the accountant is to make accounting entries to decrease the Capital Expenditure Funds and increase the Operating Capital.

STRUCTURE AND DETAILS OF ACCOUNT 441- CAPITAL EXPENDITURE FUNDS

Debit side:

Decrease in capital expenditure funds when:

- Completing, handing over and putting the fixed assets newly constructed and acquired into use, finalizing the approved capital expenditure funds;

- Returning the unused capital expenditure funds to the State Budget or the higher level entity.

Credit side:

Increase in capital expenditure funds when:

- Receiving capital expenditure funds allocated from State Budget or the higher level entity;

- Receiving capital expenditure funds from donors;

- Transferring from investment and development fund.


The current balance of the capital expenditure funds of the company which is unused or has been used but the construction is still in progress or the construction has been completed but the fund finalization has not been approved.

http://en.wikipedia.org/wiki/Upgrade

http://en.wikipedia.org/wiki/Assets


1- Upon receipt of capital expenditure funds in cash, cash at bank, enter:

Dr. 111, 112, …

Cr. 441 - Capital expenditure funds

2- Upon receipt of capital expenditure funds allocated from State Budget according to the allotted budget:

a- Upon receipt the allotted capital expenditure budget, enter a single debit entry to account 008 “Budget for non-business, project expenditure” (Off-balance sheet account)

b- When the allotted capital expenditure budget is used, accounting entries shall be put to relevant accounts based on the actual budget usage, as follows:

Dr. 111 – Cash

Dr. 152, 153, 331, …

Dr. 133 – Deductible VAT (1332) (if input VAT is deductible)

Dr. 241 – Construction in progress (expenditure using allotted capital expenditure budget)


Simultaneously, enter a single credit entry to account 008 “Budget for non-business, project expenditure” (Off-balance sheet account)

3- When the capital expenditure budget has not been allotted, the company shall obtain advance of capital expenditure fund from State Treasury. Upon receipt of such advance, enter:

Dr. 111, 112, …


4- When the capital expenditure budget has been allotted, the company shall fulfill all procedures relating to the repayment of fund advance to the State Treasury. Upon the State Treasury’s acceptance of repayment documents, enter:



5- Upon receipt of Capital expenditure funds for repayment of short-term loans, inter-company loans and loans from other sources, enter:

Dr. 311, 336, 338, …


6- For additional Capital expenditure funds transferred from Investment and development fund, enter:



7- When the construction and procurement of fixed assets using Capital expenditure funds have been completed and the assets have been put into use:

- The accountant is to increase value of fixed assets due to the completion of new construction and acquisition, enter:




- Upon the finalization of the approved construction, the accountant is to make accounting entries to decrease the Capital Expenditure Funds and increase the Operating Capital, enter:


Cr. 411 - Operating Capital

8- Upon returning unused Capital Expenditure Funds to State Budget or to the higher level entity, enter:


Cr. 111, 112, …

ACCOUNT 461

FUND FOR STATE ADMINISTRATIVE ACTIVITIES

This account is used to reflect receipt, utilization and clearance of Fund for State administrative activities and projects. This account is used only in entities who granted funds for administrative activities and projects by the Government and the higher-level entity.

Fund for State administrative activities and projects is granted by the State Budget or the higher-level entity, or directly funded by the Government, local and foreign organizations and individuals to implement target programmes, approved projects, or to perform economic, politic, social duties assigned by the State or the higher level entity without profit purposes. Fund for State administrative activities and projects is used under the estimated budget and finalized with the fund provider. Fund for State administrative activities may be income from administrative activities at the enterprise, such as hospital fees collected from employees who are treating, caring at the entity’s hospital, tuition fees, charges…


WHEN RECORDING FUND FOR STATE ADMINISTRATIVE ACTIVITIES

1. Fund for State administrative activities and projects must be recorded in detail by its source: grants by the State Budget, the higher-level entities, funds and aids from individuals and organizations or income from administrative company. Moreover, fund for State administrative activities of the current year must be separated from prior one.

2. Fund for State administrative activities and projects must be used for appropriate purposes, activities under relevant standards and norms of the State and the higher-level entities and the estimated budget.

3. Where fund for State administrative activities is granted by the State Budget, based on the granting method, fund for State administrative activities are recorded in accounting books:

- The State Budget grants funds by payment order. When receiving Credit Note (money arrives in the enterprise’s account), cash in bank and fund for State administrative activities are increased at the same time.

- The State budget grant funds by budget for administrative activities and projects. Upon the receipt of the Notice, a single debit entry is made to Account 008 “Budget for non-business, project expenditure” (off balance sheet item). When the budget is used for administrative activities and projects, a single credit entry is made to 008 “Budget for non-business, project expenditure”, and a credit entry is made to Account 461 “Fund for State administrative activities” and corresponding entries are made to relevant accounts.

4. At the end of each financial year, the enterprise must finalise Fund for State administrative activities received and used with the financial agency, the management unit, or fund providers under the current finance policies. Unused funds are treated by the authorized agency. Unused funds are carried forward upon the approval of the authorized agency.

5. At the end of the financial year, if activities which use Fund for State administrative activities are not finalized, Fund for State administrative activities of the current year shall be back to prior year.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 461 – FUND FOR STATE ADMINISTRATIVE ACTIVITIES

Debit side

- Expenses covered by Fund for State administrative activities, projects finalized

- Unused fund for State administrative activities returned to the State Budget or the higher-level entity.

Credit side

- Fund for State administrative activities received from the State Budget of the higher-level entity,

- Income from administrative activities supplementing Fund for State administrative activities.

Credit Balance

Subsidy funds received from the State Budget or higher level having not been spent or settled.

Account 461 – -Fund for State administrative activities has 2 second tier accounts:

- Account 4611 – Fund for State administrative activities brought forward: to reflect fund for State administrative activities and projects used in the prior year but the finalization report has not been approved and unused Fund for State administrative activities in the prior year. When the prior report is approved, fund for State administrative activities used in the prior year shall be charged to Account 461 “Fund for State administrative activities” (4611 - Fund for State administrative activities brought forward). Unused Fund for State administrative activities in the prior year shall be returned to the State Budget or recorded in the Fund for State administrative activities in the current year upon the decision of the finance agency or the authorized agency.

- Account 4612 – Fund for State administrative activities carried forward: to reflect Fund for State administrative activities granted by the State Budget or the higher-level entities in the current year and also unused Fund for State administrative activities in the prior year which is brought forward upon the approval of the finalization report. At the end of the financial year (at the beginning of the financial year), fund for State administrative activities of the current year which is not finalized shall be transferred from Account 4612 “Fund for State administrative activities carried forward” to Account 4611 “Fund for State administrative activities brought forward” for controlling purpose until the finalization report is approved


1. Upon receipt fund from State Budget by payment order or from the higher-level entity by in cash:

Dr. 111, 112…

Cr. 461 – Fund for State administrative activities (4612)

2. Upon the receipt of the estimated budget for administrative activities and projects, a single debit entry is made to Account 008 “Budget for non-business, project expenditure” (off balance sheet account)

3. Upon the cash withdrawal from the estimated budget to the fund or the purchase of materials, tools or direct payments to sellers, or direct payments:



Dr. 161 – Non-business expenditure out of funds received from the State (1612)

Dr. 152, 153…


At the same time, a single credit entry is made to Account 008 “Budget for non-business, project expenditure” (Off balance sheet account)

4. Income from administrative activities if any:

Dr. 111, 112…


5. Upon the receipt of funds for State administrative activities by fixed assets from the State Budget, the higher-level entity or non-refundable aids by fixed assets for administrative activities and projects:



Cr. 461 – Fund for State administrative activities

At the same time:

Dr. 161 – Non-business expenditure out of funds received from the State

Cr. 466 – Fund for State administrative activities used for fixed assets

6. Where at the end of the accounting year unused Fund for State administrative activities and projects in cash on hand or cash in bank is returned to the State Budget or the higher-level entity:

Dr. 461 - Fund for State administrative activities

Cr. 111, 112…

If such unused fund is not returned but brought forward, the above entries are not made.

7. Where the report of finalization Fund for State administrative activities and projects is approved in the current year:

Dr. 461 - Fund for State administrative activities

Cr. 161 - Non-business expenditure out of funds received from the State (1612) (approved expenses)

8. Where the report of finalization Fund for State administrative activities and projects is not approved at the year end:

Dr. 161 - Non-business expenditure out of funds received from the State (1611 - Expenditure brought forward awaiting authorization)

Cr. 161- Non-business expenditure out of funds received from the State (1612 Expenditure of current year)

- At the same time, fund for State administrative activities and projects of the current year is transferred to prior one:

Dr. 461 - Fund for State administrative activities (4612- Current year)

Cr. 461- Fund for State administrative activities (4611- Brought forward).

9. Where the report of finalization Fund for State administrative activities and projects of the prior year is approved:

Dr. 461 - Fund for State administrative activities (4611)

Cr. 161 - Non-business expenditure out of funds received from the State (1611)

10. Surplus fund for State administrative activities of the prior year is brought forward:

Dr. 461 - Fund for State administrative activities (4611- Brought forward)

Cr. 461- Fund for State administrative activities (4612- Current year).

ACCOUNT 466

FUNDS USED FOR FIXED ASSET INVESTMENTS

This account is used to reflect the current balance and the movements (increase, decrease) of funds used for FA investments. Funds used for FA investments are increased only when fixed assets are purchased; new investments are made in construction, improvements, enlargement by fund for State administrative activities and projects granted by the State Budget or aids.

Funds used for FA investments shall be decreased when fixed asset depreciation is calculated, fixed assets are transferred, disposed, deficiency is detected during the FA count, payments are made to the State, FAs are sent to other entities upon the request of the higher-level entity, the State.

STRUCTURE AND REFLECTED CONTENTS OF ACCOUNT 466 - FUNDS USED FOR FIXED ASSET INVESTMENTS

Debit side:

Decrease in funds used for fixed asset investments includes:

- Payments made to the State, fixed assets used for administrative activities and projects upon the decision of the Government agency or the authorized agency;

- Depreciation of FAs used for administrative activities and projects;

- FAs transferred, disposed, deficiency in FAs detected during the physical count;

- Decrease in net book value of FAs upon revaluation.

Credit side:

Increase in funds used for fixed asset investments includes:

- FAs purchased for that put into use of business and project’s activities:

- Fund for State administrative activities granted or non-refundable aids:

- Increase in net book value of FAs upon revaluation

Account balance of Cr side:

Funds used for fixed asset investments that are still existed in the entity.


1. Where the enterprise is granted fixed assets by the State Budget and the higher-level entity or fund for State administrative activities and projects and non-refundable aids are used to purchase fixed assets, for construction and when the purchase and construction are finished:

Dr. 211- Tangible FA

Dr. 213 – Intangible FA

Cr. 111, 112, 241, 331, 461…

At the same time,

Dr. 161 – Non-business expenditure out of funds received from the State

Cr. 466 - Fund for State administrative activities used for fixed assets

In case of purchase of fixed assets and investments in construction by Fund for State administrative activities and projects, a single credit entry is made to Account 008 - Budget for non-business, project expenditure (off balance sheet account)

2. At the end of the accounting period, depreciation of FAs purchased by fund for State administrative activities and projects to used for administrative activities and projects is calculated:

Dr. 466 - Funds used for fixed asset investments

Cr. 214 – FA depreciation

3. When FAs used for administrative activities and projects are disposed, transferred:

- Decrease from transfer and disposal of FAs:

Dr. 466 - Funds used for fixed asset investments (net book value)

Dr. 214 – FA depreciation (depreciation value)

Cr. 211 – Tangible FA (cost)

Cr. 213 – Intangible FA (cost)

- Proceeds, expenses and surplus over proceeds and expense from transfer and disposal of FAs purchased by fund for State administrative activities and projects are treated upon the decision on disposal and transfer of the authorized person.

ACCOUNT CATEGORY 5

REVENUE

This account is used to reflect all revenue from sales of products, goods, investment properties, services, interest income, royalties, dividend and share of profit, sales discount, sales allowance, sales returns.

Revenue is the total economic benefit that the enterprise gained or will gain in the accounting period, generated from the normal business activities, contributing to increase of owners’ equity. Proceeds received on behalf of the third party, which are not economic benefit, and do not result in increase of owners’ equity are not considered as revenue.

FOLLOWING REGULATIONS MUST BE FOLLOWED WHEN RECORDING THIS ACCOUNT CATEGORY

1. Determination and recognition of revenue must be in accordance with requirements in VAS 14 “Revenue and other income” and other related accounting standards.

2. Recognition of revenue and expenses must be consistent. Upon recognition of revenue, the respective expenses generating such revenue shall also be recognized..

3. Revenue from sale of goods, products shall be recognized when it meets the 5 following requirements:

- Significant risks and rewards of ownership have been transferred to the buyer

- The enterprise no longer acts as owner or controller of the goods.

- Revenue can be determined reliably

- The enterprises obtained or shall obtain economic benefits from transaction of goods.

- Selling expenses can be determined.

4. Revenue from services rendered is recognized when the outcome of the transaction can be estimated reliably. When a transaction involving the rendering of services is attributable to several periods, each period’s revenue should be recognised by reference to the stage of completion at the balance sheet date. Outcome of the transaction shall be determined when it meets the following 4 requirements:

- Revenue can be determined reliably;

- It’s possible to obtain economic benefits from the transaction;

- Outcome of the transaction at the balance sheet date can be determined;

- Expenses incurred from the transaction and expenses for completion of the transaction can be determined.

5. When goods or services are bartered for goods or services which are similar in nature and value, such transaction shall not be considered as a transaction generating revenue and shall not be recognized as revenue.

6. Each type of revenue must be followed up: Revenue from sale of goods, revenue from provision of services, revenue from interests, copyrights, dividends and distributed profits. Each type of revenue shall be again detailed by each revenue items such as sale revenue may be detailed by revenue from sale of goods, products,… for sufficient, correct determination of

operation results meeting management requirements of manufacturing and trading activities and preparation of income statement.

7. In the period, if there are sale deductions such as trade discounts, sale allowance, sale returns, such deductions must be recorded separately. Sale deductions shall be net off with revenue initial recognized to determine net revenue which shall be used as a basis to determine operation results.

8. On principle, at the end of accounting period, operation results must be determined. All the net revenue generated in the accounting period shall be transferred to Account 911 – Determining operating results. All revenue accounts shall not have closing balance.

Account Category .5 – Revenue, has 6 accounts, categorized into 3 groups:

Group Account 51 – Revenue, has 3 accounts:

Account 511 - Revenue

Account 512 - Inter-company revenue

Account 515- Financial income

Group account 52 - has 01 account

Account 521- Sales discounts

Group Account 53 – has 2 accounts:

Account 532 - Sales allowances.

ACCOUNT 511

SALES REVENUE

This account reflects sales revenue earned by an entity in an operating period from the following transactions:

- Sales of goods: sales of products produced by the entity, sales of merchandise purchased and investment properties;

- Rendering of services: performing assignments as contractually agreed in one or several accounting periods, such as transportation services, traveling services, operating lease, etc.


19. Sales revenue should be measured at the fair value of the considerations received or receivable from transactions made such as sales of products, merchandises, investment properties, rendering of services including surcharges and additional fees other than selling price (if any).

20. In the case of an entity making a sale in a foreign currency, the amount so earned shall be translated into Vietnam Dong or any formal accounting currency at the actual exchange rate or at the average inter-bank rate published by the State Bank of Vietnam at the transaction date.

21. Net sales revenue (net sales) earned by an entity in an accounting period may be less than the sales revenue initially recognized as a result of: sales allowances and rebates given or sales returns (as the goods sold do not meet the quality or specification agreed in the economic contract) and the entity has to pay special sales tax, or export duty, VAT under direct method on the sales revenue actually earned by the entity in an accounting period.

22. Only recorded in Account 511 “Sales revenue” the revenue of products, merchandises, investment properties sold, services rendered, which are determined as actually sold in the period, regardless of cash earned or receivable.

23. For goods, merchandises, services subject to VAT under deduction method, sales revenue shall be the invoiced value of goods sold and services rendered exclusive of VAT.

24. For goods, merchandises, services not subject to VAT or subject to VAT under direct method, sales revenue shall be the total payment received.

25. For goods, merchandises, services subject to special sales tax, or export duty, sales revenue shall be the total payment received (including special sales tax, or export duty).

26. Processing entity shall record in this account as sales revenue the processing fees actually earned, not including value of materials, goods received for processing.

27. For an entity acting as an agent selling goods at an assigned price for commission, records shall be made into this account of commissions receivable.

28. In case of sale of goods on credit, sale revenue shall be recorded at spot price and interest earned from forward price shall be recorded to unearned revenue according to the time of revenue recognition.

29. Account 511 also reflects revenue from goods sold and services rendered to holding company, inter-companies. Such revenue should be accounted for in details for purpose of preparing consolidated financial statements.

30. Revenue from construction contract includes:

a) Initial revenue recognised in the contract;

b) Amounts increased, decreased upon implementation of the contract; bonus and other payments if these amounts can affect revenue and can be reliably estimated;

- Revenue from a contract can be up or down from time to time, for example:

+ Contractor and its client agree upon changes and requirements that can increase or decrease revenue in the following period;

+ Revenue as stated in the contract with fixed price can be increased due to increasing price.

+ Revenue from the contract can be reduced due to the contractor can not meet progress or can not meet quality requirements;

+ For a contract with fixed price regulating fixed costs for every finished work, revenue from the contract shall be increased or decreased upon finished work volume.

- Bonus is an additional amount paid to contractor if the contractor meets or exceeds requirements. The bonus shall be charged to revenue from construction contract if it satisfies two following conditions:

+ It certainly meets or exceeds some criteria stated in the contract.

+ It can be reliably estimated.

- Other payments are payments that the contractor receives from its client or other parties to cover expenses which are not included in contract price. For example: delays caused by client; errors in technical specifications or designs and disputes in contract implementation. Determination of revenue regarding the above payments shall be subject to various uncertainly elements and often subject to result from various negotiations. Therefore, other payments shall be recorded into revenue from construction contract when:

+ The negotiations have resulted in the fact that the client accepts compensations.

+ Other payments are approved by the client and they can be reliably estimated.

31. Revenue from a construction contract shall be recognised as follows:

- In case the construction contract regulates that the contractor is entitled to payment over work progress: when results from contract implementation are reliably estimated, revenue from the contract shall be recognised in correspondence with performed work determined by the contractor at the time of preparation of financial statements, regardless preparation of payment invoice over work progress and invoice amount;

- - In case the construction contract regulates that the contractor is entitled to payment over finished work, when results from contract implementation are reliably estimated and approved by the client, revenue and expenses relating to the contract shall be recorded in correspondence with finished work approved by the client during period stated in the invoice.

32. When results from contract implementation can not be reliably estimated:

- Revenue shall be recorded in correspondence with expenses incurred for contract implementation and these expenses can be certainly refunded.

- Expenses shall be recorded when incurred.

33. For goods, services determined as sold but due to errors in quality, technical specifications,…the buyer refuses to make payment, returns or requires for rebate and the seller accepts this; or the buyer is entitled to sale discount due to purchase of huge amount; such sales deductions shall be recorded in account 531 “Sales returns” or account 532 “Sales allowances”, account 521 “Sales discounts”, and transferred to Account 511 for net revenue recognition at the period end.

34. For goods of which invoice has been issued and payment has been made; however have not been delivered, these goods shall not considered as goods sold and their value shall not be recorded in account 511 “Revenue” but shall be recorded in credit side of account “Accounts receivable –trade”.

35. For lease of assets of which rental fees received in advance for many years, revenue from services rendered for a fiscal year shall be determined by total amounts received divided by numbers of fiscal year of which advances have been received.

36. For enterprise which is responsible for supplying goods, products, services as requested by the State and which is subsidised by the State, revenue from subsidisation shall be amounts officially announced by the State, or actual subsidised by the State, which shall be recorded in Account 5114 “Revenue from subsidization”.

37. The followings shall not be recorded in Account 511:

+ Value of goods, materials, semi-finished products issued from stock to deliver to external parties for processing.

+ Value of products, goods, services supplied by the company, holding company to companies with dependent accounting system and vice versa

+ Value of products, goods and services supplied by the holding company to its member firms and vice versa.

+ Value of products, goods on consignment; services already provided to customers but not been defined as sold.

+ Value of goods at agents under consigning method (not defined as sold).

+ Financial income and other income which are not considered as revenue.


ACCOUNT 511 - SALES REVENUE

Debit side:

- Amounts of special consumption tax or export tax payable on sales revenue from sale of goods and services which are defined as sold in the period;

- Amount of VAT payable which is paid under direct method;

- Revenue for sales returns transferred at the end of period

- Sales deductions transferred at the end of period

- Sales discounts transferred at the end of period

- Transfer of net revenue into Account 911 “Operating results”.

Credit side:

- Revenue from sale of products, goods, investment properties and provision of services during period.

No closing balance is available for account 511

Account 511 – Sales revenue, has five 2nd tier accounts:

- Account 5111 – Revenue from sales of merchandizes: to record revenue and net revenue generated from the volume of merchandize recognized as being sold during an accounting period.

This account is intended specially for trading businesses such as material trading companies, foodstuff trading companies, etc.

- Account 5112 – Revenue from sales of finished goods: to record revenue and net revenue generated from the volume of goods (finished products, semi-finished products) recognized as being sold during an accounting period.

This account is intended specially for manufacturing companies in industrial, agricultural, forestry, construction, … sectors.

- Account 5113 – Revenue from sales of services: to record revenue and net revenue generated from the volume of services rendered and recognized as being sold during an accounting period.

This account is intended specially for service providers in transport, communications, tourism, public services, technology and science, accounting, auditing...

- Account 5114 – Revenue on subsidization: to record revenue on subsidization granted by the State when enterprise supplies goods and services as requested by the State.

- Account 5117 – Revenue from trading investment property: to record revenue from lease of investment property and revenue from sale, disposal of investment properties.


1. Revenue of goods (sales of finished goods, semi finished goods), merchandises, services which are realized as sales during the accounting period:

a) For goods, merchandises, services subject to VAT under deduction method and tax is paid under deduction method, sales revenue shall be recorded at the invoiced value of goods sold and services rendered exclusive of VAT.

Dr. 111, 112, 131 … (total payment)

Cr. 511 – Sales revenue (invoiced value net of VAT) (5111, 5112, 5113, 5117)

Cr. 3331 – VAT (33311)

b) For goods, merchandises, services not subject to VAT or subject to VAT under direct method, sales revenue shall be the total payment received.


Cr. 511 – Sales revenue (total payment) (5111, 5112, 5113, 5117).

2. In the case of an entity making a sale in a foreign currency, the amount so received or receivable shall be recorded in the foreign currency in the accounting books and also be translated into Vietnam Dong or any formal accounting currency at the actual exchange rate or at the average inter-bank rate published by the State Bank of Vietnam at the transaction date to be recorded in Account 511 “Sales revenue”.

3. Where tax is paid under deduction method, goods subject to VAT under deduction method are exchanged for unsimilar materials, merchandises, fixed assets for production and trade of goods, services subject to VAT under deduction method, sales revenue from exchange of other goods, fixed assets is recorded at the invoice value exclusive of VAT.

Dr. 131 - Accounts receivable – trade (total payment)

Cr. 511 - Sales revenue (invoiced value net of VAT) (5111, 5112)

Cr. 3331 - VAT (33311)

- Upon the receipt of materials, merchandises, fixed assets for which the entity’s goods are exchange:

Dr. 152, 153, 156, 211 … (invoiced value net of VAT)


Cr. 131 - Accounts receivable – trade (total payment)

- Where the fair value of the goods which the entity use for exchange is higher than the fair value of the materials, merchandises, fixed assets received from the exchange. Upon the receipt of the difference amount, enter:

Dr. 111, 112 (difference amount)


- Where the fair value of the goods which the entity use for exchange is lower than the fair value of the materials, merchandises, fixed assets received from the exchange. Upon the payment of the difference amount, enter:

Dr. 131 - Accounts receivable – trade

Cr. 111, 112…

4. When goods, merchandises, services not subject to VAT or subject to VAT under direct method are exchanged for unsimilar materials, merchandises, fixed assets for production and trade of goods, services not subject to VAT or subject to VAT under direct method, sales revenue from exchange of other goods, fixed assets is recorded at total payment.


Cr. 511 - Sales revenue (total payment) (5111, 5112)

- Upon the receipt of materials, merchandises, fixed assets for which the entity’s goods are exchange:

Dr. 152, 153, 156, 211 … (price payment)


- Recording the receipt or the payment of difference amount is made under the guideline in point 3.

5. Where goods, merchandises, services subject to VAT under deduction method are sold on credit, installment, sales revenue is recorded at the on-the-spot price net of VAT:


Cr. 511 - Sales revenue (total payment) (5111, 5112, 5117) (the on-the-spot price net of VAT)

Cr. 333 - Taxes and other payables to State Budget (3331) (VAT)

Cr. 3387 - Deferred revenue (difference between the price on credit, installment and the on-the-spot price net of VAT)

- Upon the receipt of the payment:

Dr. 111, 112…


- Periodically, interest income from credit, installment sales is recorded:


Cr. 515 – Financial income (interest income from credit, installment sales)

6. Where goods, merchandises, services not subject to VAT or subject to VAT under direct method are sold on credit, installment, sales revenue is recorded at the on-the-spot price including VAT:


Cr. 511 - Sales revenue (the on-the-spot price including VAT) (5111, 5112)

Cr. 3387 - Deferred revenue (difference between the price on credit, installment and the on-the-spot price including VAT)

- Upon the receipt of the payment:

Dr. 111, 112…


- Periodically, interest income from credit, installment sales is recorded:


Cr. 515 – Financial income (interest income from credit, installment sales)

7. Where the entity calculates VAT payable under deduction method, revenue from fixed asset operating lease and investment property operating lease must be recorded in line with the completion of fixed asset operating lease and investment property operating lease in each period. Upon the issuance of the invoice on fixed asset operating lease and investment property operating lease, enter:

Dr. 131 - Accounts receivable – trade (in case of late payment)

Dr. 111, 112 (in case of at sight payment)

Cr. 511 - Sales revenue (lease amount net of VAT) (5113, 5117)

Cr. 3331 - VAT

8. Where the entity receives lease amount of several periods from fixed asset operating lease and investment property operating lease:

- Upon the receipt of lease amount of several periods from fixed asset operating lease and investment property operating lease:

Dr. 111, 112 … (total amount received in advance)

Cr. 3387 - Deferred revenue (amount net of VAT)

Cr. 3331 - VAT

- Periodically, revenue is calculated and recorded


Cr. 511 - Sales revenue (5113, 5117)

- Where the period of fixed asset operating lease and investment property operating lease is shorter than the contractual term for which lease amount is received in advance (if any), the received extra lease amount shall be repaid:

Dr. 3387 - Deferred revenue (amount net of VAT)

Dr. 3331 – VAT (amount repaid to the lessee for VAT on non-performing asset operating lease)

Cr. 111, 112 … (total repayment)

9. Where the entity calculates VAT payable under direct method and provides fixed asset operating lease and investment property operating lease services:

- Upon the issuance of the invoice on fixed asset operating lease and investment property operating lease:

Dr. 131 - Accounts receivable – trade (in case of late payment)

Dr. 111, 112 (in case of at sight payment)

Cr. 511 - Sales revenue (total payment) (5113, 5117)

- Where the entity receives lease amount of several periods from fixed asset operating lease and investment property operating lease:

+ Upon the receipt of lease amount of several periods from fixed asset operating lease and investment property operating lease:

Dr. 111, 112 … (total amount received in advance)

Cr. 3387 - Deferred revenue (total amount received in advance)

+ Periodically, revenue is calculated and recorded:


Cr. 511 - Sales revenue (5113, 5117)

+ At the end of the account period, VAT is calculated and recorded under direct method

Dr. 511 - Sales revenue (5113, 5117)

Cr. 3331 – VAT

+ the amount is repaid due to non performing fixed asset operating lease contract:


Cr. 111, 112 … (total amount repaid)

10. For sales of goods by commission agents at assigned price:

Accounting by consignor entity

a. When goods are consigned to agents for sales, consignment delivery notes are prepared, based on which, entries are recorded:

Dr. 157 - Goods on consignment

Cr. 155, 156

b. When goods so consigned are sold, entries are made based on the invoice-listing note delivered by the agents

- Where goods sold are subject to VAT under the deduction method, sales revenue is recorded at the price net of VAT:


Cr. 511 - Sales revenue (amount net of VAT) (5111, 5112)

Cr. 3331 – VAT (33311)

At the same time, cost of sales is recorded:


Cr. 157 - Goods on consignment

- Where goods sold are subject to VAT under the direct method or not subject to VAT, sales revenue is recorded at the total price:

Dr. 111, 112, 131 …

Cr. 511 - Sales revenue (at the total price)

At the same time, cost of sales is recorded:


Cr. 157 - Goods on consignment

c. For commission payable to the agent that has made the sales:

Dr. 641 – Selling expense (commission net of VAT)


Cr. 111, 112, 131 …

Accounting by agents who receive commission for making sales at assigned price:

a. Upon receipt of goods for commission sales, the whole value of goods on consignment shall enter into account 003 “Inward consignment goods for sales” (off-balance sheet

account). A debit is for goods received and a credit is for goods sold or returned to the consignor entity.

b. Upon sales of goods received:

- When the goods are dispatched, a VAT invoice or sales invoice shall be sent out as statutorily required. Account payable for consigned goods sales are recorded based on the VAT invoice or sales invoice or related document:

Dr. 111, 112, 131 …

Cr. 331 - Accounts payable – trade (total price)

- Commission is determined on a periodic basis:

Dr. 331 - Accounts payable – trade

Cr. 511 – Sales revenue (commission net of VAT)

Cr. 3331 – VAT (if any)

- When sales receipt is remitted to the consignor entity:

Dr. 331 - Accounts payable – trade

Cr. 111, 112 …

11. For goods put on sales at dependent units:

Where the goods are subject to VAT under deduction method and the enterprise pays tax under deduction method.

a. When the enterprise (higher-level entity) dispatches goods to its dependent units (branches, shops), a delivery note and inter-company transaction listing note shall be sent out:

- The higher-level entity would identify and make entries of the cost of goods dispatched based on the delivery note and inter-company transaction listing note.

Dr. 157 – Goods on consignment (historical cost)

Cr. 155, 156 …

- When a dependent unit receives the goods dispatched by the higher-level entity, records are kept based on the delivery note and inter-company transaction listing note and related documents:

Dr. 155, 156 (inter-company sales price)


b. Having sold goods delivered from the higher-level entity, a dependent unit (paying tax under the deduction method) shall prepare VAT invoices as required by statute:

- Based on the VAT invoice, sales revenue shall be recorded:

Dr. 111, 112, 131 …

Cr. 511 – Sales revenue (net of VAT)


- Upon the receipt of VAT invoice on goods sold from the higher-level entity, deductible input VAT is recorded based on VAT invoice:


Cr. 155 – Finished goods (if cost of goods sold are not transferred)

Cr. 632 – Cost of goods sold (if cost of goods sold is transferred)

Where the goods are subject to VAT under direct method:

a. When delivering finished goods, goods not subject to VAT or subject to VAT under direct method to its dependent units, the higher-level entity shall send out a delivery note and inter-company transaction listing note.

- The higher level entity would determine cost of goods delivered based on the delivery note and inter-company transaction listing note:




- Upon receipt pf the goods from the high-level entity, a dependent unit would make relevant entries based on the delivery note and inter-company transaction listing note and related documents:

Dr. 155 – Finished goods (inter-company sales price)

Cr. 111, 112, 336

b. Having sold the goods subject to VAT under direct method from the higher-level entity, a dependent unit shall prepare a sales invoice.

- Sales revenue shall be recognized based on the sales invoice:

Dr. 111, 112, 131 …

Cr. 511 - Sales revenue (total price) (5121, 5122)

c. Where the higher level entity would use a sales invoice for goods delivered to a dependent unit.

- Based on the sales invoice, the higher-level entity recognizes sales revenue:

Dr. 111, 112, 136 …

Cr. 512 - Inter-company revenues (total inter-company sales price) (5121, 5122)

- Having received goods from the higher-level entity for sales, a dependent unit would record cost of goods received based on the sales invoice and related documents:

Dr. 155, 156

Cr. 111, 112, 336 …

- Having sold goods from the higher-level entity, a dependent entity shall prepare a sales invoice, based on which sales revenue is recorded:

Dr. 111, 112, 131 …

Cr. 511 – Sales revenue (total price) (5111, 5112)

12. For good processing activity:

a. Accounting by the transferor entity:

- For goods delivered to the transferee


Cr. 152, 156

- For costs of processing goods subject to VAT under deduction method and the enterprise pays tax under deduction method:

Dr. 154 - Work-in-progress


Cr. 111, 112, 331 …

- For processed goods taken back:

Dr. 152, 156

Cr. 154 - Work-in-progress

b. Accounting by the transferee entity

- Upon receipt of goods transferred for processing work, the total value of goods to be processed shall be entered into account 002 “Goods held under trust or for processing” (off-balance sheet account) with a debit for goods received and a credit for processed goods returned to the transferor entity.

- Having determined processing revenue:

+ Where the processing activity is subject to VAT under deduction method and the enterprise engaged in the processing work pays tax under deduction method:

Dr. 111, 112, 131 …

Cr. 511 - Sales revenue (total payment received net of VAT)

Cr. 3331 – VAT (33311)

+ Where the processing activity is not subject to VAT or subject to VAT under deduction method and the enterprise engaged in the processing work pays tax under direct method:

Dr. 111, 112, 131 …

Cr. 511 - Sales revenue (total payment received)

13. Accounting revenue from construction contracts

13.1. Where under the construction contract, the contractor is entitled to make payments over contract work-in-progress when the outcome of a construction contract can be estimated reliably, relevant entries are made based on the documents reflecting the work performed (rather than the invoice) which is determined by the contractor at the date of the financial statement preparation.

Dr. 337 - Excess of progress billings over contract work-in-progress

Cr. 511 - Sales revenue (5111)

- Based on the VAT invoice prepared under the stage of completion, excess of progress billings over contract work-in-progress is recorded:


Cr. 337 - Excess of progress billings over contract work-in-progress

Cr. 3331 - VAT

- Upon receipt of payment or advance payment from customers

Dr. 111, 112 …


13.2. Where under the construction contract, the contractor is entitled to make payments over the work performed when the outcome of a construction contract can be estimated reliably and confirmed by the customer, VAT invoice on work performed shall be prepared. Based on the invoice, relevant entries are made:

Dr. 111, 112, 131 …

Cr. 3331 – VAT


13.3 Upon receipt of the reward amount as contract performance meets or exceeds the contractual criteria, enter:

Dr. 111, 112, 131 …

Cr. 3331 – VAT


13.4 Upon receipt of compensation from the customer or other party for expenses excluding in the contract value (e.g. expenses incurred due to delays caused by the customer; errors in specifications or designs and disputes on changes in contract performance)

Dr. 111, 112, 131 …

Cr. 3331 – VAT (if any)


13.5 Upon receipt of payment for work performed or advance payment from the customer:

Dr. 111, 112 …

Cr. 131 - Accounts receivable – trade.

14. To determine special consumption tax or export tax payable, enter:

Dr. 511 – Revenue (5111, 5112, 5113)


Cr. 3333 – Import, export tax (details in import, export tax).

15. At year-end, to determine VAT payable under direct method with regard to operating activities, enter:

Dr. 511 – Revenue

Cr. 3331 – VAT payable.

16. Accounting for revenue from subsidization granted by the State:

- Upon receipt of official announcement from the State regarding subsidization, enter:

Dr. 333 – Taxes payable to the State Treasury (3339)

Cr. 511 –Revenue (5114).

- Upon receipt of money granted by the State, enter:

Dr. 111, 112, …

Cr. 333 - Taxes payable to the State Treasury (3339).

17. Accounting for sale, disposal of investment property

- For enterprise which computes VAT under deductible method, enter:

Dr. 111, 112, 131, …

Cr. 5117 – Revenue from trading investment property (selling price net of VAT)

Cr. 3331 – VAT (33311 – Output VAT).

- For enterprise which computes VAT under direct method, enter:

Dr. 111, 112,131,…(total payment)

Cr. 5117 - Revenue from trading investment property.

18. Upon sale of goods, services which are subject to VAT under deductible method and VAT is computed under deductible method applicable to holding company, subsidiaries; revenue shall be recorded into account 511 with regards to the holding company and subsidiaries at selling price net of VAT, enter.

Dr. 111, 112, …

Cr. 511 – Revenue


19. At year-end, deducting revenue from sales returns, sales allowances and sales discounts against actual revenue during accounting period to determine net revenue, enter:

Dr. 511 – Revenue

Cr. 531 – Sales returns

Cr. 532 – Sales allowances

Cr. 521 – Sales discounts.

20. At year-end, to transfer net revenue to account 911 “Operating results”, enter:

Dr. 511 – Revenue

Cr. 911 – Operating results.

ACCOUNT 512

INTERCOMPANY SALES

This account is used to reflect sales revenue of goods sold and services rendered to other units within the same system. Intercompany sales are defined as the economic benefit obtained from internal sales of goods and rendering of services among dependent accounting units of a holding company or corporation adopting internal selling price.


38. Accounting for intercompany sales is maintained in the same manner as for sales revenue (Account 511).

39. This account is exclusively for use by dependent units of a holding company or a corporation to reflect their intercompany sales in a period generated from internal sales of goods and rendering of services among dependent accounting units of a holding company or corporation.

40. No records in this account shall reflect revenue from sales of goods and rendering of services to entities other than those of the same holding company or corporation; to fellow subsidiary units.

41. Intercompany sales serves as a basis for determining internal revenue of a holding company, a corporation and dependent accounting units.

Internal revenue of a holding company, a corporation comprises internal sales and external sales. The holding company, a corporation and dependent accounting units shall fulfill their obligations to the State Budget as regulated by tax laws imposed on the quantity of goods sold and services rendered to both outsiders and insiders.

42. Account 512 shall be recorded in details by internal sales to each dependent accounting units of the holding company or corporation for preparing consolidation financial statements.


ACCOUNT 512 - INTERCOMPANY SALES

Debit side:

- Value of sales returns and sales rebates commited on the quantity of internally provided goods and services recognized at year-end;

- Special sales tax payable for the quantity of internally provided goods and services;

- Net intercompany sales transfered to Account 911 – “Determining operating results”.

Credit side:

- Total intercompany sales made during an accounting period.


Account 512 – Intercompany sales, has three 2nd tier accounts:

- Account 5121 – Sales of merchandizes: to record revenue generated from the volume of merchandize recognized as being internally sold during an accounting period.

This account is intended specially for trading businesses such as material trading companies, foodstuff trading companies, etc.

- Account 5122 – Sales of finished goods: to record revenue generated from the volume of goods sold among units of a holding company or corporation.

This account is intended specially for manufacturing companies in industrial, agricultural, forestry, construction,etc sectors.

- Account 5123 – Sales of services: to record revenue generated from the volume of services rendered among units of a holding company or corporation.

This account is intended specially for service providers in transport, communications and tourism sectors.


1. For goods, merchandizes sold to dependent accounting units:

1.1. For goods, merchandizes subject to VAT under deduction method and the entity pays VAT under deduction method.

a. When the entity (the holding company, higher level entity) delivers goods, merchandizes to dependent accounting units (such as branches, shops), the internal stock issuance and delivery note shall be prepared.

- The holding company, higher level entity shall base on the internal stock issuance and delivery note to determine cost of goods, merchandizes delivered to dependent accounting units for sales, enter:

Dr. 157 – Goods on consignment (cost)

Cr. 155, 156,…

- When the dependent accounting unit receives the goods delivered to by the holding company, higher level entity, its accountant shall base on the internal stock issuance and delivery note and other related supporting documents to enter:

Dr. 156 – Merchandize inventory (internal selling price)

Cr. 336 – Intercompany payables

b/ When the dependent accounting unit (paying VAT under deduction method) sells the VAT taxable goods consigned by the the holding company, higher level entity, VAT invoices must be properly prepared as regulated for this sales.

- The dependent accounting units shall base on the sales VAT invoices to enter:

Dr. 111, 112, 131,…

Cr. 511 – Sales revenue (Selling price net of VAT)


- The holding company, higher level entity shall base on the list of sales invoices prepared and submitted by the dependent accounting units to prepare VAT invoices on the goods sold

internally and send them to the dependent accounting units. Based on the VAT invoices, the accountant shall reflect intercompany sales using the internal selling price before VAT, enter:

Dr. 111, 112, 136 (internal selling price including VAT)

Cr. 512 – Intercompany sales (internal selling price net of VAT)


Simultaneously, to record cost of goods sold internally:



- When the dependent accounting unit receives the VAT invoice on goods sold internally sent by the holding company, higher level entity for the volume of goods sold, based on the VAT invoice reflecting the input VAT deductible, enter:

Dr. 133 – VAT deductible

Cr. 156 – Merchandize inventory (if cost of goods sold not yet transferred)

Cr. 632 – Cost of goods sold (if cost of goods sold has been transferred)

c/ Where the holding company, higher level entity does not use the internal stock issuance and delivery note for the goods delivered to the dependent accounting units, but uses invoices (VAT) instead, invoices (VAT) must be prepared right upon delivery of goods to the dependent accounting units.

- The holding company, higher level entity shall based on the invoices (VAT) reflecting sales revenue, enter:

Dr. 111, 112, 136 (internal selling price including VAT)

Cr. 512 – Intercompany sales (internal selling price net of VAT)


- Upon receipt of VAT invoice and goods consigned by the holding company (higher level entity) for sales, the dependent accounting unit shall base on the VAT invoice and other related supporting documents to reflect cost of merchandize inventory at the internal selling price net of VAT, input VAT deductible, enter:

Dr. 155, 156 (internal selling price including VAT)

Dr. 133 – VAT deductible

Cr. 111, 112, 136 (total internal selling price paid)

- When the dependent accounting unit sells the goods, which are subject to VAT under deduction method) consigned by the the holding company, higher level entity, VAT invoices must be properly prepared as regulated for this sales and sales revenue shall be recorded, enter:


Cr. 511 – Sales revenue (selling price net of VAT)


1.2. For goods, merchandizes not being subject to VAT or subject to VAT under direct method:

a/ When the entity paying VAT under direct method (the holding company, higher level entity) delivers goods, merchandizes, which are not subject to VAT or subject to VAT under direct

method, to dependent accounting units for sales, the internal stock issuance and delivery note shall be prepared as regulated.

- The holding company, higher level entity shall base on the internal stock issuance and delivery note to determine cost of goods, merchandizes delivered to dependent accounting units for sales, enter:

Dr. 157 – Goods on consignment (cost)


Cr. 156 – Merchandize inventory

- When the dependent accounting unit receives the goods delivered to by the holding company, higher level entity, based on the internal stock issuance and delivery note and other related supporting documents, enter:

Dr. 155 – Finished goods (internal selling price)

Dr. 156 – Merchandize inventory

Cr. 111, 112, 336,…

b/ When the dependent accounting unit paying VAT under direct method sells the VAT non-taxable goods or VAT taxable under direct method goods consigned by the the holding company (higher level entity), sales invoices must be properly prepared.

- The dependent accounting units shall record sales revenue based on the sales invoices, enter:

Dr. 111, 112, 131,…

Cr. 511 – Sales revenue (total price paid)

- The holding company, higher level entity shall base on the list of sales invoices prepared and submitted by the dependent accounting units to prepare sales invoices. Based on the sales invoices, to record the sales revenue, enter:

Dr. 111, 112, 136, …

Cr. 512 – Intercompany sales (total internal selling price)

Simultaneously, to record cost of goods sold internally:



c/ Where sales invoice is issued by the holding company, higher level entity immediately upon delivery of goods to the dependent accounting units.

- The holding company, higher level entity shall based on the sales invoices reflecting sales revenue, enter:

Dr. 111, 112, 136, …

Cr. 512 – Intercompany sales (total internal selling price)

- Upon receipt of goods consigned by the holding company (higher level entity) for sales, the dependent accounting unit shall base on the sales invoice and other related supporting documents to reflect cost of merchandize inventory, enter:

Dr. 155 – Finished goods (internal selling price)

Cr. 111, 112, 136,…

- When the dependent accounting unit sells the goods consigned by the the holding company, higher level entity for sales, sales invoices must be prepared. Based on the sales invoices, sales revenue shall be recorded, enter:

Dr. 111, 112, 131,…

Cr. 511 – Sales revenue (Total payment)

2. At year-end, to transfer sales revenue attributable to sales returns, sales rebates (if any) of intercompany sales to account “Intercompany sales”, enter:

Dr. 512 – Intercompany sales


Cr. 532 – Sales rebates

3. At year-end, to determine special sales tax payable on the intercompany sales in the accounting period (if any), enter:


Cr. 3332 – Special sales tax

4. At year-end, to determine VAT payable under direct method attributable to the goods and services sold internally in the accounting period (if any), enter:


Cr. 3331 – VAT payables

5. At year-end, to transfer intercompany sales to Account 911 “Determining operating results”, enter:



6. Where salaries are paid to employees and other labourers in kind (goods, merchandises):

a/ For goods, merchandises subject to VAT under deduction method, when paying bonus or salaries to employees and other labourers by such goods, merchandises, enter:

Dr. 334 – Payables to employees (total payment)

Cr. 512 – Intercompany sales (selling price before tax) (5121, 5122)


b/ When paying bonus or salaries to employees and other labourers by goods, merchandises that are not subject to VAT or subject to VAT under direct method, enter:


Cr. 512 – Intercompany sales (total payment) (5121, 5122)

7. For goods, merchandizes, services used or consumed internally:

a/ If the goods, merchandizes, services, which are subject to VAT under deduction method, are used internally for production of goods and supply of services which are subject to VAT under deduction method, upon issuance of goods, merchandizes for internal use, accounting entries shall be made to reflect intercompany sales, enter:

Dr. 623, 627, 641, 642, …

Cr. 512 – Intercompany sales (production cost or cost of merchandise)

b/ If the goods, merchandizes, services, which are subject to VAT under deduction method, are used internally for production of goods and supply of services which are not subject to VAT, then the VAT payable on the goods, merchandizes, services used internally shall be charged to operating expenses and the accountant record intercompany sales as production cost or cost of merchandise, enter:

Dr. 623, 627, 641, 642, …

Cr. 512 – Intercompany sales (cost of production or cost of merchandise)


8. When goods, merchandizes, services are used for promotion, advertisement purposes:

For goods, services subject to VAT under deduction method and the entity pays VAT under deduction method, upon issuance of goods for promotion, advertisement purposes:

- If the promotion, advertisement is for production of goods and supply of services which are subject to VAT under deduction method, the accountant record sales of goods, merchandizes for promotion, advertisement purposes as cost of production or cost of merchandise, enter:



- If the promotion, advertisement is for production of goods and supply of services which are not subject to VAT or subject to VAT under direct method, the accountant shall record sales revenue, non-deductible input VAT, enter:

Dr. 641 – Selling expenses (cost of production or cost of goods sold plus output VAT)



9. Where goods, merchandizes are used for donation: if the donations of goods, merchandizes, which are subject to VAT under deduction method, made to external organizations, individuals are funded from the reward and welfare fund, the accountant shall reflect sales revenue using selling price net of VAT, non-deductible output VAT, enter:

Dr. 431 – Reward and welfare fund (total payment)

Cr. 512 – Intercompany sales (selling price net of VAT)


10. For goods, merchandizes not subject to VAT or subject to VAT under direct method, upon being issued for donation to external organizations, individuals and funded from the reward and welfare fund, enter:

Dr. 431 – Reward and welfare fund (total payment)

Cr. 512 – Intercompany sales (total payment).

ACCOUNT 515

FINANCIAL INCOME

This account is used to reflect interest incomes, royalties, dividend, profit share and other financial incomes of an entity.

Financial income comprises:

- Interest income: loan interest; bank deposit interest; interest on sales on credit, instalment; bond interest; bill interest; payment discount allowed on purchases of goods and services; etc.

- Dividend, profit share;

- Income from trading of long-term and short-term securities;

- Proceeds from withdrawal or disposal of investments in joint ventures, associates, subsidiaries and other equity investments;

- Income from other investment activities;

- Foreign exchange gains;

- Gains from selling foreign currencies;

- Gains from capital transfer;

- Other financial incomes.


43. Financial incomes to be recorded in Account 515 include interest incomes, royalties, dividend, profit share and other financial incomes deemed to be realized in the period, regardless of whether such incomes have been received or will be received.

44. For proceeds from trading of securities, income recognized shall be the difference where the selling price is higher than the original cost, interest on bonds, bills or shares.

45. For proceeds from forex trading, income recognized shall be the positive difference between ask and bid prices.

46. For interests from investments in shares, bonds, only the interests received in the periods that such securities have been repurchased by the entity shall be recorded as income in the period. Any interests accumulated prior to the entity’s repurchase of such securities shall be recorded by reducing original costs of such investments.

47. For gains from transfer of investments in subsidiaries, joint ventures and associates, income to be recorded in Account 151 shall be the difference where the transfer price is higher than the original cost.


ACCOUNT 515 - FINANCIAL INCOME

Debit side:

- VAT payable under direct method (if any);

- Transfer of net financial income to Account 911 – “Determining operating results”.

Credit side:

- Interest, dividend and share of profit;

- Gains from transfer of investments in subsidiaries, joint ventures, associates;

- Payment discounts allowed;

- Foreign exchange gains from operating activities in the period;

- Gains from selling foreign currencies;

- Foreign exchange gains from year-end revaluation of monetary items denominated in foreign currencies from operating activities;

- Transfer or allocation of foreign exchange gains from completed capex activities (pre-operating stage) to financial income;

- Other financial incomes in the period.



1.To record dividend, profit share from equity investments in the period, enter:

Dr. 111, 112, 138,…

Dr. 221 – Investments in subsidiaries (share dividend received)

Dr. 222 – Investments in joint ventures (share of profit reinvested in joint ventures)

Dr. 223 – Investments in associates (dividend, share of profit reinvested)

Cr. 515 – financial income

2. Method for accounting of investments in securities:

- Upon purchase of short-term, long-term securities, based on the actual costs, enter:

Dr. 121, 228,…

Cr. 111, 112, 141,…

- Periodically, compute and collect bill interest, bond interest or receive notice on dividend, share of profit receivable:

+ For interest received in cash, enter:

Dr. 111, 112, 138,…

Cr. 515 – financial income

+ For dividend, share of profit reinvested, enter:

Dr. 121 – Short-term investment

Dr. 228 – Other long-term investments


- Where interest received on investments including interests accumulated prior to the entity’s repurchase of such investments, the interest so received shall be allocated, only the interests received in the periods that such securities have been repurchased by the entity shall be recorded as financial income in the period; interests accumulated prior to the entity’s repurchase of such securities shall be recorded by reducing original costs of such investments, enter:

Dr. 111, 112 (total interest received)

Cr. 121 – Short-term investment (Interests accumulated prior to the entity’s repurchase of investments)

Cr. 223 – Investment in associates (Accumulated interest prior to repurchase of investments)

Cr. 228 – Other long-term investment (Accumulated interest prior to repurchase of investments)

Cr. 515 – Financial income (the interests received in the periods that such securities have been repurchased)

+ For periodic receipt of bond interest, bill interest (if any), enter:

Dr. 111, 112, …


- Upon transfer of short-term, long-term investments in securities, based on the transfer price:

+ Where gains are generated, enter:

Dr. 111, 112,… (payment price)

Cr. 121 – Short-term investment (historical cost)

Cr. 228 – Other long-term investment (historical cost)

Cr. 515 – Financial income (gains from sales of securities)

+ Where losses incurred, enter:

Dr. 111, 112,… (total payment price)

Dr. 635 – Financial expenses (losses from sales of securities)


Cr. 228 – Other long-term investment (historical cost)

- For forfeiture or settlement of short-term securities when they fall due, enter:

Dr. 111, 112,… (payment price)


Cr. 515 – Financial income (gains)

3. Accounting for sales of foreign currencies (from operating activities) if gains are generated, enter:

Dr. 111 (1111), 112 (1121),… (Total payment price – Actual offer rate)

Cr. 111 (1111), 112 (1121),… (Book rate)

Cr. 515 – Financial income (the difference where the actual offer rate is higher than the book rate)

4. According to interest payment terms, to compute interests receivable in the period on loans granted as stated in the loan agreements, enter:

Dr. 138 – Other receivables


5. Interests received on deposits in the period, enter:

Dr. 111, 112,…


6. Payment discounts:

Payment discounts accepted by the seller in return for the entity’s early payment, enter:



7. Upon sales of investments in subsidiaries, businesses under common control, associates, financial income recorded in Account 515 shall be the difference where the selling price if higher than the historical cost, enter:

Dr. 111, 112,…

Cr. 221 – Investment in subsidiaries (historical cost)

Cr. 222 – Investment in joint ventures (historical cost)

Cr. 223 – Investment in associates (historical cost)

Cr. 515 – Financial income (the difference where the selling price if higher than the historical cost)

8. Where manufacturers, businesses purchase raw materials, merchandizes, fixed assets, services and pay for such purchases in foreign currencies:

- If the average interbank rate or actual rate is higher than the rate booked in Accounts 111, 112, enter:

Dr. 151, 152, 153, 156, 157, 211, 213, 241, 623, 627, 641, 642, 133, …

(at the average interbank rate or actual rate)

Cr. 111 (1111), 112 (1121),… (Book rate in Accounts 111, 112)


9. Where manufacturers, businesses settle their liabilities (accounts payable - trade, short-term borrowings, long-term borrowings, long-term liabilities, inter-company payables, …) in foreign currencies, if foreign exchange rates recorded in Accounts 111, 112 are lower than those posted to sub-ledgers relating to such payable accounts, enter:

Dr. 311, 315, 331, 336, 341, 342,… (book rates)

(at the average interbank rate or actual rate)


Cr. 111 (1111), 112 (1121),… (Book rate in Accounts 111, 112)

10. For debt payments received in foreign currencies (accounts receivable – trade, inter-company receivables, …), if foreign exchange gains are generated, enter:

Dr. 111 (1112), 112 (1122) (at the average interbank rate or actual rate)


Cr. 131, 136, 138, … (Book rate)

11. For treatment of foreign exchange differences from year-end revaluation of monetary items denominated in foreign currencies from operating activities, to transfer all foreign exchange differences from year-end revaluation of monetary items denominated in foreign currencies from operating activities to financial income (for foreign exchange gains) to determine operating results, enter:



12. For newly established businesses, upon completion of construction period (pre-operating stage), to transfer foreign exchange gains (the net amount after netting off the debit side and credit side of Account 4132) from construction activities (pre-operating stage) in Account 413 – Foreign exchange differences (Account 4132) immediately to financial income (Account 515), or to transfer to Account 3387 (for foreign exchange gains) for amortizing over a maximum period of 5 years, enter:


Cr. 515 – Financial income (for foreign exchange gains immediately recorded to financial income)

Cr. 3387 – Deferred revenue (for foreign exchange gains to be amortized)

+ Periodically, to amortize realized foreign exchange gains generated during the construction period to financial income of the financial year subsequent to the year in which the construction is completed and put to operations, enter:

Dr. 3387 – Deferred revenue (foreign exchange gains)


13. Upon sales of products, goods which are subject to VAT under deduction method using sales on credit, instalment method, to record sales revenue of the accounting period at the upfront payment price; the difference between the price of sales on credit, instalment and the upfront payment price shall be recorded to Account 3387 “Deferred revenue”, enter:

Dr. 111, 112, 131,…

Cr. 511 – Sales revenue (at the upfront payment net of VAT)

Cr. 3387 – Deferred revenue (the difference between the price of sales on credit, instalment and the upfront payment price net of VAT)

Cr. 333 – Taxes payable to State Treasury (Account 3331 – VAT payables)

- Periodically, to determine and transfer revenue from interests on sales on credit, instalment in the period, enter:



14. Periodically, to determine and transfer revenue from interests on loans or bond purchases with interest paid in advance, enter:



15. At year-end, to determine VAT payable under direct method in relation to finance activities (if any), enter:

ACCOUNT 521

SALES DISCOUNT

This account is used to reflect sales discounts for which deductions have been made against customers’ accounts or payments have been made to customers in return for their purchases of goods (products, merchandizes) and services with bulk quantity and it is agreed that a sales discount shall be given by the seller to the buyer (this agreement has been stated in the sales contract or commitments).


48. This account is to record only sales discounts given to the buyers which have been made in the period in accordance with the entity’s policy on sales discounts. Sales discount is the amount discounted based on the published price that the entity offers its customers for their bulk purchases.

49. In case the buyer is allowed for a sales discount after several purchases, such discount shall be net off against the selling price on the last “VAT invoice” or “Sales invoice”. In case the buyer stop their purchase or when the value of sales discount given to the buyer is higher than the sales amount stated in the last invoice, cash payment shall be made to the buyer. Sales discounts made in these cases shall be recorded to Account 521.

50. In case a bulk buyer is given a sales discount and the invoiced selling price is the discounted price (the sales discount amount has been deducted), the sales discount in this case shall not be recorded in Account 521. Sales revenue shall be recorded as net of sales discount.

51. Records shall be made in details as to discounts made to each customer and each type of goods sold, such as: goods sold (products, merchandizes), services rendered.

52. During the accounting period, sales discounts actually made shall be debited to Account 521 “Sales discount”. At the end of the accounting period, sales discounts shall be transferred in full to Account 511 “Sales revenue” in order to determine the net sales actually realized in the reporting period.


ACCOUNT 521 - SALES DISCOUNT

Debit side:

- Sales discount agreed with customers.

Credit side:

- At the end of the accounting period, sales discounts to be transferred in full to Account 511 “Sales revenue” in order to determine the net sales actually realized in the reporting period.

No closing balance is available for account 521 – Sales discount


1. To record amount of sales discount actually made in the period, enter:

Dr. 521 – Sales discount

Dr. 3331 – VAT payables (33311) (if any)

Cr. 111, 112, 131,…

2. At the end of the accounting period, to transfer the sales discounts agreed with the buyers in the period to Account 511 “Sales revenue”, enter:

Dr. 511 – Sales revenue

Cr. 521 – Sales discount

ACCOUNT 531

SALES RETURNS

This account is used to reflect value of goods which have been sold but subsequently returned for such reasons as: breaches against commiments, economic contract; goods of sub-quality, sub-standard or poor workmanship. Value of sales returns recorded in this account shall adjust the actual sales revenue realized in the operating period to arrive at the net sales from goods and services sold in the reporting period.

Recorded in this account only the value of goods which have been sold but subsequently returned (at the invoiced price). Other expenses incurred by the entity relating to the sales returns shall be recorded to Account 641 “Selling expenses”.

During the accounting period, the value of goods which have been sold but subsequently returned is debited to Account 531 “Sales returns”. At the end of the accounting period, total sales returns shall be transferred to Account 511 “Sales revenue” or Account 512 “Intercompany sales” in order to determine the net sales realized in the reporting period. The goods which have been sold but subsequently returned must be in stock as finished goods, merchandize inventory and treated in accordance with current financial and taxation policies.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 531 - SALES RETURNS

Debit side:

- Value of sales returned for which payment has been refunded or a deduction is made against the customer’s account.

Credit side:

- To transfer total sales returns to Account 511 “Sales revenue” or Account 512 “Intercompany sales” in order to determine the net sales realized in the reporting period.



1. Upon receipt of sales returns, cost of sales returns shall be accounted for:

a) Where the enterprise adopts the perpetual inventory method:





b) Where the enterprise adopts the periodic inventory method:

Dr. 611 – Purchases (for merchandize)

Dr. 631 – Cost of production (for products)


2. For refund concerning the sales returns:

a) Where the goods returned are VAT taxable under deduction method and the entity pays VAT under the deduction method, enter:

Dr. 531 – Sales returns (Selling price net of VAT)

Dr. 3331 – VAT payables (33311) (VAT on goods sold but subsequently returned)

Cr. 111, 112, 131,…

b) Where the goods returned are not VAT taxable or VAT taxable under direct method, entries for the refund shall be:

Dr. 531 – Sales returns

Cr. 111, 112, 131,…

3. For expenses incurred relating to sales returns (if any), enter:


Cr. 111, 112, 141, 334,…

4. At the end of the accounting period, to transfer total sales returns in the period to Account 511 “Sales revenue” or Account 512 “Intercompany sales”, enter:

Dr. 511 – Sales revenue (5111, 5112)



ACCOUNT 532

SALES REBATES

This account is used to reflect the sales rebates actually given and treatment of such sales rebates in the accounting period. Sales rebates are deductions given to customers for the goods sold by reason that the goods are sub-quality, sub-standard or do not meet the requirements in terms of specification as specified in the economic contract.

Recorded in this account only the deductions made based on the rebate agreements occurred after goods are sold and billed (uninvoiced rebates) due to sub-quality, sub-standard goods.

During the accounting period, the sales rebates actually given are debited to Account 532 “Sales rebates”. At the end of the accounting period, before preparing financial statements, to transfer total sales rebates to Account 511 “Sales revenue” or Account 512 “Intercompany sales” in order to determine the net sales realized in the period.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 532 - SALES REBATES

Debit side:

- Deductions given to customers for the goods sold by reason that the goods are sub-quality, sub-standard or do not meet the requirements in terms of specification as specified in the economic contract;

Credit side:

- To transfer total sales rebates to Account 511 “Sales revenue” or Account 512 “Intercompany sales”;



1. Upon receipt of supporting documents evidencing the sales rebates given to customers for the goods sold by reason that the goods are sub-quality, sub-standard or do not meet the requirements in terms of specification as specified in the economic contract:

a) In case rebate is given on sales of goods which are VAT taxable under deduction method and the entity pays VAT under the deduction method, the sales rebate given to the customer shall be entered:

Dr. 532 – Sales rebates (selling price net of VAT)

Dr. 3331 – VAT payables (33311) (VAT on goods sold which are subject to rebates)

Cr. 111, 112, 131,…

b) In case rebate is given on sales of goods which are not VAT taxable or VAT taxable under direct method, the sales rebate given to the customer shall be entered:

Dr. 532 – Sales rebates

Cr. 111, 112, 131,…

2. At the end of the accounting period, to transfer total sales rebates to Account 511 “Sales revenue” or Account 512 “Intercompany sales”, enter:

Dr. 511 – Sales revenue


Cr. 532 – Sales rebates

ACCOUNT CATEGORY 6

OPERATING EXPENSES

Accounts of this category are to record operating expenses, cost of production (for enterprises applying the periodic inventory method); record costs of materials, goods purchased and cost of goods sold; financial expenses, selling expenses and G&A expenses of enterprises of all industries and economic sectors.

Principles for accounting of operating expenses:

5. A business entity may choose to apply either of the inventory accounting methods: perpetual accounting method or periodic accounting method. Once chosen for application in the business, the inventory accounting method shall be applied consistently for at least one accounting year.

6. Enterprises applying periodic accounting method shall carry out physical inventory count at year end in determining the closing balance of materials, goods, merchandise inventory. Based on the physical count results, the entity shall determine the opening and closing balances of inventory and the purchases made in the period to determine cost of materials and goods issued for use in the production and business process and cost of goods, services sold in the period.

7. Accounts which summarize operating expenses and cost products, namely Account 154 “Work in progress” (perpetual inventory system), Account 631 “Cost of production” (periodic inventory system), shall, in addition to keeping control accounts records, maintain subsidiary account records for each cost centre, such as plant, production team, department, etc., or by lines of products, services, etc.

Operating expenses such as production overheads, expenses for irrigation and drainage, soil preparation and first year planting in regards of plant grown once with multiple harvests etc, which cannot be assigned to a particular product, shall first be recorded in control accounts and then allocated to relevant cost centres by an appropriate method.

Account category 6 - Operating expenses comprises 10 accounts being classified into 4 groups:

Account group 61 comprises 1 account:

- Account 611: Purchases;

Account group 62 comprises 4 accounts:

- Account 621: Direct material costs;

- Account 622: Direct labour costs;

- Account 623: Cost of construction machinery;

- Account 627: Production overheads;


- Account 631: Cost of production;

- Account 632: Cost of goods sold;


- Account 641: Selling expenses;

- Account 642: General and administrative expenses;

ACCOUNT 611

PURCHASES

This account is used to reflect the amount of materials, tools, supplies and goods purchased, in stock or put into use in the period.


53. Account 611 “Purchases” is applicable only to those enterprises adopting the periodic inventory system.

54. Purchased materials, tools, supplies and goods entered into Account 611 “Purchases” shall be carried at historical cost.

55. For enterprises applying periodic inventory method for accounting of inventory, the enterprise shall have to carry out a physical count of inventory at year-end to determine quantity and value of each material, goods, product, tool, supply invwentory having been issued for use in production process or sold in the period.

56. In the case of the periodic inventory system: based on the purchase invoices, delivery notes or receiving notes, import tax advice (or tax payment receipt, etc.) historical cost of purchase is debited to Account 611 “Purchases”. Accounting of inventory set for use or delivered requires only one entry record at year-end based one the physical count results.

57. Sub-ledger shall be maintained to keep track of purchase by materials, supplies, tools and goods.


ACCOUNT 611 - PURCHASES

Debit side:

- Transfer of the opening balance of raw materials, merchandized goods, tools and supplies (as physically counted).

- Cost of raw materials, tools and supplies, and merchandized goods purchased in the period; sales returns, etc.

Credit side:

- Transfer of the closing balance of raw materials, merchandized goods, tools and supplies (as physically counted).

- Cost of raw materials, tools and supplies, and merchandized goods used or sold during the period (not yet recognized as sales).

- Cost of raw materials, tools and supplies, and merchandized goods returned to the suppliers or rebates received.


Account 611 “Purchases” has two sub-accounts

- Sub-account 6111 – Purchases of raw materials: is to record cost of raw materials, tools and supplies purchased and issued for use in the accounting period and transfer of the opening balance and closing balance of raw materials, merchandized goods, tools and supplies.

- Sub-account 6112 – Purchases of merchandized goods: is to record cost of merchandized goods purchased and delivered to customers in the accounting period and transfer of the opening balance and closing balance of merchandized goods.


I. For industrial, agricultural, forestry and construction manufacturers

1. At the beginning of the accounting period, the opening balance of raw materials, tools and supplies (from prior year-end physical count results) are transferred to set up opening balance of purchases account, enter:

Dr. 611 – Purchases (6111 - Purchases of raw materials)



2. For purchaes of raw materials, tools and supplies for use in production of goods and rendering of services which are VAT taxable under deduction method, the historical costs of raw materials, tools and supplies purchased shall be recorded net of tax to Account 611, enter:

Dr. 611 – Purchases (6111 - Purchases of raw materials) (net of VAT)


Cr. 331 – Accounts payable – trade (3311)

3. For purchaes of raw materials, tools and supplies for use in production of goods and rendering of services which are not subject to VAT or VAT taxable under direct method, the price of raw materials, tools and supplies purchased shall be recorded inclusive of tax to Account 611, enter:

Dr. 611 – Purchases (6111 - Purchases of raw materials) (purchase price including VAT)

Cr. 331 – Accounts payable – trade

4. For enterprises paying VAT under direct method, the price of raw materials, tools and supplies purchased shall be recorded inclusive of tax to Account 611, enter:

Dr. 611 – Purchases (6111 - Purchases of raw materials) (total price)

Cr. 331 – Accounts payable – trade

5. If the enterprise is offered a cash discount when paying for purchases, enter:


Cr. 111, 112, …

Cr. 515 – Financial income (payment discount)

6. In the case that raw materials, tools and supplies purchased do not meet the requirements agreed in the economic contract as to category, quality and specification or commited to be returned to the seller or rebates offerred:

- Based on the value of purchase returns, enter:

Dr. 111, 112, (for cash immediately received)

Dr. 331 – Accounts payable – trade (deducted to payables to suppliers)

Cr. 611 – Purchases (6111) (value of purchase returns)


- If the entity agrees to keep the goods for rebates, enter:



Cr. 611 – Purchases (6111) (the rebate accepted)

Cr. 133 – Deductible VAT (if any)

7. Based on the results of the year-end physical inventory count, the entity would arrive at the closing balance of inventory and raw materials, tools and the cost of supplies held for use and the cost of goods sold during the period.

- Actual cost of closing inventory of raw materials, tools and supplies is transferred (physical count results), enter:



Cr. 611 – Purchases (6111)

- Actual cost of inventory of raw materials, tools and supplies inventory issued for use in production and business process in the period, enter:

Dr. 621, 623, 627, 641, 642, 241,…


- Actual cost of inventory of raw materials, tools and supplies which are lost or deficient as specified in the inventory physical count report and wait for resolution, enter:



II. For merchandizing enterprises

1. At the beginning of an account period, the opening merchandized inventory is identified, enter:

Dr. 611 – Purchases (6112)

Cr. 156 – Merchandise inventory

2. During the accounting period, purchases of merchandised goods for use in production of goods or rendering of services which are subject to VAT under deduction method or subject to VAT under direct method, based on invoices and purchase documents:

- For cost of purchase, enter:



Cr. 111, 112, 141; or

Cr. 331 – Accounts payable – trade (total price)

- Actual expenses incurred on purchases, enter:



Cr. 111, 112, 141, 331,…

In case of early payment, if the entity is offered a cash discount on the batch of goods purchased, enter:


Cr. 111, 112,…

Cr. 155 – Financial income (payment discount received)

- For value of purchase returns, enter:



Cr. 611 – Purchases (6112) (value of purchase returns)


- For the rabate offered by the supplier for goods failing to meet requirements as to specification, quality as agreed in the economic contract, enter:





3. At year-end, based on the physical inventory count results, to calculate, determine value of merchandize inventory, goods on consignment deemed as unsold and value of goods deemed as sold:

- Transfer of closing balance of inventory and goods on consignment, enter:




- Transfer of cost of goods sold, enter:



ACCOUNT 621

DIRECT MATERIAL COSTS

This account is used to reflect costs of materials directly consumed in the production of goods or the rendering of services in industrial, construction, agriculture, forestry and fishery, and services (transportation, communication, hotel, tourist, consultancy, etc.).


58. Only record in Account 621 costs of raw materials (both materials and sub-materials) consumed directly in the production of goods and rendering of services in the period. Once materials are issued for use, they shall be recorded at actual cost.

59. During the accounting period, the actual costs of direct materials shall be debited to account 621 “Direct material costs” as to each unit by which materials are directly consumed (if such an unit is identifiable during the production process) or recorded in an account for the whole process (if such an unit is unidentifiable during the production process).

60. By year-end, the costs of materials used shall be transferred (if materials are recorded separately for each unit), or allocated and transferred to Account 154 (if materials are not recorded separately for each unit) to compute the cost of goods manufactured and services rendered during the accounting period. When allocating costs of materials used in manufacturing goods and rendering services, the entity shall apply relevant criteria, such as norms of materials held for use, etc.

61. In the case of a deduction method enterprise purchasing materials and supplies for use in the production and supply of goods and services taxable under the deduction method or putting the purchased materials, not through the warehouse, directly into the production process, the cost of materials and supplies so used shall be the price net of VAT.

In the case of a deduction method enterprise purchasing materials and supplies for use in the production and supply of goods and services non-taxable or taxable under direct method and the entity pays tax under direct method, the cost of materials and supplies so used shall be the total price including VAT relating to the purchased materials directly put into the production process not through the warehouse.

62. Where the direct material costs are higher than normal level, the excess shall not be included in the cost of production, but transferred immediately to Account 632 “Cost of goods sold”.


ACCOUNT 621 - DIRECT MATERIAL COSTS

Debit side:

- Actual cost of materials and supplies set for use in the production and supply of goods and services in an accounting period.

Credit side:

- Cost of materials actually used in the production and supply of goods and services in the period transferred to Account 154 “Work in progress” or Account 631 “Cost of production” and detailed as to utilizing units to arrive at cost of production or construction.

- The direct material costs exceeding the normal level to be transferred to Account 632.

- Cost of materials left over and taken back to the warehouse



1. For materials and supplies issued for use in the production and supply of goods and services in the period, enter:

Dr. 621 – Direct material costs


2. Where materials and supplies purchased are directly put to use (not through the warehouse) in the production of goods and rendering of services which are VAT taxable under deduction method, enter:

Dr. 621 – Direct material costs (net of VAT)


Cr. 331, 141, 111, 112, …

3. Where materials and supplies purchased are directly put to use (not through the warehouse) in the production of goods and rendering of services which are VAT taxable under direct method, enter:

Dr. 621 – Direct material costs (purchase price including VAT)

Cr. 331, 141, 111, 112, …

4. For materials left over from the production of goods and rendering of services and taken back to the warehouse, enter:



5. At year-end, a material table shall be drawn up, with breakdowns by consuming units (construction works; manufacturing plants; types of products, services) under the direct or allocation method, enter:


Dr. 631 – Cost of production (using periodic method for accounting of inventories)

Dr. 632 – Cost of goods sold (the direct material costs exceeding the normal level)


ACCOUNT 622

DIRECT LABOUR COSTS

This account is used to reflect costs incurred for labours directly involved in the production of goods or rendering of services in industrial, construction, agriculture, forestry and fishery, and services (transportation, communication, hotel, tourist, consultancy, etc.).

Direct labour costs include accounts payable to employees who are managed by the enterprise and directly take part in the production of goods or rendering of services, and those hired from outside for particular jobs. Payment would include salaries, wages, allowances, and salary-based deductions such as social insurance, health insurance and trade union fee.


63. No entries shall be posted into this account as to salaries, wages, allowances, etc payable to factory management, administrative and sales staff.

64. For construction activity in particular, no entries shall be posted into this account as to salaries, wages, allowances payable to staff involved directly in running construction machinery, as to salary-based deductions for social insurance, health insurance and trade union fee calculated upon the payroll fund assigned to employees directly involved in construction activity, construction machinery running and plant workers.

65. Account 622 shall be maintained in details by cost centres.

66. Where the direct labour costs are higher than normal level, the excess shall not be included in the cost of production, but transferred immediately to Account 632 “Cost of goods sold”.


ACCOUNT 622 - DIRECT LABOUR COSTS

Debit side:

- Costs on labours directly involved in the production of goods or rendering of services would include salaries, wages and salary-based deductions as regulated for the proper period.

Credit side:

- Transfer of direct labour costs to the debit side of account 154 “Work in progress”;

- The direct labour costs exceeding the normal level to be transferred to Account 632.



1. Based on the payroll payment sheet, to record the salaries, wages and other payables to staff involved directly in production of goods or rendering of services, enter:

Dr. 622 – Direct labour costs


2. For regulatory deductions made in relation to social insurance, health insurance and trade union fees made based on salaries of employees involved directly in production of goods or rendering of services (the part to be borne by the entity), enter:


Cr. 338 – Other payables (3382, 3383, 3384)

3. For accrued paid leaves of production workers, enter:



4. When leaves are actually taken by production workers, the paid leaves shall be reflected the amounts payable in relation to such paid leaves by entering:



5. At year-end, direct labour costs shall be calculated and allocated by cost centres to debit side of Account 154 or debit side of Account 631, enter:

Dr. 154 – Work in progress, or

Dr. 631 – Cost of production (using periodic method for accounting of inventories)

Dr. 632 – Cost of goods sold (the direct labour costs exceeding the normal level)

Cr. 622 – Direct labour costs

ACCOUNT 623

COSTS OF CONSTRUCTION MACHINERY

This account is used to record and allocate costs incurred on motor vehicles and construction machines used directly in construction and installation works carried out by entities in a mixed manner, both manually and by machine.

In the event that a construction work is carried out entirely by machines, accounting entries shall not be made to Account 623 “Costs of construction machinery”, but all expenses incurred shall be recorded directly to Accounts 621, 622, 627.

No record shall be made into Account 623 as to deductions for social insurance, health insurance, trade union fees based on salaries payable to those operating construction machines. Where the costs of construction machinery are higher than normal level, the excess shall not be included in the construction cost, but transferred immediately to Account 632.


ACCOUNT 623 - COSTS OF CONSTRUCTION MACHINERY

Debit side:

- Cost incurred on the construction machinery running (machinery supplies; salaries, wages and allowances of those operating these machines; maintenance and repairs of machinery and vehicle). Other material and service expenses relating to construction machinery running.

Credit side:

- Costs of construction machinery debited to Account 154 “Work in progress”;

- The costs of construction machinery exceeding the normal level to be transferred to Account 632.


Account 623 “Costs of construction machinery” has 6 sub-accounts:

- Sub-account 6231 – Labour costs: to record salaries, allowances and compensations payable to those directly involved in operating construction vehicles and machines; or serving the operation, such as catering fuels, supplies, etc. for construction vehicles and machines.

This account is not to reflect salary-based deductions for these employees’ social insurance, health insurance and trade union fees. These deductions shall be dealt with in account 627 “Production overheads”

- Sub-account 6232 – Material cost: to record fuel costs (petrol, lubricants, etc.) and other supplies for construction vehicles and machines.

- Sub-account 6233 – Working tool expenses: to record tools facilitating the operating of construction vehicles and machines.

- Sub-account 6234 – Depreciation expenses: to record depreciation charges of construction vehicles and machines.

- Sub-account 6237 – Outside services: to record outside service costs such as repairs, insurance premium, utility, rents, subcontracting, etc. attributable to construction vehicles and machines.

- Sub-account 6238 – Other expenses in cash: to record expenses in cash attributable to the running of construction vehicles and machines.


Accounting for costs of construction machinery depends on the manner in which construction vehicles and machines are organized: by means of the operation of a specialized team of vehicles and machines or assignment of vehicles and machines to construction units.

1. In the case of a specialized team of vehicles and machines with a separate accounting system, the practice shall be as follows:

- When expenses are incurred on the team’s operation:

Dr. 621, 622, 627

Cr. 111, 112, 152, 331, 334, 214, …

- Accounting for costs of construction machinery and costing of a work shift is undertaken on account 154 “Work in progress”. Based on the cost (actual cost or lump-sum price) of a work shift provided to each construction work and with the accounting organization and the work relation between the specialized team and the construction unit taken into account, relevant entries would be posted:

+ Where the entity applies the approach whereby services are internally provided among units and sections, enter:

Dr. 623 – Costs of construction machinery (6238 – Other expenses in cash)


+ Where the entity applies the approach whereby services are internally sold among units and sections, enter:



Cr. 333 – Taxes payable to State Treasury (33311) (VAT payable calculated on inter-company sales of construction machinery services)

Cr. 512 – Inter-company sales

2. Where such a specialized team is not organized or is organized without a separate accounting system, the whole costs of construction machinery (including recurrent expenses and non-recurrent expenses: extra-pay, running allowance attributable to construction vehicles and machines) shall be recorded as follows:

- Based on amounts of salary, wage and others payable to those directly involved in operating construction vehicles and machines, enter:

Dr. 623 – Costs of construction machinery (6231 – Labour costs)


- When supplies are issued or purchased in support of the running of construction vehicles and machines, enter:

Dr. 623 – Costs of construction machinery (6232 – Material costs)

Cr. 152, 153

- When supplies are purchased and directly set (not through the warehouse) for use in support of machinery operation, enter:

Dr. 623 – Costs of construction machinery (6232 – Material costs) (net of VAT)


Cr. 331, 111, 112, …

- For depreciation of construction vehicles and machines assigned to a specialized team, enter:

Dr. 623 – Costs of construction machinery (6234 – Depreciation expenses)

Cr. 214 – Fixed asset depreciation

- For outside services acquired (repairs, utility, rents of fixed assets, subcontracting, etc.), enter:

Dr. 623 – Costs of construction machinery (6237 – Outside services)


Cr. 111, 112, 331…

- For other expenses incurred in cash, enter:



Cr. 111, 112,…

- For costs of construction machinery (actual cost of a work shift) allocated to each construction work based on the cost breakdown, enter:

Dr. 154 – Work in progress (Cost of construction machinery item)

Dr. 632 – Cost of goods sold (the costs of construction machinery exceeding the normal level)

Cr. 623 – Costs of construction machinery

ACCOUNT 627

PRODUCTION OVERHEADS

This account is used to reflect general expenses incurred by plants, departments, groups, construction sites, etc. in support of the production of goods and rendering of services, including: management personnel of plants, departments, groups; deductions for social insurance, health insurance and trade union fees at the salary-based rates as regulated for staff of such plants, departments, groups.

Particularly for construction firms, production overheads would include deductions for social insurance, health insurance and trade union fees made based on salaries of direct construction workers, construction machine operators and site management personnel (managed by the enterprise); depreciation of fixed assets used by plants, production units; borrowing costs if such costs are capitalized in value of construction in progress; repairing and warranty expenses for construction works and other expenses relating to operations of In addition, this account is also used for reflecting expenses relating to operations of plants, departments, groups, construction sites.


67. Account 627 is applicable to entities involved in industrial manufacturing, agricultural, forestry, fishery, construction, transportation, telecommunication, tourism and service activities.

68. Account 627 is recorded in details as to each plant, department or work team.

69. Production overheads recognized in Account 627 must be recorded separately as to fixed production overheads and variable production overheads, in which:

a. Fixed production overheads are indirect production expenses, which are normally not varied by quantity of outputs produced, such as maintenance expenses and administration expenses incurred by plants, departments, groups, work teams, etc.

- Fixed production overheads are allocated to processing costs for each unit of output based on normal capacity of the production machines. Normal capacity is reflected by the quantity of outputs produced at the moderate level in the normal production conditions;

- Where the number of actual outputs produced is higher than the normal capacity, fixed production overheads are allocated to each product unit based on actual expenses incurred.

- Where the number of actual outputs produced is lower than the normal capacity, fixed production overheads are allocated to processing cost of each product unit based on the normal capacity level. The unallocated overheads are recorded to cost of goods sold in the period.

b. Variable production overheads are indirect production expenses, which are normally varied directly or almost directly by quantity of outputs produced, such as indirect material costs, indirect labour costs. Variable production overheads are allocated fully to processing costs for each product unit based on actual expenses incurred.

70. Where different types of products are produced within the same period of time in the same production process but the production overheads for each type of products are not reflected separately, production overheads are allocated to each type of products in a proper way, assuring the consistence among accounting periods.

71. At the end of the accounting period, production overheads shall be debited to Account 154 “Work in progress” or debited to Account 631 “Cost of production”.

72. This account is not applicable to trading establishments.


ACCOUNT 627 - PRODUCTION OVERHEADS

Debit side:

- Production overheads incurred during the period.

Credit side:

- Items reducing production overheads;

- Unallocated fixed production overheads being recognized to cost of goods sold in the period for the actual outputs produced exceed the normal capacity outputs;

- Production overheads are debited to Account 154 “Work in progress” or debited to Account 631 “Cost of production”.


Account 627 “Production overheads” has 6 sub-accounts:

- Sub-account 6271 – Plant employee expenses: to record salaries, allowances and compensations payable to plant or team management personnel; meal allowances for plant or team management personnel; deductions for social insurance, health insurance and trade union fees at the salary-based rates as regulated for staff of such plants, departments, groups, etc.

- Sub-account 6272 – Material cost: to record expenses on materials issued for usage of production plants, such as materials for repairing, maintaining fixed assets, tools and supplies which are under the control and use of the plants, expenses for temporary shed, etc.

- Sub-account 6273 – Supplies expenses: to record tools held for use in the management of production process.

- Sub-account 6274 – Depreciation expenses: to record depreciation expenses on fixed assets directly used in production of goods and rendering of services and fixed assets held for general use by the plants, departments, groups.

- Sub-account 6277 – Outside services: to record outside services acquired for the sake of plants, production units, such as: repairing expenses, outsourcing expenses, utility expenses, communication expenses, fixed asset lease expenses, subcontractor expenses (for construction entities).

- Sub-account 6278 – Other expenses in cash: to record sundry expenses in cash other than those mentioned above and attributable to operations of production plant, department, group, etc.


1. Upon calculation of salaries, wages and other allowances payable to plant employees; meal allowances payable to management personnel of plant, production department, group, enter:

Dr. 627 – Production overheads (6271)


2. For deductions made in relation to social insurance, health insurance and trade union fees made based on salaries of direct construction workers, construction machine operators and site management personnel, enter:


Cr. 338 – Other payables

3. Accounting of materials issued for use of plants (for enterprises applying perpetual method for accounting of inventories):

- Upon issuance of auxiliary materials for use of plant, including repairs, maintenance of fixed assets for plant management purpose, enter:



- Upon issuance of tools and supplies, total value of which is insignificant, for use of plant, production department, group, based on the issuance note, enter:



- Upon issuance of tools and supplies, total value of which is significant, for use of plant, production department, group, and amortization is required, enter:

Dr. 142, 242


- For amortization of tools and supplies expenses to production overheads, enter:



Cr. 242 – Long-term prepayment

4. For depreciation of plant, equipment and machinery managed by the plant or department, enter:


Cr. 142 – Fixed asset depreciation

5. For utility, communication charges incurred by the plant or department, enter:


Dr. 133 – Deductible VAT (if VAT is deductible)

Cr. 111, 112, 331, …

6. For accruals or amortization of payments for overhauling of fixed assets under plant’s management, expensed off to production overheads:

- For accruals or amortization of payments for overhauling of fixed assets, enter:


Cr. 335, 142, 242.

- When fixed assets overhauling expenses actually incur, enter:

Dr. 2413 – Fixed assets overhauling expenses

Dr. 133 – Deductible VAT (if VAT is deductible)

Cr. 331, 111, 112, …

- Upon completion of fixed asset overhauling, enter:

Dr. 142, 242, 335

Cr. 2413 – Fixed assets overhauling expenses

7. For entity having assets held for operating lease, when incurring expenses relating to fixed assets for operating lease:

- For initial direct expenses relating to operating lease, enter:

Dr. 627 – Production overheads (for insignificant expenses, which are recorded immediately to expenses of the period)

Dr. 142, 242 (for significant expenses which should be amortized)


Cr. 111, 112, 331, …

- Periodically, depreciation of fixed assets for operating lease is charged to operating expenses, enter:


Cr. 214 – Fixed asset depreciation (depreciation of fixed assets for operating lease)

- Periodically, to amortize the initial direct expenses relating to operating lease (if applicable) in accordance with the recognition of revenue from operating lease, enter:




8. For construction entity, upon determination of provision for warranty of construction work, enter:



- When incurring expenses for repair, warranty of construction works, enter:

Dr. 621, 622, 623, 627

Cr. 111, 112, 152, 214, 334, …

- At year-end, to transfer expenses for repair, warranty of construction works, enter:


Cr. 621, 622, 623, 627

- Upon completion of repair, warranty of construction works, enter:



9. At year-end, to determine interest expenses payable and paid immediately; if interest expenses are capitalized to WIP assets, upon payment of interest expenses, enter:

Dr. 627 – Production overheads (WIP assets)

Cr. 111, 112 (if interest payment is made periodically)

10. At year-end, to determine interest expenses payable but remain unpaid; if interest expenses are capitalized to WIP assets, the interest expenses payable shall be entered:


Cr. 335 – Accrued expenses (interest payables)

11. For prepayment of interests relating to WIP assets, enter:

Dr. 142, 242

Cr. 111, 112

Periodically, to amortize prepaid interests to cost of WIP assets (if it is capitalized), enter:


Cr. 142, 242

12. To record items reducing production overheads, enter:

Dr. 111, 112, 138,…


13. At year-end, based on the table of production overhead allocation, to transfer or allocate production overheads to relevant accounts as to each products, group of products and services:

- For entity applying perpetual method for accounting of inventory, to transfer production overheads at year-end, enter:


Dr. 632 – Cost of goods sold (unallocated fixed production overheads)


- For entity applying periodic method for accounting of inventory, to transfer production overheads at year-end, enter:

Dr. 631 – Cost of production

Dr. 632 – Cost of goods sold (unallocated fixed production overheads)


ACCOUNT 631

COST OF PRODUCTION

This account is used to reflect total costs of production and determine costs of products and services in manufacturing enterprises of industrial, agricultural, forestry sectors and service providers in transportation, communication, tourism, hospitality industries, which apply the periodic method for accounting of inventories.


1. This account is not applicable to enterprises applying the perpetual method for accounting of inventories.

2. Entered into this account shall be the following items of expenses:

- Direct material costs

- Direct labour costs

- Costs of construction machinery (for construction enterprises)

- Production overhead costs

The following expenses shall not be recorded in this account:

- Selling expenses

- General and administrative expenses

- Financial expenses

- Other expenses

- Non-business expenditure out of funds received from the State

3. Also recorded in this account are expenses incurred by a segment in support to the enterprise’s principal activities; costs of goods, raw materials and supplies and processing costs (outsourced or processing internally).

4. Account 631 “Cost of production” shall be recorded in details as to occurrence unit (i.e. workshop, group, work team, …) and by category and group of products, services, ect.

5. With respect of agriculture, the cost of produce is normally identified by the end of a crop or a year. Produce is priced in the year in which it is harvested, that is, a cost incurred in a year but the harvest falls in the following year, then the cost shall be recognized in the subsequent year, or harvesting year.

- For cultivation field, costs are recorded in details by three races of plants:

+ Short-term plants

+ Plants that are raised once but give yields round the year

+ Perennial cropping

For plants which grow in two or three crops in a year, or which are grown in a year and yield in the following year or which are both grown and give yield at the same time, etc, records shall be entered allowing for the current situation, with costs separated for one crop, one planting area and one year from another.

No record shall be entered into this account as to cost of new plantation or caring of perennial cropping that is in nursery period.

- For expenses attributable to several cost centres, or to a number of crops or years, records shall be kept in separate accounts, wherefrom costs shall subsequently be allocated to the production cost of relevant produces, such as irrigation, soil preparation, and new plantation of trees, plant grown once with multiple harvests (such expenses are not part of capital expenditure fund).

Where two or more races of annual plants grow in the same cultivated area, expenses shall be relevantly allocated to each race of plants (i.e. seeding, sowing, harvesting, etc.) and common expenses (soil preparing, irrigating, etc.) shall be recorded in separate accounts and allocated to each race of plants by cultivated area.

- For perennial plants, expenses incurred over the period from the cultivation to the first harvest are considered as investments to generate fixed assets and are thus recorded in account 241 “construction in progress”.

For animal raising, expenses shall be recorded in details as to race of livestock (buffalo, ox or pig raising), and by breeding group or ranch. For breeding livestock being reclassified as feeding livestock, the net book value shall be recorded in account 631 “Cost of production”;

6. Account 631 “Cost of production” used by transportation enterprises shall be detailed by activities (transportation of passengers or goods).

For transportation enterprises, tires wear out at a degree greater than depreciation of the vehicle, and accordingly require frequent replacement. Such costs should not be expenses at one time, but shall be allocated on a monthly basis.

7. For hotel service providers, this account should be maintained in terms of activity, such as foods, rooms, entertainment and others (laundry, hairdressing, communication, massage, etc.)

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 631 - COST OF PRODUCTION

Debit side:

- Opening inventory of work in progress;

- Production expenses incurred during an accounting period;

Credit side:

- Cost of finished goods and completed services transferred to Account 632 “Cost of goods sold”;

- End of year work in progress transferred to account 154 “Work in progress”



1. Work in progress is debited to Account 631 “Cost of production” at the beginning of year, enter:



2. At year-end, direct material cots are transferred to cost of production, enter:



3. At year-end, direct labour cots are transferred to cost of production, enter:


Cr. 622 – Direct labour costs

4. At year-end, production overheads are allocated to cost of production detailed by category of products or services, enter:


Dr. 632 – Cost of goods sold (fixed overhead costs not allocated)


5. At year-end, work in progress is valued upon an inventory count, enter:


Cr. 631 – Cost of production

6. For finished goods stocked and services completed, enter:


Cr. 631 – Cost of production

ACCOUNT 632

COST OF GOODS SOLD

This account is used to reflect costs of products, goods, services, investment properties sold; production costs of erection and construction works (for construction engineering entities) performed in the period.

In addition, this account is also used for reflecting expenses relating to operations of investment properties, such as: depreciation costs; repairing costs; leasing costs relating to investment properties under operating lease (if such costs are insignificant); costs relating to transfer, disposal of investment properties.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 632 - COST OF GOODS SOLD

1. For accounting of inventories using perpetual method

Debit side:

- For production and business activities, record:

- Costs of goods sold and services rendered in the period;

- Material cost, labour cost exceeding the normal level and unallocated fixed production overheads being included in cost of goods sold in the period;

- Inventory losses after deducting the compensation from responsible individuals;

- Expenses on self constructed fixed assets, which are in excess of the normal level and are not included in cost of self constructed fixed assets finished;

- Allowances for inventories (difference between current year allowances being higher than the unused allowances brought forward from previous year);

- For investment property related business activities, record:

- Depreciation charge of investment property in the period;

- Costs on repairing, upgrading, renovating investment properties, which do not meet criteria for being included in cost of investment property;

- Expenses incurred from operating lease o investment properties in the period;

- Net book value of investment property sold, disposed of in the period;

- Expenses on sales, disposal of investment property in the period;

Credit side:

- Transfer of cost of goods sold, services rendered in the period to the debit side of Account 911 “Determining operating results”;

- At the end of the accounting period, transfer of all expenses incurred relating to investment property related business activities during the period to Account 911 for determining operating results.

- Reversal of allowances for inventories at the year end (difference between current year allowances being smaller than the allowances made in previous year)

- Value of sale returns in stock


2. For accounting of inventories using periodic method

2.1. For trading companies

Debit side:

- Costs of goods sold in the period;


Credit side:

- Cost of goods on consignment which are yet to be recognized as sales;


- Transfer of cost of goods sold to the debit side of Account 911 “Determining operating results”.

2.2. For manufacturing and service companies

Debit side:

- Opening inventory of finished goods;


- Cost of finished goods in stock, services completed

Credit side:

- Closing inventory of finished goods transferred to the debit side of Account 155 “Finished goods”;


- Cost of finished goods issued for sale, services completed being considered as sold in the period is transferred to the debit side of Account 911 “Determining operating results”.



1. For entities adopting perpetual method for accounting of inventory 1. For finished goods issued for sale, services completed being considered as sold in the period, enter:


Cr. 154, 155, 156, 157,…

2. To reflect expense items being recorded directly to cost of goods sold:

- In case the actual outputs produced are below the normal designed capacity, the entity’s accountant shall compute and determine fixed production overheads being allocated to processing cost per one product unit based on the normal designed capacity. The unallocated fixed production overheads (not included in the cost of production the difference where the total fixed production overheads actually incurred is higher than the fixed production overheads being incorporated to cost of production) are recognized as cost of goods sold in the period, enter:


Cr. 154 – Work in progress; or


- To reflect inventory losses after deducting (-) the compensation from responsible individuals, enter:


Cr. 152, 153, 156, 138 (1381),…

- To reflect expenses on self constructed fixed assets, which are in excess of the normal level and are not included in cost of self constructed fixed assets finished, enter:


Cr. 241 – Construction in progress (for self construction)

Cr. 154 – Work in progress (for self fabrication)

3. Accounting of allowances or reversal of allowances for inventories (difference between current year allowances being higher or smaller than the unused allowances brought forward from previous year).

At the year-end, based on the downward movement in inventory price as at the end of the accounting period, the entity shall calculate the amount of allowance for inventory to be made in comparison with the unused allowances brought forward from previous year to determine the amount of additional allowance or amount of allowance to be reversed (if any):

- Where the allowance for inventory to be made in current year is higher than the unused allowances brought forward from previous year, additional allowance shall be made, enter:


Cr. 159 – Allowance for inventory

- Where the allowance for inventory to be made in current year is smaller than the unused allowances brought forward from previous year, the difference shall be reversed, enter:

Dr. 159 – Allowance for inventory


4. Economic transactions relating to investment property business:

- For periodic depreciation of investment properties, which are held waiting for price increase or are putting out for operating lease, enter:

Dr. 632 – Cost of goods sold (Details of investment property related operating expenses)

Cr. 2147 – Depreciation of investment property

- Expenses relating to investment property incurred subsequent to initial recognition, if do not meet criteria for being incorporated in cost of investment property, enter:


(if immediately recorded to expenses)

Dr. 242 – Long-term prepayment (if amortization is required)

Cr. 111, 112, 152, 153, 334,…

Expenses relating to leasing of investment property as operating lease (for insignificant expenses), enter:


Cr. 111, 112, 331, 334,…

- Accounting of decrease in cost and depreciation of investment property due to sales or disposal, enter:

Dr. 214 – Fixed asset depreciation (2147 – Depreciation of investment property)

Dr. 632 – Cost of goods sold (Net book value of investment property)

Cr. 217 – Investment property (cost)

- For expenses incurred from sales, disposal of investment property, enter:



Cr. 111, 112, 331, …

5. In case any product produced by the entity is used as its fixed assets, enter:



6. For sale returns in stock, enter:

Dr. 155, 156


7. At year-end, cost of goods delivered and recognized as sales in the period are transferred to the debit side of Account 911 “Determining operating results”, enter:



2. For entities adopting periodic method for accounting of inventory 1. For trading companies:

- At year-end, cost of goods delivered and recognized as sales in the period are determined and transferred, enter:



- At year-end, cost of goods delivered and recognized as sales in the period are transferred to the debit side of Account 911 “Determining operating results”, enter:



2. For manufacturing and service companies:

- At the beginning of the period, to transfer cost of opening inventory of finished goods to Account 632 “Cost of goods sold”, enter:



- At the beginning of the period, to transfer value of finished goods, services on consignment but yet recognized as sales to Account 632 “Cost of goods sold”, enter:



- To record cost of production of finished goods in stock and service completed, enter:


Cr. 631 – Costs of production

- At year-end, to transfer cost of closing finished goods inventory to the debit side of Account 155 “Finished goods”, enter:



- At year-end, to determine value of finished goods, services on consignment but yet recognized as sales, enter:



- At year-end, cost of goods, services delivered and recognized as sales in the period are transferred to the debit side of Account 911 “Determining operating results”, enter:



ACCOUNT 635

FINANCIAL EXPENSES

This account is used to reflect expenses from financial activities including costs or losses relating to financial investments, loan and borrowing costs, costs of investment in joint ventures, associates, loss from assignment of short-term securities, costs of selling securities, etc..; provisions for diminution in securities investments, losses from forex trading, foreign exchange losses, etc.

Account 642 is recorded in details for every single item of expenses.

The following expense items shall not be recorded to Account 635:

- Expenses for production of goods and provision of services;

- Selling expenses;

- General and administration expenses;

- Expenses for real estate trading;

- Capital expenditure;

- Expenses covered by other sources of fund;

- Other financial expenses.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 635 - FINANCIAL EXPENSES

Debit side:

- Interest expenses, interest on purchases on credit, financial lease interests;

- Losses on selling foreign currencies;

- Discounts given to customers;

- Losses on disposals, transfers of investments;

- Foreign exchange losses incurred in the operating period (realized foreign exchange losses);

- Foreign exchange losses due to year end revaluation of monetary items denominated in foreign currencies from operating activities (unrealized foreign exchange losses);

- Provisions for diminution in value of securities investments (the difference where the amount of provision to be made this year is higher than the unused provision of previous year);

- Transfer or allocation of foreign exchange difference relating to a completed capex investment (foreign exchange losses – pre-operating period) to financial expenses;

- Expenses for other financial investment activities.

Credit side:

- Reversal of provision for diminution in value of investment securities (the difference where the amount of provision made in this period is smaller than the unused provision of prior years brought forward);

- At the end of the accounting period, transfer of all financial expenses incurred during the period to Account 911 for determining operating results.



1. When any expenses incur relating to a sale of securities, enter:


Cr. 111, 112, 141,…

2. Upon sale of any investments in joint ventures, subsidiaries, associates at a price being lower than the original cost (at loss), enter:

Dr. 111, 112,… (Selling price)

Dr. 635 – Financial expenses (the loss amount)

Cr. 221 – Investment in subsidiaries

Cr. 222 – Investment in joint ventures

Cr. 223 – Investment in associates

3. Upon recovery of joint venture investment to a joint controlling business, investment in subsidiaries, associates where the recovered amount is smaller than the original cost, enter:

Dr. 111, 112, 152, 156, 211… (recovered amount)

Dr. 635 – Financial expenses (the loss amount)

Cr. 221 – Investment in subsidiaries

Cr. 222 – Investment in joint ventures

Cr. 223 – Investment in associates

4. When any expenses incur relating to lending or forex trading activities, enter:


Cr. 111, 112, 141,…

5. At the end of the accounting period, based on the situation of diminution in value of short-term investments, long-term investments in securities of all sorts, of the existing short-term, long-term investments, the entity determine provisions to be made for diminution in values of short-term, long-term investments:

- Where the provision for diminution in values of short-term, long-term investments to be made in current year is higher than the unused provision for diminution in values of short-term, long-term investments brought forward from prior year, the surplus difference shall be entered:


Cr. 129 – Provision for diminution in value of short-term investments

Cr. 229 - Provision for diminution in value of long-term investments

- Where the provision for diminution in values of short-term, long-term investments to be made in current year is smaller than the unused provision for diminution in values of short-term, long-term investments brought forward from prior year, the difference shall be reversed, reducing financial expenses:

Dr. 129 – Provision for diminution in value of short-term investments

Dr. 229 - Provision for diminution in value of long-term investments

Cr. 635 – Financial expenses

6. Discounts given to a purchaser for his/her early payments as agreed upon the purchase/sale of goods, enter:


Cr. 131, 111, 112,…

7. Loss from sale of foreign currencies relating to operating activities, enter:

Dr. 111 (1111), 112 (1121) (at the selling rate)

Dr. 635 – Financial expenses (loss amount – if applicable)

Cr. 111 (1112), 112 (1122) (at the book rate)

8. For the interest payments made regularly by the entity relating to the entity’s borrowings, enter:


Cr. 111, 112,…

9. For the up-front payment of interest by the entity, enter:

Dr. 142 – Short-term prepayment (for short-term prepayment of interests)

Dr. 242 – Long-term prepayment (for long-term prepayment of interests)

Cr. 111, 112, …

Periodically, upon amortization of interest payments corresponding to each period to financial expenses, enter:




10. For arrear, periodical interest payments, upon determining interest payable to be recorded to financial expenses in each period, enter:



At the maturity date of a long-term loan, upon the repayment of the principal and interest by the entity, enter:

Dr. 341 - Long-term borrowing (remaining principal of the long-term loan to be repaid)

Dr. 335 - Accrued expenses (accrued interests of previous periods)

Dr. 635 - Financial expenses (interest payment for the current period)

Cr. 111, 112, …

11. For instalment payments under fixed asset finance leases, upon the lessee’s receipt of invoice from the lessor, enter:

Dr. 635 - Financial expenses (instalment payment under the lease for the period)

Cr. 111, 112 (if prompt payment is made)

Cr. 315 – Current portion of long-term debts (for lease on credit)

12. Upon acquisition of fixed assets under an agreement of purchase on credit or instalment purchase, for immediate use in production and business activities, enter:

Dr. 211, 213 (cost – at the prompt payment price)

Dr. 133 – Deductible VAT (if applicable)

Dr. 242 – Long-term prepayment the interest applied to purchase on credit being the difference between the total payable amount less (-) the prompt payment price less (-) VAT (if deductible)

Cr. 331 – Accounts payable – trade (aggregate payment)

For the interest payable relating to the purchase on credit or instalment purchase periodically amortized to financial expenses, enter:



13. For periodic payment of bond interest being recorded to financial expenses, enter:


Cr. 111, 112, … (Bond interest payment in the period).

14. For bonds with interest payable at maturity, the entity shall accrue interest expenses for each accounting period to financial expenses, enter:


Cr. 335 - Accrued expenses (Bond interest payment in the period)

15. For amortizing prepaid bond interest to borrowing costs in each period, enter:


Cr. 242 – Long-term prepayment (Breakdown of prepaid bond interest) (Bond interest amortized in the period).

16. For bond issuance costs of insignificant value to be charged to expenses in the period such costs incurred, enter:


Cr. 111, 112,….

17. For bond issuance costs of significant value to be amortized, enter:

Dr. 242 – Long-term prepayment (breakdown of bond issuance costs)

Cr. 111, 112, …

For periodic amortization of bond issuance costs, enter:

Dr. 635 – Financial expenses (The amortized value of bond issuance costs in the period)

Cr. 242 – Long-term prepayment (breakdown of bond issuance costs)

18. When the entity issues bonds at a discount or a premium for mobilizing operating funds, the entity shall periodically charge the interest expenses to the operating expenses in the period by entering:


Cr. 111, 112,… (if interests are paid periodically)

Cr. 242 – Long-term prepayment (amortization of borrowing costs payables in the period – if borrowing costs are prepaid for long period)

Cr. 335 - Accrued expenses (accruals of borrowing costs payable in the period – if borrowing costs are paid in arrears).

- For bond issuance at discount, periodically, bond discount value shall be amortized to borrowing costs by entering:


Cr. 3432 – Bond discount (the amortized value of discount in the period)

- For bond issuance at premium, periodically, bond premium shall be amortized to reduce borrowing costs, enter:

Dr. 3433 – Bond premium


19. For on-going business entity paying foreign currencies for purchasing goods and services, if the average inter-bank exchange rate or the effective rate of the transaction is lower than the rate booked to accounts 111, 112, enter:

Dr. 151, 152, 153, 156, 157, 211, 213, 241, 623, 627, 641, 642, 133… (at the average inter-bank exchange rate or the effective rate of the transaction)

Dr. 635 – Financial expenses (Foreign exchange loss)

Cr. 111 (1112), 112 (1122) (the rates booked to accounts 111, 112)

20. Upon settlement of liabilities (trade payables, short-term borrowings, current portion of long-term loans, long-term debts, inter-company payables, …) by foreign currencies, if the exchange rates booked to liabilities accounts are less than the rate booked to accounts 111, 112, enter:

Dr. 311, 315, 331, 336, 341, 342,… (the booked rates)


Cr. 111 (1112), 112 (1122) (the rates booked to accounts 111, 112)

21. Upon collection of receivables in foreign currencies (trade receivables, intercompany receivables, …), if the exchange rates booked to receivable accounts exceeds the effective rates or the average inter-bank exchange rates, enter:

Dr. 111 (1112), 112 (1122) (the average inter-bank exchange rate or the effective rate)


Cr. 131, 136, 138 (the rates booked to accounts 131, 136, 138).

22. For resolution of foreign exchange differences upon revaluation of foreign currency balances as at the year end attributable to monetary items denominated in foreign currencies from the entity’s operating activities, the entity’s accountant transfers all differences upon revaluation of foreign currency balances as at the year end attributable to monetary items denominated in foreign currencies from the entity’s operating activities to financial expenses (if after offsetting the credit and debit balances of Account 4131, a debit balance is still available in Account 4131) for determining operating results from operating activities.

Upon transfer of unrealized foreign exchange losses to financial expenses, enter:

Dr. 635 – Financial expenses (if a foreign exchange loss incurred)

Cr. 413 – Foreign exchange difference (4131)

23. For newly established entity with no commercial activities having been commenced, upon completion of construction period (pre-operating period), the entity’s accountant transfers the debit balance of Account 4132 (if a foreign exchange loss incurred) attributable to construction activities (pre-operating period) immediately to financial expenses or to Account 242 “Long-term prepayments” (foreign exchange losses) for being amortized over a period of maximum 5 years, enter:

Dr. 635 - Financial expenses (if a foreign exchange loss incurred) (if the loss is immediately expensed off to financial expenses)

Dr. 242 - Long-term prepayments (foreign exchange losses) (if amortization is required)

Cr. 413 - Foreign exchange difference (4132).

- Periodically, upon amortization of foreign exchange losses attributable to construction activities (pre-operating period), enter:

Dr. 635 - Financial expenses (foreign exchange losses)

Cr. 242 - Long-term prepayments.

24. For sales of short-term, long-term securities investments with their selling prices being lower than their costs, enter:

Dr. 111, 112, … (the selling prices)

Dr. 635 - Financial expenses (the difference where their costs being higher than their selling prices)

Cr. 121, 228.

25- As at the end of the accounting period, transfer entirely financial expenses to Account 911 “Determining operating results from operating activities”, enter:

Dr. 911 – Determining operating results from operating activities

Cr. 635 - financial expenses.

ACCOUNT 641

SELLING EXPENSES

This account is used to reflect actual expenses incurred during the process of selling products, goods and rendering services, including expenses relating to offering, introducing, advertising products, sale commissions paid, product warranty expenses (except for construction works)and protection, package and transportation costs .

Account 642 is recorded in details by expense item such as: staff, raw materials, packages, tools, supplies, fixed asset depreciation, outside services and other expenses in cash. Depending on business nature as well as management requirements of each industry, Account 641 may be extended to some other expense items. At the end of each accounting period, the entity’s accountant transfers selling expenses to the Debit side of Account 911 “Determining operating results”.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 641 - SELLING EXPENSES

Debit side:

- Expenses incurred relating to the process of selling products, goods and rendering services;

Credit side:

- Transfer of general and administration expenses to Account 911 “Determining operating results” for computing profit and loss in the period.


Account 641 - Selling expenses, has seven 2nd tier accounts:

- Account 6411 – Staff expenses: reflecting expenses payable to sales staff, packing staff, transportation staff, warehousing staff … including salaries, meal allowances, wages and benefits in terms of social insurance, health insurance, trade union budget, …

- Account 6412 – Raw material, packaging costs: reflecting expenses on raw materials and packages issued for use in maintaining, selling products, goods, services such as expenses on materials for product package, expenses on materials, fuel for protecting, loading, transporting products, goods during the selling process, materials for repairing, protecting fixed assets, …used by sales department.

- Account 6413 – Tools and supplies costs: reflecting expenses on tools and supplies used for selling products, goods such as measuring tools, computation equipment, working equipment, etc.

- Account 6414 – Fixed asset depreciation costs: reflecting depreciation costs of fixed assets held by warehousing and sales departments such as warehouses, stores, warehousing space, loading and unloading equipment, transportation vehicles, computation, measuring and quality test equipment, etc.

- Account 6415 – Warranty expenses: reflecting all expenses relating to the warranty of products, goods. Particularly, repair and warranty expenses incurred related to construction works shall not be charged to this account but to Account 627 “Production overheads”.

- Account 6417 – Outside services: reflecting expenses on purchasing outside services for the purpose of sale activities such as outside services for repairing fixed assets directly for the purpose of sales activities, rentals under warehouse leases, warehousing space leases, fees under loading contracts, transportation contracts for selling purposes, commissions paid to sales agents and import, export commission, ...

- Account 6418 – Other expenses paid in cash: reflecting other expenses paid in cash relating to selling process, other than those listed above, such as: expenses for receptions by sales department, production promotions, advertisement, customer meetings, etc.


1. Salaries, per diem, meal allowances, wages and benefits in terms of social insurance, health insurance, trade union budget for staff directly involved in the process of selling products, services, rendering services, enter:


Cr. 334, 338,...

2. Materials, tools used for selling products, goods, enter:


Cr. 152, 153, 142, 242.

3. Depreciation of fixed assets used by sales department, enter:


Cr. 214 – Depreciation of fixed assets

4. Payments for outside services such as power, water supply, communication (telephone, fax,…), payments for small repair of fixed assets being charged directly to selling expenses, enter:


Dr. 133 - Deductible VAT (if applicable)

Cr. 111, 112, 141, 331, …

5. Where accruals of expenses for overhaul of fixed assets:

- When accruing expenses for overhaul of fixed assets to selling expenses, enter:



- When expenses for overhaul of fixed assets actually incur, enter:

Dr. 335 – Accrued expenses

Cr. 331, 241, 111, 112, 152, …

6. Where significant expense for overhaul of fixed assets incurs only once in servicing the sales of products, goods and service in several accounting periods, the entity shall not adopt the accrual method for expenses for overhaul of fixed assets, but the Account 242 “Long-term prepayment”.

Periodically, the expense incurred for overhaul of fixed assets shall be amortized to selling expenses by entering:


Cr. 242 - Long-term prepayment

7. Accounting of products, goods warranty costs (excluding warranty of construction works):

7.1. Where sale of products, goods is accompanied by a warranty voucher ensuring the making good of all workmanship defects found during the defect liability period, the entity has to determine each level of making good expenses covering all warranty obligations:

- In determining provisions for warranty expenses, the accountant shall enter:


Cr. 352 – Provisions for liabilities

7.2. As at the end of the next accounting period, the entity has to compute, determine provisions to be made for warranty expenses:

- Where the provisions for liabilities to be made for the current accounting period is higher than the unused provisions for warranty expenses carried forward from previous accounting period, the difference shall be provided accordingly and debited to selling expenses, enter:

Dr. 641 - Selling expenses (6415)

Cr. 352 – Provisions for liabilities

- Where the provisions for liabilities to be made for the current accounting period is smaller than the unused provisions for warranty expenses carried forward from previous accounting period, the difference shall be reversed and selling expenses shall be reduced accordingly, enter:

Dr. 352 – Provisions for liabilities

Cr. 641 - Selling expenses (6415)

8. For products, goods for internal use in serving the sale activities, based on the relevant supporting documents, the accountant shall record sales, VAT payables relating to such products, goods for internal use:

- Products, goods for internal uses being used for sale activities selling goods, services, which are subject to VAT using deduction method, shall not be subject to VAT, enter:

Dr. 641 - Selling expenses (6412, 6413, 6417, 6418)

Cr. 512 - Intra-company sales (Production costs or COS of products issued for internal use).

- Products, goods for internal uses being used for sale activities selling goods, services, which are not subject to VAT shall be subject to VAT, which shall be charged to selling expenses, enter:

Dr. 641 - Selling expenses (6412, 6413, 6417, 6418)


Cr. 512 - Intra-company sales (Production costs or COS of products issued for internal use plus (+) VAT)

9. Amounts payable to import, export commissioners for their payments paid on behalf of the entity relating to the export goods and export commission fees, based on relevant supporting documents, enter:



Cr. 338 – Other payables (3388) (in details by every export commissioner)

10. Sale commission payable by the entity to its sale agencies, enter:



Cr. 131 – Account receivables - trade

11. Where required any reduction in selling expenses, enter:

Dr. 111, 112, …

Cr. 641 - Selling expenses.

12- As at the end of the accounting period, transfer entirely selling expenses to Account 911 “Determining operating results”, enter:


Cr. 641 - Selling expenses.

ACCOUNT 642

GENERAL AND ADMINISTRATION EXPENSES

This account is used to reflect general and administration expenses of the entity including salary expenses for the entity’s management team (salaries, remunerations, allowance, etc.); social insurance, health insurance, trade union budget for the entity’s managers; office supplies, working tools, depreciation costs of office fixed assets; land rental, license tax; allowance for doubtful debts; outside services (power, water supply, telephone, fax, insurance of properties against fire, etc..); other expenses made in cash (festivities, customer conference, etc.)

Account 642 is recorded for every single item of expenses as regulated.

Depending on management requirements of each sector, each business, Account 642 can be opened with some 2nd tier accounts for reflecting expenses being classified to general and administration expenses of the entity. At the end of each accounting period, the entity’s accountant transfers the general and administration expenses to the Debit side of Account 911 “Determining operating results”.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 642 - GENERAL AND ADMINISTRATION EXPENSES

Debit side:

- The general and administration expenses actually incurred in the period;

- Allowance for doubtful debts, allowance for obligations (the difference where the amount of allowance made this period exceeds the unused provision of prior years);

- Provision for severance allowance

Credit side:

- Reversal of allowance for doubtful debts, allowance for obligations (the difference where the amount of allowance made this period is smaller than the unused provision of prior years);

- Transfer of general and administration expenses to Account 911 “Determining operating results”.


Account 642 - General and administration expenses, has eight 2nd tier accounts:

- Account 6421 – Management staff expenses: reflecting payments to management staff of the entity, such as salaries, allowances, social insurance, health insurance, trade union budget for Board of Directors, management staff at divisions, and department of the entity.

- Account 6422 – Management material expenses: reflecting expenses on supplies used for management of the entity such as stationeries, materials for repairing fixed assets, office equipments, etc. (VAT inclusive or exclusive)

- Account 6423 – Office supply expenses: reflecting expenses on office supplies (VAT inclusive or exclusive).

- Account 6424 – Fixed assets depreciation: reflecting depreciation costs for fixed assets used for management activities such as: office buildings, warehouse, structures, office transmission equipment, vehicles, etc.

- Account 6425 – Taxes, fees and charges: reflecting expenses on taxes, fees and charges such as: license tax, land rental, etc and other fees and charges.

- Account 6426 – Provisions: reflecting provisions for doubtful debts, provisions for obligations to be charged to the entity’s operating expenses.

- Account 6427 – Outside services: reflecting expenses on acquisition of outside services for management activities; payments for acquiring and using technical documents, patents, etc (unqualified for being recognized to fixed assets) to be amortized to the general and administration expenses; fixed assets lease expenses, payments to subcontractors.

- Account 6428 – Other expenses paid in cash: reflecting other expenses being classified to general and administration expenses of the entity, other than those listed above, such as: expenses for meetings, festivities, per diem, transportation, allowance for female employees, etc.)


1. Salaries, remunerations, allowances and other payments to management staff, payments of social insurance, health insurance, trade union budget for management staff of the entity, enter:

Dr. 642 – General and administration expenses (6421)

Cr. 334, 338.

2. Materials issued or purchased for immediate use for management activities such as: fuel and grease for vehicles, materials for repairing general fixed assets of the entity, …, enter:

Dr. 642 - General and administration expenses (6422)

Dr. 133 – Deductible VAT (1331) (if applicable)


Cr. 111, 112, 142, 242, 331, …

3. Office equipment, supplies issued or purchased without recorded to stock register for the management team’s usage shall be recorded once directly to general and administration expenses, enter:




Cr. 111, 112, 331, …

4. Depreciation of fixed assets used for general management of the entity, such as: buildings, structures, warehouses, transmission equipment, …, enter:


Cr. 214 – Depreciation of fixed assets

5. License tax, land rental, … payable to State Treasury, enter:


Cr. 333 – Tax payable to State Treasury

6. Road, bridge fees payable, enter:


Cr. 111, 112, …

7. Allowance for doubtful debts being expensed to operating expenses of the period, enter:


Cr. 139 - Allowance for doubtful debts

8. Payments for outside services such as telephone, power, water supply, one time payments for small repair of fixed assets, enter:



Cr. 111, 112, 331, 335, …

9. Payments for meetings, receptions, female employees, research and training, association member fees and other expenses, enter:



Cr. 111, 112, 331, 335, …

10. Periodically, amounts transferred to higher authorities for establishment of management funds shall be recorded to general and administration expenses, enter:


Cr. 336 - Inter-company payables

Cr. 111, 112 (if prompt payment is made to the higher authorities)

11. Non-deductible input VAT being charged to general and administration expenses, enter:


Cr. 133 - Deductible VAT (1331, 1332)

12. Upon making provision for severance allowance, enter:


Cr. 351 – Provision for severance allowance

13. For products, goods subject to VAT using deduction method for internal use being used for the entity’s management activities:

- Products, goods for internal uses being used for production activities producing goods, services, which are subject to VAT using deduction method shall not be subject to VAT, enter:

Dr. 642 - General and administration expenses (6422, 6423, 6427, 6428)

Cr. 512 - Intra-company sales (Production costs or COS of products issued for internal use).

- Products, goods for internal uses being used for production activities producing goods, services, which are not subject to VAT or subject to VAT using direct method shall be subject to VAT, which shall be charged to general and administration expenses, enter:

Dr. 642 - General and administration expenses (6422, 6423, 6427, 6428)


Cr. 512 - Intra-company sales (Production costs or COS of products issued for internal use)

14. Reversal of the difference where the allowance for doubtful debts required to be provided in this accounting period is smaller than the unused allowance for doubtful debts carried forward from previous period, enter:

Dr. 139 – Allowance for doubtful debts

Cr. 642 – General and administration expenses (6426)

15. Upon making provision of payables for corporate restructuring, provision must be made for highly risky contracts and other payables (except provision for warranty expenses), enter:


Cr. 352 – Provision for payables.

- At the end of the fiscal year, or at the end of mid-term accounting period, the entity must compute, determine amount of provision required for coporate restructuring expenses, provision for highly risky contracts and provion for other payables:

+ Where the allowance for payables required to be provided as at the end of this accounting period is higher than the unused allowance for payables from previous period, the difference shall be entered:


Cr. 352 – Provision for payables.

+ Where the allowance for payables required to be provided as at the end of this accounting period is smaller than the unused allowance for payables from previous period, the difference shall be subject to a reversal reducing expenses incured, enter:

Dr. 352 – Provision for payables

Cr. 642 - General and administration expenses.

16. where required any reduction in general and administration expenses, enter:

Dr. 111, 112, …


17- As at the end of the accounting period, transfer entirely general and administration expenses to Account 911 for determining operating results in the period, enter:



ACCOUNT CATEGORY #7OTHER INCOME

This account category reflects income from activities other than turnover generating business activities of the entity. This account only reflects other income generated in the accounting period. At the end of the accounting period, these incomes shall be transferred to Account 911 “Determining operating results” and has no closing balance.

Account category “ Other income” has 01 account:

- Account 711 - Other income

ACCOUNT 711OTHER INCOME

This account is used to reflect incomes other than those generated from the entity’s normal business activities.

The entity’s other incomes comprise:- Proceeds from transfer, sales, disposal of fixed assets;- Gains from revaluation of materials, goods, fixed assets contributed to joint ventures,

investments in associates, other long-term investments;- Income from sale and leaseback of assets;- Penalties paid by other parties for their breach of contracts;- Recovery of written-off bad debts;- Tax refunds by State Treasury;- Income from payables for which creditors are unidentifiable;- Rewards paid by customers in regards of the sale of goods, products, services excluded

from revenue (if applicable); - Income in forms of gifts, presents in cash or in kind given by organization, individuals to

the entity;- Incomes other than those listed above.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 711 - OTHER INCOME

Debit side:

- VAT payable (if any) calculated using direct method for other incomes of entities where VAT is calculated by using direct method.

- At the end of the accounting period, other incomes generated in the period to be transferred to Account 911 “Determining operating results”.

Credit side:

- Other incomes generated in the period;

No closing balance is available for account 711 – “Other income”


1- Accounting of other income from fixed asset transfer, sales, disposal transactions:

1.1- Recording income from transfer, sale, disposal of fixed assets:

+ For entities where VAT is calculated using deduction method, enter:

Dr. 111, 112, 131 (Gross sales)

Cr. 711 – Other income (income net of VAT)

Cr. 3331 – VAT payables (33311)

+ For entities where VAT is calculated using direct method, enter:

Dr. 111, 112, 131 (Gross sales)

Cr. 711 – Other income (Gross sales)

1.2- Recording expenses for transfer, disposal of fixed assets, enter:

Dr. 811 – Other expenses


Cr. 111, 112, 141, 331…(Gross sales)

Simultaneously, reducing cost of fixed assets disposed of, transferred, sold by entering:

Dr. 214 – Depreciation of fixed assets (Depreciation cost)

Dr. 811 – Other expenses (Residual value)



2- Accounting of other income relating to revaluation of materials, goods, fixed asset investments in associates:

- For investments in associates with capital contributions made in form of materials, goods, based on the revaluation of the materials, goods as agreed between the investor and the associate, if the revalued value of the materials, goods exceeds their carrying value, enter:

Dr. 223 – Investment in associates (at the revalued value)

Cr. 152, 153, 155, 156… (Carrying value)

Cr. 711 – Other income (difference where the revalued value of materials, goods exceeds their carrying value)

- For investments in associates with capital contributions made in form of fixed assets, based on the revaluation of the fixed assets as agreed between the investor and the associate, if the revalued value of the fixed assets exceeds their net book value, enter:


Dr. 214 – Depreciation of fixed assets (Accumulated depreciation)

Cr. 211, 213… (Cost)

Dr. 811 – Other income (difference where the revalued value of fixed assets exceeds their net book value)

3- Accounting of other income generated from equity investment in the joint-controlling business entity:

3.1- For equity investments in the joint-controlling business entity in form of materials, goods, where the revalued value of the materials, goods contributed exceeds their carrying value, enter:

Dr. 222 – Investment in joint ventures (at the revalued value)

Cr. 152, 153, 155, 156, 611… (Carrying value)

Cr. 3387 – Deferred revenue (the difference where the revalued value exceeds the carrying value corresponding to the entity’s interest in

the joint venture) (difference from revaluation of materials, goods contributed to the joint-controlling business entity)

Cr. 711 – Other income (difference where the revalued value exceeds the carrying value corresponding to other parties’ interest in the joint venture)

- When the joint-controlling business entity sells such contributed materials, goods to an independent third party, the joint venture partners transfer the deferred revenue (the deferred part upon capital contribution) to other income of the period, enter:



3.2- For equity investments in the joint-controlling business entity in form of fixed assets, where the revalued value of the fixed assets contributed exceeds their net book value, enter:



Cr. 3387 – Deferred revenue (the difference where the revalued value exceeds the net book value of the fixed assets shall be deferred by the difference corresponding to the entity’s interest in the joint venture)

Cr. 711 – Other income (difference where the revalued value exceeds the net book value of the fixed assets corresponding to other parties’ interest in the joint venture)



- Annually, based on the useful lives of the fixed assets used by the joint-controlling business entity, the entity’s accountant allocates the deferred revenue to other income of the period, enter:

Dr. 3387 – Deferred revenue (details of difference from revaluation of fixed assets used for capital contribution)

Cr. 711 – Other income (the portion of Deferred revenue allocated to one year)

- In case the joint venture contract terminates or any joint venture partners transfer their interest in the joint venture to other partners, the unallocated difference from revaluation of fixed assets upon capital contribution is transferred to other income, enter:

Dr. 3387 – Deferred revenue (details of difference from revaluation of fixed assets used for capital contribution)


4- Accounting of other income generated from the transaction where the joint venture partner transfers the fixed assets to the joint-controlling business entity.

- Upon the transfer of fixed assets to the joint-controlling business entity, accountant reduces cost of fixed assets upon the transfer, enter:


Dr. 214 – Fixed asset depreciation (Depreciation cost)

Cr. 211, 213... (At cost)

Simultaneously, records other income from selling fixed assets at actual selling price to the joint-controlling business entity:

Dr. 111, 112, 131…



- At the end of the accounting period, based on the situation that the fixed assets was sold at profit to the joint-controlling business entity but in the period, the joint-controlling business entity has not sold such fixed assets to an independent third party but keeps them for its own use, such joint venture partner shall reflect the deferment and record to Deferred revenue the gains from the sale of fixed assets corresponding to its interest in the joint-controlling business entity, enter:

Dr. 711 – Other income (the deferred gain from the sale of fixed assets corresponding to the entity’s interest in the joint venture)

Cr. 3387 – Deferred revenue

- Periodically, the joint venture partner shall amortize the deferred gain corresponding to its interest in the joint venture to other income based on the useful lives of the fixed assets used by the joint-controlling business entity, enter:



- When the joint-controlling business entity sells the fixed assets that they purchased from the joint venture partner to an independent third party, the joint venture partner enters:

Dr. 3387 – Deferred revenue (the balance of deferred gain corresponding to its interest in the joint venture remaining unamortized to other income)


5- Accounting of other income generated from the entity’s capital contributions in kind to other entities, however, their voting rights are less than 20%:

- For capital contribution in form of materials, goods, based on the revaluation of the materials, goods as agreed between the investor and the investee, if the revalued value of the materials, goods exceeds their carrying value, enter:

Dr. 228 – Other long-term investment (at the revalued value)

Cr. 152, 153, 156 (Carrying value)

Cr. 711 – Other income (difference where the revalued value of materials, goods exceeds their carrying value)

- For capital contribution in form of fixed assets, based on the revaluation of the fixed assets as agreed between the investor and the investee, if the revalued value of the fixed assets exceeds their net book value, enter:

Dr. 228 – Other long-term investment (at the revalued value)


Cr. 211, 213 (Cost)

Cr. 711 – Other income (difference where the revalued value of fixed assets exceeds their net book value)

6- Accounting of other income generated from sale and leaseback of fixed assets being financial leases:

- In case of sale and leaseback of fixed assets with a price higher than the net book value of the fixed assets, upon the completion of the fixed assets sale transaction, based on the relevant invoices and supporting documents, enter:

Dr. 111, 112, 131 (Total payment)

Cr. 711 – Other income (at the net book value of the fixed assets sold and leased back)

Cr. 3387 – Deferred revenue (the difference where the selling price exceeds the net book value of the fixed assets)


Simultaneously, reduce cost of fixed assets:

Dr. 811 - Other expenses (residual value of the fixed assets sold and leased back)

Dr. 214 – Depreciation of fixed assets (if applicable)

Cr. 211 – Tangible fixed assets (Cost of fixed assets)

- In case of sale and leaseback of fixed assets with a price lower than the net book value of the fixed assets, upon the completion of the fixed assets sale transaction, based on the relevant invoices and supporting documents, enter:

Dr. 111, 112, 131 (Total payment)

Cr. 711 – Other income (selling price of the fixed assets)

Cr. 3331 – VAT payables (if applicable)

Simultaneously, reduce cost of fixed assets:

Dr. 811 - Other expenses (at the selling price of the fixed assets)

Dr. 242 – Long-term prepayment (the difference where the selling price is smaller than net book value of the fixed assets)

Dr. 214 – Depreciation of fixed assets (if applicable)

Cr. 211 – Tangible fixed assets (Cost of fixed assets)

The accounting entries record the leased assets and financial lease liabilities, instalments of lease payment in accordance with Account 212- Financial lease fixed assets.

7- Accounting of other income generated from sale and leaseback of fixed assets being operating leases:

Upon the sale and leaseback of fixed assets, based on the VAT invoices and supporting documents relating to the sale of fixed assets, the entity’s accountant reflects the sale transaction according to the following cases:

- If the selling price is agreed to be fair value, gains or losses must be recognized right in the period they incurred. Income from sale of fixed assets is reflected by entering:

Dr. 111, 112, 131 …

Cr. 711 – Other income (selling price of fixed assets)


Simultaneously, reduce cost of fixed assets (same as stated in item 6)

- In case the price for sale and leaseback of fixed assets is lower than their fair value but the lease rate is lower than the market lease rate, the loss incurred shall not be recorded immediately but shall be amortized in line with the lease payments over the assets lease period. Based on the relevant VAT invoices and supporting documents relating to the sale of fixed assets, reflecting income from sale of fixed assets by entering:

Dr. 111, 112 …

Cr. 711 – Other income (selling price of the fixed assets)



- In case the price for sale and leaseback of fixed assets is higher than their fair value, the difference shall not be recorded immediately as an income in the period, but shall be amortized over the period such assets are expected to be used, while the difference between the fair value and net book value shall be recorded immediately as an income in the period.

+ Based on the relevant VAT invoices relating to the sale of fixed assets, enter:

Dr. 111, 112, 131 …

Cr. 711 – Other income (at the fair value of the fixed assets)

Cr. 3387 – Deferred revenue (difference where the selling price is higher than net book value of the fixed assets)



+ Periodically, the entity’s accountant shall amortize the difference between the selling price being higher than the fair value of the fixed asset sold and leased back, reduce production and operating costs for the period in accordance with the lease payments throughout the expected using period of fixed assets, enter:


Cr. 623, 627, 641, 642.

8- Upon expiry of the warranty period of a construction works, if no warranty expenses incurred or the allowance for construction warranty obligations is higher than the actual warranty expenses incurred, the unused allowance for construction warranty obligations must be reversed, enter:

Dr. 352 – Allowance for Obligations


9- Accounting of penalties paid by other parties for their breach of contracts:

- Upon receipt of penalty payment from customers due to their breach of economic contract, enter:

Dr. 111, 112, …


- In case a depositor is in breach of an economic contract signed with the fined entity, as agreed in the economic contract:

+ For the penalty being deducted to the deposit of the depositor, enter:

Dr. 338 – Other payables (for short-term deposit)

Dr. 344 – Long-term deposit received (for long-term deposit)


+ Upon actual return of the deposit to the depositor, enter:

Dr. 338, 344 (net of the penalty) (if applicable)


10- Accounting of insurance claims settled by insurance companies, enter:

Dr. 111, 112, …


- For expenses relating to the handling of damages where insurance has been bought, enter:



Cr. 111, 112, 152, …

11- Accounting of written-off but later recovered bad debts:

- When any bad debts are known for sure to be unrecoverable and must be written off, based on the bad debt write-off minutes, enter:

Dr. 139 - Allowance for doubtful debts (if such allowance is available)

Dr. 642 – General and administrative expenses (if no allowance is available)


Simultaneously, a single entry shall be made to the Debit side of Account 004 “BAD DEBTS written off” (Off-balance sheet account) for follow-up purpose in a specified period, allowing the arrear recovery of such bad debts.

- Upon the recovery of the bad debt already written off, enter:

Dr. 111, 112, …


Simultaneously, a single entry shall be made to the Credit side of Account 004 “BAD DEBTS written off” (Off-balance sheet account).

12- For payables for which creditors are unidentifiable and are decided to be written off and credited to other income, enter:




13- For VAT payables being reducible:

- If the VAT reduction is credited to other income and such reduction is computed directly to the VAT payables, enter:

Dr. 3331 – VAT payables


- If the VAT reduction is credited to other income and such reduction is made in cash by State Treasury, enter:

Dr. 111, 112, …


14- For refunds of import, export tax, excise tax being recorded to other income (if applicable), enter:

Dr. 111, 112, …


15- When the entity receives donation, gifts, presents of materials, goods, fixed assets, … enter:

Dr. 152, 156, 211, …


16- At the end of the accounting period, compute and reflect the VAT payables using direct method incurred from the other income, enter:


Cr. 3331 – VAT payables.

17- As at the end of the accounting period, transfer entirely other income for the period to Account 911 “Determining operating results”, enter:



ACCOUNT CATEGORY #8OTHER EXPENSES

This account category reflects expenses of activities other than turnover generating business activities of the entity. Other expenses are expenses (losses) incurred by events or transactions, which are independent from normal business operations of the entity and its corporate income tax expenses.

This account only reflects expenses incurred in the accounting period, to be transferred to Account 911 “Determining operating results” and has no closing balance.

Account category #8 – Other expenses, comprises 02 accounts:

- Account 811 - Other expenses- Account 821 - Corporate income tax expenses

ACCOUNT 811OTHER EXPENSES

This account category reflects expenses of activities other than turnover generating business activities of the entity.

The entity’s other expenses comprise:- Expenses from disposal, transfer of fixed assets and residual values of fixed assets

disposed of, transferred (if applicable);- Losses from revaluation of materials, goods, fixed assets contributed to joint ventures,

investments in associates, other long-term investments;- Penalties due to breaches of economic contracts;- Taxation fines, tax arrear payments;- Other payments

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 811 - OTHER EXPENSES

Debit side:

- Other expenses incurred

Credit side:

- At the end of the accounting period, all other expenses incurred during the period shall be transferred to Account 911 “Determining operating results”;



1- Accounting of fixed asset transfer, sales, disposal transactions:

- Recording other income from transfer, sales, disposal of fixed assets, enter:

Dr. 111, 112, 131…


Cr. 3331 – VAT payables (33311) (if applicable)

- Reducing cost of fixed assets for business production after the transfer, disposal, enter:





- Recording expenses incurred relating to the transfer, disposal of fixed assets, enter:


Cr. 133 – Deductible VAT (1331) (if applicable)

Cr. 111, 112, 141…

2- Accounting of other expenses relating to revaluation of materials, goods, fixed asset investments in associates:

- Capital contribution in form of materials, goods: for investments in associates in form of materials, goods, based on the revaluation of the materials, goods as agreed between the investor and the associate, if the revalued value of the materials, goods is smaller than their carrying value, enter:


Dr. 811 – Other expenses (difference where the revalued value of materials, goods being smaller than their carrying value)


- Capital contribution in form of fixed assets: for investments in associates in form of fixed assets, based on the revaluation of the fixed assets as agreed between the investor and the associate, if the revalued value of the fixed assets is smaller than their net book value, enter:



Dr. 811 – Other expenses (difference where the revalued value of fixed assets being smaller than their net book value)

Cr. 211, 213… (Cost)

3- Accounting methods for economic transactions relating to equity investment in the joint-controlling business entity:

- For equity investments in form of materials, goods in the joint-controlling entity, where the carrying value of the materials, goods contributed exceeds their revalued value, enter:


Dr. 811 – Other expenses (difference where the carrying value exceeds the revalued value)

Cr. 152, 153, 155, 156, 611… (Carrying value)

- For equity investments in form of fixed assets in the joint-controlling entity, where the revalued value of the fixed assets contributed is smaller than their net book value, enter:

Dr. 222 – Investment in joint ventures (at the revalued value of the fixed assets as agreed by the concerned parties)

Dr. 214 – Depreciation of fixed assets (Accumulated depreciation cost)




4- Accounting of capital contributions in form of materials, goods, fixed assets to other entities, however, only 20% of voting rights are held:

- For capital contribution in form of materials, goods, based on the revaluation of the materials, goods as agreed between the investor and the associate, if the revalued value of the materials, goods is smaller than their carrying value, enter:


Dr. 811 – Other expenses (difference where the revalued value of materials, goods being smaller than their carrying value)


- Capital contribution in form of fixed assets: for investments in associates in form of fixed assets, based on the revaluation of the fixed assets as agreed between the investor and the associate, if the revalued value of the fixed assets is smaller than their net book value, enter:




Cr. 211, 213… (Cost)

5- Accounting of fines for beaching economic contracts, tax regulations, and tax arrear payments, enter:


Cr. 111, 112 …


Cr. 338 – Other payables

6- For additional Capital expenditure funds transferred from Investment and development fund, enter:



7- As at the end of the accounting period, transfer entirely other expenses incurred during the period for determining operating results, enter:


Cr. 811 – Other expenses

ACCOUNT 821

CORPORATE INCOME TAX EXPENSES

This account is used to reflect the entity’s corporate income tax expenses including current tax expenses and deferred tax expenses during the year, forming basis for determining the entity’s business operating results for the current fiscal year.

ACCOUNTING OF THIS ACCOUNT SHOULD RESPECT

THE FOLLOWING RULES

1. The corporate income tax expenses being recorded to this account include current tax expenses and deferred tax expenses in determining profit (or loss) for a fiscal year.

2. Current tax expenses are the amounts of corporate income tax payable on the taxable income of the year using current corporate income tax rates.

3. Deferred tax expenses are the amount of tax payable by the entity in future arising from:

- Recognition of deferred tax liabilities for the year;

- Reversal of deferred tax assets, which had been recognized in previous years

4. Deferred tax incomes are the reductions in the deferred tax expenses arising from:

- Recognition of deferred tax assets for the year;

- Reversal of deferred tax liabilities, which had been recognized in previous years


ACCOUNT 821 - CORPORATE INCOME TAX EXPENSES

Debit side:

- Current tax expenses during the year;

- The current tax expenses of previous years being additionally payable this year due to the fact that findings of immaterial errors in previous years have given rise to the increase in current tax expenses of the current year;

- Deferred tax expenses for the year arising from the recognition of deferred tax liabilities (i.e. the difference where the deferred tax liabilities of the year exceeds the deferred tax liabilities reversed during the year);

- Recognition of deferred tax expenses (the difference where the deferred tax assets reversed during the year exceed the deferred tax assets of the year);

- Transfer of the difference where the credit entry to Account 8212 – “Deferred tax expense” exceeds the debit entry to Account 8212 – “Deferred tax expense” for the period to the Credit side of Account 911 – “Determining operating results”

Credit side:

- The actual current tax payables for the year being smaller than the current tax provisionally payables, which had been deducted to the current tax expenses recorded in the year;

- The corporate income tax payables being reduced due to the fact that findings of immaterial errors in previous years have given rise to the decrease in current tax expenses of the current year;

- Reduction in deferred tax expenses and recognition of deferred tax assets (the difference where the deferred tax assets generated during the year exceed the deferred tax assets reversed during the year);

- Reduction in deferred tax expenses (the difference where the deferred tax liabilities reversed during the year exceed the deferred tax liabilities incurred during the year);

- Transfer of the difference where the debit entry to Account 8212 exceeds the credit entry to Account 8212 – “Deferred tax expense” for the period to the Debit side of Account 911 – “Determining operating results”

Account 821 – “Corporate income tax expenses” has no closing balance.

Account 821 – “Corporate income tax expenses” has two 2nd tier accounts:

- Account 8211 – Current tax expenses

- Account 8212 – Deferred tax expenses

ACCOUNT 8211

CURRENT TAX EXPENSES

This account is used to reflect current tax expenses incurred by the entity during the year.

ACCOUNTING OF THIS ACCOUNT SHOULD RESPECTTHE FOLLOWING RULES

1. Quarterly, based on the CIT declaration, the entity’s accountant records the provisionally payable CIT as current tax expenses.

2. At the year end, based on the tax finalization, if the provisionally payable CIT for the year is smaller than the tax amounts payable in that year, accountant records the additionally payable CIT to current tax expenses. If the provisionally payable CIT for the year exceeds the tax amounts payable in that year, accountant reduces the current tax expenses by the difference between the provisionally payable CIT for the year and the amounts payable.

3. In case of finding immaterial errors relating to the payable CIT for previous years, the entity is permitted to record the increase (or decrease) the payable CIT for previous years to current tax expenses of the year when the errors are found.

4. At the end of the fiscal year, accountants shall transfer current tax expenses of the year to Account 911 – “Determining operating results” for determining operating results of the year.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 8211 - CURRENT TAX EXPENSES

Debit side:

- CIT payables charged to current tax expenses of the year;

- CIT of previous years being additionally payable this year due to the fact that findings of immaterial errors in previous years have given rise to the increase in current tax expenses of the current year;

Credit side:

- The actual current tax payables for the year being smaller than the current tax provisionally payables, which had been deducted to the current tax expenses recorded in the year;

- The corporate income tax payables being reduced due to the fact that findings of immaterial errors in previous years have given rise to the decrease in current tax expenses of the current year;

- Transfer of the current tax expenses to the Debit side of Account 911 – “Determining operating results”

Account 8211 – “Current tax expenses” has no closing balance.

ACCOUNT 8212

DEFERRED TAX EXPENSES

This account is used to reflect deferred tax expenses incurred by the entity during the year.


o At the year end, the entity’s accountant shall calculate the deferred tax liabilities for recording to deferred tax expenses, simultaneously, calculate the deferred tax assets for recording to deferred tax assets (reduce deferred tax expenses).

o The entity’s accountant shall not record to this Account the deferred tax assets and deferred tax liabilities arising from transactions being recorded directly to equity.

o At the end of the accounting period, accountants shall transfer the difference between the debit entry and the credit entry of Account 8212 – “Deferred tax expense” to Account 911 – “Determining operating results”.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 8212 - DEFERRED TAX EXPENSES

Debit side:

- Deferred tax expenses for the year arising from the recognition of deferred tax liabilities (i.e. the difference where the deferred tax liabilities of the year exceeds the deferred tax liabilities reversed during the year);

- Reversal of deferred tax assets, which had been recognized in previous years (i.e. the difference where the deferred tax assets reversed during the year exceed the deferred tax assets generated during the year);

- Transfer of the difference where the credit entry to Account 8212 – “Deferred tax expense” exceeds the debit entry to Account 8212 – “Deferred tax expense” for the period to the Credit side of Account 911 – “Determining operating results”

Credit side:

- Reduction in deferred tax expenses (the difference where the deferred tax assets generated during the year exceed the deferred tax assets reversed during the year);

- Reduction in deferred tax expenses (the difference where the deferred tax liabilities reversed during the year exceed the deferred tax liabilities incurred during the year);

- Transfer of the difference where the credit entry to Account 8212 – “Deferred tax expense” is smaller then the debit entry to Account 8212 – “Deferred tax expense” for the period to the Debit side of Account 911 – “Determining operating results”

Account 8212 – “Deferred tax expenses” has no closing balance.

I. Method for accounting key economic transactions relating to current tax expenses

1- Quarterly, in determining CIT provisionally payable according to Law on Corporate Income Tax, the entity’s accountant shall record the current tax amounts provisionally payable to the State Treasury to current tax expenses by entering:

Dr. 8211 – Current tax expenses

Cr. 3334 – Corporate income tax

Upon payment of CIT to State Treasury, enter:

Dr. 3334 – Corporate income tax

Cr. 111, 112, …

2- At the end of the fiscal year, based on the CIT actually payable as stated in the tax finalization or informed by the tax authority:

+ If the CIT actually payable for the year exceeds the CIT provisionally payable, the entity’s accountant reflects the additional current CIT payable by entering:



Upon payment of CIT to State Treasury, enter:


Cr. 111, 112, …

+ If the CIT actually payable for the year is smaller than the CIT provisionally payable, the entity’s accountant reduces the current tax expenses by entering:


Cr. 8211 – Current tax expenses

3- In case of finding immaterial errors in previous years relating to the payable CIT for previous years, the entity is permitted to record the increase (or decrease) the payable CIT for previous years to current tax expenses of the year when the errors are found.

+ For the case where the current tax expenses of previous years being additionally payable this year due to findings of immaterial errors in previous years having given rise to the increase in current tax expenses of the current year, enter:



Upon payment, enter:


Cr. 111, 112, …

+ For the case where the payable current tax expenses being reduced due to findings of immaterial errors in previous years having given rise to the decrease in current tax expenses of the current year, enter:



4- Upon transfer of the current tax expenses as at the end of the accounting period, enter:

+ If in Account 8211, the Debit entry exceeds the Credit entry, the difference shall be entered:



+ If in Account 8211, the Debit entry is smaller than the Credit entry, the difference shall be entered:



II. Method for accounting key economic transactions relating to deferred tax expenses

1- Deferred tax expenses for the year arising from the recognition of deferred tax liabilities (i.e. the difference where the deferred tax liabilities of the year exceeds the deferred tax liabilities reversed during the year):

Dr. 8212 – Deferred tax expenses

Cr. 374 – Deferred tax liabilities

2- Deferred tax expenses for the year arising from the reversal of deferred tax assets, which had been recognized in previous years (i.e. the difference where the deferred tax assets reversed during the year exceeds the deferred tax assets generated in the year), enter:


Cr. 243 – Deferred tax assets

3- Reduction in deferred tax expenses (the difference where the deferred tax assets generated during the year exceed the deferred tax assets reversed during the year), enter:

Dr. 243 – Deferred tax assets

Cr. 8212 – Deferred tax expenses

4- Reduction in deferred tax expenses (the difference where the deferred tax liabilities reversed during the year exceed the deferred tax liabilities incurred during the year), enter:

Dr. 347 – Deferred tax liabilities


5- At the end of the accounting period, transfer the difference between the Debit entry and the Credit entry of the Account 8212 - Deferred tax expenses:

+ If in Account 8211, the Debit entry exceeds the Credit entry, the difference shall be entered:



+ If in Account 8211, the Debit entry is smaller than the Credit entry, the difference shall be entered:



ACCOUNT CATEGORY #9DETERMINING OPERATING RESULTS

ACCOUNT 911DETERMINING OPERATING RESULTS

This account is used for determining and reflecting income from business operations and other activities of the entity during a fiscal year/period. The entity’s business operation results include: operating income, net financial income and net other income.

1. Operating income is the difference between net sales and cost of sales (covering all of products, merchandizes, investment properties and services, production costs of construction works, operating expenses relating to investment properties, such as: depreciation costs, repairing and upgrading costs, operating lease expenses, expenses relating to disposing, transferring investment properties), selling expenses and general and administrative expenses.

2. Net financial income is the difference between financial income and financial expenses.3. Net other income is the difference between other incomes and other expenses and

corporate income tax.


1. This account must reflect fully and accurately the business operation income in the period

in accordance with the currently applicable financial policies.2. Business operation income must be accounted for by each type of business activities

(production, processing, trading, service, financial activities, …). Within each type of business activities, the entity may need to make separate records for each type of products, each business line, and each type of services.

3. Revenue and income recorded to this account must be net sales and net income.

STRUCTURE AND REFLECTED CONTENTS OFACCOUNT 911 - DETERMINING OPERATING RESULTS

Debit side:

- Cost of products, merchandizes, investment properties and services sold

- Financial expenses, corporate income tax expenses and other expenses;

- Selling and general and administrative expenses

- Transfer of profit

Credit side:

- Net revenue from products, merchandizes, investment properties and services sold in the period;

- Financial income, other income and reductions in corporate income tax expenses;

- Transfer of loss;



1- At the end of the fiscal period, upon the transfer of net sales to Account 911- Determining operating results, enter:

Dr. 511 – Revenue from goods sold and services rendered

Dr. 512 – Inter-company sales

Cr. 911 - Determining operating results

2- Upon transfer of cost of products, merchandizes, investment properties and services sold during the fiscal period, operating expenses relating to the investment properties, such as depreciation costs, repairing and upgrading costs, operating lease expenses, expenses relating to disposing, transferring investment properties, enter:


Cr. 632 – Cost of sales

3- Upon the transfer of financial income and other income at the end of fiscal period, enter:




4- Upon the transfer of financial expenses and other expenses at the end of fiscal period, enter:

Dr. 911 - Determining operating results


Cr. 811 – Other expenses

5- Upon the transfer of current corporate income tax expenses at the end of fiscal period, enter:


Cr. 8211 – Corporate income tax expenses - current

6- At the end of fiscal period, upon transfer of the difference between the Debit and Credit balances of Account 8212 “Deferred corporate income tax expenses”:

+ If in Account 8212, the Debit balance exceeds the Credit balance, the difference shall be entered as follows:


Cr. 8212 – Corporate income tax expenses - deferred

+ If in Account 8212, the Debit balance is smaller than the Credit balance, the difference shall be entered as follows:

Dr. 8212 – Corporate income tax expenses - deferred


7- At the end of fiscal period, upon the transfer of selling expenses incurred during the period, enter:


Cr. 641 – Selling expenses

8- At the end of fiscal period, upon the transfer of general and administrative expenses for the period, enter:


Cr. 642 – General and administrative expenses

9- Upon determination and transfer of after tax profit of the entity for the period, enter:


Cr. 421 – Retained earnings

10- For transferring the operating loss of the period, enter:

Dr. 421 - Retained earnings


For entities preparing mid-term financial reports (quarterly), accounting entries (from 1 to 10) shall be made for quarterly accounting period.

OFF-BALANCE SHEET ACCOUNTSACCOUNT CATEGORY 0

Off-balance sheet accounts are used to reflect the assets currently held at but not owned by the entity such as: Leased assets; Materials, goods held on behalf of or for processing for other entities; Goods held on consignment, deposit. Simultaneously, this account category also reflects several economic items, which have been reflected in On-balance sheet Accounts, but need further follow up for management purpose such as: Resolved bad debts; Foreign Currencies (detailed by denominated currency); Budget for project, administrative expenditure.

In principle, accounts of this category shall be recorded using “Single entry” method, i.e. an entry to a certain account shall not require a counter entry to another account.

Values of assets, materials, capital recorded to accounts of this category shall be contract prices, or prices specified in the hand-over minutes, or in invoices or other supporting documents. Leased fixed assets shall be recorded at the value stated in the fixed assets lease contract.

All assets, materials, goods being reflected in off-balance sheet accounts must also be protected and physically checked on a regular basis as if they are the entity’s owned assets.

Account category 0 – Off-balance sheet accounts, including 6 accounts:Account 001 - Leased assets;Account 002 - Materials, goods held under trust, for processing;Account 003 - Goods held on consignment, deposit;Account 004 - Resolved bad debts;Account 007 - Foreign Currencies;Account 008 - Budget for project, non-business administrative expenditure.

ACCOUNT 001

LEASED ASSETS

This account is used to reflect values of all assets (including fixed assets, investment properties and tools and supplies), which the entity leases from other entities.

STRUCTURE AND REFLECTED CONTENT OFACCOUNT 001 - LEASED ASSETS

Debit side:Increase in value of leased assets.

Credit side:Decrease in value of leased assets.

Debit side balance:Net value of leased assets.

This account only reflects value of leased assets under operating leases (the assets shall be returned to the lessor after the lease). This account shall not reflect value of financial lease assets.

Leased assets must be accounted for separately by leasing entity/individual and by type of assets. Hand-over minutes must be prepared and signed by both the lessor and the lessee upon delivery of the leased assets. The lessee is responsible for safely holding and using the leased assets for the right purposes. Any further equipment to the assets or changes in the assets’ structure or technical functions must be approved by the lessor. All expenses relating to the use of leased assets shall be recorded to relevant accounts in the Balance Sheet.

ACCOUNT 002

MATERIALS, GOODS HELD UNDER TRUST OR FOR PROCESSING

This account reflects values of assets, materials, goods held under trust of or for processing for other entities. Values of assets held under trust of or for processing for other entities are accounted for at the actual prices upon handing over of the assets. If no price is available, a provisional price shall be determined for accounting purpose.

STRUCTURE AND REFLECTED CONTENT OFACCOUNT 002 - MATERIALS, GOODS HELD UNDER TRUST OR FOR PROCESSING

Debit side:Value of assets, materials, goods held under trust of or for processing for other entities;

Credit side:- Value of assets, materials, goods having been issued for processing and delivered to the hiring entities;- Value of unused assets, materials, goods having been returned to the hiring entities;- Value of assets, materials, goods held under trust having been returned to the owners;

Debit side balance:Net value of assets, materials, goods being held under trust or for in-progress-processing.

Expenses relating to the processing, protection of assets, materials, goods held under trust of or for processing for other entities are not recorded to this account, but to the expense accounts on the balance sheet.

Assets, materials, goods, which are held under trust of or for processing for other entities must be accounted for separately by item of materials, goods, place of holding and owner. Materials, goods held under trust shall not be used and must be protected as properly as the entity’s owned assets. Handing over documents must be prepared and signed by both parties upon the hand-over or return of assets.

ACCOUNT 003

GOODS HELD ON CONSIGMENT FOR SALE

This account is used to reflect values of Goods held on consigment for sale from other entities, individuals.

STRUCTURE AND REFLECTED CONTENT OFACCOUNT 003 - GOODS HELD ON CONSIGMENT FOR SALE

Debit side:Value of Goods held on consigment for sale.

Credit side:- Value of goods sold on behalf or returned to the consignors, depositors;- Value of deposited goods having been disposed due to the depositor’s breach of economic contract.

Debit side balance:Net value of Goods held on consigment for sale.

Upon handing over of consigned goods, both the consignor and consignee must weigh, measure, count, determine volume and quality of the consigned goods. The accounting records of Goods held on consigment for sale must be made separately for each item of goods, each consignor, each place of holding and each physically responsible individual. For goods sold on behalf or returned to the consignors, depositors, beside the credit entry of related contract price to Account 003, accounting entries are also made to Balance Sheet captions, reflecting the sale and payment transactions with the consignors.

ACCOUNT 004

BAD DEBTS WRITTEN OFF

This account is used to reflect such receivables that have been written off, but still need further follow-up for recovery. Bad debts, though having been written off from Balance Sheet, shall not mean having been entirely crossed out. These amounts, subject to the applicable financial policies, shall be followed up for later recovery when the debtor’s financial condition changes positively.

STRUCTURE AND REFLECTED CONTENT OFACCOUNT 004 - BAD DEBTS WRITTEN OFF

Debit side:Bad debts having been written off from Balance Sheet and continuing to be followed up off-balance sheet.

Credit side:- Recovered amounts of bad debt;- Amount of bad debts written off upon decision of competent authorities or levels and no off-balance sheet follow up required.

Debit side balance:Amount of bad debts to be recovered, for which follow up is required.

If later any amounts of the written off bad debts are recovered, accounting entry shall be made to increase the entity’s other incomes (Balance Sheet) and at the same time Account 004 “BAD DEBTS written off” shall be credited. When any bad debts are known for sure to be unrecoverable, approval from competent authority shall be obtained for their writing off. When such approval is given, Account 004 shall be credited.

Accounting records are made separately for each debtor and each debt item.

ACCOUNT 007

FOREIGN CURRENCIES

This account is used to reflect the income, payments and balance by denominated currency for each foreign currency in the entity.

STRUCTURE AND REFLECTED CONTENT OFACCOUNT 007 - FOREIGN CURRENCIES

Debit side:Income of foreign currency (denominated currency)

Credit side:Payment of foreign currency (denominated currency)

Debit side balance:Net value of foreign currency (denominated currency)

Translation of foreign currencies into Vietnam Dong is not required for this account.

Accounting records to Account 007 are made separately for each foreign currency.

ACCOUNT 008

BUDGET FOR PROJECT, ADMINISTRATIVE EXPENDITURE

This account is used to reflect the budget for project, administrative expenditure allocated by the competent authority, the entities’ appropriation of budget during the period by withdrawing funds from the State Budget, the closing budget balance.

The accounting records must be made separately: budget for administrative expenditure, budget for project expenditure.

STRUCTURE AND REFLECTED CONTENT OFACCOUNT 008 - BUDGET FOR PROJECT, ADMINISTRATIVE EXPENDITURE

Debit side:Allocated budget for project, administrative expenditure

Credit side:Appropriation of budget for project, administrative expenditure

Debit side balance:Remaining budget for project, administrative expenditure

At the year end, the remaining budget for project, administrative expenditure will be abrogated or brought forward to the following year subject to the decision of the competent authority. For entities having various budgets, ledgers recording budget for administrative expenditure and budget for project expenditure will be maintained separately for each project.

Decision 15.2006.MOF.corporate Accounting Regime English Version

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Transcript of Decision 15.2006.MOF.corporate Accounting Regime English Version