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MINISTRY OF FINANCE

Decision 15/2006/QD-BTC

PREFACE

Accompanying with twenty-two Vietnamese Accounting Standards that have been released, the
Ministry of Finance issued a comprehensive set of accounting system – the Decision
15/2006/QD-BTC (“the Decision 15”) applied for all business entity including the foreign
invested companies doing business in Vietnam.

Wishing to convey these regulations to foreign investors (existing and future) in Vietnam and also
the interested professionals abroad, we, KTC Assurance & Business Advisors, have obtained
approval and assistance from the Department of Accounting and Auditing Policy of the Ministry
of Finance to make an unofficial translation of these regulations into English.

The book is structured as follows:

- Part I : Chart of Accounts


- Part II : Financial statements
- Part III : Accounting documents
- Part IV : Accounting books and forms
- Appendix I : Accounting flow charts
- Appendix I : Accounting law

KTC Assurance & Business Advisors is a professional accounting firm committed to providing
high quality service to our clients. At KTC, we are focusing on providing value added services
which bring to our client practical and cost-effective
cost-effective solutions to their business issues. We have
office in Hanoi and a representative office in Ho Chi Minh City.

Our translation and edition team is led and reviewed by highly qualified specialists, including
Noli Encarnacion, Long Duc Ngo, Hung Duy Pham, Linh Thuy Do and Anh Van Thai who have
practices in Vietnam and overseas. Since this is
from ten to twenty years experience in accounting practices
the first edition being published, we would be much appreciated to receive any advice or
comments from our readers for our continuous improvements.

KTC Assurance & Business Advisors would like to express sincere thanks to the Department of
Accounting and Auditing Policy y of the Ministry of Finance, especially Professor Bui Van Mai
for his kind assistance and encouragement.

Our sincere thanks are also expressed to our other committed and hard-working team members,
namely Tam Thanh Hoang, Huong Dieu Le, Hong Bich Nguyen, Toan Duy Nguyen, Hien Luong
Thu, Tam Thanh Phan, Mai Anh Phan and Lan Thi Van.

While every effort has been made to ensure that the translation reflects the form and spirit of the
Decision 15, KTC accepts no responsibility for any loss and/or damage resulted from your
reliance on this translation. Further inquiries and/or advice on this publication should be
addressed to:
KTC Assurance & Business Advisors
Suite 237, 33A Pham Ngu Lao
Hoan Kiem, Hanoi, Vietnam
URL: www.ktcvietnam.com.
Telephone: +84-4-933 4057
Email: ktc@ktcvietnam.com
Att: Linh Thuy Do (Mrs)

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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

MINISTRY OF FINANCE SOCIALIST REPUBLIC OF VIETNAM


No. 15/2006/Q -BTC Independence – Freedom – Happiness

Hanoi, 20 March 2006

DECISION
on promulgation of the Corporate Accounting System

THE MINISTER OF FINANCE

- Pursuant to the Accounting Law No. 03/2003/QH11 dated 17 June 2003 and Decree No.
129/2004/N -CP dated 31 May 2004 of the government detailed stipulating and guiding the
implementation of some regulations of Accounting Law on business activities;
- Pursuant to the Decree No. 77/2003/N -CP dated 1 July 2003 of the Government stipulating
the function, responsibility, right and organizati
organizational
onal structure of the Ministry of Finance;

Upon the proposal of the Director of the Acc


Accounting
ounting and Auditing Policy Department and the
Chief Officer of the Ministry of Finance

DECIDES

Article 1:: Promulgate the “Enterprise Accounting System” applicable to enterprises in all fields
of business and economic sectors. The Enterprise
Enterprise Accounting System includes:

Part 1: Chart of accounts


Part 2: Financial Statements
Part 3: Accounting Documents
Part 4: Accounting Books

Article 2:: Entrepreneurs, companies, corporations based on the “Corporate Accounting System”
study, tailor and set up their accounting system with detailed contents and application met the
business features as well as management requirements of each business field, economic sector.
Any amendment or supplement to class 1 and class 2 sub-accounts or amendment on presentation
of financial statements should be allowed by the Ministry of Finance in official documents.

In compliance with stipulations of this Cor


Corporate
porate Accounting System and guiding documents of
apply chart of accounts, documents, accounting books
higher authorities, entity should study and appl
and type of accounting books met the business features, management requirements and
accounting quality of the enterprise.

Article 3: This Decision comes in to effect 15 days from the gazette day. Only the regulation of
“Preparation of interim consolidated financial statements” in the Point 4 “Responsibility of
preparing and disclosure of financial statements”, Item I/A Part Two is applicable from the year
of 2008.

This Decision replaces the Decision No. 1141TC/QDD/C KT dated 1 November 1995 of the
Minister of Finance promulgating the “Corporate Accounting System”, Decision No.
167/2000/Q -BTC dated 25 October 2000 of the Minister of Finance issuing “Enterprise
Financial Statements System” and Decrees of No. 10TC/C KT dated 20 March 1997 “Guidance
on amendment, supplement of Corporate Accounting System”; Decree No. 33/1998/TT-BTC
dated 17 March 1998 “Guidance on making and using of provision for obsolete stock, provision
for doubtful debt, provision for price reduction of securities in State owned enterprises”; Decree

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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

No.77/1998/TT-BTC dated 6 June 1998 “Guidance on exchange rate of foreign currency to


Vietnamese Dong in accounting record of enterprises”; Decree No.100/1998/TT-BTC dated 15
July 1998 “Guidance on accounting for Value Added Tax and Enterprise Income Tax”; Decree
No.180/1998/TT-BTC dated 26 December 1998 “Supplemented guidance on accounting for
Value Added Tax”; Decree No.186/1998/TT-BTC dated 28 December 1998 “Guidance on
accounting for export, import, special consumption tax”; Decree No.107/1999/TT-BTC dated 1
September 1999 “Guidance on accounting for Valued Added Tax on financial lease”; Decree No.
120/1999/TT-BTC dated 7 October 1999 “Guidance on amendment, supplement of Enterprise
Accounting System”; Decree No.54/2000/TT-BTC dated 7 June 2000 “Guidance on accounting
for sale of goods at subsidiaries of dependent accounting in other locations ad through
commission agents”.

Article 4: All regulations in Decisions of promulgation of Vietnamese Accounting Standards and


namese Accounting Standards from batch 1 to 5
Circulars of guidance on implementation of Vietnamese
which do not conflict with this Decision are still on effect.

Article 5:: Ministries, ministry-like offices, People’s Committees of provinces and centrally
controlled cities are responsible for guiding; developing the application of “Corporate Accounting
developing
System” promulgated in compliance with this D ecision in dependent units or authorized area.
Decision

Article 6:: Director of Accounting and Auditing Policy Department, Chief of Ministry’s Offices,
Director of the Enterprise Finance Department, Di rector of the General Department of Tax and
Director
Head of related Departments of Ministry of Fi nance are responsible for guidance, monitor and
Finance
implementation of this Decision.

For the Minister of Finance


Vice Minister
(signed)

Tran Van Ta

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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

PART I
CHART OF ACCOUNTS

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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

I. GENERAL REGULATIONS

1. Chart of accounts is used to classify and systemize the economic transactions by their nature.

Chart of accounts applied for business entities consists of class 1 and class 2 sub-accounts,
balance sheet accounts and off balance sheet accounts.

2. Entrepreneurs, companies and corporations based on the “Corporate Accounting System”,


study, tailor and set up their accounting system with detailed contents and application met the
business features as well as management requirements of each business field, economic
sector.
3. Any amendment or supplement to class 1 and class 2 sub-accounts or amendment on their
title or codes or accounting treatment for specific transactions should be approved by the
Ministry of Finance in written.

4. Entrepreneurs, companies and corporations are


are allowed to open sub-accounts for class 2 and
3 of which are not regulated in the chart of accounts given by this Decision. The business
entity doesn’t have to apply forr approval of the Ministry of Finance for these types of sub-
accounts.

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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

II. CHART OF ACCOUNTS APPLIED FOR BUSINESS ENTITIES

Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
CATEGORY 1
CURRENT ASSETS

01 111 Cash on hand


1111 Vietnam dong
1112 Foreign currency
1113 Gold, silver, gemstones

02 112 Cash in bank Maintain in details


1121 Vietnam dong
1122 Foreign currency
1123 Gold, silver, gemstones

03 113 Cash in transit


1131 Vietnam dong
1132 Foreign currency

04 121 Short term investment


1211 Equity securities
1212 Debt securities

05 128 Other short-term investments


1281 Short-term deposits
1288 Other short-term investment

06 129 Provision for short-term investments

07 131 Account receivable-trade Maintain in details

08 133 Deductible value added tax


Deductible VAT of merchandises and
1331 services
1332 Deductible VAT of fixed assets

09 136 Inter-company receivables


1361 Investment in subsidiary
1368 Other inter-company receivables

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Decision 15/2006/QD-BTC

Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5

10 138 Other receivables


1381 Shortage of assets awaiting resolution
1385 Receivable from equitisation
1388 Other receivable

11 139 Provision for doubtful debts


12 141 Advances to suppliers Maintain in details

13 142 Prepaid expenses


Short-term deposits, mortgages and
14 144 collateral
15 151 Goods in transit
Maintain in details
upon management
16 152 Raw materials requirement
17 153 Tools and supplies
18 154 Work in process
19 155 Finished goods
20 156 Merchandise goods
1561 Purchase costs
1562 Collection costs
1567 Property/real estate
21 157 Goods on consignment
Goods in bonded warehouse For entity having
goods imported
and exported in
22 158 bonded warehouse
23 159 Provision for obsolete stock
Expenditures from subsidies of State
24 161 Budget
1611 Prior year budget
1612 Current year budget

CATEGORY 2
NON-CURRENT ASSETS

25 211 Tangible assets


2111 Buildings & structures
2112 Machinery and equipment

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Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
2113 Transportation and facilities
2114 Office equipment
Perennial trees, working and producing
2115 animals
2118 Other tangible assets
26 212 Finance lease assets
27 213 Intangible assets
2131 Land Use rights
2132 Mastheads and publishing titles
2133 Copy rights, patents
2134 Brand names
2135 Computer software
2136 Licenses and franchises
2138 Other intangible assets
Accumulated depreciation and
28 214 amortization
2141 Accumulated depreciation on fixed assets
Accumulated depreciation on finance lease
2142 assets
2143 Amortization of intangible assets
2147 Amortization of investment property
29 217 Investment property
30 221 Investment in subsidiaries
31 222 Shares in joint ventures
32 223 Investment in associates
33 228 Other long-term investments
2281 Equity securities
2282 Debt securities
2288 Other long-term investments
34 229 Provision for long-term investments
35 241 Construction in progress
2411 Acquisition of fixed assets
2412 Construction in progress
2413 Extraordinary repairs
36 242 Long-term prepaid expenses
37 243 Deferred tax assets
38 244 Long-term deposits

CATEGORY 3

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Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
LIABILITIES
39 311 Short-term loan
40 315 Current portion of long-term loan
41 331 Trade payables Maintain in details
42 333 Tax and statutory obligations
3331 VAT
33311 Output VAT
33312 Import VAT
3332 Special consumption tax
3333 Import, export duties
3334 Profit tax
3335 Personal Income tax
3336 Natural resource tax
3337 Land and housing tax
3338 Other taxes payable
3339 Fees, duties and other obligations
43 334 Payables to employees
3341 Payable to employee salary
3342 Other payable to employees
44 335 Accruals
45 336 Inter-company payables
For construction
contract in which
Contraction contractor payables based on payment made by
46 337 agreed progress billing progress
47 338 Other payables
3381 Surplus of assets waiting for resolution
3382 Trade union fees
3383 Social insurance payable
3384 Health insurance payable
Payable from equitization (applicable to
3385 privatized SOEs only)
3386 Receipt of deposits and pledges
3387 Deferred income
3388 Other payables
48 341 Long-term loans
49 342 Long-term payable
50 343 Bond issued
3431 Bond cost

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Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
3432 Bond discount
3433 Bond premium
51 344 Long-term deposits received
52 347 Deferred tax liabilities
53 351 Provision for severance allowance
54 352 Provisions

CATEGORY 4
OWNERS’ EQUITY

55 411 Paid-in capital


4111 Share capital
4112 Capital surplus (Share premium) For joint stock
entity
4118 Other capital
56 412 Asset revaluation reserve
57 413 Foreign exchange differences
Foreign exchange differences at balance
4131 sheet date
Foreign exchange differences under
4132 construction period
58 414 Investment and development fund
59 415 Financial reserve fund
60 418 Other funds
For joint stock
61 419 Treasury share entity
62 421 Undistributed earnings
4211 Prior year earnings
4212 Current year earnings
63 431 Bonus and welfare funds
4311 Bonus funds
4312 Welfare funds
4313 Social benefit fund in form of fixed assets
64 441 Investment in capital construction For SOEs
For companies,
groups &
65 461 Subsidy funds from State Budget corporations
4611 Prior year
4612 Current year

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Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
66 466 Sources for acquisition of fixed assets

CATEGORY 5:
REVENUES

67 511 Sales
5111 Sales of merchandise
Maintain in details
upon management
5112 Sales of products requirement
5113 Service revenues
5114 Revenue from subsidies
5117 Sales from property investment
Sales to
68 512 Inter-company revenue subsidiaries
5121 Sales of merchandise
5122 Sales of products
5123 Service revenues

69 515 Financial income


70 521 Sales discounts
71 531 Sales returns
72 532 Sales allowances

CATEGORY 6
PRODUCTION COSTS AND COST

Applied for
periodic inventory
73 611 Purchases method
6111 Purchases of raw material
6112 Purchases of merchandise

74 621 Raw material costs


75 622 Direct labor costs
For construction
76 623 Machine costs contractor
6231 6231 Labor costs
6232 6232 Use of auxiliary materials
6233 6233 Use of tools and supplies

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Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5
6234 6234 Depreciation
6237 6237 Service rental
6238 Sundry cash expenses
77 627 Factory overhead costs
6271 Indirect labour
6272 Use of auxiliary materials
6273 Use of tools and supplies
6274 Depreciation
6277 Services rendered
6278 Sundry cash expenses
Periodic inventory
78 631 Cost of products manufactured method
79 632 Cost of goods sold
80 635 Financial expenses
81 641 Selling expenses
6411 Sales salary expenses
6412 Packaging and indirect materials
6413 Consumable and office supplies
6414 Depreciation
6415 Warranty expenses
6417 Rendered services
6418 Sundry cash expense
82 642 General and administration expenses
6421 Office salaries
6422 Consumable and office supplies
6423 Office supplies
6424 Depreciation
6425 Taxes, fees and charges
6426 Expenses from provisions
6427 Services rendered by outsiders
6428 Sundry cash expenses

CATEGORY 7
OTHER INCOME

83 711 Other income Maintain in details

CATEGORY 8
OTHER EXPENSES

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Code
No. Class 1 Class 2 NAME OF ACCOUNTS NOTE
1 2 3 4 5

84 811 Other expenses Maintain in details

85 821 Enterprise Income Tax


8211 Current income tax
8212 Deferred income tax

CATEGORY 9
INCOME SUMMARY

86 911 Income summary

CATEGORY 10
OFF BALANCE SHEET ACCOUNTS

001 Operating lease assets

Maintain in details
upon management
002 Goods held under trust or for processing requirement

003 Goods received on consignment for sale

004 Bad debts written off

007 Multi-foreign currencies

008 Subsidies of State Budget

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III. CONTENT AND RECORDING METHOD ACCOUNTING DOCUMENTS

CATEGORY I

CURRENT ASSETS

This account records both the balance and movements of the current assets in a business.

Current assets are those assets owned by the enterprise and their benefits are fully realised within
one year or within the company’s business cycle. Current assets may be cash, inventory, short
term investments and other receivables.

Current assets of the business include: cash, short term investments, receivables, inventories, and
itures from subsidies of the State Budget.
other current assets. It also includes expenditures

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. When accounting for current assets, the accountant must comply with those regulations stated
for each individual current asset including cash, short term investments, receivables, short
term deposit, inventories.

2. Short term investments, receivables and inventory should be recorded at cost. However, at the
end of the fiscal year these accounts must be re -valued at the lower of cost or market value
re-valued
(net realisable value).

Provision for the decline in the value of inventory,


inventory, receivables and investments are recorded
in their respective provision accounts and may not be netted against the respective current
asset.

The provision accounts are used to adjust the valu


valuee of a current asset to the lower of cost or
market value for presentation in the balance sheet.

Current assets have 24 accounts which are classified into six groups:

Group 11 – Cash is composed of three accounts:

Account 111 – Cash on hand


Account 112 – Cash in bank
Account 113 – Cash in transit

Group 12 – Short term investments are composed of three accounts:

Account 121 – Short term investment


Account 128 – Other short term investment
Account 129 – Provision for short term investment

Group 13 – Receivables are composed of five accounts:

Account 131 – Accounts receivable – trade


Account 133 – VAT deductible
Account 136 – Inter-company receivable
Account 138 – Other receivable
Account 139 – Provision for doubtful debts

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Group 14 – Advances are composed of three accounts:

Account 141 – Advances


Account 142 – Prepaid expenses
Account 144 – Short term deposits

Group 15 – Inventory is composed of nine 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 – Provision for obsolete stock

Group 16 – Expenditure from subsidies of State Budget is composed of one account:

Account 161 – Expenditure from subsidies of State Budget

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GROUP 11

CASH

The cash account records both the balance and movements of cash of the entity including: cash on
hand, cash in banks and cash in transit.

ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Cash must be accounted for in VND, except for being authorized to use another common
currency.

2. For entities which enter into foreign currency transaction, the foreign currency must be
converted into VND using the exchange rate at the date of transaction (either the actual
exchange rate or the average inter-bank exchange
exchange rate ruling on the foreign currency market
stipulated by the State Bank of Vietnam at the date of transaction) for recording.

If the entities buy foreign currency for cash on hand or to deposit at the banks or to settle
payment by using VND, the foreign currency must be converted into VND using either
buying exchange rate or exchange rate at the the date of payment. The entities should record in
those foreign currencies into VND in the credit side of accounts 1112, 1122 at the stipulated
exchange rates on account 1112, 1122 using one of following methods: average cost; first in -
first out; last in - first out; actual cost (foreign currency is treated as a special product).

converted
Foreign currency transaction needs to be convert ed into VND and also recorded in original
currency individually. Differences due to changes in the exchange rate are to be recorded in
financial income/ expenses account (applying in construction stage and also for enterprise
which is operating in construc
construction)
tion) or account 413 (applying for enterprise in pre-operating
construction stage). The period end balances of foreign currency cash accounts are to be
retranslated at the average inter-bank foreign currency rates stipulated by the State Bank of
Vietnam as at the balance sheet date.

Foreign currencies are also recorded individually in account 007 – “Multi-foreign currencies”
recorded
(Off balance sheet accounts).

3. Gold, silver, precious metals and gemstones may be recorded in the cash account only for the
entities that are not in the business of dealing
dealing/trading in gold, silver, precious metals and
gemstones.

A company should maintain detailed records of gold, silver and gemstones and for each item
the quantity, weight, quality and value should be maintained. Gold, silver, precious metals
and gemstones should be recorded at market price (billing price or purchase price).

One of four inventory methods may be applied when gold, silver, precious metals and
gemstones are sold.

Group 11 - Cash is composed of three accounts:


- Account 111- Cash on hand
- Account 112 – Cash in bank
- Account 113 – Cash in transit

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ACCOUNT 111

CASH ON HAND

This account records the cash receipts, cash payments and cash balance of the entity including:
cash on hand in VND and foreign currencies, gold, silver, precious metals and gemstones.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Only records cash receipts and cash payments of cash on hand and foreign currencies on
hand. Receipts are being deposited directly into the bank (not through the safe of the entity)
should not be recorded in debit side of account 111 “Cash on hand”. Such amounts should be
debited to account 113 “Cash in transit”.

2. Other cash deposits from other entities and pepersonal mortgages and collateral must be
managed and recorded in the same way as assets of the entity.

3. Upon cash receipts or payments, accountant must issue the official receipt or payment
and authorized person according to relevant
voucher with signature of receiver, payee and
regulations on supporting documents. In special cases, approval for transferring or receiving
must be attached.

maintaining a cash book to record daily cash receipts


4. The cash accountant is responsible for maintaining
receipts and disbursement in the order of
and cash disbursements, foreign currency receipts
occurrence so that the balance of cash on hand must be calculated at any point in time.

5. The cashier is responsible for managing and controlling cash in and cash out. The cashier
compare the results of the count to the balance
must perform a cash count on a daily basis and compare
per cash book and cash ledger. Any differences mu st be investigated for reasons by the cash
must
accountant and cashier and a solution is proposed to resolve the differences.
proposed

6. For entities which enter into foreign currency transaction, the foreign currency must be
converted into VND using the exchange rate at the date of transaction (either the actual
exchange rate or the average inter-bank exchange
exchange rate ruling on the foreign currency market
stipulated by the State Bank of Vietnam at the date of transaction) for recording.

If the entities buy foreign currency for cash on hand or to deposit at the banks or to settle
payments by using VND, the foreign currency mu must be converted into VND using either
buying exchange rate or exchange rate at the date of payment. The credit side of account
1112 should be converted into VND using the rate in account 1112 using one of following
methods: average cost; first in - first out; last in - first out; actual cost (foreign currency is
treated as a special product).

Foreign currencies are recorded individually in account 007 – Multi-foreign currencies (Off
balance sheet accounts).

7. Gold, silver, precious metals and gemstones may be recorded in the cash accounts for entities
which are not in the gold, silver, value metals and gemstones trading/dealing business. For
those companies in the business of dealing/trading in gold, silver, precious metals and
gemstones, the receipts and dispatches are recorded as inventories. When they are used for
payment purpose, they can be recorded as foreign currency.

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STRUCTURE AND CONTENT OF ACCOUNT 111 – CASH ON HAND

Debit:

- Receipts of cash on hand, foreign currency, gold, silver, value metals and gemstones on hand
at the company premises.

- Surplus of cash, foreign currencies, gold, silver, precious metals and gemstones following the
stock count and the cash count minute.

- The gain on foreign exchange difference resulted from revaluation of foreign currencies at the
end of period (foreign currencies on hand).

Credit:

- Payment of cash on hand, foreign currency, gold, silver, precious metals and gemstones on
gold,
hand at the company premises.

- Shortage of cash on hand, foreign currencies, gold, silver, precious metals and gemstones on
hand following the cash count and stock taking minute.

- The loss on foreign exchange difference resulted from revaluation of foreign currencies at the
end of period (foreign currencies on hand).

Debit balance:

- Cash on hand, foreign currency, gold, silver, precious metals and gemstones on hand at the
premises.

Account 111 has three sub-accounts:

Account 1111 Cash in VND: to record the receipts, payments and balance of cash on hand in
VND including bank notes at the company's premises.

Account 1112 - Cash in foreign currencies: to record the receipts, payments and balance of cash
in foreign currencies at the company's premises at equivalent VND

Account 1113 – Gold, silver, precious metals and gemstones: to record the issued in/out and
balance of gold, silver, precious metals and gemstones.

MAJOR TRANSACTIONS

1. Receipts cash from the sale of goods and rendering of services:

- If goods and services are subject to subtraction method VATand the entity pays VAT in
subtraction method, the accountant records receipts from sale of goods and rendering of
services at price excluding VAT:

Dr. 111 – Cash on hand (total receipts)


Cr. 3331 – VAT payable (33311)
Cr. 511 – Sales (selling price excluding VAT)
Cr. 512 – Inter-company sales (selling price excluding VAT)

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- If goods and services are not subject to VAT or subject to VAT using direct method, the
accountant records receipts from sale of goods and rendering of services at total receipts:

Dr. 111 – Cash on hand


Cr. 511 – Sales (total receipts)
Cr. 512 – Inter-company sales (total receipts)

2. Cash receipts from State Budget in term of cash allowances or grants:

Dr. 111 – Cash on hand


Cr. 333 – Taxes and statutory obligations (3339)

3. Cash receipts from other financial activities, other incomes which are subject to subtraction
method VAT and the entity pays VAT in subtraction
subtrac method (for example receipts of interest
from short term investment, long term investment, receipts from disposal and transfer of fixed
assets):

Dr. 111 – Cash on hand (total receipts)


Cr. 3331 – VAT payable (33311)
Cr. 515 - Financial incomes (the receipts excluding VAT)
Cr. 711 – Other incomes (the receipts excluding VAT)

4. Cash receipts from financial activities, other incomes subject to subtraction method VAT or
not subject to VAT and the entity pays VAT using direct method:

Dr. 111 – Cash on hand


Cr. 515 – Financial incomes
Cr. 711 – Other incomes

5. Cash receipts from withdrawals from the bank accounts; from long term loans, short term
loans, other (in VND or foreign currencies):

Dr. 111 – Cash on hand (1111, 1112)


Cr. 112 – Cash at bank (1121, 1122)
Cr. 311, 341…

6. Cash collection from accounts receivable and other receivables:

Dr. 111 – Cash on hand (1111, 1112)


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

7. Cash receipts from short term investments, deposits, collateral or mortgage or receipts of
repayment of investment:

Dr. 111 – Cash on hand (1111, 1112)


Cr. 121 – Short-term investments
Cr. 128 – Other short-term investments
Cr. 138 – Other receivables

Translation by KTC Assurance & Business Advisors 19


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Cr. 144 – Short-term deposits, collateral and mortgage


Cr. 244 – Long term deposits
Cr. 228 – Other short-term investments

8. Cash receipts of deposits, mortgages and collaterals in VND or foreign currencies from other
entities:

Dr. 111 – Cash on hand (1111, 1112)


Cr. 338 – Other payables (if short term deposit, collaterals)
Cr. 344 – Long term deposits

9. Surplus of cash on hand resulting from cash count waiting for resolution:

Dr. 111 – Cash on hand


Cr. 338 – Other payable (3381)

10. Cash receipts of capital contribution:

Dr. 111 – Cash on hand


Cr. 411 – Paid in capital

11. Cash on hand deposited to the bank:

Dr. 112 – Cash in bank


Cr. 111 – Cash on hand

12. Purchases of short-term and long-term securities in cash or investment in subsidiaries,


associates or joint ventures by cash:

Dr. 121 – Short-term investments


Dr. 221 – Long term investments
Dr. 222 – Shares in joint ventures
Dr. 223 – Investment in associates
Dr. 228 – Other long term investments
Cr. 111 – Cash on hand

13. Deposit, collateral or mortgage in other entities by cash:

Dr. 144 – Short term deposits, collaterals and mortgage


Dr. 244 – Long term deposits
Cr. 111 – Cash on hand

14. Cash payments for fixed assets acquisition for immediate uses:

- Acquiring fixed assets using in producing goods and services which are subject to subtraction
method VAT:

Dr. 211 – Tangible assets (purchased price excluding VAT)


Dr. 213 – Intangible assets (purchased price excluding VAT)
Dr. 133 – VAT deductible (1332)
Cr. 111 – Cash on hand

Translation by KTC Assurance & Business Advisors 20


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

- Acquiring fixed assets used for production of goods and services which are subject to VAT
using direct method; or not subject to VAT; or for administration activities, projects funded
by State Budget; or in cultural and welfare activities funded by bonus and welfare fund:

Dr. 211, 213 (total payment)


Cr. 111 – Cash on hand (total payment)

If the fixed assets acquired by fixed assets fund or investment and development fund are used
for production, the accountant records an increase in capital contribution. At the finalization
of the fixed assets funds, the record should be:

Dr. 441, 414 …


Cr. 411 – Paid in capital

15. Cash payment for construction costs, large repair or purchase of fixed assets that needs
installation process before being used in the production of goods and services which are
subject to subtraction method VAT:

Dr. 241 – Construction in progress


Dr. 133 – VAT deductible (1332)
Cr. 111 – Cash on hand

16. Cash payments for purchases of materials, tools and supplies and merchandises using in
production of goods and services which are subj
subject
ect to subtraction method VAT (perpetual
inventory method):

Dr. 152 – Raw materials


Dr. 153 – Tools and supplies
Dr. 156 – Merchandise goods (Purchase price excluding VAT)
Dr. 157 – Goods on consignment
Dr. 133 – VAT deductible (1331)
Cr. 111 – Cash on hand

17. Cash payments for purchases of supplies, materials


materials and merchandises using in production of
goods and services which are subject to subtraction
subtraction method VAT and periodic inventory
method:

Dr. 611 – Purchases (6111, 6112)


Dr. 133 – VAT deductible (1331)
Cr. 111 – Cash on hand

18. Cash payment to creditors:

Dr. 311 – Short term loans


Dr. 315 – Current portion of long term loans
Dr. 331 – Trade payable
Dr. 333 – Tax and statutory obligations
Dr. 334 – Payable to employees
Dr. 336 – Inter-company payable
Dr. 338 – Other payable
Cr. 111 – Cash on hand

Translation by KTC Assurance & Business Advisors 21


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

19. Cash payment for materials purchased for immediate use in production of goods and services
which are subject to subtraction method VAT of which the entity pays VAT in subtraction
method:

Dr. 621, 623, 627, 641, 642


Dr. 133 – VAT deductible (1331)
Cr. 111 – Cash on hand

20. Cash payment for financial and other activities:

Dr. 635, 811


Dr. 133 – VAT deductible (if any)
Cr. 111 – Cash on hand

21. Shortage of cash as result of cash count waiting for resolution:

Dr. 138 – Other receivable (1381)


Cr. 111 – Cash on hand

22. Transactions relating to foreign currencies:

22.1 Recording cash on hand transactions in fore ign currency of production and trading period
foreign
(applying for production and trading entities under construction stage)

a. Cash purchase of goods and services in foreign currencies:

- If foreign exchange loss arisen as result of external purchase of merchandise, goods, fixed
assets and services:

Dr. 151, 152, 153, 156, 157, 211, 213, 241, 623, 627, 641, 642, 133
(using exchange rate at the date of transaction)
Dr. 635 – Financial expenses (loss on foreign exchange difference)
Cr. 111 (1112) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign


Multi-fo currencies (Off
balance sheet accounts).

- If foreign exchange gains arisen as result of external purchase of merchandise, goods, fixed
assets and services:

Dr. 151, 152, 153, 156, 157, 211, 213, 241, 623, 627, 641, 642, 13…
(using exchange rate at the date of transaction)
Cr. 111(1112) (using the entity’s current exchange rate)
Cr. 515 – Financial incomes (gain on foreign exchange difference)

At the same time, single entry is credited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

- If the entities receive materials, merchandises, fixed assets from suppliers; or borrow short
term or long term loans, long term liabilities, or inter-company payable etc in foreign
currencies, by using the exchange rate at the date of transaction, the record should be:

Translation by KTC Assurance & Business Advisors 22


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Dr. Related accounts (using exchange rate at the date of transaction)


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

b. Cash payment to creditors (trade payable, short-term loans, long term loans, long term
liabilities, inter-company payable etc.)

- If foreign exchange loss arisen when making cash payment to creditors:

Dr. 311, 315, 331, 336, 341, 342… (using the entity’s current exchange rate)
Dr. 635 – Financial expenses (loss on foreign exchange difference)
Cr. 111 (1112) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

- en making cash payment to creditors:


If foreign exchange gain arisen when

Dr. 311, 315, 331, 336, 341, 342… (using the entity’s current exchange rate)
Cr. 515 – Financial income (gain on foreign exchange difference)
Cr. 111 (1112) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign


Multi-fo currencies (Off
balance sheet accounts).

c. Cash receipts from sales, other incomes in foreign currencies:

Dr. 111 (1112) (actual exchange rate or average inter-bank exchange rate stipulated by SBV)
Cr. 511, 515, 711... (actual exchange rate or average inter-bank exchange rate stipulated
by SBV)

debited to account 007 – Multi-foreign


At the same time, single entry is debited Multi-fo currencies (Off
balance sheet accounts).

d. Cash receipts from receivables in foreign currencies (accounts receivable, inter-company


receivables etc)

- If foreign exchange loss arisen from the receipts from receivables:

Dr. 111 (1112) (using exchange rate at the date of transaction)


Dr. 635 – Financial expenses (loss on foreign exchange difference)
Cr. 131, 136, 138… (using the entity’s current exchange rate)

At the same time, single entry is debited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

22.2 Cash transactions during the period relating to foreign currencies in construction investment
period (pre-operating stage):

a. External purchase of materials, services, fixed assets, equipments and construction and
installation volume from suppliers or contractors:

- Foreign exchange loss resulted from payment to suppliers and contractors in acquiring

Translation by KTC Assurance & Business Advisors 23


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

materials, services, fixed assets, equipments and construction and installation volume:

Dr. 151, 152, 211, 213, 241… (using exchange rate at the date of transaction)
Dr. 413 – Foreign currencies difference (4312) (loss on foreign exchange difference)
Cr. 111 (1112) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

- Foreign exchange gain resulted from payment to suppliers and contractors in acquiring
materials, services, fixed assets, equipments and construction and installation volume:

Dr. 151, 152, 211, 213, 241… (using exchange rate at the date of transaction)
Cr. 111 (1112) (using the entity’s current exchange rate)
Cr. 413 – Foreign currencies difference (4132) (gain on foreign exchange difference)

At the same time, single entry is credited to account 007 – Multi-foreign


Multi-fo currencies (Off
balance sheet accounts).

b. Cash payment to creditors in foreign currencies


currencies (trade payable, long term payable, inter-
company payable (if any):

- Foreign exchange loss resulted from payment to creditors:

Dr. 311, 315, 331, 336, 341, 342… (using the entity’s current exchange rate)
Dr. 413 – Foreign currencies difference (4132) (gain on foreign exchange difference)
Cr. 111 (1112) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign


Multi-fo currencies (Off
balance sheet accounts).

- Foreign exchange gain resulted from payment to creditors:

Dr. 311, 315, 331, 336, 341, 342… (using the entity’s current exchange rate)
Cr. 111(1112) (using the entity’s current exchange rate)
Cr. 413 - Foreign currencies difference (4132) (Gain on foreign exchange difference)

At the same time, single entry is credited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

c. Annually, realized foreign exchange difference arisen in construction investment period (pre-
operating stage) are accumulated in account 413 “Foreign exchange difference” (4132) until
the construction is completed and brought in use. The foreign exchange difference is treated
in accordance with the current regulations (refers to guidance of account 413 – Foreign
exchange difference).

22.3. Accounting for foreign currencies difference due to revaluation of cash balance in foreign
currencies at the end of fiscal year.

At the end of fiscal year, the entity must revalue the balance of account 111 – “Cash on hand”
in foreign currency using the exchange rate of the fiscal year end date (the average inter-bank
exchange rate ruling by the SBV at the closing date of the financial statements). This

Translation by KTC Assurance & Business Advisors 24


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

revaluation may result in foreign currencies difference. The entity must keep track details of
the foreign currencies difference arising from revaluation foreign currencies in construction
investment period (pre-operating stage) (account 4132) and in normal business operation
stage (account 4131).

- If foreign exchange gains made:

Dr. 111 (1112)


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

- If foreign exchange loss incurred:

Dr. 413 – Foreign exchange difference (4131, 4132)


Cr. 111 (1112)

Translation by KTC Assurance & Business Advisors 25


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 112

CASH IN BANK

This account records the balance and movement of cash in banks.

1. Recording in account 112 “Cash in bank” is based on the following documents: debit notes,
credit notes, copies of deposit acknowledgements and enclosed original evidence from the
bank (authorized payment and receipt vouchers, bank transfers and bank notified cheques,
etc.).

2. When receiving bank documents, accountant must check and compare these with the original
evidences. If there is a difference between thee account balance per the bank reconciliation and
the amount omen the original evidence, the accountant should inform the bank in order to
ensure the matter is investigated ed and resolved with mutual agreement. At the end of the
month, should resolutions of the matter still be outstanding, the balance per the bank
documents such as debit notes, credit notes or copies of deposit acknowledgement
acknow should be
recorded. The difference is debited to account 138 “Other receivable” (1388) (if the balance
per accounting records is greater than the bank documents); or credited to account 338 “Other
payable” (3388) (if the balance per accounting bo ok is less than the bank documents). The
book
difference should be followed up for examining, reconciling and investigating for resolution
in the next month.

3. For entities which have related organizations, departments without using separate accounting
system, separate bank accounts can be opened to facilitate the payment and receipt
transactions process. The accountant should kkeep
eep a sub-ledger for each account for each
currency (in VND or foreign currencies).

4. Each bank account should have a separate detailed


detailed bank book for ease of reconciliations.

Cash deposited into bank in foreign currencies is converted into VND using the actual
exchange rate or the average inter-bank exchange rate ruling by the State Bank of Vietnam at
the date of transaction (the “average inter-bank exchange rate of SBV”).
inter-bank

Buying foreign currency to deposit into bank account


accounts should be recorded at actual exchange
rate.

Withdrawing foreign currencies from the bank should be converted into VND using the
exchange rate which is being used in the sub-ledger of account 1122 applying one of
following methods: Average cost, First in - first out, Last in - first out, Actual cost.

5. At the stage of production and business (applying for both entity in construction stage and
enterprise operating in construction industry), the transactions relating to foreign currency
difference arisen from foreign currency deposits into bank accounts is credited in account 515
– Financial income (foreign exchange gain) or debited in account 635 – Financial expenses
(foreign exchange loss).

6. In case there is foreign exchange difference resulted from the transactions in foreign
currencies occurred in construction investment period (pre-operating stage), the difference
should be recorded in account 413 – Foreign exchange difference (4132).

Translation by KTC Assurance & Business Advisors 26


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

STRUCTURE AND CONTENT OF ACCOUNT 112 - CASH IN BANK

Debit:

- Cash in VND, in foreign currencies, gold, silver, precious metals and gemstones deposited
into the banks.

- Gain on foreign exchange difference resulted from revaluation of the bank balance in foreign
currencies at the end of the period.

Credit:

- Cash in VND, in foreign currencies, gold, silver, precious metals and gemstones withdrawn
from the banks.

- Loss on foreign exchange difference resulted from revaluation of the bank balance in foreign
currencies at the end of the period.

Debit balance:

Cash in VND, in foreign currencies, gold, silver,


silver, precious metals and gemstones in the bank.

Account 1121 - VND: to record VND deposited in the bank.

1122 - Foreign currencies: to record VND equivalent amount of foreign currencies


deposited in the bank.

Account 1123 – Gold, silver, precious metals, gemstones: to record the value of gold, silver,
precious metals and gemstones deposited in the bank.

MAJOR TRANSACTIONS

1. Deposit cash on hand into the bank:

Dr. 112 - Cash in bank


Cr. 111 - Cash on hand

2. Receipt of credit notes from bank advising cash in transit deposited to the bank account of the
entity:

Dr. 112 - Cash in bank


Cr. 113 - Cash in transit

3. Receipt of deposit from customer or collection of receivables made through bank account.
Based on credit notes, the accountant records:

Dr. 112 - Cash in bank


Cr. 131 - Accounts receivable

4. Collection of deposits, collaterals through bank account:

Translation by KTC Assurance & Business Advisors 27


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Dr. 112 - Cash in bank


Cr. 144 - Short term deposits, mortgages and collateral
Cr. 244 – Long term deposits

5. Receipt of capital contribution, shares in join ventures from investors through bank account:

Dr. 112 - Cash in bank


Cr. 411 – Paid in capital

112 – Cash in bank


Cr. 344 – Long term deposits
Cr. 338 – Other payable (3388)

Cr. 121 - Short term investments (at historical cost)


Cr. 128 – Other investments
Cr. 515 – Financial income (interest income)
Cr. 3331 – VAT payables (33311)

using subtraction method VAT, revenues from sales of goods and


rendering of services or income generated from other
other activities are subject to subtraction method
VAT. Receipts of the sales through
through bank account, the accountant records:

Dr. 112 – Cash in bank (total receipts)


Cr. 511 – Sales (selling price excluding VAT)
Cr. 512 – Inter-company sales (selling price excluding VAT)
Cr. 515 – Financial income (selling price excluding VAT)
Cr. 711 – Other income (income excluding VAT)
Cr. 3331 – VAT payable (33311)

sales of goods and rendering of services, financial


8.2 Receipt through the bank of revenues from sal
activities and other activities which are not subject to VAT or subject to VAT using direct
method:

Dr. 112 – Cash in bank


Cr. 511 – Sales (total receipts)
Cr. 512 – Inter-company sales (total receipts)
Cr. 515 – Financial income
Cr. 711 – Other income

9. Receipt of interest income from the bank:

Dr. 112 – Cash in bank


Cr. 515 – Financial income

Translation by KTC Assurance & Business Advisors 28


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Cr. 112 – Cash in bank

Cr. 112 – Cash in bank

12. for short term investment:

Cr. 112 - Cash in bank

- Inventories are recorded


corded using perpetual method:

Cr. 112 – Cash in bank

- Inventories are recorded


recorded using periodic method:

Cr. 112 – Cash in bank

Dr. 221 – Long term investments


Dr. 222 – Shares in joint ventures
Dr. 223 – Investment in associates
Dr. 228 – Other long term investments
Construction in progress
Dr. 133 – VAT deductible (1332 – if any)
Cr. 112 – Cash in bank

Dr. 311 - Short term loans

Translation by KTC Assurance & Business Advisors 29


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Dr. 315 Current portion of long term loans


Dr. 331 Account payables
Dr. 333 - Taxes and statutory obligations
Dr. 336 – Inter-company payable
Dr. 338 - Other payable
Dr. 341 – Long term loans
Dr. 342 – Long term liabilities
Cr. 112 - Cash in bank

Dr. 411 – Paid in capital


Dr. 421 – Undistributed earnings
Dr. 414, 415, 418
Cr. 112 – Cash in bank

17. Payment of sales discounts, sales returns, sales allowances which are subject to subtraction
method VAT and the entity paid subtraction method VAT by bank transfer:

Dr. 521 – Sales discounts


Dr. 531 – Sales returns
Dr. 532 – Sales allowances
Dr. 3331 – VAT payable (33311)
Cr. 112 – Cash in bank

18. Payments for machinery expenses, factor


factory
y overhead, selling expenses, general and
administration expenses, financial expenses, and other expenses which are subject to
subtraction method VAT by bank transfer:

Dr. 623 – Machinery expenses


Dr. 627 - Factory overhead expenses
Dr. 641 - Selling expenses
Dr. 642 - General and administration expenses
Dr. 635 - Financial expenses
Dr. expenses
Dr. 133 – VAT deductible (1331)
Cr. 112 - Cash in bank

19. Transactions relating to foreign currencies:

19.1 Recording foreign currency transactions arisen in the period related to the business
activities, including construction activities of the production and business entity

a. Purchase materials, tools and supplies, merchandises, fixed assets, services in foreign
currencies through bank:

- If foreign exchange loss resulted from external purchase of materials, merchandises, fixed
assets and services:

Dr. 151, 152, 153, 156, 211, 213, 241, 623, 627, 642, 641, 133
(using exchange rate at the date of transaction)
Dr. 635 – Financial expenses (loss on foreign exchange difference)

Translation by KTC Assurance & Business Advisors 30


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Cr. 112 – Cash in bank (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

- If foreign exchange gain resulted from external purchase of materials, merchandises, fixed
assets and services:

Dr. 151, 52, 153, 156, 211, 213, 241, 623, 627, 641, 642, 133
(using exchange rate at the date of transaction)
Cr. 112 (1122) (using the entity’s current exchange rate)
Cr. 515 – Financial income (gain on foreign exchange difference)

At the same time, single entry is credited to account 007 – Multi-foreign


Multi-fo currencies (Off
balance sheet accounts)

- Payment to creditors (trade payable, short term loans, long term loans, long term liabilities,
inter-company payable etc.)

If foreign exchange loss arisen from payment to creditors:

Dr. 311, 315, 331, 336, 341, 342 (using the entity’s current exchange rate)
Dr. 635 – Financial expenses (loss on foreign exchange difference)
Cr. 112 (1122) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign


Multi-foreign currencies (Off
balance sheet accounts).

If foreign exchange gains arisen from payment to creditors:

Dr. 311, 315, 331, 336, 341, 342 (using the entity’s current exchange rate)
Dr. 515 – Financial income (gain on foreign exchange difference)
Cr. 112 (1122) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – (Off balance sheet accounts).

b. Receipts of foreign currencies from sales and other income:

Dr. 112 (1122) (actual rate or average inter-bank exchange rate)


Cr. 511, 515, 711 (actual rate or average inter-bank exchange rate)

At the same time, single entry is debited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

c. Collection of receivables in foreign currencies (accounts receivable, inter-company


receivable, etc.)

- Loss on foreign exchange difference:

Dr. 112 (1122) (using exchange rate at the date of transaction)


Dr. 635 – Financial expenses (loss on foreign exchange difference)
Cr. 131, 136, 138 (using the entity’s current exchange rate)

Translation by KTC Assurance & Business Advisors 31


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At the same time, single entry is debited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

- Gain on foreign exchange difference:

Dr. 112 (1122) (using exchange rate at the date of transaction)


Cr. 515 – Financial income (gain on foreign exchange difference)
Cr. 131, 136, 138 (using the entity’s current exchange rate)

At the same time, single entry is debited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

reign currencies of construction activities (pre-


19.2. Accounting transactions relating to foreign
operating stage)

a. Purchase of merchandises, services, fixed assets, equipment construction amount, installation


which are passed from sellers or constructors:

- payment transactions in foreign currencies:


Loss on foreign exchange difference in payment

Dr. 151, 152, 211, 213, 241… (using exchange rate at the date of transaction)
Dr. 413 – Foreign currencies difference (4312) (loss on foreign exchange difference)
Cr. 112 (1122) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 - Multi-foreign currencies (Off
balance sheet accounts).

- payment transaction in foreign currencies:


Gain on foreign exchange difference in payment

Dr. 151, 152, 211, 213, 241… (using exchange rate at the date of transaction)
Cr. 112 (1122) (using the entity’s current exchange rate)
Cr. 413 – Foreign currencies difference (4132) (gain on foreign exchange difference)

At the same time, single entry is credited to account 007 - Multi-foreign currencies (Off
balance sheet accounts).

b. Payment to creditors (account payables, long term loans, inter-company payable (if any), etc.)
in foreign currencies

- Loss on foreign exchange difference:

Dr. 311, 315, 331, 336, 341, 342… (using the entity’s current exchange rate)
Dr. 413 – Foreign currencies difference (4132) (gain on foreign exchange difference)
Cr. 112 (1122) (using the entity’s current exchange rate)

At the same time, single entry is credited to account 007 – Multi-foreign currencies (Off
balance sheet accounts).

- Gain on foreign exchange difference:

Dr. 311, 315, 331, 336, 341, 342… (using the entity’s current exchange rate)
Cr. 112 (1122) (using the entity’s current exchange rate)

Translation by KTC Assurance & Business Advisors 32


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Cr. 413 - Foreign currencies difference (4132) (gain on foreign exchange difference)

At the same time, singer entry is credited to account 007 - Multi-foreign currencies (Off
balance sheet accounts).

c. Annually realized foreign exchange difference arisen in capital construction stage (pre-
operating stage) are accumulated in account 413 “Foreign exchange difference” (4132) until
the construction is completed and put in use. The foreign exchange difference is treated
according to the current regulations (refers to instruction of account 413 – Foreign exchange
difference).

19.3 Accounting for foreign currencies difference due to revaluation of cash balance in foreign
currencies at the end of fiscal year

At the end of fiscal year, the enterprise must revalue the balance of account 112 – “Cash in
bank” in foreign currency using the exchange rate of the fiscal year end date (the average
inter-bank exchange rate ruling by the SBV at the the closing date of the financial statements).
This revaluation may arise foreign exchange difference.
difference. The enterprise must keep track in
details the foreign currencies difference arising
arising from revaluation foreign currencies in capital
construction stage (pre-operating) in account 4132 and in business operation stage in account
4131.

- Gain on foreign exchange difference:

Dr. 112 (1122)


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

- Loss on foreign exchange difference:

Dr. 413 – Foreign exchange difference (4131, 4132)


Cr. 112 (1122)

Translation by KTC Assurance & Business Advisors 33


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 113

CASH IN TRANSIT

This account records cash transferred to the bank, the State treasury for which the bank/State
treasury credit notes have not been received or cash payment to other enterprise from bank
account with completeness of procedures for transferring but has not received debit notes or bank
statement.

Cash in transit includes VND and foreign currency in the following cases:

- Receipts in cash or by cheque deposited directly to the bank account.

- Transfer through the post office to pay other enterprise.

- Cash receipts from sales are being used to pay tax at the same time (cash transactions
between three parties: the enterprise, the buyers and the State Treasury).

ACCOUNT 113 - CASH IN TRANSIT


STRUCTURE AND CONTENTS OF ACCOUNT

Debit:

- Cash in VND, foreign currency or by cheque is deposited into the bank or transferred into the
bank by the post office for which the bank credit notes have not been received.

- Gain on foreign exchange difference resulted from revaluation of cash balance in foreign
currencies in transit at the end of the period.

Credit:

- “Cash in bank” or related accounts.


Cash is transferred to account 112 – “Cash

-
.

Debit balance

Cash in transit at the end of the period.

113 sub

Account 1131 – VND: to record VND in transit.

Account 1132 – Foreign currency: to record foreign currencies in transit.

MAJOR TRANSACTIONS

1. Cash receipts from sales, receivable or other income in cash or by cheque deposited directly
to the bank (not through company’s premises) for which the bank advice has not been
received confirming the transactions:

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


Cr. 131 – Accounts receivable

Translation by KTC Assurance & Business Advisors 34


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Cr. 3331 – VAT payable (33311) (if any)


Cr. 511 – Sales
Cr. 512 – Inter-company sales
Cr. 515 – Financial income
Cr. 711 – Other income

2. Deposit cash on hand into bank for which bank advice confirming deposit is not yet received:

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


Cr. 111 – Cash on hand (1111, 1112)

3. Payment to creditors from cash in bank for which bank advice confirming payment is not yet
received:

Dr. 113 - Cash in transit (1131, 1132)


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

4. Cheques received from customer and deposited to bank for which bank advice confirming the
transaction not yet received:

Dr. 113 - Cash in transit (1131, 1132)


Cr. 131 - Accounts receivable

5. Receipt credit notes of bank confirming cash deposited to bank account:

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


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

confirming cash payment for suppliers:


6. Receipt debit notes of bank confirming

Dr. 331 - Accounts payable-trade


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

7. At the end of the period, the enterprise must revalue cash balance of foreign currencies in
aver
account 113 “Cash in transit’’ based on the average inter-bank exchange rate ruling by the
State Bank of Vietnam:

- Gain on foreign exchange difference:

Dr. 113 – Cash in transit (1132)


Cr. 413 – Foreign exchange difference

- Loss on foreign exchange difference:

Dr. 413 – Foreign exchange difference


Cr. 113 – Cash in transit (1132)

Translation by KTC Assurance & Business Advisors 35


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 121

SHORT TERM INVESTMENTS

This account records investments which will mature or be sold within one year.

Short term investments include:

- Shares which trade on the stock market;

- Bonds, securities, promissory notes: company bonds, government bonds;

- Other shares.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. Short term investments should be recorded at th eir actual cost (historical cost). This cost
their
includes: purchase price plus other expenses (if any) such as broker's expenses, taxes, bank
charges.

2. Short term investments include long term investments which are to be sold or matured within
investments
a year.

price of a short term investment has been lower


3. At the end of each fiscal year, if the market price
than its historical cost, a provision for this decrease should be made.

4. The accountant should maintain details with regards to each individual investment. The
investment categories, investment
details which should be maintained are: the investment invest partner, the par
value and market value of the stock.

STRUCTURE AND CONTENTS OF ACCOUNT 121 - SHORT TERM INVESTMENTS

Debit:

The value of short term investments purchased.

Credit:

The value of the short-term investments which have been sold, matured or liquidated.

Debit balance

Total value of short-term investment held by the entity.

Account No. has two sub-accounts

Account No. 1211 – Shares: to record shares being purchased and sold.

Account No. 1212 – Bonds, bills, promissory notes: to record bonds, bills, promissory notes being
purchased and sold.

MAJOR TRANSACTIONS

Translation by KTC Assurance & Business Advisors 36


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1. Purchase short term investments based on the actual price (i.e. including purchase price,
brokerage expenses, taxes, bank charge, etc.):

Dr. 121 – Short term investments


Cr. 331- Trade payable
Cr. 111 – Cash on hand
Cr. 112 – Cash in bank
Cr. 141 – Advances
Cr. 144 – Short term deposits

2. Periodically calculating earned interests from bonds and receipts:

a) Earned interest is reinvested into bonds, bills (i.e. money is not through the entity’s premise)

Dr. 121 – Short term investment


Cr. 515 – Financial income

b) Interests is received in cash:

Dr. 111, 112


Cr. 515 – Financial income

c) Earned interests including accumulated inter ests generated before being purchased by the
interests
company should be recorded separately. Interests generated since being purchased by the
company is recorded in financial income. Accumulated
Accumulated interests generated before being
purchased by the company is deducted against
against the value of the investment.

Dr. 111, 112 (Total earned interest)


Cr. 121 – Short term investments (accumulated interests generated before being
purchased by the company)
Cr. 515 – Financial income (interests generated
generated since being purchased by the company)

3. Periodically, receipts of dividends (if any):

Dr. 111, 112


Dr. 138 – Other receivables (i.e. money is not received yet)
Cr. 515 – Financial income

4. Record sales of short term investments based on selling price:

a) Gain:

Dr. 111, 112… (total receipts)


Dr. 131 – Account receivable (total receipts)
Cr. 121 – Short term investment (historical price)
Cr. 515 – Financial income (difference of selling price and historical price)

Translation by KTC Assurance & Business Advisors 37


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b) Loss:

Dr. 111, 121 or 131 (total receipts)


Dr. 635 – Financial expenses (difference of selling price and historical cost)
Cr. 121 – Short term investment (historical cost)

c) Expenses arisen from selling securities:

Dr. 635 – Financial expenses


Cr. 111, 112…

5. Collecting or liquidating of matured short term investments:

Dr. 111, 112, or 131


Cr. 121 – Short term investment (historical cost)
Cr. 515 – Financial income

Translation by KTC Assurance & Business Advisors 38


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ACCOUNT 128

OTHER SHORT TERM INVESTMENTS

This account records the balance and movements of other short term investments including loans
and borrowings which will mature or be sold within one year.

When investments are made in cash or in commodities (e.g. fixed assets, raw materials, goods,
etc.), the value of the commodities must be agreed by the parties. Any difference between the
book value and the agreed upon value should be either debited to account 811 or credited to
account 711.

The accountant should maintain a sub-ledger for individual investment and loans and borrowings.

STRUCTURE AND CONTENTS OF ACCOUNT


ACCOUNT 128 - OTHER SHORT TERM
INVESTMENTS

Debit:

Increase in other short term investments.

Credit:

Decrease in other short term investments.

Debit balance:

The value of the short term investments at the end of the period.

Account No. has two sub-accounts

Account No. 1281 – Short term deposits: to record movements and balance of short term deposits

Account No. 1288 – Other short term investments: to record movements and balance of other
short term investments.

MAJOR TRANSACTIONS

1. Short term investments paid for in cash:

Dr. 128 - Other short term investments (1281, 1288)


Cr. 111, 112 ….

2. Short-term investments made through the contribution of raw materials, finished and
merchandise goods which will be held within one year:

a. If the accepted value of the materials and goods is higher than the book value:

Dr. 128 – Other short term investments (1288)


Cr. 152 – Raw materials
Cr. 155 – Finished goods
Cr. 156 – Merchandise goods
Cr. 711 – Other income (difference of the revaluation and the book value of the materials

Translation by KTC Assurance & Business Advisors 39


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and goods).

b. If the accepted value of materials and goods is less than the book value:

Dr. 128 - Other short term investments (1288)


Dr. 811 – Other expenses (difference of the revaluation and the book value of materials and
goods)
Cr. 152 – Raw materials
Cr. 155 – Finished goods
Cr. 156 – Merchandise goods

3. Receipts of other short term investments:

Dr. 111, 112, 152, 156, 211…


Dr. 635 – Financial expenses (loss)
Cr. 128 - Other short term investments (1281, 1288) (historical cost)
Cr. 515 – Financial income (gain)

Translation by KTC Assurance & Business Advisors 40


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ACCOUNT 129

PROVISION FOR SHORT TERM INVESTMENTS

This account records balance and movements of provisions for short tem investments.

The provision for short term investments is used to write down the value of short tem investments
when its market value is less than cost.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. The provision/reversal of provision for short term investments can be made at the end of the
fiscal year when the accounting records are closed for financial year end. For entities issuing
the interim financial statements, provision/reverses
provision/reverses on provision will be adjusted if there is
significant movement in the value of the investments

2. The provision for short term investments is provided upon the difference between the net
realizable value (market price) and the historical cost in the accounting book. If the provision
period is greater than the provision required in the
for short term investments required in this period
increase in the financial expenses of the period.
prior period, then the difference should be an increase
required in this period is less than the provision
If the provision for short term investments required
required in the prior period, the difference should be deducted from to the financial expenses.

3. The criteria to provide provision for short term investments include:

- entities are invested in accordance with relevant laws and


The securities held by the entities
regulations.

- Those securities are freely traded in the market and their market prices are lower than their
book value at the time of stock-taking or financ
financial
ial statements are issued (provisions should
not be made for securities which are not freely traded in the market).

4. The provision for short term investments should be made for each individual investment with
a price decreased at the end of the financial
financial year in the following formula:

Provision Quantity of Historical Market


for = securities losing X cost of - value
short-term value at the end securities on of securities
securities of the fiscal year the book

The entity must quantify the provisions required for each individual investment that is
diminuted in value and a list of provisions for diminution in value of short term investments
are summarized and compared with those of prior period in order to quantify the figure to
adjust in the financial expenses.

Translation by KTC Assurance & Business Advisors 41


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STRUCTURE AND CONTENTS OF ACCOUNT 129 - PROVISION FOR SHORT TERM


INVESTMENTS

Debit:

Reversal of provisions for short term investments due to the provision required in this period is
lower than the provision provided in prior period.

Credit

Provisions for short term investments (initial provision required and the difference between
provision required in this period and the provision provided in the prior period).

Credit balance

Current balance of provision for short term investments.

MAJOR TRANSACTIONS

1. At the end of the accounting period, the account ant should provide initial provision for the
accountant
diminution in value of short term investments:

Dr. 635 – Financial expenses


Cr. 129 - Provisions for short tem investments

2. At the end of the next accounting period:

- If the provision for short term investments required


required in this period is less than the provision
required in the prior period, the difference should be reversed as follows:

Dr. 129 - Provisions for short tem investments.


Cr. 635 – Financial expenses

- If the provision for short term investments required in this period is greater than the provision
required in the prior period, the difference sshould
hould be added to financial expenses as follows:

Dr. 635 – Financial expenses


Cr. 129 - Provisions for short term investments

Translation by KTC Assurance & Business Advisors 42


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ACCOUNT 131

ACCOUNTS RECEIVABLE

This account records the balance and movements of receivables from customers from the sales of
products, goods, services of the entities
This account also records the amounts receivable from contractors on construction work
completed.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The accounts receivable should be recorded in details for each customer, nature of the amount
receivable, short term and long term receivables and for each time of receipt.

Trades receivable are receivables from customers who purchase products, goods, or services
and also include fixed assets and investment properties.

Cash sales from sales of products, goods, invest


investment
ment property, fixed assets and rendering of
services are not recorded in this account ((cash
cash sales should be recorded as cash on hand,
cheques, or cash in bank).

Accounts receivable should be classified as cocollectable


llectable on time; likely unrecoverable; and
definitely unrecoverable to provide useful information for accountants to access bad debts or
provide solutions for unrecoverable receivable.
provide provision for bad debts and provide

If the sales of products or goods, rendering of servi


services,
ces, investment properties supplied to the
customers do not comply with the terms in the economic contract, the customers might
request a discount on the goods/services or return them to the entity

STRUCTURE AND CONTENTS OF ACC


ACCOUNT
OUNT 131 - ACCOUNTS RECEIVABLE

Debit:

- Amounts receivable from customers on the sale of products, goods, investment properties,
fixed assets and rendering of services.

- Excess receipts returned to customers.

Credit:

- Receipt of payment from customers.

- Receipt of advance, deposit from customers.

- Price discounts allowed due to complaints by customers on the basis that the supplied goods
do not comply with the sales agreement.

- Sales returned by the client (including or excluding VAT).

- Sales discounts and trade discount.

Translation by KTC Assurance & Business Advisors 43


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Debit balance:

Amounts receivable from customers.

Accounts receivable may have credit balances. These credit balances represent deposits or excess
amounts received from customers. The debit and credit balances of each individual customer
should be presented separately in “assets” or “liabilities” in the balance sheet respectively.

MAJOR TRANSACTIONS

1. Recognize the sale of products, goods, investment properties and rendering of services:

- With respect to goods, services and investment properties which are subject to subtraction
method VAT and the entity pays subtraction on method VAT. Sales are recorded at VAT-
exclusive price as follows:

Dr. 131 – Accounts receivable (total amount)


Cr. 511 – Sales (Selling price excluding
excluding VAT) (5111, 5112, 5113, 5117)
Cr. 3331 – VAT payable (33311)

- With respect to goods, services and investment properties which are not subject to VAT or
subject to subtraction method VAT, sales are recorded at total amount:

Dr. 131 – Accounts receivable


Cr. 511 – Sales (Total amount) (5111, 5112, 5113, 5117)

Record goods returned from customers

With respect to goods and services are subject to subtraction method VAT and the entity pays
subtraction method VAT

Cr. 131 – Accounts receivable


Cr. 111, 112…

With respect to goods which are not subject to VAT or subject to credit VAT in direct
method

Cr. 131 – Accounts receivable

If the goods/services supplied to the customer do not comply with the economic contract,
they may be discounted on the price. If the customers have not paid for the receivables, based
on documents which confirmed the discount, the accountant can write down receivable to
discounted amount as follows

Cr. 131 – Accounts receivable (discount amount)

Translation by KTC Assurance & Business Advisors 44


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In the case, goods and services are not subject to VAT or subject to direct subtraction method
VATor subject to indirect subtraction method VAT while entity pays VAT using the direct
method

Cr. 131 – Accounts receivable

Cash receipts from sale of goods, products, rendering of services and sales of investment
properties (including interest charged on receivable, if any):

Cr. 131 – Accounts receivable


Cr. 515 – Financial income (interest income)

Cr. 131 – Accounts receivable

Cr. 131 – Accounts receivable

7. Record deposits received from the customers from sale contracts or service contracts:

Dr. 111, 112


Cr. 131 - Accounts receivable

8. Accounting treatment for contractors for receivables from construction contracts:

8.1 If the term of the construction contract stipulates that the contractor is allowed to make
payments according to an agreed process billing, the construction contract performance result
is reliably estimated, by referencing to the completed volume determined by the contractor
regardless of whether invoices according to the set schedule have been billed, the accountant
records the following:

Dr. 337 – Construction contractor payables based on agreed progress billing


Cr. 511 – Sales

Based on invoice issued according the agreed progress billing, the accountant records:

Dr. 131 – Accounts receivable


Cr. 337 - Construction contractor payables based on agreed progress billing
Cr. 3331 – VAT payable (33311)

8.2 If the construction contract stipulates that the contractor is allowed to make payments
according to the value of work volume performed, the contract performance result is reliably

Translation by KTC Assurance & Business Advisors 45


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determined and certified by customers, the accountant should issue invoice based on the
completed work volume certified by the customers in the period and records based on the
issued invoice:

Dr. 131 – Accounts receivable


Cr. 3331 – VAT payable (33311)
Cr. 511 – Sales

8.3 Bonuses received from customers that are additionally paid to contractors due to completion
of contracts beyond contractual requirements:

Dr. 131 – Accounts receivable


Cr. 3331 – VAT payable (33311)
Cr. 511 – Sales

8.4 Additional receivables from the customer or other parties to offset extra costs which are not
covered in the contractual price (e.g. delay caused by the customers, errors in technical or
designing specifications, and disputes over changes in the contract performance):

Dr. 131 – Accounts receivable


Cr. 3331 – VAT payable (33311)
Cr. 511 – Sales

8.5 When receiving cash payments for completed work or cash deposit from customer, the
accountant records:

Dr. 111, 112…


Cr. 131 – Accounts receivable

9. Recording receivables transactions of an import consignee:

9.1 When receipt of deposits from consignor to open LC:

Dr. 111, 112…


Cr. 131 – Accounts receivable (details by consignors)

9.2 When transferring money or using bank loans to open LC (payment made in Letter of Credit),
based on the supporting documents, record as:

Dr. 144 – Short term deposits, mortgage and collaterals


Cr. 111, 112, 311…

9.3 When importing materials, equipments and products, the entity needs to reflect the
followings:

- If consignee pays the seller total amount of mechandise on behalf of the consignor, based on
related documents, the accountant records:

Dr. 151 – Goods in transit (if the goods are in transit)


Dr. 156 – Merchandise goods (if the goods have arrived to warehouse)
Cr. 331 – Trade payable (to each seller details)

Translation by KTC Assurance & Business Advisors 46


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- If the merchandises received and transfered directly to the consignor without going through
the consignee’s premises, the accountant records:

Dr. 331 – Trade payable (details by consignor)


Cr. 331- Trade payable (details by sellers)

- If import tax is paid on behalf of the consignor, based on related documents, the accountant
records:

Dr. 151 – Goods in transit


Dr. 156 – Merchandise goods
Cr. 3333 – Import, export tax payable (taxes by details)

In the case, the merchandises received and transfered directly to the consignor without going
through the consignee’s premises:

Dr. 331 – Trade payable (details by consignor)


Cr. 3333 - Import, export tax payable (details by taxes)

- If import VAT is paid on behalf of the consignor, based on related documents, record as:

Dr. 151 – Goods in transit


Dr. 156 – Mechandise goods
Cr. 3331 – VAT payable (33312)

In the case, the merchandises received and transfered directly to the consignor without going
through the consignee’s premises:

Dr. 331 – Trade payable (details by consignors)


Cr. 3331 – VAT payable (33312)

- If special consumption tax is paid on behalf of the consignor, based on related documents,
the accountant records:

Dr. 151 – Goods in transit


Dr. 156 – Mechandise goods
Cr. 3332 – Special consumption tax payable

In case the merchandises received and transfered directly to the consignor without going
through the consignee’s premises, the accountant records:

Dr. 331 – Trade payables (details by consignors)


Cr. 3332 - Special consumption tax payable

- When transfering the merchandises to the consignor, based on VAT invoice and related
documents, the accountant records:

Dr. 131 - Accounts receivable (details by consignors)


Cr. 156 – Mechandise goods (total amount inclusive tax payable)
Cr. 151 – Goods in transit

9.4. With respect to consigment charge and VAT on the service charge, based on the VAT
invoice and other related documents, the accountant records the revenue from consignment fees:

Translation by KTC Assurance & Business Advisors 47


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Dr. 131, 111, 112 (Total amount)


Cr. 511 - Sales (5113)
Cr. 3331 - VAT payable

9.5. With respect to surcharges paid on behalf of the consignor (e.g. bank charge, customer
research fees, storages, handling fees or delivery fees...), based on related documents, the
accountant records:

Dr. 131 - Accounts receivable (details by consignor)


Cr. 111, 112,...

9.6. With respect to receipts from the consignor for mechandise value, import tax, import VAT,
se taxes to the State Treasury on behalf of the
special consumption tax (if the consignee paid those
consignor), and charges araising from import consignment services, the accountant records:

Dr. 111, 112,...


Cr. 131 - Accounts receivable (details by consignor)

9.7. When making payment for mechandise to the seller on behalf of consignor:

Dr. 331 - Trade payable (detail by sellers)


Cr. 112, 144,...

9.8. When making payment for import tax, VAT, special consumption tax to State Treasury on
behalf of the consignor, based on related documents, the accountant records:
related

Dr. 3331, 3332, 3333,...


Cr. 111, 112,...

9.9. In case the import consignee performs custom and tax application but the consignor pays
taxes itself, the amount of taxes that are paid by the consignor should be recorded as follows:

Dr. 3331, 3332, 3333,...


Cr. 131 - Accounts receivable (details by consignor)

10. If the consignor pays seller by merchandise rather than in cash (bartering transactions), a
deduction to account receivable is made based on the value of bartered merchandise (fair
value on VAT invoice or official invoice issued by consignor), the accountant records:

Dr. 152 – Raw materials


Dr. 153 – Tool and supplies
Dr. 156 – Merchandise goods
Dr. 611- Purchase (periodic inventory accounting)
Dr. 133 – VAT deductible (if any)
Cr. 131 – Accounts receivable

11. In case the receivable is definitely unrecoverable, the accountant must write off bad debts by:

Based on the bad debts written off minutes:

Dr. 139 – Provision for doubtful debts (amount of provision already provided)
Dr. 642 – General and administration expenses (amount of provision not yet provided)

Translation by KTC Assurance & Business Advisors 48


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Cr. 131 - Accounts receivable

At the same time, a debit must be recorded to account 004 "Bad debts written off" (Off
balance sheet accounts) so that they can be followed up within the regulated timeframe for
future collectibles from these customers.

12. At the end of fiscal year, accounts receivable in foreign currency must be revalued at average
inter-bank exchange rate on foreign currency market stipulated by the State Bank of Vietnam
ruling at the date of financial statements preparation.

- If the average inter-bank exchange rate in foreign currency market stipulated by the State
Bank of Vietnam ruling at the date of financial statements preparation is greater than the
booking exchange rate of account 131, the resulted difference will be recorded as follows:

Dr. 131 - Accounts receivable


Cr. 413 – Foreign exchange difference (4131)

- If the average inter-bank exchange rate in fo reign currency market announced by the State
foreign
Bank of Vietnam ruling at the date of financial
financial statements preparation is lower than the
booking exchange rate of Account 131, the resulted
resulted difference will be recorded as follows:

Dr. 413 - Foreign exchange difference (4131)


Cr. 131 - Accounts receivable

- Refer to instruction to account 413 for exchange


exchange difference from revaluation at the end of
fiscal year for accounts receivable in foreign currency.

Translation by KTC Assurance & Business Advisors 49


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ACCOUNT 133

VAT DEDUCTIBLE

This account records VAT amount that is deductible, deducted and to be deducted of the entity.

VAT deductible input is the VAT on goods and services used in the business, in the production of
goods and services that are subject to VAT.

VAT input equals (=) total VAT on the VAT invoices of goods and services (including fixed
assets) used in production of goods and services subject to VAT, the amount of import VAT
recorded on the tax dossier documents of imported goods, or tax payment dossiers on behalf of a
foreign party as the Ministry of Finance’s regulation for foreign organizations, individuals doing
business in Viet nam not belonging to investmentment forms under the Vietnam law on foreign
investment.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. Account 133 only applies for entity subject to subtraction method VAT, not applicable for
entity of which goods and services are subject to VAT in direct method or goods and services
are not subject to VAT.

2. For goods and services purchased for production of goods and services both subject to and
not subject to VAT, entities have to independe
independently
ntly record VAT deductible input and non-
deductible VAT input.

When it is impossible to independently record, the amount of VAT input should be recorded
to account 133. At the end of the accounting period, the accountant must define the amount of
VAT deductible based on the percentage of th thee sales from goods and services subject to VAT
in the total sales from goods and services in that period. The amount of non-deductible VAT
input is included in the cost of goods sold or production costs, overhead on each specific
case.

When the amount of non-deductible VAT is high high costly, a proportion of the amount should
be allocated in cost of goods sold in correspondence
correspondence with the revenue in the current period.
The rest should be charged to cost of goods sold in the next period.

3. When an entity buys goods and services used for production of goods and services not subject
to VAT or subject to direct VAT; used in adminisation and services activities; used in
projects whose expenditure is covered by Stage Budget; in benefit and fringe activities which
are covered by social and welfare fund, the VAT input should not be deductible and not
recorded to account 133. The amount of non-deductible VAT should be recorded into the
purchasing cost of those mechandises, fixed assets and services.

4. When purchased goods and services are used specific documents (such as post stamp,
transportation ticket, etc.) showing that the paying prices have been included VAT; based on
those documents, the entity must define the non-tax price. The VAT input is deducted as the
regulation at point b, article 1.2, item I, part III Circular 120/2003/TT-BTC dated December
12, 2003 of the Ministry of Finance.

5. When agricultural, forestry, fishery enterprises export products that they directly feed, plant
and catch, they will be only deducted the VAT input on goods and services directly used in
the period of feed, catch and plant.

Translation by KTC Assurance & Business Advisors 50


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6. Purchased goods being lost or damaged by natural calamities, fire because of organisations,
individuals’ responsibility and these people have to compensate, the VAT input of these
goods should be recorded into the value of damaged goods that being compensated. They
should not be recorded as VAT deductible input in the monthly VAT declaration.

7. The VAT occurred in one month should be declared in the monthly VAT declaration of that
month. If the amount of VAT deductible input is greater than the amount of VAT output, the
deducted VAT is the amount of VAT output of that month. The rest amount of VAT input
will be deducted in following month or considered to be refunded as laws and regulations on
VAT.

When VAT invoices or documents of paying VAT input of purchased goods, services in a
month and have not been declared in the monthly VAT report of that month, that VAT will
be deducted in the following months as laws and regulations on VAT.

corporations do not directly produce, sell goods and


8. When the head offices of general corporations
services not subject to VAT, the VAT input on goods and services purchased for the offices’
activities will not be deducted or refunded.

When the head offices of general corporations produce, sell goods and services
serv subject to VAT,
the head offices must register and declare the VAT for each these activities independently.

9. When an entity paying VAT in direct method changes to pay subtraction method VAT, the
amount of VAT input will be deducted since the month applying VAT deduction method.
before the that month will not be deducted.
The VAT input of goods and services purchased before

10. According to the law on VAT, the VAT deductible input is determined based on the amount
of VAT recorded on VAT invoices of purchased goods and services or documents of paying
VAT for imported goods; or documents of payingpaying VAT on behalf of foreign contractors as
stipulated. The entity’s VAT input will not be deducted In the case of purchasing goods and
services without VAT invoices or with illegal ones. The entity’s VAT input will not be
deducted when VAT invoices do not note the VAT amount (excluding of specific cases using
included VAT); do not note or note incorrectly
the VAT invoices noting the total value has included
therefor it is unlikely to verify the seller; fake VAT
the name, address, tax code of the seller therefore
invoices, documents; corrected or erased invoices, blank invoice (goods and services actually
not sold); invoices noted the value higher than th
the real value of the sold goods and services.

STRUCTURE AND CONTENTS OF ACCOUNT 133 - VAT DEDUCTIBLE

Debit:

Amount of VAT deductible;

Credit:

- Amount of VAT input deducted;

- Transferring the non-deductible VAT;

- VAT input on goods purchased but then was returned, reduced the price;

- Amount of VAT input refunded.

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Debit balance:

VAT input will be deducted, VAT input was refunded but the State Budget has not yet returned.

Account 133 - VAT deductible have two sub-accounts:

- Account 1331 - VAT deductible on goods and services: to record VAT deductible input on
raw materials, goods, services purchased for producing, selling goods, services subject to
subtraction method VAT.

- Account 1332 - VAT deductible on fixed asset: to record VAT input on investing, purchasing
fixed assets for producing, selling goods and services subject to subtraction method VAT.

MAJOR TRANSACTIONS

1. When purchasing raw materials, goods and ser vices subject to subtraction method VAT;
services
purchasing investment property subject to subtraction method VAT, the accountant records
the value of materials, merchandise goods, costs of purchasing, transit, loading, renting
warehouse lease etc. at the actual cost including
including the price excluding VAT and then records
the VAT deductible:

Dr. 152 - Raw material


Dr. 153 - Tools and supplies
Dr. 156 - Goods
Dr. 211 - Tangible assets
Dr. 213 - Intangible assets
Dr. 611 - Purchases
Dr. 217 - Investment property
Dr. 133 - VAT deductible (1331, 1332)
Cr. 111, 112, 331,... (total payment)

2. When purchasing raw materials, goods, tool toolss and services for producing, selling goods,
services, repairing fixed assets, investing in construction subject to subtraction method VAT,
the accountant records the value of raw materi materials, goods, tools, services into the price
excluding VAT, and then records VAT input:

Dr. 621, 623, 627, 641, 642, 241, 142, 242,... (purchased price excluding VAT)
Dr. 133 – VAT deductible (1331)
Cr. 111, 112, 331,... (total payment)

3. When credit VAT payer purchased goods subject to subtraction method VATwhich are sold
right away (not through the company’s premises):

Dr. 632 - Cost of goods sold (purchased price excluding VAT)


Dr. 133 - VAT deductible (1331)
Cr. Accounts 111, 112, 331,... (total payment)

4. When importing raw materials, goods and fixed assets, the accountant records the value of
imported raw materials, goods and fixed assets including total amount payable to the seller
(using the actual exchange rate or the average inter-bank exchange rate on the foreign
currency market announced by the SBV at the transaction date), import duties and special
consumption tax (if any) and transportation costs:

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Dr. 152 – Raw materials (purchased price excluding import VAT)


Dr. 156 – Merchandise goods (purchased price excluding import VAT)
Dr. 211 – Tangible assets (purchased price excluding import VAT)
Cr. 333 – Tax and statutory obligations (3332, 3333)
Cr. 111, 112, 331,...

For VAT on imported goods:

- When imported goods for producing, selling goods and services subject to subtraction
method VAT, the VAT on imported goods will be deducted:

Dr. 133 – VAT deductible (1331, 1332)


Cr. 333 – Tax and statutory obligations (33312).

- If imported merchandises are used for productio n of goods and services not subject to VAT
production
or subject to VAT in direct method or used in State activities, projects, cultural and welfare
activities etc. funded by State Budget, project budget or bonus and welfare funds, the VAT
payable of imported merchandises should be recorded into value of that purchased
merchandise:

Dr. 152 – Raw material (Price including import VAT and import duties)
Dr. 156 - Goods (Price including import VAT and import duties)
Dr. 211 – Tangible assets (Price including import VAT and import duties)
Cr. 333 - Tax and statutory obligations (33312).

5. When purchased goods returned or reduced the price because of poor quality subject to
returning the goods to the seller and related
Subtraction method VAT, based on documents of returning
documents, the accountant records the value of goods being purchased and then returned or
reduced the price and the non-deductible VAT input:

Dr. 111, 112, 331 (total amount)


Cr. 133 - VAT deductible (VAT input on purchased goods being returned or reduced the
price)
Cr. 152, 153, 156, 211,... (price excluding VAT)

6. Purchased raw materials, goods, services and fi


fixed assets are used for production of goods
and services subject to VAT and not subject to VAT. However, the entity can not separately
record the VAT deductible input:

6.1. Purchasing raw materials, goods, services, fixed assets:

Dr. 152, 153, 156, 211, 213 (price excluding VAT)


Dr. 133 - VAT deductible (VAT input)
Cr. 111, 112, 331,...

6.2. At the end of the accounting period, the accountant must define the amount of deductible, non-
deductible VAT input based on the proportion rate of revenue. The amount of non-deductible
VAT input is deducted based on the rate (%) of sales from goods and services subject to VAT on
the total sales from goods and services in the period. The amount of non-deductible VAT input in
the period is recorded as following:

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The amount of non-deductible VAT input in the period is recorded into cost of goods sold:

Dr. 632 - Cost of goods sold


Cr. 133 - VAT deductible (1331).

When the amount of non-deductible VAT input is with high value, therefore allocated into
the cost of goods sold of several periods. The accountant transferrs the amount of non-
deductible VAT input to the cost of goods sold of the next period:

Dr. 142 - Short term prepaid expenses; or


Dr. 242 - Long term prepaid expenses
Cr. 133 - VAT deductible (1331).

Periodically, the accountant allocates the amount


ount of non-deductible VAT input into the cost of
goods sold of the next period:

Dr. 632 - Cost of goods sold


Cr. 142, 242,....

7. When purchasing fixed assets and having VAT invoices


invoices used for both production of goods
and services subject to VAT and not subject to VAT, the accountant must record the value of
the fixed assets with the price excluding VAT. VAT input is debited into account 133. At the
end of the accounting period, the amount of VAT deductible input must be defined based
b on
the proportion rate of sales from goods and services
services subject to VAT on the total sales from
goods and services in the accouting period:

- Amount of VAT input is deducted in the period:

Dr. 333 - Tax and statutory obligations(33311)


Cr. 133 - VAT deductible (1332).

- The amount of non-deductible VAT input is recorded into production costs relating to the
usage of fixed assets:

When the amount of non-deductible VAT input is great and has to be allocated:

Dr. 142 - Short term prepaid expenses; or


Dr. 242 - Long term prepaid expenses
Cr. 133 - VAT deductible (1332).

Periodically, the accountant allocates the amout of non-deductible VAT input into cost:

Dr. 623, 627, 641, 642,...


Cr. 142 – Short term prepaid expenses
Cr. 242 – Long term prepaid expenses (long term allocation)

When VAT input is not deducted:

Dr. 623, 627, 641, 642


Cr. 133 - VAT deductible (1332)

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8. Purchased raw materials, goods, services and fixed assets are damaged by natural disaster,
fire, lost due to the the responsibility of an organization, individual who have to compensate.
The VAT input on these goods will not be recorded into VAT deductible input when
declaring the VAT:

- Purchased raw materials, goods, services, fixed assets are damaged and have not been found
out the reasons:

Dr. 138 - Other receivable (1381)


Cr. 133 - VAT deductible (1331, 1332)

- Purchased raw materials, goods, services, fixed assets are damaged, when there are decisions
of the authority to deal the compensation of the organization, individual:

Dr. 111, 334 (compensation receipts)


Dr. 632 - Cost of goods sold (if being recorded into cost)
Cr. 138 - Other receivable (1381)
Cr. 133 - VAT deductible (If the reason is found out, decision on resolution must be
immediately taken)

9. Goods, services purchased for exporting are deducted, refunded VAT input when they meet
the conditions, proceduces and records forfor being refunded VAT input as the current
regulations:

- VAT input on purchased raw materials, goods, services, fixed assets involving the export of
goods, services being deducted, refunded as the cu rrent regulations is recored as purchasing
current
domestic raw materials, goods, services, fixed asset
assetss (Refer to guidance on items 1, 2, 3).

- When being refunded VAT input on exported goods, services (if any):

Dr. 111, 112,....


Cr. 133 - VAT deductible (1331)

10. At the end of a month, the accountant defines VAT deductible input and VAT output when
defining the amount of VAT payable in that period:

Dr. 3331 - VAT payable (33311)


Cr. 133 - VAT deductible

11. When an entity subject to subtraction method VAT frequently has amount of VAT input
greater than amount of VAT output, the entity will be refunded VAT as regulated by the tax
law.

When receiving the refunded VAT:

Dr. 111, 112,....


Cr. 133 – VAT deductible (1331, 1332)

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ACCOUNT 136

INTER-COMPANY RECEIVABLE

This account records the balance and movements of amounts receivable from parent companies,
subsidiaries, divisions and affiliated companies.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. This account records receivables between the parent company and its subsidiaries or between
subsidiaries. The holding companies should be trading/manufacturing entities and not just
holding parent companies. The subsidiaries should have their own accounting system.

2. The contents of the inter-company receivable are as follows:

a. In the parent companies

- Parent companies allotment of the subsidiaries business capital which has not been refunded
subsidiaries
or liquidated;

- The amount lent to subsidiaries that no interest is charged;

- The amounts to be received from subsidiaries;

- Amounts received by the subsidiaries on behalf of the parent company;

- Payments on behalf of the subsidiaries;

- a fixed amount given to the subsidiaries for internal assignment;

- Other receivable;

b. In the subsidiaries:

- Allotment of the parent companies busin ess capital which has not been received yet;
business

- Lending;

- Amounts received on the subsidiaries behalf by the parent company or other subsidiaries;

- Payments on behalf of the parent company or other subsidiaries;

- Other receivable.

3. This account is not used to record the investment of the parent company into its subsidiaries
and the payment between the parent company and its subsidiaries.

4. Account 136 should be maintained in detail with respect to the amount of the receivable and
who it is from. Each of the entities should have their method with regards to collecting the
inter-company receivables during the fiscal year.

5. At the end of the fiscal year, reconciliations and confirmations on the transactions and the
balances of account 136 “Inter-company receivables” should be prepared. The offset of

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account 136 “Inter-company receivable” and account 336 “Inter-company payable” shall be
applied for each item of the same entity.

STRUCTURE AND CONTENTS OF ACCOUNT 136 - INTER-COMPANY


RECEIVABLE

Debit:

- Amount transferred to the subsidiaries (including direct transfer or by other forms);

- Payment on behalf of fellow group company;

- Amount to be received from the parent company or the subsidiary of the company;

- Fundable amount from the parent companies to the subsidiaries;

- Funded business capital of the subsidiaries.

Credit:

- Refund of capital from the subsidiaries;

- The liquidation of funded capital for non-profit operations;

- Receipt of amounts receivable from inter-companies;

- Net off inter-company accounts payable against inter-company accounts receivable.


against

Debit balance:

Amount receivable from inter-companies.

This account has two sub-accounts:

subsidiaries. This account is only used by parent companies


Account 1361 - Investment in equity subsidiaries.
(the General Corporation, holding companies) to record current business capital in the
subsidiaries which was funded by the parent compan
company. The investment of parent company in the
subsidiaries shall not be recorded in this account, but in account 221 “Investment in subsidiaries”.

Account 1368 - Other receivable: To record all other inter-company receivables.

MAJOR TRANSACTIONS

I. Accounting for the subsidiaries

1. Parent on behalf of the parent/related companies:

Dr. 136 – Inter-company receivable (1368)


Cr. 111 - Cash on hand
Cr. 112 - Cash in bank

2. Calculation of the fundable bonus allowance business development fund in the fiscal period

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Dr. 136 – Inter-company receivable (1368)


Cr. 414 - Business development funds
Cr. 415 - Reserved funds
Cr. 431 - Bonus and welfare funds

3. Loss in operations is covered by the parent companies:

Dr. 136 – Inter-company receivable (1368)


Cr. 421 - Undistributed earnings

4. Inter-company receivables on inter-company sales:

Dr 136 – Inter-company receivable (1368)


Cr. 512 – Inter-company sales

5. Receipt of the amounts receivable from inter-companies:

Dr. 111 - Cash on hand


Dr. 112 - Cash in bank
Dr. 152 - Raw material
Dr. 153 - Tools and supplies
Cr. 136 – Inter-company receivable (1368)

6. Net off inter-company receivables against inter-company payables:

Dr. 336 – Inter-company payable


Cr. 136 – Inter-company receivable (1368)

II. Accounting for the parent companies

1. Allotment of the business capital to the subsidiaries:

Dr. 136 – Inter-company receivable (1361 - Investment in equity of subsidiaries)


Cr. 111, 112, …

2. Allotment of the business capital to the subsidiaries by fixed assets:

Dr. 136 – Inter-company receivable (net book value) (1361)


Dr. 214 - Accumulated depreciation of fixed asset (depreciated amount)
Cr. 211 - Tangible assets

3. In the case where the subsidiaries receive the business capital directly from the State Budget
with the authorization of the parent companies:

Dr. 136 – Inter-company receivable (1361)


Cr. 411 - Paid in capital

4. Increase of business capital in the subsidiaries due to the receipt of non-refundable aid or the
purchase of fixed assets by basic construction capital and the business development fund:

Dr. 136 – Inter-company receivable (1361)


Cr. 41 I - Paid in capital

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5. At the end of the fiscal period, based on the approved financial statements of the subsidiaries,
the accountant records the addition of the business capital from operating results:

Dr. 136 – Inter-company receivable (1361)


Cr. 411 - Paid in capital

6. Transfer the State Budget to the subsidiaries:

Dr. 136 – Inter-company receivable (1368)


Cr. 111, 112, 461,…

In the case where the State Budget is withdrawn to transfer to the subsidiaries for business
capital, the accountant records simultaneously to credit account 008 “Subsidies of State
Budget” (off balance sheet accounts).

7. In the case where the subsidiaries submit the business capital to the State Budget with the
authorization of the parent companies:

Dr. 411 – Paid in capital


Cr. 136 – Inter-company receivable (1361)

8. Amounts receivable from the subsidiaries for ma nagement fees of the holding company:
management

Dr. 411 – Paid in capital


Cr. 136 - Inter-company receivable (1361)

9. Amount receivable from the business profit of the subsidiaries during of the fiscal period:

Dr. 136 – Inter-company receivable (1368)


Cr. 421 - Undistributed earnings

10. The amount receivable from the subsidiaries with regards to the investment and development
fund, financial reserve fund, the bonus and welfare fund and other funds:

Dr. 136 –Inter-company receivable (1368)


Cr. 414 - Business development funds
Cr. 415 - Reserved funds
Cr. 418 – Other funds
Cr. 431 - The bonus and welfare funds

11. Receipt of the amounts collected from the subsidiaries including profit earned, investment
and development fund, financial reserve fund, bonus and welfare fund, and other funds:

Dr. 111, 112, …


Cr. 136 – Inter-company receivable (1368)

12. Payment on behalf of the subsidiaries:

Dr. 136 – Inter-company receivable (1368)


Cr. 111, 112,…

13. Receipt of money for expenses paid on behalf of the subsidiaries:

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Dr. 111 - Cash on hand


Dr. I 12 - Cash in bank
Cr. 136 – Inter-company receivable (1368)

14. Net off of inter-company receivables against inter-company payables:

Dr. 336 – Inter-company payable


Cr. 136 – Inter-company receivable (1368)

15. Receivable of management fee from the subsidiaries:

Dr. 136 – Inter-company receivable


Cr. 511 – Sales (in details)

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ACCOUNT 138

OTHER RECEIVABLE

This account records the balance and movements of receivables and receipts other than those
mentioned in account 131, 133 and 136.

The content and scope of this account includes the following:

1. A shortage of assets awaiting to be resolved

2. Compensation receivable from individuals and groups (both inside and outside the enterprise)
for losing or damaging materials, merchandise, cash, etc. that are resolved.

3. Receivables from short-term loans or leased materials temporarily that no interest is earned.

4. Payments for non-profit operations, constructi on and business expenditures that are not
construction
approved by the authority and should be recollected or suspended.

5. Such payment as bank charge, custom checking duty, transportation fee, handling fee, etc
made by the export consignees on behalf of the export consignor.

6. Receivables generated from SOEs equitization such as equitization expenses, unemployment


allowance, training expenses for employees in equitized entity.

7. Interest, dividend and gains from financial investment.

8. Other receivable.

STRUCTURE AND CONTENTS OF ACCOUNT 138 – OTHER RECEIVABLE

Debit:

- An unsolved asset shortage;

- Receivables from individuals and groups (both in


inside and outside the enterprise) with respect
to solved asset shortages;

- Receivables from equitizing SOEs;

- Receivables of interest, dividend and gains shared from financial investment;

- Other receivable.

Credit:

- Transfer of the amount of the asset shortage into the relevant accounts according to the
reason for the difference;

- Transfer receivables from the equitization;

- Receipts of other receivables.

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Debit balance:

Other receivables still outstanding.

This account could also have a credit balance when the amount received is greater than the
receivable (in special cases and should be show in detail for staff).

- Account 1381 – Shortage of assets awaiting resolution: to record shortage in assets where no
reason has been found.

In principle, shortage of asset should be solved by the person responsible for the shortage and
the reason should be determined.

Account 1381 is used when the reason for lost or damaged property has not been determined.

When both the person responsible and the reasons for the differences is determined at the
differences should be directly booked to the relevant
time the differences are discovered, the differences
accounts, not to account 1381.

- Account 1385 – Receivable from equitization: to record equitization receivable that entity
paid, such as equitized expenses, unemployment allowance and training expenses in equitized
entity, etc.

- receivable: to record other receivables except


Account 1388 - Other receivable: except those already recorded in
account numbers 131, 133, 136 and and 1381, 1385 such as receivable interest, dividend and
gains from financial investment; receivable of compensation for losing money, assets, etc.

1. Shortage of tangible assets which are used fo


forr production and business, has been discovered
and no reason yet determined awaiting to solve:

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


Dr. 214 – Accumulated depreciation (depreciation value)
Cr. 211 – Tangible assets (historical cost)

This tangible asset must also be removed from the fixed assets register.

2. Shortage of tangible assets used for administrative activity, project or welfare activity has
been discovered and no reason yet determined awaiting to solve:

Dr. 214 – Accumulated depreciation (depreciated amount)


Dr. 466 – Funds for established tangible assets (net book value)
Dr. 4313 – Bonus & welfare funds for established tangible assets (net book value)
Cr. 211 – Tangible assets (historical cost)

- At the same time, the accountant records the net book value of shortage assets waiting for
resolution:

Dr. 138 – Other receivable (1381)


Cr. 431 – Bonus & welfare funds (tangible assets used for welfare activity)

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Cr. 338 – Other payable (tangible assets used for administrative activity, project)

3. Shortage in materials, goods and cash on hand was found during the physical inventory count
and no reason has yet been determined, awaiting to solve, as follows:

Dr. 138 - Other receivable (1381)


Cr. 152 - Raw materials
Cr. 153 - Tools and supplies
Cr. 155 - Finished goods
Cr. 156 - Merchandise inventory
Cr. 111 - Cash on hand

4. Based on the solving reports issued by the authorized body for the shortage of assets, the
accountant must record shortages into the relevant accounts:

Dr. 334 – Payable to employees (The compensation deducted into salary)


Dr. 138 – Other receivable (1388 – other receivable) (compensation)
Dr. 632 – Cost of goods sold (value of shortage after being deducted re
receipt of compensation
according to the resolving reports)
Dr. Other related accounts (according to the resolving reports)
Cr. 138 – Other receivable (1381 – Shortage of assets awaiting resolution)

5. When both the person responsible and the reason for


for the shortage is determined at the time
the shortage is discovered:

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


Dr. 334 – Payable for employees (compensation deducted into salary)
Dr. 632 – Cost of goods sold (value of shortage after being deducted re
receipt of compensation
according to the resolving reports)
Cr. 621 – Raw material cost
Cr. 627 – Overhead expenses
Cr. 152 – Raw materials
Cr. 153 – Tools and supplies
Cr. 155 – Finished goods
Cr. 156 – Merchandise goods
Cr. 111 – Cash on hand

6. Short term lease of materials, capital and other receivable, as follows:

Dr. 138 – Other receivable (1388)


Cr. 111 – Cash on hand
Cr. 112 – Cash in bank
Cr. 152 – Raw materials
Cr. 153 – Tools and supplies

7. Export consignee pays bank charge, custom checking fees, transportation fee, handling fee on
behalf of the export consignor:

Dr. 138 – Other receivable (1388) (total payments)


Cr. 111, 112…

8. Periodically, receipts of earned interest, dividend and gains from shared investment:

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Dr. 111, 112… (total amount receipt)


Dr. 138 – Other receivable (1388)
Cr. 515 – Financial income

9. When the export consignees clear the amount of payment on behalf, the accountant of the
export consigner record as follows:

Dr. 331 – Trade payables


Cr. 138 – Other receivable (1388)

10. Receipt of other receivable:

Dr. 111 – Cash on hand


Dr. 112 – Cash in bank
Cr. 138 – Other receivable

11. For State-Owned Enterprise, written off bad debts:

Dr. 111 – Cash on hand (compensation of related individuals and groups)


Dr. 334 – Payable for employees (compensation deducted into salary)
Dr. 139 – Provision for doubtful debts (if being
being covered by provision for doubtful debts)
Dr. 642 – General and administration expen ses (if recorded in operating expenses)
expenses
Cr. 138 – Other receivable (1388 – Other receivable)

At the same time, the accountant debits to account 004 – Bad debts written off - Off balance
sheet account.

12. The enterprise uses factoring with a debts and assets trading company for the other
receivables (represented on balance sheet).

Dr. 111, 112… (Receipt amount from factoring)


Dr. 139 – Provision for doubtful debts (Differenc
(Differencee is covered by provision for doubtful debts)
Dr. Other related accounts (Difference between historical
historical cost of bad debts and the receipts
from factoring and the recovered amount by the the provision for doubtful debts under current
financial management regulation)
Cr. 138 – Other receivable (1388)

13. Records expenses araising from equitization of the SOE:

Dr. 1385 – Receivable from equitization (details by expenditures)


Cr. 111, 112, 152, 331…

14. Records payments made to unemployed staff due to the transition from a SOE to a joint stock
company:

Dr. 1385 – Receivable from equitization


Cr. 111, 112…

15. Records payments for training employees who are moved from equitized company:

Dr. 1385 – Receivable from equitization


Cr. 111, 112, 331…

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16. When equitization process is finished, the enterprise must prepare the finalization report on
expenditure araising from the equitization and submit this report to authorized agency. Total
expenses for equitization, compensation for unemployed staff, training expenses etc. are
deducted from the receipts from sales of State-owned securities after equitization of SOEs.

Dr. 3385 – Payables from equitization (details of receipt from selling of securities belonging
to State capital)
Cr. 1385 – Receivable from equitization

17. Payment for funded projects, construction, production are not approved and must be
recollected:

Dr. 138 – Other receivable


Cr. 161, 241, 641, 642…

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ACCOUNT 139

PROVISION FOR DOUBTFUL DEBTS

This account records the balance and movements of provision for doubtful debts.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. At the end of the fiscal year or the end of interim period (for enterprises issued the interim
financial statements), the accountant should identify doubtful debts or uncollectible amount
to make/or reverse provisions for bad debts as general and administration expenses of the
reporting period.

2. In principle, the provision for doubtful debts should be based on concrete evidence
(customers went bankrupt or their properties were damaged, lost etc. therefore they are
requests for payments but the amount remains
unable to pay; the entity has sent many requests
receivables are considered as bad debts once
uncollected). Under current regulations, receivables
following evidences are provided:

- customers, descriptions, amount in which bad debts are


Receivables are recorded in details of customers,
clearly identified.
- Receivables are supported by original copy of invoice, or confirmation by customers
including: signed contract, lease contract, contract liquidation, lease claim, reconciliation, etc.

3. The provision for doubtful debts should be made based on the following:

- The receivables are overdue following the signe d contract, promissory note, engagement
signed
contract or bill. The entity has sent many requests for payments but the amount remains
uncollected;
- The receivable is not due yet however customers went bankrupt or are in process of
resolution or disappeared or run away.

4. The provision for doubtful debts should be made in accordance with current regulations on
financial management for enterprises.

5. The bad debts have been followed up in a few years. The entity has attempted to collect
money but still not receive and the customers can still not pay. The entity could use factoring
service from the debt and asset trading company or write off bad debts.

If writing off bad debts, the accountant must also record in details in account 004 – Bad debts
written off (Off balance sheet accounts). Writing off of bad debts must be approved by the
board of management and the financial management committee (in SOEs) or authorized
agency under the Company Charter.

These bad debts should be followed up within period of time regulated by financial
management regime to ensure whether the customers are able to pay. After writing off bad
debts, these bad debts are recovered. The accountant records the recovered amount in account
711 “Other income”.

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STRUCTURE AND CONTENTS OF ACCOUNT 139 - PROVISION FOR DOUBTFUL


DEBTS

Debit:

- Reverse provision for doubtful debts.


- Write off the bad debts.

Credit:

- Provision for doubtful debts charged as general and administration expenses.

Credit balance:

- Provision for doubtful debts at the end of the period.

MAJOR TRANSACTIONS:

1. At the end of the fiscal year or the end of the interim period (for enterprise issued interim
financial statements), if debts seem hardly collected (bad debts),
debts), the accountant identifies the
amount of bad debts that requires provision. If the provision required in this period exceeds
the unused provision from the prior period, th
thee difference should be recorded as expenses:

Dr. 642 – General and administration expenses


Cr. 139 – Provision for doubtful debts

2. If the provision for doubtful debts required in this period is less than the unused provision for
doubtful debts in the prior period, the accountant reverses the difference into expenses:
accountant

Dr. 139 – Provision for doubtful debts


Cr. 642 – General and administration expenses (details of reversed provision for doubtful
(details
debts)

3. The entity should write off the bad debts that are unrecoverable. Writing off bad debts must
comply with the current regulations of financial systems. Based on the report of writing off
bad debts approved by authorized body, the accountant records:

Dr. 139 – Provision for doubtful debts (if provision already made)
Dr. 642 – General and administration expenses (if provision not yet made)
Cr. 131 – Accounts receivable
Cr. 138 – Other receivable

At the same time the accountant debits account 004 - Bad debts written off (Off balance sheet
account).

4. Bad debts which have been written off and subsequently recovered, the accountant records
the receipt amount:

Dr. 111, 112…


Cr. 711 – Other income

At the same time, the accountant credits account 004 – Bad debts written off (Off balance
sheet accounts).

Translation by KTC Assurance & Business Advisors 67


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5. The entity can use factoring services provided by the debt and asset trading company. The
factoring service is completed (receivables presented on the balance sheet) and money is
collected, the accountant records:

Dr. 111, 112… (receipt resulted from factoring services)


Dr. 139 – Provision for doubtful debts (difference covered by the provision for doubtful
debts)
Dr. Other relevant accounts (difference between the historical cost of bad debts and the
receipt amount resulted from factoring services and the amount covered by the provision for
doubtful debts under current regulations of financial system)
Cr. 131, 138…

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ACCOUNT 141

ADVANCES

This account records advances to staff, employees and liquidation of these advances.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. An advance is money or materials given to an employee to carry out their trading and
production duties or to finish approved work. Advances should be given to a company’s staff
or employees. Employees who receive advances on a regular basis (material supply
department, administration department, etc) should be appointed by the general director in
writing.

2. Person receiving advances (personally or on behalf of a group) should be responsible for the
advances and should use them for approved purposes only. Advances not used should be
returned to the cashiers. The receiver could not transfer advances to other person.

shed, the person who received the advance should prepare an


When the work has been finished,
advance settlement voucher (enclosed original receipts). This voucher should record the
amount of the advance received, the amount of the advance used and the difference between
the amount received and the amount spent (if any). Advances not used should be returned to
the cashiers or net off against the employees’ salary. In case, the actual approved payments
exceed the amounts advanced, the supplem ent will be paid by the company.
supplement

3. Staff must liquidate the previous advanc


advancee before requesting for another advance.

record every advance made by persons as well


4. The accountant should keep a sub-ledger and record
as record the settlement of advances.

STRUCTURE AND CONTENTS OF ACCOUNT 141 - ADVANCES

Debit:

The amount of money or materials advanced to an employee.

Credit:

- Amount of advances settled.


- Unused advances should be returned to the cashier or net off against the employees’ salary.
- Unused materials should be returned to the stock.

Debit balance:

Outstanding advances not settled.

MAJOR TRANSACTIONS

1. Cash or materials advanced to employees:

Dr. 141 – Advances


Cr. 111, 112, 152…

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2. After finishing the works, the receiver of the advance should prepare an advance settlement
voucher and attach all original receipts and approved documents to submit the accountant.

Dr. 152, 153, 156, 241, 331, 621, 623, 627, 642…
Cr. 141 – Advances

3. The unused advance returned to the cashier or the store or net off against salary of the
receiver:

Dr. 111 – Cash on hand


Dr. 152 – Raw materials
Dr. 334 – Payable for employees
Cr. 141 – Advances

4. Where the actual approved payments exceed the amounts advances, the accountant should
prepare a payment voucher to pay the addition to the receiver:

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


Cr. 111 – Cash on hand

Translation by KTC Assurance & Business Advisors 70


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ACCOUNT 142

PREPAID EXPENSES

This account records payments which have not been expensed in the income statement of the
current period and the allocation of this payment in the income statement in the periods that they
relate within the fiscal year or the business cycle.

Prepaid expenses are expenses which relate to several fiscal periods and they therefore can not be
charged wholly to the current period but should be allocated to the coming periods in which they
relate.

THIS ACCOUNT MUST COMPLY WITH FOLLOWING TO REGULATIONS:

1. Prepaid expenses include:

- Rental expenses for showroom, workshops, stores,


stores, offices which have been paid for one
fiscal year or one business cycle.

- Expenses for renting services for one fiscal year or one business cycle.

- Insurance expenses (fire insurance, transportation insurance, life insurance, etc.) and fees paid
for one fiscal year or one business cycle
cycle.

- High value of tools and supplies which are considered


considered current asset and used in less than one
fiscal year.

- The value of rotating packaging and tools for lease


lease which is used in one fiscal year or a
business cycle as maximum.

- Expenses for purchase technical documents and other prepayment which are allocated to
income statement within one fiscal year or one business cycle.

- Expenses during breaks in operations (unpredictable).

- value that should be allocated for several periods


Repair expenses for fixed assets with a large valu
(monthly, quarterly) in one fiscal year or one business cycle.

- Other prepaid expenses (i.e. prepayment of loan interest, prepayment of interest on instalment
purchase, instalment payment).

2. Account 142 is only used for expenses which relate to several fiscal periods with high value
and occur only once and can not be allocated to one period. Enterprise must identify and
strictly stipulate the contents of account 142 Prepaid expenses”.

3. Based on the nature of the expenses, the methods and criteria of calculation along with the
allocation of prepaid expenses into manufacturing and trading expenses would be chosen.
The accountant should record the details of prepaid expenses; the amount allocated into
overhead, selling and administrative expenses; and the remaining unallocated balance.

4. Repair expenses for fixed assets with large value, can be allocated in several periods within a
fiscal year. Some specific fixed assets that the repair occurs on regular basis can be allocated
in general and administration expenses.

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STRUCTURE AND CONTENTS OF ACCOUNT 142 – PREPAID EXPENSES

Debit:

Actual prepaid expenses.

Credit:

The prepaid expenses are allocated during the fiscal


period.

Debit balance:

Prepaid expenses which have not been taken into general and administration expenses.

MAJOR TRANSACTIONS

1. Prepaid expenses relating to several periods in a fiscal year:

a. Prepaid expenses is for production of goods aand


nd services which are subject to subtraction
method VAT:

Dr. 142 – Prepaid expenses


Dr. 133 – VAT deductible (if any)
Cr. 111 – Cash on hand
Cr. 112 – Cash in bank
Cr. 152 – Raw materials
Cr. 153 – Tools and supplies
Cr. 241 – Construction in progress (2413)
Cr. 331 – Account payables
Cr. 334 – Payable for employees
Cr. 338 – Other payables

b. Prepaid expenses is for production of goods and services which are either subject to VAT in
direct method or not subject to VAT:

Dr. 142 – Prepaid expenses (total payments)


Cr. 111 – Cash on hand
Cr. 112 – Cash in bank
Cr. 141 – Advances
Cr. 331 – Account payables

2. Fixed assets are operating lease (office, manufactory, shop, etc.). Enterprises prepaid leases
for several periods in the fiscal year.

- Leased assets are used in production of goods and services which are subject to subtraction
method VAT:

Dr. 142 – Prepaid expenses (lease price excluding VAT)


Dr. 133 – VAT deductible (if any)
Cr. 111, 112…

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- Leased assets are used in production of goods and services which are subject to VAT in direct
method or not subject to VAT:

Dr. 142 – Prepaid expenses (total payments)


Cr. 111, 112…

3. The entity should be periodically allocated to general and administration expenses:

Dr. 241 – Construction in progress


Dr. 623 – Machines expenses
Dr. 627 – Factory overhead expenses
Dr. 641 – Selling expenses
Dr. 642 – General and administration expenses
Cr. 142 – Prepaid expenses

4. Tools and supplies are with high value and their useful
useful life is within one year that should be
allocated in several periods (monthly, quarterly) in one fiscal year:

- Tools and supplies are put in use. Based on goods dispatch notes, the accountant records:

Dr. 142 – Prepaid expenses


Cr. 153 – Tools and supplies

- Periodically tools and supplies should be allo cated following reasonable criteria. The number
allocated
of allocations for tools and supplies should be based on the time used or the volume of
production in which tools are used in the accounting period:

Dr. 623, 627, 641, 642…


Cr. 142 – Prepaid expenses

5. When a large amount of money has been spent to repair fixed assets which will be allocated
into several operating periods, the following entry is made when the repair is completed:
entry

Dr. 142 – Prepaid expenses


Cr. 241 – Construction in progress (2413)

6. Calculation and allocation of the repair eexpenses into the manufacturing and business
expenses in several accounting periods:

Dr. 623 – Machine expenses


Dr. 627 – Factory overhead expenses
Dr. 641 – Selling expenses
Dr. 642 – General and administration expenses
Cr. 142 – Prepaid expenses

7. When the initial direct expenses relating to financial lease assets occur in negotiation, signing
the contract, etc. before lease assets received, the accountant records:

Dr. 142 – Prepaid expenses


Cr. 111, 112…

8. The initial direct expenses relating to financial lease assets is recorded into the historical cost
of financial lease assets:

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Dr. 212 – Financial lease assets


Cr. 142 – Prepaid expenses (transferring the initial direct expenses of the financial lease
assets occurred before the assets received)
Cr. 111, 112… (amount of direct costs relating to financial lease assets to receive the
lease assets)

9. The entity made the prepayment for the interest payable:

Dr. 142 – Prepaid expenses


Cr. 111, 112…

- Periodically, interest payable should be allocated in proper periods:

Dr. 635 – Financial expenses (If borrowing costs are recorded into production and business
expenses)
Dr. 241 – Construction in progress (If borrowing costs are capitalized in the value of
construction investment assets)
borrowing costs is capitalized in the value of
Dr. 627 – Factory overhead expenses (If borrowing
uncompleted assets)
Cr. 142 – Prepaid expenses

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ACCOUNT 144

SHORT-TERM MORTGAGES, DEPOSITS AND COLLATERAL

This account records the entity's assets and capital which are mortgaged, deposited and used as
short-term collateral (within one year or a normal production and business cycle) at the banks,
financial companies, State Treasury, credit institutions.

Mortgages are that the entity brings its assets to lender to borrow money or to gain the guarantees.
The mortgages can be gold, silver, gemstones, precious metals, bonds, stocks, cars, motorbikes,
etc. or ownership certificates of a house, land or other assets. During the mortgaging period, the
entity may not use these assets. After paying off the loan the entity may take back the assets.

upt, the mortgages can be sold by the lender to


If the entity is unable to pay the loan, or goes bankrupt,
recover the unpaid loan.

Deposit is that entity paid an amount of money or gemstones, precious metals or any documents
with value into the block account at bank to ensure guarantee for the enterprise.

Collateral is that the assets lessee paid to the llessor


essor an amount of money or gemstones, precious
metals or other things with value. The collateral
collateral serves to bind and hold the lessee responsible for
the leased assets including managing the asset, using the asset properly and returning the asset on
time. The amount of the deposit required by the less or may be equal to or higher than the actual
lessor
asset value.

Short term deposits, mortgages and collateral are re corded in account 144 “Short term mortgages,
recorded
deposits and collateral” at the book value. The valu
valuee recorded when the assets
assets are given and when
they are returned is the same.

STRUCTURE AND CONTENT OF ACCOUNT 144 - SHORT TERM DEPOSITS,


MORTGAGES AND COLLATERAL

Debit:

The value of assets mortgaged, and the value of assets or money deposited or used as short term
collateral.

Credit:

Receive back the mortgaged assets, assets or deposits or used as short term collateral.

Debit balance:

The mortgaged assets, assets or deposits used as short term collateral.

MAJOR TRANSACTIONS

1. Use cash, gold, silver, precious metals, gemstone, or cash in bank to make a deposit or use as
collateral:

Dr. 144 – Short term deposits, mortgage and collateral


Cr. 111 – Cash on hand (1111, 1112, 1113)
Cr. 112 – Cash in bank (1121, 1122, 1123)

Translation by KTC Assurance & Business Advisors 75


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2. Pledges fixed assets:

Dr. 144 – Short term deposits, mortgage and collateral (recovered value)
Dr. 214 – Accumulated depreciation (depreciation value)
Cr. 211 – Tangible assets (historical cost)

Documentation of assets mortgaged (ownership certificates of land, houses, assets) are not
recorded in this account but in the detail ledger.

3. Take back the mortgages, deposits and short term collateral:

3.1 Take back the mortgaged assets:

Dr. 211 – Tangible assets (mortgaged value)


Cr. 144 – Short term deposits, mortgage,, and collateral (net book value)
Cr. 214 – Accumulated depreciation (depreciation value)

3.2 Take back the money, gold, silver, precious metals and gemstones from
fro the deposit, and short
term collateral:

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


Dr. 112 – Cash in bank (1121, 1122, 1123)
Cr. 144 – Short term deposits,
deposits, mortgage, and collateral

4. As the entity broke commitment, the fine should be deducted into the value of the short term
deposit:

Dr. 811 – Other expenses (deduction amount)


Cr. 144 – Short term deposits,
deposits, mortgage, and collateral

5. The entity does not pay the good consignor. The consignor asks to deduct the payable into the
the consignor, the accountant records:
deposit. When getting the advice from the

Dr. 331 – Account payables


Cr. 144 - Short term deposits,, mortgage, and collateral

Translation by KTC Assurance & Business Advisors 76


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GROUP 15

INVENTORIES

These accounts represent the current value and movement of the entities inventory (if applying
the perpetual method) or the opening balance and closing balance of the entities inventory (if
applying the periodic method).

Inventory is classified as current assets which are held for sale in the normal production and
business period; in the on-going process of production and business; raw materials, materials,
tools and supplies for use in production of goods and services.

Inventories consist of goods purchased for trading (merchandises, property, goods in transit,
goods on consignment, goods for further processing); finished goods and finished goods on
consignment, work in progress (incomplete products and completed products not yet going
through the procedures for being put into stores of finished products); raw materials, materials,
tools and supplies in stock, sent for processing, and already purchased but being transported en
route.

Accounting inventories is reflected in group 15. It must comply with the following
regulations of Vietnamese Accounting Standa rd No. 2 “Inventories” determination of the
Standard
original price of inventories, the method of the calculating value of inventories, the marking-
down of inventories to suit the net realizable value,
value, determination of the provision for decline
in inventory and accounting it as expenses

The principle of determination of the original price of inventories is regulated specially for
each material, merchandise; as well as each the source and the time of the calculating value

Entity pays VAT in subtraction method, googoods


ds and services which used for production,
business activities and belong to VAT payer under
under the deduction method, their value are the
buying price non-refundable taxes

Entity pays VAT in direct method, goods and services which are not belong to VAT payer; or
are used for the administrative, welfare activ
activity, and project activities; the value of the
purchasing goods, services is total payments (including VAT

5. The value of inventories shall be calculated according to one of the following methods:

a. Specific identification method:

The specific identification method is based on the actual value of the each purchasing
merchandise, each product so this method shall apply to enterprises having a few goods items
or stable and identifiable goods items.

the value of each kind of inventories shall be calculated


according to the average value of each similar kind of goods at the beginning of the period
and the value of each kind of inventories purchased or manufactured in the period. The
average value may be computed either according to periods or the time when a goods lot is
warehoused, depending on the enterprise’s situation.

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c. The First-in, First-out method (FIFO) shall apply upon the assumption that the first
inventories purchased or manufactured is the first inventories delivered, and the inventories
left at the end of the period are those purchased or produced at a time close to the end of the
period. By this method, the value of the delivered goods shall be computed according to the
price of the lot of goods warehoused at the beginning of the period or at a time shortly after
the beginning of the period, the value of the inventories shall be computed according to the
price of the goods warehoused at the end of the period or at a time shortly before the end of
the period.

d. The Last-in First-out method (LIFO) shall apply upon the assumption that the most recently
purchased or manufactured inventories are delivered first, and the inventories left at the end
of the period are those which are purchased or produced earlier. By this method, the value of
the delivered goods shall be computed according to the price of the lot of goods warehoused
most recently or shortly earlier; the value of the inventories shall be computed according to
the price of the goods warehoused at the beginning of the period or shortly after the
beginning of the period, which still remain in stock.

advantages and disadvantages. The reliance and


Each of the above methods has certain advantages
depends on management demands, the staff ability
accuracy of each of the above methods depends
capabilities of the entity will all be factored
and skill and the equipment and data processing capabilities
in when choosing one of the above methods. In addition it also depends on the maintaining
movements of inventory within the entity.
demands, specifications, recipes, and movements

6. For materials, merchandises purchase in foreign currency, the enterprise must be based on the
spot exchange rate or the average exchange rate on ruling the Vietnam State Bank at the time
currency should be converted in to Vietnam dong to
of the transaction is made, the foreign currency
record inventory.

7. At the end of the accounting period of the year, if the value of inventories can not be fully
outmoded, as well as their selling prices fall or the
recovered because of being damaged, outmoded,
finishing and/or sale costs rise, the marking-down of inventories has to the level equal to the
net realizable value. The net realizable value is the estimated selling price of inventories in a
normal production and business period minus (-) the estimated cost for completing the
products and the estimated cost needed for their consumption.

equa to the net realizable value have to set up


The marking-down of inventories to the level equal
provision for obsolete stock. The amount of the provision for obsolete stock setting up is the
difference between the original price and the net realizable value.

8. When selling inventories, the original price of goods sold shall be recorded as cost of
production and business in the period in consistence with the recognized turnover related
thereto. All the difference between the higher inventory price decrease reserve to be set up at
the end of the current year’s accounting period and the lower inventory price decrease reserve
already set up at the end of the previous year’s accounting period, volumes of damaged and
lost inventories, after subtracting the compensations paid by individuals due to their
liabilities, and unallocated factory overhead expenses, shall be recognized as production and
business expense in the period. Where the inventory price decrease reserve to be set up at the
end of the current year’s accounting period is lower than the inventory price decrease reserve
already set up at the end of the previous year’s accounting period, the difference there of must
be added and recorded as decrease in production and business expense.

9. An entity must keep detailed records of both the value of inventory as well as the inventories

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physical characteristics, inventory specifications and model numbers and where the inventory
is being used; must also keep track of the value and quantity of actual inventory and recorded
inventory in general ledger and sub-ledger.

The enterprise may choose one of three detail records as follows:

- Double inventory card system;

- Inventory movement reconciliation;

- Inventory balance reconciliation.

2. An enterprise only uses one of two inventory methods: perpetual method or periodic method.
The choice of inventory accounting method depends on the characteristics of the enterprise’ s
inventory, type of inventory, specifications of the inventory and management’s demands for
applying consistently during the accounting period.

INVENTORY ACCOUNTING METHODS

a. Perpetual method

The perpetual method is the method for reco rding and reflecting of the movement of
recording
inventory perpetually, continuously and systematically on the accounting ledger.

In the case, the enterprise applies


applies the perpetual method, inventory accounts are used for
recording the balance and the increase and decreas
decreasee movement of inventories. So that, the
value of inventories in accounting book can be determined any time in the accounting period.

At the end of the period, the enterprise bases on the actual value of inventories to compare
and investigate with the recorded inventories. Theoretically, the physical count should always
agree to the accounting records. If having any variance, the enterprise must find reason and
resolved on a timely basic.

The perpetual inventory method is often aapplied


pplied in manufacturing companies (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

The periodic method is the record method based on the physical inventory count for
reflecting of the balance of inventories in the general accounting ledger at the end of the
period and from there calculating of the output value of inventories during the period
following the formula below:

Stock-out = Opening + Stock-in - Closing


balance balance

According to the method, the movement of inventory (stock-in and stock-out) is not recorded
in the inventory accounts. The value of stock-in inventories in the period is recorded to a
specific account (account 611 – Purchases).

The stock-taking must be taken at the end of the fiscal period in order to determine the actual

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balance of inventory, the value of stock-out (used for production or selling). It is also used as
a base to record account 611 “Purchases”.

Hence, when enterprise applies the periodic method, inventory accounts is only used at the
beginning of the accounting period (to reallocate the opening balance) and at the end of the
accounting period (to record the ending inventory balance).

The periodic method is applied in those entities which have many types of raw materials and
merchandise with very different specifications, low value and used or sold perpetually (retail
shop, etc).

The advantages of the periodic method are simple and greatly reduce the amount of
accounting work required. However, the accuracy of inventory used/sold during the period is
affected by the quality of management in the warehouse and at the counter or at the port.

The inventory group has nine 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 goods;
- Account 157 - Goods on consignment;
- Account 158 – Goods in bonded warehouse;
- Account 159 - Provision for obsolete stock.

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ACCOUNT 151

GOODS IN TRANSIT

This account records the value of goods and materials (raw material, tools and supplies,
merchandise) purchased that title has been transferred, however the goods are still in transit, at
the port or arrived to the entity’s premise yet waiting for being taken into store.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. Goods and materials which have not been received but are considered as belonging to the
entity include:

- Goods and materials which have been purchased and paid for, or the company has accepted
to pay for, but goods and materials are still in the supplier's warehouse, port or in transit;

- Goods and materials are in the entity’s warehouse but they have not been inspected and the
warehouse
receiving notes has not been prepared

2. Goods in transit is recorded to account 151 at cost as regulated in Vietnamese Accounting


Standard No. 02 “’Inventories”.

3. Every day when purchase invoices are received received before the goods are delivered, the
accountant will not record into book, but perform
perform reconciliation between the invoice and the
contract and file the invoice in the "purchased goods in transit" file.

During the month, upon receiving the goods, based on the receiving notes and selling invoice
the accountant records directly to account 152 “Raw materials”, account 153 “Tools and
supplies” and account 156 “Merchandise goods”, account 158 “Goods in bonded warehouse”.

At the end of the month, if the goods have still not been received, based on the invoice the
accountant records the amount of purchase to account 151 “Goods in transit”.

4. The accountant must record details and keep track of goods in transit by type, by shipment, or
by economic contract.

STRUCTURE AND CONTENTS OF ACCOUNT


ACCOUNT 151 – GOODS IN TRANSIT

Debit:

- Value of goods and materials in transit;

- Allocation of the closing balance of goods in transit at the end of the period (if the entity
applies the periodic inventory method).

Credit:

- Value of goods in transit received or shipped to the customer;

- Reallocation of the beginning balance of goods in transit to purchases (if the entity applies the
periodic inventory method).

Debit balance:

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Goods have been purchased but are still in transit (have not been put into the enterprise’
warehouse).

MAJOR TRANSACTIONS

I. Where the company uses the perpetual inventory method:

1. At the end of the period, based on selling invoice of goods in transit used for production of
goods and services subject to subtraction method VAT to record:

Dr. 151 – Goods in transit (buying price excluding VAT)


Dr. 133 – VAT deductible
Cr. 331 – Trade payable
Cr. 111, 112, 141…

- If goods in transit are used for production of ggoods


oods and services not subject to VAT or subject
to subtraction method VAT:

Dr. 151 – Goods in transit (total payments)


Cr. 111, 112, 331…

2. Upon receiving the goods in the subsequent month, based on invoice and receiving notes to
record:

Dr. 152 – Raw materials


Dr. 153 – Tools and supplies
Dr. 156 – Merchandise goods
Cr. 151 – Goods in transit

3. In the case where the goods do not go through the company’s warehouse but are directly
warehouse, from the port, or directly shipped to
delivered to the customer from the supplier’s warehouse,
the agent on consignment:

Dr. 632 – Cost of goods sold


Dr. 157 – Goods on consignment
Cr. 151 – Goods in transit

4. In the case where goods in transit are damages or losses detected immediately or when stock
count, based on the minute of damages and losses, the accountant records the losses as
follows:

Dr. 1381 – Shortage of assets awaiting resolution


Cr. 151 – Goods in transit

II. Where the company uses the periodic inventory method:

1. At the beginning of the fiscal period, the opening balance of goods in transit is reallocated to
purchases:

Dr. 611 – Purchases


Cr. 151 – Goods in transit

Translation by KTC Assurance & Business Advisors 82


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2. At the end of the period, based on count results of goods in transit to record:

Dr. 151 – Goods in transit


Cr. 611 – Purchases

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ACCOUNT 152

RAW MATERIALS

This account records the current value and movement of the raw materials in the enterprise’s
warehouse.

Raw materials owned by the enterprise are used in the manufacturing process and can be
purchased or produced. Raw materials recorded in this account are classified as follows:

- Raw materials;

- Supplies;

- Fuel oil;

- Spare parts;

- Construction materials and equipment.

1. Raw materials:: Raw materials are the major element used during manufacturing process to
produce main products. The definition of raw raw materials depends on each specific
entity, there is not definition for raw materials
manufacturing entity. In trading and services entity,
semi-finished goods purchased from outside for
or supplies. Raw materials also include semi-finished
continuing of manufacturing process.

2 Supplies:: Supplies are not a major element in manufacturing process, therefore do not form
the main products. Supplies are used to cha nge the product colour, taste, appearance of
change
products, higher the products’ quality, or facilitate
facilitate the processing, or serve the technical
needs, preservation and packaging in manufacturing process.

3. Fuel oil:: This is used to provide heat energy in manufacturing process and to facilitate
processing. Fuel oil can be in the form of liquid, air or solid.

4. Spare parts:: Spare parts are used to repair or replace machines, equipments, tools and
supplies, vehicles, etc.

5. Construction materials and equipments


equipments: These are materials and equipment used for
construction. Construction equipments include installed equipment, non-installed equipment,
tools, instruments and construction parts used to install in construction.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Raw materials input and output are recorded in account 152 at cost as regulated in
Vietnamese Accounting Standard No. 2 “Inventories”. The cost of raw materials is
determined according to each source.

1.1 The cost of raw materials purchased consist of: the buying price on invoice, import duty,
special consumption tax (if any), expenses for transportation, loading and unloading,
preservation, classification and insurance, etc. incurred in the buying process of materials, per
diem of purchasing officers, expenses of the purchasing department and other costs directly
relating to the purchase and losses within norm (if any).

Translation by KTC Assurance & Business Advisors 84


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- If the entity purchases raw materials used for production of goods and services subject to
subtraction method VAT, the value of materials purchased is recorded at buying price
excluding VAT. VAT inputs of materials purchased and of transportation, handling,
preservation, processing, etc. are deducted and record to account 133 “VAT deductible”
(1331).

- If the entity purchases raw materials used for production of goods and services not subject to
VAT or subject to subtraction method VAT, or used for social and welfare activities, the
value of materials purchased are recorded at total amount including non-VAT deductible (if
any).

- If raw materials are purchased in a foreign currency, the purchase must be converted into
VND using the actual exchange rate or the average inter-bank exchange rate ruling by the
ansaction and recorded to the value of raw
State Bank of Vietnam at the time of the transaction
materials.

1.2 The original price of raw materials processed consists of the actual raw materials cost and
processing cost.

1.3 The original price of raw materials sent for processing consists of the materials cost,
transportation fee to and from the processing plant
plant and the processing fee paid to the processor.

1.4 The original price of raw materials contributed to an joint venture is the actual cost accepted
by the parties and shareholders.

2. The actual of raw materials is determined by one of the following methods:


determined

- Specific identification method;

- Weighted average method after each input or at the end of the period;

- First-in, First-out method;

- Last-in, First-out method.

The enterprise must apply one of the above methods consistently during the accounting
period.

3. Detailed records of raw materials must be maintained for each stock, each group and each
type of raw materials.

Translation by KTC Assurance & Business Advisors 85


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4. If raw materials are recorded in the accounting books at their recorded cost, the actual cost of
raw materials used will be calculated at the end of the accounting period based on the
following formula:

Index of the Actual cost of beginning + Actual cost of raw materials


difference between balance of raw materials purchased in period
actual cost and =
recorded cost of raw Recorded cost of beginning Recorded cost of raw materials
materials (1) balance of raw materials in + purchased in period
period

Actual cost of raw = Recorded cost of raw X Index of the between actual cost
materials issued in materials issued in period and recorded cost of raw
period materials

STRUCTURE AND CONTENTS OF ACCOUNT 152 – RAW MATERIALS

Debit:

- The actual value of raw materials put in store,


store, purchased, produced, sent out for processing,
contributed, or from other sources;

- Surplus of raw materials detected during the physical inventory count;

- Allocation of the closing balance of raw materials (if the company uses the periodic inventory
materials
method).

Credit:

- The actual value of raw materials used in the production, sold, sent for outside processing, or
raw materials contributed to a joint venture;

- Value of raw materials returned to supplier and discounts from supplier;

- Purchase discounts received;

- Shortage of raw materials detected during the physical inventory count;

- Reallocation of the opening balance of raw materials (if the company uses the periodic
inventory method).

Debit balance:

Value of raw materials inventory.

MAJOR TRANSACTIONS

I. Where the entity uses the perpetual inventory method:

1. When purchasing raw materials and putting into the enterprises’ warehouse, the value of raw
materials is recorded based on the invoice, received note and related documents:

Translation by KTC Assurance & Business Advisors 86


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- Where raw materials used for production of goods and services subject to subtraction method
VAT:

Dr. 152 – Raw materials (buying price excluding VAT)


Dr. 133 – VAT deductible (1331)
Cr. 111, 112, 141, 331… (Total amount)

- Where raw materials used for production of goods and services subject to subtraction method
VATor not subject to VAT, or used for social and welfare activity:

Dr. 152 – Raw materials (Total amount)


Cr. 111, 112, 141, 311, 331… (Total amount)

purchase discounts, raw materials purchased are


2. In the case where the entity received purchase
recorded at reduced price:

Dr. 111, 112, 331…


Cr. 152 – Raw materials
Cr. 133 – VAT deductible (1331) (if any)

3. If raw materials purchased do not agree to the raw materials particulars in the signed contract,
they will either be returned to the supp lier or the supplier will offer a discount. The
supplier
accountant will record the materials re turned or at discounted price:
returned

Dr. 111, 112, 331…


Cr. 152 – Raw materials (buying price excluding VAT)
Cr. 133 – VAT deductible (1331) (if any)

4. Invoices in which the raw materials have not yet been received by the enterprise are filed in a
separate purchased goods in transit folder.

4.1. Upon receiving the raw materials during the month, the accountant records to account 152
“Raw materials” based on the invoice and receiving note.

4.2. At the end of the month, if raw materialss have still not been received, based on the invoice
(where raw materials used for production of googoods and services subject to subtraction method
VAT) the accountant records:

Dr. 151 – Goods in transit


Dr. 133 – VAT deductible (1331)
Cr. 331 – Trade payable
Cr. 111, 112, 141…

- In the following month, upon receiving the materials, based on the invoice and receiving note
the accountant records:

Dr. 152 – Raw materials


Cr. 151 – Goods in transit

5. Actual discounts given by the supplier are recorded upon payment as follows:

Dr. 331 – Trade payable

Translation by KTC Assurance & Business Advisors 87


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Cr. 515 – Financial income (purchase discount)

6. Imported raw materials:

- If imported materials are used for production of goods and services subject to subtraction
method VAT, the original price of import raw materials is recorded according to the price
including import duty as follows:

Dr. 152 – Raw materials (price including import duty)


Cr. 331 – Trade payable
Cr. 3333 – Import, export duties (details of import duty)

At the same time, a VAT deductible of imports shall be recorded:

Dr. 133 – VAT deductible


Cr. 3331 – VAT payable (33312 – VAT of import goods)

- If imported materials are used for production of goods and services subject to subtraction
method VATor not subject to VAT, or used to administration and project activities; the
original price of import raw materials according to the price including import duty and VAT
of import goods:

Dr. 152 – Raw materials (including import duty and VAT of import goods)
Cr. 331 – Account payable
Cr. 3333 – Import, export duties
Cr. 3331 – VAT payable (33312)

- If imported materials are subject to special consumption tax, the tax payable must be included
consumption
in the original price.

Dr. 152 – Raw materials (the price includes special consumption tax of import goods)
Cr. 331 – Trade payable
Cr. 3332 – Special consumption tax

7. In the case, raw materials purchased for use in production of goods and services subject to
subtraction method VAT, the cost incurred from purchasing, handling and transportation
from supplier’s place to the enterprise’ss warehouse is recorded as follows:

Dr. 152 – Raw materials


Dr. 133 – VAT deductible (1331)
Cr. 111, 112, 141, 331…

8. Raw materials sent out for further processing:

- When the entity sent raw materials out for further processing:

Dr. 154 – Work in progress


Cr. 152 – Raw materials

- If processing cost incurred, the cost is recorded as follows:

Dr. 154 – Work in progress

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Dr. 133 – VAT deductible (1331) (if any)


Cr. 111, 112, 131, 141…

- When the entity received processed materials:

Dr. 152 – Raw materials


Cr. 154 – Work in progress

9. Raw materials produced by the entity itself:

- When the materials put in production for further processing:

Dr. 154 – Work in progress


Cr. 152 – Raw materials

- When the self made materials put into warehouse:

Dr. 152 – Raw materials


Cr. 154 – Work in progress

10. The surplus of raw materials detected during the physical inventory count. If the entity has
found reason, the surplus will be recorded based on the result. If the entity has not found
reason, the surplus will be recoded as follows:

Dr. 152 – Raw materials


Cr. 338 – Other payable (3381 – Surplus of assets awaiting resolution)

- Where the resolution on the surplus detected in physical count is given, based on the
resolution the following is recorded:

Dr. 338 – Other payable (3381)


Cr. Related accounts

- If the surplus is determined as belong to other parties immediately after the physical
inventory count that has not been recorded in account 152, the surplus is debited to account
002 “Goods held under trust or for processi
processing” not to account 338 (3381). Where the
materials returned to those parties, a single entry is credited into account 002 (“Off balance
sheet accounts”).

11. Where raw materials put into production:

Dr. 624 – Raw materials cost


Dr. 623, 627, 641, 642…
Cr. 152 – Raw materials

12. Where raw materials used for construction or for repair of fixed assets:

Dr. 241 – Construction in progress


Cr. 152 – Raw materials

13. Raw materials transferred to contribute in an jointly controlled entities:

a. Where raw materials are transferred to contribute in an joint venture:

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Dr. 222 – Share in joint venture (revalued amount)


Dr. 811 – Other expenses (difference of revalued amount and the lower book value)
Cr. 152 – Raw materials (book value)
Cr. 711 – Other income (Difference of greater revalued amount and the book value of
raw materials in correspondence with the benefit of other parties in the venture).
Cr. 3387 – Deferred income (Difference of greater revalued amount and the book value
of raw materials in correspondence with the benefit of other parties in venture)

b. When jointly controlled entities sell finished goods which are produced from contributed raw
materials, or sell contributed raw materials to an independent third party, the contributors
allocate deferred income to other income in the period:

Dr. 3387 – Deferred income


Cr. 711 – Other income

14. Where raw materials transferred to contribute in associates:

Dr. 223 – Investment in associates (revalued amount)


Dr. 811 – Other expenses (Difference of lo wer revalued amount and the book value)
lower
Cr. 152 – Raw materials
greater revalued amount and the book value)
Cr. 711 – Other income (Difference of greater

15. Shortage of raw materials detected during the physical inventory count:

When shortage of raw materials in store or preservation place is detected in the physical
the solution and the person in charge must be
inventory count, report must be prepared and the
found out. Based on the physical inventory count and resolution made by authorized person,
the accountant records the followings:

- If the shortage is due to an error or not yet recorded, an adjustment should be made in the
accounting records.

- If the shortage is resulted from damage within permitted range (damage in norm):

Dr. 632 – Cost of goods sold


Cr. 152 – Raw materials

- If the reason for shortage has not yet been identified and awaiting for resolution, the damage shall
be recorded as follows:

Dr. 138 – Other receivable (1381 – Shortage of assets awaiting resolution)


Cr. 152 – Raw materials

- Where the resolving report is issued by the authorized person, basing on the resolving report
should be recorded:

Dr. 111 - Cash on hand (if the person in charge paid the compensation for the loss)
Dr. 138 – Other receivable (compensation must be paid by the person in charge)
Dr. 334 – Payable for employee (compensation deducted into the salary of the person in
charge)
Dr. 632 – Cost of goods sold (the remained damages should be charged to cost of goods sold)
Cr. 138 – Other payable (1381 – Shortage of assets awaiting resolution)

Translation by KTC Assurance & Business Advisors 90


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II. Where the company uses the periodic inventory method

1. At the beginning of the period, the opening balance of raw materials is allocated to the
purchases account:

Dr. 611 – Purchases


Cr. 152 – Raw materials

2. At the end of the period, based on the result of the physical inventory count, the closing
balance of raw materials is recorded as follows:

Dr. 152 – Raw materials


Cr. 611 – Purchases

Translation by KTC Assurance & Business Advisors 91


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ACCOUNT 153

TOOLS AND SUPPLIES

This account records the current value and movement of tools and supplies of the enterprise.
Tools and supplies are materials which are not valuable and durable enough to be considered as
fixed assets. Therefore, tools and supplies are accounted for as materials.

According to the current regulations, the following materials are not considered as fixed assets
but tools:

- Temporary tents, tools and supplies and special assembled tools used for the construction;

- Packing materials which are attacheded to the goods but their value is not included in the value
ng preservation, transportation and usage;
of the goods that is depreciated during

- Glass and ceramic equipment;

- Management and office equipment;

- Professional working clothes and shoes, etc.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Accounting for tools and supplies in account 153 is recorded at cost. The cost of tools and
supplies should be determined as regulated for raw materials (see guidance in account 152).

2. The value of tools and supplies will be calculate


calculatedd according to one of the four methods that
are regulated in Vietnamese Accounting Standard No. 2 “Inventories”.

3. Detailed records for tools and supplies must be maintained by group, store or type.

4. Tools and supplies which are issued for production, trading or rental must be kept track in
value and quantity in accounting book, location of the tools and supplies are to be used; the
name of the lessee and the person in charge. High
High value or valuable tools and supplies must
be preserved in a special way.

5. Low value tools and supplies which are issued for production must be recorded all in one
time in production and business expense.

6. Where high value tools and supplies which are issued for production within one year shall be
recorded into account 142 “Prepaid expenses” and allocated to production and business
expense for several periods in the year.

7. Where high value tools and supplies which are issued for production over one year shall be
recorded into account 242 “Long term prepaid expenses” and allocated to operating and
business expenses.

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STRUCTURE AND CONTENTS OF ACCOUNT 153 – TOOLS AND SUPPLIES

Debit:

- The actual value of tools and supplies purchased, produced, sent out for processing, or
contributed;

- The actual value of tools and supplies received back from the lessee.

- Surplus of tools and supplies detected during the physical inventory count.

- Allocation of the closing balance of tools and supplies (if the entity uses the periodic
inventory method).

Credit:

- The actual value of tools and supplies used for production, trading, leasing or contribution to
a joint venture;

- Purchase discounts received from supplier when the entity purchased tools and supplies;

- Value of tools and supplies returned to suppliers or discounted by supplier;

- Shortage of tools and supplies detected during the physical inventory count;

- Reallocation of the beginning balance of tool


toolss and supplies (if the entity uses the periodic
inventory method).

Debit balance:

The actual value of tools and supplies in the stock.

Account 153 – Tools and supplies has three sub-accounts:

Account 1531 - Tools and supplies: to record the current value and movement in tools and
supplies.

Account 1532 - Reusable packaging material: to record the current value and movement in
reusable packaging materials used in the course of operations in which reusable packaging
materials are used several times. The used value of reusable packing material will be charged
gradually into operating and business expense over several periods.

Account 1533 - Tools for leasing: to record the current value and movement in tools and supplies
for leasing.

Only tools and supplies purchased for leasing are recorded into this account. Other tools and
instruments that are not classified as above will be recorded into account 1531 Tools and
supplies which were used in the operations of the entity but are now being leased should be also
recorded into this sub-account.

Translation by KTC Assurance & Business Advisors 93


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MAJOR TRANSACTIONS

I. Where the company uses the perpetual inventory method

1. Value of tools and instruments purchased for production of goods and services subject to
subtraction method VAT will be recognized at the buying price excluding VAT. The
accounting entry is recorded based on invoices, received note and related documents:

Dr. 153 – Tools and supplies (the price excluding VAT)


Dr. 133 – VAT deductible (Input VAT) (1331)
Cr. 111, 112, 141, 331… (Total amount)

- Value of tools and supplies purchased for production of goods and services subject to VAT in
direct method or not subject to VAT, or for social and welfare activities:

Dr. 153 – Tools and supplies (Total amount)


Cr. 111, 112, 331… (Total amount)

2. Where Tools and supplies purchased are given discounts:

Dr. 111, 112, 331…


Cr. 153 – Tools and supplies (discount amount)
Cr. 133 – VAT deductible (1331)

3. Where tools and instruments purchased are given discounted due to not comply with
specification, quality in the contract:

Dr. 111, 112, or


Dr. 331 – Trade payable
Cr. 153 – Tools and supplies (discount amount)
Cr. 133 – VAT deductible (if any)

4. Tools and supplies returned to supplier:

Dr. 331 – Trade payable


Cr. 153 – Tools and supplies (the value of Tools and supplies returned)
Cr. 133 – VAT deductible (if any) (VAT of Tools and supplies returned)

5. Record of payment discount (if any):

Dr. 331 – Trade payable


Cr. 515 – Financial income (payment discount)

6. Tools and supplies issued for the course of operation:

6.1 If the value of tools and supplies issued is not very high, the tools and supplies should be
expensed immediately:

Dr. 623 – Machine expense


Dr. 627 – Factory overhead expense (6273)
Dr. 641 – Selling expense (6412, 6413)
Dr. 642 – General and administration expense (6423)
Cr. 153 – Tools and supplies (1531, 1532)

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6.2 If the tools and supplies issued have a high value and will be used in several periods or
reusable packaging issued that will be allocated to operating and business expense, the accountant
records as follows:

Dr. 142 – Prepaid expenses (Tools and supplies have high value and useful life within one
year)
Dr. 242 – Long term prepaid expenses (Tools and supplies have high value and useful life
over one year)
Cr. 153 – Tools and supplies (1531, 1532)

- When tools and supplies are allocated for several periods:

Dr. 623, 627, 641, 642…


Cr. 142 – Prepaid expenses
Cr. 242 – Long term prepaid expenses

7. Tools and supplies for rent:

- When issuing tools and supplies for rent:

Dr. 142 – Prepaid expenses


Dr. 242 – Long term prepaid expenses
Cr. 153 – Tools and supplies (1533)

- Allocating the value of tools and supplies to the expenses:

Dr. 627 – Factory overheard expenses


Cr. 142 – Prepaid expenses
Cr. 242 – Long term prepaid expenses

- Entity pays VAT in subtraction method, the income from the rental of tools and supplies is
recorded as follows:

Dr. 111, 112, 131…


Cr. 511 – Sales (5113)
Cr. 3331 – VAT payable (33311)

- Received tools and supplies back from the lessee:

Dr. 153 – Tools and supplies (1533)


Cr. 142 – Prepaid expenses (the amount not expensed)
Cr. 242 – Long term prepaid expenses (the amount not expensed)

8. After the physical inventory count, the surplus, shortage or damage of raw materials is
detected, the accounting records should be adjusted based on the reasons or decisions of
management or an authorized body:

8.1 If the surplus (shortage) is due to error or not yet recorded, an adjustment must be made.

8.2 If the shortage is detected and the reasons and the person in charge has not yet been
identified:

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Dr. 138 – Other payable (1381 – Shortage of assets awaiting resolution)


Cr. 153 – Tools and supplies

- If the reason is identified and the person in charge must compensate for the loss:

Dr. 111 – Cash on hand


Dr. 334 – Payable for employees
Dr. 138 – Other receivable (1388) (the compensation must be paid by the person in charge)
Dr. 632 – Cost of goods sold (the shortage and damages that are charged to cost of goods
sold)
Cr. 138 – Other receivable (1381)

8.3 If the reason of the surplus has not yet been identified:

Dr. 153 – Tools and supplies


Cr. 338 – Other payable (3381)

- the resolution issued by the authorized person,


When the reason has been identified, based on the
the accountant records:

Dr. 338 – Other payable (3381)


Cr. Relevant accounts

II. Where the company uses the periodic inventory method

1. At the beginning of the accounting period, the opening balance of tools and supplies is
reallocated to purchases account:

Dr. 611 – Purchases


Cr. 153 – Tools and supplies

2. At the end of the accounting period, the closing balance of tools and supplies is allocated to
tools and supplies account:

Dr. 153 – Tools and supplies


Cr. 611 – Purchases

Translation by KTC Assurance & Business Advisors 96


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ACCOUNT 154

WORK IN PROGRESS

This account summaries production cost in order to compute the cost of products and services in
industry, construction, poultry, planting and processing products of agriculture, forestry and
fishery for those entities using the perpetual inventory method.

If the entity uses the periodic inventory method, account 154 will only record the value of work in
progress at the end of the period.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. Account 154 “Work in Progress” reflects production


production expenses incurred during period, costs
period, the opening balance and
of products and services completed in the period, a closing balance of
work in progress of the main and sub-products as well as ones sent out for processing in the
manufacturing entity (i.e. industry, agriculture, forestry, construction, fishery, etc) or in
hospitality, etc). This account
service entity (i.e. transportation, tourism, hospitality, acc also represents
expenses relating to manufacturing, processing and services provided in trading companies if
the entity organizes these kinds of activities.

recorded in detail. The records must be kept


2. Production expenses in account 154 must be recorded
track the following: expenses by the cost centre where the expenses were incurred (i.e. plant,
expenses by category, product, part, type of
manufacture team, construction site, etc); and expenses
services or service progress.

3. The following production expenses are recorded into account 154:

- Direct raw materials expenses

- Direct labour expenses

- Machine expenses (construction)

- Factory overhead expenses

4. Where raw materials costs and labour costs are hi higher than the normal level and fixed factory
overhead expenses have not been allocated, they should not be computed into inventory. Those
expenses shall be recognized in cost of goods sold in the period.

5. At the end of the period, the fixed factory overhead expenses shall be allocated into the processing
cost of each product unit only according to the normal capacity (credit 627, debit 154). When the
quantity of actually-manufactured products is lower than the normal capacity, the accountant must
compute and determine the factory overhead costs which shall be allocated into the processing
cost of each product unit only according to the normal capacity. The unallocated amount of
factory overhead costs (not recorded in cost of finished goods) shall be recognized as cost of
goods sold in the period (credit 627, debit 632).

The variable indirect factory overhead costs shall be allocated one time into the processing cost of
each product unit according to the actual costs incurred.

6. For construction contractor, account 154 “Work in progress” is used to summarise production
expenses and compute construction costs in the following categories: raw materials costs, direct

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labour costs, machine costs, overhead costs. For production of other finished goods, account 154
is used to summarise the production cost of workshop, or production department, manufacturing
team.

7. For industrial entity rendered outside services for further processing, or outsourced apart of
production, those expenses are also recorded in account 154.

8. The following expenses are not recorded into account 154:

- Selling expense;

- General and administration expenses;

- Financial expenses;

- Other expenses;

- Enterprise income tax;

- Subsidized , project expenses;

- Construction in progress;

- Expenses funded by other sources.

STRUCTURE AND CONTENTS OF ACCOUNT 154 – WORK IN PROGRESS

Debit:

- Raw materials costs, direct labour costs, machine costs and factory overhead costs incurred
relating to production of finished goods and services in the period;

- Raw materials costs, direct labour costs, machine costs and factory overhead cost incurred relating
to construction or of internal all-inclusive price;

- Allocation of the closing balance of work in progress (if the entit


entity applies the periodic inventory
method).

Credit:

- Actual cost of finished goods put into warehouse or transferred for sale;

- Cost of completed construction handed over partially, or entirely in the period, or transferred to
the contractor (higher level or inter-company); or cost of completed construction waiting for sale;

- Actual cost of completed services provided to customers;

- Value of materials recovered, non-repairable products;

- Value of finished goods and materials returned from outside processing;

- Where raw materials costs, labour costs are higher than the normal level and fixed factory
overhead costs have not been allocated, those cost shall not be computed into inventory, but into

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cost of goods sold in the period. In the case, entity producing upon orders, or entity which has
long business cycle and the accountant allocates fixed factory overhead costs into account 154 at
the end of each accounting period until goods finished, those fixed overhead costs shall not
computed in inventory but in cost of goods sold (credit 154, debit 632).

- Reallocation of the opening balance of work in progress (if the entity applies the periodic
inventory method).

Debit balance:

Work in progress at the end of the period.

APPLYING THIS ACCOUNT TO VARIOUS BUSINESSES

INDUSTRY

The account 154 “Work in progress” applying to industry summarizes the production costs and
calculate the cost of products by cost centre (i.e
(i.e.. plant and production unit). This account also records
costs from sending materials out for processing, outsourced services to other companies, or costs for
manufacturing.

ATTENTION FOR RECORDING TO ACCOUNT 154 IN INDUSTRY

1. This account is used to record the following costs:

- Direct material costs for production or services;

- Direct labour costs for production or services;

- Direct factory overhead costs for production or services;

2. This account will keep track costs by cost centre (plant and production unit), type of product and
product parts.

MAJOR TRANSACTIONS IN INDUSTRY

I. Where the company uses the perpetual inventory method

1. At the end of the period, direct materials expenses are allocated by cost centre:

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (the material costs that are higher than the normal level)
Cr. 621 – Raw materials costs

2. At the end of the period, direct labour expenses are allocated by cost centre:

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (the direct labour costs that are higher than the normal level)
Cr. 622 – Direct labour costs

3. Where the quantity of actually-manufactured products is higher than or equal to that of the normal
capacity, the accountant must compute, allocate those costs to factory overhead expenses
(variable and fixed costs) by cost centre:

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Dr. 154 – Work in progress


Cr. 627 – Factory overhead costs

4. When the quantity of actually-manufactured products is lower than that of the normal capacity,
the accountant must compute and determine fixed factory overhead costs. The fixed factory
overhead costs shall be allocated into the processing cost of each product unit only according to
the normal capacity. The unallocated fixed overhead costs (the difference between the actual fixed
factory overhead costs incurred higher than the fixed factory overhead costs computed in the cost
of products) shall be recorded into cost of goods sold in the period. The accounting entry is
recorded as follows:

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (the fixed factory overhead costs not allocated in cost of products)
Cr. 627 – Factory overhead costs

5. Value of materials returned to the store from outside processing:

Dr. 152 – Raw materials


Cr. 154 – Work in progress

6. Since value of products is non-repairable, the compensation must be charged to the person in-
charge:

Dr. 138 – Other receivable (1388)


Dr. 334 – Payable for employees
Cr. 154 – Work in progress

7. In the case, the entity has a long production and business cycle and during the accounting period,
costs and overhead costs have been recorded in account 154 but it is
materials costs, direct labor costs
exceeded normal rates (abnormal), such
determined that such costs exceeded su abnormal costs should be
recorded in the cost of goods sold (not allocated into the inventories):

Dr. 632 – Cost of goods sold


costs from accounts 621, 622, 627 to account 154)
Cr. 154 – Work in progress (transferred costs

to the store in the period:


8. Cost of finished goods put into

Dr. 155 – Finished goods


Cr. 154 – Work in progress

9. Finished goods directly transferred to customers, not through the warehouse (i.e. water, electricity,
etc.):

Dr. 632 – Cost of goods sold


Cr. 154 – Work in progress

II. Where the company uses the periodic inventory method

1. At the end of the period, based on the physical inventory count, the closing balance of work in
progress is allocated as follows:

Dr. 154 – Work in progress

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Cr. 631 – Cost of products manufactured

2. At the beginning of the period, the opening balance of work in progress is reallocated as follows:

Dr. 631 – Cost of products manufactured


Cr. 154 – Work in progress

AGRICULTURE

Account 154 “Work in progress” is used in agriculture to summarise production cost and compute the
cost of products in activities such as raising, planting and processing the agriculture products.

ATTENTION FOR RECORDING TO ACCOUNT 154 IN AGRICULTURE

1. This account must be kept track in detail by activities


activities (i.e. raising, planting and processing, etc.)
by cost centre (i.e. manufacture team, factory, etc.) and by the type of plants, products and
services.

2. The actual cost of agriculture products will be determined at the end of the crop, or the year.
incurred shall be recognised in that year. That
Products are harvested in one year, the actual cost incurred
means the cost incurred in the current year while the products are not going to be harvested until
the next year, the actual cost shall be computed in next year.

cost must be recorded accordin


3. With respect to planting, cost accordingg to three types of plants:

- Short-term plants (paddy, potatoes, cassava, etc.);

- several times (pineapples, bananas, etc.);


Plants which can be harvested several

- Perennial plants (tea, coffee, rubber, pepper, fruit tree, etc.).

Plants that are harvested two or three times in one year, or planted this year then harvested in the
coming year, or planted and harvested in the same same year in a different area must have costs
vidual situation. The accountant
assigned according to their individual accountan must take into account seasons,
ears, and areas when determining the cost of plants.

4. This account does not record such expenses as land renovation expenses, expenses incurred in
ng expenses, management expenses,
planting perennial plants, selling expen financial expenses and other
expenses.

5. In principle, production expenses with regards to agriculture are debited into account 154 “Work
in progress” by cost centre. Expenses relating to several cost centres, seasons and periods must be
recorded into a separate account and then allocated into the cost of the relevant products such as
irrigation expenses, land preparation, planting expenses for newly long time plants which can be
harvested one time or several times (the expenses are not classified as capital investment).

6. If there are more than two types of short-term plants in the same area, expenses must be allocated
to each type of plant (i.e. seeding, sowing, harvesting, etc.) and general expenses relating to many
plants, (i.e. land preparation, watering, etc.) must be recorded into a separate account and
allocated to each type of plant according to occupied area, or any suitable criteria).

7. For perennial plants, expenses incurred from land preparation to the first harvest are considered as
capital investments and are recorded into account 241 – “Construction in progress”.

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8. Expenses for perennial plants include expenses for caring for and harvesting the plants.

9. Attention should be paid when recording the poultry raising expenses into account 154:

- Poultry raising expenses should be recorded in details for each raising activity (buffalo, ox, pig,
etc.) and for each type of animal and livestock.

- New born livestock produced from breeds or from animals raised for meat is recorded into a sub-
ledger according to actual cost;

- Only the remaining value of breeds that were transferred to raise for meat shall be recorded into
account 154;

- The unit cost in poultry raising is calculated per kilogram of fresh milk, number of cow, cost per
eeding an animal a day, etc.
one kilogram of pork, cost of breeding

10. The raw materials costs, direct labour costs hi gher than that of the normal level, and the
higher
unallocated fixed factory overhead costs should not be recorded in products cost but into cost of
goods sold in thee current period.

MAJOR TRANSACTIONS IN AGRICULTURE

I. Where the company uses the perpetual inventory method

accountant computes and allocates raw material


1. At the end of the period, the accountant material costs by cost centre:

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (the value of raw material costs that is higher than the normal level)
Cr. 621 – Raw material costs

direct labour costs is computed and allocated to each cost centre:


2. At the end of the period, the direct

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (the direct labour costs that is higher than the normal level)
Cr. 622 – Direct labour costs

actory overhead costs should be computed,


3. At the end of the period, the factory co allocated to each cost
centre:

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (part of fixed factory overhead costs is unallocated in products cost)
Cr. 627 – Factory overhead expenses

4. To record the value of any by-products collected (i.e. animal manure, straw, stubble, etc.):

Dr. 152 – Raw material costs


Cr. 154 – Work in progress

5. To record the value of wastage, materials received back from an outside processor:

Dr. 152 – Raw materials


Cr. 154 – Work in progress

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6. To record the value of new born animals and animals which were being bred for meat but are now
working animals or reproducing animals:

Dr. 211 – Tangible assets (2116)


Cr. 154 – Work in progress

7. To record the actual cost of finished goods put into warehouse or directly shipped to customers:

Dr. 155 – Finished goods


Dr. 632 – Cost of goods sold
Cr. 154 – Work in progress

II. Where the company uses the periodic inventory method

This is similar to the entries recorded under industry.

TRADING SERVICES

Account 154 “Work in progress” is applied to trading and servicing enterprises, such as transportation,
post office, tourism, servicing, etc. This account is used to summarize cost
costs (raw material, direct
labour and factory overhead expenses) and compute service cost rendered.

ATTENTION FOR RECORDING TO ACCOUNT 154 IN TRADING/SERVICES

1. In transportation companies, this account is used to summarize production cost and calculate the
cost of transportation by land (i.e. car, train and other simple transportation means), railway, sea,
air and pipe, etc.

Account 154 in transportation companies must be detailed by activity (i.e. transportation of


passengers, transportation of goods), department or service units.

In transportation companies, tires are worn out quickly


quickly than their depreciation,
depreciat therefore, they
must be replaced many times. The value of replaced
replaced tires should be not charged directly to the
cost of transportation when replaced but allocated
allocated to expenses monthly. Therefore, on the
monthly basis, the transportation companies ar are allowed to make accruals to the cost of
transportation (accrued expenses) under current regulations.

2. The raw materials, direct labour costs higher than the normal level, and the unallocated fixed
factory overhead costs should not be recorded in cost products but in cost of goods sold in the
current period.

3. In tourism companies, this account must be detailed by each type of activities, such as tour-guide,
hospitality and tourist – transportation.

4. In hotel companies, this account must be track in detail for each type of activity, such as food,
rooms, entertainment and others (laundry, hair dressing, telegram, sport, etc.).

The accounting treatment for major transportation and service entities is similar to the industry
entity. However, the following entry is recorded when the service has been provided:

Dr. 632 – Cost of goods sold


Cr. 154 – Work in progress

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CONSTRUCTIONS

Construction companies only apply the perpetual inventory method, not the periodic inventory
method, therefore, account 154 is used to summarize production costs and track the cost of
construction work and other services.

The raw materials, direct labour costs which is higher than the normal level, and the unallocated fixed
factory overhead costs should not be recorded in the cost of construction work but in cost of goods
sold in the current period.

This account in construction has four sub-accounts:

Account 1541 – Construction:: to summarize costs, compute the cost of construction work and
construction in progress at the end of the period;

Account 1542 – Other products:: to summarize costs, compute the cost of other products and work in
progress at the end of the period (finished goods, building components, etc.);
building

Account 1543 – Services:: to summarize costs, compute the cost of services and work in progress of
services at the end of the period;

Maintenance: to summarize maintenance, installa


Account 1544 - Maintenance: tion expenses incurred in the period
installation
and work in progress at the end of the period.

MAJOR TRANSACTIONS IN CONSTRUCTION

I. Accounting treatment for produc tion costs of construction work (also applied for entities
production
having internal lump-sum construction contract of which a separate accounting book is used)

Summary of production costs of construction work must be kept track by construction project, each
category in construction project and cost item regulated in setting construction budget including:

- Raw materials costs;

- Labour cost;

- Machine costs;

- Overhead.

The overhead are debited in account 154 “Construction” including overhead incurred in sub-
contracting department, or construction site. The administration expenses in construction companies
are debited in account 642 “General and administration expenses”. Those expenses shall be
transferred to debit side of account 911 “Income summary” assigned for the cost of completed
construction work that was sold in the period.

1. The accounting treatment for construction costs (the debit side of account 1541 – Construction)

1.1. Record raw material costs:

Raw material costs include actual value of raw materials, materials, components or rotational
materials that make construction products (excluding secondary materials for machine, machine

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for executing the work or material calculated into overhead).

Accounting principles of direct raw materials: if raw materials are used for any construction work
that must be directly computed for this construction work based on the actual used quantity and
the actual cost of materials paid out (average cost; first in, first out, etc).

At the end of the accounting period, or when construction completed, the physical count for
remaining materials (if any) at the production site must be taken. Based on that, the accountant
shall record a decrease in raw material costs used in construction.

In reality, if it is unlikely to allocate raw material costs to each construction project or construction
category, the enterprise can allocate according to suitable criteria (in relation with the material,
fuel use , etc.)

- Based on the list of allocated materials for each construction project and construction work:

account: raw materials) (1541)


Dr. 154 – Work in progress (sub-account:
Dr. 632 – Cost of goods sold (amount of raw material costs that is higher than the normal level)
material
Cr. 621 – Raw materials costs

1.2. Recording direct labour costs is similar to that under industry.

1.3. Record machine costs:

machine costs for construction by machine. Machines constitute the


Machine costs include machine
consist of machines running by steam, diesel, gas,
machines directly used for construction. Those consist
machines used for in
electricity, etc. (including machines stallation).
installation).

Machine costs include regular expenses and temporary costs.

Regular expenses include labour costs of machine workers, raw materials, tools and supplies,
depreciation, services rental (small repair, electricity, water, insurance fee, etc.), other
expenses in petty cash.

Temporary costs include machine repair with high value (overhaul repair) not met criteria to
increase historical cost of machine, temporary costs for machine (canvas, tent, platform, rails
etc.). If the temporary costs occurred ahead of time (debited into account 142 or account 242),
they are then allocated in the debit side of account 623 “Machine costs”. If the temporary costs
occurred later, they should be accrued into construction cost in the current period (due to machine
actually used in the period). In this case, the enterprises should accrue the expenses by credit
account 335 “Accruals” and debit account 623 “Machine costs”.

Summary and computation of machine costs must be separately accounted for each machine
(refer to accounting treatment in account 623 “Machine costs”).

- Based on the list of machine costs (actual costs) allocated to each project and project items:

Dr. 154 – Work in progress (Machine costs)


Dr. 632 – Cost of goods sold (Amount of machine costs higher than the normal level)
Cr. 623 – Machine costs

1.4. Record factory overhead costs

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- Factory overhead costs constitute production costs of the team and of construction site including
salary of factory manager, team leader, group leader, social insurance, health insurance and trade
union fees which is calculated based on a regulated ratio of employees’ salary, machinery
controllers and manager of workshop, group, team, depreciation allocated for team’s
activities and other costs. When the costs incurred in the period:

Dr. 627 – Factory overhead costs


Dr. 133 – VAT deductible (if any)
Cr. 334, 338, 152, 153, 142, 214, 335, 111, 112,...

- Record the provisions for construction project warranty:

Dr. 627 – Factor overhead costs


Cr. 352 – Provisions

- maintenance incurred such as raw material, direct


When expenses for project repair and maintenance
labour, machine costs, and factor overhead, th
thee accountant should record those expenses in
relevant accounts:

Dr. 621 – Raw material costs


Dr. 622 – Direct labour costs
Dr. 623 – Machine costs
Dr. 627 – Factor overhead costs
Dr. 133 – VAT deductible (if any)
Cr. 112, 152, 153, 214, 331, 334, 338,...

- At the end of the period, the enterprise should transfer actual costs of raw material, direct
labour, machine costs, factory overhead relating to repair and maintenance incurred in the
period to summarise expenses of repair
repair and maintenance activities:

Dr. 154 – Work in progress


Cr. 621 – Raw material costs
Cr. 622 – Direct labour costs
Cr. 623 – Machine costs
Cr. 627 – Factor overhead costs

- Record completed repair and maintenance of construction handed over to the customer:

Dr. 352 – Provisions


Cr. 154 – Work in progress

- When the warranty period is over, construction does not need to repair or warranty provisions
made was higher than the actual costs, the difference should be reversed:

Dr. 352 – Provisions


Cr. 711 – Other income

- At the end of the period, based on the list of factory overhead cost to allocate to related
construction work and construction items (in ratio of labour cost):

Dr. 154 – Work in progress


Dr. 632 – Cost of goods sold (unallocated factory overhead costs should not be charged into
cost of construction work)

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Cr. 627 – Factor overhead costs

2. Allocation of construction costs (credit side of account 1541 – Construction)

2.1. Irrecoverable costs relating to the construction contract (i.e. insufficient legal conditions for
continuing the contract performance, or contracts when the customers cannot perform their
obligations) must be recognized as costs in the current period:

Dr. 632 – Cost of goods sold


Cr. 154 – Work in progress

2.2. Costs directly relating to each contract can be net off against the production cost if other
incomes generated not included in the contractual revenue. For example, proceeds from the sale
of unused raw materials and wastage and of construction machines and equipment upon the
liquidation of contract:

a. Returned unused raw materials to the store


store when construction contract completed:

Dr. 152 – Raw materials (historical cost)


Cr. 154 – Work in progress

b. Wastage is recollected and put back into warehouse:

Dr. 152 – Raw materials (net realizable value)


Cr. 154 – Work in progress

c. If unused raw materials and wastage are recolle cted and directly sold, not through the
recollected
enterprise’s warehouse, the accountant should recognize income from sales of unused raw
materials and wastage by decreased costs:

Dr. 111, 112, 131... (total amount)


Cr. 3331 – VAT payable (33311)
Cr. 154 – Work in progress (price excluding VAT)

d. Disposals of machines, equipments used for construction contract and the fixed assets fully
depreciated upon liquidation of the contract :

Record income from disposal of machines, equipments:

Dr. 111, 112, 131,...


Cr. 3331 – VAT payable (33311)
Cr. 154 – Work in progress (selling price-exclusive VAT)

Record cost resulted from disposal of machines, equipments (if any):

Dr. 154 – Work in progress


Dr. 133 – VAT deductible (33311)
Cr. 111, 112,...

Write off the cost of fixed assets fully depreciated or disposed:

Dr. 214 – Accumulated depreciation and amortization

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Cr. 211 – Tangible assets

2.3 At the end of the period, the actual cost of the completed construction considered as sold
(handed over some items or all to the customer – Party A, or to internally official contractor) is
treated as follows:

a. In the case, the construction handed over to the Party A (including the volume of completed
construction work according to internal fixed contract for contractor):

Dr. 632 – Cost of goods sold


Cr. 154 – Work in progress (1541)

b. In the case, completed construction waiting for sale (building for sale) or not been handed
over, based on the cost of completed construction work to record:

Dr. 155 – Finished goods


Cr. 154 – Work in progress

c. If the enterprise handed-over completed construction to the official contractor (higher


contract of which a separate accounting book
authorities, inter-companies having lump-sum contract
is prepared):

Dr. 336 – Inter-company payable (3362)


Cr. 154 – Work in progress (1541)

II. Accounting treatment for production cost and computation cost of industrial products
and services in construction companies is similar to that under industry.

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ACCOUNT 155

FINISHED GOODS

This account records the current value and movement of the enterprises’ finished goods.

Finished goods are those which have gone through all the stages of the production process and are
tested for technical qualification to store.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Accounting for stock-in, stock-out and outstanding balance of finished goods in account 155
should be recorded at cost as regulated in Vietnamese Accounting Standard No. 02 “Inventories”.

2. Finished goods produced by officialcial production and secondary production


pr department must be
valued at the production cost (historical cost) including raw materials,
ma direct labour, overhead
expenses and other costs directly related to the production of finished goods.

Variable factory overhead costs shall


all be entirely allocated into the
the processing cost of each product
unit according to the costs
sts actually incurred.

Fixed factory overhead costs shall be allocated into the processing cost of each product unit on the
capacity of machinery. Normal capacity
basis of the normal production capacity capacity is the average quantity of
products turned out under normal production conditions.

Where the quantity of actually-manufactured pro products


ducts is higher than the normal capacity, the
fixed factory overhead costs shall be allocated to each product unit according to actually incurred
costs.

Where the quantity of actually-manufactured products is lower than the no


normal capacity, the fixed
factory overhead costs shall be allocated into the processing cost of each product unit only
according to the normal capacity. The unallo
unallocated
cated amount of factory overhead costs shall be
recognized as production and business expense to determine operation result in the period
(recognized in cost of goods sold).

3. Costs not permitted to be incorporated into the original price of inventories are:

a. Costs of raw materials, materials, labour and other production and business costs incurred at a
level higher than normal;

b. Costs of inventories preservation minus the inventories preservation cost needed for subsequent
production processes and the preservation cost prescribed in paragraph 06 of Vietnamese
Accounting Standard No. 02 “Inventories”;

c. Selling expenses;

d. Enterprise management costs.

4. Finished goods sent out for further processing must be valued at the actual processing cost
including direct raw materials, processing cost and other costs directly related to the processing of
finished goods.

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5. The value of finished goods shall be calculated according to one of four methods that are
regulated in Vietnamese Accounting Standard No. 02 “Inventories”.

6. Where the enterprises apply the perpetual inventory method, the inventory accountant keeps track
the records of daily finished goods in and out at a pre-determined cost (estimated or pre-
determined cost). At the end of the month, the accountant shall compute the actual cost of finished
goods and determine the difference between the actual cost and the pre-determined cost (and also
the difference resulted from the opening balance). This is a base to determine the actual cost of
finished goods in and out during the period (refer to the formula instructed in account 152 – Raw
materials).

7. Accounting for finished goods must be detailed under each store, each type and kind of products.

STRUCTURE AND CONTENTS OF ACCOUNT 155 – FINISHED GOODS

Debit:

- Value of finished goods;

- Surplus of finished goods detected in the physical inventory count;

- goods at the end of the period (if the company uses


Allocation of the closing balance of finished goods
the periodic inventory method).

Credit:

- Value of finished goods out;

- Shortage of finished good detected in the physical inventory count;

- Reallocation the beginning balance of finished goods at the end of the period (if the company uses
the periodic inventory method).

Debit balance:

Value of finished goods in stock at the end of the period.

MAJOR TRANSACTIONS

I. Where the company uses the perpetual inventory method

1. Finished goods produced by the company itself or sent out for further processing put into
warehouse:

Dr. 155 – Finished goods


Cr. 154 – Work in progress

2. Finished goods shipped to the customers, the accountant records the cost of goods sold as follows:

Dr. 632 – Cost of goods sold


Cr. 155 – Finished goods

3. Finished goods sent on consignment, sales agents or subsidiaries (if using goods dispatch note

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cum internal transport note):

Dr. 157 – Goods on consignment


Cr. 155 – Finished goods

4. Where the finished goods are returned by the buyers: in the case, the finished goods returned are
subject to VAT in subtraction method, sales returns should be recorded at VAT-exclusive selling
price:

Dr. 531 – Sales returns (VAT-exclusive selling price)


Dr. 3331 – VAT payable (33311)
Cr. 111, 112, 131… (Total amount of goods returned)

- rds the cost of goods returned:


At the same time, the accountant records

Dr. 155 – Finished goods


Cr. 632 – Cost of goods sold

5. Where the finished goods used internally for production and business operation:

In the case, finished goods used


used for production of goods and services subject to VAT in
subtraction method:

- When finished goods are used:

Dr. 632 – Cost of goods sold


Cr. 155 – Finished goods

- Record inter-company sales and VAT output:

Dr. 621 – Raw materials costs


Dr. 627 – Factory overhead costs
Dr. 641 – Selling expenses
Dr. 642 – General and administration expenses
Dr. 241 – Construction in progress
Cr. 512 – Inter-company sales (production costs)

stment in jointly controlled entities:


6. Finished goods contributed as capital investment

a. When enterprise contributed finished goods as capital investment in joint ventures:

Dr. 222 – Shares in joint ventures (revalued price)


Dr. 811 – Other expenses (difference between lower revalued prices and the book value of
finished goods)
Cr. 155 – Finished goods
Cr. 711 – Other income (difference between greater revalued prices and the book value of
finished goods in correspondence with benefit of other parties in the joint venture)
Cr. 3387 – Deferred income (difference between greater revalued prices and the book value
of finished goods in correspondence with the enterprise’s benefit in the joint venture)

b. When jointly controlled entity sold this finished goods for third party, the venture parties should
reallocate the deferred income to other income:

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Dr. 3387 – Deferred income


Cr. 711 – Other income

7. Finished goods contributed as investment in associates:

Dr. 223 – Investment in associates (revalued price)


Dr. 811 – Other expenses (difference between lower revalued amount and the book value of
finished goods)
Cr. 155 – Finished goods
Cr. 711 – Other income (difference between greater revalued price and the book value of
finished goods)

8. When the enterprise detected the surplus or shortage of finished goods during the physical
inventory count, the report must be prepared and the reason and also the person in-charge must be
based on the counting minutes
identified. The accounting treatment is made based mi and the resolving
report issued by authorized person.

- If surplus or shortage is made by mistake or has not yet recorded, the accountant shall make
adjustment in the accounting books;

- If enterprise has not yet determined the reason and waiting for resolution:

If surplus:

Dr. 155 – Finished goods


Cr. 338 – Other payable (3381)

When the resolving report issued by authorized person:

Dr. 338 – Other payable


Cr. Relevant accounts

If shortage:

Dr. 138 – Other receivable (1381 – Shor


Shortage
tage of assets awaiting resolution)
Cr. 155 – Finished goods

When resolution issued by authorized person, based on the decision to record:

Dr. 111, 112… (if the person in-charge paid compensation in cash)
Dr. 334 – Payable employees (if the compensation deducted in employees’ salary)
Dr. 138 – Other receivable (1388) (the compensation to be paid by the person in-charge)
Dr. 632 – Cost of goods sold (remaining amount after deducted into compensation)
Cr. 138 – Other receivable (1381)

Translation by KTC Assurance & Business Advisors 112


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II. Where the company uses the periodic inventory method

1. At the beginning of the period, based on the inventory physical count the accountant reallocates
the opening balance of finished goods to account 632 “Cost of goods sold”:

Dr. 632 – Cost of goods sold


Cr. 155 - Finished goods

2. At the end of the period, based on the inventory physical count, the accountant allocates the
closing balance of finished goods:

Dr. 155 – Finished goods


Cr. 632 – Cost of goods sold

Translation by KTC Assurance & Business Advisors 113


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ACCOUNT 156

MERCHANDISE GOODS

This account records the current value and movement of merchandise goods including items in stock,
in the store as well as property.

Merchandise goods are materials, products purchased by the entity for resale (either wholesale or
retail). The cost of inventory includes the purchase price as well as all expenses relating to the
purchase. In the case where the materials or products must be further processed, refurbished or
categorized to bring higher value or saleability before they can be sold, the value of goods purchased
consist of the purchase price plus (+) processing cost. For imported goods, such costs as import tax,
special consumption tax (if any), VAT (if not deductible), insurance, etc. will be added to the cost of
imported goods.

The account 156 “Merchandise goods” is still used in those cases where the merchandise goods is
purchased for both resale and production and the company is unable to separate the two.

The following should not be recorded into


into account 156:

1. Merchandise inventory held on consignment or kept for another party (in this case the entity
unt 002 “Goods held under trusts or for processing”, or account 003 “Goods
should use account
received on consignment for sale” (Off balance sheet accounts).

2. Merchandise purchased for the entity’s production


production and business (in this case, the purchase should
be posted to account 152 “Raw materials”, or account 153 “Tools and supplies”).

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Accounting for stock-in or stock-out of merchandise


merchandise goods in account 156 is recorded at cost as
regulated in Vietnamese Accounting
Accounting Standard No. 02 “Inventories”.

- The cost of merchandise goods consists of the purchase price, import tax, special consumption tax
(if any), VAT (if not deductible) and costs incurred in process of purchasing, handling required to
deliver the goods from the supplier to the enterprise’s stock.

- Goods purchased for the entity’s production of goods and services subject to VAT in subtraction
method, the cost of goods is recorded at the purchase price exclusive VAT.

- Goods are purchased for the entity’s production of goods and services which are subject to VAT
in direct method or not subject to VAT, the cost of goods is recorded at total amount (including
VAT).

2. The cost of goods is computed according to each type of item purchased and must be separately
recorded at the purchase price and additional expenses incurred to purchase that item.

3. The value of merchandise goods shall be calculated according to one of the four inventory
methods as regulated in Vietnamese Accounting Standard No. 02 “Inventories”.

4. Purchasing cost incurred during period should be calculated for goods sold in period and goods
still in stock. The method for expenses allocation should be selected in accordance with the
company’s features and should be consistently applied during the accounting period.

Translation by KTC Assurance & Business Advisors 114


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5. At each store, the records should be kept track of the amount and type of merchandise inventory
on hand.

STRUCTURE AND CONTENTS OF ACCOUNT 156 – MERCHANDISE GOODS

Debit:

- Buying price of merchandise according to invoice (including non-refundable taxes);

- Purchasing expenses;

- Value of goods sent for further processing (including the buying price and processing cost);

- Cost of goods returned by buyers;

- Surplus of goods detected in the inventory physical count;

- Allocation of the year end balance of stock (where the company uses the periodic inventory
method);

- Value of property purchased or transferred from investment property.

Credit:

- Value of merchandise sold, shipped to agents and divisions on consignment, send out for further
processing or to be used in production process;

- Purchasing expenses allocated to merchandise during the period;

- Purchasing discounts;

- turned for suppliers;


Value of merchandise returned

- Shortage of merchandise detected in the inventory physical count;

- Opening balance of merchandise in stock (if the company uses the


th periodic inventory count);

- Value of property sold or transferred to investment property, owner-occupied property or fixed


assets.

Debit balance

- Buying price of merchandise in stock;

- Purchasing expenses for merchandise in stock.

Account 156 – Merchandise goods has three sub-accounts:

- Account 1561 – Original costs: To record the current value and movement of goods purchased
and goods on hand (at the buying price).

- Account 1562 – Purchasing expenses: To record the purchasing expenses incurred in order to
purchase merchandise goods and allocation of those expenses to cost for goods sold and

Translation by KTC Assurance & Business Advisors 115


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merchandise on hand (including goods in stock and on consignment). This account will record
expenses directly involved in the buying process such as merchandise insurance, store rental,
transportation, handling required to deliver goods from the supplier to the enterprise’s stock and
losses within a reasonable limit incurred from the purchase of merchandise.

Account 157 – Property: To record the current value and movement of property of the entity.

Property includes land used right, a building, or a building and land used right, infrastructure
purchased by the entity for resale in the normal business cycle, or investment property changed as
inventory for sale purpose.

STRUCTURE AND CONTENTS OF ACCOUNT 1561 – ORIGINAL COSTS

Debit:

- Buying price of merchandise goods according to invoice;

- Import duty or special consumption tax of imported goods or import VAT, VAT input if not
deductible for merchandise purchased;

- Value of goods sent for further processing and completed goods put into warehouse including
completed
buying price and processing cost;

- Value of goods received from contribution capital;


from

- Value of goods returned then put into warehouse;

- Surplus of merchandise goods detected the inventory physical count;

- Allocation of merchandise goods at the end of period (where the company uses the periodic
inventory method).

Credit:

- Value of merchandise goods used during period (sold, exchanged, presented, shipped to an agent
on consignment, divisions, used internally, contributed in a joint venture, in associates);

- Purchase discounts;

- Allowance from reduction in price of goods purchased;

- Value of merchandise goods returned to suppliers;

- Value of good damages and losses;

- Opening balance of merchandise goods (if the enterprise uses the periodic inventory method).

Translation by KTC Assurance & Business Advisors 116


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Debit balance:

- Value of merchandise goods in stock at the end of the period.

STRUCTURE AND CONTENTS OF ACCOUNT 1562 – PURCHASING EXPENSES

Debit:

- Purchasing expenses incurred to purchase merchandise during the period.

Credit:

- Purchasing expenses allocated to merchandise sold during the period.

Debit balance:

- nses at the end of the period.


The balance of purchasing expenses

STRUCTURE AND CONTENTS OF ACCOUNT 1567 – PROPERTY

Debit:

- Value of property purchased for resale;

- Net book value of property transferred to inventory;

- Cost that is added to the original price of property incurred from repairing and upgrading the
property waiting for sale.

Credit:

- Value of the property sold during the period;

- ansferred to investment property or fixed assets.


Value of the property transferred

Debit balance:

The balance of property at the end of the period.

MAJOR TRANSACTIONS

I. Where the enterprise uses the perpetual inventory method:

1. Based on invoices, received notes and related documents to record merchandise goods purchased
and put into the warehouse:

1.1 Goods purchased for production of goods and services subject to subtraction method VAT:

- Where the company purchases domestic merchandise goods:

Dr. 156 – Merchandise goods (1561) (buying price exclusive VAT)


Dr. 133 – VAT deductible (1331) (VAT input)
Cr. 111, 112, 141, 331… (total amount)

Translation by KTC Assurance & Business Advisors 117


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- Where the company imports merchandise goods:

Dr. 156 – Merchandise goods (1561) (buying price plus (+) import duty)
Cr. 111, 112, 331…
Cr. 3333 – Import, export tax payable (taxes by details)

At the same time, record VAT payable of import goods to the State Budget:

Dr. 133 – VAT deductible (1331)


Cr. 3331 – VAT payable (33312 – Import VAT)

- In the case, the entity imports merchandise that is subject to special consumption tax:

Dr. 156 – Merchandise goods (1561) (buying price plus (+) import tax and special consumption
tax)
Cr. 111, 112, 331…
Cr. 3333 – Import, export taxes payable
Cr. 3332 – Special consumption tax

- Where the entity imports merchandise from an agent shall be followed the guidance of account
agent
331 “Trade payable”.

1.2 Goods purchased for production of goods and services subject to subtraction method VAT or not
subject to VAT:

- Where the company purchases domestic merchandise:

Dr. 156 – Merchandise goods (1561) (total amount)


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

- Where the company imports merchandise:

Dr. 156 – Merchandise goods (1561) (buying price plus (+) import tax (+) VAT (+) special
consumption tax (if any)).
Cr. 111, 112, 331
Cr. 3333 – Import, export duties (taxes by details)
Cr. 3331 – VAT payable (33312)
Cr. 3332 – Special consumption tax (if any)

2. In the case where the invoice has been received but the merchandise goods has not yet arrived at
the end of the period, based on the invoice to record:

Dr. 151 – Goods in transit


Dr. 133 – VAT deductible (if any)
Cr. 111, 112, 331…

- In the following period once the goods has arrived:

Dr. 156 – Merchandise goods (1561)


Cr. 151 – Goods in transit

3. Where the company is entitled to a purchase discount:

Translation by KTC Assurance & Business Advisors 118


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Dr. 111, 112, 331…


Cr. 156 – Merchandise goods (1561)
Cr. 133 – VAT deductible (1331) (if any)

4. Cost of merchandise returned to supplier because of interior quality or for not being what was
ordered as stipulated in the contract that may lead to reduction in price:

Dr. 111, 112…


Dr. 331 – Trade payable
Cr. 156 – Merchandise goods (1561)
Cr. 133 – VAT deductible (1331) (if any)

5. Purchasing expenses for goods used in production of goods and services subject to subtraction
method VAT:

Dr. 156 – Merchandise goods (1562)


Dr. 133 – VAT deductible (if any)
Cr. 111, 112, 141, 331…

6. Property purchased for sale:

Dr. 156 – Merchandise goods (1567 – Property


Property – buying price exclusive VAT)
Dr. 133 – VAT deductible (1332)
Cr. 111, 112, 331…

7. Direct cost related to purchase of property:

Dr. 156 – Merchandise goods (1567 – Property)


Dr. 133 – VAT deductible (1332)
Cr. 111, 112, 331…

8. In the case where the property is transferred to inventory when owner decided to repair and
upgrade the property for sale:

- ading the property for sales issued:


Upon the decision on repairing, upgrading

Dr. 156 – Merchandise goods (1567 – property – net book value)


Dr. 214 – Accumulated depreciation and amortization (2147 – Accumulated depreciation)
Cr. 217 – Investment property (historical cost)

- Record of costs incurred from repairing and upgrading:

Dr. 154 – Work in progress


Dr. 133 – VAT deductible
Cr. 111, 112, 152, 334, 331…

- Allocation of all expenses incurred from repairing and upgrading to the value of property when
the work is completed:

Dr. 156 – Merchandise goods (1567)


Cr. 154 – Work in progress

Translation by KTC Assurance & Business Advisors 119


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9. Based on VAT invoice and selling invoice and goods dispatch note to record the value of goods
that is determined as sold:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (1561)

At the same time, the sale is recognised:

- Where the company pays VAT in subtraction method and goods sold subject to subtraction
method VAT:

Dr. 111, 112, 131… (Total amount)


Cr. 511, 512 (selling price - exclusive VAT)
Cr. 3331 – VAT payable (33311)

- on method VAT or not subject to VAT:


Where the goods subject to subtraction

Dr. 111, 112, 131… (Total amount)


Cr. 511, 512… (Total amount)

10. Where the company sent goods to subcontractor for further processing:

a. Delivered goods to subcontractor for further processing, :

Dr. 154 – Work in progress


Cr. 156 – Merchandise goods (1561)

b. Record of processing cost:

Dr. 154 – Work in progress


Dr. 133 – VAT deductible (if any)
Cr. 111, 112, 331…

c. When the processing is completed, relocate to merchandise inventory:

Dr. 156 – Merchandise goods (1561)


Cr. 154 – Work in progress

11. Merchandises are delivered to customer or to agent on consignment:

Dr. 157 – Goods on consignment


Cr. 156 – Merchandise goods (1561)

12. When merchandise delivered to divisions for sale:

- If the company used good dispatch note cum internal transport note:

Dr. 157 – Goods on consignment


Cr. 156 – Merchandise goods (1561)

- If the company used VAT invoice or selling invoice as evidence of shipment, the accountant
determines cost of goods sold:

Translation by KTC Assurance & Business Advisors 120


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Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods

13. In the case goods subject to VAT used internally

a. Where goods used internally for production of goods and services subject to subtraction method
VAT, the accountant records inter-company sales at cost:

Dr. 623, 627, 641, 642… (Cost of goods delivered)


Cr. 512 – Inter-company sales (Cost of goods delivered)

At the same time, cost of goods used is recognized:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (156)

lly for production of goods and services


b. Where goods used internally ser subject to subtraction method
records inter-company sales at cost. Non-deductible
VAT or not subject to VAT, the accountant records
VAT must be recognized to expenses:

Dr. 623, 627, 641, 642… (cost of goods used plus (+) VAT output)
Cr. 3331 – VAT payable (33311)
Cr. 512 – Inter-company sales (cost of goods used)

At the same time, cost of goods used is recorded as follows:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (1561)

14. Merchandises subject to VAT used for presents or payment to employees:

a. Where goods used for presents (s pending from bonus and welfare fund), or payment to employees
(spending
for production of goods and services subject to subtraction method VAT, the accountant
recognizes sales at selling price exclusive VAT:

Dr. 431 – Bonus and welfare fund (if used for present)
Dr. 334 – Payable for employees (if used for payment to employees)
Cr. 512 – Inter-company sales
Cr. 3331 – VAT payable (33311)

At the same time, cost of goods used is recorded:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (1561)

b. Where goods used for presents (spending from bonus and welfare fund), or payment for
employees for production of goods and services subject to subtraction method VATor not subject
to VAT, the accountant records inter-company sales at total amount:

Dr. 431 – Bonus and welfare fund (if used for present)
Dr. 334 – Payable for employees (if used for payment to employees)
Cr. 512 – Inter-company sale

Translation by KTC Assurance & Business Advisors 121


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15. Merchandise subject to subtraction method VAT or not subject to VAT when goods used for
present or internally, sale is recorded as total amount:

Dr. 641, 642, 431


Cr. 512 – Inter-company sale

At the same time, the accountant records cost of goods used:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (1561)

16. Merchandises transferred to contribute in a jointly controlled entity:

a. When goods transferred to contribute:

Dr. 222 – Share in joint venture (revalued price)


Dr. 811 – Other expenses (difference between revalued price and the lower book value)
Cr. 156 – Merchandise goods
revalued price and greater book value of goods
Cr. 711 – Other income (difference between revalued
corresponding to benefit of other parties in the joint venture)
between revalued price and greater book value of
Cr. 3387 – Deferred income (difference between
goods corresponding to its benefit in the joint venture)

b. When jointly controlled entity sold the goods for third parties, the contributor should transfer
deferred income to other income of the period:

Dr. 3387 – Deferred income


Cr. 711 – Other income

17. Goods transferred to contribute in associates:

Dr. 223 – Investment in associates (revalued price)


Dr. 811 – Other expenses (Difference between revalued price and lower book value)
Cr. 156 – Merchandise goods
Cr. 711 – Other income (Difference between revalued price and greater book value)

18. At the end of the period, purchasing expenses are allocated to goods sold during period:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (1562)

19. Surplus of merchandise detected should be investigated and recorded in the minutes. Based on the
reason, an appropriate adjustment must be made:

a. If the surplus is due to an error or not yet recorded, an adjustment should be made in the
accounting records.

b. If the surplus is owned by other entity, the surplus shall be debited to account 002 “Goods held
under trust or for processing” (Off balance sheet accounts). After returning the surplus of
merchandise to the owner, account 002 is credited.

c. In the case where the reason is not yet known:

Translation by KTC Assurance & Business Advisors 122


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Dr. 156 – Merchandise goods


Cr. 338 – Other payable (3381)

d. Upon the decision on resolution of the surplus issued by authorized person:

Dr. 338 – Other payable (3381)


Cr. Related accounts

20. Shortage of merchandise detected should be investigated and recorded in the minutes. Based on
the decision on resolution issued by the authorized person, an appropriate adjustment must be
made:

a. Record of the shortage where reason is not yet known and awaiting resolution:

tage of assets awaiting resolution)


Dr. 138 – Other receivable (1381 – Shortage
Cr. 156 – Merchandise goods

sued by the authorized person:


b. Upon the decision on resolution issued

Dr. 111, 112… (If the person in charge


charge paid the compensation in cash)
Dr. 334 – Payable for employees (If the compensation deducted to salary of the person in charge)
Dr. 138 – Other receivable (the compensation must be paid by the person in charge)
Dr. 632 – Cost of goods sold (the damage amount)
Cr. 138 – Other receivable (1381)

21. When the property is determined as sold in period, based on VAT invoice, or selling invoice,
handover minute of property to record:

Dr. 632 – Cost of goods sold


Cr. 156 – Merchandise goods (1567 – Property)

At the same time, sales of property should be recorded:

If the company pays VAT in direct method:

Dr. 111, 112, 331…


Cr. 511 – Sales (5117) (price-exclusive VAT)
Cr. 3331 – VAT payable (33311)

If the company pays VAT in subtraction method:

Dr. 111, 112, 331…


Cr. 511 – Sales (5117) (total amount)

II. Where the enterprise uses the periodic inventory method

1. At the beginning of the period, the opening balance of merchandise must be reallocated into
purchases:

Dr. 611 – Purchases


Cr. 156 – Merchandise goods

Translation by KTC Assurance & Business Advisors 123


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2. At the end of the period:

The entity must determine the closing balance of both quantity and value of merchandise.

a. Based on the closing balance of merchandise as reported in the inventory physical count to record:

Dr. 156 – Merchandise goods


Cr. 611 – Purchases

b. Based on total value of goods sold:

Dr. 632 – Cost of goods sold


Cr. 611 – Purchases

Translation by KTC Assurance & Business Advisors 124


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ACCOUNT 157

GOODS ON CONSIGNMENT

This account records goods on consignment or goods which have been shipped to customer, a sale
agent or divisions, or services which have been rendered but customers have not yet accepted them for
payment.

This account is used by all types of enterprises in all types of business.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Goods on consignment recorded in account 157 should be valued at cost as regulated in


rd No. 02 “Inventories”.
Vietnamese Accounting Standard

2. Account 157 “Goods on consignment” is used to record the goods shipped to customer, an agent
on consignment and divisions or services which have been rendered according
acc to economics
der but have not been considered as sold (goods and services that have
contract or the purchase order
been shipped or provided have not been recognized as sale in period yet).

3. Goods recorded in this account stil


stilll belong to the enterprise. The accountant must open a detailed
journal for each type of finished
finished goods and merchandise delivered
delivered until they are accepted for
payment.

4. This account is not used to record the transportation expenses, handling


handling expenses or advances to
customer.

5. Account 157 may be kept track in details according


according to each type of goods, products on
consignment and services provided to customer and each agent on consignment.

STRUCTURE AND CONTENTS OF ACCOUNT 157 – GOODS ON CONSIGNMENT

Debit:

- Value of merchandise, finished goods delivered to customers, agents on consignment or divisions;

- which have not been determined as sold;


Cost of services rendered to customers which

- At the end of the period, the merchandise and finished goods shipped which has been determined
as sold shall be transferred (if the enterprise uses the periodic inventory method).

Credit:

- Value of merchandise, finished goods shipped, and services provided which have been
determined as sold;

- Value of merchandise, finished goods, and services shipped but then were returned by the
customer;

- At the beginning of the period, the value of merchandise, finished goods shipped, and services
provided has not been determined as sold (if the enterprise uses the periodic inventory method).
Debit balance:

Translation by KTC Assurance & Business Advisors 125


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Value of merchandise, finished goods shipped which have not been determined as sold during period.

MAJOR TRANSACTIONS

I. Where the enterprise uses the perpetual inventory method

1. When enterprise ships merchandise, finished goods to customer, agent on consignment according
to economic contract, based on goods dispatch note and goods on consignment to record:

Dr. 157 – Goods on consignment


Cr. 156 – Merchandise goods
Cr. 155 – Finished goods

2. Services rendered to customer but have not been determined as sold during period:

Dr. 157 – Goods on consignment


Cr. 154 – Work in progress

services rendered to customer have been determined


3. When goods on consignment and completed services
to be sold during period:

- If merchandise, services are subject to VAT and enterprise pays VAT in subtraction method, sale
goods sold, services rendered is recorded according to the sale price-exclusive
of goods, finished goods
VAT.

Dr. 131 – Accounts receivable


Cr. 511 – Sales (sale price-exclusive VAT)
Cr. 3331 – VAT payable (33311)

- If merchandise services not subject to VAT or subject to VAT in direct method:

Dr. 131 – Accounts receivable


Cr. 511 – Sales (total amount)

At the same time, cost of goods sold in the period is recorded:

Dr. 632 – Cost of goods sold


Cr. 157 – Goods on consignment

4. When the enterprise shipped merchandise, finished goods (subject to VAT in subtraction method
and the enterprise pays VAT in subtraction method) to its divisions, based on the goods dispatch
note cum internal transport note, the accountant of the enterprise records as follows:

Dr. 157 – Goods on consignment (prime cost)


Cr. 155 – Finished goods
Cr. 156 – Merchandise goods

Periodically, based on the list of selling invoices prepared by the divisions, the enterprise issues
VAT invoice for goods transferred internally. Based on VAT invoice, the accountant records:

Dr. 111, 112, 136… (Internal sale price including VAT)


Cr. 3331 – VAT payable (33311)
Cr. 512 – Inter-company sales (internal sale price-exclusive VAT)

Translation by KTC Assurance & Business Advisors 126


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At the same time, cost of goods sold is recorded:

Dr. 632 – Cost of goods sold


Cr. 157 – Goods on consignment

5. In case, merchandise and finished goods shipped are returned by customer:

a. Merchandise or finished goods can be sold or repaired:

Dr. 156 – Merchandise goods; or


Dr. 155 – Finished goods
Cr. 157 – Goods on consignment

b. Merchandise or finished goods can not be sold or repaired:

Dr. 632 – Cost of goods sold


Cr. 157 – Goods on consignment

II. Where the enterprise uses the periodic inventory method

1. At the beginning of the period, the enterprise must transfer the value of merchandise and finished
consignment and the value of services rendered but have
goods shipped to customer, an agent on consignment
The accounting entry is recorded
not yet determined as sold in the period. The recorded as follows:

Dr. 611 – Purchases (for merchandise)


goods sold (for finished goods and services)
Dr. 632 – Cost of goods
Cr. 157 – Goods on consignment

the physical inventory count the enterprise determines


2. At the end of the period, based on result of the
the value of merchandise, finished goods (both finished and semi-finished) on consignment and
services rendered have not been considered as sold at the end of the period:

- which have not been accepted for payment and


The value of goods shipped to customers which
merchandise sent out on consignment therefore is not considered to be sold at the end of the
period:

Dr. 157 – Goods on consignment


Cr. 611 – Purchases

- At the end of the period, the enterprise must transfer the value of finished goods shipped to
customer or sent out on consignment, and the value of services rendered to customer which have
not been determined as sold at the end of the period:

Dr. 157 – Goods on consignment


Cr. 632 – Cost of goods sold

Translation by KTC Assurance & Business Advisors 127


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ACCOUNT 158

GOODS IN BONDED WAREHOUSE

This account records current value and movement of goods in bonded warehouse.

Bonded warehouse is only used for foreign invested enterprises to produce exports under special
customs regulation. Imported raw materials for production, which are stored at bonded warehouse, are
not subject to import duty as well as other relevant taxes.

Imported raw materials and finished goods which are stored at bonded warehouse only include raw
materials used in production and finished goods produced owned by the enterprises.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Bonded warehouse is only set up at enterprise that is established under the Foreign Investment
Law in Viet Nam (currently replaced by Investment Law) for exports purpose (at least export of
50% of its products).

2. The enterprise must record completely


completely and timely the input and output of raw materials, materials
and merchandises imported and expo rted and finished goods stored under current regulations of
exported
Viet Nam.

3. Bonded warehouse should be located in area that is convenient for management and supervision
of customs.

4. Imports transferred in bonded warehouse must no nott be sold in Vietnam market. Under special
circumstances, the Ministry of Trade allowed to sell the imports in Vietnam market, the enterprise
must pay import tax and other taxes under current regulations.

5. If goods in bonded warehouse are damaged or have poor quality not satisfying requirement of
production, the customs shall require to re-export or destroy those goods as regulated by the
General Custom Department under supervision of the customs, tax and environment agency.

6. The enterprise must be kept track in detail to record quantity and value of each raw material,
goods according to each input and output.

STRUCTURE AND CONTENTS OF ACCOUNT 158 – GOODS IN BONDED WAREHOUSE

Debit:

The value of raw materials, finished goods and merchandises put in bonded warehouse during the
period.

Credit:

The value of raw materials, finished goods and merchandises in bonded warehouse used during the
period.

Translation by KTC Assurance & Business Advisors 128


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Debit balance:

The balance of raw materials, finished goods and merchandises in bonded warehouse at the end of the
period.

MAJOR TRANSACTIONS

1. When the raw materials imported for production of goods to export or processing export are
transferred into bonded warehouse, the enterprise has not to pay import duty and VAT:

Dr. 158 – Goods in bonded warehouse


Cr. 331 – Trade payable

2. When imported raw materials in bonded warehousee used in production, or processing exports:

Dr. 621 – Raw materials cost


Cr. 158 – Goods in bonded warehouse

3. When finished goods, exports and processing exports transfer to bonded warehouse (if any):

Dr. 158 – Goods in bonded warehouse


Cr. 155, 156…

4. When goods in warehouse is exported (if any):

- Record of cost of goods in bonded warehouse sold:

Dr. 632 – Cost of goods sold


Cr. 158 – Goods in bonded warehouse

- Record of sales of goodss in bonded warehouse:

Dr. 111, 112, 131…


Cr. 511 – Sales

5. If the export ratio is lower than the bonded rate, the enterprise must pay import tax and VAT (if
any) for difference between exports that must be done and the actual exports:

- When the enterprise determines import tax payable (if any):

Dr. 632 – Cost of goods sold


Cr. 333 – Tax and statutory obligations (3333 – import, export duties)

- When VAT payable of imports (if any) is determined:

Dr. 133 – VAT deductible (1331 – VAT deductible of merchandise and services)
Cr. 333 – Tax and statutory obligations (33312 – Import VAT)

- When the enterprise paid import tax and VAT (if any):

Dr. 333 – Tax and statutory obligations (3333 – Import, export tax payable)
Dr. 333 – Tax and statutory obligations (33312 – Import VAT)
Cr. 111, 112…

Translation by KTC Assurance & Business Advisors 129


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6. In the case, the enterprise is allowed to sell goods in bonded warehouse in Vietnamese market by
the Ministry of Trade, the enterprise must pay import tax and other taxes under current regulation.

- When the enterprise is allowed to use goods in bonded warehouse, the enterprise must transfer
goods in bonded warehouse to the normal warehouse of the enterprise and pay tax for those
goods.

Dr. 155, 156


Cr. 158 – Goods in bonded warehouse

At the same time, the enterprise should record the import tax and VAT payable:

- When the enterprise determines import tax payable (if any):

Dr. 155, 156


Cr. 333 – Tax and statutory obligations (3333 – Import, export tax payable)

- When the enterprise determines VAT payable (if any):

Dr. 155, 156 (if not deductible)


deductible of merchandise and services)
Dr. 133 – VAT deductible (1331 – VAT deductible
Cr. 333 – Tax and statutory obligations (33312 – Import VAT)

- When enterprise paid import tax and VAT, the accountant shall record:

Dr. 333 – Tax and statutory obligations (33312, 3333)


Cr. 111, 112…

7. If the goods in bonded warehouse sold in the local market:

- Cost of goods in bonded warehouse sold is recorded as follows:

Dr. 632 – Cost of goods sold


Cr. 158 – Goods in bonded warehouse

At the same time, the enterprise must determine import tax and VAT payable of the goods,
products, raw materials in bonded warehouse and record as guided in the entry (5).

- The enterprise should record sales of goods in bonded warehouse sold as follows:

Dr. 111, 112, 131…


Cr. 511 – Sales
Cr. 333 – Tax and statutory obligations (33311 – Output VAT)

8. If goods in bonded warehouse are damaged or have poor quality not satisfying requirement of
export, the enterprise must import the new ones or destroy the old ones:

- If the goods are re-imported:

Dr. 155, 156…


Cr. 158 – Goods in bonded warehouse

Translation by KTC Assurance & Business Advisors 130


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At the same time, the enterprise must determine the amount of import tax and VAT payable of the
goods as guided in the entry (6). When enterprise paid taxes:

Dr. 333 – Tax and statutory obligations (33312, 3333)


Cr. 111, 112…

- If enterprise re-exported (returned to suppliers):

Dr. 331 – Trade payable


Cr. 158 – Goods in bonded warehouse

- If the goods are destroyed:

handise, raw materials are destroyed)


Dr. 632 – Cost of good sold (the merchandise,
Cr. 158 – Goods in bonded warehouse

Translation by KTC Assurance & Business Advisors 131


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Decision 15/2006/QD-BTC

ACCOUNT 159

PROVISION FOR OBSOLETE STOCK

This account records provision for obsolete stock made when there is reliable evidence that the net
realizable value of the inventory declined as compared with its cost.

Provision is an estimated amount that is recorded into production and business expenses the value
declined below the book value of the inventory. Provision is made to compensate for losses due to a
decline in the value of materials, merchandise; as well as to reflect the net realizable value of the
inventory on the financial statement at the year end.

Net realizable value of inventory is the estimated selling price of inventories in a normal production
and business period minus (-) the estimated cost for completing the products and the estimated cost
needed for their consumption.

Provision of inventory is recorded in account 159 “Provision for obsolete stock” to adjust the cost
value in the inventory accounts.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. Provision for obsolete stock is made when net realizable value of inventory is lower than its cost.
The provision is recorded in co st of goods sold in period.
cost

2. Inventory provision should only be made at the end of the accounting period when the financial
statements are prepared. The inventory provision must be made under regulations of Vietnamese
Accounting Standard “I nventories” and the current regulations of the financial regime. For
“Inventories”
enterprises that prepare and issue the interi m financial statement publicly such as listed
interim
companies, the enterprises may consider
consider and adjust the provision made on the balance sheet as
complied with the value principle of inventory of below net realizable value (If the net realizable
value of inventory is lower than its cost).

3. Provision should be computed for each type of inventory. For services provided in progress,
provision should be computed for each type of services.

4. At the end of the fiscal year, based on quality, original price, net realizable value of each material,
merchandise, and service provided in progress, the accountant determines the provision for
obsolete stock required for the following fiscal year:

- If provision for obsolete stock required in the current year is greater than the unused provision for
obsolete stock made in the prior year, the additional provision shall be recorded leading to an
increase in the cost of good sold.

- If provision for obsolete stock required in the current year is lower than the unused provision for
obsolete stock made in the prior year, the difference is deducted into provision leading to a
decrease in the cost of good sold.

Translation by KTC Assurance & Business Advisors 132


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Decision 15/2006/QD-BTC

STRUCTURE AND CONTENTS OF ACCOUNT 159 – PROVISION FOR OBSOLETE


STOCK

Debit:

Value of inventory provision reversed by reduction cost of goods sold in period.

Credit:

Provision made and recorded into cost of goods sold in period.

Credit balance:

Balance of inventory provision at the end of the period.

MAJOR TRANSACTIONS:

1. At the end of the fiscal year (or of the quarter), when enterprise made the initial provision for
obsolete stock:

Dr. 632 – Cost of goods sold


Cr. 159 – Provision for obsolete stock

fiscal year (or of the quarter):


2. At the end of the following fiscal

- If provision for obsolete stock required in the current year is greater than the unused provision for
obsolete stock made in the prior year, the difference shall be recorded as follows:

Dr. 632 – Cost of goods sold (provision by details)


Cr. 159 – Provision for obsolete stock

- If provision for obsolete stock required in the current year is lower than the unused provision for
obsolete stock made in the prior year, the difference shall be recorded as follows:

Dr. 159 – Provision for obsolete stock


Cr. 632 – Cost of goods sold (provision by details)

Translation by KTC Assurance & Business Advisors 133


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ACCOUNT 161

EXPENDITURES FROM SUBSIDIES OF STAGE BUDGET

This account records expenditures for activities and projects covered by State Budget serving certain
economic, political and social mission assigned by the State or higher authorities from non-business
activities without any profit purpose. The amount spent for non-profit activities, projects is covered by
State Budget, Official Development Assistance or from higher authorities; or aided and non-
refundable.

This account only applies to the entities that have not-profit operations or projects funded by the State
Budget or subsidized by higher authorities or aided, not refundable. Those entities maybe use the
income from not-profit activities to cover its expenses.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Enterprise must be recorded in details accordi ng to each expenditure sources, fiscal year, budget
according
year and classification of State Budget items.

2. Accounting for expenditures for not profit operations or projects must be in line with the budget
prepared and consistent and reconciled among the accounting books, supporting documents as
well as the financial statements.

funds of State Budget, annual project funds of


3. This account records expenditures from subsidy funds
expenditures under the current financial management
enterprise including regular and irregular expenditures
policies.

4. At the end of the year, if the expenditures incurred in the current year have not been approved, the
balance of credit side of account 1612 “Current year budget” will be reallocated to debit side of
account 1611 “Prior year budget” while waiting for approval.

STRUCTURE AND CONTENTS OF ACCOUNT 161 – EXPENDITURES FROM


SUBSIDIES OF STATE BUDGET

Debit:

Expenditures from subsidies of State Budget incurred.

Credit:

- Expenditures not approved and therefore must be paid from another source.

- Expenditure approved to be covered by subsidy funds or project funds.

Debit balance:

Expenditures from subsidies and from projects of State Budget which have not been finalized or the
finalized report has not been approved.

Translation by KTC Assurance & Business Advisors 134


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Account 161 - Expenditures from subsidy of State Budget has two sub-accounts

Account 1611 - Prior year budget: to record prior years expenditures from subsidies of State Budget
and from projects which have not been approved.

Account 1612 - Current year budget: to record the current year expenditures from subsidies of State
Budget and from funded project.

MAJOR TRANSACTIONS

1. Payment for not-profit activities, programs and projects covered by the subsidy fund and the
project fund:

Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 111, 112…

2. Salary and other payable to employees or suppliers that are funded by subsidy and project fund:

Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 334 – Payable to employees
Cr. 331 – Trade payable

3. Using materials, tools and supplies for state and project activities:

Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 152 – Raw materials
Cr. 153 – Tools and supplies

4. Receipt of fund from higher authorities


authorities or withdrawal of forecast to pay directly for state and
project activities:

Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 461 – Subsidy funds from State Budget

If enterprise withdrawn the forecast from State Budget to spend, at the same time must credited in
account 008 “Subsidies of State Budget” (Off balance sheet accounts).

5. When enterprise transferred completed extraordinar


extraordinary repair expenses to use for state and project
activities:

Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 241 – Construction in progress (2413 – Extraordinary repair)

6. If enterprise acquired fixed assets or invested construction for State and project activities from
State Budget:

- When the enterprise acquires fixed assets or completed construction investment transferred to use:

Dr. 211 – Tangible assets


Cr. 111, 112, 331, 241, 461…

At the same time, records as follows:

Translation by KTC Assurance & Business Advisors 135


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Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 466 – Sources for acquisition of fixed assets

If the enterprise withdrawn the forecast from State Budget to acquire fixed assets, the single entry
is credited in account 008 “Subsidies of State Budget” (Off balance sheet accounts).

7. When the enterprise drawn social insurance, health insurance and trade union fees from salary of
employees who participated in the state and project activities:

Dr. 161 – Expenditure from subsidies of State Budget (1612)


Cr. 338 – Other payable (3382, 3383, 3384)

8. At the end of year, if the balance-sheet has not been approved, the accountant should transfer the
debits balance of account 1612 “Current year budget” to account
accoun 1611 “Prior year budget”:

Dr. 1611 – Prior year budget


Cr. 1612 – Current year budget

9. When the balance-sheet is approved, amount of expenditure from subsidies and from projects are
covered by subsidy funds from State Budget:

Dr. 461 – Subsidy funds from State Budget (4611 – Prior year subsidy funds from State Budget)
Cr. 161 – Expenditure from subsidies of State Budget (1611 – Prior year budget)

10. Sending from the subsidy fund was not right, they will not be approved by the authorized agency
and must be recovered:

Dr. 138 – Other receivable (1388)


Cr. 161 – Expenditure from subsidies of State Budget (1611 – Prior year budget)

Translation by KTC Assurance & Business Advisors 136


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MINISTRY OF FINANCE
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CATEGORY 2

NON-CURRENT ASSETS

A corporation’s non-current assets constitute tangible assets, intangible assets, finance lease
assets, investment property, investments in subsidiaries, investment in associates, shares in joint
ventures, Other long term investments, construction in progress, long term prepaid expenses,
deferred tax assets.

THIS CATEGORY MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. When accounting for non-current assets, the historical cost principle must be followed.
Furthermore, fixed assets must be presented at their net book value.

2. The three values associated with fixed assets are


are as follows: cost, accumulated depreciation,
and net book value.

Net book value equals (=) cost minus (-) accumulated depreciation of fixed assets

3. Fixed assets should be properly classified in accordance with the accounting statistical reports
accordance
for the purpose of management and government authorities.

4. Long term investments include long term ssecurities


ecurities investment, investments in a joint
venture, investments in real estate etc. The current value as well as all increases and decreases
in securities must be recorded. Furthermore, real estate must be recorded at historical cost.
Lastly, investments in joint ventures must be rrecorded
ecorded at actual costs incurred (with the joint
venture). Detailed records must be maintained to keep track of individual investments,
expenses (if any) and income arising from long term financial activities.

Non-current assets include fourteen acco unts, divided into three groups:
accounts,

Group Account 21 - Fixed assets are composed five accounts:

Account 211 - Tangible assets


Account 212 - Finance lease assets
Account 213 - Intangible assets
preciation and amortisation
Account 214 - Accumulated depreciation
Account 217 - Investment property

Group Account 22 - Long term investments are composed five accounts:

Account 221 - Investments in subsidiaries


Account 222 - Shares in joint ventures
Account 223 - Investment in associates
Account 228 - Other long term investments
Account 229 - Provision for long term investments

Group Account 24 – Other non-current assets is composed four accounts:

Account 241 - Construction in progress


Account 242 - Long term prepaid expenses
Account 243 - Deferred tax assets
Account 244 - Long term deposits

Translation by KTC Assurance & Business Advisors 137


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Translation by KTC Assurance & Business Advisors 138


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ACCOUNT 211

TANGIBLE ASSETS

This account reflects the current value and movements of all tangible assets of the entity at
historical costs.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Tangible assets mean assets in physical form which are possessed by the enterprises for use in
production and business activities in conformity with the recognition criteria of tangible
assets.

2. Tangible assets must have independent structures or many independent components united to
be a system doing one or several certain utilities. All the system w
will not work if any component
of the system is lack. Tangible assets must satisfy all following four recognition criteria:

a. Future economic benefits will surely be obtained;

b. Their historical cost has been determined in a reliable way;

c. Their useful life is estimated at more than one year;

d. They meet all value criteria according to current regulations (no less than 10 million VND).

components being united, in which each component


A system consists of many independent components
components is lack, the system still works on main
has different useful life. If one of the components
activities. However, for the purpose of managing and using fix assets, each component is
satisfies simultaneously four standards of fixed
managed independently. If each component satisfies
assets, each one is considered a tangible asset.

Working animals and animals fed for the purpose of getting their products are considered
tangible assets if they independently satisfy simultaneously four recognition criteria of
tangible assets.

Long live trees gardens are considered fixed assets if any part of the garden, or trees satisfies
simultaneously four recognition criteria of fixed assets.

3. Tangible assets are recorded in account 211 at historical cost. The historical cost of each
individual fixed asset should be recorded in detail. Historical cost of tangible assets is
determined as follows:

a. Historical cost of purchased tangible assets: Historical cost of purchased tangible assets
consists of buying price (minus (-) trade discounts and price reductions), taxes (excluding
reimbursed tax amounts) and expenses directly related to the putting of the assets into the
ready-for-use state, such as ground preparation expense; initial transportation, loading and
unloading expense; installation and trial operation expense (minus (-) amounts recovered
from products and wastes turned out from trial operation); expert cost and other directly-
related expenses.

For fixed assets purchased for production of goods and services subject to subtraction method
VAT, the value of fixed assets is recorded at buying price excluding VAT.

Translation by KTC Assurance & Business Advisors 139


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For fixed assets purchased for production of goods and services not subject to VAT or subject
to VAT in direct method, or using in State activities, projects or programs or for social
welfare activities, the value of fixed assets is recorded at total amount including VAT.

b. Tangible assets formed from construction investment by contractual mode: The historical
costs of tangible assets formed from construction investment by contractual mode are the
settled costs of the invested construction as current regulations on managing of investment
and construction, other directly related expenses and registration fee (if any).

Fixed assets are working livestock or livestock fed for products, Long term orchard, historical
cost is the actual expenses paid to these livestock, orchards from the beginning to the time of
come into use as current regulations on managing of investment and construction, other
related expenses.

c. Tangible assets purchased in deferred payment mode: The historical cost of tangible assets
purchased in deferred payment mode shall be shown at the buying price promptly paid at the
purchase time. The difference between the payable total amount and the promptly-paid
buying price shall be accounted as expense in the payment period.

d. Self-constructed or self made tangible assets: the historical cost of self-constructed or self
made tangible assets is its actual cost plus (+) installation and trial operation cost. Where the
themselves into fixed assets, the historical costs shall
enterprises turn the products made by themselves
be the production costs of such products plus (+ (+)) the expenses directly related to the putting
of the fixed assets into the ready-for-use state. In these cases, all internal profits must not be
included in the historical cost of these assets.
assets. Unreasonable expenses, such as wasted
materials and supplies, labour or other costs in excess of the normal levels arising in the self-
construction or self-generating process must not be included in the historical cost of tangible
assets.

e. Tangible assets purchased in exchange form: The historical cost of a tangible fixed asset
purchased in the form of exchange for a dissimilar tangible asset or other assets shall be
determined according to the reasonable value of the received tangible assets, or that of the
exchanged ones, after adjusting the cash amounts or cash equivalents which are additionally
paid or received.

The historical cost of a tangible asset purchased in the form of exchange for similar one, or
possibly formed through its sale in exchange for fo the right to own similar ones (similar assets
bus
are those with similar utilities, in the same business field and of equivalent value). In both
cases no profit or loss is recognized in the exchange process. The historical cost of the
received asset shall be the residual value of the exchanged one.

f. Tangible assets granted or received: Historical cost of tangible assets granted or received
consists of the net book value of the fixed assets recorded on the book of the entity that sent
the assets to or the actual value determined by the Handover Committee and expenses for
transporting, loading, for upgrade, assemble, trial test, registration excise (if any) that the
entity received the assets pays to put the assets into use.

Historical cost of tangible assets transferred among divisions in the company is the historical
cost recorded in the entity received following documents of those assets. Based on the
historical cost, accumulated depreciation, the net book value in the accounting book and
documents of the assets, the entity received those assets records into its accounting book.
Expenses related to the transfer assets among divisions of the company is not recorded to the
historical cost of assets but recorded into production, business expenses in the period.

Translation by KTC Assurance & Business Advisors 140


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g. Tangible assets augmented from joint venture contribution, recollecting the capital
contribution surplus, donation and present, etc.: Historical cost of assets augmented from
joint ventures, recollecting the capital contribution surplus, donation and present etc., is the
actual value decided by the Handover Committee and the expenses directly related to the
putting of the assets into the ready-for-use state such as expenses for transporting, loading,
assemble, trial test, registration excise (if any).

4. The historical cost of tangible assets is changed only in the following cases:

- Revaluation of fixed assets following the State decision;

- Additional construction and equipment provided for fix assets;

- useful life, or increase the power of assets;


Changing parts of fixed assets to increase the useful

- Improving parts of fixed assets to increase considerably qualities of productions;

- Using new producing technology progress to decrease running cost of assets;

- De-assembling one or some parts of fixed assets.

5. All increases and decreases of fixed assets must be recorded in the minutes and comply with
accountant's responsibility to set-up and complete fixed
the respective regulations. It is the accountant's
assets registers.

6. Tangible assets under operating lease must be depreciated as regulations of current


accounting standard and financial policies.

7. Tangible assets must be recorded in details for each asset, kinds of fixed assets and location,
time started using and their status for managing fixed assets.

ACCOUNT 211 - TANGIBLE ASSETS


STRUCTURE & CONTENTS OF ACCOUNT

Debit:

- Increase due to completion of construction in progress, purchases, contributions by the joint


venture parties, donations, aid, etc.;

- Increase due to additional equipment and improvements of fixed assets;

- Increase of the fixed assets historical cost due to revaluation.

Translation by KTC Assurance & Business Advisors 141


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Credit:

- Decrease in the historical cost of tangible assets due to transfers to other enterprises, disposals
or contribution to a joint venture;

- Decrease in the historical cost of fixed assets due to disassembling parts of the fixed assets;

- Decrease due to the devaluation of fixed assets.

Debit balance:

The current value of fixed assets at the enterprise.

211 - six

- Account 2111 – Architect costs, building: to record the value of construction projects such as
buildings, architect costs, fences, water tower, water tanks, park, decoration, infrastructure
projects such as roads, bridges and locks, railway, quay and wharf, etc.

- Account 2112 - Machinery equipment: to record value of machinery and equipment used in
the business, production activities comprising of specialized machinery, equipment assembly
lines and single machines.

- Account 2113 - Transpor tation and facilities: to record value of transportation facilities
Transportation
consisting of road, railway, waterway, airway, pipe lines and carrying facilities
(communications utilities, merchandi
merchandises/material
ses/material conveyor belt).

- Account 2114 - Office equipment: to record value of equipment and tools used in business
and administrative management (computer, ceiling fans, stand fans, tables and chairs,
measuring equipment, quality testing equipment, vacuum and cleaners, etc.).

- Account 2115 - Long life tree, working and producing animals: to record value of all long life
trees (coffee, tea, rubber, orchid etc.), worki
working
ng animals (elephant, horse, cow,..) and animals
fed for the purpose of getting their products (milk cow, breeding animals etc.).

- Account 2118 - Other tangible assets: to record value of other tangible assets not included
above (art, technical manuals etc.).

MAJOR TRANSACTIONS

I. Increase in tangible assets

Increase in fixed assets due to financing from parent company (SOEs), contributions of fixed
assets, purchasing, and completion of construction activities, donation and aid.

1. Receipt of shares in joint ventures or capital as tangible assets:

Dr. 211 - Tangible assets


Cr. 411- Paid-in capital

2. Acquisitions of tangible assets

2.1. Acquisitions of tangible assets (new or used) used in producing, selling goods, services

Translation by KTC Assurance & Business Advisors 142


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subject to subtraction method VAT, according to documents involved in purchasing fixed assets,
the accountant defines historical cost of fixed assets, prepares the hand-over minute of fixed assets
and records:

Dr. 211 - Tangible assets (price excluding VAT)


Dr. 133 - VAT deductible (1332)
Cr. 111, 112, ...
Cr. 331 - Trade payables
Cr. 341 - Long term borrowings

2.2. Purchasing fixed assets for producing, selling goods, services not subject to VAT or subject
to VAT in direct method:

Dr. 211 - Tangible assets (total amount)


Cr. 111, 112, ...
Cr. 331 - Trade payables
Cr. 341 – Long term borrowings

2.3. If fixed assets are acquired by funds for cconstruction


onstruction expenditures or corporation’s business
development funds for business and production activities,
activities, the accountant must increase business
funds and decrease for construction expenditures
expenditures or decrease business development funds when
on investment is approved:
the finalization of construction

Dr. 414 - Business development funds


Dr. 441 - Funds for construction expenditures
Cr. 411 - Paid-in capital

3. Acquisition of tangible assets in deferred, instalment method:

- Purchasing tangible assets in deferred, instalment method and immediately used in business
activities:

Dr. 211 - Tangible assets (historical cost – at sight price)


Dr. 133 - VAT deductible (1332) (if any)
Dr. 242 – Long term prepaid expenses (long term prepaid expenses) (deferred interest
expenses is the total payment minus (-) the at sight price minus (-) VAT, if any)
Cr. 331 - Trade payables (total amount)

- Periodically, make payment to the sellers:

Dr. 331 - Trade payables


Cr. 111, 112 (periodic payment includes both the historical cost and the periodic deferred
and instalment interest expenses)

- Periodically, record into expenses based on the deferred, instalment interest expenses in each
period:

Dr. 635 – Financial expenses


Cr. 242 - Long term prepaid expenses

4. Corporation is donated, gifted fixed assets used in business and production activities:

Dr. 211 - Tangible assets

Translation by KTC Assurance & Business Advisors 143


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Cr. 711 - Other incomes

Other costs directly involved in the donated, gifted assets are recorded in historical cost:

Dr. 211 - Tangible assets


Cr. 111, 112, 331, ...

5. Self-produced fixed assets:

- When use products being self-produced to change into fixed assets for business and
production activities:

Dr. 632 – Cost of goods sole


Cr. 155 - Finished goods (if used)
Cr. 154 - Work in progress (if put into use, not through the company’s premise)

Simultaneously, increase tangible assets:

Dr. 211 – Tangible assets


revenue is the actual cost of the product)
Cr. 512 – Inter-company revenue (the revenue

- Record of expenses for assembling, test running involved in tangible assets:

Dr. 211 - Tangible assets


Cr. 111, 112, 331,...

6. Acquisition of tangible assets as bartering:

6.1. When receiving the similar tangible assets as bartering and using in production, business
activities immediately:

Dr. 211 - Tangible assets (historical cost of the assets received based on the net book value of
the assets sent as bartering)
asset (depreciated value of the assets sent as
Dr. 214 - Accumulated depreciation of fixed assets
bartering)
Cr. 211 – Tangible assets (historical cost of the assets sent as bartering)

ing with the dissimilar


6.2. The tangible assets purchased as bartering dissimila tangible assets:

- When sending the tangible assets as bartering:

Dr. 811 - Other expenses (the net book value of the tangible assets sent as bartering)
Dr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 211 – Tangible assets (historical cost)

Simultaneously increase the income from exchanging fixed assets:

Dr. 131 - Trade payables (total amount)


Cr. 711 - Other incomes (the fair value of fixed assets sent as bartering)
Cr. 3331 – VAT (account 33311) (if any)

- When receiving tangible assets as bartering:

Translation by KTC Assurance & Business Advisors 144


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Dr. 211 – Tangible assets (fair value of fixed assets received as bartering)
Dr. 133 – VAT deductible (1332) (if any)
Cr. 131 - Trade payables (total amount)

- Receipt of additional money since the value of the sent assets are higher than the value of the
received assets in exchange:

Dr. 111, 112 (additional amount)


Cr. 131 - Trade payables

- Additional payment since the value of the sent assets are lower than the value of the received
assets in exchange:

Dr. 131 - Trade payables


Cr. 111, 112,...

7. Acquisition of tangible assets such as buildings, architect costs attached to land used rights
and put in to production and business activities:

Dr. 211 – Tangible assets (historical cost - detailing in buildings, architect costs)
Dr. 213 – Intangible assets (historical cost - detailing in land use rights)
Dr. 133 – VAT deductible (if any)
Cr. 111, 112, 331,...

8. Tangible assets increases when finished construction investment:

8.1. Construction recorded in the same accounting book system of the company:

- When the construction is completed, finalized and put into production, business:
finalized

Dr. 211 – Tangible assets (historical cost)


Cr. 241 – Construction in progress

- If the assets formed by the investment do not satisfy the recognition criteria of tangible assets
as regulations of the accounting standard:

Dr. 152, 153 (materials, tools and supplies received)


Cr. 241 - Construction in progress

- If the construction has been funded by construction capital fund or other capital funds, the
accountant will record an increase in paid in capital and a decrease in the funds as approved.

8.2. Construction investment is not recorded in the same accounting book of the entity (the
investor has a separate accounting book to record the investment):

- When the company is handed over the completed construction and the source formed the
assets (including the borrowings for construction projects):

Dr. 211 – Tangible assets (historical cost)


Dr. 133 – VAT deductible (1332) (deducted amount)
Cr. 411 - Paid-in capital (owner’s equity)
Cr. 341 - Long term borrowings (borrowed from credit institutions); or
Cr. 343 - Debt securities (capital from issuing bond)

Translation by KTC Assurance & Business Advisors 145


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Cr. 136 – Inter-company receivable (capital granted from the high authority)

- For SOEs, if the assets (invested for long-term) are completed, finalized and handed over, the
value to be recorded shall be the value at the time of handover (value agreed by the
authority):

Dr. 211 – Tangible assets (historical cost approved)


Dr. 133 – VAT deductible (1332) (if any)
Cr. 411 - Paid-in capital (owner’s equity)
Cr. 341 - Long term borrowings
Cr. 136 – Inter-company receivable

The assets completed shall be handed-over accompanying with the long term borrowings and
debts formed those assets.

9. When the construction or its categories is co mpleted and put into use but has not been
completed
finalized and approved yet, based on the actual expenses for construction the company
records the estimated cost to increase the tangible assets (a (as a base to calculate the
depreciation for the assets put in use). After the finalization of the investment is approved,
any difference from the estimated value shall be adjusted.

10. Capital contribution to joint ventures in the form of assets shall be recorded based on the
form
value agreed by parties:

Dr. 211 – Tangible assets


Cr. 411 - Paid-in capital

11. Record of fixed assets transferred within the General Corporation (without payment):

Dr. 211 - Tangible assets (historical cost)


Cr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 411 - Paid-in capital (net book value)

12. When use subsidies of State Budget, or of funded project to invest, purchase fixed assets and
then put the purchased ones into State projects or activities:

Dr. 211 – Tangible assets


Cr. Account 111, 112
Cr. 241 - Construction in progress
Cr. 331 - Trade payables
Cr. 461 - Subsidy funds from State Budget (4612)

Simultaneously record an increase in the sources for acquisition of fixed assets:

Dr. 161 - Expenditures from subsidies of State Budget (1612)


Cr. 466 - Sources for acquisition of fixed assets

For budgeted assets acquisition, record a single entry to credit side of account 008 – Budget
for expenditures from subsidies of State Budget.

13. Acquisition of fixed assets funded by welfare funds that is completed and then used for
cultural, welfare activities:

Translation by KTC Assurance & Business Advisors 146


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Dr. 211 – Tangible assets (Total amount)


Cr. 111, 112, 331, 341,...

- Simultaneously record a decrease in the welfare funds:

Dr. 4312 - Welfare funds


Cr. 4313 - Welfare funds to purchase fixed assets

14. Expenses created after the initial recognition involving in tangible assets such as expenses for
repair, improvement and upgrade:

- When expenses for repair, improvement of the tangible assets incurred after the initial
recognition:

Dr. 241 – Construction in progress


Dr. 133 – VAT deductible (1332)
Cr. 112, 152, 331, 334,...

- When the repair, improvement of fixed assets is completed and put them into use:

If the expenses satisfied the recognition criteria of tangible assets, then an increase to the
historical cost of tangible assets is recorded:

Dr. 211 – Tangible assets


Cr. 241 - Construction in progress

If the expenses satisfied recognition criteria of tangible assets, an increase to the historical
cost of tangible assets is recorded:

Dr. 623, 627, 641, 642 (if the value is low)


Dr. 242 – Long term prepaid expenses (in case of allocation of high value in long term)
Cr. 241 - Construction in progress

II. Decrease in tangible assets

Decrease of fixed assets may be due to many different reasons such as disposals, damage,
shortage of fixed assets in physical collation, cont
contributions to a joint venture, transfer to other
enterprises, disassembling some parts of the fixed assets etc. For all decreases in the value of
fixed assets, the accountant must complete all necessary procedures and determine any gains or
losses.

Based on the relevant documents, the accountant would record the following:

1. Sales of fixed assets used in business, production activities, or in State projects and activities:

In most cases, fixed assets are sold because the company no longer uses them or they are
ineffective. When fixed assets are sold, the necessary procedures should be followed (a
committee is set up to value the assets, publicly report and auction organisation, business
contract and document of transferred fixed assets are prepared). Based on the sales
documents or receiving vouchers from the sale of fixed assets to record the following:

1.1. Sales of fixed assets used in business, production activities:

Translation by KTC Assurance & Business Advisors 147


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- If the company subject to subtraction method VAT, proceeds from the sales of fixed assets
are recorded as follows:

Dr. 111, 112, 131, ...


Cr. 3331 - VAT payable (33311)
Cr. 711 – Other incomes (price not include VAT)

- If the company subject to VAT in direct method, proceeds from the sales of fixed assets are
recorded as follows:

Dr. 111, 112, 131, ...


Cr. 711 - Other incomes (total amount)

- Based on the sales documents of fixed assets to write off the sold assets:

Dr. 214 - Accumulated depreciation of fixed assets (2141) (depreciated value)


Dr. 811 – Other costs (the net book value)
Cr. 211 – Tangible assets (historical cost)

- Other costs involving in selling the fixed assets are debited into account 811 "Other
incomes".

1.2. Sale of tangible assets used in State projects and activities:

- Based on the sales documents of fixed assets to reduce the sold fixed assets:

Dr. 466 - Sources for acquisition of fixed assets (net book value)
Dr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 211 – Tangible assets (historical cost)

- Income involving in the sale of tangible assets is recorded into related accounts as regulations
of authorised agency.

1.3. Sales of tangible assets used in cultural, welfare activities:

- transferred to reduce the sold assets:


Based on the minute of fixed assets transferred

Dr. 431 - Bonus and welfare funds (4313) (the net book value)
Dr. 214 - Accumulated depreciation of fixed assets (depreciated value)
Cr. 211 – Tangible assets (historical cost)

- Simultaneously record the income from the sales of fixed assets:

Dr. 111, 112,…


Cr. 431 - Bonus and welfare funds (4312)
Cr. 333 - Tax and statutory obligations (3331) (If any)

- Record the expenses from the sales of assets:

Dr. 431 - Bonus and welfare funds (4312)


Cr. 111, 112,…

Translation by KTC Assurance & Business Advisors 148


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2. Accounting for fixed assets disposals

Fixed assets are disposed of for the following reasons: they are damaged and can no longer be
used, they are technically obsolete or no longer suitable for business, production demands.

When it has been decided to dispose of fixed assets, the company must select a team of
workers to take care of the disposal. This team is responsible for organizing the disposal in
accordance with process, procedures in the financial management regulations and preparing
“Minute of disposal of fixed assets” as regulated template.

Minutes are made in duplicate in which one copy goes to the accounting department and the
other copy goes to the department which used the asset.

Based on the fixed asset disposal minute and relevant documents, the accountant will record
the fixed assets disposal as the sale of fixed assets

3. Contribute to jointly controll entity by tangible assets:

y control entity by fixed assets:


3.1. When contribute to jointly

Dr. 222 - Shares in joint ventures (value agreed by parties)


ulated depreciation of fixed assets (depreciated amount)
Dr. 214 - Accumulated
Dr. 811 - Otherr incomes (difference
(difference of revalued amount and net book value)
Cr. 211 - Tangible assets (historical cost)
Cr. 3387 - Deferred income (difference between revalued amount and net book value of
fixed assets shall be deferred in corresponding to the company’s benefit in the joint
venture)
Cr. 711 - Other incomes (difference between revalued amount and net book value of
fixed assets in corresponding to the company’s benefit of other parties in the venture).

3.2. Periodically, based on the useful life of fixed assets that th


the jointly control entity uses, the
accountant shall allocate the deferred income to other income in the period:
income

Dr. 3387 - Deferred income (details of difference


difference due to the revaluation of fixed assets
contributed to jointly control entity);
Cr. 711 - Other incomes (the deferred income allocated in the period)

4. Accounting for the surplus or shortage of tangible assets:

The surplus or shortage of fixed assets must be specified the reasons. Based on the “Fixed
assets physical counting report" and the conclusion of the counting committee, the accountant
should accurately record the surplus or shortage and on a timely basis.

4.1. Surplus of fixed assets:

- The surplus in assets due to assets not being recorded, the accountant must record the
increase in fixed assets for each specific case based on the related documents:

Dr. 211 – Tangible assets


Cr. 241, 331, 338, 411,…

- If the surplus of fixed assets are being used, besides recording the increase in fixed assets,
based on the historical cost and depreciation rate, the accountant must calculate the

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depreciation amount to provide additional charge for fixed assets or for assets used in welfare
activities or State projects and activities:

Dr. Production, business costs (Fixed assets used in production, business activities)
Dr. 4313 - Welfare funds to form fixed assets (Fixed assets used for welfare)
Dr. 466 - Sources for acquisition of fixed assets (Fixed assets used for State projects,
activities)
Cr. 214 - Accumulated depreciation of fixed assets (2141).

- If the surplus of fixed assets which belong to another entity, that entity should be informed. If
the owner of the surplus asset can not be determined, the situation should be reported to the
higher level authorities or the financial entity (for SOE) to resolve the problem. While
waiting for an explanation, the accountant should temporarily record the assets to account
002 “Materials, merchandise goods held under tr trust or for processing" (off balance sheet
accounts) in order to keep track of it based on the “Physical counting report”.

sponsible for shortages in assets must be determined. The treatment


4.2. The reasons and the person responsible
should be in accordance with the current financial management regulations.

- If the solution is found out, based on "Report for treatment of fixed assets shortage" and the
fixed assets register, the accountant must determine the historical cost and the accumulated
depreciation of the fixed assets. This is the base to write off the fixed assets and its net book
value. Depending on the solution, the entry is:

Shortage of fixed assets used in production and business:

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


Dr. 111, 334, 138 (1388) (If the responsible person will compensate)
Dr. 411 – Paid-in capital (If decrease in capital is allowed)
Dr. 811 – Other costs (If the company bears the loss)
Cr. 211 – Tangible assets

Shortage of fixed assets used in State projects or activities:

(1) Decrease in fixed assets:

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


Dr. 466 - Sources for acquisition of fixed assets (the net book value)
Cr. 211 – Tangible assets (historical cost)

(2) The net book value of shortage fixed assets must be collected according to the solution made:

Dr. 111 - Cash on hand (received in cash)


Dr. 334 - Payables to employees (If deducted into salary of employees)
Cr. Related accounts (depending on specific solution)

Shortage fixed assets being used in cultural, welfare activities:

(1) Decrease in fixed assets:

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


Dr. 4313 - Welfare funds to make the fixed assets (the net book value)

Translation by KTC Assurance & Business Advisors 150


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Cr. 211 – Tangible assets (historical cost)

(2) The rest value of shortage fixed assets must be collected according the solution made:

Dr. 111 – Cash on hand (If received in cash)


Dr. 334 - Payables to employees (If deducted to the salary of employees)
Cr. 4312 - Welfare funds

- When the reason for shortage fixed assets has not been found and the solution has not been
determined:

If shortage fixed assets being used in production, business activities:

(1) Decrease in fixed assets and write off the net book value of shortage fixed assets:

Dr. 214 - Accumulated depreciation of fixed assets (2141) (depreciated value)


Dr. 138 – Other receivables (1381) (the net book value)
Cr. 211 – Tangible assets (historical cost)

(2) When a resolution has been made for the net book value of shortage fixed assets:

Dr. 111 - Cash in hand (compensation received)


Dr. 138 - Other receivables (1388) (If the responsible person will compensate)
Dr. 334 - Payables to employees (If deducted to salary of employees)
Dr. 411 - Paid-in capital (If a decrease in capital is allowed)
Dr. 811 - Other expenses (If the company bears the loss)
Cr. 138 – Other receivables (1381)

Shortage of fixed assets used in State projects or activities:

(1) Decrease in fixed assets:

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


Dr. 466 - Sources for acquisition of fixed assets (the net book value)
Cr. 211 – Tangible assets (historical cost)

Simultaneously record the net book value of shortage fixed assets into account 1381
“Shortage of assets awaiting resolution”:

Dr. 1381 - Shortage of assets awaiting resolution


Cr. 338 – Accruals

(2) When a resolution for the net book value of shortage fixed assets has been made:

Dr. 111, 334,...


Cr. 1381 - Shortage of assets awaiting resolution

Simultaneously record the compensation for the net book value of shortage fixed assets into
related accounts as decided by the authority:

Dr. 338 - Other payable


Cr. Related accounts (Account 333, 461,...)

Translation by KTC Assurance & Business Advisors 151


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Shortage fixed assets being used in cultural, welfare activities:

(1) Decrease in fixed assets:

Dr. 214 - Accumulated depreciation of fixed assets (Depreciated value)


Dr. 4313 - Welfare funds funded fixed assets (Net book value)
Cr. 211 - Tangible assets (Historical cost)

Simultaneously record the net book value of shortage fixed assets into account 1381
“Shortage of assets awaiting resolution”:

Dr. 1381 - Shortage of assets awaiting resolution


Cr. 4312 - Welfare funds

(2) When a resolution for the net book value of shortage fixed assets has been made:

Dr. 111, 334,...


Cr. 1381 - Shortage of assets awaiting resolution

5. Assets used in production, business activities do not meet the recognition criteria of tangible
assets must be treated as equipments:

Dr. 623, 627, 641, 642 (If the net book value is low)
Dr. 242 – Long term prepaid costs (If the net book value is high and must be allocated)
Dr. 214 - Accumulated depreciation of fixed assets (Depreciated amount)
Cr. 211 – Tangible assets (Historical cost)

6. Accounting for the sale and lease of tangible assets under the operating lease is referred to
guidance in account 811 or 711).

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ACCOUNT 212

FINANCE LEASE ASSETS

This account reflects the current value and movements of financial lease assets of the enterprise.

- A finance lease is a lease whereby the lessor transfers most of the risks and rewards
associated with the ownership over an asset to the lessee. The ownership over the asset may
be transferred at the end of the lease term.

- Classification of leases as finance leases if they meet one of five following standards:

The lessor transfers the asset’s ownership to the lessee at the end of the lease term;

At the inception of the lease, the lessee has the


the right to purchase the leased asset at a price
expected to be lower than the reasonablee price at the end of the lease term;

The lease term accounts for most of the economic life


life of the asset even if the ownership is not
transferred;

At the inception of the lease, the present value


value of the minimum lease payment accounts for
most of the reasonable value of the leased asset;

The leased asset is of a special-use type whic


which
h can be used only by the lessee without major
modification or overhaul.

- Lease contracts will be also considered finance lease


lease contracts if they fall into at least one of
the following three cases:

If the lessee cancels the contract and pays compensation for damage associated with the
contract cancellation to the lessor;

Incomes or losses from the change in the reasonable


reasonable value of the residual value of the leased
asset are associated with the lessee;

The lessee is able to continue leasing the asset after the lease contract expires at a rent lower
than market rents.

The lease of assets being the land use right will be usually classified as operating lease.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. This account is used by the lessee to record the value of the finance lease assets. These assets
do not belong to the enterprise but the enterprise has a legal obligation and responsibility to
keep, manage and use them in the same way as the company's own assets.

Historical cost of finance lease assets is recorded as the fair value of the leased assets or
present value of the minimum lease payment (when the reasonable value is higher than the
present value of the minimum lease payment) and initial direct costs created involving in
finance lease activities.

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When calculate the present value of minimum lease payment, the company may use the
implicit interest rate, the interest rate noted in the lease contract or marginal interest rate from
borrowing of the lessee.

Historical cost of finance lease assets does not include the VAT that the lessor paid when
purchasing fixed assets to let others lease (This amount of tax the lessee must return to the
lessor, including when finance lease assets used in production of goods and services subject
to subtraction method VAT and in direct method, or not subject to VAT).

2. This account is not used to record the value of fixed assets under operating leases.

3. Periodically, the lessee has responsibility to determine the depreciation of the assets and
charge into production and business expenses on the consistent basis of depreciation policy
among similar assets of the company.

If the lessee are not certain on possession of lease assets when the leas
lease contract is over, the assets
shall be depreciated over lease period if the lease pe riod is shorter than useful life of the lease
period
assets.

4. Periodically, upon receiving the invoice the lessee


lessee must pay the VAT amount to the lessor
and record as follows:

- Finance lease used for production, business activities of goods, services subject to subtraction
activities
method VAT, the amount of VAT in each period is recorded into account 133 "VAT
deductible" (1332);

- Finance lease used for production, business activities of goods, services subject to VAT in
direct method, the amount of VAT in each peri od is recorded into business expenses in the
period
period.

5. Account 212 is recorded in details


details for each leased fixed assets.

STRUCTURE AND CONTENTS OF ACCOUNT 212 - FINANCE LEASE ASSETS

Debit:

Increase of historical cost for finance lease assets.

Credit:

Decrease of historical cost of finance lease assets due to the asset being returned to the lessor
when the lease contract is over or the asset is purchased.

Debit balance:

Historical cost of current financial leased assets.

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MAJOR TRANSACTIONS

1. Record of initial direct costs involving in finance lease assets before receiving the assets such
as negotiation, signing contract expenses:

Dr. 142 – Prepayment expenses


Cr. 111, 112,...

2. Record of payment in advance for or deposit to guarantee the leases:

Dr. 342 – Long term borrowings (prepaid amount - if any)


Dr. 244 - Long term deposits
Cr. 111, 112,...

3. When the amount payable of finance lease is determined at the price excluding VAT that the
lessor paid when purchasing fixed assets.

3.1. When receiving finance lease assets, based on the lease contract and related documents the
accountant records value of finance lease assets using the price excluding VAT input:
assets

Dr. 212 - Financial leased assets (price excluding VAT)


Cr. 342 - Long term borrowings (present value of the leased assets or current value of the
minimum lease payment minus (-) the payable in the period)
Cr. 315 - Current portion of long term loan (payable in the period)

3.2. Record of initial direct costs involving in finance lease activities into historical cost of
finance lease assets:

Dr. 212 - Financial leased assets


Cr. 142 - Short-term prepaid costs, or
Cr. 111, 112,... (direct costs involving in lease activities created when receiving lease
assets)

3.3. At the end of the accounting period, based on the lease contract, the accountant determines
the current portion of long term loans in coming period:

Dr. 342 - Long term borrowings


Cr. 315 - Current portion of long term loan

3.4. Periodically, receipt of the lease bill:

3.4.1 When the finance lease asset is used in production, business activities of goods and services
subject to subtraction method VAT:

- Record of payment of principle amount, interest expenses and VAT to the lesse:

Dr. 635 – Financial expenses (interest expenses in this period)


Dr. 315 - Current portion of long term loan (principle amount paid in this period)
Dr. 133 – VAT deductible (1332)
Cr. 111, 112,...

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- When receiving the invoice but the company does not pay immediately, based on the invoice
the accountant record interest payable and the VAT amount into account 315 - Current
portion of long term loan:

Dr. 635 - Financial expenses (Interest expenses)


Dr. 133 - VAT deductible (1332)
Cr. 315 - Current portion of long term loan

3.4.2 When finance lease assets used in production of goods and services not subject to VAT or
subject to VAT in direct method:

- Record of payment of principle amount, interest expenses and VAT to the lessor:

Dr. 635 - Financial expenses (Interest expenses paid in this period)


Dr. 315 - Current portion of long term loan (Principle amount paid in this period)
Dr. 623, 627, 641, 642 (VAT paid this period)
Cr. 111, 112,...

- When receiving the invoice but the company does not immediately pay, based on invoice the
accountant records interest payable and VAT payable into account 315 "Current portion of
long term loan":

Dr. 635 - Financial costs (Interest expenses payable in this period)


Dr. 623, 627, 641, 642 (VAT payable in the period)
Cr. 315 - Current portion of long term loan

determined at the price including VAT that the


4. When the amount payable of finance lease is determined
lessor paid when purchasing fixed assets:

assets, the lessee also bears VAT amount that the lessor paid
4.1. When receiving finance lease assets,
when purchasing the assets. Based on the lease contract and related documents, the
excluding VAT that must be returned to the
accountant records value of assets using price excluding
lessor:

Dr. 212 - Finance leased assets (price not include VAT)


Dr. 138 – Other receivables (VAT input of finance lease assets)
Cr. 315 - Current portion of long term loan (Payable in this period including VAT)
Cr. 342 – Long term borrowings (Present value of minimum lease payment or reasonable
value of leased assets minus (-) payables in this period plus (+) VAT amount that lessee
must pay within the lease period)

4.2. Record of direct initial costs into historical cost of finance lease assets:

Dr. 212 - Financial leased assets


Cr. 142 - Short-term prepayment
Cr. 111, 112,...(direct expenses created involving in finance lease activities when
receiving the assets)

4.3. At the end of the accounting period, based on the lease contract, the accountant determines
the current portion of long term loans in coming period:

Dr. 342 – Long term borrowings


Cr. 315 - Current portion of long term loan

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4.4. Periodically, record of the lease payment:

- Record payment of principle amount and interest expenses to the lessor:

Dr. 635 – Financial expenses (Interest expenses paid in the current period)
Dr. 315 - Current portion of long term loan (principle amount paid in the current period
including VAT)
Cr. 111, 112,...

- Based on the invoice, record the VAT payable to the lessor in the period:

When finance lease assets is used in production of goods and services subject to subtraction
method VAT:

Dr. 133 - VAT deductible (1332)


Cr. 138 - Other receivables

When finance lease assets is used in produc


production
tion of goods and services subject to VAT in
direct method or not subject to VAT:

Dr. 623, 627, 641, 642,...


Cr. 138 - Other receivables

- When receiving invoice but the company does not pay immediately, based on the invoice the
company records the interest payable in the current period to account 315 “Current portion of
long term loan”:

Dr. 635 - Financial expenses


Cr. 315 - Current portion of long term loan (Interest payable in the period)

- Simultaneously, based on the invoice, the company records the VAT returned
return to the lessee in
the period. The accounting entries are similar to record of payment when receiving the
invoice.

5. Record payment of commitment fee in using capital to the lessor:

Dr. 635 - Financial expenses


Cr. 111, 112,...

6. When returned the assets to the lessor as agreed in the lease contract, the accountant reduces
the value of assets:

Dr. 214 - Accumulated depreciation and amortization (2142)


Cr. 212 - Finance leased assets

7. The lease contract regulates that the leesee only leases a part of the value of the assets, then
purchases those assets. When received the transfer of the own right of assets, the accountant
records a decrease in the finance lease assets and and increases in the tangible assets owned
by the company. When change from finance lease assets to assets owned by the company:

Dr. 211 - Tangible assets

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Cr. 212 – Finance leased assets (net book value of finance lease assets)
Cr. 111, 112,... (Additional payable amount)

Simultaneously transfer the depreciation value:

Dr. 2142 – Amortization of finance lease assets


Cr. 2141 - Accumulated depreciation of fixed assets

8. Accounting for the sale and lease back under the finance lease assets:

8.1. Record of the sale and lease back with the price higher than the net book value of the assets:

- Accounting for the sale is referred to item 7.3 - Account 711.

- Accounting entries for recognition of leased assassets and payables for financial lease, and
periodical payment are similar to item 3 & 4 of account 212.

- Periodically, the accountant determines depreci ation amount and charge to production and
depreciation
business expenses:

Dr. 623, 627, 641, 642,...


Cr. 2142 - Accumulated depreciation and amortization of finance leased assets.

- Periodically, the accountant transfers difference between the sale price and the net book
value of fixed assets sold and leased back, and reduces the production, business expenses in
the period following lease period:

Dr. 3387 - Deferred income


Cr. 623, 627, 641, 642,...

lower price than net book value of assets:


8.2. Record of the sale, lease back with lower

- Accounting for the sale is referred to item 7.2 - Account 711.

- ass
Accounting entries for recognition of leased assets and payables for financial lease, and
periodical payment are similar to item 3 & 4 of account 212.

- differe
Periodically, the accountant transfers the difference between lower (loss) the sale price and
the net book value of fixed assets sold and leased back, and records an increase in
production, business expenses in the period:

Dr. 623, 627, 641, 642,...


Cr. 242 - Long term prepaid expenses

Translation by KTC Assurance & Business Advisors 158


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ACCOUNT 213

INTANGIBLE ASSETS

This account reflects the current value and the increases, decreases in intangible assets of a
company.

Intangible assets mean 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
assets.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Historical cost means all costs incurred by th thee enterprises to acquire intangible assets as of
the time of putting these assets into use as expected.

- The historical cost of a separately-purchased in tangible fixed asset consists of the buying
intangible
price (minus (-) trade discounts or price reductions), taxes (excl (excluding reimbursed tax
amounts) and expenses directly related to th
thee putting of the asset into use as planned;

- Where a procured intangible asset is paid by deferred payment mode, its historical cost shall
be shown at the purchasing price which should have been promptly paid at the time of
amount payable and the promptly-paid purchase
purchase. The Difference between the total amount
price shall be accounted into the production and business expense according to the payment
period, except where such difference is included in the historical cost of the intangible asset
(capitalization) under the regulations of the accounting standard “Costs of borrowing”;

- exchange involving payment accompanied with


If an intangible asset is formed from the exchange
vouchers related to the capital ownership of the establishment, its historical cost is the
reasonable value of vouchers issued in relation to capital ownership;

- The historical cost of an intangible asset for a definite term is the right to use land when the
receiving the land use right lawfully transferred
land is allocated or the payment made when receiving
from other persons, or the land use right value contributed to joint-venture capital;

- The historical cost of an intangible assets for indefinite term is the payment made when
receiving the land use right lawfully transferred from other entities (including payment made
to individuals, organisations who transferred the right, compensation for land clearance,
ground preparation, registration fee, etc.).

- The historical cost of intangible assets allocated by the State or presented, donated is
determined according to the initial reasonable value plus (+) the expenses directly related to
the putting of the assets into use as planned.

2. Actual costs incurred related to development stage are recorded into production, business
expenses in the period. Intangible assets created in development stage satisfied recognition
criteria of intangible assets regulated in Vietnamese Accounting Standard 4 “Intangible
assets”, are recorded into account 241 "Construction in progress" (2412). When finishing
development stage, expenses attributable to historical cost of intangible assets in development
stage must be debited to account 213 “Intangible assets".

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3. Depreciation shall start from the time the intangible fixed asset is put into use. Depreciation
shall be allocated into production, business expenses in the period as regulation of accounting
standard of intangible assets. In the case of fixed assets is land use rights, depreciation shall
be calculated for land use right for a definite term.

4. Costs related to intangible assets, which are incurred after initial recognition, must be
recognized as production and business expenses in the period. If they meet simultaneously
the two following conditions, they shall be included into the historical costs of intangible
assets:

5. These costs can help intangible assets generate more future economic benefits than the
original operation evaluation;

nd associated with a specific intangible asset.


6. These costs are appraised in a certain way and

7. Those costs incurred to generate future economic benefits for the enterprises, including
enterprise establishment cost, personnel-training co st and advertising cost incurred before the
cost
newly-set up enterprises start to operate, costs for the research stage, relocation cost, shall be
recognized as production and business expenses in the period or gradually allocated into
production and business expenses in the maximum period of three years.

8. Costs related to intangible assets, which have been recognized by the enterprises as costs of
determining the business operation results in th thee previous period, shall not be re-recognized
as part of the historical cost of intangible assets.

9. Trademark, distribution right, customers’ name list and items of similar nature created
internally are not recorded as intangible assets.

10. Intangible assets are kept and recorded in details in the “Fixed assets register”.

STRUCTURE AND CONTENTS OF ACCOUNT 213 - INTANGIBLE ASSETS

Debit:

Historical costt of increased intangible assets.

Credit:

Historical cost of decreased intangible assets.

Debit balance:

Historical cost of current intangible assets of the company.

Account 213 - Intangible assets compose seven sub- accounts:

- Account 2131 - Land use rights: to record the value of intangible assets constituted actual
costs that have been paid directly involving in the land use including money to have the land
use rights, compensations for land clearance, ground preparation (in the case of land use right
separated from stage of building construction and architectural objects on land), registration
fee (if any). This account does not record expenses for constructions on the land.

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When the company receives land from the State without fee, the annual fee is recorded into
expenses. In this case, the land use right is not considered as intangible assets. Therefore, it is
not recorded into account 2131.

- Account 2132 – Trademark and distribution rights: to record the value of intangible assets
including all actual costs that the company paid to have the trademark and distribution rights.

- Account 2133- Copy rights, patents: to record the value of intangible assets including all
actual costs that the company paid to have copy rights, patents.

- Account 2134 - Brand names: to record the value of intangible assets including actual costs
directly involving in purchasing brand names.

- Account 2135 - Computer software: to record the value of intangible assets including all
actual costs that the company paid to have computer software.

- Account 2136 - Licenses and franchises: to record the value of intangible assets including all
actual costs that the company paid to have the licenses or franchises, such as registration
certificates, exploration licence, manufacturing of new products, etc.

- Account 2138 - Other intangible assets: to record value of other intangible assets that have
not been recorded above.

MAJOR TRANSACTIONS

1. Accounting for purchasing intangible assets:

- Purchasing intangible asset


assetss used in production of goods and services subject to Subtraction
method VAT:

Dr. 213 - Intangible assets (Price excluding VAT)


Dr. 133 - VAT deductible (1332)
Cr. 112 - Cash in bankk
Cr. 141 - Advances to suppliers
Cr. 331 - Trade payables

- Purchasing intangible assets used in producti


production of goods and services not subject to VAT:

Dr. 213 - Intangible assets (Total amount)


Cr. 112, 331,...(Total amount)

2. Purchasing intangible assets in deferred, instalment method:

- Purchasing intangible assets for production of goods and services subject to subtraction
method VAT:

Dr. 213 - Intangible assets (Historical cost- At sight price excluding VAT)
Dr. 242 - Long term prepaid expenses (Deferred, instalment interest equals Difference
between total payment minus (-) at sight price and VAT input (if any))
Dr. 133 - VAT deductible (1332)
Cr. 331 - Trade payables (Total amount)

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- Purchasing intangible assets used in production of goods and services not subject to VAT or
subject to VAT in direct method:

Dr. 213 - Intangible assets (Historical cost- At sight price including VAT)
Dr. 242 - Long term prepaid expenses (The interest of deferred, instalment payment equals
total amount minus (-) at sight price)
Cr. 331 - Trade payables (Total amount)

- Periodically, record the payable interest of purchasing intangible assets in deferred,


instalment method:

Dr. 635 - Financial expenses


Cr. 242 - Long term prepaid expenses

- When make payment to the seller:

Dr. 331 - Trade payables


Cr. 111, 112,...

3. Intangible assets purchased by exchange

3.1. Exchange of similar intangible assets:

When receive an intangible assets and use in production, business activities at once:

Dr. 213 - Intangible assets (Historical cost of re ceived intangible assets recorded based on
received
the net book value of exchanged fixed assets)
Dr. 214 - Accumulated depreciation and amortization
amortization (2143) (Depreciated amount of
exchanged fixed assets)
Cr. 213 - Intangible assets (Historical cost of exchanged intangible assets)

3.2. Exchange of dissimilar intangible assets:

- Reduce the exchanged intangible assets:

Dr. 214 - Accumulated depreciation and nd amortization (Depreciated amount)


Dr. 811 - Other expenses (The net book value of exchanged fixed assets)
Cr. 213 - Intangible assets (Historical cost)

- Simultaneously record the income from the exchange of fixed assets:

Dr. 131- Accounts receivable (Total amount)


Cr. 711 - Other income (Reasonable value of exchanged fixed assets)
Cr. 3331 – VAT (33311) (if any)

- Increase the received intangible assets:

Dr. 213 - Intangible assets (Fair value of received fixed assets)


Dr. 133 - VAT deductible (1332) (if any)
Cr. 131 - Accounts receivable (Total amount)

4. Value of intangible assets formed from within the enterprises in development stage:

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4.1. When expenses incurred in development stage do not satisfy recognition criteria of
intangible assets, the accountant records those expenses into production, business expenses
in the period or into long term prepaid expenses:

Dr. 242 - Long term prepaid expenses (if the value is high) or
Dr. 642 - General and administration expenses
Cr. 111, 112, 152, 153, 331,...

4.2. When determine the expenses incurred in development stage satisfied recognition criteria of
intangible assets:

a. Record actual expenses created in development stage to form historical cost of intangible
assets:

Dr. 241 - Construction in progress


Dr. 133 - VAT deductible (1332 - if any)
Cr. 111, 112, 152, 153, 331,...

b. When development stage is finished, the accountant


accountant must determine the total actual expenses
created to form historical cost of intangible assets:

Dr. 213 - Intangible assets


Cr. 241 - Construction in progress.

5. When purchase of intangible assets as land use rights and buildings, architectural objects on
land, the accountant must determine separately the value of land use rights and of buildings,
architectural objects on land as intangible and tangible assets, respectively:

Dr. 211 - Tangible assets (Historical cost of buildings and architectural objects)
Dr. 213 - Intangible assets (Historical cost of land use rights)
Dr. 133 - VAT deductible (1332 - if any)
Cr. 111, 112, 331,...

6. If an intangible asset is formed from the exchange


exchange involving payment accompanied with
vouchers related to the capital ownership of the establishment, its historical cost is the
reasonable value of vouchers issued in relation to capital ownership:

Dr. 213 - Intangible assets


Cr. 411 - Contributed capital (4111, 4112)

7. When the company is donated, presented of sponsored intangible assets and put into use for
production, business activities:

- When receive intangible assets as presents, donations:

Dr. 213 - Intangible assets


Cr. 711 - Other income

- Expenses created involving in intangible assets from sponsorship, present and donation:

Dr. 213 - Intangible assets


Cr. 111, 112,...

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8. When the company receives shares in joint ventures by land use rights, based on the
document of transfer land use rights:

Dr. 213 - Intangible assets


Cr. 411 - Contributed capital (4111)

9. When there is a decision of change the use purpose of investment property as land use rights
to intangible assets:

Dr. 213 - Intangible assets (2131)


Cr. 217 - Investment property

Simultaneously transfer the accumulated depreciation of investment property to accumulated


depreciation of intangible assets:

Dr. 2147 - Amortization of investment property


Cr. 2143 - Amortization of intangible assets

10. When invest in associates in the form of contribution by intangible assets, based on the
revaluation price of intangible assets between the company and the associate.
between

10.1. When the intangible assets represented as cont ribution whose revaluation price is lower
contribution
than its net book value:

Dr. 223 - Investment in associates


Dr. 214 - Accumulated deprecia tion and amortization (2143)
depreciation
Dr. 811 - Other expenses (Difference between th thee revaluation price lower than the net book
value of intangible assets)
Cr. 213 - Intangible assets

contribution whose revaluation price is greater


10.2. When the intangible assets represented as contribution
than its net book value:

Dr. 223 - Investment in associates


Dr. 214 - Accumulated depreciation
depreciation and amortization (2143)
Cr. 213 - Intangible assets
Cr. 711 - Other income (difference between the revalued price and the net book value of
intangible assets).

11. Contributed by intangible assets to jointly control entity

11.1. When the intangible assets represented as contribution whose revaluation price is lower
than its net book value:

Dr. 222 - Shares in joint ventures (The value agreed by the venturers)
Dr. 214 - Accumulated depreciation and amortization (2143)
Dr. 811 - Other expenses (Difference between the lower revalued price and the net book
value of intangible assets)
Cr. 213 - Intangible assets (Historical cost)

11.2. When the intangible assets represented as contribution is lower than the net book value,
the difference between the revaluation price and the net book value equivalent to the benefit
of other parties in the venture is recorded into account 711 “Other income”. The difference

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equivalent to the benefit of the company in the venture is recorded into account 3387
“Deferred income”:

Dr. 222 - Shares in joint ventures (The value agreed by the venture parties)
Dr. 214 - Accumulated depreciation and amortization (2143) (depreciated amount)
Cr. 213 - Intangible assets (Historical cost)
Cr. 711 - Other income (Difference between the higher revalued price and the net book
value of fixed assets equivalent to benefit of other ventures in the venture)
Cr. 3387 - Deferred income (Difference between the higher revalued price and the net
book value of fixed assets equivalent to the benefit of the company in the venture is
deferred)

- Periodically, based on the useful life of the fixed assets that the jointly control entity uses, the
accountant allocates the deferred income into other income in the period:

difference due to revaluation of fixed assets


Dr. 3387 - Deferred income (details of difference
contributed to jointly control entity)
Cr. 711 - Other income.

intangible assets is similar to accounting for the


12. Accounting for the sale and liquidation of intangible
sale and liquidation of tangible assets (See regulations of account 211).

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ACCOUNT 214

ACCUMULATED DEPRECIATION AND AMORTIZATION

This account reflects the increases and decreases in depreciation value and accumulated
depreciation value of fixed assets and investment property while they are in use and other
increases, decreases in fixed assets, investment property.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. In principle, all the current fixed assets, investment property of the company involving in
production, business activities (consist of unused assets, disused assets, assets waiting for
disposal) must be depreciated according to current regulations.

Depreciation and amortization of fixed assets and investment property used in production,
business activities is recorded into production, business expenses in the period. Amortization
of unused, disused and fixed assets waiting for di sposal is recorded into other expenses. In
disposal
some special cases, fixed assets are not depreciated (such as spare fixed assets, fixed assets
used for social purpose, etc.), the company must follow the current financial policy. For fixed
assets used in State activities, funded projects or social welfare activities, the company does
not have to charge the depreciation to expenses
expenses account. The company should only calculate
the accumulated depreciation and amortization.

2. Based on the current financial management policy and accounting standards and based on
management requirement of the company, one of three depreciation methods suitable for each
fixed assets and investment property must be cchosen
hosen in order to encourage the development
of the business and to ensure the quick and ade quate capital recovery which is suitable to the
adequate
company.

Amortization method for each fixed assets and inv estment property must be used consistently
investment
and may be changed when there are significant changes in the method of obtaining the
economic benefit of fixed assets and investment property.

3. It is necessary to review the useful life and method of depreciation of fixed assets at the end
of a fiscal year. If the estimated useful life of assets is much different from the previous
estimates, the useful life must be changed correspondingly. The method of depreciation of
fixed assets is changed when there are significant changes in the method of estimates of
obtaining the economic benefit fixed assets. In this case, the depreciation expenses for the
current year and following years must be adjusted and disclose in the financial statements.

4. Fixed assets which are fully depreciated (capital fully recovered) but still used for production,
business activities will no longer be depreciated.

If fixed assets are not fully depreciated (capital not fully recovered) but are damaged and
need to be disposed of, the reason must be verified and responsibility of group and
individuals must be identified to compensate.

The remaining value of fixed assets which are not fully recovered should be compensated by
the receipts from disposals of those fixed assets. The compensation amount should be decided
by the management of the company.

If the receipt from disposal of fixed assets is not enough to recover the net book value, the
difference will be considered as loss on disposal of fixed assets. This loss is recorded as other

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expenses. Especially for state owned enterprises, this issue will be resolved in accordance
with the Government’s current financial management regulations.

5. Amortisation of intangible assets depends on the useful life of every intangible assets from
the date first put into use (based on contracts, commitments or usage). For land use right, the
useful life is determined as the term of using the land. In the case of undetermined useful life
of land use right, no depreciation have to be calculated.

6. For finance lease assets, in the rental period, the leasee must charge the depreciation to
production, business expenses to recover the capital.

7. For investment property, in the period of holding the assets for sale or in operating lease, the
depreciation of investment property must be charged to production, business expenses. The
company may based on similar fixed assets that the reporting enterprise use (fixed assets) to
estimate the useful life and the method of depreciation of investment property.

STRUCTURE AND CONTENTS OF ACCOUNT 214 - ACCUMULATED


DEPRECIATION AND AMORTIZATION

Debit:

Decrease in accumulated depreciation of investment property and fixed assets due to disposals,
sales and transfer to another company or contribute to joint ventures, etc.

Credit:

assets and investment property due to depreciating


Increase in accumulated depreciation of fixed assets
fixed assets and investment property.

Debit balance:

assets and investment property of the company.


The current accumulated depreciation of fixed assets

amortization, compose four sub-accounts:


Account 214 - Accumulated depreciation and amortization,

- Account 2141 - Accumulated depreciation on fixed assets: to record depreciation of tangible


assets and other increases, decreases of tangible assets.

- Account 2142 - Accumulated depreciation and amortization: to record depreciation of finance


lease assets and other increases, decreases of finance lease assets.

- Account 2143 - Amortization of intangible assets: to record amortisation of intangible assets


and other Increases, Decreases of intangible assets.

- Account 2147 – Amortization of investment property: to record amortization of investment


property held for sales or for operating lease.

MAJOR TRANSACTIONS

1. A charge depreciation of fixed assets into operation and production cost and other expenses
must be made periodically:

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Dr. 623 - Machine costs (6234)


Dr. 627 - Factory overhead costs (6274)
Dr. 641 - Selling expenses
Dr. 642 - General and administration expenses
Dr. 811 - Other expenses
Cr. 214 - Accumulated depreciation and amortization (appropriate sub-accounts)

2. Receipt of fixed assets which are transferred within a General Corporation or a company:

Dr. 211 – Tangible assets (Historical cost)


Cr. 411 - Contributed capital (The net book value)
Cr. 214 - Accumulated depreciation and amortization (2141) (Depreciation value)

3. A charge amortisation of investment property held for sales or for operating lease must be
made periodically:

Dr. 632 – Cost of goods sold (Details in expenses for investment property)
depreciation and amortization (2147)
Cr. 214 - Accumulated depreciation

investment property, as well as recording the


4. In the case of decreasing fixed assets and investment
reduction of the historical cost of fixed assets, the decrease of depreciation of fixed assets and
investment property should be recorded. (See regulations of accounts 211, 213, 217).

5. For fixed assets used in State activities or funded projects, the depreciation is made at the end
of the fiscal year:

Dr. 466 - Sources for acquisition of fixed assets


Cr. 214 - Accumulated depreciation and amortization

6. Fixed assets used in cultural, welfare activities, the depreciation is made at the end of the
fiscal year:

Dr. 4313 - Welfare funds to make fixed assets


Cr. 214 - Accumulated depreciation and amortization

s
7. At the end of the fiscal year, the company should review the useful life and method of
deprecia
depreciation of fixed assets. If the depreciation is changed, the accounting book should be
adjusted as follows:

- If the depreciation of fixed assets increases (higher than the charge in the year) due to the
changes of useful life and method of depreciation, the difference is recorded as follows:

Dr. 623, 627, 641, 642 (Difference between increased amount)


Cr. 214 - Accumulated depreciation and amortization (appropriate sub-account)

- If the depreciation of fixed assets decreases (lower than the charge in the year) due to the
changes of useful life and method of depreciation, the difference is recorded as follows:

Dr. 214 - Accumulated depreciation and amortization (appropriate sub-account)


Cr. 623, 627, 641, 642 (difference between decreased amount)

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ACCOUNT 217

INVESTMENT PROPERTY

This account reflects the current value and increases, decreases in investment property of the
company using historical cost.

Investment property is property being land-use rights or a building - or part of a building - or


both, infrastructure held by the owner or by the lessee under a finance lease to earn rentals or for
capital appreciation or both, 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.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. This account reflects value of fixed assets that satisfy recognition criteria of investment
property. This account is not used to record property held for sale in the ordinary course of
business or in the process of construction or deve lopment for such sale in the near future,
development
fixed assets used by the owner, fixed assets in the progress to use in the future 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 measured reliably.

2. Investment property is recorded into this account at its cost. Cost is the amount of cash or
cash equivalents paid or the fair value of other consideration given to acquire an asset at the
time of its acquisition or construction.

a. Depend on each cases, the cost of the investment property is calculated as follows:
investment

- The cost of a purchased investment property comprises its purchase price and any directly
attributable expenditure. Directly attributable expenditure includes, for example, professional
fees for legal services, property transfer taxes and other transaction cost.

- If payment for an investment property is deferred, its cost is the cash price equivalent. The
difference between this amount and the total payments is recognized as interest expense over
the period of credit, except when the difference is charged to cost of investment property in
accordance with VAS 16 “Borrowing Costs”;

- The cost of a self-constructed investment property is the actual costs and other directly
attributable expenditure at the date when the construction or development is complete.

- If the finance lease assets held to be leased out for operating leases meet the recognition
criteria of investment property, the historical cost of the investment property shall be
recorded in compliance with VAS 6 “Leases” when leases start.

b. The cost of an investment property is not increased by:

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- start-up costs (unless they are necessary to bring the property to its working condition);

- initial operating losses incurred before the investment property achieves the planned level of
occupancy;

- abnormal amounts of wasted material, labour or other resources incurred in constructing or


developing the property.

3. Subsequent expenditure relating to an investment property must be recorded as production,


business expenses in the period except for 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. During the time of holding property for capital appreciation or for rentals, the depreciation
must be charged for investment property. Depr eciation of investment property is recorded
Depreciation
into production, business expenses in the period. The company may based on similar fixed
assets that the company is using to determine the useful life and depreciation method of
investment property,

5. For purchased investment property must be cons tructed, repaired, upgraded before use, the
constructed,
expenses arising from purchase, construction or development of investment property or for
repairs, maintenance or enhancements are recorded into account 241 “Construction in
progress”. When the construction and development finishes, the cost of investment property
is determined to transfer into account 217 “Investment property”.

6. Transfers to, or from, investment property should be made when, and only when, there is a
should
change in use, evidenced by:

a. commencement of owner-occupation, for a transfer from investment property to owner-


transfer
occupied property;

b. commencement of development with a view to sale, for a transfer from investment property
to inventories;

c. end of owner-occupation, for a transfer from owner-occupied property to investment


property;

d. commencement of an operating lease to another party, for a transfer from inventories to


investment property; or

e. end of construction or development, for a transfer from property in the course of construction
or development (regulated in VAS 3 “Tangible assets”) to investment property.

Transferring from or to the investment property and owner occupied property or inventories
does not change the book value of transferred assets and the historical cost of assets in
determining its value or for preparation of the financial statements.

7. When a company sells an investment property without repair and maintenance, the company
shall not transfer it to inventory account but retain the assets into account 217 "Investment
property" until that assets are sold.

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8. Income from sale of investment property is recorded as total price (price excluding VAT
when the company paying VAT in subtraction method).

If sale of an investment property in deferred payment method, the consideration received is


recognised initially at the cash price equivalent. The difference between the nominal amount
of the consideration and the cash price equivalent is recognized as deferred interest income in
VAS 14 “Revenue and other income”.

9. Decrease in investment property occurred in followings cases:

- Transfer to and from inventories and owner-occupied property;

- Sale of investment property;

- Disposal of investment property;

- Return property to the lessor at the end of the lease period.

10. Investment property is recorded in details by each investment property in “investment


property register” similar to fixed assets.

STRUCTURE AND CONTENTS OF ACCOU NT 217 – INVESTMENT PROPERTY


ACCOUNT

Debit:

Historical cost of increased investment property in the period.

Credit:

Historical cost of decreased investment property in the period.

Debit balance:

Historical cost of current investment property.

MAJOR TRANSACTIONS

1. Purchase of investment property in at sight payment method:

- The company paying VAT in subtraction method:

Dr. 217 - Investment property


Dr. 133 - VAT deductible (1332)
Cr. 111, 112, 331,...

- The company paying VAT in direct method:

Dr. 217 - Investment property


Cr. 111, 112, 331,...

2. Purchase of investment property in deferred payment method:

2.1. The company paying VAT in subtraction method:

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Dr. 217 - Investment property (Historical cost - at sight price excluding VAT)
Dr. 242 - Long term prepaid expenses (Interest of deferred payment equals total payment
minus (-) at sight price and input VAT)
Dr. 133 - VAT deductible (1332)
Cr. 331 - Trade payables

2.2. The company paying VAT in direct method:

Dr. 217 - Investment property (Historical cost - at sight price including VAT)
Dr. 242 - Long term prepaid expenses (Interest of deferred payment equals total payment
minus (-) at sight price including VAT)
Cr. 331 - Trade payables

2.3. Periodically, calculate and allocate the interest payable of purchasing investment property in
deferred method:

Dr. 635 - Financial expenses


Cr. 242 - Long term prepaid expenses

2.4. Record the payment to the seller:

Dr. 331 - Trade payables


Cr. 515 - Financial income (discount from making payment before the credit limit)
Cr. 111, 112,…

3. Investment property when construction was completed:

3.1. When it is created the investment property expenses, based on the related documents, the
accountant records expenses into account 241 “Construction in progress” (Similar to
construction of tangible assets, see account 211 “Tangible assets”).

3.2. When finishing construction and transfer it to investment property, the accountant based on
the transfer document to record:

Dr. 217 - Investment property


Cr. 241 - Construction in progress

4. When changing from owner occupation to investment property, based on documents of


change the use purpose:

Dr. 217 - Investment property


Cr. 211 - Tangible assets, or
Cr. 213 - Intangible assets

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Simultaneously transfer the accumulated amortization:

Dr. 2141, or 2143


Cr. 2147 - Amortization of investment property

5. Transfer the stock-balance to investment property, based on the document of transfer the use
purpose:

Dr. 217 - Investment property


Cr. 156 - Merchandise goods (1567 - Property/real estate)

6. When finance lease asset held to be leased out under one or more operating leases meets the
recognition criteria of investment property, based on the finance lease contract and relating
documents, the leasee records as follows:

Dr. 217 - Investment property


Cr. 111, 112, 315, 342

(The accountant records the payment to leasor leasor when receiving invoice followed the
regulations of account 212 “Finance lease assets”).

7. If subsequent expenditure created after initial recognition of investment property satisfies


company’s obligations to incur expenditure that
conditions for capitalization or includes the company’s
bring the asset to its working condition,
is necessary in the future to bring condition, it is added to net book
value of investment property:

recognition (repair & maintenance or enhancement


7.1. Actual expenses created after the initial recognition
of investment property):

Dr. 241 - Construction in progress


Dr. 133 - VAT deductible (1332)
Cr. 111, 112, 152, 331,...

enhancement of the asset, the company transfers and


7.2. When finished repair & maintenance or enhancement
increases the historical cost of investment property:

Dr. 217 - Investment property


Cr. 241 - Construction in progress

8. At the end of the finance lease period:

8.1. If return the finance lease assets classified as investment property:

Dr. 2147 - Amortization of investment property


Dr. 632 - Cost of goods sold (difference between the historical cost of finance lease assets
and accumulated depreciation amount)
Cr. 217 - Investment property (historical cost)

8.2. When repurchase of the finance lease assets classified as investment property for further
investment, the accountant records the additional charge to the historical cost investment
property:

Dr. 217 - Investment property

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Cr. 111, 112,…

8.3. When repurchase of the finance lease assets classified as investment property for production
of goods and services or management activities of the company, the accountant reclassifies
the assets to owner-occupied property:

Dr. 211 - Tangible assets, or


Dr. 213 - Intangible assets
Cr. 217 - Investment property
Cr. 111, 112 (additional amount)

Simultaneously transfer the accumulated amortization:

Dr. 2147 - Amortization of investment property


Cr. 2141 or 2143

9. Accounting for the sale, disposal of investment property

9.1. Record the sale, disposal of investment property:

- The company paying VAT in subtraction method:

Dr. 111, 112, 131 (Total amount)


Cr. 511 – Sales (5117 - Sale of investment property) (price excluding VAT)
Cr. 3331 – VAT payables (33311)

- The company paying VAT in direct method:

Dr. 111, 112, 131 (total amount)


Cr. 511 – Sales (5117 - Sale of investment property) (total amount)

9.2. Reduce the historical cost and the net book value of investment property that have been sold
or disposed of:

Dr. 214 - Accumulated depreciation and amortiz


amortization (2147 - Amortization of investment
property)
Dr. 632 - Cost of goods sold (net book value of investment property)
Cr. 217 - Investment property (historical cost of investment property)

10. Accounting for investment property transferred to inventories or to owner occupied property:

10.1. When transfer from investment property to inventories, the owner decides to repair,
upgrade for sale:

- When there is decision of repair, upgrade investment property for sale, the accountant
transfers the net book value of investment property into account 156 “Merchandise goods”:

Dr. 156 - Merchandise goods (Account 1567 - net book value)


Dr. 214 - Accumulated depreciation and amortization (2147) (depreciated amount)
Cr. 217 - Investment property (historical cost)

- When expenses incurred from repair, upgrade for sale:

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Dr. 154 - Work in progress


Dr. 133 - VAT deductible (If any)
Cr. 111, 112, 152, 334, 331,…

- When finished the repair and maintenance the property for sale, the company transfers all
actual expenses incurred to merchandise goods of fixed assets waiting for sale:

Dr. 156 - Merchandise goods (1567)


Cr. 154 - Work in progress

10.2. Transfer investment property to owner-occupied fixed assets:

Dr. 211, 213


Cr. 217 - Investment property

Simultaneously record:

Dr. 2147 - Amortization of investment property


Cr. 2141, 2143

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ACCOUNT 221

INVESTMENT IN SUBSIDIARIES

This account reflects the current value and increases, decreases in investment in subsidiaries. A
subsidiary is an enterprise that is controlled by another enterprise (known as the parent).
Investment in subsidiaries consists of:

1. Shares: Shares are documents or accounting entries or electronic data acknowledged the right
and legal benefit of the mother company in its subsidiaries. Shares include common shares
and preference shares.

The parent company holds common shares of subsidiaries, has the right to attend Share
holders Assembly Meeting, has right to dominate and nominate members of the Board of
management, has the vote right of important problems of repair, add the Charter of the
Company, business strategy, divide profit as regul ation in the Charter of the company. The
regulation
parent company holds equity securities rece ives dividend based on the result of business
receives
activities of subsidiary, but the owners of equity securities are also in risk of loss or
bankruptcy of subsidiary, as the Charter of the Company and the Law on Bankruptcy.

2. Capital investment as contribution in money, other assets to subsidiary operated under form
of State owned company, limited liability company with one member, State Joint Stock
Company and other types of company.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Account 221 "Investment in subsidiaries" is only recorded investment when the investor
holds more than 50 % owner’s equity (more than 50% vote right) and has the right to control
financial policies and business activities of the company
company in order to obtain economic benefits
from that company. When the investor loses the right to control the company, the investor
shall reduce the investment in subsidiaries.

2. The investment of the investor held less than 50% owner’s equity (less than 50% vote right)
in an entity are still recorded into account 221 "Investment in subsidiaries" when it obtains:

a. Power over more than 50% of the voting rights of the other entity by virtue of an agreement
with other investors; or

b. Power to govern the financial and operating policies of the other entity under a statute or an
agreement; or

c. Power to appoint or remove the majority of the members of the board of management or
equivalent governing body of the other entity; or

d. Power to cast the majority of votes at meetings of the board of management or equivalent
governing body of the other entity.

3. Investment in subsidiaries must be recorded at cost. Cost means purchase price plus (+)
purchase expenses (if any), such as intermediary expenses, transaction expenses, bank fee,
taxation, etc.

4. Accounting for transactions created in the progress of business combination of the company
considered as the purchaser in the business combination leading to the parent-subsidiary

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relationship is implemented as the Circular of guidance for applying the Vietnamese


Accounting Standard No. 11 "Business combination".

5. The accountant must record in details of investments in each subsidiary in par value, actual
price of securities, actual costs of investment in subsidiaries.

6. It is essential to record correctly, timely incomes from subsidiaries (distributed dividends and
profits) of the fiscal year into the separated financial statements of the parent. Distributed
dividends and profit from subsidiaries are recorded into financial income of the parent
companies.

STRUCTURE AND CONTENTS OF ACCOUNT 221 - INVESTMENT IN SUBSIDIARIES

Debit:

Actual value of increased investment in subsidiaries.

Credit:

Actual value of decreased investment in subsidiaries.

Debit balance:

Actual current value of investment in subsidiaries of the parent companies.

MAJOR TRANSACTIONS

1. When the parent buys shares or makes invest ment in subsidiaries in money as committed in
investment
the agreement of contribution, or purchase the investment in subsidiaries, based on the actual
amount of investment in subsidiaries:

Dr. 221 - Investment in subsidiaries


Cr. 111, 112, 341,...

Simultaneously the accountant records in details of each share at its par value (If investment
in subsidiaries through acquiring shares of the subsidiary).

2. If any expense created in the progress of buyi


buying securities, or investing in subsidiaries:

Dr. 221 - Investment in subsidiaries


Cr. 111, 112,...

3. Transfer investment in associates, joint venture, financial instruments to investment in


subsidiaries in order to gain the control:

Dr. 221 - Investment in subsidiaries


Cr. 222 - Shares in joint ventures
Cr. 223 - Investment in associates
Cr. 228 - Other long term investments
Cr. 121 - Short term investment
Cr. 111, 112 (additional investment in cash)

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4. When received the acknowledgement of distributed dividend and profit or money from
subsidiary:

Dr. 111, 112 (If received money)


Dr. 138 - Other receivables (1388)
Dr. 221 - Investment in subsidiaries (distributed dividend, profit are added to investment in
subsidiaries - If any)
Cr. 515 - Financial income

5. When transfer from investment in subsidiaries into investment in associates, or in jointly


control entity, or in financial instruments due to sales a part of investment in subsidiaries
leading to lose the control:

5.1. If make profit:

Dr. 111, 112 (received amount)


Dr. 222 - Shares in joint ventures
Dr. 223 - Investment in associates
Dr. 228 - Other long term investments
Cr. 221 - Investment in subsidiaries
Cr. 515 - Financial income (if gained)

5.2. If make loss:

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


Dr. 222 - Shares in joint ventures
Dr. 223 - Investment in associates
Dr. 635 - Financial expenses (if lost)
Cr. 221 - Investment in subsidiaries

6. When collect, dispose of or sell the investment in subsidiaries that made loss:
investment

Dr. 111, 112, 131,...


Dr. 635 - Financial expenses (for loss iinvestment
nvestment that can not collected)
Cr. 221 - Investment in subsidiaries

7. When collect, dispose of or sell the investment in subsidiaries that made profit:

Dr. 111, 112, 131,...


Cr. 221 - Investment in subsidiaries
Cr. 515 - Financial income (profit)

8. Accounting for of cost of business combination of the acquirer in a business combination


leading to the parent-subsidiary relationship.

On the acquisition date, the acquirer measures and records the cost of a business combination
as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred
or assumed, and equity instruments issued by the acquirer, in exchange for control of the
acquiree plus (+) any costs directly attributable to the business combination. Simultaneously
the acquirer, the parent, records its shares in the subsidiary as an investment in subsidiaries.

- If the acquirer paid in cash or cash equivalent for its acquisition in the business combination:

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Dr. 221 - Investment in subsidiaries


Cr. 111, 112, 121,...

- If the acquirer paid for its acquisition in the business combination by issuing shares whose
price (fair value) at the date of exchange is higher than the par value:

Dr. 221 - Investment in subsidiaries (the fair value)


Cr. 4111 - Share capital (par value)
Cr. 4112 - Capital surplus (difference between the fair value and par value of shares)

- If the acquirer paid for its acquisition in the business combination by issuing shares whose
price (fair value) at the date of exchange is lower than the par value:

Dr. 221 - Investment in subsidiaries (fair value)


Dr. 4112 - Capital surplus (difference between the fair value and par value of shares)
Cr. 4111 - Share capital (par value)

- Actual costs incurred from issuing shares:

Dr. 4112- Capital surplus


Cr. 111, 112,...

- If the acquirer paid for its acquisition in the business combination by exchanging its assets:

When send the exchanged assets, the ac


accountant
countant reduces the exchanged assets:

Dr. 811 - Other expenses (net book value of tangible assets sent for exchange)
Dr. 214 - Accumulated depreciation andand amortization (depreciated amount)
Cr. 211 - Tangible assets (historical cost)

investment
Simultaneously, increase other income and investment in subsidiaries due to exchange of
fixed assets:

Dr. 221 - Investment in subsidiaries (total amount)


Cr. 711 - Other income (fair value of fixed assets sent for exchange)
Cr. 3331 – VAT payable (account 33311) (if any)

When deliver merchandise goods for exchange, the accountant records:

Dr. 632 - Cost of goods sold


Cr. 155, 156,...

Simultaneously record the sales and increase investment in subsidiaries:

Dr. 221 - Investment in subsidiaries


Cr. 511 - Sales
Cr. 333 - Tax and statutory obligations (33311) (if any)

- If the acquirer paid for its acquisition in the business combination by issuing bonds:

If bonds are issued at par value:

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Dr. 221 - Investment in subsidiaries (fair value)


Cr. 343 - Debt securities (3431 – par value)

If bonds are issued with a surplus:

Dr. 221 - Investment in subsidiaries (fair value)


Cr. 3431 - Bond cost (par value)
Cr. 3433 - Bond premium (the surplus)

If bonds are issued with discount:

Dr. 221 - Investment in subsidiaries (fair value)


Dr. 3432 - Discounted bond (discount amount)
Cr. 3431 - Bond cost (par value)

- Expenses directly involves in the business combination


combination such as expenses for legal consulting,
due diligence, etc., the accountant at the acquirer shall record as follows:

Dr. 221 - Investment in subsidiaries


Cr. 111, 112, 331,...

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ACCOUNT 222

SHARES IN JOINT VENTURES

This account reflects all the shares in joint ventures in the establishment of a jointly control entity
and the progress of taking back shares in joint ventures when the joint contract is over.

A joint venture is a contractual arrangement whereby two or more parties undertake an economic
activity which is subject to joint control. Jointly controlled activities referred to herein include

- Business cooperation contract involvement in the form of jointly controlled operations;

- Business cooperation contract involvement in the form of jointly controlled assets;

- Joint venture contract involvement in the establishment of jointly controlled entities.

A jointly control entity is established by the contribution of venture parties. A jointly control
operates independently like a company. However, it
entity is a business entity newly established, operates
venture contract. A jointly control entity must organize
is controlled by venture parties in the joint venture
the accounting activity independently as currentcurrent regulations on accounting just like other
responsible for control assets, payable loans, income,
companies. The jointly control entity is responsible
other income and expenses created in the entity. Each contributors receive the income from the
jointly control entity in accordance with agreement of the venture contract.

consist of all kinds of property, materials, capital


Capital contributions to jointly control entity consist
owned by the company, including Long term borrowings for contribution.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Capital contributions to jointly control entity is recorded into account 222 when the investor
policies and activities of invested entity. When the
has the jointly control right over financial policies
en
investor loses the control right, the share in the jointly control entity shall be recorded into
account of investment in associates.

shar in joint ventures are categorised in three


2. The principles and accounting treatment for shares
c
forms of jointly controlled operations, jointly controlled assets and jointly control entity. The
"Finan
company must follow regulations in VAS 8 "Financial reporting of interests in joint ventures"
(Decision No 234/2003/QD-BTC dated 30 December Decem 2003). Account 222 “Shares in joint
ventures” is used only for companies contributing to jointly control entity but not recording
the contribution to the business entity in form of jointly controlled operations and jointly
controlled assets.

3. The value of the contribution to the jointly control entity recorded in this account must be
agreed by venturers in the capital contribution minute.

4. Contribution to joint venture by materials, goods:

- If the revalued amount of materials, goods is higher than the book value at the time of
contribution, the difference is recorded as follows:

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The difference between the higher revalued amount of materials, goods contributed and the
book value should be recorded into other income in the current period in corresponding to the
benefit of others parties in the venture.

The difference between the higher revalued amount of materials, goods contributed and the
book value should be recorded as deferred income in corresponding to the benefit of the
company in the venture. When the jointly control entity sells those materials, goods to the
independent third party, the deferred income shall be transferred into other income.

- If the revalued amount of materials, goods is lower than the book value at the time of
contribution, the difference is recorded into other expenses in the current period.

5. Contribution to jointly venture by fixed assets:

- If the revalued amount of fixed assets is higher than the net book value at the time of
contribution, the difference is recorded as follows:

The difference between the revalued amount an


and
d the net book value of fixed assets should be
recorded into other income in corresponding to the benefit of other venture parties in the
venture.

The difference between the revalued amount of fixed assets and the net book value fixed
assets should be recorded as deferred income in corresponding to the company’s benefit in
the venture. Annually, this deferred inco income
me (benefit from revaluation of fixed assets
contributed to the venture) shall be allocated to other income based on the useful life of the
asset that the jointly control entity uses.

- If the revalued amount of fixed assets is lower than the net book value at the time of
contribution, the difference is recorded into other expenses in the period.

6. When collection of shares in joint ventures, the company reduces the contribution based on
the value of materials, assets and money that the jointly control entity
entit returns. The losses due
to uncollectible of the full contribution are recorded
recorded as financial expenses. If the collection
generated income is recorded to financial income.
value is higher than the contribution, the generated

jointl control entity is recorded as the financial


7. Interest income from contribution to the jointly
inco
income and credited to account 515 “Financial income”. The income that is shared to venture
parties can be paid all in one time or partly in each period or be kept to add to shares in joint
ventures if venture parties agreed.

Expenses from the venture activities incurred in contributors (if any) are debited into account
635 “Financial expenses”.

8. Contributors in the jointly control entity have right to transfer the contribution in the venture.
If the transfer value is higher than the contribution to the jointly control entity, the difference
is credited into account 515 “Financial income”. In contrast, if the transfer value is lower than
the contribution to the venture, the difference is debited into account 635 “Financial
expenses”.

9. For jointly control entity, when venture parties transfer the contribution to each others,
expenses involving in the transfer of venture parties are not recorded in the accounting book
of the jointly control entity. The jointly control entity shall record in details of contribution

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and make procedures to change the owner on the Business License or Investment License.

10. Venture parties or other partners acquires contribution of other venture parties in the venture,
the contribution to the venture shall be recorded at actual acquired value (The acquired value
may be higher or lower than the book value of the transferred contribution at the time of
transfer).

11. The accountant must account in details of shares in joint ventures to the jointly control entity
in each partner, each instalment and collection as well as transfer.

STRUCTURE AND CONTENTS OF ACCOUNT 222 - SHARES IN JOINT VENTURES

Debit:

ributed to the jointly control entity.


Increase of shares in joint ventures contributed

Credit:

Decrease of shares in joint ventures to jointly ccontrol


ontrol entity due to collection, transfer or no
longer be jointly control.

Debit balance:

Shares in joint ventures to jointly control entity at the end of the period.

MAJOR TRANSACTIONS

I. Accounting for contribution in jointly control entity:

1. Record of contribution to jointly control entity in cash:


jointly

Dr. 222 - Shares in joint ventures


Cr. 111, 112,...

2. Record of contribution to jointly control entity by materials, goods in which the joint parties
agreed in valuing the materials, goods contributed.

2.1. When the revalued amount is lower than the book value of materials, goods:

Dr. 222 - Shares in joint ventures (revalued amount)


Dr. 811 - Other expenses (difference between the book value and the revalued amount)
Cr. 152, 153, 155, 156, 611 (book value)

2.2. When the revalued amount is higher than the book value of materials, goods:

- When contribute materials, goods to jointly control entity:

Dr. 222 - Shares in joint ventures (revalued amount)


Cr. 152, 153, 155, 156, 611 (book value)
Cr. 3387 - Deferred income (difference between the revalued amount and the book value
in corresponding to the benefit of the entity in the venture) (details of difference due to
revaluation of materials, merchandise goods contributed to the jointly control entity)
Cr. 711 - Other income (difference between the revalued amount and the book value in

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corresponding to the benefit of other entities in the venture)

- When the jointly control entity sells the materials, goods to an independent third party, the
contributor transfers the deferred income to other income in the period:

Dr. 3387 - Deferred income


Cr. 711 - Other income

3. Record of contribution to jointly control entity by fixed assets in which the joint parties
agreed in revaluing the fixed assets contributed:

3.1. When the revalued amount is lower than the net book value of the fixed assets:

Dr. 222 - Shares in joint ventures (revalued amount)


ation and amortization
Dr. 214 - Accumulated depreciation
Dr. 811 - Other expenses (difference between th thee net book value and the revalued amount of
fixed assets)
Cr. 211 - Tangible assets (historical cost)
Cr. 213 - Intangible assets (historical cost)

3.2. When the revalued amount is higher than the net book value of the fixed assets:

Dr. 222 - Shares in joint ventures (revalued amount)


Dr. 214 - Accumulated depreci ation and amortization
depreciation
Cr. 3387 - Deferred income (difference betw een the revalued amount and the net book
between
value in corresponding to the benefit of the entity in the venture)
Cr. 711 - Other income (difference between the revalued amount and the net book value
in corresponding to the benefit of other entities in the venture)
Cr. 211 - Tangible assets (historical cost)
Cr. 213 - Intangible assets (historical cost)

- Annually, based on the useful life of fixed asset


assetss that the jointly control entity uses, the
accountant allocates the deferred income into other income in the period:

Dr. 3387 - Deferred income (details in difference


difference due to revaluation of fixed assets
contributed)
Cr. 711 - Other income (deferred income allocated in a year)

- When the joint ventures contract is over, or the contributor transfers the shares in joint
ventures to another partner, remaining differences resulted from revaluation of the fixed
assets contributed are transferred to other incomes:

Dr. 3387 - Deferred income (details in difference due to revaluation of fixed assets
contributed)
Cr. 711 - Other income

4. A Vietnamese company is authorized by the State to contribute the land used right, sea
surface to foreign invested companies. After the State’s decision is released and procedures to
contribute to the joint venture are finished, the accountant records:

Dr. 222 - Shares in joint ventures


Cr. 411 - Contributed capital (details in the State’s contribution)

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5. When the contributor is shared the joint venture profit and uses this profit to add up the
contribution in the venture:

Dr. 222 - Shares in joint ventures


Cr. 515 - Financial income

6. Record of expenses involving in contribution to the joint venture incurred in the period such
as interest expenses from borrowings for contribution and other expenses:

Dr. 635 - Financial expenses


Dr. 133 - VAT deductible (If any)
Cr. 111, 112, 152,…

7. Record profit from the shares in the venture in the period:

7.1. When receipt of the acknowledgement of shared profit from jointly control entity:

Dr. 138 - Other receivables (1388)


Cr. 515 - Financial income

7.2. When receipt of money:

Dr. 111, 112 (Received amount)


Cr. 138 - Other receivables (1388)

8. Accounting for collection of shares in the jointl


jointlyy control entity when the venture contract is
over or the jointly control entity stops working:

8.1. When collect shares in the jointly control entity, based on the reporting minutes of venture
jointly
parties to record:

Dr. 111, 112, 152, 153, 156, 211, 213,...


Cr. 222 - Shares in joint ventures

th loss of the business must


8.2. The contribution that is uncollectible due to the mu be recorded into
financial expenses:

Dr. 635 - Financial expenses


Cr. 222 - Shares in joint ventures

8.3. If the collection amount is higher than the contribution, the difference is considered as
income and recorded into financial income:

Dr. 111, 112, 152, 153, 156, 211, 213,...


Cr. 515 - Financial income

9. Accounting for the sales of the contribution to the jointly control entity:

9.1. The company sells the shares in the jointly control entity, based on fair value of assets
transferred from the acquirer:

Dr. 111, 112, 152, 153, 156, 211, 213,...


Dr. 635 - Financial expenses (difference between fair value of received assets and the shares)

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Cr. 222 - Shares in joint ventures


Cr. 515 - Financial income (difference between fair value of received assets and the
shares)

9.2. A Vietnamese company is authorized by the State to contribute the land used right to the
venture. When transfer the shares in the jointly control entity to the foreign venture parties
and return the land use right to the State:

Dr. 411 - Contributed capital


Cr. 222 - Shares in joint ventures

If the foreign venture parties pay the Vietnamese partner an amount of money as
compensation to the transfer (where the jointly control entity leases the land):

Dr. 111, 112,...


Cr. 515 - Financial income

9.3. In the case, the acquirer is a venture parties in the joint venture, after increase its shares in
combine the shares and based on the vote right to
the jointly control entity, the acquirer must combine
determine whether this contribution is investment in subsidiaries or investment in associates:

Dr. 221 - Investment in subsidiaries


Dr. 223 - Investment in associates
Cr. 111, 112 (amount paid to the seller to obtain the shares)
Cr. 222 - Shares in joint ventures

parties in the joint venture, the contribution shall


9.4. In the case, the acquirer is the new venture parties
be recorded as shares in joint ventures at the cost basis:

Dr. 222 - Shares in joint ventures


Cr. 111, 112 (amount paid to the seller to obtain the shares)
Cr. Other related

9.5. In the case, the Vietnamese partner transfers the shares in jointly contro
control entity to the foreign
partners, then returns the land used right to the State and the land is rented by the venture,
the jointly control entity shall reduce land used rights and the contributed capital in
corresponding to the land used rights. Retain or increase the capital depends on the coming
investment of the owners. The land rent shall not be recorded into owner’s equity but into
production and business expenses in the correspondent periods.

10. When the venture parties in the venture contributes more to the jointly control entity by
assets, the accounting entry is similar to the one for the first contribution.

11. Accounting for transactions between contributor in the venture and the jointly control entity:

11.1. When the contributor sells assets to the jointly control entity:

- When sold products, merchandise goods to the jointly control entity and delivered finished
goods and merchandises:

Dr. 632 - Cost of goods sold


Cr. 155 - Finished goods; or
Cr. 156 - Merchandise goods.

Translation by KTC Assurance & Business Advisors 187


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Based on the actual price of goods sold to record the sales:

Dr. 111, 112, 131,... (total amount of finished goods and merchandise sold to jointly control
entity)
Cr. 511 – Sales (price excluding VAT)
Cr. 3331 – VAT payable (VAT amount)

- When sold fixed assets to the jointly control entity, the accountant reduces fixed assets:

Dr. 811 - Other expenses (net book value)


Dr. 214 - Accumulated depreciation and amortization (accumulated depreciation and
amortization)
Cr. 211, 213 (historical cost)

Simultaneously record other income from sales of fixed assets using the actual price sold to
the jointly control entity:

Dr. 111, 112, 131,...


Cr. 711 - Other income
Cr. 333 - Tax and statutory obligations (33311)

- At the end of an accounting period, if th thee fixed assets, finished


finished goods, merchandise goods
sold to the jointly control entity with profit but in the period the jointly control entity has not
yet sold those assets to another independent third party, the venture parties shall defer the
income from sales of finished goods and merc handises equivalent to the venture parties’
merchandises
benefit in the venture:

Sales of finished goods and merchandises:

Dr. 511 – Sales (deferred income from sale of finished goods, merchandises equivalent to the
venture parties’ benefit in the venture)
Cr. 3387 - Deferred income

Sales of fixed assets:

Dr. 711 - Other income (deferred income from sale of finished goods, merchandises
equivalent to the venture parties’ benefit in the venture)
Cr. 3387 - Deferred income

- In the next accounting period, when the jointly control entity sells finished goods,
merchandises to an independent third party, the venture records:

Dr. 3387 - Deferred income (deferred amount from sale of finished goods, merchandises
equivalent to the venture parties’ benefit in the venture)
Cr. 511 - Sales

- For the fixed assets sold, periodically, the venture parties transfers gradually the deferred
amount equivalent to the venture parties’ benefit in the venture to other income based on the
useful life of the fixed assets that the jointly control entity uses:

Dr. 3387 - Deferred income

Translation by KTC Assurance & Business Advisors 188


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Cr. 711 - Other income

- When the jointly control entity sells assets acquired from the venture parties in the venture to
an independent third party, the venture parties record:

Dr. 3387 - Deferred income (remaining amount of income in corresponding to the benefit of
the venture parties in the venture not been transferred to other income)
Cr. 711 - Other income

11.2. When the venture parties purchases assets from the jointly control entity:

When purchase assets from jointly control entity, based on related invoice and documents,
the accounting entries for assets, goods purchased from the jointly control entity are similar
to the ones from other suppliers.

II. Accounting for jointly control entity

A. Basic regulations

1. A joint venture contract in the form of jointly control entity is a venture not setting up a new
business entity. Venture parties have the obligations and rights according to regulations in the
contract. The activity of the joint venture contract is organized by venture parties with other
contract
business activities of venture parties.

2. The joint venture contract provides that expenses


expenses created independently at each venture
parties for the jointly control entity, that venture
venture parties must cover those costs. Common
expenses (if any) are shared among venture parties based on regulations in the contract.

3. Venture parties must open accounting books to record and reflect in their financial reports
these contents:

Assets contributed to the venture and kept under control of the venture parties in the venture;

Borrowings;

Income from sale of goods or provision of services of the venture;

Expenses.

4. All common expenses incurred in the venture parties must be recorded. Based on agreements
in the venture contract of common expenses allocation, periodically the venture parties
prepare the “List of allocation of common expenses” confirmed by venture parties and then
send to each parties one copy (original copy). The “List of allocation of common expenses”
together with legal original documents is the basis for parties to account for common
expenses allocated as agreed in the contract.

5. If the venture regulates about sharing the products, periodically as agreements in venture
contract, the venture parties prepare the “List of products to share” which is confirmed by the
venture parties on the quantity, characteristics. Then each party keeps one copy (original
copy). The goods received notes (or delivery notes) must be prepared in two copies when the
products are delivered. Each party holds one copy. The goods received notes shall be the base
for parties to record, keep track of and for liquidation of the contract.

Translation by KTC Assurance & Business Advisors 189


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B. Major transactions

1. Accounting for expenses incurred independently in each venture parties

1.1. Based on related invoices and documents to record expenses created independently that
venture parties have to cover when involved in jointly controlled operations:

Dr. 621, 622, 627, 641, 642 (details in joint ventures contract)
Dr. 133 - VAT deductible (if any)
Cr. 111, 112, 331,…

1.2. At the end of the period, transfer the expenses created independently to summarise the
production and business expenses of the joint venture contract:

Dr. 154 - Work in progress (details in joint ventures contract)


Cr. 621, 622, 627 (details in joint ventures contract)

2. Accounting for common expenses incurred that are charged to all venture parties:

2.1. Accounting in the venture parties creating common expenses:

a) When creating common expenses, based on related invoices and documents all venture
parties record:

Dr. 621, 622, 627, 641, 642 (details in joint ventures contract)
Dr. 133 - VAT deductible (if any)
Cr. 111, 112, 331,...

b) If the venture contract regulates the share of common expenses, at the end of accounting
period, based on the regulations of the contract, the accountant prepares the “List of
allocation of common expenses” agreed by ventur
venturee parties. Based on allocated expenses to
other venture parties to record:

Dr. 138 - Other receivables (details for each venture party)


Cr. 133 - VAT deductible (if any)
Cr. 621, 622, 627, 641, 642

2.2. Accounting for the venture parties not creating common expenses for venture contract:

Based on the “List of allocation of common expenses” that was agreed by venture parties
(following the acknowledgement of the venture parties created common expenses):

Dr. 621, 622, 623, 641, 642 (details in joint ventures contract)
Dr. 133 - VAT deductible (if any)
Cr. 338 - Other payables (details for venture parties creates common expenses)

3. Accounting for shared products:

3.1. When received shared products from venture contract, based on the received note and related
documents:

Dr. 152 - Raw materials (If the shared product is not finished goods)

Translation by KTC Assurance & Business Advisors 190


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Dr. 155 - Finished goods (If the shared product is finished goods)
Dr. 157 - Goods on consignment (If the shared products sent for consignment, not through
the company’s premise)
Cr. 154 - Work in progress (Including independent expenses and common expenses that
venture parties have to cover) (Details in joint ventures contract).

3.2. When received shared products from the contract and put into use for production of other
products, based on the received notes and related documents:

Dr. 621 – Raw material costs


Cr. 154 - Work in progress (including independent expenses and common expenses that
venture parties have to cover) (details in joint ventures contract).

3.3. When the venture contract regulates of not sharing products but giving to an entity to sell to
outside, after issuing to the seller of the products, transfer independent expenses and
common expenses that venture parties have to cover to cost of goods sold:

Dr. 632 - Cost of goods sold


Cr. 154 - Work in progress (including independent expenses and common expenses that
venture parties have to cover) (details in joint ventures contract).

4. Accounting for sales that a venture parties sells products for other parties and shares income
to other venture parties:

4.1. Accounting at the seller:

- When sell products as regulation of contract, the seller must issue invoice for all products
sold, simultaneously records sales generated:

Dr. 111, 112, 131,...


Cr. 338 - Other payables (details in joint ventures contract)
Cr. 3331 – VAT payable (if any)

- and “Report of Revenue Allocation” to record


Based on the regulation of venture contract and
income equivalent to benefit of the venture parties:

Dr. 338 - Other payables (details in joint ventures contract)


Cr. 511 – Sales (benefit that the seller receives as agreements in contract)

- When receive invoice issued by venture parties who do not sell products based on income
that those venture parties receive from the contract:

Dr. 338 - Other payables (details in joint ventures contract)


Dr. 3331 – VAT (33311) (if share VAT output)
Cr. 338 - Other payables (details for each venture parties)

- When send sales to venture parties who do not sell products:

Dr. 338 - Other payables (details for each venture parties)


Cr. 111, 112,...

4.2. Accounting at the venture parties who do not sell products:

Translation by KTC Assurance & Business Advisors 191


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- The venture parties do not sell products of venture. Based on the “Report of revenue
allocation” confirmed by venture parties and related documents, the venture parties shall
issue invoice for the seller based on income that the company receives:

Dr. 138 - Other receivables (including VAT if share VAT output, details for venture parties
selling products)
Cr. 511 – Sales (details for contract and shared amount)
Cr. 3331 – VAT (if the VAT input amount is shared also)

- When the venture parties pay for the sales, based on the actual receipt:

Dr. 111, 112,... (amount sent by venture parties)


Cr. 138 - Other receivables (details for venture parties selling product)

III. Accounting for venture in form of jointly controlled assets

A. General regulations

1. Jointly controlled assets contributed by venture parties are assets contributed or purchased by
venture parties, used in venture’s purpose and makes profit for venture parties as regulation
of venture contract.

2. Each venture party receives products from using of jointly controlled assets, therefore must
cover a part of the expenses created as agreements in contract.

3. Venture parties must record in details in the


the same accounting book system of each one to
record and reflect in the financial statements as follows:

Contribution to jointly controlled assets, classified by the nature of assets;

Loans independently created of each contributor to the venture;

Borrowings, the common loan that have to bear with other contributor to the venture from the
operation of venture;

Income from sale or use of products shared from the venture and created expenses are shared
from activities of venture;

Expenses created involving in business contribution.

4. When it is created common expenses, income that venture parties must suffer or receive,
venture parties must account as the case of jointly controlled operations.

B. Accounting for some activities involving in the venture in the form of jointly controlled
assets

1. When the venture parties use their fixed assets to contribute to the venture contract in the
form of jointly controlled assets, the accountant records those fixed assets in account 211 and
only records the changes of purpose, location of use of fixed assets.

2. When the venture parties purchase or use other assets to contribute to the venture contract in
the form of jointly controlled assets, the accountant records the assets based on actual

Translation by KTC Assurance & Business Advisors 192


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expenses paid to obtain the assets:

Dr. 211, 213 (details of jointly controlled assets in venture contract)


Dr. 133 - VAT deductible (if any)
Cr. 111, 112,...
Cr. 331 - Trade payables

3. When the venture parties, by themselves or in cooperation with other parties, invest in
construction to have the jointly controlled assets:

- Based on actual expenses to record:

Dr. 241 - Construction in progress (details of venture contract of jointly controlled assets)
Dr. 133 - VAT deductible (if any)
Cr. 111, 112, 152, 153, 155, 156,...
Cr. 331, 341,…

- into use and the finalization of construction


When the construction is completed and put into
determines the value of jointly controlled assets
investment is approved, the accountant determines
construction and expenses not approved (if any):
formed from investment in construction

Dr. 211 - Tangible assets (details in jointly controlled assets)


Dr. 213 - Intangible assets (details in jointly controlled assets)
Dr. 138 - Other receivables (1388) (expenses not approved and to be collected, if any)
Dr. 152 - Raw materials
Cr. 241 - Construction in progress

- Based on capital, fund for investment, construc tion of jointly controlled assets, the accountant
construction
increases the contributed capital and decreases capital, fund according to current regulations.

- involving in accounting for expenses, income that


The method of record business operations involving
venture parties in jointly controlled assets must suffer or receive is done as regulation for
jointly controlled operations.

Translation by KTC Assurance & Business Advisors 193


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ACCOUNT 223

INVESTMENT IN ASSOCIATES

This account reflects the value of the direct investment of investor in associates and the increases
and decreases of investment in associates.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The investment is considered investment in associates when the investor hold directly from
20% to less than 50% owner’s equity (from 20% to less than 50% vote right) of the invested
entity without any other regulations.

- When the vote right rate of the investor in thee associate equals the contribution rate of the
investor in that associate:

Vote right rate Total contribution of the investor in the


associate
of the direct = X 100%
investor
in the associate Total owner’s equity of the associate

- When the vote right rate is different from the contribution rate due to other agreements
investor’s vote right is determined based on the
between the investor and the associate, the investor’s
agreement document between the investor and the associate.

2. Accounting for investment in associates when make up and explain the own finance report of
the investor in cost basis method. When account the investment in associates in cost basis
change during the time of investment progress,
method, the value of the investment does not change
exempt from the investor purchases more or liquidates all or a part of that investment or get
benefits out of the shared profit.

3. The cost basis of the investme nt is determined as follows:


investment

- Cost basis of investment in associates consists of the contribution or real value of the
investment adds (+) purchasing expenses (if any), such as expenses for intermediary,
transaction...

- When contribute to the associate by fixed assets, materials, merchandise goods, the cost basis
of the investment is recorded based on the value agreed by contributors. The difference
between the noted value of fixed assets, materials, merchandise goods and the revalued
amount is recorded as follows:

The difference between the higher revalued amount than the net book value of materials,
merchandise goods is recorded into other income; the difference between the lower revalued
amount than the noted value of materials, merchandise goods is recorded into other expenses;

The difference (higher) between the revalued amount and the net book value of fixed assets is
recorded all into other income; the difference (lower) between the revalued amount and the
net book value of fixed assets is recorded into other expenses;

4. The accountant must record in details of the value of investment to associates. Record the

Translation by KTC Assurance & Business Advisors 194


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value of investment in associates as follows:

- The amount of investment in joint stock companies listed on the stock market of an investor
should be recorded according to the actual payment to buy the securities, including direct
expenses involving in purchasing of securities and official report of the securities trading
centre on the ownership of the investor for those securities.

- The amount of investments in joint stock companies that have not been listed on the stock
market should be recorded according to the document of ownership for those securities and
receipt documents of selling securities of the invested entities or purchasing documents of
those securities;

- For investments in others kinds of company, the record is based on document of contribution,
profit (or loss) sharing report agreed by the parties or purchasing, selling documents of those
investments;

- Investors are only allowed to record the divi dend, income shared from the associate when
dividend,
receive official notice of the associate about the dividend for the investor or the shared
income in the period on accrual principle.

STRUCTURE AND CONTENTS OF ACCOUNT 223 - INVESTMENT IN ASSOCIATES

Debit:

Increase of cost of the investment.

Credit:

- Cost of the investment reduces owing to getting back the capital invested or get other benefit
out of shared profit;

- Cost of the investment reduces owing to sale, liquidation of all or a part of the investment.

Debit balance:

Historical cost of the investment in associates at the end of the period.

MAJOR TRANSACTIONS

1. When invest in associates in the method of buying equity securities or contribute by money,
based on the real payment, the investor records:

Dr. 223 - Investment in associates


Cr. 111, 112,...

2. When the investor holds the investment less than 20% vote right in a specific company, when
the investor buys more equity securities or contributes more to the company to become the
investor having considerable influence on the invested entity, the investor notes:

Dr. 223 - Investment in associates


Cr. 228 - Other long term investments (investment is less than 20%)
Cr. 111, 112 (additional amount)

Translation by KTC Assurance & Business Advisors 195


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3. When invest in associates by contributing by materials, goods, fixed assets, based on the
revalued amount of materials, merchandise goods, fixed assets agreed by the investor and the
associate:

Dr. 223 - Investment in associates


Dr. 214 - Accumulated depreciation and amortization
Dr. 811 - Other expenses (if the revalued amount of materials, merchandise goods, fixed
assets is lower than the noted value of materials, merchandise goods, the net book value of
fixed assets)
Cr. 152, 153, 156, 211, 213,...
Cr. 711 - Other income (if the revalued amount of materials, merchandise goods, fixed
assets is higher than the noted value of materials, merchandise goods, net book value of
fixed assets)

4. When receive the official notices of the associ


associate about the dividend, shared profit, the
investor records:

Dr. 138 - Other receivables (When receive the official notices of the associate)
Dr. 223 - Investment in associates (If receive the dividend by equity securities)
Cr. 515 - Financial income

When truly receive money:

Dr. 111, 112,...


Cr. 138 - Other receivables

5. When receive other benefit from the associate out of dividend, shared profit, the investor
reduces the cost basis of the investment:

Dr. 111, 112, 152,...


Cr. 223 - Investment in associates

6. When the investor buy more the capital or the associate and has the right of control the
associate, the investor transfer the cost basis of the investment to account 221 "Investment in
subsidiaries":

Dr. 221 - Investment in subsidiaries (if the investor becomes the parent company)
Cr. 223 - Investment in associates
Cr. 111, 112,... (if buy more capital to become the parent company)

7. When the investor liquidates a part of investment in associates, so that does not have the
considerable influence on the invested entity, the investor transfers the cost basis of the
investment to other related account:

Liquidation, sale of profitable investment:

Dr. 228 - Other long term investments


Dr. 111, 112,... (income from liquidation, sale of a part of the investment)
Cr. 223 - Investment in associates
Cr. 515 - Financial income (difference between the noted value of the investment and the
sales of that investment)

Translation by KTC Assurance & Business Advisors 196


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Liquidation, sale of a part of the investment that made loss:

Dr. 635 - Financial expenses (difference between net book value of the investment and the
sales of that investment)
Dr. 228 - Other long term investments
Dr. 111, 112,... (proceeds from liquidation, sale a part of the investment)
Cr. 223 - Investment in associates

- When liquidate, sell all the investment in a associate, the investor reduces the investment and
records income (profit or loss) from the liquidation, sale of the investment:

Accounting for sale, liquidation of the investment that made loss:

Dr. 111, 112, 131,...


Dr. 635 - Financial expenses (difference of the
the proceeds and the book value of investment)
Cr. 223 - Investment in associates

Sale, liquidation of profitable investment:

Dr. 111, 112, 131,...


Cr. 515 - Financial income (difference between
between the proceeds and the book value of
investment)
Cr. 223 - Investment in associates

Expenses for liquidation, sale of investments:

Dr. 635 - Financial expenses


Dr. 133 - VAT deductible (if any)
Cr. 111, 112,...

Translation by KTC Assurance & Business Advisors 197


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ACCOUNT 228

OTHER LONG TERM INVESTMENTS

This account records the current value and the increases, decreases of Other long term
investments (except for investment in subsidiaries, shares in jointly control entity, investment in
associates) such as debt securities, equity securities, or investment in other companies that has
less than 20% owner’s equity (20% vote right), etc and collection period over one year.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. When lending, the accountant must record in details of each amount of money to each
borrower, borrowing method, borrowing period and interest rate.

2. When the company invests by buying bonds, the accountant must record in details of each
entity issuing debt securities, time and bond interest rate.

another company and only has less than 20% vote


3. When the investor buys equity securities of another
right, the accountant must record the investment into this account and must record in details
of each par value of equity securities, the entity issuing equity securities.

4. When the investor contributes to the jointly cont rol entity but has not the jointly control right
control
and has less than 20% vote right in the vent ure, record the contribution into account 228
venture,
“Other long term investments” using the cost basis.

STRUCTURE AND CONTENTS OF ACC OUNT 228 - OTHER LONG TERM


ACCOUNT
INVESTMENTS

Debit:

her long term investments.


Increase in the value of other

Credit:

Decrease in the value of other long term investments.

Debit balance:

Current value of other long term investments.

Account 228 "Other long term investments" composes three sub- accounts:

- Account 2281 - Equity securities: to record long term investment by equity securities of the
investor.

- Account 2282- Debt securities: to record long term investment by bond of the investor.

- Account 2288 - Other long term investments: to record other long term investments such as
lends, contribution by money or assets.

MAJOR TRANSACTIONS

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1. When lend other companies for more than a year:

Dr. 228 - Other long term investments (2288)


Cr. 111, 112, …

2. Periodically, record interest income generated according to the loan contract:

Dr. 111, 112,… (if collection in cash at sight)


Dr. 138 - Other receivables (if cash has not received at once)
Cr. 515 - Financial income (interest expenses created from borrowings for obtaining
capital)

3. Record of interest income in the current period:

Dr. 111, 112,... (if collection in cash at sight)


Cr. 515 - Financial income

4. Record of collection of the principal and interest income:

Dr. 111, 112,… (principal and interest income)


Cr. 228 - Other long term investments (principle amount) (2288)
Cr. 515 - Financial income (interest income)

5. Record of bond acquisition in another company in the period of more than one year:
company

Dr. 228 - Other long term investments (2282)


Cr. 111, 112,…

6. Record of interest income received in advance:

6.1. When make payment to acquire bond and received interest income in advance:

Dr. 228 - Other long term investments (2282)


Cr. 111, 112,… (Actual payment)
Cr. 3387 - Deferred income (interest income received in advance)

6.2. Periodically, calculate and allocate the income in the proper period:

Dr. 3387 - Deferred income


Cr. 515 - Financial income

7. Record of interest income periodically received:

7.1. When pay to acquire the bond:

Dr. 228 - Other long term investments (2282)


Cr. 111, 112,...

7.2. Periodically record interest income:

Dr. 111, 112 (if cash received)


Dr. 138- Other receivables (if cash not yet collected)
Cr. 515 - Financial income

Translation by KTC Assurance & Business Advisors 199


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8. Record of bond acquisition with interest income received later:

- When pay to buy the bond, accounting entry is similar to the one guided in item 7.1.

- Periodically, calculate and record the interest income in each period:

Dr. 138 - Other receivables (1388)


Cr. 515 - Financial income

- When the bond is due, the interest income is collected:

Dr. 111, 112,...


Cr. 228 - Other long term investments (2282)
Cr. 138 - Other receivables (1388) (accumulated interest income in prior periods)
Cr. 515 - Financial income (interest income of the current period)

9. Record of principal collected when the bond is due:

Dr. 111, 112,...


Cr. 228 - Other long term investments (2282)

cont ributes in another company but only has less


10. When the company buys equity securities or contributes
than 20% of vote right:

Dr. 228 - Other long term investments (equal to cost of the investment adds (+) expenses
directly involving in investment activities such as intermediary expenses) (2281, 2288)
Cr. 111, 112, 331,...

11. When the company contributes to another company by assets but only has less than 20% of
vote right and has not the jointly control right, based on the revalued amount of materials,
merchandise goods, fixed assets to record:

Dr. 228 - Other long term investments (2288)


ation and amortization
Dr. 214 - Accumulated depreciation
reva
Dr. 811 - Other expenses (difference of the revalued amount and the book value of materials,
merchandise goods, the net book value of fixed assets)
Cr. 152, 153, 156, 211, 213,...
Cr. 711 - Other income (difference of the revalued amount and the book value of
materials, merchandise goods, the net book value of fixed assets)

12. When the company increases the investment from dividend or distributed profit:

Dr. 228 - Other long term investments (2281, 2288)


Cr. 515 - Financial income

13. When the investor sells a part of the investment in subsidiaries, joint venture, associate and
lose the right of control or the right of jointly control or lose the considerable influence:

Dr. 228 - Other long term investments (2281, 2288)


Cr. 221 - Investment in subsidiaries
Cr. 222 - Shares in joint ventures
Cr. 223 - Investment in associates

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14. Sale of equity securities, or liquidation of contribution in other long term investments:

- If profit made:

Dr. 111, 112,...


Cr. 228 - Other long term investments (2281, 2288)
Cr. 515 - Financial income (difference between the cost of goods sold and historical
cost).

- If loss incurred:

Dr. 111, 112,...


Dr. 635 - Financial expenses (difference between the cost of goods sold and historical cost)
Cr. 228 - Other long term investments (2281, 2288)

15. When the investor contributes more to the venture and become a contributor having the
jointly control right in the jointly control entity:

Dr. 222 - Shares in joint ventures


Cr. 111, 112,… (additional contribution)
Cr. 228 - Other long term investments (2288)

16. When the investors contribute more and become the parent company or have considerable
influence:

Dr. 221- Investment in subsidiaries, or


Dr. 223 - Investment in associates
Cr. 111, 112 (additional contribution)
Cr. 228 - Other long term investments (2281, 2288)

Translation by KTC Assurance & Business Advisors 201


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Decision 15/2006/QD-BTC

ACCOUNT 229

PROVISION FOR LONG TERM INVESTMENTS

This account reflects the current value and the increases and decreases in provision for long term
investments and loss of other long term investments. Provision for long term investments consists
of:

- Provision for decrease of stock in financial investment activities is the provision for the loss
value due to possible decrease of stocks that the company holds;

- Provision for loss due to decrease of long term investments or loss of the entity receiving
investment and need more capital.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Provision and reverse for long term investments are often made at the end of the accounting
period. If the company is accepted by the Ministry of Finance to use the fiscal year different
from solar calendar year (not from 1 January to 31 December), provisions should be made on
the last day of the financial year.

statements, if there are any great changes of


For companies preparing the interim financial statements,
provision, the provisions or reverses shall be revised (increased or decreased) at the end of
interim period (quarterly report).

2. Provision for long term investments must be done as regulation of each kind of long term
investment. Provision is determined by the difference between the net realisable value
(market price) or the collectible investment andand historical cost recorded in the accounting
book. If the provision required in the current year is higher than the provision balance in the
into business and production expenses in the year.
prior year, the difference shall be recorded into
If the provisions required in the current year are lower than the provision not yet used in the
prior year, the difference shall be reduced to business and production expenses in the year.

3. Provision for long term investments is done at the end of a fiscal year if the market price of
us
stocks long term investment of the company usually declines as compared to the historical
conditi
cost recorded in the accounting book. The conditions to make the provision for decline in the
long term securities are as follows:

- The stocks of the company are invested legally;

- The securities are tradable in the market. At the balance sheet date, the market value of the
securities declines as compared to its historical cost recorded in accounting book.

4. The company must provide the provision for each kind of long term securities when there is a
decline in price at the balance sheet date in the following formula:

Provision for Quantity of Original cost of


decrease of decreased securities securities Market value
long term at the time of X recorded on the - of
securities preparing
for the next year annual financial accounting book securities
statements

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The company must determine the provision required for each kind of long term securities
whose prices decline and combine those provisions in the list of provisions for decline in long
term securities investment. This list should show the comparative figure of prior year that has
not been used up yet in order to determine the additional provision or the reverse into
financial expenses.

5. The provision must be made for the capital of the General Corporation contributed in its
members or of the General Corporation or holding company invested in State limited
liabilities company with one member, limited liabilities companies with more than two
members, joint stock company, partnership, joint venture, associates or other long term
investments. If the investee makes loss, then requires more investment (except for the loss is
planned ahead of time in the business plan), the provision for each investment is made in the
following formula:

Provision for Actual Actual Investment of the


contribution company

from long term of parties - owners’ X


investment in the equity Total contribution of
company parties to the company

The provision for each long term investment shall be made up to the amount invested.

At the balance sheet date of the following year,


year, if there is profit gained from the investment,
the investee makes gain or less loss, the reverse entry must be made for part of or total
amount of provision made to reduce the financial expenses.

6. The provision for financial investment is al so used to compensate loss of long term
also
investments since the investee is bankrupt or suffers natural disaster, etc., leading to
investments uncollectible or collected at amount lower then its historical cost. This provision
is not used to compensate for loss due to liquidation of investments.

STRUCTURE AND CONTENTS OF ACCOUNT 229 - PROVISION FOR LONG TERM


INVESTMENTS

Debit:

- Reverse of provision for long term investments th


this year when the provision required is lower
than the unused one provided in prior year;

- Compensate value of loss of long term investment when there is decision to use the provision
already made to compensate for the loss.

Credit:

Increase of provision for long term investments (provision for the first time and additional
provision for the difference).

Translation by KTC Assurance & Business Advisors 203


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Credit balance:

Current provision for long term investments at the end of the period.

MAJOR TRANSACTIONS

1. At the end of the accounting period, based on the decline in the current long term investments
to provide the first provision:

Dr. 635 - Financial expenses


Cr. 229 - Provision for long term investments

2. At the end of next accounting period:

- If the provision required this year is higher than provision for long term investments made in
prior year that has not been used up yet, an addition provision must be made for that
difference:

Dr. 635 - Financial expenses


Cr. 229 - Provision for long term investments

- If provision required in this year is lower than the provision for long term investments made
in prior year that has not been used up yet, a reverse must be made for that difference:

Dr. 229 - Provision for long term investments


Cr. 635 - Financial expenses

3. Actual loss occurred (for instance, the investee is bankrupt, or suffers natural disaster, fire,
etc). The investments are uncollectible or th
thee collected amount is lower than the amount
initially invested. The company decides to use the provision for long term investments
already made to compensate loss:

Dr. 111, 112 (If any)


Dr. 229 - Provision for long term investments (provision amount already made)
Dr. 635 - Financial expenses (provision amount not yet provided)
Cr. 222, 223, 228 (historical cost of investments being loss)

Translation by KTC Assurance & Business Advisors 204


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Decision 15/2006/QD-BTC

ACCOUNT 241

CONSTRUCTION IN PROGRESS

This account reflects construction expenses (including costs of purchasing fixed assets, construct
or reconstruct, repair, widen, re-equip the construction) and the status of finalization of
construction in companies purchasing fixed assets, construction and renovation of fixed assets.

Fixed asset renovation and construction projects can be performed by the company itself or by
another company. This account is also used for companies performing themselves to records
expenses created in the progress of construction and renovation.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Construction expenses are expenses needed to construct or reconstruct, repair, improve,


widen or re-equip the construction. Construction expenses is calculated based on the amount
of work, norms system, economic-technical norms and policies of the State, suitable with
objective elements of the market in each pe riod, regulation on managing
period, ma of construction
investment. Construction expenses consist of:

- Construction expenses;

- Equipment expenses;

- Other expenses.

Account 241 is recorded in details in each construction, construction categories. Each


category of construction must be recorded in de tails for each type of expenses of construction
details
and is controlled in accumulate from the inception
inception until the construction or categories of
construction are complete and put into use.

2. In construction, constructing expenses and eequipment


quipment are often recorded for each assets,
expenses for project management and other expenses that are often commonly paid. The
investor must account for and allocate expenses for project management and other expenses
for each asset in the principle:

- Expenses for project management and other expenses directly involving in a specific asset,
account for that asset;

- Expenses project management and other common expenses directly involving in many assets,
account in suitable method.

3. When construction is completed and has put into use but the finalization of the construction
has not been approved, the company increases the historical cost of assets using the estimated
price (Estimated price is used based on the actual expenses paid to have the fixed assets). The
company calculates the depreciation amount based on this estimated cost until the cost is
adjusted upon the approved value.

4. Actual expenses for renovation fixed assets could be recorded directly into production,
business expenses in the period of the company. If expenses for renovation fixed assets in the
period has high value and involves in many periods of production, and business, it is
acceptable to allocate gradually into production, business expenses.

Translation by KTC Assurance & Business Advisors 205


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Account 241 - Construction in progress, composes three sub-accounts:

- Account 2411 - Acquisition of fixed assets: to record expenses for purchasing fixed assets and
the finalization status of expenses from purchasing fixed assets if assembly, testing is needed
before put into use (including both purchase of new or used fixed assets). If fixed assets
purchased needs more investment, equipment to put into use, all the expenses for more
purchase, equipment are also recorded into this account.

- Account 2412 - Construction in progress: to record expenses for investment in construction


and the finalization status of construction. This account is recorded in details for each
construction, construction categories (For each assets formed from the investment) and each
assets must be recorded in details of each expenses of construction.

- Account 2413 - Extraordinary repairs:: to record expenses and the finalization status of fixed
assets renovation. General repairs of fixed asset
assets are not recorded into this account but
recorded directly into expenses for production and business.

STRUCTURE AND CONTENTS OF ACCOUNT 241 - CONSTRUCTION IN


PROGRESS

Debit:

- Expenses for construction, purchasing and renovation of fixed assets (tangible and intangible
assets)

- Costs for upgrading and improving fixed assets

- Expenses for purchasing investment property (If the construction investment is needed);

- Expenses for construction of investment property;

- Expenses created after initial recognition of fixed assets, investment property.

Credit:

- Value of fixed assets created by completed cconstruction projects, purchasing and have put
into use;

- Value of construction removed and other construction expenses that were not approved when
finalized the construction;

- Value of renovation of completed fixed assets transferred when finalization of the


construction was approved;

- Value of investment property formed from construction completed;

- Transfer expenses created after initial recognition of fixed assets, investment property to
related accounts.

Debit balance:

- Costs of construction and renovation of fixed assets in progress.

Translation by KTC Assurance & Business Advisors 206


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Decision 15/2006/QD-BTC

- Value of construction projects and renovations of fixed asset completed but not come into use
or the fixed asset has not been approved.

- Value of investment property in progress.

MAJOR TRANSACTIONS

A. Accounting for investment and construction expenditures at consignor

I. Accounting for construction

1. When the consignee handovers the construction works and fixed assets completed and put
them into production of goods and services that are subject to subtraction method VAT, based
nutes of completed construction projects and
on the consignment contract, finalization minutes
invoices, the accountant records the followings:

Dr. 241 - Construction in progress (2412, 2413)


Dr. 133 - VAT deductible (1332) (if any)
Cr. 331 - Trade payables

2. When purchasing equipments for construction, if the fixed assets formed are used in
subtraction method VAT, based on invoices and
production of goods and services subject to subtraction
goods received notes:

Dr. 152 - Raw materials (Price excluding VAT)


Dr. 133 - VAT deductible (1332)
Cr. 331 - Trade payables (Total amount)

When send the non-assembled equipments directly to the construction site and transfer to the
consignee:

Dr. 241 - Construction in progress


Dr. 133 - VAT deductible (1332)
Cr. 331 - Trade payables
Cr. 151 - Goods in transit

3. Record of payment to the consignee or the supplier of materials, goods, services involving in
construction:

Dr. 331 - Trade payables


Cr. 111, 112

4. Record of equipments for construction sent to the consignee:

a) For equipments not need assembled:

Dr. 241 - Construction in progress


Cr. 152 - Raw materials (details of equipments in warehouse)

b) For equipments need assembled:

- When sent equipments to the consignee:

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Dr. 152 - Raw materials (details of equipment to be assembled)


Cr. 152 - Raw materials (details of equipments in warehouse)

- When the completed construction transferred by the consignee is checked and taken over and
approved for payment, the value of equipments is recorded into construction:

Dr. 241- Construction in progress (2412)


Cr. 152 - Raw materials (details of equipment to be assembled)

5. When other expenses created:

Dr. 241 - Construction in progress (2412)


Dr. 133 - VAT deductible (1332) (If any)
Cr. 111, 112, 331, 341

6. When an investor using foreign currencies in investment construction activities, based on


whether that investment is in pre-operating stage (not yet running the production, business
stage
activities) or the course of business:

6.1. Expenses incurred from construction in pre-operating


pre-operating stage (The company has not yet do
business, production activities):

- The expenses for construction in foreign currencies:

Dr. 241 - Construction in progress (Using the exchange


exchange rate of the date of transaction)
Cr. 111, 112 (Using the book exchange rate)
Cr. 331 - Trade payables (Using the exchange rate of the date of transaction)
Cr. 152, 153
Cr. 413 – Foreign exchange differences (4132) (Difference between book and the date of
transaction exchange rate – gain from foreign exchange differences).

If the noted exchange rate is higher than the exchange rate at the date of transaction, the
exchange
difference is debited into account 413 - Foreign exchange differences (loss from foreign
exchange differences).

- When the construction completed and put into uuse, and the finalization of the investment is
approved, the accountant transfers the outstanding balance of account 413 (4132) the foreign
exchange differences arisen in construction to financial expenses or financial income, or to
account 242 "Long term prepaid expenses" (if the loss is substantial), or account 3387
"Deferred income" (if the gain is substantial) and then allocate it in the maximum period of
five years (for accounting entries, please refer to the guidance in account 413 "Foreign
exchange differences").

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6.2. Expenses created for construction in the course of business:

The expenses created for construction in foreign currencies:

Dr. 241- Construction in progress (Using the exchange rate of the date of transaction)
Cr. 111, 112 (Using the book exchange rate)
Cr. 331 - Trade payables (Using the exchange rate of the date of transaction)
Cr. 515 - Financial income (Difference between the book and the date of transaction
exchange rate - gain from foreign exchange differences).

If the book exchange rate is higher than the one in the transaction day, the difference is
debited into account 635 "Financial expenses" (loss from foreign exchange differences).

II. Accounting for construction completed and put into use

1. When the construction is completed, the progr ess of check and take over is finished, assets
progress
are transferred and put into use: If the constr uction finalization report is approved, based on
construction
the value of assets (formed from investment) aapproved
pproved to record into the accounting book. If
the draw has not been approved, Increases the value of assets formed from investment using
provisional price (Provisional price is real expe nses paid to have the assets, based on account
expenses
241 to specify the provisional price)
price).. Both cases are recorded as follows:

Dr. 211 - Tangible assets


Dr. 213 - Intangible assets
Dr. 152, 153
Cr. 241 - Construction in progress (approved price or provisional price)

2. If the finalization of construction investment is approved, the accountant must adjust the
estimation to the approved value:

- If the approved value is higher than the estimation:

Dr. 211 - Tangible assets


Dr. 213 - Intangible assets
Dr. 152, 153
Dr. 138 - Other receivables (receivables of the expenses submitted for approval that were not
approved)
Cr. 241- Construction in progress (difference between the approved value and the
estimation)

- If the approved value is lower than the estimation, the reverse entry is made for the above
entry.

- If fixed assets formed from investment in capital construction or investment and development
fund, simultaneously the accountant records:

Dr. 441- Investment in capital construction


Dr. 414- Investment and development fund
Cr. 241- Construction in progress (unapproved amount) (if any)
Cr. 411- Contributed capital (Approved value of assets formed from investment in
construction)

Translation by KTC Assurance & Business Advisors 209


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(In the case, the construction is funded by the contributed capital, the accountant should
not simultaneously record this entry).

3. When the construction is finished but has not yet been put into use, waiting for set up or
approve, the accountant must record in details for Account 241 "Construction in progress" for
the completed construction waiting for transfer and approve.

III. Accounting for construction of investment property

1. Expenses to make the property ready for work after purchasing:

Dr. 241 - Construction in progress


Dr. 133 - VAT deductible (1332) (If any)
Cr. 111, 112, 331

truction of investment property:


2. Record of expenses created from construction

Dr. 241 - Construction in progress


Dr. 133 - VAT deductible (1332)
Cr. 111, 112, 152, 153, 142, 141, 242, 331

3. Transfer the completed property construction:

Dr. 217 - Investment property (if the property meets the recognition criteria of investment
property)
Dr. 156 - Goods (1567 - Property/real estate) (if the fixed assets are held for sale)
Cr. 241 - Construction in progress

4. When expenses created from upgrade, improvement that (1) surely make the investment
property more economically value than initial (2) being the company’s ob
obligation to make the
investment property ready for work, the acc ountant increases the historical cost of the
accountant
investment property:

- Record actual expenses for upgrade, improvement of investment property:

Dr. 241 - Construction in progress


Dr. 133 - VAT deductible (1332)
Cr. 111, 112, 152, 153, 331,...

- When the upgrade, improvement of investment property completed, the accountant transfers
and increases the historical cost of investment property:

Dr. 217 - Investment property


Cr. 241 - Construction in progress

B. Accounting for construction conducted by the company itself

1. Accounting for construction is recorded into the same accounting book system of the
company:

1.1. Record the actual expenses incurred in construction investment:

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- If the construction used for production of goods and services subject to subtraction method
VAT, the expenses incurred shall be recorded as follows:

Dr. 241 - Construction in progress (Price excluding VAT)


Dr. 133 - VAT deductible (1332)
Cr. 111, 112 (Total amount)

- If the construction used for production of goods and services subject to VAT in direct method
or not subject to VAT, the expenses incurred shall be recorded as follows:

Dr. 241 - Construction in progress (Total amount)


Cr. 111, 112, 152 (Total amount)

1.2. When the construction is completed and the finalization of construction investment is
approved, the accountant records accounting entri
entries that are similar to the ones guided in
Sections II and III.

1.3. When the finalization of construction is aapproved,


pproved, based on invest
investment source and purposes
to record:

a) Fixed assets used in production, business activ ities are funded by construction investment
activities
fund (the State Budget) or investment and development fund, when the finalization of
construction investment is approved, the accountant records the followings
followings:

Dr. 441 - Investment in capital construction


Dr. 414 - Investment and development fund
Cr. 411 - Contributed capital

b) Fixed assets are made from welfare funds and are used in welfare activities, when the
finalization of construction investment is approved; the accountant increases the welfare
funds that make fixed assets:

Dr. 431 - Bonus and welfare funds (4312 - Welfare funds)


Cr. 431 - Bonus and welfare funds (4313 - Welfare funds to make fixed assets)

C. Accounting for renovation of fixed assets

Accounting for renovation of fixed assets of theth company can be similar to accounting for
constructions performed itself or on consignment procedure.

1. Renovation of fixed assets by the Company itself:

1.1. Expenses for renovation incurred are debited into account 241 "Construction in progress"
(2413) and recorded in details for each construction, each renovation of fixed assets. Based
on documents of expenses incurred, the company records:

- If renovation of fixed assets used in production of goods and services subject to subtraction
method VAT:

Dr. 241 - Construction in progress (2413) (Price excluding VAT)


Dr. 133 - VAT deductible (1332)
Cr. 111, 112, 152, 214 (Total amount)

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- If renovation of fixed assets used in production of goods and services subject to VAT in
direct method or not subject to VAT:

Dr. 241 - Construction in progress (2413) (Total amount)


Cr. 111, 112, 152, 214, 334 (Total amount)

1.2. When the renovation completes, the accountant must determine the actual cost of each
renovated construction to record these expenses as following cases:

- If expenses for renovation of fixed assets are low value, the accountant transfers all the
expenses to production, business expenses in the period:

Dr. 623 - Machine costs


Dr. 627 - Factory overhead costs
Dr. 641 - Selling expenses
Dr. 642 - General and administration expenses
Cr. 241 - Construction in progress (2413)

- If expenses for renovation of fixed assets are high value and involve in many production,
assets completes, the accountant transfers to
business periods, when the renovation of fixed assets
prepaid expenses account (allocated) or accruals (in the case accruals for renovation expenses
were provided):

Dr. 142 - Prepaid expenses


Dr. 242 - Long term prepaid expenses
Dr. 335 - Accruals
Cr. 241 - Construction in progress (2413)

- If repair or improvement of fixed assets met recognition criteria, the accountant increases the
historical cost of fixed assets:

Dr. 211- Tangible assets


Cr. 241 - Construction in progress (2413)

2. Renovation of fixed assets conducted by consignment:

- When the consignee handovers the renovation volume:

Dr. 241 - Construction in progress (2413)


Cr. 331- Trade payables

- The accounting entries for transferring renovation expenses are similar to the ones in
renovation of fixed assets conducted by the Company itself.

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ACCOUNT 242

LONG TERM PREPAID EXPENSES

This account reflects actual expenses created involving in business results of many accounting
periods and the transfer of these expenses to production, business expenses of the next accounting
periods.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Long term prepaid expenses are:

- Prepaid expenses for fixed assets under operating lease (Land use rights, buildings, stocks,
offices, showrooms and other fixed assets) for production, business activities in many fiscal
years. When prepayment for land rent in long term periods are granted the certificate of land
used rights, these expenses are recorded into account 213 instead of account 242;

- The prepayment for leases of long term infrastructure used in busin


business activities for several
periods that was not granted the certificate of used right;

- The prepayment for business activities in many fiscal years;

- The expenses for the company establishment, tr aining, advertising incurred in pre-operation
training,
stage that are allocated in not more than three years;

- High-value research expenses are allocated in years;

- Expenses in development stage that do not satisfy recognition criteria of intangible assets;

- Training expenses for managing staff and technical workers;

- Expenses for relocation or restructuring of the company with high value that are allocated in
restructuring has not been provided yet;
several years if the provision for restructuring

- expl
Expenses for insurance (insurance for fire, explosion, civil responsibility of the owner of
transporting vehicle, insurance for vehicle, property, etc) and fees that the company purchases
and pays one time for many fiscal years;

- Tools and supplies with high value put in production and business activities one time and
used for more than one year that must be allocated in years;

- The repayment for interest expenses from borrowings for long term periods or from issuing
bonds;

- Interest expenses from instalment, deferred payment;

- Expenses incurred from issuing the company bonds with high value that should be gradually
allocated;

- Expenses for renovation of fixed assets incurred once with high value that the company did
not make provisions for and must be allocated in many years;

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- The transfer of foreign exchange differences incurred and resulted from revaluation of
monetary items in foreign currencies (if loss) in construction investment period (pre-
operating) when completed;

- The difference between the selling price and the net book value of fixed assets sold and lease back
under financial lease (the selling price is lower);

- The difference between the selling price and the net book value of fixed assets sold or lease back under
financial lease (the selling price is lower);

- Expenses with high value involving in investment property after the initial recognition that
does not satisfy the recognition criteria to increase the historical cost of the assets that should
be allocated in years;

- When the business combination not leading to the parent-subsidiary relationship generated
goodwill or when equitizing the SOEs leading to the business advantage;

- Other expenses.

2. Account 242 should only record expenses incurred in production, business activities for more
than one year;

3. The calculation and allocation of Long term pr epayment into production, business expenses
prepayment
in each accounting period should be based on the
the nature and amount of each kind of expenses
to choose the appropriate method;

4. The accountant should record each Long term prepayment in details of amount incurred,
amount allocated into appropriate periods and th
thee remaining that has not been allocated into
expenses;

5. The company must record in details of fo reign exchange differences (loss on foreign
foreign
exchange differences) for the investment construction incurred in pre-operating period that
construction
have not been allocated into expenses.

STRUCTURE AND CONTENTS OF ACCOUNT 242 – LONG TERM PREPAID


EXPENSES

Debit:

- Long term prepaid expenses incurred in a period;

- Transfer of foreign exchange differences incurred and resulted from revaluation of monetary
items in foreign currencies (if loss) in investment construction investment period (pre-
operating) when completed, then shall be allocated into financial expenses.

Credit:

- Long term prepaid expenses recorded into production, business expenses;

- Record the allocation of foreign exchange differences incurred and resulted from revaluation
of monetary items in foreign currencies (if loss) in construction investment (pre-operating)
when completed into financial expenses in the period.

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Debit balance:

- Long term prepaid expenses have not been recorded into production, business expenses in the
period;

- Foreign exchange differences incurred and resulted from revaluation of monetary items in
foreign currencies (if loss) in construction investment (pre-operating) when completed, that
have not been allocated at the year end.

MAJOR TRANSACTIONS

1. Record of the high-value long term prepaid expenses incurred that must be gradually
allocated into production, business expenses in many fiscal years such as establishment
expenses, expenses for training for employees, adve
advertising in pre-operating stage of the newly
established company, research and reallocation expenses:

Dr. 242 - Long term prepaid expenses


Dr. 133 - VAT deductible (If any)
Cr. 111, 112, 152, 331, 334, 338

Periodically, the long term prepaid expenses must be allocated into production,
production, business expenses:

Dr. 623, 627, 635, 641, 642


Cr. 242 - Long term prepaid expenses

2. Record of prepayment for lease of fixed assets, infrastructure under operating lease in many
assets,
years:

- If fixed assets leased are used for production of goods and services subject to Subtraction
method VAT:

Dr. 242 - Long term prepaid expenses


Dr. 133 - VAT deductible (If any)
Cr. 111, 112

- If fixed assets leased are used for production of goods and services subject to VAT in direct
method or not subject to VAT:

Dr. 242 - Long term prepaid expenses


Cr. 111, 112

3. Record of tools and supplies with high value put in production, business activities one time
and used for more than a year that must be allocated in years:

- When the tools and supplies put in use, based on the goods dispatch notes to record:

Dr. 242 - Long term prepaid expenses


Cr. 153 - Tools and supplies

- Periodically the tools and supplies shall be allocated in suitable method. The allocation can be
determined based on their useful life or the volume of products, services that those tools and
supplies produced in each period:

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Dr. 623, 627, 641, 642,...


Cr. 242 - Long term prepaid expenses

4. Record the acquisition of fixed assets and investment property in deferred, instalment
method:

- When acquired tangible assets, intangible assets or investment property in deferred,


instalment method and used them for production, business, or held for capital appreciation or
for operating lease:

Dr. 211, 213, 217 (Historical cost - at sight price)


Dr. 133 - VAT deductible (If any)
Dr. 242 - Long term prepaid expenses (The interest expense from deferred payment is the
Difference between the total payment minus (-) the at sight payment price minus (-) VAT (If
any))
Cr. 331 - Trade payables (Total amount).

- Periodically, when pay to the sellers, the accountant records:

Dr. 331 - Trade payables


Cr. 111, 112 (The periodic payment including the principal amount and interest expenses
created from the deferred, instalment method).

- Periodically, the payment of interest expenses created from the deferred and instalment
method are allocated to expenses:

Dr. 635 - Financial expenses


Cr. 242 - Long term prepaid expenses

5. Record of the expenses for renovation of fixed


fixed assets incurred once with high value that the
company has not provided the provisions for, then allocated in years when the renovation
completed:

5.1. Transfer the renovation expenses to account long term prepaid:

Dr. 242 - Long term prepaid expenses.


Cr. 241 - Construction in progress (2413)

5.2. Periodically, the renovation expenses for fixed assets are allocated to production, business
expenses in the fiscal year:

Dr. 623, 627, 641, 642,...


Cr. 242 - Long term prepaid expenses

6. Record of initial direct expenses with high value involving in fixed assets under operating
lease that should be allocated in years:

Dr. 242 - Long term prepaid expenses


Cr. 111, 112, 331,...

Periodically, the initial direct expenses involving in the operating lease of fixed assets are
allocated matching with the recognition of revenue:

Translation by KTC Assurance & Business Advisors 216


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MINISTRY OF FINANCE
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Dr. 627 - Factory overhead costs


Cr. 242 - Long term prepaid expenses

7. When foreign exchange differences incurred and resulted from revaluation of monetary items
in foreign currencies (if loss on foreign exchange differences is substantial) in construction
investment (pre-operating period) when completed, are transferred to long term prepayment
for gradual allocation into financial expenses:

Dr. 242 - Long term prepaid expenses


Cr. 413 - Foreign exchange differences (4132)

8. Periodically, record the allocation into financial expenses of foreign exchange differences
incurred and resulted from revaluation of monetary items in foreign currencies in
construction investment (pre-operating) when completed:

Dr. 635 - Financial expenses (the loss)


Cr. 242 - Long term prepaid expenses

9. Record of the payment in advance to the lende


lenderr for interest expenses on long term loans:

Dr. 242 - Long term prepaid expenses


Cr. 111, 112,...

- Periodically, record the allocation of the interest expenses for the current period to financial
expenses or capitalize into construction in progress:

Dr. 635 - Financial expenses (If the interest expenses are recorded into production, business
expenses in the period)
Dr. 241 - Construction in progress (If the interest expenses are capitalized into construction in
progress)
Dr. 627 - Factory overhead costs (If the interest expenses are capitalized into construction in
progress)
Cr. 242 - Long term prepaid expenses

10. When the company issues bonds at the face valuvalue to obtain capital and pays the interest on
bonds in advance at the issuance date, the inte
interest expenses shall be debited to account 242
(details by prepayment of interest on each
each bond) and then allocated into expenses.

- At the time of issue of bonds:

Dr. 111, 112 (Actual amount)


Dr. 242 - Long term prepaid expenses (details by prepayment of interest on each bond)
Cr. 3431 - Value of securities

- Periodically, record the allocation of the prepayment of interest on bond into financial
expenses for the current period:

Dr. 635 - Financial expenses (If recorded into financial expenses in the current period)
Dr. 241 - Construction in progress (If capitalized into construction in progress)
Dr. 627 - Factory overhead costs (If capitalized into value of work in progress)
Cr. 242 - Long term prepaid expenses (details by prepayment of interest on each bond)
(the allocation amount of interest expense in the current period)

Translation by KTC Assurance & Business Advisors 217


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11. Record of expenses incurred when issuing the Company bonds:

- If expenses for issuing bond are low value, the accountant records into expenses in the
period:

Dr. 635 - Financial expenses


Cr. 111, 112,...

- If expenses for issuing bond are highly value, the accountant record for allocation gradually:

Dr. 242 - Long term prepaid expenses (details for expenses of issuing bonds)
Cr. 111, 112,...

- nds shall be allocated to expenses:


Periodically, the expenses for issuing bonds

Dr. 635, 241, 627 (The allocation amount in the current period)
(Details of expenses for issuing bonds).
Cr. 242 - Long term prepaid expenses (Details

investment property after the initial recognition:


12. Accounting for expenses involving in investment

- Record of expenses with high value involving in investment property after the initial
recognition that does not satisfy the recognition criteria to increase the historical cost of the
assets that should be allocated in years:

Dr. 632 - Cost of goods sold (Details in expenses created from investment property)
Dr. 242 - Long term prepaid expenses (If expenses with high value)
Cr. 111, 112, 152, 153, 334,…

- investment property after initial recognition shall be


Periodically, the expenses involving in investment
allocated into business expenses in the current period:

Dr. 632 (Allocation of expenses involving in the investment property after initial recognition
in the current period)
Cr. 242 - Long term prepaid expenses

13. When the business combination does not lead to the parent-subsidiary relationship (net asset
acquisition) but creates the goodwill at the date of transaction:

If the acquirer makes the payment in cash or cash equivalents for the acquisition:

Dr. 131, 138, 152, 153, 155, 156, 211, 213, 217 (Fair value of acquired assets)
Dr. 242 - Long term prepaid expenses (Details of goodwill)
Cr. 311, 331, 341, 342 (Fair value of payables and contingent liabilities)
Cr. 111, 112, 121 (Amount of cash and cash equivalents that the acquirer paid)

If the acquirer issues shares for the acquisition:

Dr. 131, 138, 152, 153, 155, 156, 211, 213, 217,… (Fair value of acquired assets)
Dr. 242 - Long term prepaid expenses (Details of goodwill)
Dr. 4112 - Capital surplus (Difference between the lower fair value and par value of shares –
if the fair value of shares is lower than their par value)
Cr. 4111 - Share capital (Par value)

Translation by KTC Assurance & Business Advisors 218


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Cr. 311, 315, 331, 341, 342,… (Fair value of payables and contingent liabilities)
Cr. 4112 - Capital surplus (Difference between the fair value and the par value of the
shares – if the fair value of shares is higher than their par value)

Translation by KTC Assurance & Business Advisors 219


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ACCOUNT 243

DEFERRED TAX ASSETS

This account records current value and the increases, decreases of deferred tax assets.

Deferred tax assets are calculated as following:

Deferred tax = Differences + The carry forward of X Current


assets temporarily unused tax losses and EIT rate (%)
deductible unused tax credits

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. A deferred tax asset should be recognized fo forr the carry forward of unused tax losses and
probable that future taxable profit will be available
unused tax credits to the extent that it is probable
against which the unused tax losses and unused tax credits can be utilized.

2. At the end of a year, the accountant prepares a “Details of differences temporarily


deductible”, the “Details of unused differences temporarily deductible”. The carry forward of
unused tax losses and unused tax credits as a base forfor preparation of the “Details of deferred
deferred tax assets or reversed amount in the current
tax assets” in order to record the value of deferred
year.

3. The value of deferred tax assets in the year is calculated according to offset of deferred tax
assets incurred in the year and the income tax that has been recorded in previous years but is
returned in the year as follows:

- higher than the deferred tax assets reversed in the


If the deferred tax assets created in a year is higher
year, the difference is recorded as deferred tax assets and reduced the deferred income tax
expenses.

- lower than the deferred tax assets reversed in the


If the deferred tax assets created in a year is lower
year, the difference is reduced the deferred tax assets and increased the deferred income tax
expenses.

rred tax assets when deductible


4. The accountant must reverse deferred deductib temporary differences do
not influence on the taxable income (when the assets are taken back or the liabilities are paid
partly or all).

5. At the end of a fiscal year, the company has to revalue deferred tax assets that have not yet
been recorded in previous years to the extend that it is probable that future taxable profit will
be available to record additions into the current year.

6. Deferred tax assets are created in major cases:

- Deferred tax assets created from differences temporarily deductible since depreciation of
fixed assets in accounting purpose is faster than in tax purpose.

- Deferred tax assets created from differences temporarily deductible because of recording an
amount of cost in the current year that is only deducted from taxable income in the next year.

Translation by KTC Assurance & Business Advisors 220


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For example, the provision for repairing of fixed assets recorded in the current year shall be
only deducted into taxable income of the year that those expenses actually occurred.

- Deferred tax assets are calculated based on the deducted value of the carry forward of tax loss
and unused tax credits.

STRUCTURE AND CONTENTS OF ACCOUNT 243 - DEFERRED TAX ASSETS

Debit:

Increase of deferred tax assets.

Credit:

Decrease of deferred tax assets.

Debit balance:

Remain of deferred tax assets at the end of the period.

MAJOR TRANSACTIONS

At the end of the year, based on the “Details of deferred tax assets” prepared, the accountant
records or reverses deferred tax assets created from transactions recorded into deferred tax assets:

1. If the deferred tax assets created in a year is higher than the deferred tax assets returned in the
higher
year, the accountant records the additional amount of deferred tax assets being the difference
of the deferred tax assets created and the amount returned in the year:

Dr. 243 - Deferred tax assets


Cr. 8212 - Deferred income tax

2. If the deferred tax assets created in a year is lower than the deferred tax assets returned in the
lower
year, the accountant reduces the deferred tax assets
assets as the difference between the deferred tax
assets created and the amount returned in the year:

Dr. 8212 - Deferred income tax


Cr. 243 - Deferred tax assets

Translation by KTC Assurance & Business Advisors 221


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ACCOUNT 244

LONG TERM DEPOSITS

This account reflects the money or assets which an entity deposits at other entities or economic
organizations in the term of over one year or one normal production, business cycle.

The money or assets deposited should be kept track of and collected when the term expired.

STRUCTURE AND CONTENTS OF ACCOUNT 244 - LONG TERM DEPOSITS

Debit:

The money or assets used for long term deposits.

Credit:

- The amount being deducted from long term deposits and recorded into other expenses;
deposits

- The value of money or assets used as long term deposits being reduced when being collected;

Debit balance:

Assets or money are reflected on the balance sheet as long term deposits.

MAJOR TRANSACTIONS

1. Use of money, valuable metal, gemstone for long term deposits:

Dr. 244 - Long term deposits (Details in each kind)


Cr. 111 – Cash on hand (1111, 1112, 1113)
Cr. 112 – Cash in bank (1121, 1122, 1123)

2. Collection of money or assets as long term deposits:

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


Dr. 112 - Cash in bank (1121, 1122, 1123)
Cr. 244 - Long term deposits

3. When the company is fined and deducted from the value of long term deposits:

Dr. 811 – Other expenses


Cr. 244 - Long term deposits

Translation by KTC Assurance & Business Advisors 222


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

CATEGORY 3

LIABILITIES

This account records liabilities which occur in the course of doing business. The company must
pay the amount of the liability to its creditors. Liabilities consist of loans and borrowings, trade
payables, taxes payable, payables to employees and other payables.

Liabilities include current liabilities and non-current liabilities.

1. Current liabilities: liabilities which the company must settle within one year or within a
business operation cycle.

Current liabilities include:

- Short term loan;


- Current portion of long term loans;
- Trade payables;
- Taxes payable to the State;
- Salaries and allowances payable to employees;
- Accruals;
- Receipts of short term deposits; and
- Other payables.

2. Non-current liabilities: liabilities that are not due for at least one year.

Non-current liabilities include:

- Long term loans for investment and development:;


- Long term notes payable:
- Bonds payable;
- Long term deposits which the company has received;
- Deferred tax liabilities;
- Provision for severance allowance; and
- Provisions.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS


REGULATIONS:

1. Companies must keep detailed records with respect to their liabilities. Companies must keep
track of the amounts payable to each individual creditor.

2. Liabilities must be classified as current or non-current depending on their terms.

3. Liabilities in gold, silver, precious metals or gemstones must be accounted for in detail.
Records must include the individual creditor and such information as the quantity and value.

4. At the end of the fiscal year the balance of the liabilities in foreign currencies must be
revalued using the exchange rate as regulated.

5. With respect to creditors who the company permanently transacts with or have large
balances, the accountant must control and reconcile the liabilities incurred with the individual
creditors and must periodically get written confirmation from the creditors.

Translation by KTC Assurance & Business Advisors 223


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MINISTRY OF FINANCE
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6. Usually liability accounts have credit balances. However there may be cases where the
individual creditor balances in the accounts 331, 333, 334, 338 are debits indicating that the
paid amount greater than the payable amount. At the end of the accounting period in order to
prepare the financial statements, it is permitted to report the debit balance as an asset and the
credit balance as a liability in the balance sheet.

Liabilities have been split into four major accounts with sixteen sub-accounts:

Accounts 31- Short term loans have two sub-accounts:

Account 311- Short term loan


Account 315- Current portion of long term loan

Account 33- Current account payables have seven sub-accounts:

Account 331- Trade payable


Account 333- Tax and statutory obligations
Account 334- Payable to employees
Account 335- Accruals
Account 336- Inter-company payable
Account 337- Construction contract payables based on agreed progress billing
Account 338- Other payables

Account 34 - Non-current liabilities have five sub-accounts:

Account 341- Long-term loans


Account 342- Long-term payable
Account 343- Debt securities
Account 344- Receipts of long-term deposits
Account 347-Deferred tax liabilities

Account 35 - Provisions have two accounts:


Account 351- Provision for severance allowance
Account 352- Provisions

Translation by KTC Assurance & Business Advisors 224


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MINISTRY OF FINANCE
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ACCOUNT 311

SHORT TERM LOANS

This account records the amount of the short term borrowings and repayments by a company.
Short term borrowings include: borrowings from the bank; borrowings from entities or
individuals both inside and outside the company.

Short term borrowings are liabilities which are due within one year or within a normal business
operation cycle or within a fiscal year.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. The accountant must keep detailed records with respect to amounts borrowed amounts repaid
(principal and interest) and the outstanding balance
balance which must be repaid to each creditor or
to each borrowing contract.

2. If the funds borrowed are in a foreign currency, the accountant must keep track details of the
original currency. Loan or repayment in fore ign currency should be converted into Vietnam
foreign
Dong using either the actual exchange rate or average inter-bank exchange rate on foreign
currency market announced by the SBV at the da te of transaction or the exchange rate of
date
accounting book (debit balance of account 331 is converted into VND using the exchange
rate of accounting book while credit balance of account 331 is converted into VND using the
average inter-bank exchange rate). Foreign exchange difference resulted
resulted from difference of
exchange rates when loans occurred and when loan payment and foreign exchange difference
resulted from revaluation of loans in foreign cu rrency at the end of the fiscal year (in the
currency
course of doing business) are recorded into fina ncial expenses or financial income of the
financial
reporting period.

STRUCTURE AND CONTENTS OF ACCOUNT 311 - SHORT TERM LOAN

Debit:

- The amount of short term loan repaid.

- Decrease in short term loans due to a decrease in exchange rates (loan is in a foreign
currency)

Credit:

- The amount of short term loans;

- Increase in short term borrowings due to the increase in exchange rates (loan is in a foreign
currency).

Credit balance:

- The amount of short term loans that have not been paid.

Translation by KTC Assurance & Business Advisors 225


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MAJOR TRANSACTIONS

1. To record the loan to buy raw materials, supplies and merchandise goods:

a. Raw materials, supplies and merchandise goods purchased are used in production of goods
and services subject to VAT in subtraction method:

Dr. 152 - Raw materials (purchased price not including VAT)


Dr. 153 - Tools and supplies (purchased price not including VAT)
Dr. 156 - Merchandise inventory (purchased price not including VAT)
Dr. 133 - VAT deductible (1331)
Cr. 311 - Short term borrowings (total payment)

b. If raw materials, supplies and merchandise inventory purchased are used in production of
goods and services not subject to VAT or subject to VAT in direct method, value of raw
materials, supplies merchandise inventory includes VAT (total payment):

Dr. 152 - Raw materials (total payment)


Dr .153 - Tools and supplies (total payment)
Dr. 156 - Merchandise goods (total payment)
Cr. 311 - Short-term loans (total payment)

2. The company has buying or selling contracts in which payment term is made by Letter of
Credit. Enterprise borrows money from the bank to open Letter of Credit:

Dr. 144 – Short-term deposits,


deposits, mortgages and collateral
Cr. 311 – Short-term loans

3. To record borrowings to repay suppliers, paid long-term loans, paid long-term payable:

Dr. 331 - Trade payables


Dr. 315 - Current portion of long-term loan
Dr. 341 - Long-term loans
Dr. 342 - Long-term payable
Cr. 311 – Short-term loans

4. Borrowings in foreign currency to pay supplie


suppliers, customers, long-term loans, long-term
payable must be converted into VND using the actual exchange rate or average inter-bank
exchange rate at the date of transaction.

a. When actual exchange rate or average inter-bank exchange rate is less than exchange rate of
accounting book:

Dr. 331 – Trade payables (using the exchange rate of accounting book)
Dr. 315 - Current portion of long-term loan (using the exchange rate of accounting book)
Dr. 341 - Long-term loans (using the exchange rate of accounting book)
Dr. 342 - Long-term payable (using the exchange rate of accounting book)
Cr. 311 - Short-term loan (using the actual exchange rate or average inter-bank exchange
rate)
Cr. 515 - Financial income (Difference of actual exchange rate or average inter-bank
exchange rate and the exchange rate of accounting book)

Translation by KTC Assurance & Business Advisors 226


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b. When actual exchange rate or average inter-bank exchange rate is greater than exchange rate
of accounting book:

Dr. 331 - Trade payables (using the exchange rate of accounting book)
Dr. 315 - Current portion of long-term loan (using the exchange rate of accounting book)
Dr. 341 - Long-term loans (using the exchange rate of accounting book)
Dr. 342 - Long-term payable (using the exchange rate of accounting book)
Dr. 635 - Financial expenses (difference of the actual exchange rate or average inter-bank
exchange rate and the exchange rate of accounting book)
Cr. 311 - Short-term loan (current exchange rate or inter-bank average exchange rate)

5. Borrowing money for cash on hand or put in bank:

Dr. Accounts - 111, 112...


Cr. 311 - Short-term loan

6. When borrowing foreign currency in short - term to buy raw materials, merchandise goods to
go warehouse or using or payment for lease services, record:

Dr. Accounts - 152, 156, 627, 641, 642 (using the actual exchange rate or average inter-bank
exchange rate)
Cr. 311 - Short-term loan (using the actual exchange rate or average inter-bank exchange
exchange
rate)

7. When enterprise pay short-term loan


loan by cash on hand, cash in bank:

Dr. 311 - Short-term loan


Cr. 111, 112

8. To record the repayment of borrowings in cash on hand or cash in bank in local or foreign
currencies in the course of business:

a. Loss of foreign exchange difference:

Dr. 311 – Short-term loan (using exchange rate of accounting book in the account 311)
Dr. 635 – Financial expenses (loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using exchange rate of accounting book in the accounts
1112, 1122)

b. Gain of foreign exchange difference:

Dr. 311 – Short-term loan (using exchange rate of accounting book in the account 311)
Cr. 515 – Financial income (gain of foreign exchange difference)
Cr. Accounts – 111 (1112), 112 (1122) (using exchange rate of accounting books in the
accounts 1112, 1122)

9. To record the repayment of short-term loan in cash on hand or cash in bank in local or
foreign currencies in construction stage (pre-operating)

a. Loss of foreign exchange difference:

Dr. 311 – Short-term loan (using the exchange rate of accounting book in the account 311)
Dr. 413 – Foreign exchange differences (4131) (Loss of foreign exchange difference)

Translation by KTC Assurance & Business Advisors 227


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Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book in the accounts
1112, 1122).

b. Gain of foreign exchange difference:

Dr. 311 – Short-term loan (using the exchange rate of accounting book in the account 311)
Cr. 413 – Foreign exchange differences (4131) (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book in the accounts
1112, 1122).

10. At the end of the fiscal year, the balance of the loan in foreign currency can be revalued using
the average inter-bank exchange rate announced by SBV at end of the fiscal year:

a. Gain of foreign exchange difference:

Dr. 311 – Short-tem loan


Cr. 413 - Foreign exchange differences

b. Loss of foreign exchange difference:

Dr. 413 – Foreign exchange differences


Cr. 311 – Short-term loan

Translation by KTC Assurance & Business Advisors 228


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ACCOUNT 315

CURRENT PORTION OF LONG-TERM LOAN

This account records the current-portion of long-term loans that is due in the accounting period
but have not paid yet; and portion of long-term loan that must be paid in the next fiscal year and
the repayment of these loans.

The current portion of a long tem loan is the amount of the loan that must be paid within the
current accounting period.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

ack schedules, the company must determine the


1. At the end of the fiscal year, based on pay-back
portion of long term liability that will be due in the next accounting period and reclassify it
into Current portion of long term loan.

2. The accountant must keep track of the Curre Currentnt portion of long term loan in detail by
individual creditor, including the amounts which have been paid and the balance remaining.
They must also keep track of each foreign currency
currency loan by creditor and convert these loans
into VND based on the exchange rate at the da te of transaction (using the actual exchange
date
rate or average inter-bank exchange rate in the foreign currencies market announced by the
SBV at the transaction date). The credit balanc
balancee of the account 315 should be converted into
VND using the exchange rate of accounting book. The realized foreign exchange difference
in the course of business and unrealized fo reign exchange differences resulted from
foreign
revaluation of the balances in foreign currencies at the end of the fiscal year (applying to both
entities in construction stage and entities operati ng in construction) are recorded to the
operating
financial expenses or financial income of the income statement.

STRUCTURE AND CONTENTS OF ACCOUNT 315 – LONG-TERM LOAN

Debit:

- Current portion of long term loan which have been paid;

- Loss of foreign exchange difference resulted from revaluation of balance of long-term loan in
foreign currency at the end of the fiscal year.

Credit:

- Current portion of the long term loan which is due;

- Gain of foreign exchange difference resulted from revaluation of balance of long term loan in
foreign currency at the end of the fiscal year.

Credit balance:

The remaining balance of the current portion long term loan that must be paid or is past–due.

Translation by KTC Assurance & Business Advisors 229


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MAJOR TRANSACTIONS

1. At the end of the fiscal year, the accountant determines the Current portion of long term loan
which will be due in the next year:

Dr. 342 - Long term payable


Cr. 315 - Current portion of long term loan

2. To record payment of the current portion of long term loans in cash on hand or cash in bank:

Dr. 315 – Current portion of long term loans


Cr. 111, 112, ...

3. To record the repayment of the current portion of long term loan by foreign currency in the
course of doing business:

- If the exchange rate recorded in account 315 is lower than the exchange rate recorded in
accounts 111, 112:

Dr. 315 – Current portion of long term loan (using the exchange rate of accounting book)
Dr. 635 – Financial expenses (loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)

- If the exchange rate recorded in account 315 is greater than the exchange rate recorded in
accounts 111, 112:

Dr. 315 – Current portion of long term loan (using the exchange rate of accounting book)
Cr. 515 – Financial income (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)

4. To record repayment of the current portion of long term loan for capital construction in
foreign currencies in pre-operating stage:

- If the exchange rate recorded in account 315 is lower than the exchange rate recorded in the
accounts 111,112:

Dr. 315 – Current portion of long term loan (using the exchange rate of accounting book)
(l
Dr. 413 – Foreign exchange differences (loss of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)

- If the exchange rate recorded in account 315 is greater than the foreign exchange rate
recorded in accounts 111, 112:

Dr. 315 – Current portion of long term loans (using the exchange rate of accounting book)
Cr. 413 - Foreign exchange differences (gain of foreign exchange difference)
Cr. 111 (1112), 112 (1122) (using the exchange rate of accounting book)

5. To record the repayment of the current portion of long term loan by cash collected from
receivables, or new short term borrowings:

Dr. 315 – Current portion of long term loans


Cr. 131, 138
Cr. 311 – Short-term loans

Translation by KTC Assurance & Business Advisors 230


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6. At the end of the fiscal year, the balance of the current portion of long term loan in foreign
currency can be revalued based on the average inter-bank exchange rate announced by the
SBV at the end of the fiscal year:

- Gain of foreign exchange differences:

Dr. 315 – Current portion of long term loans


Cr. 413 – Foreign exchange differences

- Loss of foreign exchange differences:

Dr. 413 – Foreign exchange differences


Cr. 315 – Current portion of long-term loans

Translation by KTC Assurance & Business Advisors 231


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ACCOUNT 331

TRADE PAYABLES

This account records the settlement of the amounts payable by the company to suppliers of raw
materials and merchandises and services according to the economic contracts signed. This
account also records the settlement of amounts payable to construction contractors and sub-
contractors.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Payables to suppliers of raw materials, goods, services or construction contractors and sub-
contractors must be recorded in detail by individuals. The records must show the amount due
to each individual supplier and also show the amounts
ounts paid in advance to the sellers, suppliers
or contractors but for which the company has not received the goods, services, or completed
construction work.

2. The accountant would not record the purchase of raw materials, merchandise goods and
services that were paid in cash (e.g. cash on hand, cheque or paid through the bank).

3. In the case, the raw materials, merchandise goods and services were received but the
company has not received the official invoice at the end of the month, the accountant should
record the cost of the purchase in its books at an estimated cost and make adjustment
according to the invoice or official notice from the seller when received.

4. When recording this account, the accountant must keep track of and classify the transactions
into proper accounts such as payment discount s, sales discounts, sales allowances that are
discounts,
offered by the suppliers or sellers.

STRUCTURE AND CONTENTS OF ACC OUNT 331 - TRADE PAYABLES


ACCOUNT

Debit:

- Amount paid to sellers of goods and raw materials


materials and suppliers of services and construction
contractors;

- Amount paid in advance to the sellers, suppliers or contractors but for which the company has
not received the goods, services, or completed construction work;

- Amount of purchase allowances offered by the supplier according to the contract;

- The amount of purchase discounts that seller agreed to deduct for credit;

- Value of raw materials and goods that was lost or poor in quality then were returned to the
sellers.

Credit:

- Amount must be paid to sellers, suppliers and contractors for raw materials, goods and
services;

- The adjustments from temporary cost to current cost of raw materials, merchandise and
services when the official invoice or notice has been received.

Translation by KTC Assurance & Business Advisors 232


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Credit balance:

- The amounts payable to suppliers, sellers and contractors.

This account can have a debit balance. A debit balance (if any) shows the amount of advances to
creditors or the overpayment by details of individuals. When preparing the balance sheet, the
accountant must reclassify these debit balances to an asset account and credit balance to the
liabilities account.

MAJOR TRANSACTIONS

1. To record the receipt of purchased raw materials and goods that have not been paid or
gnment and not through the company's premise
purchased goods that are transferred for consignment
under perpetual inventory method.

1.1. The enterprise paid VAT in subtraction method

- Raw materials and goods purchased are used for production of goods and services subject to
VAT in subtraction method:

Dr. 152 – Raw materials (purchased price not including VAT))


Dr. 153 – Tools and supplies (purchased price not including VAT)
Dr. 156 – Merchandises good (purchased price not including VAT)
Dr. 157 – Goods on consignment (purchased price not including VAT)
Dr. 133 - VAT deductible (1331)
Cr. 331 – Trade payables (Total amount)

- If raw materials and goods purchased are used for production of goods and services not
subject to VAT or subject to VAT in direct method, the value of raw materials and goods
includes VAT (total amount):

Dr. 152 – Raw materials


Dr. 153 – Tools and supplies
Dr. 156 – Merchandise goods
Cr. 331 – Trade payables

1.2. When the enterprise paid VAT in direct method, the value of raw materials and goods
includes VAT (total amount):

Dr. 152 – Raw materials


Dr. 153 – Tools and supplies
Dr. 156 – Merchandise goods
Cr. 331 – Trade payables

2. To record the receipt of purchased raw materials and goods that have not been paid or
purchased goods that are transferred for consignment and not through the company's premise
under periodic inventory method.

2.1. The enterprise paid VAT in subtraction method:

- Raw materials and goods purchased are used for production of goods and services subject to
VAT in subtraction method:

Translation by KTC Assurance & Business Advisors 233


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Dr. 611 - Purchase (Purchased price not including VAT)


Dr. 133 – VAT deductible (1331)
Cr. 331 – Trade payables (Total amount)

- If raw materials and goods purchased are used for production of goods and services not
subject to VAT or subject to VAT in direct method, the value of raw materials and goods
includes VAT (total amount):

Dr. 611 - Purchase (Total amount)


Cr. 331 – Trade payables (Total amount)

2.2. The enterprise paid VAT in direct method. The value of raw materials and goods purchased
is the total amount:

Dr. 611 - Purchases (Total amount)


Cr. 331 – Trade payables (Total amount)

3. For acquisition of fixed assets which have not been paid to sellers and are used for production
payables based on invoice issued by the sellers,
of goods and services, the accountant records payables
handover minute of the fixed assets and other related documents. In the case, the enterprise
paid VAT in subtraction method:

- If fixed asset acquired are used for production of goods and services subject to VAT in
subtraction method:

Dr. 211 – Tangible assets (Purchased price not including VAT)


Dr. 213 - Intangible assets (Purchased price not including VAT)
Dr. 133 – VAT deductible (1332)
Cr. 331 – Trade payables (Total amount)

- If fixed asset acquired are used for production of goods and services not subject to VAT or
value of raw materials and goods purchased includes
subject to VAT in direct method, the value
VAT (total amount):

Dr. 211 – Tangible assets


Dr. 213 - Intangible assets
Cr. 331 – Trade payables

4. The enterprise has construction in progress and has sub-contractors working in the project.
When the sub-contracted work is completed and the sub-contractor handover the work to the
contractor, the accountant records payables based on the contract, handover minute and the
invoice received.

- If the construction will be used for production of goods and services subject to VAT in
subtraction method, the accountant records as follows:

Dr. 241 – Construction in progress (Price not including VAT)


Dr. 133 – VAT deductible
Cr. 331 – Trade payables (Total amount)

- If the construction will be used for production of goods and services not subject to VAT or
subject to VAT in direct method, the value of construction includes VAT (total amount):

Translation by KTC Assurance & Business Advisors 234


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Dr. 241 – Construction in progress


Cr. 331 – Trade payables

- When the enterprise paid VAT in direct method, the value of construction includes VAT
(total amount):

Dr. 241 – Construction in progress


Cr. 331 – Trade payables

5. The enterprise employs services (e.g. transportation, electricity, water, telephone, audit,
consulting, advertisement, other services expenses). The value of these services could include
or not include VAT depending on VAT method that the enterprise applied:

Dr. 156 – Merchandise goods (1562)


Dr. 241 – Construction in progress
Dr. 142 – Prepaid expenses
Dr. 242 – Long-term prepaid expenses
Dr. 623, 627, 641, 642, 635, 811
Dr. 133 – VAT deductible (1331) (if any)
Cr. 331 – Trade payables (Total amount)

6. To record the payment to the sellers, suppliers, constructors:

Dr. 331 – Trade payables


Cr. 111, 112, 311, 341,...

sellers, suppliers and contractors:


7. To record the advances made to sellers,

Dr. 331 – Trade payables


Cr. 111, 112,...

8. To record the collection of an advance from the supplier who could not deliver the goods:

Dr. 111, 112,...


Cr. 331 – Trade payables

9. To record purchase discounts that the enterpri


enterprise enjoyed due to payment before due and
deducted into payable amount:

Dr. 331 – Trade payables


Cr. 515 – Financial income

10. To record the received raw materials and merchandises that then were returned due to poor
quality and deducted into payable amount:

Dr. 331 – Trade payables


Cr. 133 – VAT deductible (1331) (if any)
Cr. 152, 153, 156, 611,...

11. The seller agreed to reduce the price for of the purchased raw materials and merchandise that
were poor in quality and still in the stock:

Translation by KTC Assurance & Business Advisors 235


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Dr. 331 – Trade payables


Cr. 152, 153, 156,... (reduced amount)
Cr. 133 –VAT deductible (1331) (if any)

12. This would be used to record those trade payables in which the creditors do not want to be
paid or could not be addressed. The accountant should record to other income:

Dr. 331 – Trade payables


Cr. 711 – Other income

13. The accountant has to determine the completed construction volume that must be paid to sub-
constructor according to the sub-contracting contract that were signed by both parties that the
VAT amount on the completed construction volume is credited or not credited. Based on
invoice, payment request, finalization report of completed construction work and the sub-
contracting contract, the accountant records as follows:

Dr. 632 – Cost of good sold (price not including VAT)


Dr. 133 – VAT deductible (1331)
Cr. 331 – Trade payables (Total amounts including VAT that must be paid to sub-
contractors)

14. The enterprise is an agent that sells goods at nominated price for commission

- When receiving goods for consignment, the accountant debits the account 003 - Goods
received on consignment for sale (Off balance sheet accounts) (at the nominated price given
by the supplier).

- When selling goods:

Dr. 111, 112, 131,...


Cr. 331 – Trade payables (at the nominated price)

Simultaneously, a credit is recorded to account 003 – Goods received on consignment for sale
(Off balance sheet accounts) (at the nominated price).

- When commission is determined, the sales of goods on consignment is recognized as follows:

Dr. 331 – Trade payables


Cr. 511 - Sales
Cr. 3331 - Tax and statutory obligations (if any)

- When payment was made to the agent:

Dr. 331 – Trade payables (Amount less commission)


Cr. 111, 112,...

15. Accounting for trade payables at the import consignor:

15.1. To record advances made to the import consignee to open Letter of Credit complying
with the consigment contract:

Dr. 331 – Trade payables (Details by consignees)


Cr. 111, 112,...

Translation by KTC Assurance & Business Advisors 236


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15.2. When receiving goods that were returned by import consignee, the accountant records
cost of imported goods, import duties, import VAT, special consumption tax, if any based on
invoices of the consignee and relevant documents. There are two cases as follows:

a. In the case, imported goods used for production of goods and services are subject to VAT in
subtraction method, the VAT import will be deducted.

- If the import consignee paid taxes to the State Treasury on behalf of the consignor (i.e. import
duties, VAT, special consumption tax):

Dr. 151, 152, 156, 211, 611 (Cost of imported goods not including import VAT)
Dr. 133 –VAT dedutible
Cr. 331 – Trade payables (detail by consignees)

- If the import consignee performed tax declaration while the consignor paid taxes to the State
itself, the value of imported goods are determined
determined as similar to the case in which the import
consignee paid taxes on behalf of the consignor (as similar to above entry). When payment is
made to the State, the accountant records:

Dr. 331 – Trade payables (Details by the consignees)


Cr. 111, 112,...

b. In the case, the imported goods used for production


production of goods and services are not subject to
VAT or subject to VAT in direct method or used for State activities or projects that were funded
by State Budget, the VAT import should not be deducted.

- If the import consignee pays taxes to the State Treasury on behalf of the consignor.

Dr.151, 152, 156, 211 (Cost of imported goods including taxes that must be paid)
Cr. 331 – Trade payables (Details by consignees )

- If the import consignee performed tax declaration while the consignor paid taxes to the State
itself, the value of imported goods are determined
determined as similar to the case in which the import
consignee paid taxes on behalf of the consignor (as similar to above entry). When payment is
made to the State, the accountant records:

Dr. 331 – Trade payables (Details by import consignees)


Cr. 111, 112,...

15.3. To record consignment fee that must be paid to the import consignee:

Dr. 151, 152, 156, 211,...


Dr. 133 –VAT deductible
Cr. 331 – Trade payable ( Details by import consignees )

15.4. To record amount of money that must be paid to the import consignee for its payment
relating to consignment activities on behalf of the consignor.

Dr. 151, 152, 156, 211,...


Dr. 133 – VAT deductible (if any)
Cr. 331 – Trade payables (Details by import consignees )

Translation by KTC Assurance & Business Advisors 237


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15.5. To record payment made to the import consignee for the remaining balance, import duties,
special consumption tax (if the import consignee paid to the State Treasury on behalf of the
consignor), consignment fee and other amounts that was paid by the consignee on behalf of the
consignor:

Dr. 331 – Trade payables (Details by the import consignees)


Cr. 111, 112,...

15.6. The import consignee returns the goods on consigment of which VAT haven’t been paid.

a. When received goods, based on goods dipatch note cum internal transport note of the import
consignee, the accountant shall record cost of goods on consigment at the prices including VAT
of import goods:

Dr. 152, 156, 211 (Cost of import goods including tax that must be paid to State)
Cr. 331 – Trade payables (Details by import consignees)

b. When received VAT invoice of goods on consignment


consignment of the import consignee, the accountant
should reflect VAT dedutible.

- In the case, imported goods on consignment


consignment was still in the stock:

Dr. 133 –VAT dedutible


Cr. 152, 156, 211,...

- In the case, goods on consigment were sold:


sold

Dr.133 – VAT dedutible


Cr. 632 – Cost of goods sold

16. Recording account trade receivable at export consignee

16.1. When receipt goods of consigner on exporti


exporting,
ng, based on relevant documents to debit
account 003 - Goods received on consignment for sale.

16.2. When goods was exported, based on relevant documents to record:

a. Record receivable that will be collected on behalf of the consignor:

Dr. 131 – Account receivable - trade (Detail of each of foreign costumers)


Cr. 331 – Trade payables (Detail of each of consigner on exporting)

At the same time cost of exported goods are credited to account 003 – Goods received on
consignment for sale (Off balance sheet accounts)

b. Export, import duties that was paid on behalf of consigner on exporting:

Dr. 331 – Trade payables (Detail of each of consigner on exporting)


Cr. 338 – Other payables (3388) (Detail of payables to the State)

c. Special consumption tax that was paid on behalf of consigner on exporting:

Dr. 331 – Trade payables (Detail each of consigner on exporting )

Translation by KTC Assurance & Business Advisors 238


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Cr. 338 – Other payable (Detail of payables to the Sate )

17. At the end of the fiscal year, the balance of the trade purchases in foreign currency can be
revalued based on the inter-bank average exchange rate that SBV issued at this time:

- To record foreign exchange difference because inter-bank average exchange rate that SBV
issued at this time is lower than the exchange rate used in accounting book of account 331:

Dr. 331 – Trade payables


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

- To record foreign exchange difference because inter-bank average exchange rate that SBV
issued at this time is greater than exchange rate used in accounting book of account 331:

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


Cr. 331 – Trade payables

- Foreign exchange difference because of purch ases in foreign currency are revalued based on
purchases
exchange rate at the end of period as guided account 413.

Translation by KTC Assurance & Business Advisors 239


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ACCOUNT 333

FEES, DUTIES AND OTHER OBLIGATIONS

This account is used to reflect the relation between the company and the State relating to the
taxes, fees, duties and other payables. It also reflects the obligation and its fulfilment by the
company for an accounting period.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The company actively calculates and determines taxes and payables to the State based on the
regulations of the current laws and records the amount of the taxes payable into its general
ledger based on the notice of the tax department. Taxes payable are an obligation to the
company.

2. The company must pay its taxes fees, duties to the State in full and on time. Any questions
and claims (if any) about tax rates or taxes stated on the notice of the tax department must be
solved on a timely bases. The State will
will accept no excuses for delayed payment.

3. The accountant must maintain detailed sub-ledgers in order to keep track of taxes paid and
taxes payable to the State.

foreign currencies must convert to VND in order to


4. Companies who pay taxes to the State in foreign
record the transaction into their accounting books (if the books are recorded in VND).

STRUCTURE AND CONTENTS OF ACCOUNT 333 - TAX AND STATUTORY


OBLIGATIONS

Debit:

- The amount of deducted VAT in the period;

- The amount paid to the State for taxes, fees, duties;

- The amount of tax deducted into tax payable;

- VAT on sales returns, sales with reduced price.

Credit:

- The amount of VAT output and VAT on imported goods;

- The taxes and payables owed to the State.

Credit balance:

- The tax, fees, duties and other payables to the State.

- In special cases, account 333 can have a debit balance. A debit balance (if any) shows that
taxes have been overpaid or reflects the fact that the taxes have been exempted by the
government and they will be refunded but they have not been refunded.

Account is composed nine sub-accounts as follows:

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- Account 3331 – VAT payables: to record VAT output, VAT payable on the imported goods,
deducted VAT, paid VAT and VAT payable to the State.

Account 3331 is composed two sub- accounts:

Account 33311 – VAT output: to record the deducted VAT output, deducted VAT input, VAT
on sales returned, VAT on sales with reduced price, VAT payment and VAT payable of
goods, services in the period.

Account 33312 – VAT on imported goods: to record the determined obligation and the
payment for imported goods to the State.

- Account 3332 - Special consumption tax: to record the determin


determined obligation and the
payment for excise tax to the State.

- Account 3333 – Import, export duties: to record the determined obligation and the payment
for import and export duties to the State.

- Account 3334 – Profit tax: to record the determined obligation and the payment for profit tax
to the State.

- Account 3335 – Personal income tax: to record the determined obligation and the payment
for personal income tax to the State.

- Account 3336 - Natural resource tax: to record the determined obligation and the payment
for natural resources tax to the State.

- Account 3337 - Land and housing tax tax:: to record the determined obligation and the payment
for land and housing tax to the State.

- Account 3338 - Other taxes payable: to record the determined obligation and the payment for
other taxes payable which are not recorded into these accounts above such as: business tax,
tax payment on behalf of foreign
gn organizations, indi
individuals doing business in Vietnam. This
account must have sub-ledgers to record in detail.

- Account 3339 - Fees, duties and other obligations: to record the determined obligation and
the payment for fees, duties and other obligations to the State which are not recorded into
accounts 3331 to 3338. This account also records the amounts that the State grants to the
company (if any) such as compensation for prices.

Translation by KTC Assurance & Business Advisors 241


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MAJOR TRANSACTIONS

I. VAT payable (3331)

A. Accounting for VAT output (Account 33311)

1. Determine the VAT output when selling products and services:

When selling products and services subject to VAT in subtraction method, the company must pay
the VAT as subtraction method and issue VAT invoice. On the invoice, it must be noted the price
has not yet included VAT, charges and surcharges (if any), VAT amount and total value. The
accountant records revenue from selling goods and services (at the price not including VAT) and
VAT amount:

Dr. 111, 112, 131... (Total amount)


Cr. 3331 - VAT payable (33311)
Cr. 511 – Sales (price not including VAT)
Cr. 512 - Inter-company revenue (price not including VAT)

2. The entity has operating lease of tangible, intangible assets or investment property (the
“operating lease assets”). The entity receives leas
leasee fee in advance for several periods. The
revenue of the current period shall be recognized at the total amount divided by lease terms that
the entity received money in advance. Revenue from operating lease of tangible, intangible assets
is credited to account 5113 “Sales from service s”. Revenue from operating lease of investment
services”.
property is credited to account 5117 “Sales from property investment”.

2.1. When the company paid VAT in subtraction method:

- When received the payment for lease of long-term assets:

Dr. 111, 112 (Total amount received)


Cr. 3387 - Deferred income (price not including VAT)
Cr. 333 - Fees, duties and other obligations (3331)

- At the end of the accounting period, the accountant


accountant transfers deferred income from assets lease
to income for the current period:

Dr. 3387 - Deferred income


Cr. 511 - Sales (5113 – Revenue from operating lease of tangible and intangible assets,
5117 - Sales from property investment).

- In the next accounting period, the accountant transfers deferred income from assets leased to
income for that period:

Dr. 3387 - Deferred income


Cr. 511 - Sales (5113, 5117)

- The money that must be returned to the customers because of cancelling the contract (if any):

Dr. 3387 - Deferred income (Price not including VAT)


Dr. 3331 - VAT (VAT amount of deferred income)
Cr. 111, 112,… (Total amount returned).

Translation by KTC Assurance & Business Advisors 242


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2.2. The enterprise paid VAT in direct method:

- When receiving the customers’ pre-paid for the activities of long-term assets lease:

Dr. 111, 112,... (Total amount received)


Cr. 3387 - Deferred income (Total amount received).

- At the end of the accounting period, the accountant allocates income from assets leased for the
current period:

Dr. 3387 - Deferred income


Cr. 511 - Sales (5113 – Income from operating lease of intangible and tangible assets;
5117 - Sales from property investment)

- At the balance sheet date, thee accountant computes and records


record the VAT payable in direct
method:

Dr. 511 - Sales (5113, 5117)


Cr. 3331 – VAT payable

- In the next accounting period, the accountant allocates income from assets
a leased for that
period:

Dr. 3387 - Deferred income


Cr. 511 - Sales (5113, 5117)

- The money that must be returned to the customers because of cancelling the leasing contract of
tangible, intangible assets or investment property (if any):

Dr. 3387 - Deferred income


Cr. 111, 112,… (Total amount returned)

3. For sales of goods on instalment plan or in deferred payment (goods subject to VAT in
subtraction method and the entity pays VAT in subtraction method), the accountant determines
the revenue at the price of payment at sight excluding VAT and records the VAT amount as
follows:

Dr. 111, 112, 131,... (Total amount)


Cr. 3331 - VAT payable (33311)
Cr. 511 - Sales (Price of payment at sight excluding VAT)
Cr. 3387 - Deferred income (Interest income on outstanding instalment)

4. For barter contract, the goods shall be recorded as similar to as the ones in a normal business
contract (the goods and services provided are recorded as sold while goods and services received
are recorded as purchased). Parties shall issue invoices when sending out the goods and services
for barter. Declaration and payment for tax obligations must be implemented as current
regulations.

4.1. When bartering goods and services subject to VAT in subtraction method for other goods and
services that shall be used in production of goods and services subject to VAT in subtraction
method:

- Based on VAT invoices when bartering goods, services, the accountant records the income from

Translation by KTC Assurance & Business Advisors 243


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goods, services and the VAT as follows:

Dr. 131 - Accounts receivable


Cr. 511 - Sales (Price not including VAT)
Cr. 3331 - VAT payable (33311) (VAT on goods, services received as barter)

- Based on VAT invoices when receiving materials, goods as barter, the accountant records the
value of materials, goods and the deductible VAT input:

Dr. 152, 153, 156,... (Price not including VAT)


Dr. 133 – VAT deductible (VAT on materials, goods received as barter)
Cr. 131 - Accounts receivable.

- In the case, the materials and goods received as barter are used for the production of goods and
services not subject to VAT or subject to VAT in direct method, the VAT input of the goods
mputed into the value of goods received:
received as barter will not be deducted but computed received

Dr. 152, 153, 156,... (Total amount)


Cr. 131 - Accounts receivable (Total amount).

5. Accounting for sales, liquidation of investment property:

5.1. Enterprise pays VAT in subtraction method:


method

Dr. 111, 112, 131 (Total amount)


Cr. 5117 - Sales from property investment (Price not including VAT)
Cr. 3331 - VAT payables (33311)

5.2. Sales of investment property in deferred or late payment:


payment

a. Enterprise pays VAT in subtraction method:


method:

- When sell investment property on instalment, record the sales from property investment
according to the at sight price, the difference between
between the instalment price and at sight price and
the VAT are recorded into account 3387 “Deferred income”:

Dr. 131 – Accounts receivable


Cr. 5117 - Sales from property investment (Cash sale not including VAT)
Cr. 3387 - Deferred income (Difference between the instalment price and at sight price
excluding VAT)
Cr. 3331 - VAT payables (VAT output)

b. In case of selling investment property which are not subject to VAT or subject to VAT in direct
method on instalment:

- When selling investment property on instalment, recorded the sales from property investment of
the period according to the at sight price, the difference between the instalment price and at sight
price (including VAT) is recorded deferred income:

Dr. 111, 112, 131


Cr. 5117 - Sales from property investment (Cash sale including VAT)
Cr. 3387 - Deferred income (Difference between the instalment price and the at sight

Translation by KTC Assurance & Business Advisors 244


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price including VAT).

- At the balance sheet date, records the VAT payable in direct method:

Dr. 5117 - Sales from property investment


Cr. 333 - Tax and statutory obligations (3331).

6. Selling at listed price through sale agents for enjoying commission:

6.1. Accounting at the entity sending goods to sale agent. When finalizing with the sale agents,
the accountant records the sales and VAT payable as follows:

Dr. Accounts 111, 112, 131 (Total amount)


Cr. 3331 - VAT (33311)
Cr. 511 - Sales (Price not including VAT)

6.2. Accounting at the sale agent:

- Record receipts when goods sold:

Dr. 111 , 112, 131 (Total amount)


Cr. 331 – Trade payable (Total amount)

- Record the commission:

Dr. 331 – Trade payable (commission received)


Cr. 511 - Sales (the commission according to the price not including VAT)
Cr. 3331 – VAT payables

7. Enterprise pays VAT in subtraction method and sold goods to its divisions and subsidiaries.

7.1. Where shipped the goods subject to VAT in subtraction method to its divisions and
subsidiaries with the “Goods dispatch note cum internal delivery note”:

- When shipped goods to its divisions and subsidiaries:

Dr. 157 - Goods on consignment (Cost of goods sold)


Cr. 155 - Finished goods
Cr. 156 - Merchandise goods

- When its divisions and subsidiaries sold the goods, the enterprise issues the VAT invoice and
record sales and VAT amount based on the list of goods sold prepared by its divisions and
subsidiaries:

Dr. 111, 112, 136 (Internal selling price including VAT)


Cr. 3331 - VAT payables (33311)
Cr. 512 - Inter-company revenue (Internal selling price not including VAT).

7.2. Selling goods subject to subtraction method VATto accounting dependent entities using VAT
invoice. The accountant bases on the VAT invoice to record the sales and VAT payable:

Dr. 111, 136 (Internal sale price including VAT)


Cr. 3331 – VAT payables (33311)

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Cr. 512 - Inter-company revenue (Internal sale price not including VAT)

8. In case of sending out products, goods subject to subtraction method VAT for internal use,
promotion, advertising or for production of goods, services subject to subtraction method VAT,
the enterprise must prepare VAT invoices with clear explanation of goods used for internal
purpose of production, promotion, advertising. The VAT invoice is used as accounting document.
The enterprise gets VAT exemption for those transactions.

- When send products, goods for internal purpose, promotion, advertising activities:

Dr. 632 - Cost of goods sold


Cr. 155 - Finished goods
Cr. 156 - Merchandise goods.

- Simultaneously, record inter-company revenue:

Dr. 621, 623, 627, 641, 642,...


Dr. 211 - Tangible assets (If the finished products are used as fixed assets used in production,
business operation)
Cr. 512 - Inter-company revenue (according to production cost or cost of goods sold).

9. When sending out goods and merchandise subject to subtraction method VAT for internal use,
promotion, advertising or for production of goods, services not subject to VAT or subject to VAT
in direct method, the enterprise prepares the VAT invoice with clear explanation. The enterprise
is still subject to VAT and record those amount in the production expenses.

- When send out products, goods for internal spending:

Dr. 632 - Cost of goods sold


Cr. 155 - Finished goods
Cr. 156 – Merchandises goods.

- Simultaneously, record inter-company revenue:

Dr. 623, 627, 641, 642,... (Cost of production or cost of goods sold plus (+) the VAT on
goods for internal use); or
Dr. 211 – Tangible assets (if finished products used as fixed assets for production, trading
activities) (Cost of production plus (+) the VAT on goods for internal use)
Cr. 333 - Tax and statutory obligations (33311)
Cr. 512 - Inter-company revenue (Cost of production or cost of goods sold)

10. In case of using goods, products subject to subtraction method VAT for grant, donation
purposes which using the bonus and welfare funds, the enterprise must prepare the VAT invoice
with sufficient information of goods, products and VAT amount. In this case, the enterprise must
pay VAT and does not get VAT deduction.

- When send out products, goods to send as gifts, donation:

Dr. 632 - Cost of goods sold


Cr. 155 - Finished goods
Cr. 156 – Merchandises goods

- Simultaneously record inter-company revenue:

Translation by KTC Assurance & Business Advisors 246


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MINISTRY OF FINANCE
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Dr. 431 - Bonus and welfare funds (Total amount)


Cr. 3331 – VAT (33311) (VAT output)
Cr. 512 - Inter-company revenue (Price not including VAT).

11. When use goods, products subject to subtraction method VAT for bonus or payment instead
of salary for employees and other workforce, the enterprise must prepare VAT invoice (or sales
invoice) with full information of contents and VAT calculation as normal VAT invoice. The
enterprise must pay VAT and does not get VAT deduction.

- When send out products, goods to pay to employees as bonus or replacement of salary:

Dr. 632 - Cost of goods sold


Cr. 155 - Finished goods
Cr. 156 - Merchandise goods.

- Simultaneously, record inter-company revenue:

Dr. 334 – Payable to the employees


Cr. 512 - Inter-company revenue
Cr. 333 - Tax and statutory obligations (33311)

12. Sales returns:

If the enterprise pays VAT in subtraction method


method and the goods returned subject to VAT in
subtraction method, the accountant shall record the payable to the customer, sales and VAT on
sales returns:

Dr. 531 - Sales returns (Price not including VAT)


Dr. 3331 - VAT payable (33311) (VAT on sales returns)
Cr. 111, 112, 131 (Total amount)

- Simultaneously record the cost of goods returned:

Dr. 155 – Finished goods


Dr. 156 - Merchandise goods
Cr. 632 – Cost of goods sold

13. The company pays VAT in subtraction method. When having income from financial activities
and other income (proceeds from disposal or sales of fixed assets) subject to VAT in subtraction
method, the accountant shall record the financial income and other income using price not
including VAT:

Dr. 111, 112, 138,... (Total amount)


Cr. 3331 - VAT payable (33311)
Cr. 515 - Financial income (Price not including VAT)
Cr. 711 - Other income (Price not including VAT)

14. The company pays VAT in direct method and records the payable amount at the end of the
period:

- For production and business activities:

Translation by KTC Assurance & Business Advisors 247


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Dr. 511 - Sales


Cr. 3331 – VAT payable

- For financial activities and other activities:

Dr. 515 - Financial income


Dr. 711 - Other income
Cr. 3331 – VAT payable

15. When pay the VAT to the State Budget:

Dr. 3331 - VAT


Cr. 111, 112,...

B. Accounting for import VAT (Account 33312)

1. When importing materials, goods, fixed assets, the accountant records the payable import
duties, total payables and the value of imported materials, goods, fixed assets (not including
import VAT):

Dr. 152, 153, 156, 211, 611,...


Cr. 333 – Tax and statutory obligations (3333)
Cr. 111, 112, 331,...

Simultaneously recording the VAT on imported goods:

- When materials, goods, fixed assets are imported for producing, selling goods, services subject
to subtraction method VAT, the deductible import VAT:

Dr. 133 – VAT deductible


Cr. 3331 - VAT payable (33312)

- When materials, goods, fixed assets are imported for production of goods and services not
subject to VAT or subject to VAT in direct method, or used in project, welfare activities, the
amount of non-deductible import VAT will be recorded
record into the value of imported materials,
goods, fixed assets:

Dr. 152, 153, 156, 211, 611,...


Cr. 3331 - VAT payable (33312)

2. When pay the VAT on imported goods to the State Budget:

Dr. 3331 - VAT payable (33312)


Cr 111, 112,...

C. Accounting for deductible VAT

At the end of the period, the accountant determines the VAT deductible by offsetting VAT output
and input in that period:

- VAT deductible in the period is the amount netting off VAT output and input:

Dr. 3331 - VAT payable (33311)

Translation by KTC Assurance & Business Advisors 248


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Cr. 133 – VAT Deductible

- The actual VAT paid to the State Budget:

Dr. 3331 - VAT payable (33311)


Cr. 111, 112,...

D. Accounting for reduced VAT:

1. If the VAT is reduced and is deducted from VAT payables in that period:

Dr. 3331 - VAT payable (33311)


Cr. 711 - Other income

2. If the VAT is reduced and is refunded in cash:

Dr. 111, 112


Cr. 711 – Other income

II. Special consumption tax (Account 3332)

1. When selling goods, services which are subject to both special consumption tax and subtraction
method VAT, the accountant records the income fr om the goods, services at the selling price
from
including special consumption tax but excluding VAT:

Dr. 111, 112, 131 (Total amount)


Cr. 511 - Sales (Price including special consumption goods and excluding VAT)
Cr. 512 - Inter-company revenue (Price including
including special consumption goods and
excluding VAT)
Cr. 3331 – VAT payables (33311)

2. When selling goods, services which are subject to both Special Consumption Tax and VAT in
direct method, the accountant must record the income from the goods, services including both
special consumption tax and VAT (Total amount):

Dr. 111, 112, 131,...


Cr. 511 - Sales
Cr. 512 - Inter-company revenue

3. When determining the special consumption tax on goods, services sold in the period:

Dr. 511 - Sales


Dr. 512 - Inter-company revenue
Cr. 3332 - Special consumption tax

4. When importing goods which are subject to special consumption tax, the accountant
determines special consumption tax payable on imported goods based on the importing goods
invoices and the tax noticement of special consumption tax payable:

Dr. 152, 156, 211, 611,...


Cr. 3332 - Special consumption tax

5. When paying the special consumption tax to the State Budget:

Translation by KTC Assurance & Business Advisors 249


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Dr. 3332 – Special consumption tax


Cr. 111, 112,...

III. Export duties (Account 3333)

1. When selling goods, services which are subject to import duties, the accountant records sales
including the import duties (total amount):

Dr. 111, 112, 131,...


Cr. 511 - Sales

2. When determining the import duties payable:

Dr. 511 – Sales


ties (Detailing export duties)
Cr. 3333 - Import and export duties

3. When paying the export duties to the State Budget:

Dr. 3333 - Import and export duties


duties (Detailing export duties)
Cr. 111, 112,...

IV. Import duties (Account 3333)

1. When importing materials, goods, fixed assets, the accountant records import duties payable,
total payables, or paid to the sellers and th
thee purchase of materials, imported goods, fixed assets
(Price including import duties):

Dr. 152, 156, 211, 611,... (Price including import duties)


Cr. 3333 - Import and export du ties (Detailing import duties)
duties
Cr. 111, 112, 331,...

2. When pay the import duties to the State Budget:

Dr. 3333 - Import and export duties (Detailing import duties)


Cr. 111, 112,...

V. Profit tax (Account 3334)

1. Based on the amount of Profit tax payable to the State Budget quarterly:

Dr. 821 - Current income tax (8211)


Cr. 3334 - Profit tax payable

2. When pay the profit tax to the State Budget:

Dr. 3334 - Profit tax


Cr. 111, 112,...

3. At the end of the year, determine the profit tax to the State Budget of the fiscal year:

- If the actual amount of profit tax that the company must pay is lower than the amount that the
company has quarterly paid in advance, the difference is recorded as follows:

Translation by KTC Assurance & Business Advisors 250


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Dr. 3334 - Profit tax


Cr. 821 - Current income tax (8211)

- If the actual amount of profit tax that the company must pay is greater than the amount that the
company has quarterly paid in advance, the difference is recorded as follows:

Dr. 821 - Current income tax (8211)


Cr. 3334 - Profit tax payable

- When pay the difference of the profit tax to the State Budget:

Dr. 3334 – Profit tax payable


Cr. 111, 112,...

VI. Personal income tax (Account 3335)

1. Rules for declaring, paying and finalizing the personal income tax for highly-income people
(the “Personal Income Tax” or “PIT”):

authorized to pay the PIT (the “paying entity”) must


- The entity is responsible for paying or authorized
method The paying entity must withhold
declare and pay the PIT to the tax office in withholding method.
the tax and pay it to the State on behalf of the taxable people before paying to them.

- The paying entity must calculate the commission


commission to be enjoyed from tax payment, PIT amount
and withhold that PIT to pay to the State. When withholding PIT, the company must issue “PIT
withholding bill” to the taxable person. The paying
paying entity is responsible for controlling and
finalizing the tax bill as regulated by laws.

2. Major transactions:

2.1. Monthly, when determine


determine the PIT based on the taxable income of employees:

Dr. 334 – Payable to the employees


Cr. 333 - Fees, duties and other obligations (3335)

2.2. When make payment to individuals outside the entity, the entity must determine the PIT
payable based on the taxable irregular
ar income whenever occurred:

- Where Record payment in cash to the individuals outside the company:

Dr. 623, 627, 641, 642, 635 (Total payables); or


Dr. 161 - Expenditures from subsidies of State Budget (Total payables); or
Dr. 431 - Bonus and welfare funds (Total payables) (4311)
Cr. 333 - Fees, duties and other obligations (3335) (The amount of withheld PIT)
Cr. 111, 112 (Actual payment)

- Where payment was made for payables to individuals outside the company who have highly-
income:

Dr. 331 – Trade payable (Total payables)


Cr. 333 – Fees, duties and other obligations (amount of withheld PIT)
Cr. 111, 112 (Actual payment)

Translation by KTC Assurance & Business Advisors 251


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2.3. The paying entity withheld PIT will enjoy commission from tax payment services which is
calculated by a percentage (%) on PIT payable on the regular and irregular incomes declared.
When determining the commission:

Dr. 333 - Fees, duties and other obligations (3335)


Cr. 711 – Other income

2.4. When paying PIT to the State Budget on behalf of the taxable person:

Dr. 333 - Fees, duties and other obligations (3335)


Cr. 111, 112,...

VII. Natural resource tax (Account 3336)

1. Determining the natural resource tax recorded into production costs:

Dr. 627 - Factory overhead costs (6278)


Cr. 3336 – Natural resource tax

2. When pay the natural resource tax to the State Budget:

Dr. 3336 - Natural resource tax


Cr. 111, 112,...

VIII. Land and housing tax (Account 3337)

tax recorded in management costs:


1. Determining the land and housing tax

Dr. 642 – General and administration expenses (6425)


Cr. 3337 - Land and housing tax

2. When pay the land and housing tax to the State Budget:

Dr. 3337 - Land and housing tax


Cr. 111, 112,...

IX. Other taxes payable (Account 3338), fees, duties and other obligation (Account 3339)

1. When determining registration fee for purchase of assets (when obtaining the owner certificate
or use right on the assets bought):

Dr. 211 – Tangible assets


Cr. 333 - Fees, duties and other obligations (3339)

2. When pay other taxes, fees, duties and payables:

Dr. 333 - Fees, duties and other obligations (3338, 3339)


Cr. 111, 112,...

X. Subsidy from the State (Account 3339)

1. When the entity supplies goods and services following the State’s requirement or receives the

Translation by KTC Assurance & Business Advisors 252


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subsidy from the State, the accountant records the subsidy from the State as follows:

Dr. 333 - Fees, duties and other obligations (3339)


Cr. 511 – Sales (5114)

2. Record receipt of subsidy from the State:

Dr. 111, 112,...


Cr. 333 - Fees, duties and other obligations (3339)

Translation by KTC Assurance & Business Advisors 253


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ACCOUNT 334

PAYABLES TO EMPLOYEES

This account records salaries, wages, social insurance and other payables that are due to the
employee, as well as the payment of these liabilities.

STRUCTURE AND CONTENTS OF ACCOUNT 334 - PAYABLES TO EMPLOYEES

Debit:

- Record salaries, wages, bonuses, social insurance and other amounts which have been paid
or advanced to the employees.

- Record deductions of salaries and wages from the employees salary.

Credit:

- Record amounts payable to employees such as salaries, wages, bonuses, social insurance,
and other amounts.

Credit balance:

- Shows amounts payable to employees for salaries, wages, bonuses and other payable to
employees.

- The account 334 can have a debit balance. The de bit balance of account 334 is very special
debit
showing that the amount paid to employees was greater than what was payable.

- The account 334 should be kept track of under two headings: salaries payable and other
payables.

Accounts 334 – Payables to employees have two sub-accounts:

- Account 3341 - Payable to staff: to record salaries, wages, bonuses, social insurance and
other payables that are due to the employee of the entity, as well as the payment of these
liabilities.

- Account 3348 - Other payable to employees: to record wages, bonuses (if any) that are
due to the other employee, as well as the payment of these liabilities.

MAJOR TRANSACTIONS

1. To record salaries and allowance which are payable to employees.

Dr. 241 - Construction in progress


Dr. 622 - Direct labour costs
Dr. 623 - Machine costs (6231)
Dr. 627 - Factory overhead costs (6271)
Dr. 641 – Selling expenses (6411)
Dr. 642 - General and administration expenses (6421)
Cr. 334 – Payables to employees (3341, 3348).

Translation by KTC Assurance & Business Advisors 254


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2. To record bonuses payable to employees:

- Determining bonuses payables that are covered by the bonus and welfare funds:

Dr. 431 – Bonus and welfare funds (4311)


Cr. 334 – Payables to employees (3341).

- Payment bonuses to employees:

Dr. 334 – Payables to employees (3341)


Cr. 111, 112,...

3. To record social insurance (e.g. sick leave, maternity leave, accidents, etc) which must be paid
to employees:

Dr. 338 – Other payables (3383)


Cr. 334 – Payables to employees (3341)

4. To record annual leave which must be paid to the employees:

Dr. 623, 627, 641, 642


Dr. 335 - Accruals (the entity has already made provisions for annual leave)
Cr. 334 – Payables to employees (3341)

5. To record deductions from salaries and employees income such as advan


employees ces, health insurance,
advances,
social insurance, indemnity etc.:

Dr. 334 – Payables to employees (3341, 3348)


Cr. 141 - Advances to staff
Cr. 338 – Other payables
Cr. 138 – Other receivables

6. To record the personal income taxes which must been paid to the State:

Dr. 334 – Payables to employees (3341, 3348)


Cr. 333 - (3335)

7. To record advances or payment to the employees:

Dr. 334 – Payables to the employees (3341, 3348)


Cr. 111, 112,...

8. To record the payment to the employees:

Dr. 334 – Payables to employees (3341, 3348)


Cr. 111, 112,...

9. To record the payment to the employees by goods:

- For goods subject to subtraction method VAT, the accountant records inter-company revenue at
the price not including VAT:

Dr. 334 – Payables to employees (3341, 3348)

Translation by KTC Assurance & Business Advisors 255


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Cr. 3331 – VAT payable (33311)


Cr. 512 - Inter-company revenue (price not including VAT)

- For goods subject to VAT in direct method, the accountant records inter-company revenue at
total amount:

Dr. 334 – Payables to employees (3341, 3348)


Cr. 512 – Inter-company revenue (total amount)

10. Determining and making payment the shift meals that must be paid to employees:

- To record the shift meals expenses that must be paid to employees:

Dr. 622, 623, 627, 641, 642


Cr. 334 – Payables to employees (3341, 3348).

- To record the payment of shift meals to employees:

Dr. 334 – Payables to employees (3341, 3348)


Cr. 111, 112,…

Translation by KTC Assurance & Business Advisors 256


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ACCOUNT 335

ACCRUALS

This account records expenses which were incurred during the period but have not been paid.

Recorded in this account are expenses that have not yet occurred. However, they are recognized
in this period to ensure that when they do occur in the future they will not cause large fluctuations
to business expenses. Recording these expenses to production and business cost in the period
must be complied with matching principle of revenue and expenses incurred during the period.

Items belonging to this account include:

1. Salary expenses payable to employees for annual level.

2. Repairing for special fixed asset with high valu


valuee which occurs periodically, the enterprise can
estimate the repair expenses in the years ahead.

3. Expenses during the period in which the comp any interrupts its business operations due to the
company
season, and the company can plan for the interruption. The accountant will calculate and record
the expenses which will be paid during the interruption period.

4. Interest expenses on loans.

THIS ACCOUNT MUST COMPLY WITH FOLLOWING REGULATIONS

1. This account should record only those expenses which have been specified above. However, if
expenses other than those stated above arc to be accrued, the company must explain why to the
financial authorities.

2. Accounting for expenses which have not yet bbeen een incurred must be strictly controlled. The
company must prepare an estimate of accrued expenses and have reasonable evidence to prove
that the amount recorded is in the actual expen ses. It is prohibited to record into this account
expenses.
expenses which are not related to doing business.

3. In principle at the end of the fiscal year accr


accrued
ued expenses must be reconciled with the expenses
which have actually occurred. This procedure ill will reduce the carry forward balance in this
account.

4. If this account has a balance at the end of the fiscal year, the company must give an
explanation in the notes to the financial statements.

STRUCTURE AND CONTENTS OF ACCOUNT 335 – ACCRUALS

Debit:

- The expenses have actually been incurred;

- If the amount set up as an accrued expense turns out to be higher than the actual expense,
then the difference should be debited to reduce expenses.

Credit:

Translation by KTC Assurance & Business Advisors 257


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Accruals have been recorded.

Credit balance:

Accruals which are recognized as expenses in the current period but not yet occurred.

MAJOR TRANSACTIONS

1. To recognize in advance salary expenses payable for workers' annual leave.

Dr. 622 – Direct labour cost


Cr. 335 – Accruals

2. To record actual salary for worker’s annual leave.

Dr. 622- Direct labour cost (if amount payable exceeds accrued amount)
Dr. 335 – Accruals (accrued amount)
Cr. 334 – Payables to employees (actual salary payable amount)
Cr. 622- Direct labour cost (if amount payables are less than accrued amount).

3. To record estimated repairs and maintenance


maintenance expenses for fixed assets with high value into
operating expenses.

Dr. 623 – Machine costs


Dr. 627 – Factory overhead costs
Dr. 641 – Selling expenses
Dr. 642 – General and administration expenses
Cr. 335 – Accruals

4. When the repairing for fixed assets is complete


complete and the assets are put in use, the accountants
records the expenses actually incurred fo
forr the repairs and maintenance:

Dr. 623, 627, 641, 642 (if the paid amount exceeds the accrued amount)
Dr. 335: Accruals (accrued amount)
Cr. 241 – Construction in progress (2413) (Total actual expenses incurred)
Cr. 623, 627, 641, 642 (if the paid amount is less than accrued amount)

nses incurred during the interrupted season.


5. To record an estimate for operating expenses

Dr. 623 – Machine cost


Dr. 627 – Factory and administration cost
Cr. 335 – Accruals

6. Record actual expenses incurred during the interrupted season.

Dr. 623, 627 (Paid amount exceeds the accrued amount)


Dr. 335 – Accruals (accrued amount)
Cr. 111 – Cash on hand
Cr. 112 – Cash in bank
Cr. 152 – Raw materials
Cr. 153 – Tools and supplies
Cr. 331 – Trade payables
Cr. 334 – Payables to employees

Translation by KTC Assurance & Business Advisors 258


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Cr. 623, 627 (paid amount is less than accrued amount)

7. If the interest expenses would be paid late, at the end period interest expenses payables must be
calculated and recorded as follows:

Dr. 635 - Financial expenses (interest expenses)


Dr. 627 – Factory overhead cost (interest expenses is recognized to work in progress)
Dr. 241 – Construction in progress (interest expenses is capitalized to construction in
progress)
Cr. 335 – Accruals

8. When the enterprise issues bonds at par value and interest will be paid later (when bonds are
due), periodically the enterprise must accrue interest that must be paid in the current period to
manufacturing expenses or capitalization:

expense is recognized to work in progress)


Dr. 627 – Factory overhead cost (interest expense
Dr. 635 – Financial expenses (interest expense is recognized to financial expenses in period)
expenses is capitalized to construction in
Dr. 241 – Construction in progress (interest expenses
progress)
Cr. 335 – Accruals (interest expenses must be paid in the period)

When bonds are due, the enterprise must pay principal and interest for persons who buy
bonds:

Dr. 335 – Accruals (total interest amount)


Dr. 343 – Issued bonds (3431 – Bond cost)
Cr. 111, 112,…

9. When the enterprise issues bonds with discount and interest will be paid
pa later (when bonds are
due), periodically the enterprise must accrue interest payables for the current period to
manufacturing expenses or capitalization:

Dr. 627 – Factory overhead cost (interest is recognized to work in progress)


recognized to financial expenses in the period)
Dr. 635 – Financial expenses (interest is recognized
Dr. 241 – Construction in progress (interest is capitalized to construction in progress)
Cr. 335 – Accruals (interest must be paid in the period)
Cr. 3432 – Bond discount (discount is allocated in the period)

When bond are due, the enterprise must pay principal and interest for persons who buy the
bond:

Dr. 335 – Accruals (total interest amount)


Dr. 343 – Issued bond (3431 – bond cost)
Cr. 111, 112,…

10. When the enterprise issues bonds with premium and interest will be paid later (when bonds
are due), periodically the enterprise must accrue interest payables for the current period to
manufacturing expenses or capitalization:

Dr. 627 – Factory overhead cost (interest is recognized to work in progress)


Dr. 635 – Financial expenses (interest is recognized to financial expenses in the period)
Dr. 241 – Construction in progress (interest is capitalized to construction in progress)
Cr. 335 – Accruals (the interest for securities must be paid in the period)

Translation by KTC Assurance & Business Advisors 259


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When bonds are due, the enterprise must pay principal and interest for persons who buy those
bonds:

Dr. 335 - Accruals (total interest amount)


Dr. 3431 – Bond cost
Cr. 111, 112,…

Translation by KTC Assurance & Business Advisors 260


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ACCOUNT 336

INTER-COMPANY PAYABLES

This account records the settlement of amounts payable between an independent business entity
or General Corporation and its subsidiaries and divisions or among these subsidiaries and
divisions. The account reflects the amounts payable or the amount that an independent business
entity has paid or collected on behalf of its parent, subsidiaries or other members.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS:

1. The account 336 only reflects the internal economic transactions between the higher authority,
its subordinates and among internal units in which the higher authority is the General
Corporation. The parent must be a separate business entity and it must not be a non-business
organization. Although the subordinates could be subsidiaries or divisions of the General
Corporation or the parent, they must have a separate accounting structure.

2. Investment in subsidiaries, associates and jointly controlled entities and transactions between
jointly
the parent and its subsidiaries or among subsidiaries themselves would not be recorded to the
account 336.

3. The contents of inter-company payables in account 336 “Inter-company payables” include:

- Amounts which subsidiaries and divisions must submit


submit to the General Corporation, the parent as
well as amounts which the General Corporation andand the parent provide to the subsidiaries and
divisions.

- Amounts that the General Corporation, the pare nt, subsidiaries and divisions have paid or
parent,
collected on behalf of its General Corporation, its parent or its subsidiaries, divisions or other
members and other current accounts.

- With respect to capital that the General Cor poration and the parent company lends to its
Corporation
subsidiaries and divisions, the General Corpor ation and the parent should record the amount
Corporation
advanced into account 1361 – “Inter-company rreceivables,
eceivables, capital lending”. The subsidiaries and
divisions should record the amounts received as an increase in assets and capital and should not
record into account 336 “Inter-company payables”.

4. The accounting records must show detailed brbreakdowns of the amounts owed to each party,
and whether the amount is receivable or payable.

5. At the end of the accounting period the accountant will reconcile the account 136 and 336 and
prepare a bilateral settlement minute which will allow for the clearance of these accounts. When
reconciling, any differences must be investigated and adjusted on a timely basis.

STRUCTURE AND CONTENTS OF ACCOUNT 336 – INTER-COMPANY PAYABLE

Debit:

- Amount that the parent has paid to the subsidiary and division.

- Amount that the subsidiary has submitted to the General Corporation and the parent.

- Amount reimbursed to a member for their payment on behalf of another member.

Translation by KTC Assurance & Business Advisors 261


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- Repayment of receipts collected on behalf of another member.

Credit:

- Amount to be submitted to the General Corporation and the parent.

- Amount to be provided to the subsidiary and division.

- Amount payable to a member due to collecting a receivable on the other members’ behalf, or an
amount payable to a member due to another member paying expenses on the member’s behalf.

Credit balance:

Amount payable to inter-company.

MAJOR TRANSACTIONS

A. Accounting by the subsidiary and division

1. Periodically the subsidiary has to reflect in the general and administrative expenses the amount
that it is liable to remit to the General Corporation, its parent company for management fees.

Dr. 642 – General and administration expenses


Cr. 336 – Inter-company payables

2. To record the portions of the business deve lopment fund, financial reserved fund and bonus,
development
welfare fund to be remitted according to legislations laid down by the General Corporation or the
legislations
parent company:

Dr. 414 – Investment development fund


Dr. 4 15 – Financial reserved funds
Dr. 43 1 – Bonus & welfare fund
Cr. 336 – Inter-company payables

3. To record benefit that must be paid to the General Corporation and the parent:

Dr. 421 – Undistributed earnings


Cr. 336 – Inter-company payables

4. To calculate the retained earning refundable to the General Corporation and the parent:

Dr. 421 - Undistributed earnings


Cr. 336 – Inter-company payable

4. Amounts reimbursable to the General Corporation and the parent and other subsidiaries for
expenses that the General Corporation and the parent and other subsidiaries have paid for on the
companies behalf:

Dr. 152 - Raw materials


Dr. 153 - Tools and supplies
Dr. 211 - Intangible assets
Dr. 331 - Trade payables

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Dr. 64 1 - Selling expenses


Dr. 642 - General & administration expenses
Cr. 336 – Inter-company payable

5. To record money collected on behalf of the General Corporation and the parent:

Dr. 111 - Cash on hand


Dr. 112 - Cash in bank
Cr. 336 – Inter-company payable

6. To record the payment to the General Corporation and the parent relating to amounts payable,
amounts reimbursable, payments made by the parent on behalf of the subsidiary, or collections
made on behalf of the parent.

Dr. 336 – Inter-company payable


Cr. 111 - Cash on hand
Cr. 112 - Cash in bank

7. To record fixed asset transferred among the ssubsidiaries


ubsidiaries in the General Corporation and the
parent:

Dr 411- Contributed capital (net book value)


Dr. 214 - Accumulated depreciation and amor tization (accumulated depreciation amount)
amortization
Cr. 211- Fixed asset (historical cost)

8. Buying goods from the General Corporation and the parent (or other subsidiaries of the
General Corporation and the parent)

8.1 Goods subject to subtraction method VAT

a. When having received goods from the General Corporation, the parent or other subsidiaries, the
accountant records based on goods dispatch note cum internal goods transfer note and relating
documents as follows:

Dr. 156 - Goods (Internal selling prices)


Cr. 336 – Inter-company payables

b. When selling goods, the entity must issue VAT invoice. The accountant records revenue and
VAT output based on VAT invoice:

Dr. 111, 131,...


Cr. 511 – Sales
Cr. 3331 – VAT payable (33311)

At the same time, a list of invoices for goods delivered within the General Corporation and the
parent (or other subsidiaries of the General Corporation and the parent) is prepared and sent to
these entities to determine inter-company revenue.

c. When the division received VAT invoice for the goods were transferred from the General
Corporation or the parent, the accountant records deductible VAT input based on VAT invoice.

Dr. 133 – VAT deductible


Cr. 156 – Merchandise goods (if cost of goods sold has not been transferred to income

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summary)
Cr. 632 – Cost of goods sold (if cost of goods sold has been transferred to income
summary)

d. In the case, because of the accounting and management requirement, the entity doesn’t use the
internal goods transfer note but the VAT invoice, the entity must issue VAT invoice when
delivering goods to its subsidiaries and divisions in other provinces. Based on the VAT invoice,
the accountant should record inter-company revenue as follows:

Dr. 111, 112, 136 (Internal selling price including VAT)


Cr 3331 – VAT
Cr. 512 – Inter-company revenue (Internal selling price not including VAT)

- When the divisions received VAT invoice and goods from the General Corporation or the
parent, the accountant should record inventory at internal selling price not including VAT and
deductible VAT input.

Dr. 155, 156 (Inter-company selling price not including VAT)


Dr. 133 – VAT deductible
Cr. 111, 112, 336 (Total payment)

8.2. Goods subject to VAT in direct method:

a. When the subsidiaries and divisions recei ved goods from the General Corporation and the
received
parent, based on goods dispatch note cum internal
internal goods transfer note and relating document the
accountant should record as follows:

Dr. 155 – Finished goods (Internal selling prices)


Cr. 336 – Inter-company payables

b. When selling goods, the entities must issue invoice,


invoice, the accountant records revenue based on
the invoice:

Dr. 111, 112, 131,...


Cr. 511 – Sales

9. To record borrowings from higher authority (t


(the General Corporation and the parent) and other
subsidiaries:

Dr. 111, 112,...


Cr. 336 – Inter-company payables

10. Bilateral clearance between accounts payable and receivable of the General Corporation and
the parent and other subsidiaries (only bilateral clearance between accounts receivable and
payable of one subsidiary of the General Corporation and the parent):

Dr. 336 – Inter-company payables


Cr. 136 – Inter-company receivables

II. Accounting by the General Corporation and the parent

1. To record the business development fund that the General Corporation and the parent provides
for its subsidiaries.

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Dr. 414 - Business development funds


Cr. 336 – Inter-company payables

2. To record the financial reserve fund that the parent provides for its subsidiaries

Dr. 415 - Financial reserve fund


Cr. 336 – Inter-company payables

3. To record the bonus & welfare fund that the parent provides for its subsidiaries.

Dr. 431 - Bonus & welfare fund


Cr. 336 – Inter-company payable

4. To grant money to subsidiaries for these funds:

Dr. 336 – Inter-company payable


Cr. 111, 112, …

5. To record subsidies to the subsidiaries with the purpose of compensating for their losses

Dr. 421 - Undistributed earnings


Cr. 336 – Inter-company payable

6. To record amounts payable to the subsidiary for money that the parent received on behalf of its
subsidiary or what the subsidiary has paid on behalf of the parent.

Dr 111 - Cash on hand


Dr. 112 - Cash in bank
Dr. 152 – Raw material
Dr. 153 - Tools and supplies
Dr. 211 - Intangible assets
Dr. 331 - Trade payables
Dr. 627 - Factory overhead costs
Dr. 641 - Selling expenses
Dr. 642 - General & administration expenses
Cr. 336 – Inter-company payable

7. To record the payment to subsidiaries for amounts paid by the subsidiary on behalf of the
parent and for amounts collected by the parent on behalf of the subsidiary.

Dr. 336 – Inter-company payable


Cr. 111, 112,…

8. The General Corporation or the parent buy goods from the subsidiaries, please refer to point 8,
section I – accounting by the subsidiaries)

9. When subsidiaries submit management fee to the higher authority:

Dr. 111, 112,...


Cr. 136, 511,... (Refer to guidance in accounts 136, 642)

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ACCOUNT 337

CONSTRUCTION CONTRACTOR PAYABLES BASED ON AGREED PROGRESS


BILLING

This account reflects amount the customers have to pay according to a set schedule of
construction contract and amount receivables and revenue generated by reference to the
completed volume determined by the contractor in the construction contract.

THIS ACCOUNT MUST COMPLY WITH FOLLOWING REGULATIONS

1. Account 337 “Construction contractor payables based on agreed progress billing” is used to
record only if the construction contract stipulates that the contractor is allowed to make payments
according to the set schedule. This account is not used to record where the construction contract
stipulates that the contractor is allowed to make payments according to the value of performed
work volume approved by the customer.

2. The evidence to debit account 337 is the documen


documentt (not invoice) prepared by the contractor and
not been approved by the customer yet showing that revenue recognised by reference to the
completed work volume. The constructor must choose method to determine completed work
volume. The contractor should delegate this job to a relevant department. This department should
determine completed work volume and prepare documents to recognise revenue generated from
construction contract in the period.

The evidence to credit account 337 is the invoice


invoice prepared according to set schedule of
construction contract. Based on the amount in the invoice issued, the
the accountant records the
amount receivables not the revenue in the period.

3. Account 337 must keep track individual construction contract.

STRUCTURE AND CONTENT OF ACCOUNT 337 – CONST


CONSTRUCTION CONTRACTOR
PAYABLES BASED ON AGREED PROGRESS BILLING

Debit:

Amount receivable and revenue generatedrated by reference to the completed volume determined by
the contractor in the construction contract.

Credit:

Amount the customers have to pay according to a set schedule of construction contract.

Debit balance:

Difference between revenue recognized and the amount payables according to set schedule of
construction contract.

Credit balance:

To reflect the difference of lower amount of revenue of construction contract recorded and the
amount receivables from customer according to the set schedule of construction contract.

MAJOR TRANSACTIONS

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1. The construction contract stipulates that the contractor is allowed to make payments according
to a set schedule. When work volume of the construction is reliably estimated, the accountant,
based on the documents (not invoice) prepared by the contractor showing that revenue recognized
by reference to the completed work volume, shall record the followings:

Dr. 337 – Construction contractor payables based on agreed progress billing


Cr. 511 – Sales

2. Based on the invoice issued according to the set schedule, the accountant records the amount
receivables as agreed in the contract:

Dr. 131 – Accounts receivable


Cr. 337 – Construction contractor payables based on agreed progress billing.
Cr. 3331 – VAT payables

3. Receipts money from the customers:

Dr. 111, 112,...


Cr. 131 – Accounts receivable

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ACCOUNT 338

OTHER PAYABLES

This account records the changes in other payable which are not included in accounts 33 (from
account 331 to account 337). This account also records revenue advances from customers for
services that has been delivered by the company, differences resulted from revaluation of assets
that were contributed in a joint venture and differences resulted from difference of prices in sale
and leaseback transactions for both operating lease and financial lease.

Content and scope of this account involves the following major transactions:

1. The value of asset surplus for which the reason has not been determined and the company is
awaiting the authority decision.

2. The value of asset surplus payable to individuals


individuals or entities (internal and external) according to
the authority decision that were in written report if the reason was found.

3. The recognition and payment for social insurance, health insurance and trade union fees.
insurance,

4. Withholdings from employees' salaries based on the court's decision (allowance for children
when divorced, children born out of wedlock, court fees, compensation. etc.)

5. Amount payable as a result of holding deposits of another entity. Receipt of deposits and
pledges by goods would not be reflected in th is account, but followed-up in off balance sheet
this
accounts (account 003 - Goods received on consignment for sale).

6. Dividends payable to joint venture partners, shareholders.

7. Amounts payable for temporary borrowing of materials and/or money.

8. Amounts received from the import and export consignors or their agents in order to pay export
tax, import tax, duties, import VAT.

9. Amounts received in advance from customer for


for several accounting periods from leasing assets
or infrastructure (deferred income).

10. The difference from late payment price, instalment price and price of payment at sight
according to the contract.

11. Interest income received before money has lent to the borrowers or before buying debts
instruments.

12. Foreign exchange difference and revaluation of balances in foreign currency of construction
activity (pre-operating stage) in which the construction is complete but hasn’t been finalized at
the end of the fiscal year.

13. Deferred interest income due to revaluation of assets that were contributed in jointly
controlled entity in correspondence with the interests of the venture parties in the joint venture.

14. Amount payables of collections from sales of State shares, collections on behalf, and
collections from sales of assets that were eliminated in the value of the enterprise.

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15. The difference due to difference of higher selling price and net book value of sold assets or
leaseback assets of financial lease.

16. The difference due to difference of higher selling price and fair value of sold assets or
leaseback assets of operating lease.

17. Other amounts payables and receivable.

STRUCTURE AND CONTENTS OF ACCOUNT 338 - OTHER PAYABLES

Debit:

- Value of asset surplus to be reclassified into relevant accounts in accordance with the
authority decision in the written report.

- Amount of social insurance which has been paid to an employee.

- Trade union fees which have been paid by the entity.

- surance & trade union fees which have been remitted to the
Social insurance, health insurance
authorities.

- Deferred income to be allocated in relating periods; advances returned to customer when the
periods;
enterprise stops leasing asset.

- Allocation amount of foreign exchange differe nce and revaluation of balances in foreign
difference
currency (gain of foreign exchange difference) of construction activity (pre-operating stage)
into financial income when the construction is complete.

- Allocation amount of difference from revalued pr ice and net book value of the asset that were
price
contributed in the jointly controlled entity in correspondence with the interests of the venture
parties in the joint venture.

- Allocation amount of difference from late payment price, instalment price and price of
payment at sight (late payment interest income
income) according to the contract into financial
expenses.

- Transferring the difference of higher selling pri


price and the net book value of the sold fixed
asset and leaseback assets of financial lease to decrease the production and business
expenses;

- Transferring the difference of higher revalued amount and book value of materials and goods
that were contributed into the jointly controlled entity in correspondence with the interests of
the venture parties in the joint venture to other income when the jointly controlled entity sold
those materials and goods to the third party;

- Remitting the collections from the accounts receivable and receipts from sales of fixed assets
which were eliminated from the value of the enterprises when equitizing the SOEs to the
Fund of Enterprise Restructuring;

- Transferring expenses resulted from equitization that were deducted against income
generated from equitization of the state owned enterprises;

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- Other amounts which have been paid.

Credit:

- Asset surplus is waiting to solve (the reason has been determined);

- Value of asset surplus payable to individuals and entities (internal, external) according to the
authorities decision in the written report in which the reason is determined);

- Recognition of social insurance, health insurance and trade union fees to production and
business expenses;

- Recognition of social insurance, health insurance and trade union fees to withhold employees
of income;

- Amounts to be settled with an employee regarding


regarding housing and utility expenses;

- Injection from funds to cover overpayment of trade union fees;

- Social insurance paid to employees was ccovered


overed by the Social Insurance Fund;

- Deferred income occurred in accounting period;

- Allocation amount of foreign exchange difference


difference and revaluation of balances in foreign
currency (gain of foreign exchange difference) of construction activity (pre-operating stage)
into financial income when the construction is complete;

Difference of late payment price, instalment price and price of payment at sight according to
the contract;

- The difference due to difference of higher selling


se lling price and net book value of sold assets or
leaseback assets of financial lease;

- The difference due to difference of higher selling price and fair value of sold assets or
leaseback assets of operating lease;

- Difference of revalued price and net book valu


value of the asset that were contributed in the
jointly controlled entity in correspondence with the interests of the venture parties in the joint
venture;

- Amount payables of collections of receivables, collections on behalf, and collections from


sales of assets that were eliminated in the value of the enterprise for equitization;

- Amount payables that were recorded in the joint stock company for the collections on behalf
and collections from sales of assets that were withheld for the State (eliminated in the value
of the enterprise for equitization);

- Amount received from sales of State shares;

- Other payables.

Credit balance:

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- Amounts payables;

- Amount of social insurance, health insurance and trade union fees that are calculated but have
been not paid for administration organization or trade union fees which has been not use all,
will be kept for enterprise;

- Value of asset surplus awaiting the decision of the authorities;

- Deferred income in the end of the accounting period;

- Foreign exchange difference and revaluation of balances in foreign currency of construction


activity (pre-operating stage) in which the construction is complete but hasn’t been finalized
at the end of the fiscal year;

- Difference of higher selling price and fair value or net book value of soled or leaseback fixed
assets that has not been transferred yet;

- Difference of higher revalued amount and book value


value of fixed assets contributed in the jointly
controlled entity that has not been transferred yet;

- Amount payables of collections of receivables, collections on behalf, and collections from


sales of assets withheld for the State that were eliminated in the value of the enterprise at the
eliminated
end of accounting period;

- Amount payables of collections from receivables, collections on behalf and collections from
sales of assets withheld for the State that the joint stock company must pay;

- Amount payables of collections from selling State shares at the end of accounting period;

This account may have a debit balance. The debit balance reflects the amount paid to the
authorities exceeds the obligation or the company hhas
as not paid social insurance to employees and
trade union fees and the overpayment has not been reimbursed.

Account 338 – Other payables have eight sub-accounts:

Account 3381 – Surplus of assets waiting for resolution: to record the value of asset surplus for
which the reason has not been determined and th
the company is awaiting the authorities’ decision.

If the cause of the asset surplus has been detected, and the surplus is officially resolved in the
minutes, the value of the asset surplus is then recorded directly into the relevant accounts rather
than account 338 (3381).

Account 3382 – Trade union fees: to record recognition and payment for social insurance to
employees.

Account 3383 – Social insurance payables: to record recognition and payment for social
insurance.

Account 3384 – Health insurance payables: to record recognition and payment according to
regulation

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Account 3385 - Payables from equitization: to record the amount payables of collections from
selling the State share, collection of receivables on behalf and collections from selling assets that
were eliminated to the value of enterprise and other payables according to regulations.

Account 3386 – Receipts of short term deposits: to record the amounts that entity received
deposits and pledges of other entities and individuals outside the entity with the term of one year
to guarantee services relating to production and business activities according to the signed
contract.

Account 3387 – Deferred income: to record the balance and movement of deferred income of the
entity in the accounting period. This account would be used to record the amount of money that
the customer paid in advance for lease assets for one or several periods; interest income received
in advance before lending capital or buying debts instrument; difference of late payment price,
instalment price and price of payment at sight as committed; gain of foreign exchange difference
and revaluation of balances in foreign currencies of construction activities (pre-operating stage) to
be allocated when the construction was complete;
complete; difference of higher revalued amount and book
value of assets contributed in joint venture in corr espondence with the interests of venture parties.
correspondence

This account would not be used to record advance from customer for goods and services that have
advance
not been provided.

Account 3388 – Other payables: to record other payable except for those accounts that should be
recorded to accounts: from account 3381 to account 3387.

MAJOR TRANSACTION

1. To reflect the value of fixed asset surplus for which the reason has not been determined and the
company is awaiting the authorities’ decision:

Dr. 211 – Tangible asset (historical cost)


Cr. 214 – Accumulated depreciation and
and amortization (depreciation amount)
Cr. 338 – Other payables (3381) (net book value)

Simultaneously, an increase in fixed assets register is recorded based on the fixed assets
documents.

2. To record the surplus value of materials, merchandise and cash detected through a physical
count for which the reason has not been determined, and the company is awaiting the authorities’
decision:

Dr. 111 – Cash on hand


Dr. 152 – Raw materials
Dr. 153 – Tools and supplies
Dr. 155 – Finished goods
Dr. 156 – Merchandise goods
Dr. 158 - Goods in bonded warehouse
Cr. 338 – Other payables (3381)

3. When the company receives the authorities’ decision the accountant must record to the relevant
accounts:

Dr. 338 – Other payables (3381)


Cr. 411 – Contributed capital, or:

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Cr. 441 – Investment in capital construction


Cr. 338 – Other payables (3388);
Cr. 642 – General and administration expenses.

4. Monthly withholding social insurance, health insurance, trade union fees to production and
business expenses:

Dr. 623 – Machinery cost


Dr. 622 – Direct labour cost
Dr. 627 – Factory overhead costs
Dr. 641 – Selling expenses
Dr. 642 – General and administration expenses
Cr. 338 – Other payables (3382, 3383, 3384)

5. Calculate health insurance, social insurance, trade union fees deducted from salaries of
employees:

Dr. 334- Payables to employees


Cr. 338 – Other payables (3384)

6. To record social insurance, trade union fees submitted to the authorities and buying health
insurance card:

Dr. 338 – Other payables


Cr. 111, 112,...

7. Calculate social insurance payable to employees when sick leave, maternity leave, etc.

Dr. 338 – Other payables (3383)


Cr. 334 – Payables to employees

8. To record spending out of trade union fund:

Dr. 338 – Other payables (3382, 3383)


Cr. 111, 112,...

essive payments made from trade union fund:


9. To record a reimbursement due to excessive

Dr. 111 – Cash on hand


Dr. 112 – Cash in bank
Cr. 338 – Other payables

10. To record receipt of deposits:

- Receipt of deposits from other entities in cash:

Dr. 111 (1111, 1113), 112,...


Cr. 338 – Other payables (3386)

In case, the depositing party violated the signed economic contract, the entity will be fined as
agreed in the contract:

+ Penalty deducted into the deposit amount:

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Dr. 338 – Other payables (3386) (short term deposits)


Cr. 711 – Other income

+ Repayment of the deposit amount that the penalty was deducted:

Dr. 338 – Other payables (3386) (the deducted amount) (if any)
Cr. 111, 112,...

11. Calculate the interests must be paid to the venture parties or dividends must be paid to
shareholders according to the made by the general assembly of shareholders:

Dr. 421 – Undistributed earnings


Cr. 338 – Other payables (3388)

12. To record deferred income from leasing fixed asset, investment property under operating
lease; and the revenue of the current accounting pe riod that was determined by dividing the total
period
receipt from leasing fixed assets, investment property and the periods of leasing fixed assets and
investment property:

a. Enterprise paid VAT in subtraction method:

When having received advances from the customers


customers for asset lease, investment property in
several years, the accountant records the deferred income at price not including VAT:
records

Dr. 111, 112,... (advance amount)


Cr. 3387 – Deferred income (leasing price not including VAT)
Cr. 3331 – VAT payable (33311)

Calculating and recording deferred income of each accounting period:

Dr. 3387 – Deferred income


Cr. 511 – Sales (5113, 5117)

In the case, the leasing asset contract was broken, cash then was returned to the lessee:
broken,

Dr. 3387 – Deferred income (leasing price not including VAT)


Dr. 3331 - VAT payable (the VAT amount returned to the lessee for leasing that was not
implemented)
Cr. 111, 112,...( returned amount).

b. Enterprise paid VAT in direct method:

When having received advances from lessee for several years, the accountant records deferred
income at total receipt:

Dr. 111, 112,...


Cr. 3387 – Deferred income (total amount)

Calculating and recording deferred income of each of accounting period:

Dr. 3387 – Deferred income


Cr. 511 - Sales (5113, 5117).

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The accountant records payable VAT in direct method:

Dr. 511 – Sales (5113, 5117)


Cr. 3331 - VAT payables (33311).

When the leasing asset contract was broken, cash then was returned to the lessee:

Dr. 3387 – Deferred income


Cr. 111, 112,... (returned amount).

13. Accounting for selling goods under late payment or instalment plan:

a. Selling goods under late payment or instalment plan that is subject to Subtraction method
VAT:

When selling goods under late payment or instalme nt plan, the accountant records revenue in the
instalment
current period at the price of payment at sight. Th
Thee difference of late payment price, instalment
price and the price of payment at sight would be recorded to account “deferred income”:

Dr. 111, 112,131,...


Cr. 511 - Sales (price of payment at sight not including VAT)
Cr. 3387 – Deferred income (difference of price of late payment, instalment and price of payment
at sight not including VAT)
Cr. 333 – VAT payables (3331).

Periodically, the accountant calculates, determines and transfers the interest income generated
from selling goods under late payment or instalment plan to profit and loss account:

Dr. 3387 – Deferred income


Cr. 515 – Financial income.

When having received money from selling goods under late payment and instalment plan
including the difference of price of late payment or instalment plan and price of payment at sight:

Dr. 111, 112,...


Cr. 131 – Accounts receivable.

b. Selling goods under late payment or instalment plan that is not subject to VAT in direct
method:

When selling goods in late payment or instalment plan, the accountant should record revenue in
the current period at the price of payment at sight. The difference of late payment price,
instalment price and the price of payment at sight should be recorded to account “deferred
income”:

Dr. 111, 112, 131,...


Cr. 511- Sales (price of payment at sight including VAT)
Cr. 3387 – Deferred income (difference of price of late payment, instalment and price of payment
at sight including VAT)

At the same time, the cost of goods sold is recorded as follows:

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+ Selling goods:

Dr. 632 - Cost of goods sold


Cr. 154 (631), 155, 156, 157,...

+ Disposal of investment property:

Dr. 632 - Cost of goods sold (net book value of investment property)
Dr .214 - Accumulated depreciation and amortization (2147) (accumulated depreciation)
Cr. 217- Investment property

At the end of the period, VAT payables are determined in direct method:

Dr. 511 – Sales


Cr. 333 – Tax and obligation payables (3331).

Periodically, the accountant should calculate, de termine and transfer the interest income
determine
te payment or instalment plan to profit and loss account:
generated from selling goods under late

Dr. 3387 – Deferred income


Cr. 515 – Financial income

When having received money from selling goods under late payment and instalment plan
including the difference of price of late payment or instalment plan and price of payment at sight:

Dr. 111, 112,...


Cr. 131 – Accounts receivable

14. Sales and leaseback assets of financial lease in which selling price is higher than the net book
value of the fixed assets sold or the assets leased back
back:

When selling asset procedure is completed, based on invoice and relating documents the
accountant records:

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


Cr. 711- Other income (net book value of asset sold or the assets leased back)
Cr. 3387 – Deferred income (Difference of selling
selling price and net book value of fixed asset)
Cr. 3331 - VAT payables

At the same time, the accountant records a decrease in fixed asset:

Dr. 811 – Other expenses (net book value of assets sold or leased back)
Dr. 214 – Accumulated depreciation and amortization (depreciation amount) (if any)
Cr. 211 – Tangible assets (historical cost)

Periodically, the difference (gain) of selling price and net book value of fixed asset sold and
leased back was transferred to production and business expenses in the current period matching
with leasing period:

Dr. 3387 – Deferred income


Cr. 623, 627, 641, 642,...

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15. When the construction was complete (pre-operating stage), the accountant transfers the
foreign exchange difference to profit and loss account. If the account 413 “Foreign exchange
difference” has credit balance, it will be recorded to financial income or transferred to account
3387 “deferred income” for allocating in 5 years as maximum:

Dr. 413 – Foreign exchange difference (4132)


Cr. 515 - Financial income
Cr. 3387 – Deferred income (Gain of foreign exchange difference to be allocated)

Allocation of realized foreign exchange gains occurred in construction stage to financial income
when the construction is complete and put in use:

Dr. 3387 – Deferred income


Cr. 515 – Financial income (Gain of foreign exchange difference)

16. When assets contributed into jointly controlled entity that revalued amount is higher than the
net book value of fixed assets, the accountant records the difference of revalued amount and the
records
net book value in correspondence with the interests of other venture parties in the joint venture to
account 711 “other income” and records the differe nce of revalued amount and the net book value
difference
in correspondence with the entity’s interests in the joint venture to account 3387 “Deferred
income”:

Dr. 222 – Shares in joint ventures (revalued amount)


Dr. 214 – Accumulated depreciation and amor tization (2417) (depreciated amount)
amortization
Cr. 211, 213 (historical cost)
Cr. 711 – Other income (Difference of re valued amount and the net book value in
revalued
correspondence with the interests of other venture parties in the joint venture)
Cr. 3387 – Deferred income (Difference of revalued
revalued amount and the net book value in
correspondence with the interests of the entity in the joint venture)

Periodically, based on the useful life of fixed assets that are used by the jointly controlled entities,
the accountant allocates the deferred income to other income of the current period:

Dr. 3387 – Deferred income


Cr. 711 – Other income.

venture parties and jointly controlled entity


17. Accounting for transactions between venture

17.1. Venture parties sell assets to the jointly controlled entity:

- The venture party sold goods to the jointly controlled entity. When goods are delivered, the
accountant records as follows:

Dr. 632 – Cost of goods sold


Cr. 155 – Finished goods, or
Cr. 156 - Merchandise goods

At the same time, based on the price of goods sold, the accountant records the revenue as follows:

Dr. 111, 112, 131,... (total value of finished goods and goods sold to jointly controlled entity)
Cr. 511 - Sales (Price not including VAT)
Cr. 3331 - VAT payables (33311)

Translation by KTC Assurance & Business Advisors 277


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- The venture party sells fixed asset to jointly controlled entity, the accountant records to decrease
the fixed asset.

Dr. 811- Other expenses (net book value)


Dr. 214 – Accumulated depreciation and amortization (depreciated amount)
Cr. 211, 213 (historical cost)

At the same, the accountant records other income generated from sales of fixed asset at market
price to the jointly controlled entity.

Dr. 111, 112, 131,...


Cr. 711- Other income
Cr. 333 - VAT payables (33311)

At the end of accounting period, if the assets, finished goods and goods sold to the jointly
controlled entity have not been sold to the independent third party, the venture party records
deferred income generated from sales of fixed assets, finished goods and goods in correspondence
with its interests in the joint venture:

+ Sales of merchandise and goods:

Dr. 511 – Sales (Deferred amount due to sales of finished goods, merchandises
merchandises in correspondence
with its interests in the joint venture)
Cr. 3387 – Deferred income

+ Sales of fixed asset:

Dr. 711- Other income (Deferred amount due to sales of fixed assets in correspondence with its
interest in the joint venture)
Cr. 3387 – Deferred income

In the next accounting period, if the jointly controlled entities sells the merchandise and finished
controlled
goods to an independent third party, the venturer records the following:

Dr. 3387 – Deferred income (deferred amount in correspondence with the interests in the joint
venture)
Cr. 511 – Sales

- Periodically the venture party allocates the deferred income to the other income in
correspondence with its interests in joint venture based on the useful life of the assets that the
jointly controlled entity is using:

Dr. 3387 – Deferred income


Cr. 711 - Other income

When the jointly controlled entity sells the assets purchased from the venture party to an
independent third party, the venture party records:

Dr. 3387 – Deferred income (portion of actual gains attributable to its interests in the joint
venture that has not been allocated to other income)
Cr. 711 - Other income

17.2. Venture party buys asset from the jointly controlled entity:

Translation by KTC Assurance & Business Advisors 278


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When buying asset from the jointly controlled entity, based on relating documents, the accountant
records the purchase the same as purchases from other suppliers.

18. Accounting for payables of collections from sales of the State shares:

- During the period of determining the value of the enterprise and the State Owned Enterprise
officially transited to a joint stock company, collections of receivables or collections from sales of
assets that were eliminated from the value of the enterprise, the accountant records these total
receipts to Enterprise Restructuring Fund:

Dr. 111, 112,...


Cr. 3385 - Payable from equitization

At the same time, a single entry is credited d to account 002 “Goods held under trust or for
processing” (off balance sheet accounts) at the sold value of merchandise and assets withheld for
the State that were eliminated from the value of enterprise.

- When submitting the collections of receivables or collections from sales of assets that were
eliminated from the value of enterprise to th
thee Enterprise Restructuring
Restructurin Fund, the accountant
records:

Dr. 3385 - Payables from equitization


Cr. 111, 112,...

- When selling shares of the State, the accountant records:

Dr. 111, 112,...


Cr. 3385 – Payables from equitization.

When the equitization is complete, the enterprise must report and finalize the equitization
expenses to the agency that made the equiti zation decision. Total expenses arisen in the
equitization
equitization would be deducted into the receipt
receiptss from sales of State shares. The accountant
records the approved expenses resulted from equitization:

Dr. 3385 – Payables from equitization (details of receipts from sales of State shares)
Cr. 1385 - Receivables from equitization (details of expenses resulted from equitization).

When submitting the variance of total receipts from sales of State shares and the equitization
expenses to the Enterprise Restructuring Fund, the accountant records:

Dr. 3385 - Payables from equitization


Cr. 111, 112,...

Translation by KTC Assurance & Business Advisors 279


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ACCOUNT 341

LONG-TERM LOANS

This account records long term loans and repayments of enterprise.

Long term loan is a loan that the repayment period is more than one years.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. At the end of accounting period, the enterprise must calculate and plan long term loan
schedule and also determine the current portion which is due next year. The enterprise must
plan with regards to how they are going to pay the amounts off. The enterprise must keep
track of individual creditors and loan contract.

2. If the funds borrowed are in a foreign currency, the accountant must keep details of the
original currency. Loan or repayment in fore ign currency should be converted to Vietnamese
foreign
Dong using the actual exchange rate or averag
averagee inter-bank exchange rate on foreign currency
market announced by the SBV at the date of transaction or using the exchange rate of
accounting book. Debit balance of account 341 is converted into Vietnamese dong using the
exchange rate of accounting book. Foreign exchange difference (if any) occurred from
repayment of long-term loan in foreign currenc
currencyy in the course of doing business (applying to
both enterprise in construction stage and enterp rise in construction activity) would be treated
enterprise
to financial income or expenses. Foreign exch ange difference occurred in construction stage
exchange
(pre-operating stage) would be recorded to account 413 – “Foreign exchange difference” and
treated according to the current regulations (refer to instruction of account 413).

3. At the end of accounting period, the balance of long term loan must be revalued using
average inter-bank exchange rate announced by the SBV at the date of transaction. Foreign
exchange difference resulted from revaluation of the balance of long term loan in foreign
currency is recorded to account 413 – “Foreign exchange difference” and treated according to
the current regulations (Refer to instruction of account 413).

STRUCTURE AND CONTENTS OF ACCOUNT 341 - LONG TERM LOAN

DEBIT:

- Long term loans paid;

- Foreign exchange difference resulted from revaluation of the balance of long-term loan in
foreign currency at the end of the fiscal year.

Credit:

- Long term loan incurred during the current period.

- Foreign exchange difference resulted from revaluation of balance of long-term loan in foreign
currency at the end of the fiscal year.

Credit balance:

Long term loan which have are not due within the current year.

Translation by KTC Assurance & Business Advisors 280


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MAJOR TRANSACTIONS

1. Long term loan to acquisition of fixed asset for production of goods and services subject to
subtraction method VAT.

Dr. 211 – Tangible asset (price not including VAT)


Dr. 213 – Intangible asset (price not including VAT)
Dr. 133 – VAT deductible (1332)
Cr. 341 – Long term loan

2. Long term loan for construction.

- Acquisition of assets or constructions for production of goods and services subject to subtraction
method VAT:

Dr. 241 – Construction in progress (price not including VAT)


Dr. 133 – VAT deductible (1332)
Cr. 341 – Long term loan

- Acquisition of assets or constructions for production of goods and services not subject to VAT
or subject to VAT in direct method:

Dr. 241 – Construction in progress (total amounts)


Cr. 341 – Long term loan.

3. Long term loan for th


thee purchases of raw materials,
materials, equipments and tools:

- Purchases of raw materials, equipment and tool


toolss for production of goods and services subject to
subtraction method VAT:

Dr. 152 – Raw material (prices not including VAT)


Dr. 153 – Tools, supplies (price not including VAT)
Dr. 133 – VAT deductible (1331)
Cr. 341 – Long term loan

- Purchases of raw materials, equipment and tools for production of goods and services not
subject to VAT or subject to VAT in direct method:

Dr. 152 – Raw materials (total amount)


Dr. 153 – Tools, supplies (total amount)
Cr. 341 – Long term loan

4. Long term loan for paying creditors and contractors:

Dr. 331 – Trade payable


Cr. 341 – Long term loan

5. Long term loan for advance payment to construction contractors:

Dr. 331 – Trade payables (amount paid in advance payment to contractors)


Cr. 341 – Long term loan

Translation by KTC Assurance & Business Advisors 281


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6. Long-term loan for investment in subsidiaries, associates, joint ventures, long term securities
and bonds:

Dr. 221 – Investment in subsidiaries


Dr. 222 – Share in joint ventures
Dr. 223 – Investment in associates
Dr. 228 – Other long term loan
Cr. 341 – Long term loan

7. Long term loan in VND (put in cash on hand or deposit in bank):

Dr. 111 – Cash on hand


Dr. 112 – Cash in bank (1121)
Cr. 341 – Long term loan

8. Long term loan in a foreign currency must be converted into Vietnam Dong using the actual
exchange rate or average inter-bank exchange rate in the foreign currency market announced by
rate
the SBV at the date of transaction:

Dr. 111 – Cash on hand (1112) (loan to put in cash on hand)


Dr. 112 – Cash in bank (1122) (loan to deposit in bank)
Dr. 221, 222, 223 – (loan for investment in subsidiaries, associates, joint ventures)
Dr. 331 – Trade payables (loan for payment the seller)
Dr. 211 – Tangible asset (loan for acquisition of fixed asset)
Dr. 133 – VAT deductible (if any)
Cr. 341 – Long term loan.

9. Long term loan repayment made in cash on hand, cash in bank, or cash receiving from
receivables (in Vietnam Dong):

Dr. 341 – Long term loan


Cr. 111 – Cash on hand
Cr. 112 – Cash in bank
Cr. 131 – Accounts receivable

10. Long term repayment made in cash on hand or cash in bank (in a foreign currency):

- If long-term loan repayment in a foreign curre


currency in the course of doing business (applying to
both enterprise in construction stage and enterprise in construction activity)

Dr. 341 – Long term loan (using exchange rate of accounting book of account 341)
Cr. 111, 112 (using exchange rate of accounting book of accounts 111,112)
Cr. 515 – Financial income (gain of foreign exchange difference) (loss of foreign
exchange difference would be debited to account 635 – Financial expenses)

- If long-term loan repayment for construction (pre-operating stage)

Dr. 341 – Long term loan (using exchange rate of accounting book of account 341)
Dr. 413 – Foreign exchange difference (loss of foreign exchange difference)
Cr. 111, 112,... (using exchange rate of accounting book of accounts 111, 112)
Cr. 413 –Foreign exchange difference (gain of foreign exchange difference) (loss of
foreign exchange difference would be debited to account 431)

Translation by KTC Assurance & Business Advisors 282


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11. At the end of the fiscal year, when preparing financial statement, balance of long term loan in
a foreign currency must be revalued according to average inter-bank exchange rate announced by
the SBV (if there is a change in the foreign exchange rate)

- Loss of foreign exchange difference:

Dr. 413 – Foreign exchange difference (4131, 4132)


Cr. 341 – Long term loan

- Gain of foreign exchange difference:

Dr. 341 – Long term loan


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

Translation by KTC Assurance & Business Advisors 283


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ACCOUNT 342

LONG TERM PAYABLES

This account records long-term payables such as obligations under financial lease or other long-
term payables (borrowing tem is greater than one year).

For a financial lease, the total lease obligations to credit to account 342 “Long-term payables” is
the total amount payable determining by the current cost of minimum lease amount or fair value
of lease asset, minus (-) amount payables in the current period, plus (+) amount of VAT that the
lessee must pay during lease term.

If an obligation under a financial lease is in a foreign currency, then the lessee should calculate
and translate the amount into VND based on the ac actual exchange rate or average inter-bank
exchange rate announced by the SBV at the date of transaction. When payment made in a foreign
currency, the debit side of account 342 must be converted into VND using the exchange rate of
accounting book of account 342.

STRUCTURE AND CONTENTS OF ACCOUNT 342 - LONG TERM PAYABLES

Debit:

- Repayment of long-term liabilities;

- Posting the current portion of long-term liabilities due to account 315;

- Reducing liability with the agreement of creditors;

- Loss of foreign exchange difference resulted from revaluation of long term payables in a
foreign currency.

Credit:

Long term liabilities incurred in the current period.

Gain of foreign exchange difference resulted from revaluation of long term liabilities in a foreign
currency.

Credit Balance:

Long-term debts which is not due within the current period.

MAJOR TRANSACTIONS

I. Accounting for transactions relating to financial lease:

1. Amount payable under financial lease is determined at purchased price not including VAT that
the lessor paid when acquisition of leased asset.

- When received financial lease asset, based on lease asset and relating documents to reflect cost
of financial lease asset at price not including VAT input.

Translation by KTC Assurance & Business Advisors 284


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Dr. 212 – Financial lease asset (price not including VAT)


Cr. 342 - Long term payables (Current cost of payment minimum lease amount or reasonable cost
of lease asset minus original debt must payment incurrent period)
Cr. 315 - Current portion of long-term loan (amount payables in the current period)

- At the end of accounting period, based on the lease contract to determine the Current portion of
long term loan that must be paid in the next accounting period:

Dr. 342 – Long term payables


Cr. 315 – Current portion of long term loan

2. Amount payable under financial lease is determined at purchased price including VAT that the
lessor paid when acquisition of leased asset.

- When received financial lease asset, the lessee also record the VAT of the asset that the lessor
paid before. Based on the finance lease contract, return the VAT amount to the lessor.

Dr. 212 – Financial lease asset (price not including VAT)


Dr. 138 – Other receivables (VAT input of financial lease asset)
Cr. 315 – Current portion of long term loan (debts must be paid in current period including VAT)
Cr. 342 – Long term payables (the current cost of minimum lease am ount or reasonable cost of
amount
lease asset, minus debt payment in current period, plus VAT that lessee must payment during
lease term).

- At the end of accounting period, base on lease contract to determine the Current portion of long term
loan must be paid in the next accounting period:

Dr. 342 – Long term payables


Cr. 315 – Current portion of long term loan

II. Accounting for transaction relating other long term payables:

1. Long term payables for construction:

Dr. 241 - Construction in progress


Cr. 342 – Long term payables

2. For long term debts that the creditors were not identified, when there is a decision to write off
or not have to pay during equitization of state owned enterprise:

Dr. 342 – Long term payables


Cr. 711 – Other income.

3. At the end of the accounting period, the accountant determines the Current portion of long term
loans for the next accounting period and records the followings:

Dr. 342 – Long term payables


Cr. 315 – Current portion of long term loans

III. Preparation of financial statement at the end of the accounting period:

The balance of long term payables in a foreign currency must be revalued according to average
inter-bank exchange rate announced by the SBV:

Translation by KTC Assurance & Business Advisors 285


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1. Loss of foreign exchange difference:

Dr. 413 – Foreign exchange difference


Cr. 342 – Long term payables

2. Gain of foreign exchange difference:

Dr. 342 – Long term payables


Cr. 413 – Foreign exchange difference

Translation by KTC Assurance & Business Advisors 286


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ACCOUNT 343

ISSUED BONDS

This account is used to reflect bonds issued and its payment. This account is also used to reflect
discount, premium of bond incurred when issuing bonds and allocation of those discounts and
surplus in order to determine borrowing costs to be charged to manufacturing expenses or
capitalized.

An enterprise might issues bonds under three scenarios as follows:

- Bonds issued at value (issued price is equal to par value): where issuing price of bond is equal
to its par value. It is often happened when market interest rate is equal title rate of bonds issued.

- Bonds issued with discount (issued price is lower than its value): where selling price of bond is
lower than its issuing one. The difference between the higher issuing price and selling one is
called bond discount. It is often happened when market interest rate is greater than title rate of
bonds issued.

- Bonds issued with premium: (issued price is higher than its face value): where selling price of
bond is higher than its issuing one. The difference between the lower issuing price and selling one
is called bond premium. It is often happened when market interest rate is lower than nominal rate
of bond issued.

the entity borrows money by issuing bonds when


Bond discount and premium are incurred only if the
interest rate which is agreed by the lenders.
there is a difference between the market and nominal interest

Bond discount and premium should be determined and recorded right at issuing date. The
rate after bond was issued should not have impact
difference between market and nominal interest rate
on the recorded discount and premium.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Account 343 is only used for the entity borrowing money by issuing bonds.

2. Account 343 must be kept track in details of bonds issued including:

- Bond value;
- Bond discount;
- Bond premium.

At the same time, it must be kept track in details by terms of issued bonds.

3. The enterprise must keep track of bond discounts and premium for each type of issued bond
and their allocation in order to determine borrowing costs to be charged to expenses (the profit
and loss account) or capitalized for each period.

- Bond discount is allocated to determine the borrowing cost for each period within bond terms;

- Bond premium is allocated to decrease borrowing cost for each period within bond terms;

- When interest expenses arising from bonds issued meet criteria to be capitalized, those
expenses and allocation of discount or excess of securities for each period must not be higher the

Translation by KTC Assurance & Business Advisors 287


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actual interest expenses incurred and the allocation amount of discount and excess in that period.

- Allocation of discount or premium of bonds may apply the actual rate method or straight line
method:

+ Actual rate method: where discount or premium is allocated to each period can be calculated by
the difference of interest expenses payables in each period (equal to opening balance of book
value of bonds multiply with actual rate on the market) and amount payables for each period.

+ Straight – line method: where discount or premium is allocated to the same part for each period
during the duration of securities.

4. In the case, the enterprise pays interest when the bond issued fall due, the enterprise must
periodically calculate interest from bond issued to record to manufacturing expenses or to
capitalize to value of asset in process.

5. When preparing financial statement, the debt


debt securities in the liabilities on the balance sheet
are reflected by net value (Net value of securities equal value of securities minus discount of
securities plus excess of securities).

STRUCTURE AND CONTENTS OF ACCOUNT 343 – ISSUED BONDS

Debit:

- Payment when bonds fall due;


- Bond discount incurred during the period;
- Allocation of bond premium incurred during the period.

Credit:

- Bond value recorded at par value in the period;


- Allocation of bond discount in the period;
- Bond premium incurred during the period.

Credit balance:

Residual value of bond issued at the end of the period.

Account 343 – Issued bond has three sub–accounts:

- Account 3431 – Bond par value


- Account 3432 – Bond discount
- Account 3433 – Bond premium

Translation by KTC Assurance & Business Advisors 288


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MAJOR TRANSACTIONS

I. Bond issued at par value:

1. To reflect receipts from issuing bonds:

Dr. 111, 112,... (receipts from issuing bonds)


Cr. 3431 – Bond par value

2. Periodically, paid interests will be charged to expenses or capitalized:

Dr. 635 – Financial expenses (if posted to financial expenses in the period)
Dr. 241 – Construction in progress (if capitalized to value of construction investment
asset in progress)
Dr. 627 – Factory overhead cost (if capitalized to cost of asset in process)
Cr. 111, 112,... (Interest paid in the period)

3. If the interest shall be paid in arrear (when bonds fall due), periodically, enterprise must
estimate interest expenses payable in the period to expenses or capitalization:

Dr. 635 – Financial expenses (if posted to financial expenses in the period)
Dr. 241, 627 (If capitalized to cost of asset in progress)
Cr. 335 – Accruals (the part in interest securities must be paid in the period)

- When bonds fall due, enterprise must pay the principal and interests to bond holders:

Dr. 335 – Accruals (total bond interests)


Dr. 3431 –Bond par value (principal)
Cr. 111, 112,...

4. If bond interests are paid at the issuing date, bond interest expenses are first debited to account
242 (bond interest paid in advance) and will be then systematically allocated to costing objects

- At bond issuing date:

Dr. 111, 112,... (Actual receipts)


Dr. 242 – Long term prepaid expenses ((bond interest paid in advance)
Cr. 3431 – Bond par value

-Periodically, bond interests paid in advance are systematically allocated to the borrowing costs in
the period:
Dr. 635 – Financial expenses (if charged to financial expenses in the period)
Dr. 241– Construction in progress (if capitalized to cost of construction in progress)
Dr. 627 – Factory overhead cost (if it is capitalized to work in process)
Cr. 242 – Long term prepaid expenses (details of bond interest paid in advance)
(bond interests allocated in the period)

5. Bond issuing costs:

- If costs for issuing bonds are insignificant, they should be charged to expenses (profit and
loss account) in the period:

Translation by KTC Assurance & Business Advisors 289


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Dr. 635 – Financial expenses


Cr. 111, 112,...

- If bond issuing costs are significant, they should be allocated:

Initial entry:
Dr. 242 – Long term prepaid expenses (bond issuing expense)
Cr. 111, 112,...

Periodically, bond issuing costs are allocated:


Dr. 635, 241, 627 (allocated bond issuing costs)
Cr. 242 – Long term prepaid expenses (detailed of bond issuing costs)

6. Bond payments when due:

Dr. 3431 – Bond par value


Cr. 111, 112,...

II. Accounting for issued bonds with discounts

1. To reflect actual receipts from issued bonds:

Dr. 111, 112,... (Amount receipts from selling bonds)


Dr. 3432 – Bond discount (the difference between lower receipt and bond par value)
Cr. 3431 – Bond par value

2. If bond interests are paid periodically, they should be charged to expense (the profit and loss
should
account) or capitalized:

Dr. 635 – Financial expenses (if charged financial expenses in the period)
Dr. 241 – Construction in progress (if capita lized to construction in progress)
capitalized
Dr. 627 – Factory overhead cost (if capitalized to work in process)
Cr. 111, 112,... (bond interests must be paid in the period)
Cr. 3432 – Bond discount (bond interests allocated in the period)

3. In the case bond interest are in arrear (when bonds fall due)

- Periodically, enterprise must estimate interest expenses payable in the period:

Dr. 635 – Financial expenses (if charged financial expenses in the period)
Dr. 241, 627 (if capitalized to construction in progress)
Cr. 335 – Accruals (bond interests must be paid in the period)
Cr. 3432 – Bond discount (bond discount allocated in the period)
- When bonds fall due, enterprise must pay principal and bond interests to bond holders:

Dr. 335 – Accruals (total bond interests)


Dr. 3431 – Bond par value
Cr. 111, 112,...

4. In the case, bond interests are paid at the issuing date, interest expenses will be debited to
account 242 (bond interests paid in advance) and then be allocated systematically to costing
objects:

Translation by KTC Assurance & Business Advisors 290


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- When issuing bonds:

Dr. 111, 112,... (Total actual receipts)


Dr. 3432 – Bond discount
Dr. 242 – Long term prepaid expenses (bond interest paid in advance) (bond interest paid
in advance)
Cr. 3431 – Bond par value

- Periodically, interests are charged expenses in the period or capitalized:

Dr. 635 – Financial expenses (if charged to expenses in the period)


Dr. 241 – Construction in process (if capitalized to construction in progress)
Dr. 627 – Factory overhead cost (if capitalized to work in process)
Cr. 242 – Long term prepaid expenses (bond inte interest paid in advance) (bond interest
allocated in the period)
Cr. 3432 – Bond discount (bond discount allocated in the period )

5. Payments when bonds fall due:

Dr. 3431 – Bond par value


Cr. 111, 112,...

III. Accounting for issued bonds with premium:

1. Reflects actual receipts from issuing bonds:

Dr. 111, 112 (Actual receipts)


Cr. 3433 – Bond premium (difference of actual receipt and par value of bonds issued)
Cr. 3431 – Bond par value

2. Where periodically interest was paid:

- When interest are charged to expenses or capitalized:

Dr. 635 – Financial expenses (if charged to financial activities in the period)
capitalized into construction in progress)
Dr. 241 – Construction in progress (if capitalized
Dr. 627 – Factory overhead cost (if capitalized into work in process)
Cr. 111, 112,... (bond interests paid in the period)

- At the same time, bond premium is systematically allocated to decrease borrowing costs in the
period:

Dr. 3433 – Bond premium (premium allocated in the period)


Cr. 635, 241, 627

3. Where bond interest shall be paid later (when bonds fall due), periodically the entity should
accrue the expenses:

- Calculate bond interest and post to relevant accounts:

Dr. 635, 241, 627


Cr. 335 – Accruals (bond interest to be paid in the period)

Translation by KTC Assurance & Business Advisors 291


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- At the same time, allocate the premium to decrease the borrowing cost in the period:

Dr. 3433 – Bond premium


Cr. 635, 241, 627

- Where bonds fall due, the enterprise should pay principal and interest to bond holders:

Dr. 335 – Accruals (bond interest)


Dr. 3431 – Bond par value (principal)
Cr. 111, 112,...

4. Where bond interests are paid at bond issuing date, the bond interest should be debited to
account 242 (bond interest paid in advance) and will be systematically allocated to costing
objects:

- When issuing bonds:

Dr. 111, 112,... (actual receipt)


Dr. 242 – Long term prepayment (details of bond interest paid in advance)
Cr. 3433 – Bond premium
Cr. 3431 – Bond par value

- Periodically, allocate the prepayment to relevant accounts:

Dr. 635 – Financial expenses (if charged to financial expense in the period)
Dr. 241 – Construction in progress (if capitalized into construction in progress)
capitalized
Dr. 627 – Factory overhead cost (if capitalized in work in process)
Cr. 242 – Long term prepaid expenses (details of bond interest paid in advance) (bon
interest allocated in period)

At the same time, allocate the bond premium to decrease the borrowing costs in each period :

Dr. 3433 – Bond premium (premium allocated in period)


Cr. 635, 241, 627

Translation by KTC Assurance & Business Advisors 292


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ACCOUNT 344

LONG TERM DEPOSITS RECEIVED

This account records deposits that the company receives from other entities or outside persons
(more than one year term), to ensure business services will be carried out properly with respect to
contracts signed. In case, the enterprise should not record to this account for receipt of deposits in
kind. They should be kept track in off balance sheet accounts (Account 003 - Goods received on
consignment for sale).

Long-term deposits received must be recorded in detail for each customer.

STRUCTURE AND CONTENTS OF ACCOUNT 344 – LONG TERM DEPOSITS


RECEIVED

Debit:

Long term deposits repaid.

Credit:

Long term deposits received

Credit balance:

Long term deposits repayable.

MAJOR TRANSACTIONS

1. Receipt of deposits from another entity or person outside of the company.


entity

Dr. 111, 112


Cr. 344 - Long term deposits received (details by each customer)

2. Repayment of deposits to customers.

Dr. 344 - Long term deposits received


Cr. 111, 112

3. In case, the entity deposited violates the signed contract and is fined according to the contract:

a. Receipt of penalty due to violation of the signed contract:

- If deduction into deposits amount:

Dr. 344 – Long term deposits received


Cr. 711 – Other income.

b. Repayment of the remaining deposits:

Dr. 344 – Long term deposits received (deducted amount)


Cr. 111, 112.

Translation by KTC Assurance & Business Advisors 293


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4. Received and returned deposits in asset (Refer to instruction of account 003 – “Goods received
on consignment for sale).

Translation by KTC Assurance & Business Advisors 294


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ACCOUNT 347

DEFERRED TAX LIABILITIES

This account reflects the balance and movement of deferred tax liabilities. Deferred tax liabilities
are determined based on the taxable temporary differences and the current rate of enterprise
income tax by the following formula:

Deferred tax liabilities = Taxable temporary x EIT rate (%)


differences

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. A deferred tax liability should be recognised forr all taxable temporary differences, unless the
deferred tax liability arises from the initial recogn
recognition of an asset or liability in a transaction
which at the time of the transaction affects ne ither accounting profit nor taxable profit (tax
neither
loss).

2. At the end of the fiscal year, the accountant must


must determine the taxable temporary differences
tax base to calculate the deferred tax liabilities
incurred during the year. These differences are tax
recorded for the current year.

3. Recognition of deferred tax liabilities must be performed according to regulation as below.


Content of the regulation is balance between deferred tax liabilities in this period and
deferred tax liabilities in the years before but it are recorded decrease in this period (be
returned). This regulation including contents as below:

- If the deferred tax liabilities in this period exceed the amount returned in this period, the
deferred tax liabilities that is the difference of
accountant would record additional amount of deferred
the recoverable amount in the period.
the deferred tax liabilities incurred and the

- If the deferred tax liabilities in this period is lower than the deferred tax liabilities which is
record decrease deferred tax liabilities which is the
returned in this period, accountant will to record
incurred is lower than deferred tax liabilities is
different from the deferred tax liabilities incurred
returned in this period.

4. Deferred tax liabilities incurred during the year not relating to items which are recorded
rded as deferred income tax expense.
directly to owner equity shall be recorded

5. When the taxable temporary differences do not affect taxable profit (when assets are returned
or obligations are paid), the accountant must decrease the deferred tax liabilities.

6. Major transactions that deferred tax liabilities incurred:

Deferred tax liabilities incurred from the taxable temporary differences. For example, the
useful lifetime of fixed assets determined by the enterprise is longer than the lifetime
regulated by the tax office. Therefore, the depreciation of fixed asset in accounting book is
lower than the depreciation that is allowed to deduct into taxable income.

Translation by KTC Assurance & Business Advisors 295


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STRUCTURE AND CONTENTS OF ACCOUNT 347 – DEFERRED TAX LIABILITIES

Debit:

Decrease (reverse) of deferred tax liabilities in the period.

Credit:

Deferred tax liabilities recorded in the period.

Credit balance:

Deferred tax liabilities balance at the end of the period.

MAJOR TRANSACTIONS

At the end of the fiscal year, based on the “List


“List of deferred tax liabilities”, the accountant records
deferred tax liabilities occurred during the year into deferred income tax expenses:

1. If the deferred tax liabilities incurred during year are greater than the reversed amount in the
year, the accountant records the addition which is the difference of deferred tax liabilities
incurred and the amounts reversed in the year:

Dr. 8212 – Deferred income tax expenses


Cr. 347 – Deferred income tax liabilities

2. If the deferred tax liabilities incurred during the ye ar are less than the reversed amount in the
year
year, the accountant decreased (reverse)
(reverse) the difference of the deferred tax liabilities incurred
during year and the reversed amount in the year:

Dr. 347 – Deferred income tax liabilities


Cr. 8212 – Deferred income tax expenses

Translation by KTC Assurance & Business Advisors 296


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ACCOUNT 351

PROVISION FOR SEVERANCE ALLOWANCE

This account reflects making and using provision for severance allowance of the enterprise.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING THE REGULATIONS

1. The provision for severance allowance is used for payment severance allowance, vocational
training for the employees in compliance with the current regulations.

2. The provision for severance allowance is provided and recorded to general and administration
expenses in the period. At the year end, the unused amount of provision for severance
allowance would be carried forward to the next year. If the provision for severance allowance
is not sufficient to cover the actual payment
payment to the resigned and unemployed staff, the
difference should be recorded to general and administration expenses in the fiscal year.

3. The provision for severance allowance is made at the time of closing books for preparing
yearly financial statements. In the case, the entity has to prepare the interim financial
statements (quarterly), the provision for severance allowance should be made at the end of the
quarter.

STRUCTURE AND CONTENTS OF ACCO UNT 351 - PROVISIO


ACCOUNT PROVISION FOR SEVERANCE
ALLOWANCE

Debit:

Payment made to the employees who are resigned or lost job from the provision for severance
allowance.

Credit:

Making the provision for severance allowance.

Credit balance:

The provision for severance allowance has not been used yet.

MAJOR TRANSACTIONS

1. Making the provision for severance allowance following the current regulations:

Dr. 642 – General and administration expenses


Cr. 351 – Provision for severance allowance

2. Payment for severance allowance, vocational training for the employees following the current
regulations:

Dr. 351 – Provision for severance allowance


Cr. 111, 112,...

Translation by KTC Assurance & Business Advisors 297


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3. If the provision for severance allowance is not sufficient to cover the actual payment to the
resigned and redundant employees, the difference should be recorded to general and
administration expenses in the fiscal year:

Dr. 642 – General and administration expenses


Cr. 111, 112,...

4. At the end of the accounting period, the enterprise determines the amount of provision for
severance allowance that should be made. If the provision for severance allowance in the
current year is greater than the unused amount in the accounting book, the difference should
be recorded as follows:

Dr. 642 – General and administration expenses


Cr. 351 – Provision for severance allowance

Translation by KTC Assurance & Business Advisors 298


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ACCOUNT 352

PROVISIONS

This account is used to reflect the current provision, making and using the provisions of
enterprise.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. A provision shall be recognised when:

- An enterprise has a present obligation (legal or constructive) as a result of a past event;


- It is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation; and
- A reliable estimate can be made of the amount of the obligation.

2. The amount recognised as a provision shall be th thee best estimate of the expenditure required to
settle the present obligation at thee balance sheet date or at the end of interim period.

3. The provision is made once at the end of the year.


year. If the entity has to prepare interim financial
statements, the provision shall be made at the end of interim period. In case, the provision
required in current period is greater than unused amount of provision made in prior period, the
difference shall be recorded to general and admi nistration expenses in current period. In case, the
administration
provision required in current period is less than unused amount of provision made in prior period,
general administration expenses in current period.
the difference shall be recorded to decrease the general

must be made for each construction work at the


Provision for warranty of construction contract must
balance sheet date or at the end of the interim period. If the provision for warranty of construction
incurred, the difference shall be recorded to account
contract made is greater than actual expenses incurred,
711 – “Other income”.

4. A provision shall be used only for expenditures for which the provision was originally
recognised.

5. Provisions shall not be recognized for future operating loss unless the liabilities are related to
onerous contract and meet the criteria of general recognition for provision.

onerous the present obligation under the contract shall be


6. If an enterprise has a contract that is onerous,
recognised and measured as a provision. The provision must be made for individual onerous
contract.

7. A provision for restructuring costs is recognised only when the general recognition criteria for
provisions set out in paragraph 11 in VAS 18 “Provision, contingent asset, contingent liabilities”
are met.

8. A constructive obligation to restructure arises only when an enterprise:

a. Has a detailed formal plan for the restructuring identifying at least following five criteria:
- The business or part of a business concerned;
- The principal locations affected;
- The location, function, and approximate number of employees who will be compensated for
terminating their services;
- The expenditures that will be undertaken; and

Translation by KTC Assurance & Business Advisors 299


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- When the plan will be implemented; and

b. Has raised a valid expectation in those affected that it carries out the restructuring by starting to
implement that plan or announcing its main features to those affected by it.

9. A restructuring provision shall include only the direct expenditures arising from the
restructuring, which are those that are both:
- necessarily entailed by the restructuring; and
- not associated with the ongoing activities of the enterprise.

10. A restructuring provision does not include such costs as:


- Retraining or relocating continuing staff;
- Marketing; or
- Investment in new systems and distribution networks.

11. Provisions usually include the followings:

- Provision for restructuring;

- Provision for goods warranty;

- Provision for onerous contract in which the unavoidable costs of meeting the obligations
under the contract exceed the economic benefits expected to be received under it;

- Other provisions.

record it to general and administration expenses.


12. When provision is made, enterprise could record
recorded to selling expenses while provision for
However, provision for goods warranty is recorded
warranty of construction work is recorded to factory overhead cost.

STRUCTURE AND CONTENTS OF ACCOUNT 352 – PROVISIONS

Debit:

- Decrease provisions when arising expenses that are relating to provisions were made;

- Decrease (reverse) provisions if it is no longer probable that an outflow of resources


re
embodying economic benefits will be required to settle the obligation;

- The difference of the provisions required in the current year and the unused amount of
provision made in the prior year.

Credit:

Reflect provision made that posted to expenses.

Credit balance:

Reflect existing provisions at the end of the period.

MAJOR TRANSACTIONS

1. Provision for restructuring

Translation by KTC Assurance & Business Advisors 300


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Dr. 642 – General and administration expenses (6426)


Cr. 352 – Provisions

2. An enterprise has a contract that is onerous in which the unavoidable costs of meeting the
obligations under the contract exceed the economic benefits expected to be received under it. The
unavoidable costs dedicated in the contract are such costs as compensation and reimbursement
due to failure in implementing the obligations. When it is probable that a provision has to be
made for the onerous contract, the accountant records the following:

Dr. 642 – General and administration expenses (6426)


Cr. 352 – Provisions.

nty card to customers in which guarantees that


3. When the enterprise sells goods and gives warranty
the obligations to repair the goods detected due to the manufacturer’s fault during the warranty
period, the enterprise must measure the amount of expenses for each repair level of the warranty
obligation. When provision for warranty is determined,
determined, the accountant records the following:

Dr. 641 – Selling expenses.


Cr. 352 – Provisions.

When provisions for warranty of construction work is determined:

Dr. 627 – Factory overhead cost


Cr. 352 – Provisions.

4. Other provisions required are recorded to general and administration expenses:

Dr. 642 – General and administration expenses (6426)


Cr. 352 – Provisions.

5. Expenses occurred relating to the provision was originally recognised:


provision

5.1. Expenses incurred in cash:

Dr. 352 – Provisions


Cr. 111, 112, 331,...

5.2. Expenses occurred relating to the provisions for warranty of goods, construction work was
originally recognised such as raw materials, direct labour, fixed asset depreciation, other services
rendered outside, etc.

a. There is no separate unit taking care of warranty of goods and construction work:

- When expenses arising relating to warranty of goods and construction work:

Dr. 621, 622, 627,...


Dr. 133 – VAT deductible (if any)
Cr. 111, 112, 152, 214, 331, 334, 338,...

- At the end of the period, the accountant transfers the actual expenses for warranty of goods and
construction work incurred during the period:

Translation by KTC Assurance & Business Advisors 301


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Dr. 154 – Work in progress


Cr. 621, 622, 627,...

- When the repairing for goods and construction work completes, the accountant records:

Dr. 352 – Provision


Dr. 641 – Selling expenses (the amount of provision for warranty of goods that have not
been provided sufficiently)
Cr. 154 – Work in progress.

b. There is a separate unit taking care of warranty of goods and construction work. The amount
payables to the warranty agency for repairing goods and construction work shall be recorded as
follows:

Dr. 352 – Provisions


difference of provision for warranty and actual
Dr. 641 – Selling expenses (amount of difference
expenses incurred for repairing goods)
Cr. 336 – Inter-company payables.

the interim accounting period (the “accounting period”),


6. At balance sheet date or at the end of the
need to be made at the end of accounting period.
the enterprise must determine the provisions that need

- If the provisions required to be made in the current period are greater than the unused amount of
difference shall be recorded into expenses:
provisions made in the prior period, the difference

Dr. 642 – General and administration expenses (6426)


provision for warranty of goods)
Dr. 641 – Selling expenses (for provision
Cr. 352 – Provisions.

- If the provisions required to be made in the current period are less than the unused amount of
difference shall be reversed into expenses:
provisions made in the prior period, the difference

Dr. 352 – Provisions


Cr. 642 – General and administrations expenses (6426)
Cr. 641 – Selling expenses (for provision for warranty of goods)

interim accounting period, the provision for warranty


- At balance sheet date or at the end for interim
construction work for each work:

Dr. 627 – General and administration expenses


Cr. 352 – Provisions.

7. The warranty period for construction work is passed. There is no requirement to implement the
warranty or the provision for warranty of construction work greater than actual expenses incurred,
the difference shall be reversed as follows:

Dr. 352 – Provisions


Cr. 711 – Other income.

8. Under certain circumstances, the enterprise can find the third party to pay partial or all
expenses for provisions (for example: insurer, warranty from the manufacturer). The third party
may reimburse all expenses that enterprise paid. When the enterprise receives partial or all
compensation from the third party for the provisions:

Translation by KTC Assurance & Business Advisors 302


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Dr. 111, 112,...


Cr. 711- Other income.

Translation by KTC Assurance & Business Advisors 303


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CATEGORY 4

OWNERS’ EQUITY

This account is used to reflect the current value, the increase and decrease of the equity of joint
venture, liabilities limited companies, liabilities partnership or share holders in joint stock
companies.

Owners’ equity is the amount that the company is not liable to pay. Owners’ equity is comprised
of the contribution of company’s owners and investors or the business results. Therefore, owners’
equity is not a liability.

A company may have more than one equity owners. In State-Owned enterprises, the equity is
provided by the State, so the State is the owner.r. In joint ventures, public limited companies,
associate companies, capital owners are contributors
contributors or organizations, individuals contributing. In
joint stock companies, capital owners are share holders. In private companies, capital owners are
individuals or families’ owners.

Owners’ equity consists of:

- Capital contributed by investors to establish or expand the business. The equity owners of
establish
the company may be the government, and individual or an organization that takes part in a joint
venture or share holder, share holders buying and holding securities;

- Capital surplus due to issuing securities with


with the price higher or lower than the face
value;

- Donation, gifts (if increase the owners’ equity);

- Equity supplemented from the business income


income according to prevailing financial policy
regulations or resolution of shareholders or board of management, etc;
shareholders

- The difference from revaluation of assets or exchange rates incurred in construction


period, and funds formed from profit after
after tax (investment and development fund,
financial reserve, other funds of owners’ equity, retained earning
earnings, capital expenditure,
etc);

- The value of treasury share reducing the owners’ equity.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The company could actively use its equity and funds according to current financial
regulations In principle that it shall ensure that owners’ equity and funds are properly
accounted for and recorded in detail for each source of equity and each owner.
Owners’ equity represents the source of net assets of the company, which do not refer to
a particular property, but is a consideration in general.

2. The transfer of capital from one source to another shall be carried in adherence to
prevailing financial regulations and through required procedures.

3. Where there are changes in accounting policy or significant errors that should be applied
retroactively, the errors should be adjusted to the opening balance of the owners’ equity
after the impact of the errors and change on the owners’ equity is identified.

Translation by KTC Assurance & Business Advisors 304


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4. In the case where a company is dissolved, the owners (or members who paid in capital)
only receive the residual amount after all the liabilities have been paid.

Category 4 - Owners’ equity, includes 12 accounts and is divided into 5 groups:

Group Account 41 consists of 7 accounts:

- Account 411 - Paid in capital;


- Account 412 - Asset revaluation reserve;
- Account 413 - Foreign exchange differences;
- Account 414 - Investment and development fund;
- Account 415 - Financial reserve fund;
- Account 418 - Other funds;
- Account 419 - Treasury share

Group Account 42 consists of 1 account:

- Account 421 - Undistributed earnings.

Group Account 43 consists of 1 account:

- Account 431 - Bonus and welfare funds.

Group Account 44 consists of 1 account:

- Account 441 - Funds for capital expenditures.

Group Account 46 consists of 2 accounts:

- Account 461 - Subsidy funds from State Budget;


- Account 466 - Sources for acquisition of fixed assets.

Translation by KTC Assurance & Business Advisors 305


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ACCOUNT 411

PAID-IN CAPITAL

This account is used to reflect the value at present as well as the increase and decrease of
enterprise’s paid in capital.

In a SOE, paid in capital consists of paid in capital issued from the State, from other internal
companies in the corporate, capital from the parent company to the subsidiaries, asset revaluation
reserves (if being allowed to increase or decrease the paid in capital), or supplement from funds,
from profit after tax of business activities or non-refundable grants from local and foreign
organizations, individuals.

In a joint venture, paid in capital is contributed by the joint venture parties and increased by the
result of business activities.

In a joint stock company, paid in capital is contributed by share holders in type of buying
securities, or supplemented from business profit according
according to resolution of the board of share
holders or regulations in the operation rules of the company, from capital surplus from selling
securities with the price higher than the face value.

In public limited companies and associate compani es, paid in capital is contributed by members,
companies,
supplement from the profit after tax of business activities.

In a private company, paid in capital consists of capitals contributed by the company’s owners or
supplemented from the profit after tax of business activities.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Record into Account 411 “Paid in capital” based on the actual capital contributed when
newly established or supplemented to expand the business.

2. Record in details the paid in capital according


according to the each source to raise capital, i.e for
each contributing organizations, individuals.

a) For State-Owned enterprises, paid in cap


capital can be recorded in details as follows:
- Owners’ equity: is the capital provided from the State (including capital from State
Budget, such as: asset revaluation reserve, etc.);
- Additional capital from business profit or donation, gifts, etc.

b) For joint ventures, public limited companies and associate companies, paid in capital is
recorded in details as follows:
- Owners’ equity: is the capital of contributing members;
- Other capitals: is the capital supplemented from profit after tax or donation, gifts.

c) For joint stock companies, paid in capital is recorded in details as follows:


- Owners’ equity: is the money or assets contributed by share holders according to the
face value of issued securities;
- Capital surplus: is the difference between the face value and issuing price of securities;
- Other capitals: is the additional capital from profit after tax or donation, gifts not yet
recorded for each share holder.

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3. For joint ventures, record in details the paid in capital for each parties of capital
contributors. Each time of capital contributions, capital amount, capital kinds needs
detailed record, such as: initial capital, additional capital from business results.

4. Only decrease the paid in capital when the entity makes a reimbursement of capital to the
State Budget, share holders or joint venture partners, or transfers the capital to another
internal companies in the corporate, or compensates for losses according to the resolution
of the board of share holders, or when the entity dissolves.

5. In the case where an entity receives contribution to joint ventures, joint stock companies
from share holders by foreign currencies, the value is converted into VND using the real
exchange rate or average exchange rate on the inter-bank foreign currencies market
published by the Vietnam State bank at the time of creating. In the operational period, it
is not allowed to revalue the credit balancece Account 411 “Paid in capital” in foreign
currencies.

6. In the case of contribution capital in-kind, the paid in capital is increased according to the
revalued amount of assets agreed by capital contributors.

7. For joint stock companies, share contribution


contribution by share holders are recognized at the
actual share price but recorded into two di fferent categories namely Owners’ equity
different
(share capital) and capital surplus (share pr emium). Share capital is recorded at share’s
premium).
face value. Capital surplus reflects the differe nce between the actual receipts and the face
difference
value of the initial or additional share issuance;
issuance; and the difference between the actual
amount received when reissuing treasury sh ares and value at the buy-back price.
shares
Particularly, when buying back and cancel shares at the day of purchase, the paid in
capital at the day of purchase should be reduced by the value of bought back shares at the
actual price detailed by the face value and the capital surplus of bought-back securities.

STRUCTURE AND CONTENTS OF ACCOUNT 411 – PAID-IN CAPITAL

Debit:

Paid in capital reduced due to:


- Returning capital to capital owners;
- Dissolving, liquidating the entity;
- Compensating for losses according to the reso
resolution of the board of share holders (for
joint stock companies);
- Buying back securities for cancellation (for joint stock companies).

Credit:

Paid in capital increased due to:


- Capital contribution by owners (initial and additional capital contribution);
- Increased capital from operating profit;
- Share issued at the price higher than the face value;
- Value of gifts, donation (after paying tax), resulting in increased paid-in capital

Credit balance:

The current paid-in capital of the enterprise

Account 411 – Paid- in capital, includes three sub-accounts:

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- Account 4111- Share capital: This account reflects the actual capital contributed by owners
according to the company’s regulations. For joint stock companies, capital from issuing stocks is
recorded into this account at the face value.

- Account 4112- Capital surplus: This account reflects the difference between value of stock at
higher actual issuing price and that at the face value; and the difference between value of treasury
shares at actual re-issued price and that at the buy-back price (for joint stock companies).

- Account 4118- Other capital: This account reflects the paid in capital created from operating
profits or gifts, donation and revaluation of assets (if these transactions are eligible for increasing
and/or decreasing the paid in capital).

MAJOR TRANSACTIONS

l, investment capital from owners:


1. When receiving the paid in capital,

Dr. 111, 112


Dr. 211 - Tangible fixed assets
Dr. 213 - Intangible fixed assets
Cr. 411- Paid in capital (4111).

share holders with the issuing price equal to the


2. When receiving money for share buying from share
face value:

Dr. 111, 112 (face value)


Cr. 411 - Paid in capital (Acc. 4111) (face value).

3. When receiving money for share buying from share


share holders with the issuing price higher than
the face value:

Dr. 111,112 (issuing price)


Cr. 411 - Paid in capital (Account 4111) (face value) and
Cr. 4112 (difference between the issuing price and the face value)

4. When receiving the money from reissuing the treasury share:

Dr. 111,112 (reissuing price)


Dr. 411 - Paid in capital (4112) (difference between the value of treasure shares at the
lower reissuing price and that at the book value)
Cr. 419 - Treasury share (at book value)
Cr. 411 - Paid in capital (4112) (difference between the value of treasure shares
at the higher reissuing price and that at the book value).

5. Supplement the paid in capital from the investment and development fund where allowed by
the board of management or the authorities:

Dr. 414 - Investment and development fund


Cr. 411 - Paid in capital.

6. Supplement the paid in capital from the asset revaluation reserve, when approved:

Dr. 412 - Asset revaluation reserve

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Cr. 411 - Paid in capital.

7. When the construction supported by the funds for capital expenditures is completed or the
fixed assets are purchased and put into use for production, business activities, and the investment
capital is approved, increase the historical cost of fixed assets, simultaneously increase the paid in
capital:

Dr. 441 - Funds for capital expenditures


Cr. 411 - Paid in capital.

8. When members of a corporation, subsidiaries of a parent company receive the capital from the
corporation, parent company to increase the paid in capital, the accountant of the sub-level entity
should record:

Dr. 111, 112


Cr. 411 - Paid in capital.

9. When receiving the donation, gifts:

Dr. 111,112
Dr. 211 – Tangible fixed assets
Dr. 152 - Raw materials
Cr. 711 - Other income.

After paying duties to the State, if the rest value is allowed to increase the paid in capital (4118):
Dr. 421 - Undistributed earnings
Cr. 411 - Paid in capital (4118).

10. Supplement the paid in capital due to paying the dividend to the share holders by shares:

Dr. 421 - Undistributed earnings


Dr. 411 - Paid in capital (4112) (difference between issuing price and the face value)
Cr. 411 - Paid in capital (Account 4111 – face value and Account 4112 -
difference between issuing price and the face value).

11. When receiving the paid in capital from joint venture parties:

Dr. 111,112, 211, 213


Cr. 411 - Paid in capital (4111).

12. When a joint stock company buy back and cancel its own shares to at the day of repurchase:

12.1. If the buy-back price is higher than the face value:


Dr. 411 - Paid in capital (Account 4111 (face value))
Dr. 411- Paid in capital (Account 4112 (difference between buy-back price and the face
value))
Cr. 111,112

12.2. If the buy-back price is lower than the face value:


Dr. 411- Paid in capital (4111) (face value)
Cr. 111,112
Cr. 411- Paid in capital (4112) (difference between the buy-back price and the face
value).

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13. When cancelling the treasury shares:


Dr. 411- Paid in capital (Account 4111 (face value))
Dr. 411- Paid in capital (Account 4112 (difference between the buy-back price and the
face value))
Cr. 419 - Treasury share (buy-back price).

14. When return capital to the contributors:


Dr. 411- Paid in capital (4111, 4112)
Cr. 111,112

15. When member companies, subsidiaries return the paid in capital to the corporation, parent
company in the method of reducing the capital, the accountant of the sub-level should record:
Dr. 411 - Paid in capital
Cr. 111, 112

16. When the paid in capital of a company is asked to transfer capital to another company as the
asked
decision of the authority (if any):

- If transferred capital is in the form of fixed assets:


Dr. 411 - Paid in capital
Dr. 214 - Accumulated depreciation and amortization
Cr. 211 – Tangible fixed assets
Cr. 213 - Intangible fixed assets.

- If transferred capital is in the form of cash:


Dr. 411 - Paid in capital
Cr. 111, 112

17. Accounting for purchasing and selling (assets/capital) associated with business combination
when purchaser issue shares is governed in the Circular guiding VAS 11 – “Business
combination”.

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ACCOUNT 412

ASSET REVALUATION RESERVE

This account is used to reflect the current asset revaluation reserve and its treatment in the
enterprise.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Re-valued assets are normally fixed assets, investment property. In some specific situations, it
is possible and necessary to revalue the raw materials, tools and supplies, finished goods, and
work in process, etc.

2. Asset revaluation reserve is recorded into this account in following situations:


- Revaluations are required by the State;
- State-owned-enterprises are equitized;
- Other situations are required law (such as conversion of the company’s ownership)

3. This account does not reflect the difference rresulted


esulted from asset revalu
revaluation for the purpose of
investment in joint ventures or subsidiaries. The difference resulted from asset revaluation under
these cases is recognized in Account 711 – Other income (if profitable) or Account 811 – Other
expenses (if loss).

4. The asset is revalued based on the price list regulated by the State or specified by the assets
regulated
valuation committee.

5. Asset revaluation reserve arising from revaluation of assets is recorded and treated in
compliance with the current financial regulations.

STRUCTURE AND CONTENTS OF AC COUNT 412 – ASSET REVALUATION


ACCOUNT
RESERVE

Debit:
- The decreased difference due to revaluation;
- The increased difference recorded due to revaluation
revaluation.

Credit:
- The increased difference due to revaluation;
- The decreased difference recorded due to revaluation of assets.

Account 412 – Asset revaluation reserve, may have the ending balance in the debit side or credit
side:

Debit ending balance:


Outstanding decreased difference due to revaluation of assets.

Credit ending balance:


Outstanding increased difference due to revaluation of assets.

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MAJOR TRANSACTIONS

1. When the State makes decision to revalue the fixed assets, investment property, raw materials,
merchandise goods, etc or the revaluation is required when privatizing the State-owned
enterprises, the companies conduct verification and revaluation of the assets and record the
difference arisen from asset revaluation into accounting books.

a. Revaluation of materials, merchandise goods:

- If the revalued cost is higher than the book value, the increased difference should be recorded as
follows:
Dr. 152 – Raw materials
Dr. 153 – Tools and supplies
Dr. 155 – Finished goods
Dr. 156 – Merchandise goods
Cr. 412 – Asset revaluation reserve.

- If the revalued cost is lower than the book value, the decreased value should
value, shoul be recorded as follows:
Dr. 412 – Asset revaluation reserve
Cr. 152 – Raw materials
Cr. 153 – Tools and supplies
Cr. 155 – Finished goods
Cr. 156 – Merchandise goods.

b. Revaluation of fixed assets and investment property.

- Based on the result of examination and revaluation of fixed assets, investment property:

+ The cost, net book value, accumulated depreciation are increased:

Dr. 211 - Tangible assets (the increased cost)


Dr. 213 - Intangible assets (land use right – the increased cost)
Dr. 217 - Investment property (the increased cost)
Cr. 214 - Accumulated depreciation and amortization (accumulated
depreciation/amortisation being increased)
Cr. 412 - Asset revaluation reserve (the rest value being increased).

+ The cost, net book value, accumulated depreciation are decreased:

Dr. 412 - Asset revaluation reserve (the net book value being decreased)
Dr. 214 - Accumulated depreciation and amortization (the accumulated depreciation
being decreased)
Cr. 211 - Tangible assets (the historical cost being decreased)
Cr. 213 - Intangible assets (land use right – The historical cost being decreased)
Cr. 217 - Investment property (the historical cost being decreased).

2. At the end of a fiscal year, asset revaluation reserve is treated in compliance with the decision
of the authority:

- If Account 412 has the credit ending balance and there is a decision of increasing paid in capital:

Dr. 412 – Asset revaluation reserve


Cr. 411 – Paid in capital

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- If Account 412 has the debit ending balance, there is a decision of reducing paid in capital:

Dr. 411 – Paid in capital


Cr. 412 – Asset revaluation reserve.

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ACCOUNT 413

FOREIGN EXCHANGE DIFFERENCES

This account is used to reflect the foreign exchange differences arisen in the process of
construction investment (pre-operating period); foreign exchange differences resulted from
revaluation of monetary items denominated in foreign currencies at the balance sheet date and the
treatment to those foreign exchange differences. Foreign exchange differences are the differences
arisen from the actual exchange or exchange of the same amount of foreign currency into the
accounting currency at different foreign exchange rate.

Foreign exchange differences are arisen mainly in following situations:

1. The actual purchase and sale activities, exchange,


exchange, and payment of business trasnsactions that
zed foreign exchange differences); actual foreign
are made in foreign currency in the period (realized
exchange differences arisen in the period (realized
(realized foreign exchange differences) in the company
includes:

- Realized foreign exchange differences arisen in the period of construction investment (pre-
operating period);

- Realized foreign exchange differences arisen in the operating period, including construction
investments activities during operating period of a business.

2. Revaluation of monetary items denominated in foreign currencies at the balance sheet date.
Foreign exchange differences arisen due to th thee revaluation of monetary items in foreign
currencies at the balance sheet date includes:

- Foreign exchange differences at the balance sheet date due to the revaluation of monetary items
in foreign currencies during the constructi on investment period (pre-operating period);
construction

- Foreign exchange differences at the balance sheet date due to the revaluation of monetary items
in foreign currencies involving in business operating activities.

For companies using the financial instruments to hedge foreign exchange risk, borrowings and
payables in foreign currencies are recorded at the actual foreign exchange rates (at the transaction
dates). It is not allowed to revalue the borrowings and payables in foreign currencies that have
been hedged for foreign exchange by financial instruments.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The principle for recording business activities conducted in foreign currencies and revaluing
monetary items in foreign currencies at the balance sheet date.

1.1. Enterprises must record business transactions in foreign currencies in the accounting books
and prepare the financial statement in VND or the approved accounting currency unit (after
approved by the Ministry of Finance). When converting the foreign currency into the VND or the
approved accounting currency unit, the company has to use the actual exchange rates ruling at the
transaction dates or the inter-bank exchange rates published by the State Bank of Vietnam.

Companies have to simultaneously record the original currencies in details for accounts of cash
on hand, cash at bank, cash in transit, accounts payable and receivables amount and Account 007
“Foreign currencies” (Off balance sheet account).

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1.2. For accounts of revenues, stocks, fixed assets, production costs, other costs, the debit side of
the accounts of cash and liabilities; the credit side of account liabilities: business transactions in
foreign currencies must be recorded in VND or in the approved accounting currency unit at the
exchange rate ruling at the transaction dates (the actual exchange rate or average inter-bank
exchange rates published by the State Bank of Vietnam at the date of transactions).

1.3. For the credit side of cash accounts, business transactions in foreign currencies should be
recorded in the accounting book in VND or in the approved accounting currency unit at the
accounting exchange rates (using one of among specific rate, weighted average rate, FIFO or
LIFO rate).

1.4. For the debit side of liabilities accounts or the credit side of accounts receivable, transactions
in foreign currencies should be recorded in VND or the approved accounting currency unit at the
accounting exchange rates.

1.5. At the end of the accounting period, the company has to revalue all the monetary items in
foreign currencies at the average inter-bank exchange rate published by the State Bank of
Vietnam at end of the accounting period.

1.6. If the company sell for and purchases foreign


foreign currencies by the VND, the actual exchange
rate at the date of the transactions should be used.

2. The treatment principles of foreign exchange differences.

2.1. Treatments of foreign exchange differences


differences arisen in the accounting period and the
differences resulted from revaluation at the end of the business period, including
incl the construction
investment activities (for business that has construction
construction investment activities during the operating
period) are as follows:

- All foreign exchange differences arisen in the period and foreign exchange differences resulted
from revaluation of monetary items denominated in foreign currencies at the balance sheet date
will be recorded immediately into the financial expenses or income in that period.

- Companies are not allowed to use foreign exchange


exchange differences resulted from revaluation of
monetary items in foreign currencies at the ba
balance sheet date to distribute profit or pay
dividends.

2.2. Treatments of foreign exchange differences arisen in the period and differences resulted from
revaluation at the end of the construction investment activities (pre-operating period) are as
follows:

- In the period of construction investments, the realised foreign exchange differences and the
foreign exchange differences resulted from revaluation at the balance sheet date of monetary
items denominated in foreign currencies will be accumulated on the Balance sheet (under item
“Foreign exchange differences”).

- When the construction investment is finished, the accumulated foreign exchange differences
arisen in the construction investment period (foreign exchange gains or losses) are not capitalized
into the value of the fixed assets but (1) (if the differences are insignificant) are low) are
debited/credited all to the financial expenses/incomes of the fiscal year when the fixed assets and
investment properties are completed and put into use or (2) are allocated (to the profit and loss

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accounts) over not more than five years (if the differences are significant at the time the
constructed assets put into use).

2.3. Foreign exchange differences resulted from conversion of the financial statements of
integrated foreign business entities are recognised immediately in financial expenses/income in
the period.

3. Enterprises are only allowed to record foreign exchange differences into Account 413 “Foreign
exchange differences” in the following cases:

- Realized foreign exchange differences and foreign exchange differences resulted from
revaluation of monetary items in foreign currencies at the balance sheet date of construction
investment activities during pre-operating period of newly established enterprises (when the
investment has not yet been completed);

- The foreign exchange differences resulted from revaluation of monetary items denominated in
foreign currencies at the balance sheet date during operating period, including construction
investment activities (business entities that have the construction inv
investment during operating
period).

4. At the balance sheet date, the accountant revalue


revalue monetary items including ending balance of
accounts “Cash on hand”, “Cash in bank”, “Cash in transit”, cash equivalents, payables,
receivables denominated in foreign currencies at the average exchange rate on the inter-bank
foreign currencies market as published by the State
State Bank of Vietnam at the balance sheet date.
The foreign exchange differences from revaluation
revaluation of the ending balance of monetary items in
foreign currencies at the balance sheet date during
during operating period are recorded into Account
413 “Foreign exchange differences”.

5. For companies not specializing in selling and purchasing foreign currencies, transactions of
purchases and sales of foreign currencies should be converted into VND at the actual selling or
buying exchange rates. The exchange rate differences
differences between the actual buying and selling rates
of should be recorded into Account 515 “Financial incomes” or Account 635 “Financial
expenses”.

STRUCTURE AND CONTENTS OF ACCOUNT 413 – FOREIGN EXCHANGE


DIFFERENCES

Debit:
- Foreign exchange differences resulted from revaluation of monetary items in foreign currencies
(exchange rate losses) at the balance sheet date of business activities, including construction
investment (business entities with the construction investment activities during operating period);

- Foreign exchange differences arisen and revaluation of monetary items in foreign currencies
(exchange rate loss) of construction investment (pre-operating period);

- Transfer the foreign exchange differences resulted from revaluation of monetary items in
foreign currencies at the balance sheet date (exchange rate gains) of business activities into
financial income;

- Transfer all the foreign exchange differences arisen and revaluation of monetary items in
foreign currencies (exchange rate gains) of business activities in construction investment (when
finishing the construction investment period) into financial incomes or deferred income (if
allocated).

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Credit:

- Foreign exchange differences resulted from revaluation of monetary items in foreign currencies
(exchange rate gains) at the balance sheet date of the business activities, including the
construction investment activities (business entities with construction investment activities
during operating period);

- Foreign exchange differences arisen or resulted from revaluation of monetary items in foreign
currencies (exchange rate gains) of construction investment (pre-operating period);

- Transfer the foreign exchange differences resulted from revaluation of monetary items in
foreign currencies (exchange rate loss) at the balance sheet date of the business activities into
financial expenses;

- Transfer all the foreign exchange differences arisen or resulted from revaluation of monetary
nge rate loss) of the construction
items in foreign currencies (exchange construc investment (when finishing
the construction investment period) into financia
financiall expenses or into long-term prepaid expenses (if
allocated).

Account 413 “Foreign exchange differences” may have the credit ending balance or debit ending
balance.

Debit balance:

The foreign exchange differences arisen or resulted


resulted from revaluation of monetary items in foreign
currencies (exchange rate losses) of the constr uction investment (pre-operating period, the
construction
investment not yet completed) at the balance sheet date.

Credit balance:

The foreign exchange differences arisen and revalu ation of monetary items in foreign currencies
revaluation
onstruction investment (pre-operating period, the investment not yet
(exchange rate gains) of the construction
completed) at the balance sheet date.

Account 413 - Foreign exchange differences has 2 sub-accounts:

- Account 4131 - Foreign exchange differences res resulted from revaluation at the balance sheet
date: Reflect the foreign exchange differences resulted from revaluation of monetary items in
foreign currencies (exchange rate gains and losses) at the balance sheet date of business activities;
including the construction investment (business entities with construction investment activities
during operating period).

- Account 4132 - Foreign exchange differences in the construction investment period: Reflect the
foreign exchange differences arisen and exchange rate differences resulted from revaluation at the
balance sheet date of monetary items in foreign currencies (exchange rate gains and losses) of the
construction investment (pre-operating period).

MAJOR TRANSACTIONS

I. Accounting for foreign exchange differences arisen in the period of business activities,
including the construction investment of the production and trading entities

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1. When purchase materials, merchandise goods, fixed assets, services and pay by foreign
currencies:

- If exchange rate loss created in the transaction of purchasing materials, merchandise goods,
fixed assets, services:
Dr. 151, 152, 153, 156, 157, 158, 211, 213, 217, 241, 623, 627, 641, 642, 133 (according
to the exchange rate at the transaction day)
Dr. 635 - Financial expenses (exchange rate loss)
Cr. 111 (1112), 112 (1122) (according to the accounting book value).

- If exchange rate gains created in the transaction of purchasing materials, merchandise goods,
fixed assets, services:
Dr. 151, 152, 153, 156, 157, 158, 211, 213, 217, 241, 623, 627, 641, 642, 133 (according
the exchange rate at the transaction day)
Cr. 111 (1112), 112 (1122) (according
(according to the accounting book value)
Cr. 515 – Financial income (exchange rate gains).

2. When receive materials, merchandise goods, fixed assets, and services from the supplier but
not yet paid, or when make the short term bo rrowings, long-term borrowings, long-term liabilities
borrowings,
or internal liabilities, etc by foreign currencies, based
based on the exchange rate at the transaction day:

Dr. 111, 112, 152, 153, 156, 211, 627, 641, 642 (according the exchange rate at the
transaction day)
Cr. 331, 311, 341, 342, 336 (according to the exchange rate at the transaction
day).

3. When pay the payables by foreign currencies (payable(payable to the seller, short-term loan, long-term
loan, long-term liabilities, internal liabilities, etc):

transaction of paying payable by foreign currencies:


- If exchange rate loss created in the transaction
Dr. 311, 315, 331, 336, 341, 342 (accounting book rate)
Dr. 635 - Financial expens
expenseses (exchange rate loss)
Cr. 111 (1112), 112 (1122) (accounting book rate).

- If exchange rate gains created in transaction of paying payable by foreign currencies:


transaction
Dr. 311, 315, 331, 336, 341, 342 (accounting book rate)
Cr. 515 - Financial income (exchange rate gains)
Cr. 111 (1112), 112 (1122) (accounting book rate).

4. When it is created income or other income in foreign currencies, based on the exchange rate at
the transaction day:
Dr. 111(1112), 112(1122), 131 (the exchange rate at the transaction day)
Cr. 511, 711 (the exchange rate at the transaction day).

5. When it is created receivables in foreign currencies:


Dr. 136, 138 (the exchange rate at the transaction day)
Dr. 635 - Financial expenses (exchange rate loss)
Cr. 111 (1112), 112 (1122) (accounting book rate)
Cr. 515 - Financial income (exchange rate gains).

6. When receive the receivables in foreign currencies (receivable from customers, internal
receivables, etc):

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- If it is created exchange rate loss in transaction of paying payables by foreign currencies:


Dr. 111 (1112), 112 (1122) (the exchange rate at the transaction day)
Dr. 635 - Financial expenses (exchange rate loss)
Cr. 131, 136, 138 (accounting book rate).

- If it is created profit from foreign exchange differences when paying the receivables by foreign
currencies:
Dr. 111 (1112), 112 (1122) (the exchange rate at the transaction day)
Cr. 515 - Financial income (exchange rate gains)
Cr. 131, 136, 138 (accounting book rate).

II. Accounting for foreign exchange differences arisen in the period of construction
investment (pre-operating period)

ndise goods, fixed assets, services, construction and


1. When receive purchased materials, merchandise
instalment from sellers or contractors:

- If it is created exchange rate loss in transacti on of paying by foreign currencies, the accounting
transaction
entry should be recorded as follows:
Dr. 151, 152, 211, 213, 241... (the exchange rate at the transaction day)
Dr. 413 - Foreign exchange differences (4132) (exchange rate loss)
Cr. 111 (1112), 112 (1122) (accounting book rate).

- If exchange rate gains are arisen in transaction of paying by foreign currencies, the entry should
be recorded:
Dr. 151, 152, 211, 213, 241... (the exchange rate at the transaction day)
Cr. 111 (1112), 112 (1122) (accounting book noted rate)
Cr. 413 - Foreign exchange differences (4132) (exchange rate gains).

2. When paying payables by foreign currencies (payables to sellers, long-term loan, short-term
loan, internal loan (if any)...):

- If it is created exchange rate loss in transac tion of paying payables by foreign currencies, the
transaction
accounting entry should be recorded as follows:
Dr. 311, 315, 331, 336, 341, 342... (accounting book rate)
Dr. 413 - Foreign exchange differences (4132) (exchange rate loss)
Cr. 111 (1112), 112 (1122) (accounting book rate).

- If exchange rate gains are arisen in transaction of paying payables by foreign currencies, the
accounting entry should be recorded as follows:
Dr. 311, 315, 331, 336, 341, 342... (accounting book rate)
Cr. 111 (1112), 112 (1122) (Accounting book rate)
Cr. 413 - Foreign exchange differences (4132) (exchange rate gains).

3. Annually, exchange rate differences done created in the construction investment (pre-operating
period) will be recorded accumulated into Account 413 “Foreign exchange differences” (4132)
until completing the construction investment.

4. When complete the construction investment (period before operation), transfer the realised
foreign exchange differences (the net value after balance the created value on the debit and the
credit side of Account 4132) of the construction investment (pre-operating period) into Account
413 “Foreign exchange differences” (Account 4132) immediately into financial expenses (if the
value is low), or transfer (if the value is high) to Account 242 “Long-term prepaid” (if exchange

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rate loss), or transfer immediately (if the value is low) into financial income, or transfer (if the
value is high) to Account 3387 “Deferred income” (if exchange rate gains) to allocate in the
period of not over 5 years:

- In case of the exchange rate gains, the entry as follows:

Dr. 413 - Foreign exchange differences (4132)


Cr. 3387 - Deferred income (exchange rate gains) (if allocated); or
Cr. 515 - Financial income (if record immediately into financial income)

- In case of exchange rate losses, the accounting entry should be recorded as follows:
Dr. 635 - Financial expenses (if charged into financial expenses)
Dr. 242 - Long-term prepaid (if allocated)
Cr. 413 - Foreign exchange differences (4132).

5. The treatment to realised foreign exchange differences (exchange rate gains or loss) in the
differences
period of construction investment accumulated to the time of put the fixed assets into use for
business and production activities:

- If the exchange rate losses are allocated, periodically


periodically allocate the differences of realised
exchange rate losses arisen in the period of construction
construction investment into financial expenses of the
fiscal year when completing the construction inv estment period and put the fixed assets into use,
investment
the accounting entry should be recorded as follows:

Dr. 635 - Financial expenses (exchange rate losses)


Cr. 242 - Long-term prepaid.

- If the exchange rate gains are allocated, periodically allocate the difference of realised exchange
periodically
rate losses arisen in the period of construction iinvestment
nvestment into financial expenses of the fiscal
year when completing the construction investment period and put the fixed assets into use, the
following entry should be recorded:
Dr. 3387 - Deferred income
Cr. 515 - Financial income (exchange rate gains).

III. Accounting for foreign exchange differences rresulted from revaluation at the end of the
fiscal year of monetary items in foreign currencies

1. Accounting for foreign exchange differences resulted from revaluation of monetary items in
foreign currencies at the balance sheet date:

At the balance sheet date, companies have to revalue monetary items in foreign currencies
(the currency units are different from the approved accounting currency unit) using the
average exchange rate on the inter-bank foreign currencies market published by the State
Bank of Vietnam at the end of the fiscal year, which might result in foreign exchange
differences (gains or loss). Companies have to record details of foreign exchange differences
resulted from revaluation of monetary items in foreign currencies of the construction
investment activities (pre-operating period - Account 4132 and during operating period -
Account 4131):

- If exchange rate gains are arisen, the accounting entry should be recorded as follows:
Dr. 111 (1112), 112 (1122), 131, 136, 138, 311, 315, 331, 341, 342
Cr. 413 - Foreign exchange differences (4131, 4132).

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- If created exchange rate loss is created, the accounting entry should be recorded as follows:
Dr. 413 - Foreign exchange differences (4131, 4132)
Cr. 111 (1112), 112 (1122), 131, 136, 311, 315, 331, 341, 342

2. Accounting for treatment on foreign exchange differences resulted from revaluation of


monetary items in foreign currencies at the balance sheet date:

2.1. Treatment on foreign exchange differences resulted from revaluation of monetary items
in foreign currencies of business operation at the balance sheet date (including the
construction investment of production and business entities with construction investment
activities during operating period):

- Transfer all the foreign exchange differences resulted from revaluation at the balance sheet
date (net of the debit side and credit side of Account 4131) into financial expenses (if
exchange rate losses), or financial income (if exchange rate gains) to determine the business
result:

+ Transfer the exchange rate gains from revaluation


revaluation at the balance sheet date into
financial income, the accountant should record:
Dr. 413 - Foreign exchange differences (4131)
Cr. 515 - Financial income (if exchange rate gains).

+ Transfer exchange rate loss from revaluation at the end of the fiscal year into financial
expenses, the accounting entry should be recorded as follows:
Dr. 635 - Financial expenses (if exchange rate loss)
Cr. 413 - Foreign exchange differences (4131).

2.2. Treatment on foreign exchange differences resulted from revaluation at the balance sheet
date of monetary items in foreign currencies of the construction investment (pre-operating
period):

- In the period of construction investment aand


nd the company has not yet come into commercial
operation (pre-operating period),, the foreign exchange differenc
pre-operating period) differences resulted from revaluation
at the balance sheet date will be accumu lated into Account 413 “Foreign exchange
accumulated
differences” (Account 4132). The debit balance, or credit balance will be reflected on the
balance sheet.

- When finishing the construction investment period and the fixed assets put into use for
production and business activities, the debit balance or credit balance Account 413 “Foreign
exchange differences” (Account 4132) which reflects the foreign exchange differences
resulted from revaluation of monetary items in foreign currencies at the balance sheet date
(not including the revaluation of monetary items in foreign currencies involved in the
construction investments at the time of putting the constructed assets into use) will be treated
as follows:

+ Transfer the debit balance Account 413 “Foreign exchange differences” (4132)
to Account 635 – “Financial expenses” or to Account 242 “Long-term prepaid”
(if significant) to systematically allocate the exchange rate losses of the
construction investment period over the period of not more than five years (from
the completion of the investment period) into financial expenses. The accounting
entry:

Dr. 635 - Financial expenses (if record into expenses immediately)

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Dr. 242 - Long-term prepaid (if allocated)


Cr. 413 - Foreign exchange differences (4132).

+ Transfer the credit balance Account 413 “Foreign exchange differences”


(4132) to Account 515 “Financial income” or to Account 3387 “Deferred
income” (if significant) to systematically allocate the exchange rate gains of the
construction investment period over the period of not more than five years (from
the completion of the investment period) into financial income. Accounting
entry:

Dr. 413 - Foreign exchange differences (4132)


Cr. 3387 - Deferred income (if allocated)
Cr. 515 - Financial income (if record into financial income immediately).

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ACCOUNT 414

INVESTMENT AND DEVELOPMENT FUND

This account is used to record the current value, the increases and decreases of the enterprise’s
investment and development fund.

The investment and development fund is created from the business profit after tax and used to
expand the business activities of the enterprise both in scale and depth.

The creation and use of this fund must comply with the current financial policy applied to each
kind of business: Limited Liabilities Company, private company, etc

MAJOR TRANSACTIONS

1. In the period, when increase the investment and development fund from undistributed earning:

Dr. 421 - Undistributed earnings


Cr. 414 - Investment and development fund

2. At the end of the period, determine the valu


valuee of investment and development fund that has
been created and account for the increasing value:

Dr. 421 - Undistributed earnings


Cr. 414 - Investment and development fund

3. When fixed assets purchased or construction created from the investment and development
fund complete and come into use for production and trading activities:

Dr. 211 - Tangible fixed assets


Cr. 241 – Construction in progress
Cr. 111, 112 (in case of purchase of fixed assets).

Simultaneously, increase the paid in capital, ddecrease


ecrease the investment and development fund:

Dr. 414 - Investment and development fund


Cr. 411 – Paid in capital

4. The investment and development fund is increased by the holding company:

Dr. 111, 112


Cr. 414 - Investment and development fund

5. Transfer from the investment and development fund to the holding company or other entities:
Dr. 414 - Investment and development fund
Cr. 111, 112

Translation by KTC Assurance & Business Advisors 323


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 415

FINANCIAL RESERVE FUND

This account is used to record the current value, the creation and use of financial reserve fund of
an enterprise. The financial reserve fund is increased from business profit after tax. The increase,
decrease of the financial reserve fund must obey current financial policy.

STRUCTURE AND CONTENT OF ACCOUNT 415 - FINANCIAL RESERVE FUND

Debit:

- The financial reserve fund to the holding company


- Other decreases of financial reserve fund

Credit:

Increases of financial reserve fund due from undistributed earnings or given from lower entities.
undistributed

MAJOR TRANSACTIONS

1. Increase of the financial reserve fund from undistributed earnings:

Dr. 421 - Undistributed earnings


Cr. 415 – Financial reserve fund

2. Increase of the financial reserve fund given from lower entities:

Dr. 111, 112, 136


Cr. 415 - Financial reserve fund

3. Decrease of financial reserve fund due to hand to the holding company:

Dr. 415 - Financial reserve fund


Cr. 111, 112, 336

Translation by KTC Assurance & Business Advisors 324


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 418

OTHER FUNDS

This account is used to record the current value, the increase and decrease of other funds
belonging to the owners, such as fund to promote the management, etc.

Other funds is created from business profit after tax and used for promotion purposes or other
purposes of the board of director, board of management.

The transfer and use of other funds must be in compliance with the current financial policy
applied to each type of business: Stated Owned Enterprises, joint stock company, Limited
Liabilities Company, private company, etc.

STRUCTURE AND CONTENTS OF ACCOUNT 418 – OTHER FUNDS

Debit

The use of other funds of the enterprise.

Credit

Increase of other funds created from business profit after tax.

Credit balance

Current value of other funds.

MAJOR TRANSACTIONS

1. Increase of other funds from business profit after tax:

Dr. 421 – Undistributed earnings


Cr. 418 – Other funds

2. Other funds are given by the holding company:

Dr. 111, 112, 136


Cr. 418 – Other funds

3. Other funds are given by the lower entities:

Dr. 418 – Other funds


Cr. 111, 112, 336

4. Use other funds to promote the board of management, board of director:

Dr. 418 – Other funds


Cr. 111, 112

Translation by KTC Assurance & Business Advisors 325


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 419

TREASURY SHARE

This account is used to reflect the balance and movement of the shares that were issued to the
public, yet bought back by the company in order to reissue those shares later on (called treasury
share).

The treasury shares are shares that were issued by a company and then bought back by that
company. However those shares shall not be destroyed but be reissued to the public at a specific
period of time according to laws and regulations on securities. Treasury shares held by the company
shall not get dividends and have the vote right or the right of receiving assets sharing when the
company in dissolution. When distributing dividends to shareholders, treasury shares being kept by
the company are considered as securities not yet sold.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The value of treasury share is recorded into this account according to the actual buy-back price,
including the buy-back price and expenses directly related to the buy back of securities, such as
services and information expenses, etc.

preparing the financial statement, the actual value of


2. At the end of the accounting period, when preparing
treasury share is reduced from the owner equity and presented as negative figure on the balance
sheet.

3. This account does not reflect the value of shares that the company buys from other joint stock
companies for investment purposes.

4. When the company buys back thethe shares issued by that company in order to destroy them right
away at the time of purchase, the value of those shares shall not be recorded into this account but
directly reduced account of paid-in capital and capital surplus (refer to guidance of account 411-
contributed capital).

reissued, or when being used to pay dividends,


5. The cost of the treasury share when being reissued,
bonus, etc. shall be calculated by weight average cost method.

STRUCTURE AND CONTENT OF ACCOUNT 419 - TREASURY SHARE

Debit:

Actual value of treasury share when buying.

Credit:

Actual value of treasury share being reissued, shared dividend or damaged.

Debit balance:

Actual value of treasury share which is currently hold by the company.

Translation by KTC Assurance & Business Advisors 326


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

MAJOR TRANSACTIONS

1. Accounting for buying back shares which were issued by the company:

- When a company completes procedures for buying back the shares issued by that company as
stipulated by laws and regulations, the company shall pay shareholders at the agreed price, the
accounting entry should be recorded as follows:

Dr. 419- Treasury share (bought-back price)


Cr. 111, 112

- Expenses directly related to the buying back of securities shall be recorded as follows:

Dr. 419- Treasury share


Cr. 111, 112

2- Reissuing the treasury shares:

- When reissuing treasury shares with the pri ce that is higher than the bought-back one, the
price
accounting entry should be recorded as follows:

Dr. 111,112 (total payment)


Cr. 419 - Treasury share (bought-back price)
Cr. 411 – Paid-in capital (4112) (difference between reissuing price and the
bought-back one)

- When reissuing treasury shares to the public w ith the price that is lower than the bought-back
with
one, the accounting entry should be recorded as follows:

Dr. 111,112 (total payment price of reissuing securities)


Dr. 411- Paid-in capital (4112) (difference between reissuing price and bought- back one)
between
Cr. 419- Treasury share (bought-back price)

3- Destroying the treasury shares:

Dr. 411- Paid-in capital (4111- far value of the destroyed shares);
Dr. 411- Paid-in capital (4112 - difference be between the bought-back price and the par
value of destroyed shares)
Cr. 419- Treasury share (bought-back price)

4- When the board of management made the decision of paying dividends by treasury share
(already approved by the shareholders meeting):

- If the issuing price of shares at the day of paying dividends by treasury share is higher than the
bought-back price of those shares, the accounting entry should be recorded as follows:

Dr. 421- Undistributed earnings (issuing shares price) or


Dr. 338- Other payables (3388)
Cr. 419 - Treasury share (bought-back price)
Cr. 411 – Paid-in capital (4112) (difference between the bough-back price and
the issuing one at the day of paying dividend by treasury shares)

Translation by KTC Assurance & Business Advisors 327


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

- If the issuing price of treasury shares at the day of paying dividend by treasury shares is lower
than the bought-back price, the accounting entry should be recorded as follows:

Dr. 421- Undistributed earnings (issuing price) or


Dr. 338 - Other payables (3388)
Dr. 411 - Paid in capital (4112) (Difference between the bought-back price and the
issuing one at the day of paying dividend by treasury share)
Cr. 419 - Treasury share (bought-back price of treasury share)

Translation by KTC Assurance & Business Advisors 328


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 421

UNDISTRIBUTED EARNINGS

This account is used to reflect the business results (profit, loss) after tax, income distribution and
loss treatment of the enterprise.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. Data to record into account 421 is the business profit after tax or business loss.

2. The distribution of the entity’s results should be clear and in accordance with the current
financial policy.

3. Business results should be recorded in details for each fiscal year (previous year, current year).
The company should also record in details for each content of profit distribution of the enterprise
(create funds; supplement the paid in capital, sh are dividend and profit to share holders and
share
investors).

4. When the company applies retroactively bbecause


ecause of changes of accounting policy and because
of previous years errors found in current year so that the company has to changes the beginning
balance of undistributed earnings, the accountant should increase or decrease the beginning
balance of the Account 4211 “Previous year undistributed earnings” on the accounting book and
increase or decrease the “Undistributed earnings” on the Balance sheet as the regulation of the
Accounting Standard No. 29 “Changes in Accounting
Accounting policy, Accounting estimates and errors”
and the Accounting Standard No. 17 “Enterprise Income Tax”.

STRUCTURE AND CONTENT OF ACCOUNT 421 - UNDISTRIBUTED EARNINGS

Debit:

- Losses form business operations


- Creation of funds
- Distribution of dividends, profit to share holders, investors and joint venture parties
- Increase of paid in capital
- Profit given to the holding company

Credit:

- Net income of the enterprise


- Income contributed by the subsidiaries or additions from the holding company due to
losses
- Treatment of losses on business operation

Debit balance

Undistributed losses from business operation

Credit balance

Undistributed or unused earnings

Account 421 – Undistributed earnings has two sub-accounts:

Translation by KTC Assurance & Business Advisors 329


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Account 4211 – Previous year undistributed earnings: reflect the previous years’ results of
business operation, distributions and losses treatment.

Account 4211 is also used to reflect the increase or decrease of the beginning balance of Account
4211 when applying retroactive due to changes of accounting policy or due to material errors
occurred in previous years but only found in the current year.

Account 4212 – Current year undistributed earnings: is used to reflect the current year’ results of
business operation, distributions and losses treatment.

MAJOR TRANSACTIONS

1. At the end of the accounting period, transfer the business results:

a. In case of profitable:

Dr. 911 – Income summary


Cr. 421 – Undistributed earnings (4212)

b. In case of loss:

Dr. 421 - Undistributed earnings (4212)


Cr. 911 – Income summary

2. In the fiscal year, the company pays the temporary dividends, sharing profit to investors, share
temporary
holders and contribution parties:

Dr. 421 - Undistributed earnings


Cr. 111, 112 (actual payment amount)

3. At the end of the fiscal year, determine and rrecord


ecord the dividends of the
th preference shares to the
share holders holding preference shares:

Dr. 421 - Undistributed earnings


Cr. 338 – Other payables (3388)

When make the payment:

Dr. 338 – Other payables (3388)


Cr. 111, 112 (actual payment amount)

4. When the company gives out decision or report determining the rest amount of dividend and
profit payable to the investors, share holders and contribution parties:

Dr. 421 - Undistributed earnings


Cr. 338 – Other payables (3388)

5. When make the payment of dividend and sharing profit to the investors, contribution parties
and share holders:

Dr. 338 – Other payables


Cr. 111, 112 (actual payment amount)

Translation by KTC Assurance & Business Advisors 330


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MINISTRY OF FINANCE
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6. In the year, the financial reserve fund is created from the business operation profit (income
retained by enterprise) and should be recorded as:

Dr. 421 - Undistributed earnings


Cr. 415 – Financial reserve fund

7. In the year, the investment and development fund is determined from the business operation
profit (income retained by enterprise) and should be recorded as:

Dr. 421 - Undistributed earnings


Cr. 414 – Investment and development fund

8. In the year, determine the bonus and welfare are fund and other funds based on the business
operation profit (income retained by enterprise):

Dr. 421 - Undistributed earnings


Cr. 431 – Bonus and welfare fund
Cr. 418 – Other funds

9. At the end of the year, determine the additional amount to those funds:

Dr. 421 - Undistributed earnings


Cr. 414 – Investment and development fund
Cr. 415 – Financial reserve fund
Cr. 431 – Bonus and welfare fund
Cr. 418 – Other funds

10. Increase the paid in capital from business profit (income retained by enterprise):
profit

Dr. 421 - Undistributed earnings


Cr. 411 – Paid in capital

11. The profit handed to the holding company:

Dr. 421 - Undistributed earnings


Cr. 336 – Inter-company payable

12. The profit given from subsidiaries:

Dr. 136 – Inter-company receivable


Cr. 421 - Undistributed earnings

13. The losses from business operation supported from the holding company:

Dr. 136 – Inter-company receivable


Cr. 421 - Undistributed earnings

14. Cover the losses from business operation of subsidiaries:

Dr. 412 - Undistributed earnings


Cr. 336 – Inter-company payable

Translation by KTC Assurance & Business Advisors 331


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MINISTRY OF FINANCE
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15. At the beginning of the fiscal year, transfer the current year undistributed earnings to the
previous year undistributed earnings:

- In case of Account 4212 has the Credit balance (profitable):

Dr. 4212 – Current year undistributed earnings


Cr. 4211 – Previous year undistributed earnings

- In case of Account 4212 has the Debit balance (loss):

Dr. 4211 – Previous year undistributed earnings


Cr. 4212 – Current year undistributed earnings

The loss amount of a year is deducted to the taxable profit of the following years as the
regulations of the Enterprise Tax Law or is treated
treated according to regulations of the current
financial policy.

Translation by KTC Assurance & Business Advisors 332


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 431

BONUS AND WELFARE FUNDS

This account is used to reflect the current value, the increase and decrease of the enterprise’s
bonus and welfare funds. The bonus and welfare funds is determined from the enterprise’s
business profit after tax for the purposes of staff bonuses, general benefits, public welfare to
improve the material and mental lives of employees.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

1. The increase, decrease and usage of the bonus and welfare funds should be in accordance with
the current financial policy.

2. The bonus and welfare funds should be recorded in details for each kind of funds.

3. When the fixed assets which are created from the welfare funds are put into use for cultural and
welfare activities of the enterprise, increase th
thee fixed assets and simultaneously transfer from the
welfare funds (Account 4312) to the welfare funds to create fixed assets (Account 4313). These
fixed assets are not allowed to record accumulated amortization monthly from expenses but
record once per year to decrease the we lfare funds to create fixed assets.
welfare

STRUCTURE AND CONTENTS OF ACCOU NT 431 – BONUS AND WELFARE FUNDS


ACCOUNT

Debit:

- Usage of bonus and welfare funds


- Decrease the welfare funds to create fixed assets
assets when record the amortization of fixed
assets or sell, dispose of fixed assets, find out the fixed assets lost on physical test.
- Completeness of purchasing fixed assets by welfare funds for cultural and welfare
purposes
- Bonus and welfare funds to holding company or subsidiaries

Credit:

- Increase the bonus and welfare funds from business profit after tax
- Bonus and welfare funds from holding company or subsidiaries
- Increase of welfare funds to create fixed assets when complete the purchasing of fixed
assets by welfare funds and put them into use.

Credit balance:

The current value of enterprise’s bonus and welfare funds.

Account 431 – Bonus and welfare funds has three sub-accounts:

Account 4311 – Bonus fund: record the current value, creation and usage of the enterprise’s bonus
funds

Account 4312 – Welfare fund: record the current value, creation and usage of the enterprise’s
welfare funds

Translation by KTC Assurance & Business Advisors 333


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Account 4312 – Welfare fund to create fixed assets: record the current value, creation and usage
of the enterprise’s welfare funds to create fixed assets.

MAJOR TRANSACTIONS

1. In the year, increase the bonus and welfare funds:

Dr. 421 – Undistributed earnings


Cr. 431 - Bonus and welfare funds (4311, 4312)

2. At the end of the year, determine the additional bonus and welfare funds:

Dr. 421 – Undistributed earnings


Cr. 431 - Bonus and welfare funds (4311, 4312)

3. To determine the bonus to employees and other labour in enterprise:

Dr. 431 - Bonus and welfare funds (4311 – Bonus funds)


Cr. 334 – Payable to employees

4. Use welfare funds to pay to support employees in financial difficulties, for staff vacations and
public campaigns:

Dr. 431 - Bonus and welfare funds (4312 – Welfare funds)


Cr. 111, 112

5. For enterprises subject to Subtraction method


method VAT, when donate or grant products, goods
subject to subtraction method VAT which were pur chased by the bonus and welfare funds, record
purchased
the value of these products, goods according to the price before VAT as follows:

Dr. 431 - Bonus and welfare funds (total payment value)


Cr. 3331 – VAT payable (33311)
Cr. 512 – Inter-company revenue (price before VAT)

6. Bonus and welfare funds are handed to holding company:


Dr. 431 - Bonus and welfare funds (4311, 4312)
Cr. 111, 112

7. Use bonus and welfare funds to support for natural disasters, fire, etc notes:

Dr. 431 - Bonus and welfare funds (4312)


Cr. 111, 112

8. Bonus and welfare funds are given from holding company:

Dr. 111, 112


Cr. 431 - Bonus and welfare funds (4311, 4312)

9. Fixed assets purchased by welfare funds are put into use for cultural and welfare purposes:

Dr. 211 – Tangible fixed assets (historical cost)


Cr. 111, 112, 241, 331

Translation by KTC Assurance & Business Advisors 334


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MINISTRY OF FINANCE
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Simultaneously record:

Dr. 4312 – Welfare funds


Cr. 4313 – Welfare funds to create fixed assets

10. At the end of the accounting period, record the amortization of fixed assets purchased by
welfare funds used for cultural, welfare purposes:

Dr. 4313 – Welfare funds to create fixed assets


Cr. 214 – Fixed assets amortization

11. Sale, disposal of fixed assets purchased by welfare funds used for cultural, welfare purposes:

a. Decrease the sold, disposed assets:

Dr. 4313 – Welfare funds to create fixed assets


Dr. 214 – Fixed assets amortization
Cr. 211 – Fixed assets (historical cost)

b. Record the transaction of sale, disposal:

- Payment amounts:

Dr. 431 - Bonus and welfare funds (4312)


Cr. 111, 112, 334

- Receipt amounts:

Dr. 431 - Bonus and welfare funds (4312)


Cr. 3331 – Payable VAT (if any)

Translation by KTC Assurance & Business Advisors 335


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 441

FUNDS FOR CAPITAL EXPENDITURES

This account is used to reflect the current value, the increase, decrease of funds for capital
expenditures of the enterprise. Funds for capital expenditures of the company is created from the
company’s budget or supported by the holding company.

Funds for capital expenditures of enterprise is used for new construction investment,
improvement, expansion of production and business construction and purchase of fixed assets to
renew technology. The construction investment of enterprise must obey regulations of current
investment and construction management.

When the construction and purchase or fixed assets completes and the assets are put into use for
production, business activities, the accountant must
must complete procedures to draw the capital
investment of each construction, construction parts. When the draw
dr is approved, the accountant
must reduce the funds for capital expenditures and increase the paid in capital.

STRUCTURE AND CONTENTS OF ACCOUNT 441 - FUNDS FOR CAPITAL


EXPENDITURES

Debit:

Decrease of funds for capital expenditures due to:

- Complete construction and buying fixed assets, put into use and draw the approved capital;

- Hand back the funds for capital expenditures that not been used all to the holding company, the
State.

Credit:

Decrease of funds for capital expenditures due to:

- Funds for capital expenditures from State Budget or holding company;

- Funds for capital expenditures from assistance, sponsorship;

- Addition from investment and development fund.

Credit balance:

The current funds for capital expenditures of the company not yet used or used but the
construction is in progress or completed but not yet been approved.

MAJOR TRANSACTIONS

1. Receive funds for capital expenditures in cash, cash in bank:

Dr. 111, 112


Cr. 441 - Funds for capital expenditures.

2. Receive funds for capital expenditures from the bank according to the budgeting.

Translation by KTC Assurance & Business Advisors 336


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a. Receive the budgeting for investment in construction; singly debit Account 008 "Subsidies of
State Budget" (off balance sheet accounts).

b- Withdraw the budgeting for use, based on the usage of the budgeting for investment in
construction to record into related accounts; the entry should be recorded as follows:

Dr. 111 - Cash on hand


Dr. 152, 153, 331
Dr. 133 - Deductible value added tax (1332) (if being deducted the input VAT)
Dr. 241 - Construction in progress (forecast withdrawal for payment)
Cr. 441 - Funds for capital expenditures.

Simultaneously singly credit Account 008 "Subsidies of State Budget" (off balance sheet
accounts).

3. When an enterprise has not received the budgeting for investment in construction, the
enterprise will be advanced from the Treasury. WhWhenen the enterprise received capital advanced
from the Treasury, the accounting entry should be recorded as follows:

Dr. 111,112
Cr. 338 - Other payables (3388).

4. On receipt of budgeting for construction investment, the company must complete payment
procedures to return the capital advanced fro m the treasury. When the Treasury approves the
from
payment documents, the accounting entr y should be recorded as follows:
entry

Dr. 338- Other payables (3388)


Cr. 441 - Funds for capital expenditures.

5. Receive funds for capital expenditures to pay for short-term borrowings, internal borrowings,
other borrowings; the entry should be recorded as follows:

Dr. 311, 336, 338


Cr. 441 - Funds for capital expenditures.

6. Increase funds for capital expenditures by inv


investment and development fund, the entry should
be recorded as follows:

Dr. 414 - Investment and development fund


Cr. 441 - Funds for capital expenditures.

7. When the construction and purchase of fixed assets by funds for capital expenditures complete
and are put into production and trading activities:

- Increase the value of fixed assets created from construction investment, completion of
purchasing fixed assets, the entry should be recorded as follows:

Dr. 211 - Tangible assets


Dr. 213 - Intangible assets
Cr. 241 – Construction in progress.

Translation by KTC Assurance & Business Advisors 337


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- When the draw of the completed construction is approved, reduce the funds for capital
expenditures and increase the paid in capital, the entry should be recorded as follows:

Dr. 441 - Funds for capital expenditures


Cr. 411 - Paid in capital.

8- When return the funds for capital expenditures to the State Budget, holding company, the
accounting entry should be recorded as follows:

Dr. 441 - Funds for capital expenditures


Cr. 111, 112

Translation by KTC Assurance & Business Advisors 338


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ACCOUNT 461

SUBSIDY FUNDS FROM STATE BUDGET

This account is used to reflect the receiving, using and settling of subsidy funds from State
Budget. This account is used only in entities receiving subsidies from the State or from higher
level authorities.

The subsidy funds from State Budget are funds received from the State Budget or higher level,
from domestic and foreign entities, individuals to carry out not-for-profit programs, economic,
political and social functions appointed by State or higher level authorities. The spending of
subsidy funds from State Budget must be in compliance with the approved estimation and are to
be settled with the issuing office. Subsidy funds may be collected from the operation revenues of
aff who use the services of their own branch’s
a business, such as hospital fees collected from staff
hospital, tuition fees, etc.

THIS ACCOUNT MUST COMPLY WITH THE FOLLOWING REGULATIONS

il according to their source: issued by the State or higher level,


1. Subsidy funds are posted in detail
sponsored from organization, individual, collect ed from the operation revenue and also according
collected
to the operation expenses of the previous year, or those of the current year.

2. Subsidy funds are to be used only for the purpose, content, standard and budget approved
by the State, higher level and in the approved estimation.

3. Subsidy funds are recorded on the basis of issuing procedures:

- If the State Budget issues funds by means of a cash transfer, when the credit advice has been
received showing the proceeds credited into ththee bank account, the accountant records the entry
for both the cash deposit and the subsidy funds.

- If the State Budget issues funds by means of an expense quota, when receive the notice of
issuing, singly Debit Account 008 “Subsidies of State Budget” (off balance
State balanc sheet account). When
spending funds, Credit Account 008 “Subsidies of State Budget” and simultaneously Credit
Account 461 “Subsidy funds from State Budget”.

4. At the end of the fiscal year, the entity must settle the receipt and usage of subsidy funds from
State Budget with the financial authorities, mana
management authorities and each entity issuing funds
according to the current financial policy. The unused funds are treated in accordance with the
decision of the authority. Only when receive the approval of the authority, the entity can transfer
the unused amount to the following year.

5. At the end of the fiscal year, if the spending by subsidy funds from State Budget has not been
approved, transfer the current year subsidy funds from State Budget to the subsidy funds from
State Budget of the previous year.

STRUCTURE AND CONTENTS OF ACCOUNT 461 – SUBSIDY FUNDS FROM STATE


BUDGET

Debit:

- Expenses covered by the subsidy funds


- The remaining subsidy funds returned to the State Budget of higher level

Translation by KTC Assurance & Business Advisors 339


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Credit:
- Actual proceeds received from the State Budget or higher level
- Operation revenues of the business supplementing the subsidy funds.

Credit balance:

Subsidy funds received from the State Budget or higher level having not been spent or settled.

Account 461 – Subsidy funds from State Budget has two sub-accounts:

Account 4611 – Subsidy funds of the previous year: this account records the funds of previous
year both spent and still on hand In the case where the financial statements of the subsidy fund
has not been approved. When the financial statementsents are approved, the approved amount will be
deducted from Account 461 “Subsidy funds from State Budget” (4611 - Subsidy funds of the
previous year). The amount which has not been uused, sed, according to the decisions of the financial
office, will be returned to the State Budget or transferred to this year funds.

year:: this account records the funds of the current


Account 4612 – Subsidy funds of the current year
year received from the State Budget or higher level
level including those funds transferred from the
previous year to the current year. At the end of the fiscal year, if the fund statements are not
approved, the balance of Account 4612 “Subsidy funds of the current year” must be transferred to
Account 4611 “Subsidy funds of the previous
previous year” until approval is obtained.

MAJOR TRANSACTIONS

1. Receiving subsidy funds from State Budget by mean of transfer or in cash:

Dr. 111, 112


Cr. 461 - Subsidy funds from State Budget (4612)

2. Receiving subsidy funds by means of and expense quota, singly Debit Account 008 “Subsidies
of State Budget” (off balance sheet account).

3. When using the expense quota:

Dr. 111 – Cash on hand


Dr. 331 – Accounts trade payables
Dr. 161 – Expenditures from subsidies of State Budget
Dr. 152, 153
Cr. 461 - Subsidy funds from State Budget (4612)

4. Subsidy funds from State Budget in business (if any) is recorded:

Dr. 111, 112


Cr. 461 - Subsidy funds from State Budget (4612)

5. Receiving subsidy funds from State Budget or higher level or non-refundable grant in fixed
assets:

Dr. 211 – Tangible fixed assets


Dr. 213 – Intangible fixed assets
Cr. 461 - Subsidy funds from State Budget

Translation by KTC Assurance & Business Advisors 340


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Simultaneously, record:

Dr. 161 - Expenditures from subsidies of State Budget


Cr. 466 – Sources of acquisition of fixed assets

6. At the end of the year, when the entity pay back the amount of cash retained to the State
Budget or higher level, record:

Dr. 461 - Subsidy funds from State Budget


Cr. 111, 112

If the unused amount is kept to the next year funds, do not use the above record.

7. When the financial statements of subsidy funds from State Budget are approved within the
year:

Dr. 461 - Subsidy funds from State Budget (4612)


Cr. 161 - Expenditures from subsidies of State Budget (1612) (approved expense)

8. At the end of the year, if the financial statements


statements of the subsidy funds have not been approved:

- Transfer the functional operation expenses of this year to previous year

Dr. 161 - Expenditures from subsidies of State Budget (1611 - Expenditures from
subsidies of State Budget of the current year)
Cr. 161 - Expenditures from subsidies of State Budget (1612 - Expenditures from
subsidies of State Budget of the previous year)

- Simultaneously transfer the functional operation expenses of this year to previous year:

Dr. 461 - Subsidy funds from State Budget (4612 - Subsidy funds from State Budget of
the current year)
Cr. 461 - Subsidy funds from State Budget (4611 - Subsidy funds from State
Budget of the previous year)

9. In the following year, when the financial statem


statements of the subsidy funds of the previous year
are approved, record:

Dr. 461 - Subsidy funds from State Budget (4611)


Cr. 161 - Expenditures from subsidies of State Budget (1611)

10. The unused subsidy funds of the previous year is transfer to the current year:

Dr. 461 - Subsidy funds from State Budget (4611 - Subsidy funds from State Budget of
the previous year)
Cr. 461 - Subsidy funds from State Budget (4612 - Subsidy funds from State
Budget of the current year).

Translation by KTC Assurance & Business Advisors 341


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ACCOUNT 466

SOURCES FOR ACQUISITION OF FIXED ASSETS

This account is used to record the current value, increase and decrease of the sources for
acquisition of fixed assets. Only increase this account when purchase, construct or improve fixed
assets by sources for acquisition of fixed assets supported from the State Budget or grant, donor
(allowed to increase the historical cost of fixed assets).

Decrease the sources for acquisition of fixed assets for amortization calculation, sale, disposal of
fixed assets, fixed assets lack on physical count, fixed assets turned back to the State or
transferred to another entity according to decision of State, higher level.

STRUCTURE AND CONTENTS OF ACCOUNT


T 466 – SOURCES FOR ACQUISITION
OF FIXED ASSETS

Debit:

Decrease the sources for acquisition of fixed assets:

- Fixed assets returned to the State or tr ansferred to another entity according to


transferred
decision of State or authorities;

- Amortization calculated of fixed assets used for the project’s activities;

- Sale, disposal of fixed assets, fixed assets lack on physical count;

- Rest value of fixed assets increases due to revaluation.

Credit:

Increase the sources for acquisition of fixed assets:

- Fixed assets purchased, constructed are put into use;

- Subsidy funds are provided in fixed assets;

- Rest value of fixed assets increases due to revaluation.

Credit balance:

Current sources for acquisition of fixed assets of the entity.

MAJOR TRANSACTIONS

1. In case of the State Budget or higher level authority give the funds by fixed assets or the
entity uses subsidy funds to purchase, construct fixed assets; when those activities complete
and the assets are put into use, record as follows:

Translation by KTC Assurance & Business Advisors 342


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

Dr. 211 – Tangible assets


Dr. 213 – Intangible assets
Cr. 111, 112, 241, 331, 461

Simultaneously record:

Dr. 161 - Expenditures from subsidies of State Budget


Cr. 466 - Sources for acquisition of fixed assets

When use the subsidies of State Budget to purchase, construct fixed assets, simultaneously
singly credit account 008 “Subsidies of State Budget” (off balance sheet account)

2. At the end of the accounting period, calculate the amortization of fixed assets purchased by
sources for purchase of fixed assets:

Dr. 466 - Sources for acquisition of fixed assets


amortization and depreciation
Cr. 214 – Accumulated amortization

3. When sell, dispose fixed assets;

- Decrease fixed assets:

Dr. 466 - Sources for acquisition of fixed assets (the rest value)
Dr. 214 - Accumulated amortization and depreciation
Cr. 211 – Tangible assets (historical cost)
Cr. 213 – Intangible assets (historical cost)

- Receipt, payment amounts; differences of payment, receipt on sale, disposal of fixed assets
by sources for purchasing of fixed assets are treated
treated and recorded in accordance with decision
of the authorities.

Translation by KTC Assurance & Business Advisors 343


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

CATEGORY 5

REVENUE

This category is used to record the revenue of goods sold, property investment, services provided,
interest earned, royalties, distributed dividends and profits, sales discounts, sales allowances and
sales return.

Turnover is the total value of economic benefits the enterprise has gained or will gain in an
accounting period, arising from the enterprise’s normal production and business operations,
contributing to increase the owner’s equity. Collections on behalf of a third party that do not
constitute a source of economic benefits and don’t increase the owner’s equity of the enterprise
would not be considered as turnover.

1. The determination and recording of revenue mumust


st comply with the regulations of VAS 14
related Vietnamese Accounting Standards.
“Revenue and other income” and other related

2. Recognition of revenue and expenses must be complied with matching concept. When
revenue is recognized, relating expenses attributable to that revenue must be recorded.

3. Turnover of goods sold shall only be recognized if they simultaneously meet the following
five (5) conditions:

- risks and benefits associated with the right to


The enterprise has transferred the majority of risks
own the products or goods to the buyer;

- The enterprise no longer holds the right to manage the goods as the goods owner, or the right
to control the goods;

- Revenue has been determined with relative certainty;

- The enterprise has gained or will gain economic


economic benefits from the goods sale transaction;

- It is possible to determine the costs related to the goods sale transaction.

4. Turnover from service provision transaction shall be recognized when the results of these
transactions are determined reliably. Where a service provision transaction relates to many
periods, turnover shall be recognized in each period according to the results of the work
volume finished on the date of making of such period’s accounting balance sheet. The result
of a service provision transaction shall be determined only when it satisfies all the four (4)
conditions below:

- Turnover is determined with relative certainty;

- It is possible to obtain economic benefits from the service provision transaction;

- The work volume finished on the date of preparing the balance sheet can be determined;

- The costs incurred from the service provision transaction and the costs of its completion can
be determined.

Translation by KTC Assurance & Business Advisors 344


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5. When goods or services are exchanged for goods or services of similar nature and value, such
exchange shall not be regarded as a turnover-generating transaction.

6. Sales revenue must be classified according to each type of activity such as: sales of goods and
services, interests, royalties, distributed dividends and profits. For each activity, it must
further be classified according to the type of products or services sold. This requirement
enables the company to maintain accurate and adequate results of the business operations for
both management purposes and for the preparation of the income statement.

7. Sales discounts, sales returns and sale allowances incurred during the period must be
recorded in their individual accounts. The deduction sales is minus the initial recorded sales
to the determination of net sales, is used as the basic for the determination business results of
the accounting period.

8. In principle, at the end of the accounting period,


period, the enterprise must determine operation and
business results. Net sales earned during the pe riod will be transferred to the income
period
summary - account 911. Once closed, these accounts will have no carry forward balance.

Revenue is comprised of five accounts, which are classified into three groups:

Group Sales – includes three accounts:

- Account 511 – Sales;


- Account 512 – Inter-company sales;
- Account 515 – Financial income

Group Sales Discounts – includes one account

Account 521 - Sales discounts

Group 53 - Sale returns and sales allowances - includes two accounts

- Account 531 - Sales returns;


- Account 532 - Sales allowances

Translation by KTC Assurance & Business Advisors 345


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MINISTRY OF FINANCE
Decision 15/2006/QD-BTC

ACCOUNT 511

SALES

This account records sales of goods and services of the enterprise in the accounting period from
following transactions:

- Goods sales: selling products manufactured by the enterprise, merchandise goods and
property investment.

- Provision of services: performing the work agreed upon the contracts in one or many
accounting periods; such as provision of transportation services, tourism, lease fixed assets
under the operating lease etc.

THIS ACCOUNT MUST COMPLY WITH FOLLOWING REGULATIONS

1. value of receivables which


already are collected or shall receive from such sales transactions as selling goods, services,
property investment, provision of services including surcharges and costs added to price (if
any).

2. For the sales of goods and services in a foreign currency, the enterprise must convert to VND
or a functional currency using the actual exchange rate or the average inter-bank exchange
rate announced by the SBV at the date of the transaction.

3. Net sales may be less than gross sales which initially recorded because of the following
reasons: the enterprise offers discount or allowances
allowances for goods sold or returned (as goods sold
do not meet the quality or specification stated in the contract), and the enterprise must pay
special consumption tax or export duty or VAT in direct method based on the actual revenue
of goods sold in the period.

4. Account 511 “Sales of goods and services” only reflects sales from goods, property
investment, services which have been determined
determined as earned in the period regardless the
money has received or will receive.

5. For goods and services subject to subtraction


subtraction method VAT, sales of goods and services is
determined at selling price not including VAT.

6. For goods and services not subject to VAT or subject VAT in direct method, sales of goods
and services is determined at the total amount.

7. For goods and services subject to special consumption tax or export duty, sales of goods and
services is determined at the total amount (includes special consumption tax and export duty).

8. For enterprise processing materials and goods for other entities, the enterprise should only
reflect the actual fees received as it revenue, not including the value of materials and goods
processed.

9. For enterprise selling goods on consignment at price recommended by and received


commission from the consigner, the enterprise shall only record the commission as its
revenue.

Translation by KTC Assurance & Business Advisors 346


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12. contract include:

a. Initial revenue inscribed in the contract;

b. Increase and decrease amounts in the contract performance, bonuses and other payments,
provided that these amounts are capable of changing the revenue and can be reliably
determined.

- The contractual revenue may be increased or decreased in each specific period. For example:

Contractors and customers may agree upon changes and requirements resulting in the
increase or decrease of contractual revenue in the next period as compared with the initially
agreed contract;

Revenue already agreed upon in the fixed price


price contract may increase for the reason that
prices rise high;

Contractual revenue may decrease due to the co contractors’


ntractors’ failure to keep up with the set
schedule or to ensure construction quality as agreed upon in the contract;

When the fixed price contract sets a fixed price for a finished product unit, the contractual
revenue shall increase or decrease when the
the product volume increases or decreases.

- Bonuses are supplementary amounts to be paid to contractors if they perform the contracts
according to or beyond the requirements. Bonus shall be accounted into the contract revenue
when it satisfies all the two (2) conditions below:

A number of specific standards inscribed in the contract are surely attained or surpassed; and

The bonus can be reliably determined.

- Another payment received by the contractor from the customer or another party to offset
costs is not included in the contractual price. For example: delay caused by the customer;
errors in technical or designing specifications, and disputes over changes in the contract
performance. The determination of increased revenue from the above-said payments depends
on numerous uncertain factors and usually depends on the results of many negotiations.
Therefore, other payments shall only be accounted into the contractual revenue when:

It is agreed that the customer will accept to make compensation;

Other payments are accepted by the customer and reliably determined.

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Where a construction contract stipulates that the contractor is allowed to make payments
according to the set schedule, and when the construction contract performance result is
reliably estimated, the revenues and costs related to the contract shall be recognized by
reference to the completed volume determined by the contractor on the date of compiling
financial statement, regardless of whether invoices for payments according to the set schedule
have been billed or not and how much money is inscribed on invoices.

Where a construction contract stipulates that the contractor is allowed to make payments
according to the value of performed work volume, and when the contract performance result
is reliably determined and certified by customers, the revenues and costs related to such
contract shall be recognized by reference to the completed work volume certified by the
customers in the period and reflected in the billed invoices.

- Revenue shall only be recognized to match the already arising contract costs, the
reimbursement thereof is relatively sure;

- in-period costs when they have already arisen.


Contract costs shall only be recognized as in-period

- The value of goods, materials, goods in process deliver to another entity for processing;

- The value of products, goods, services provides between companies, the corporation and
subsidiaries;

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- The value of products, goods and services provides between the corporation and member
firms;

- The goods, products are sending, the completed services has provided to customer but have
been yet sold;

- The value of consignment goods under sales agent (have been yet determined selling);

- Financial income and other income are not record as sales of goods and services.

STRUCTURE AND CONTENTS OF ACCOUNT 511 – SALES

Debit:

- The amount of special consumption tax or export


expor duty on the actual sales of goods, products
and services provision to customer and determined
determined as goods sold during the accounting
period;

- The amount of VAT payable for the enterprise paying subtraction method VAT;

- Amount of sales return transferred at the end period;

- Sale discounts transferred at the end period;

- Sales allowances transferred at the end period;

- Transfer of net sales to account 911 – “Income summary”.

Credit:

Revenue of selling goods, products,


products, property investment and the services provision has performed