6 accounting for manufacturing costs and finished construction works costing in tuan cuong construction joint stock company

Graduation thesis Mentor: Ph.D Nguyen Dao Tung Accounting for manufacturing costs and finished construction works costing in Tuan Cuong Construction Joint Stock Company Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung LIST OF SAMPLES, PICTURES AND FIGURES Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Nguyen Thuy Trinh CQ54/21CL01 Mentor: Ph.D Nguyen Dao Tung Graduation thesis Mentor: Ph.D Nguyen Dao Tung INTRODUCTION The urgency of the research topic The economic integration has opened up great opportunities for Vietnamese enterprises to integrate and develop, but at the same time it also creates tremendous challenges Thus, in order to survive and develop, businesses must constantly improve the management and organization of production and business to bring the highest business efficiency possible To ensure this, accounting is an integral part of the business Like other businesses in Tuan Cuong Construction Joint Stock Company, accounting has been used as an effective tool in running business activities and managing its business activities In particular, the Company pays special attention to manufacturing costs accounting and determination of finished construction works costing Therefore, the organization of cost accounting in particular in the Company has been in order and effectively So I decided to choose a topic: “Accounting for manufacturing costs and finished construction works costing in Tuan Cuong Construction Joint Stock Company” Subjects and research purposes Subjects of study: Organizing the accounting of manufacturing costs and determining finished construction works costing at Tuan Cuong Construction Joint Stock Company The purpose of the thesis research: to clarify the actual situation of the organization of manufacturing costs and determining finished construction works costing results at the company, helping the company to see what has been and has not been done, Thereby proposing a number of solutions to Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung further improve manufacturing costs accounting and determine finished construction works costing results at the Company Scope of the research The scope of this research is practical research on manufacturing costs accounting and determining finished construction works costing results at Tuan Cuong Construction Joint Stock Company Time range The scope of the company research period is from January 1, 2019 to December 31, 2019 Research method The thesis uses dialectical materialism, historical materialism combined with the methods of analysis, statistics, synthesis, comparison between theory and reality at Tuan Cuong Construction Joint Stock Company, then offers recommended solutions to improve manufacturing costs accounting and determine finished construction works costing results at the company Thesis structure Practicing in Tuan Cuong Construction Joint Stock Company is an opportunity for me to approach reality and learn experience for myself Meet the requirements of the Academy as well as the requirements of the practice for students, with the help of Tuan Cuong Construction Joint Stock Company and the guidance of PhD Nguyen Dao Tung, I have completed my graduation thesis “Accounting for manufacturing costs and finished construction works costing in Tuan Cuong Construction Joint Stock Company” This includes parts as follows: Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung Chapter 1: General theory for manufacturing costs and finished goods costing accounting in enterprises Chapter 2: Manufacturing costs and finished construction works costing accounting in Tuan Cuong Construction Joint Stock Company Chapter 3: Suggestions to improve manufacturing costs and finished construction works costing accounting in Tuan Cuong Construction Joint Stock Company Applying the theory learned and studied at the Academy of Finance, combined with the reality of organizing the accounting and manufacturing costs accounting and determining finished construction works costing results at Tuan Cuong Construction Joint Stock Company, together with with the enthusiastic guidance of PhD Nguyen Dao Tung and the Accounting Department at the Company, I have completed my graduation thesis Due to the limited time of practice and limited ability, my dissertation cannot avoid mistakes, so I look forward to receiving the reviews, comments and direct advice from PhD Nguyen Dao Tung and the lecturers Sincerely! Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung CHAPTER 1: GENERAL THEORY FOR MANUFACTURING COSTS AND FINISHED GOODS COSTING ACCOUNTING IN ENTERPRISES 1.1 Concepts, requirements for manufacturing costs and finished goods costing accounting 1.1.1 Manufacturing costs and cost of finished goods 1.1.1.1 Manufacturing costs In an enterprise, in order to conduct production and business activities, there must be three basic elements: labor materials, labor objects and labor forces The production and business process is the process of consuming those factors to create labor and service products The consumption of these factors in the production and business process creates the corresponding costs Manufacturing cost is the total cost of living labor, physical labor and other necessary expenses that the enterprise has spent in the process of manufacturing, creating or supplying labor, service in a certain period Manufacturing costs are typically divided into three categories: - Direct materials, which is the cost of the materials that are traceable to the product, such as the aluminum in beverage cans - Direct labor, which are the wages or salaries and fringe benefits earned by the individuals who are physically involved in converting raw materials into a finished product Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung - Manufacturing overhead, which includes all of the other costs incurred in the manufacturing activities These indirect costs include repairs and maintenance, depreciation of the manufacturing equipment, utilities, salaries of manufacturing supervisors, etc Therefore, manufacturing cost are costs (wastages) on inputs in the production process associated with business purposes The amount of cost depends on the volume of production factors consumed during the period and the price of a unit of production factor has been wasted Manufacturing cost is measured by a monetary ruler and determined within a specified time period 1.1.1.2 Cost of finished goods The cost of finished goods is expressed in terms of all the costs of living labor, physical labor and other costs calculated on a certain volume of labor and services completed Thus, the cost of finished good is the determination of the value of the cost factors that are transferred into finished products 1.1.1.3 The relationship between manufacturing cost and cost of finished goods Basically, manufacturing cost and cost of finished goods are two-sided manifestations of the production and business process, which are all expressed in the amount of the loss of living and materialized labor that businesses have spent However, manufacturing cost and cost of finished goods are different in some aspects Referring to manufacturing cost is considering the costs in a certain period (month, quarter, year), regardless of the type of products, Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung regardless of whether the product is completed or unfinished In contrast, reffering to the cost of finished goods is to determine a certain amount of production costs that are calculated for a certain amount of completed products, the cost of finished goods relates to the cost of the previous period transferred and the amount of this period going to the next period For example: prepaid expenses are expenses spent in the period, only a part of these expenses is included in the cost of finished goods, the remaining must be allocated for the next periods; or the expenses have not been actually incurred in this period but still partially deducted in the cost of finished goods during the period The difference in quantity and the relationship between manufacturing costs and cost of finished goods is reflected in the following formula for calculating the overall product price: Cost of finished goods Opening = work in progress Manufacturing + cost incurred in the period Ending - work in progress Thus, manufacturing costs are the basis for building the cost of finished goods while cost of finished goods is the basis for building the selling prices In the condition that the selling price does not change, the enterprise's savings or waste of manufacturing costs have a direct impact on low or high cost of finished goods, which will affect the profitability of the business Therefore saving costs and lowering finished goods cost is an important and regular task of economic management It helps the businesses compete effectively in the market Nguyen Thuy Trinh CQ54/21CL01 Graduation thesis Mentor: Ph.D Nguyen Dao Tung 1.1.2 Requirements for manufacturing costs and finished goods costing accounting Accounting is an effective management tool in business management and specifically, cost accounting is a key tool in managing manufacturing costs and cost of finished goods Therefore, the main requirement for accounting for manufacturing costs and cost of finished goods is to identify the objects of manufacturing cost and the objects of finished goods costing in accordance with the certain conditions of the business and at the same time, apply the most reasonable cost accounting methods, organize accounting in a logical, accurate, complete and timely manner Specifically, the following requirements should be well implemented: - Checking the implementation of production plans in each part of the enterprise - Based on the characteristics, production situation of the enterprise, production characteristics and technological process to determine the objects to collect costs, the objects to appropriately calculate the cost of finished goods - Organizing the collection and allocation of each type of manufacturing costs according to the identified objects by appropriate methods to calculate the actual cost for each object and each product unit in accordance with regulations, terms, method and ensure accuracy - Checking the implementation of technical material consumption norms, cost estimates for production management in order to promote economical and Nguyen Thuy Trinh CQ54/21CL01 10 Graduation thesis Mentor: Ph.D Nguyen Dao Tung CHAPTER 3: SUGGESTIONS TO IMPROVE MANUFACTURING COSTS AND FINISHED CONSTRUCTION WORKS COSTING ACCOUNTING IN TUAN CUONG CONSTRUCTION JOINT STOCK COMPANY 3.1 General evaluation of the accounting for manufacturing costs and cost of finished construction works in the enterprise From my point of view, since its establishment, Tuan Cuong Construction Joint Stock Company has experienced many difficulties But with the continuous efforts, the company has constantly developed and affirmed its position in the market with high quality construction works and reasonable prices Tuan Cuong Construction Joint Stock Company has a dynamic and professional management style, quickly adapting to the development of the economy Every year, the company often creates favorable conditions for accountants to attend professional training, research and implement new legal documents issued by the Ministry of Finance As a manufacturing enterprise, in addition to actively exploring the market, investing in research and new technical equipment to improve construction works quality, the company also focuses on the management for manufacturing costs and finished construction works costing to save construction work costs, lower costs of finished construction works, thereby increasing revenue, improving its competitiveness Through understanding the actual situation at the company, it is possible to give some general comments on the accounting for manufacturing costs and finished construction works costing in the company as follows: Nguyen Thuy Trinh CQ54/21CL01 97 Graduation thesis Mentor: Ph.D Nguyen Dao Tung 3.1.1 Advantages In general, the accounting for manufacturing costs and finished construction works costing in the company has properly applied the enterprise accounting regime, issued under the Circular No 200/2014 / TT-BTC of the Ministry of Finance - Accounting system The accounting system of the company is relatively complete, consistent with the actual situation The accounting staff of the company consists of well-trained, enthusiastic and experienced professionals The accountants in the accounting system are assigned the work in a scientific way, ensuring the capacity of each person and at the same time creating a smooth combination between the departments, specialization at work The incumbent, qualified and professional staff will facilitate new staff to quickly get the job done without wasting time and training costs Moreover, this accounting team is arranged in a proper arrangement in each part, with the smooth coordination between accounting sections This has made the accounting for manufacturing costs and finished construction works costing done more conveniently, providing useful information quickly and effectively The company’s accounting organizational structure which is the mix of centralization and decentralization has created the consistency between accounting units and good coordination with accountants in construction materials warehouses, creating a basis for meeting the requirements of Nguyen Thuy Trinh CQ54/21CL01 98 Graduation thesis Mentor: Ph.D Nguyen Dao Tung accounting throughout the company: rational transfer of documents, easy comparison of books, and work assignment The arrangement of accountants at each warehouse helps the initial recording to be more accurately and objectively recorded, on the other hand it enhances the sense of responsibility of the staff - Vouchers The documents used in the initial accounting process are appropriate with economic and legal requirements, in accordance with the form issued by the Ministry of Finance The information on economic transactions is fully and accurately recorded in the documents, all signed by related parties, creating favorable conditions for checking and comparing actual data and data on accounting books In addition to the required vouchers, the company also has its own vouchers to suit its business characteristics The transfer of accounting vouchers is carried out in a scientific way, strictly meeting the information needs and creating close relationships among departments in the entire accounting system The process of document transfer and internal control is relatively strict and follows a certain order This helps to gather manufacturing costs and calculate cost of finished construction works quickly and efficiently - Inventory accounting system: Currently, the company is using perpetual system The use of this system is absolutely correct because it is a commonly Nguyen Thuy Trinh CQ54/21CL01 99 Graduation thesis Mentor: Ph.D Nguyen Dao Tung used system due to its advantages such as high accuracy, providing inventory information in a timely manner This helps the company to be convenient in monitoring and controlling fluctuations of inventories Since then, it is possible to limit unnecessary losses and damages in the construction works and business process - Accounting software: The company has used FAST accounting software, which helps accountants to record, process and provide quick and timely accounting information Fast accounting software is relatively simple and flexible so it helps to reduce the volume of recording, making accounting work more accurate Using this accounting software, accountants can compare data, check data more easily, identify possible errors in accounting process  The accounting for manufacturing costs and finished construction works costing To begin with, let's start with company’s calculation period The company gathers manufacturing costs and calculates the cost of finished construction works per month Because the quality of construction works which completed are satisfactory, Tuan Cuong Construction Joint Stock Company has received many bids, hence, the company choose the monthly period to calculate cost of construction works is completely in accordance with the business and production characteristics of the company Next, the costs of finished construction works are calculated according to actual expenses items in the period, in accordance with accounting Nguyen Thuy Trinh CQ54/21CL01 100 Graduation thesis Mentor: Ph.D Nguyen Dao Tung regulations including: direct material costs, direct labor costs, manufacturing overheads costs Although the volume of accounting work is huge, thanks to the use of accounting software, the workload has been reduced, reflecting the accurate and timely changes in the price of inputs and theirs impact on the costs of finished construction works, thereby helping the company make timely and more appropriate decisions in managing manufacturing costs of the next period At the same time, the company has organized accounting work to collect manufacturing costs and calculate costs of finished construction works in a systematic and strict way from the accounting and finance department to the relevant departments, inventory this has not only reduced the workload for accountants but also brought higher work efficiency; for example, tracking timesheets, work confirmation is done by warehouse staffs so the accounting department just need to gather results Moreover, in addition to time wages based on labor contracts and actual working days paid to employees, the company also has received other allowances This shows the concern of the Board of Management for the lives of all employees in the company in general, the direct construction workers in particular, helping them to be more enthusiastic with the work Furthermore, the relationship between the manufacturing costs and finished construction works costing accounting with other accounting departments is well applied, there is a close and synchronous coordination, Nguyen Thuy Trinh CQ54/21CL01 101 Graduation thesis Mentor: Ph.D Nguyen Dao Tung helping the accounting for manufacturing costs and finished construction works costing is easier Additionally, the objects of finished construction works costing are each type of construction work, so Tuan Cuong Construction Joint Stock Company uses the simple method to calculate the cost of finished construction works From the characteristics of production situation, the company has developed a system of details accounts, details books suitable for each object of finished construction works costing Finally, the company has organized and calculated salaries for direct workers by time salary, thus ensuring transparency and clarity in timekeeping 3.1.2 Restrictions Firstly, at present, the company does not account for the losses of damaged risks in construction progress Problems encountered during construction progress account for a small proportion, for this reason, the loss is included in the cost of finished construction works However, the fact that the cost of a finished construction works has to bear the cost of damaged risks will significantly increase the cost of finished construction works, and will make the company’s construction works quality decrease Secondly, the company does not use account 335 to record payables to employees during a period, such as annual leave salary and operating expenses during the reporting period which are deducted in advance Thirdly, the company does not use account 6274 - cost of using fixed assets to reflect the depreciation expenses of fixed assets used directly for the Nguyen Thuy Trinh CQ54/21CL01 102 Graduation thesis Mentor: Ph.D Nguyen Dao Tung production of products, provision of services and fixed assets used for the operation of workshops, parts, teams and construction teams Last but not least, the cross-checking between the accountants in the company’s accounting system is ineffective because the accountants undertake many parts, one part of which can be independent of one part of another accountant, but the other part may be related Since then, the work has not been ensured properly, honestly and highly accurately 3.2 Some suggestions to improve the efficiency of accounting for manufacturing costs and finished construction works costing accounting in Tuan Cuong Construction Joint Stock Company From my perspective, the accounting for manufacturing costs and finished construction works costing at the company is relatively complete, ensuring timely information provision for corporate management requirements However, in order to keep up with the market mechanism, the accounting for manufacturing costs and finished construction works costing at the company still has some limitation that needs to be considered With my limited knowledge, I would like to suggest some ideas as follows: a Suggestions about the accounting for damaged risks in construction progress Damaged risks in construction progress is unavoidable in the process of construction works of enterprises in construction industry These losses may be due to objective or subjective causes, causing unexpected losses that increase manufacturing costs, affect costs of finished construction works Nguyen Thuy Trinh CQ54/21CL01 103 Graduation thesis Mentor: Ph.D Nguyen Dao Tung These losses need to be accounted properly to ensure that the cost of finished construction works does not increase too high In fact, in some cases, many construction companies often accept risks and break-even results or even capital loss for construction works at risk during construction However, this loss could be handled by seting up provision for loss through account 352 or account 229 b Suggestions to saving manufacturing costs In conclusion, in the current market mechanism, competition among enterprises is increasingly fierce In addition to performing good quality construction works, the lowering of cost of finished construction works is increasingly gaining the attention of businesses Saving manufacturing costs to lower costs of finished construction works will contribute to increase position of the company, increasing revenue and profit, thereby the living standard of employees is also improved, facilities and equipment are constantly being upgraded Through the research process at the company, I highly recommend that the company can now apply some following costsaving measures: - Saving materials costs Materials are the main objects and account for a large proportion in the manufacturing costs of the company Therefore saving materials costs is one of the main directions to lower the costs of finished construction works The company can implement a number of measures to save materials used for construction progress such as: • Building reasonable materials norms, Nguyen Thuy Trinh CQ54/21CL01 104 Graduation thesis Mentor: Ph.D Nguyen Dao Tung • • Reducing losses in the transporting process, Preserving raw materials carefully, strict managing the receipt and • dispatching of materials Establishing close relationships with familiar suppliers to capture the • • • market prices, Setting plans to purchase materials in a scientific and rational way, Studying the use of new materials at reasonable prices, better quality, Making the most use of recovered materials to reduce a small amount of new materials for construction progress but still ensure the construction works quality requirements - Improving labor productivity, reducing labor costs: The company also should have plans to supply sufficient materials as well as construction equipment to avoid the situation that workers have to stop and wait for jobs Besides, It’s is necessary to encourage the application of technical innovations in the construction process to increase labor productivity, In addition, the company should have a timely reward and punishment regime for workers to improve their working spirit, intensity and labor productivity c Suggestions to improve the accounting system: Firstly, improve management, assign appropriate and clear tasks to optimize the advantages of the accounting structure, avoid disproportionate work In the process of working, accountants have cross-checking to improve work efficiency together Nguyen Thuy Trinh CQ54/21CL01 105 Graduation thesis Mentor: Ph.D Nguyen Dao Tung Secondly, the company should regularly organize programs to help employees improve their qualifications: • • Short-term intensive training and retraining organized by the company Create conditions for employees to attend intensive training classes organized by universities, colleges or institutions d Suggestions to using account 335 Currently, the company does not use account 335 to record payables to employees during a period, such as annual leave salary and operating expenses during the reporting period which are deducted in advance, for example: - Expenses in seasonal cessation of construction period, in case construction cessation plan can be set up The expenses payables in cessation period shall be calculated and recorded to operating expenses during the period Accruement and recording of expenses which have not yet incurred into operating expenses during a period, must be calculated strictly (preparing an estimate for expenses approved by the competent agency) and have reasonable and reliable evidences on expenses which have to accrue in the period, to ensure amount of expenses payable recorded in this account in conformity with actual expenses incurred Strictly forbid accruement in expenses contents which are not allowed to be charged to operating expenses In principle, accrued expenses payable must be settled with actual expenses incurred The difference between accruement and actual expenses must be reverted - When accruing into expenses incurred from annual leave salary of workers, the following accounts shall be recorded as follows: Dr 622 - Direct labor costs Cr 335 - Accrued expenses Nguyen Thuy Trinh CQ54/21CL01 106 Graduation thesis Mentor: Ph.D Nguyen Dao Tung -When calculating actual annual leave salaries payable, if the accrued amount is greater than the actual expenses incurred, the following accounts shall be recorded as follows: Dr 335 - Accrued expenses (accrued amount) Cr 622 - Direct labor costs e Suggestions to using account 6274 Fixed assets owned by the company need to be charged depreciation during usage as well as allocate them according to the appropriate depreciation method In addition, fixed assets are only recognized when it is recognized to earn profits to avoid fraudulent in the period Besides, the company should classify and strictly manage between fixed assets belonging to the company and fixed assets, hired machinery temporarily used during the construction process Deduction of depreciation of machines, equipment, production workshops, belonging to the workshops, parts, teams, construction teams: Dr 627 - General production costs (6274) Cr 214 - Depreciation of fixed assets f Suggestions to update the government's accounting policies The company needs to pay attention to the government's accounting policies related to insurance for unemployed people in order to cope with unexpected situations and incidents, typically the problem of labor surplus, lack of jobs because of the disease caused by Covid - 19 in the present Nguyen Thuy Trinh CQ54/21CL01 107 Graduation thesis Mentor: Ph.D Nguyen Dao Tung CONCLUSION Accounting is an important tool for the management of the economy both micro and macro - an indispensable tool in business management of enterprises It can be said that accounting is very important for all types of businesses in the market economy today Completing the business accounting for manufacturing costs and finished goods costsing is essential for each business, it provides timely data for analyzing the operation situation and providing information It is necessary for managers to help businesses better manage themselves, ensure revenue and expenditure compensation and profits, fulfill obligations to the State and improve the lives of officials and employees With the theme "Accounting for manufacturing costs and finished construction works costing in Tuan Cuong Construction Joint Stock Company" in my final graduation thesis, I have a better understanding of the knowledge that I have been studying and studying on the school chair about the organization of accounting work, the method of accounting and bookkeeping and better understand how these issues are applied in practice, accordingly and flexibly Thereby, I also realized the advantages and shortcomings of accounting for manufacturing costs and finished goods costing and determined business results at Tuan Cuong Construction Joint Stock Company, from which I boldly proposed my ideas to complete go on bussiness After four years of studying, training and being taught and imparted the enthusiastic knowledge of teachers at the Academy of Finance, especially with the help of Tuan Cuong Construction Joint Stock Nguyen Thuy Trinh CQ54/21CL01 108 Graduation thesis Mentor: Ph.D Nguyen Dao Tung Company, I had to be able to complete my Graduation Thesis However, due to the short practice time, the issues raised in this thesis are not highly generalized, the resolution is not completely thorough and inevitable shortcomings I look forward to the comments and additional teachers Once again, I would like to thank PhD Nguyen Dao Tung, lecturer of the Accounting Department, the Deputy Director of the Academy of Finance for helping me complete my graduation thesis Sincerely! Nguyen Thuy Trinh CQ54/21CL01 109 Graduation thesis Mentor: Ph.D Nguyen Dao Tung REFERENCES 1, Accounting curriculum, Academy of Finance 2, Jonathan Jingsheng Shi, M.ASCE; and Daniel W Halpin, M.ASCE (2003), Enterprise Resource Planning for Construction Business Management 3, A Griffith, P Stephenson, P Watson (2014), Management systems for construction 4, Loveday A Nwanyanwu (2013), Hire Purchase Strategy of Physical Capital Investment and Financial Performance of Construction Companies: Illustrating from the Nigerian Stock Exchange 5, Huimin Li, David Arditi, M.ASCE, and Zhuofu Wang (2012), Factors That Affect Transaction Costs in Construction Projects 6, Brian Eksteen and David Rosenberg (2002), The Management of Overhead costs in Construction companies 7, M Motiar Rahman (2014), Barriers of Implementing Modern Methods of Construction 8, https://www.accountingcoach.com/blog/what-are-manufacturingcosts 9, https://www.investopedia.com/terms/m/managerialaccounting.asp 10,https://www.myaccountingcourse.com/accountingdictionary/management-accounting 11, Graduation thesis “Accounting for manufacturing costs and product costing in Dong Giao Foodstuff Export Joint Stock Company (DOVECO)” - Pham Minh Trang (CQ53/21.03 - Academy of Finance) and PhD Nguyen Thi Hong Van (mentor) Nguyen Thuy Trinh CQ54/21CL01 110 ... theory for manufacturing costs and finished goods costing accounting in enterprises Chapter 2: Manufacturing costs and finished construction works costing accounting in Tuan Cuong Construction Joint. .. 2: MANUFACTURING COSTS AND FINISHED CONSTRUCTION WORKS COSTING ACCOUNTING IN TUAN CUONG CONSTRUCTION JOINT STOCK COMPANY 2.1 Overview of the enterprise 2.1.1 General information of Tuan Cuong Construction. .. 1.2 Manufacturing costs and finished goods costing accounting 1.2.1 Accounting for manufacturing costs 1.2.1.1 Manufacturing costs classification In industrial manufacturing enterprises, manufacturing