7 ACCOUNTING FOR REVENUES, EXPENSES AND INCOME SUMMARY IN VIET ANH CONSTRUCTION DEVELOPMENT COMPANY LIMITED

MINISTRY OF FINANCE ACADEMY OF FINANCE STUDENT : PHẠM THỊ LINH GROUP CQ54/51.01 : GRADUATION THESIS TOPIC: [ACCOUNTING FOR REVENUES, EXPENSES AND INCOME SUMMARY IN VIET ANH CONSTRUCTION DEVELOPMENT COMPANY LIMITED] Major : English for Finance and Accounting Student code : 165D2202010021 Supervisor : Cao Phuong Thao, MSC Hanoi – 2020 DECLARATION I hereby declare that this graduation thesis is my own work and effort It has not been submitted anyone All of sources of information and data have been used, they have been acknowledgement Hanoi, 10 January, 2020 Student Pham Thi Linh ABSTRACT The development of accounting related to the development of social economy The more developed society is, the more important accounting becomes It becomes an indispensable tool in state and enterprises economic management Nowadays, to exist, the enterprises have to have suitable business strategy and business management Accounting organization plays significant part in the business management and running business Specially, good accounting organization for revenues, expenses and income summary can help enterprises increase return investment ability and develop strongly Besides, income summary helps businesses capture all business activities through indicators reflecting business results and identify clearly the factors affecting business performance, thereby facilitating business development and effective business operations.That reason why all businesses should have good accounting system ,especially, revenue, expense accounting and reporting business result accounting ACKNOWLEDGMENTS A completed research would not be done without any assistance.Therefore, the author who conducted this study gratefully gives acknowledgement to the support and motivation in the duration of doing this thesis First of all, I would like to express my sincere gratitude and gratefulness to my supervisor Mrs.Cao Phuong Thao who helped, supported and encouraged me enthusiastically while I conducted this graduation thesis Her kindly support and continuous advice went through the process of the completion Her encouragement and comments had significantly broadened and bettered my work Without her inspiration, motivation and instructions, the study would have been impossible to be done effectively Moreover, I would like to express my appreciation to the staffs as well as the managers of the departments in Viet Anh Construction Development Company Limited who helped me to conduct data collection for the study to make it more detailed Last but not least, I would like to state my special thanks to approve to my parents for their endless love, care, assistance and motivation to me for the whole of my life; my deeply thanks come to all my friends whose kindly help, care, motivation gave me strength and lift me up all the trouble for the rest of my life LIST OF ABBREVIATIONS No Abbreviation Full phrase VA R Revenues E Expenses IS Income summary 10 11 A No VAT GJ GL IBSB COGS Viet Anh Construction Development Company Limited Accounting Number Value Added Tax General Journal General Ledger International Accouting Standards Board Cost of Goods Sold LIST OF FIGURES AND TABLES Flowcharts: Flowchart 1.1: Accounting entry for direct sales (for company applying 16 Flowchart 1.2: Accounting entry for direct sales (for company applying 17 Flowchart 1.3: Accounting entry for sales through agents .17 Flowchart 1.4: Accounting entry for financial incomes 19 Flowchart 1.5: Accounting entry for others incomes .21 Flowchart 1.6: Accounting entry for trade discounts .23 Flowchart 1.7: Accounting entry for sales returns 24 Flowchart 1.8: Accounting entry for sales allowances 25 Flowchart 1.9: Accounting entry for COGS under perpetual inventory method (for sales through agents) .27 Flowchart 1.10: Accounting entry for COGS under periodic inventory method (for sales through agents) .28 Flowchart 1.11: Accounting entry for COGS under perpetual inventory method ( for direct sales) 29 Flowchart 1.12: Accounting entry for COGS under periodic inventory method 30 Flowchart 1.13: Accounting entry for financial expenses 32 Flowchart 1.14: Accounting entry for Administrative expenses 34 Flowchart 1.15: Accounting entry for selling expenses 36 Flowchart 1.16: Accounting entry for others expenses 38 Flowchart 1.17: Accounting entry for business results 40 Flowchart 2.1: ORGANIZATION SYSTEM OF THE COMPANY 45 Flowchart 2.2: COMPANY’S ACCOUNTING SYSTEM 47 Table: Table 1.0- Chart of accounts TABLE 2.1: Table of esstimaiton of project interrior of Apartment Distric, Ho Chi Minh 53 TABLE 2.2: recording example in GJ 54 TABLE 2.3: Recording example in GL of Account 511 .55 TABLE 2.4: Recording example in GL of Account 131 .56 TABLE 2.5: Recording example in GL of Account 333 .57 TABLE 2.6: Table of Recording example in GJ 59 TABLE 2.7: Table of Recording example in GL of Account 131 .60 TABLE 2.8: Table of Recording example in GL of Account 111 .61 TABLE 2.7: Payment of expenses of electric, water and internet of December 63 TABLE 2.8: Payments demand letters of expenses of electric, water and internet of December 64 TABLE 2.9: recording example in GJ 65 TABLE 2.10: recording example in GL of account 642 .66 TABLE 2.11: recording example in GL of account 111 .67 TABLE 2.12: Table of recording example in GJ 69 TABLE 2.13: Table of recording example in GL of account 642 .70 TABLE 2.14: Table of recording example in GL of account 111 71 TABLE 2.15: Payroll of management department of Decembem 73 TABLE 2.16: Table of caculating for management department of December .74 TABLE 2.17: Salary payment of management department of December 75 TABLE 2.18: Table of recording example in GJ .76 TABLE 2.19: Table of recording example in GL of account 642 .77 TABLE 2.20: Table of recording example in GL of account 111 78 TABLE 2.21: Value added tax invoice 80 TABLE 2.22: Table of recording example in GJ 81 TABLE 2.23: Table of recording example in GL of account 111 82 TABLE 2.24: Table of recording example in GL of account 711 .83 TABLE 2.25: Table of recording example in GL of account 333 .84 TABLE 2.26: Table of transfering in GJ 86 TABLE 2.27: Table of transfering in GL of Account 911 88 TABLE 3.1: Table of statisting expenses of projects .94 TABLE 3.2: Report of administration expenses 95 TABLE 3.3: The paper of confirm payment 96 TABLE OF CONTENTS DECLARATION i ABSTRACT ii ACKNOWLEDGMENTS iii LIST OF ABBREVIATIONS iv LIST OF FIGURES AND TABLES v TABLE OF CONTENTS .viii INTRODUCTION 1.Rationale of the study .1 2.Aims of the study 4.Methodology of the study .2 5.Organization of the study CHAPTER 1:LITERATURE REVIEW 1.1 Overview about Revenues, Expenses and Income summary 1.1.1 Revenues .4 1.1.1.1 Definition of revenues 1.1.1.2 Types of revenues 1.1.1.3 Revenues deductions 1.1.2 Expenses 1.1.2.1 Definition of expenses .5 1.1.2.2 Types of expenses 1.1.3 Income summary 1.1.3.1 Definition of income summary .7 1.1.3.2 Calculating income summary 1.2 Organization of accounting for revenues, expenses and income summary 1.2.1 Requirements and roles of accounting for revenues, expenses and income summary 1.2.2 Organizing of accounting for revenues .8 1.2.2.1 Accounting for revenues from sales and services rendering 14 1.2.2.2 Accounting for Financial Incomes 18 1.2.2.3 Accounting for Others Incomes 20 1.2.2.4 Accounting for Revenue deductions 22 1.2.3 Organizing accounting for expenses 25 1.2.3.1 Accounting for Costs of goods sold 25 1.2.3.2 Accounting for Financial expenses 30 1.2.3.3 Accounting for Administrative expenses 33 1.2.3.4 Accounting for selling expenses 35 1.2.3.5 Accounting for Other expenses 37 1.2.4 Organizing accounting for income summary 39 1.2.4.1 Accounting for Income summary .39 1.2.4.2 Recording method 41 1.2.5 Bookkeeping systems 41 1.2.5.1 General journal 41 1.2.4.1 Journal- ledger 42 1.2.5.2 Journal voucher 42 1.2.5.3 General journal voucher 42 CHAPTER 2: 44 ACCOUNTING FOR REVENUE, EXPENSE AND INCOME SUMMARY IN VIET ANH CONSTRUCTION DEVELOPMENT COMPANY LIMITED .44 2.1 Overview about Viet Anh construction development company limited 44 2.1.1 History and development of company .44 2.1.2 Objectives and operation field of company 44 2.1.3 Features of management system 45 2.1.4 Accounting system organization of the company 46 2.1.4.1 Accounting form, applied accounting policy and reporting system at the 32 Linh Duong Str., Hoang Mai Dist, Ha Noi (Decision No 133/2016 – TT – BTC dated August 26, 2016 by Ministry of Finance) GENERAL LEDGER Year Account Account No 2020 Income summary 911 CU: Viet Nam Đong Grneral Vocher Date Vocher Vocher A No B Date C 31/03/2020 PKT 31/03/2020 31/03/2020 PKT 31/03/2020 31/03/2020 PKT 31/03/2020 Journal Discription D Opening balance Incurred Transfer revenues from sales and services redering Transfer other income Transfer adminitrative expenses 93 Page Row E G Acc Incurred Debit Credit H -1 -2 511 188,455,500 đ 711 100,000,000 đ 642 0đ 69,309,308 đ Total Incurred 288,455,500đ 69,309,308đ 219,146,192đ TABLE 2.27: Table of transfering in GL of Account 911 If the 911 account’s balance is at credit side, it means that the company’s operation is profitable If the 911 account’s balance is at debit side, that the company’s operation is losses 94 CHAPTER 3: RECOMMENDATIONS AND SUGGESTIONS TO IMPROVE ACCOUNTING SYSTEM IN VIET ANH CONSTRUCTION DEVELOPMENT COMPANY LIMITED 3.1 Review about Accounting system of Viet Anh Construction Development Company Limited 3.1.1 Advantages Through many year experience, the accountant department has changed a lot to meet managerial needs, there are some strong points as follows 3.1.1.1 About accounting system - The accounting for sales and business result has ensured the consistency and coherence in terms of scope and method of calculation, some economic standards between the accounting department and other related departments and divisions - Almost incurred selling and administration expenses are totally collected and displayed in the income statement and notes to financial statements This helps pointing out mistakes in determining net sales and net income for the company - All most transactions are recorded completely, timely and matched with accounting requirements Periodic accounting system is applied, which saves a lot of time and efforts for accountants 3.1.1.2 About source documents, accounts, bookkeeping - All original vouchers issued by VA are suitable with Ministry of Finance’s decisions as well as managerial needs Invoices and vouchers are issued only after collecting enough documents and meeting all sales recognitions Invoices and vouchers are arranged and stored chronologically, which facilitates the future examination and uses - Reports related to sales status, selling expenses and administration expenses are prepared weekly, therefore it’s easier for managers to review and consolidate 95 Besides, the company also issues some sub-accounts for easier check – up, recording and reviewing - Each of the five persons in the accounting department is responsible for different accounts and books This task allocation helps to increase the consistency in recording books and facilitate the examination and comparison at the end of the fiscal years - Sales reports are formed weekly by subject and by model, which helps managers to catch the sales status as the earhest convenience - In addition, VA doesn’t apply any sales deductions, which makes the accounting entries for sales easier, simpler and minimizes the possible mistakes - Cost of goods sold is calculated year-end in In-out reports which show the increases, decreases and available balance of products or services Thanks to that, managers can easily realize the present status and predict the future consumption level, and then draw sound decisions - All financial statements used in VA have the same form stated by Ministry of Finance These forms are clear, logical and easy-to- follow 3.1.2 Disadvantages Despite changes to meet the managerial requirements and changes by Ministry of Finance, VA also has some weaknesses Now, after carefully studying the accounting system for sales and services, I can point out some weaknesses as follows: - Despite changes to meet the managerial requirements and changes by Ministry of Finance, VA also has some weaknesses Now, after carefully studying the accounting system for sales and services, I can point out some weaknesses as follows - Although the periodic accounting system saves a lot of time and efforts, this requires a manual check – up (counting at the warehouse) at the end of the fiscal year It is widely known that there are a lot of stuff things for accountants to complete at the end of the fiscal year such as preparing financial statements, printing ledgers, rearrange files… Therefore, if not effectively prioritizing to – lists, accountants could not submit financial statements timely - In selling and administration expenses, accounts 641 and 642 only reflect the total 96 ending balance of sub-accounts Therefore, if the accountant wants to review the detail for selling and administration expenses, he/she needs to open their subaccounts, which takes a lot of time - In internal sales, the assigned accountant only depends on the goods dispatch cum internal bill note It works only when the transaction happens simply It will be a problem if there are more than related transactions in selling internally - For account receivables and account payables, the accountant only uses codes for subject parts (each customer and dealer has one unique code) This may create difficulty if the managers not remember all their names Besides, advertising and marketing expenses take a rather large part in the total selling and administration expenses Therefore, it will be clearer and easier to manage if the sub accounts for these activities will be created - Although financial reports are prepared clearly and logically in accordance with Ministry of Finance’s standard forms, these will be useless if the managers want to compare between two fiscal years 3.2 Suggestions to improve accounting system in Viet Anh Construction Development Company Limited 3.2.1 Requirement to improve accounting system When Vietnam joined WTO and changed to a market-oriented economy, most companies are required to pay more attention to their sales and business activities Therefore, accurate, timely, complete accounting information is very important for their existence From these reasons, it is necessary to enhance and develop an effective accounting system for sales and business result Besides, the more complicated business activities are, the more complex accounting entries are So, the possible accounting system must be changed flexibly, in both form and content to adapt to changes In enhancing the accounting system for sales and business result, the company must comply with following requirements: - Ensuring to follow regulations and laws on accounting issued by Ministry of Finance; - Being suitable with the company’s characteristics and managerialrequirements; 97 - Saving time, money and effort; - Providing timely, complete and accurate accounting information Some improtance requirement have to be remembered in accounting system: - About initial accounting and chart of account: + Initial accounting is the process of recording, booking all economic transactions into accounting vouchers, which are the base for accumulation and conclusion Initial accounting is helpful only when fulfilling all such steps as determining what voucher is needed, how many vouchers will be formed, who is responsible for the vouchers, steps of transferring these vouchers + The current chart of accounts used in most of Vietnamese enterprises is announced by the Ministry of Finance It contains groups of on – balance sheet accounts and off – balance sheet accounts The reflected content, structure and recording methods in these accounts are decided by the Ministry of Finance in advance, which every enterprise must compile with However, the arrangement and usage of this chart of accounts are up to the enterprises Therefore, there will be some mistakes if the enterprise has applied in a wrong way or opened unnecessary sub-accounts or had no management on the chart usage - About accounting books In order to reflect the consumption status, some accounting books must be issued monthly, quarterly and yearly What books will be issued is dependent on the accounting form applied in the enterprise Recording, accumulating and systemizing accounting information to form financial reports is the biggest phase in financial accounting with a huge number of tasks to This phase needs the assigned accountants to be very good at booking Therefore, the application of a system of accounting books compatible with production scope and characteristics as well as the enterprise’s managerial level will promote accounting productivity, provide enough and helpful information for decision making processes - Abount accounting reports: Every company must prepare financial reports in order to consolidate anddisplay 98 accounting information in an effective and easy-to read way For service providing activities, the final result is shown in the income statement including revenues and expenses In accordance with the accounting department and managerial requirements, financial reports will be prepared monthly or annually In conclusion, how to enhance the accounting system for business and business result depends on the accounting department’s performance, the enterprise’s requirements, the regulated accounting decisions by Ministry of Finance and the changes in the whole economy and its markets 3.2.2 Suggestion to improve accouting system - Allocating tasks effectively to accountants VA is an enterprise operating in the field of interior in Vietnam The determination of profit and loss will be determined by each project Therefore, the company should assign an accountant to carefully monitor the cost of each project including construction labor costs, design costs, material costs, and other costs From there, it is possible to determine the exact profit and loss for each project The management will be more effective and accurate I can propose a sample of statistic project expenses as follows: 99 Viet Anh Construction Development Limited Company STATISTING EXPENSES Project: No Expenses Material Labour Unit Quantity Price Total Notes h k hxk Total b CONTACT VALUE TOTAL EXPENSES PROFIT a b a-b TABLE 3.1: Table of statisting expenses of projects - Every month, VA has not yet administration expenses report I propose a sample of administration expenses report used internal company to support management That report is as follow: 100 Viet Anh Construction Development Limited Company 32 Linh Duong Str., Hoang Mai Dist, Ha Noi REPORT OF ADMINISTRATION EXPENSES Month: Unit: VND No Description Amount Administation expenses - Stationery cost Administation expenses - Office tools & small equipments Administation expenses - Salary management department Outside purchasing service cost others Administation expenses - Expenses, water, internet Other cash disbursement expenses Total incurred amount Financial management Chief accountant Prepared by Lương Ngọc Lâm Hoang Thi Minh Nghia Phạm Thị Linh TABLE 3.2: Report of administration expenses 101 - Now, for documents related to payments of a contracts, VA uses only “The paper request of payment” I propose a sample of “The paper confirm of payment” to support payment advances from contracts “The paper of confirm payments” must contain all signatures of the customer and the representative of the company receiving the advance and clearly indicate the amount received, date of receipt it hepls to confirm amount that customer has successfully paid the company This paper will be print copies which have enough all signatures Customer keeps a copy and the company keeps a copy which has the same legal validity - Viet Anh Construction Development Limited Company 32 Linh Duong Str., Hoang Mai Dist, Ha Noi PAPER OF CONFIRM FOR PAYMENT Date: 2nd January,2020 Payer: Nguyen Chau Giang Amount paid: 83.758.000đ In words : Eighty three millions, seven hundred fifty eight thousand./ For: 40% of construction contract value No 02/01/2020HĐTC Payer Receiver Nguyen Chau Giang Pham Duy The TABLE 3.3: The paper of confirm payment 102 CONCLUSIONS In conclusion, the thesis with the topic “Accounting for R, E and IS in VA and suggestions for improvement” has already achieved its aims step by step Firstly, the thesis has completely reflected the theoretical background of accounting for sales and business result Secondly, almost all of accounting activities for revenues, expenses and income summary in VA were listed and analyzed Thirdly, through the above analysis, the strengths and weaknesses of the accounting system for business result were revealed Thanks to understanding the company’s weaknesses of accounting system and the budget limitations as well as managerial level, the thesis has drawn some possible solutions such as improving accounting system, effective task allocation, sub – accounts issuing, sales discount accounts usage, and improvements in accounting report preparation 103 REFERENCES VA’s document sources the first quarter,2020 (1/1/2020 – 31/03/2020) Websites: - www.vneconomy.vn - www.danketoan.com GS.TS Đoàn Xuân Tiên chủ biên, TS Lê Văn Liên Ths Nguyễn Thị Hồng Vân đồng chủ biên với tham gia biên soạn giảng viên Lý thuyết Hạch toán Kế toán Học viên Tài Chính (2014), giáo trình “Ngun lý kế tốn” - 104 APPENDIX Original documents: Appendix 1.1: VAT invoice of liquidating car 105 SUPERVISOR’S JUDGEMENT Supervisor: Cao Phuong Thao, MSC Student:Pham Thi Linh Group: 51.01 Intake: CQ 54 Topic: “Accounting for revenues, expenses and income summary in Viet Anh Construction Development Company Limited.” Mark: - In number: - In word: Supervisor 106 CRITIC’S JUDGEMENT Critic: ………………………………………………………………………… Student:Pham Thi Linh Group: 51.01 Intake: CQ54 Topic: Accounting for revenues, expenses and income summary in Viet Anh Construction Development Company Limited.” Mark: - In number: - In word: Critic  107 ... of accounting for revenues, expenses and income summary 1.2.1 Requirements and roles of accounting for revenues, expenses and income summary In order for requirements of managing revenues, expenses, ... expense and income summary The second aim is studying the accounting work, specially, accounting for revenues, expenses and income summary in Viet Anh Construction development company limited" In this,... Calculating income summary 1.2 Organization of accounting for revenues, expenses and income summary 1.2.1 Requirements and roles of accounting for revenues, expenses and income summary