THEORETICAL BASIS FOR ACCOUNTING FOR REVENUE AND
Overview on construction industry
Construction is a vital sector of the economy, focused on producing essential materials and technical foundations It features unique production processes that set it apart from other industries, significantly impacting the quality and pricing of construction projects These distinctive characteristics also influence revenue and cost accounting for construction contracts within enterprises.
Firstly, construction products are single and individual products
Each construction product is unique, differing in art, design, structure, and location, which necessitates tailored construction organization and methods for each project This uniqueness requires careful management and accounting of revenues and expenses specific to each construction item Additionally, it is essential to track actual production costs closely against estimated costs for effective project oversight.
Secondly, construction time is typically long
In large construction projects, the cost period is typically defined by the completion of work items or payment schedules, influenced by the design structure and the financial capacity of the construction unit This complexity complicates the collection of revenue and expense documentation, making accurate accounting essential for determining business results Construction enterprises can recognize actual revenue based on the amount of work completed, employing three methods to ascertain this value, while also adhering to contractual terms for revenue recognition.
Thirdly, construction products have a relatively long period of use
Construction projects have a long lifespan, making it challenging to rectify any mistakes that occur during the process Given the significant financial investment involved, errors can lead to substantial waste and serious long-term repercussions Consequently, it is essential to prioritize not only financial management but also rigorous inspection and supervision of work quality throughout the construction phase.
Fourthly, construction activities often take place outdoors so they are influenced by weather, natural and climatic conditions
Disruptions in the construction process lead to a lack of harmonization among enterprises, negatively impacting unfinished products, construction materials, equipment, and worker health This disruption affects revenue and cost accounting for construction contracts, as work interruptions can delay acceptance times and revenue recognition, while losses from objective factors complicate cost assessments.
Construction is a unique manufacturing industry that possesses distinct characteristics compared to other business sectors As a result, effective cost accounting and revenue management in construction entities necessitate a systematic approach This ensures the delivery of accurate and objective information regarding the production activities within construction enterprises.
Overview on construction contract
According to Clause 1 Article 138 of the Construction Law 2014, construction contracts are defined as civil contracts that are formally established in writing between principals and contractors These contracts are intended to execute either partially or entirely the work involved in construction investment activities.
The above definition is also recorded in Clause 1, Article 2 of Decree No 37/2015/ ND-CP Detailing construction contracts
From a management viewpoint, a construction contract is a civil contract characterized by significant economic factors, extensive scale, and prolonged execution periods It encompasses the contract's content and the contractor selection process, as well as the contractual rights and obligations of the parties involved, which may also affect third parties.
A construction contract, as defined by VAS 15, is a formal agreement for the construction of an asset or a set of properties that are interconnected in design, technology, function, or mechanical usage.
A construction contract is a written agreement between parties to construct a single asset or a combination of interdependent properties, focusing on design, technology, function, or intended use In situations where multiple contracts are signed with a customer or several customers, each featuring its own design yet closely related, it is essential to understand how these construction contracts are organized and integrated.
The combination and division of construction contracts must meet the following basic requirements in order to define a separate contract or a group of contracts:
When a construction contract encompasses multiple properties, each property is treated as an independent contract if three key conditions are satisfied: the design and estimate for each property are established, negotiations can occur individually with each contractor, and the customer retains the right to approve or reject the contract terms for each property Additionally, it must be possible to ascertain the revenue and costs associated with each asset.
A construction contract is defined when multiple contracts are signed with a customer or several customers, provided that three conditions are simultaneously fulfilled: the contracts are negotiated as a package deal, they are closely related as parts of a single project with an estimated gross profit, and they are executed concurrently or as part of a continuous process.
When a customer requests the construction of an additional property, the original contract may be modified to include this new construction An additional property is classified as a separate construction contract if it significantly differs in design, technology, and function from the assets outlined in the original agreement, or if its contract price is negotiated independently of the original contract price.
Construction contracts can vary significantly based on the size and nature of the project, the execution conditions, the type of work involved, and the relationships between the parties These contracts can be classified in various ways, with one primary method being the determination of the contract's value.
A fixed-price construction contract is an agreement where the contractor commits to a set price for the entire project or a predetermined unit price for each completed unit While the initial price remains constant, adjustments may occur if specific conditions arise, such as increased costs or changes in the scope of work, typically through mutual agreement on the unit price.
In a fixed-price construction contract, it is crucial for the contractor to effectively allocate funds at each phase and accurately predict price fluctuations Failure to do so can lead to challenges in cost management, ultimately jeopardizing the success of the construction project.
A construction contract with additional costs allows the contractor to be reimbursed for actual expenses incurred, along with an extra amount determined either by a percentage of these expenses or a fixed fee.
Under this contract type, customers cover all reasonable actual costs, including inflation of input prices Enterprises receive either a percentage of the allowable expenses or a fixed fee as additional payment This arrangement is particularly beneficial for projects with extended construction timelines, as it mitigates risks for contractors amidst fluctuating raw material prices.
Certain construction activities may exhibit traits of both fixed-price contracts and cost-plus contracts, such as those with a maximum price agreement Categorizing construction contracts in this manner significantly enhances the flexibility of construction firms, allowing them to optimize production and business operations, reduce costs, boost labor efficiency, and promote timely project completion while ensuring quality standards are met.
The construction contract outlines that the contractor will receive payments based on a predetermined schedule set by the customer, ensuring compensation according to contractual terms, regardless of the actual progress of the construction work.
In construction contracts that impose strict regulations on start and end dates, it is essential to monitor overall project timelines without detailing progress on individual components While these contracts enhance performance, companies must remain highly accountable for both the progress and quality of the construction work throughout the project.
Accounting for revenue and costs in construction contract
Revenue and expenses from construction contracts are recognized based on accrual accounting, reflecting actual profitability from completed work This widely adopted accounting model supports investors and capital markets globally Dynamic accounting enhances the accurate evaluation of business performance through accrual principles Consequently, this research thesis is grounded in the perspectives of dynamic and accrual accounting.
Under IFRS 15, entities recognize revenue by reflecting the transfer of promised goods or services to customers, ensuring the amount recognized corresponds to the expected consideration for those goods or services.
According to VAS 14 – Revenue and Other Incomes, revenue represents the total economic benefits an enterprise receives during an accounting period from its regular business and production activities, which contribute to the growth of equity capital.
Revenue generated by a business is linked to its operations, but from an accounting standpoint, revenue recognition occurs at specific times when certain conditions are met These conditions for revenue recognition are typically established based on defined criteria.
- Enterprises that have gained or will gain economic benefits from the transactions generating revenue;
- The results are determined reliably (arising on the basis of transactions of the enterprises' activities);
- Revenue creation activities have been basically completed
Under VAS 15 – Construction Contracts, construction contract revenue encompasses two key components: (a) the initial revenue as specified in the signed contract, representing the estimated price at the outset, and (b) any adjustments to contract performance, including bonuses or other payments, that may affect the revenue and can be reliably measured.
Construction contract revenue comprises the initial amount specified in the original agreement, along with potential bonuses and increases awarded when contractors meet or exceed specific criteria Additionally, revenue may be adjusted based on factors such as customer delays, errors in engineering or design criteria, and disputes regarding contract performance changes It is essential that these bonuses and adjustments are reliably determined to ensure accurate revenue reporting.
The revenue from construction contracts is based on the fair value of amounts earned or expected to be earned, influenced by various uncertainties related to future events These uncertainties include design changes from the original contracts, fluctuations in initial pricing factors, and potential delays by investors in accepting completed work To mitigate these risks, it is essential to maintain high-quality inputs and adhere to technical progress throughout the construction process.
According to VAS 15, revenue from construction activities is recorded in two cases:
In construction contracts that stipulate payment based on a schedule, revenue recognition occurs when the contractor can reliably estimate the project's progress This means that revenue is recognized in proportion to the work completed, as determined by the contractor on the financial statement date, regardless of the amounts billed or invoiced according to the scheduled progress.
In construction contracts where payment is based on the value of work performed, revenue is recognized in proportion to the work completed, as confirmed by the customer This revenue is documented on the invoice issued during the project If the construction work is completed within a single financial year, revenue can be recorded at the project's conclusion.
The method of recording revenue in construction is straightforward; however, the reliability of estimated construction performance requires clarification Given the unique characteristics of the construction industry, each contract type presents distinct estimates based on its specific terms, making it challenging to achieve reliable construction result estimates.
In fixed-price and additional cost construction contracts, reliable performance assessment is indicated when enterprises can derive economic benefits from the agreements If there is uncertainty regarding the collectability of certain items included in the contract's revenue, these unearned amounts should be recorded as costs in the income statement.
According to VAS 15, enterprises can select one of three methods to determine revenue for completed work, depending on the specific nature of their construction contracts.
(1) Percentage (%) between the expenses incurred part of the completed work at a time compared to the total estimated cost of the contract; or
(2) Assess the completed work; or
(3) Percentage (%) between the completed construction and installation volume and the total construction and installation volume to be completed in the contract.”
1.3.1.3 Accounting for revenue a If the construction contract specifies that the contractor will be paid according to the schedule
According to accounting documents reflecting revenue corresponding to the completed work (not invoices) by contractors themselves, the accountants shall record:
Dr 337: Progress billings for construction contracts
The accountant will document the invoice aligned with the planned schedule, ensuring it accurately reflects the payment amount that customers are obligated to pay as outlined in the contract.
Cr 337: Progress billings for construction contracts
Cr 3331: Value Added Tax - output b If the construction contract specifies that the contractor will be paid according to the value of work performed
Based on the accounting invoice accounting the revenue for the contractor, the accountant shall record:
Dr 111/112/131: Cash/ Cash at bank/ Trade receivables
Cr 3331: Value Added Tax - output
Dr 632: Costs of goods sold
The total cost of construction activities in enterprises encompasses all expenses related to labor, materials, and other essential costs incurred during the construction process This includes the construction contract cost, which covers all expenditures associated with the contract from its signing to its completion.
Contract expenses include costs incurred during negotiation if they can be distinctly identified, reliably estimated, and are likely to lead to a signed contract However, if these expenses have already been recorded as production and business costs in the period they were incurred, they will not be classified as construction contract expenses once the contract is signed in a subsequent period.
CURRENT ISSUES OF ACCOUNTING REVENUE AND COSTS OF
Overview of Ho Chi Minh Museum Construction JSC
Transaction Name: HOCHIMINH MUSEUM CONSTRUCTION JOINT STOCK COMPANY
The Executive Board is comprised of five members, two of whom are senior board members The Vice Chairman is the Executive Director
The Company’s Headquarter is located at 48A Lang Ha, Dong Da District, Hanoi Head office is at 381 Doi Can Ward, Lieu Giai, Ba Dinh District, Hanoi
The Company has representative offices and/or branches in some provinces and cities in Vietnam, as well as in foreign countries in accordance with the law
Through 35 years of development, Ho Chi Minh Museum Construction Company has undergone many changes in its name, legal form and size of the business
The Ho Chi Minh Museum Construction Company, established on July 30, 1975, was initially known as Construction Site 75808 under the Ministry of Construction It was created following decision number 389/BXD-TC by the Minister of Construction to oversee the construction of the Ho Chi Minh Mausoleum.
It was renamed again in 1985 to Ho Chi Minh Museum Construction Company, under the Hanoi Construction Corporation, by Decision No 618/BXD-TCCB on April
In 1993, the organization underwent a transformation into a State Enterprise under Decree 388/HDBT and was subsequently renamed the Ho Chi Minh Museum Construction Company, following Decision No 144A/BXD-TCLD issued by the Ministry of Construction on March 26, 1993.
In 2005 it was Ho Chi Minh Museum Construction Joint Stock Company according to Decision numbered 2055/QĐ-BXD, dated October 31, 2005 of Ministry of Construction
The Company has business registry number of 0103010768, given by the Department of Planning and Investing of Hanoi, on February 9, 2006, recognizing Headquarter at 381 Doi Can, Ba Dinh, Hanoi
The Company was recognized as in Category I by Decision No 1218/BXD- TCLĐ dated September 21, and Decision No 1554/QĐ-BXD dated December of the Ministry of Construction
In 2018, divested all state owned capital
The Company has developed numerous strategically designed political and diplomatic structures, including the Hall of Ba Dinh, the Ho Chi Minh Mausoleum, the Ho Chi Minh Museum, the Van Phuc Diplomatic Compound, the Vietnam Meeting Centre, and the Bac Son Martyr Monument.
- Construction of industrial, public, civil works, housing, transportation works (roads, bridges, ports), irrigation works (dykes, dams, canals)
- Interior decoration, trading houses, construction materials, manufacturing concrete structures, metal accessories for construction
- Construction of foundations and infrastructure
- Investment and development of infrastructure of urban areas and industrial parks
Here is the organizational chart of the Company:
Figure 2.1 - Organizational Structure of Ho Chi Minh Museum Construction JSC
Under the control of the board of management and related departments (Dep.), the Company is organized into 10 factories, a construction consultancy, 2 condominium management boards, 8 construction teams and workshops
The board of directors of the company consists of a general director and two deputy directors:
The General Director of the Company oversees all aspects of management and operations, directly leading quarterly and annual planning efforts This role includes organizing personnel and implementing commendation programs to recognize employee achievements.
Deputy General Directors are responsible for overseeing the company's production and business operations on behalf of the General Director, as designated by the Managing Board The company's management structure includes the General Director and appointed Deputy General Directors, who collaborate with specialized departments to ensure effective governance.
2.1.4 Some performance indicators of the Company
Table 2.1 – Debt-to-assets ratio of the Company
(Sources: Synthesized from financial statements in 2017, 2018, 2019)
During the three-year period, total assets experienced growth until 2018, followed by a decline in 2019, while total debt showed a decrease by the end of 2019.
From 2017 to 2019, the Company's debt-to-assets ratio indicated a reliance on debt exceeding its assets, particularly in 2017, where all ratios surpassed 0.5 This situation highlighted a higher financial risk and weaker solvency for the Company However, over the three-year period, the debt-to-assets ratio showed a significant decline, suggesting a shift towards reduced reliance on debt for financing.
Table 2.2 - Net profit margin of the Company
(Sources: Synthesized from financial statements in 2017, 2018, 2019)
The Company's 2019 net income is smaller than 2018 mainly due to a reduction in the work warranty of 2019 compared to more than 2018
From 2017 to 2019, the net profit margin ratio declined due to a decrease in both revenue and net income This downturn was primarily influenced by a government policy implemented between 2016 and 2017 that tightened public investment, resulting in the company’s failure to secure numerous projects and a significant drop in revenue in 2017.
2017 to 2019, there was an increase in revenue, however, this indicator still shows a decrease due to the raise in borrowing cost and administrative expenses.
Organizing accounting work at Ho Chi Minh Museum Construction JSC
The Company utilizes a centralized accounting system where all financial tasks are handled by the accounting department Within the construction teams, a small group of 1 to 4 employees is responsible for managing and monitoring work hours, summarizing completed tasks, and distributing salaries among staff and collaborators Additionally, these employees collect and compile accounting vouchers and documents, regularly forwarding classified materials to the accounting department for comprehensive payment processing.
Upon receiving accounting documents, the accounting department systematically checks, classifies, and processes them, ensuring accurate record-keeping and summarization This meticulous approach provides essential accounting information for effective management and administration At the conclusion of the accounting year, the department assesses business performance, meets state obligations, and prepares the final financial statements.
The accounting department of the company is comprised of eight individuals tasked with overseeing the entire accounting process To enhance efficiency, the department is organized into several specialized sections, each managed by one or two team members These interconnected sections work together to create a comprehensive, balanced, and harmonious accounting system.
Figure 2.2 - Organizational accounting department structure
The Chief Accountant plays a crucial role in overseeing and directing accounting operations, ensuring compliance with management reporting requirements This position is responsible for the accuracy and integrity of financial information within the organization.
The Deputy of the Accounting Department assists the chief accountant in overseeing the company's accounting functions This role involves collecting and calculating costs, determining business results, and managing detailed accounting operations, including revenue tracking.
With the remaining accountants, they are assigned tasks based on the part they are in charge
The company's financial statements, denominated in Vietnamese Dong (VND), are prepared in compliance with the Vietnamese Enterprise Accounting System as outlined in Circular 200/2014/TT-BTC and the Vietnamese Accounting Standards (VAS) issued by the Ministry of Finance.
The Company operates on a financial year that runs from January 1 to December 31 To meet management needs and align with its unique acquisition strategies and business characteristics, the Company utilizes detailed accounts.
The financial statements of the Company include:
+ Notes to the Financial Statements.
Current issues of accounting revenue and costs of construction contract in Ho
2.3.1 Current issues of construction contracts of the Company
The Company's construction contracts are primarily categorized based on the method of acquisition, specifically through competitive bidding or by direct appointment of a contractor.
Bidding involves bidders submitting proposals based on the investor's solicitation, requiring essential details in the bidding documents such as financial capacity, technical expertise, experience, and cost estimates The investor organizes the bidding process and selects contractors based on predetermined criteria, with the winning contractor being the one that successfully participates in the bidding and secures the bid.
Direct contractor appointment involves the investor submitting a request dossier, which initiates the process of assessing and evaluating the contractor's capabilities This process determines which contractor meets the selection criteria Subsequently, the chosen contractor prepares and submits both a technical proposal and a financial proposal for the investor's bid evaluation.
When an investor chooses a contractor through bidding or direct appointment, a construction contract is established based on mutual agreement The initial contract value is determined by the contractor's estimated price in bidding scenarios or the approved package estimate in cases of direct appointment.
The following documents are considered inseparable from construction contract as:
- Documents approving the bidding results;
- Decision on appointment of contractor;
Most of the company's construction contracts are fixed price agreements, but these prices can be adjusted based on specific terms outlined in each contract Adjustments may occur due to changes in state salary policies, new regulations affecting construction investment costs, or if the workload increases by more than 20% beyond what the contractor was initially expected to manage Additionally, modifications in construction design requested by the investor may also warrant a price adjustment.
The fixed price is determined in the contract by different methods depending on each type of construction contract, specifically:
- For bidding: The fixed price stated in the contract is the approved winning bid price which is approved on the basis of bids prepared by contractors
The fixed price outlined in the contract represents the agreed-upon amount between Party A (the investor) and Party B (the contractor), based on Party A's estimated price derived from the technical construction designs.
About payment method of the contract:
In most bidding projects, Party A (the investor) provides an immediate capital advance of 15% of the contract price upon the contract's commencement Subsequent payments are made based on the capital arrangement plan set by the relevant authority and the construction progress of Party B Once the project is completed, both parties will create handover minutes and finalize the contract Additionally, a retention value ranging from 5% to 10% is withheld for warranty purposes in accordance with the Construction Law.
After the contracts are signed for direct contractor appointments, Party A is required to advance up to 20% of the contract value to Party B This advance payment from Party A is contingent upon the investor's prior advance to Party A.
A The advance payment is commenced when the work reaches 40% of the payment volume and all advances are fully recovered upon payment of 80% contract value Party A pays Party B when the investors pay Party A for the volume of Party B's execution Party A shall pay Party B on the basis of the contract unit price, the accepted acceptance volume and the investor accepts payment after receiving Party B's request for payment Party B will receive the payment within 7 days from the date the bank informs the investor's payment is transferred to Party A’s account in condition that Party B has requested for full payment to Party A
Most of the payment agreements between the investor and the Company during the construction process are now made according to the amount of the work performed:
Upon completion of a work item, the Company will request the investor's acceptance of the finished work Once the investor agrees, both parties will establish a check and acceptance board that includes representatives from both Party A and Party B, as well as representatives from Party A's construction supervision consultancy unit.
Once the parties finalize the volume of completed construction items, acceptance minutes will be prepared The contractor will then create a price list based on these acceptance minutes, using the winning bid price, which will be submitted to the supervising consultancy unit of Party A for confirmation This price list serves as a crucial document in the project’s financial oversight.
2: Price list for HUD Nha Trang Construction Contract – Period no 13) , the investor will make payment to the contractor
2.3.2 Current issues of accounting for revenue in construction contracts of the Company
2.3.2.1 Current issues of the content of revenue in construction contract
Revenue from a construction contract refers to the total cash and cash equivalents generated from construction activities Accurately assessing this revenue is crucial for the Company to evaluate the benefits derived from contract performance and to assess the overall outcomes of the construction project.
Usually the revenue of the construction contract in Ho Chi Minh Museum Construction JSC includes:
- The amount of money that the Company collects from the volume of completed work items, which is accepted on the price list accepted by the investor
- The proceeds from the depreciation of input costs (if the contract stipulates and the investor accepts payment)
- Amounts collected by the Company due to design changes and workloads performed in the contract
In addition to standard revenues, the Company earns bonuses for completing contracts ahead of schedule and receives payments from investors for issues caused by the investor, such as delays or design errors, as outlined in the contract According to VAS 15, these payments are considered part of the revenue from construction contracts; however, the Company typically records them as other income (Account 711) since they are not included in the price list Consequently, the construction activity revenue reported by the Company does not fully capture these payments, even though they are infrequent and of relatively low value.
2.3.2.2 Current issues of revenue recognition
The timing of revenue recognition from construction contracts varies based on the specific characteristics of the construction work, the type of work involved, and the terms outlined in the contract.
In large-scale construction contracts with extended timelines, after conducting acceptance tests for completed work items, the Company utilizes the acceptance records to create a price list based on the winning bid Once the investors approve this price list, the accountant records the revenue from the construction contract and issues an invoice to the investor for payment.
Assess accounting situation for revenues and costs at the Company
The Company utilizes fixed-price construction contracts that include provisions for price adjustments in response to rising input costs or government policy changes This approach aligns well with the typical characteristics of construction contracts in Vietnam, where contracts tend to be smaller in scale and are supported by detailed technical designs and accurate cost estimates established prior to construction.
Currently, the Company typically enters into construction contracts based on the volume of work completed, allowing for reliable revenue recognition that aligns with customer-verified acceptance records.
The company implements cost accounting by establishing a cost estimate at the contract signing stage, which serves as a foundation for determining material, labor, and production costs for each construction project This approach enables the company to optimize capital utilization and continuously enhance efficiency Additionally, all expenses related to each construction contract are meticulously tracked and documented.
Lastly, the contents presented on the FS comply with the requirements of accounting regime and VAS
Many construction contracts signed by the Company typically utilize a fixed cost structure through appointment contractors or bids While this approach is suitable under current conditions, it poses significant risks if the Company fails to anticipate potential incidents that could negatively affect these contracts Therefore, for large-scale projects with extended timelines, numerous construction elements, complex technical designs, and various uncertainties, opting for contracts that allow for additional costs can help mitigate risks for the Company.
2.4.2.2 For revenue a About determining the revenue content of a construction contract
The company has clarified its revenue composition, noting that while certain earnings, such as bonuses from investors for early contract completion, are technically part of construction contract revenue, they are not recognized as such Instead, these bonuses are classified under other income (Account 711), highlighting a distinction in revenue reporting practices.
Cr 711 b About the accounting for revenue of construction contract:
Revenue accounting is based on the value of work performed, but the Company records revenue solely using the price list, disregarding VAT invoices, which are only utilized for declaring output VAT and customer receivables This practice does not align with current accounting standards and regulations regarding VAT invoice management Regulations state that when a construction contract specifies payment based on work volume, the company must issue a VAT invoice upon acceptance of the price list by the investor, using this invoice as the basis for revenue recognition.
As the Company evolves and enters into various contracts with differing terms, such as progress-based construction contracts and those with additional costs, it is essential to explore diverse methods for recording revenues and costs This knowledge will enable the Company to accurately determine completed work and effectively apply suitable revenue and cost recognition strategies tailored to each specific contract type.
Besides, there are many cost items should be prescribed in the cost of construction contract but not as: a About borrowing cost:
The Company currently records all loan interest as a financial expense (Account 635), without distinguishing between capitalizable and non-capitalizable interest In accordance with Standard 16 on borrowing costs, any interest eligible for capitalization should be included in operating expenses, highlighting a potential area for cost reduction.
Cost reductions in construction activities, such as the recovery of scrap and the disposal of machinery and equipment, are not classified as a decrease in expenses Instead, they are recorded as an increase in other income under Account 711 Additionally, considerations regarding security costs must also be taken into account.
There is a misclassification of the cost of hiring security guards for the account 627 because of the security guard is not directly involved in the construction process
The accounting treatment for these expenses is inadequate, resulting in an incomplete and inaccurate cost collection for construction contracts This inconsistency among construction enterprises arises from non-compliance with standardized accounting practices, ultimately impacting the comparability of financial information both within individual companies and across the construction industry.
The company's financial statements effectively illustrate the revenue and costs associated with construction contracts according to the Vietnamese accounting standards However, they do not disclose the methodology used for determining the completed work of a construction contract, nor do they provide the total accumulated revenue recorded for these contracts up to the reporting date.
Chapter 2 of the thesis evaluates the current state of financial accounting for revenue and costs in construction activities within the Company, highlighting both achievements and existing challenges It identifies the advantages and disadvantages of the accounting system, revealing the underlying causes of shortcomings related to state legal documents and enterprise practices This analysis serves as a foundation for proposing solutions to enhance revenue and cost accounting in construction activities, which will be further explored in Chapter 3.
COMPLETION OF ACCOUNTING FOR REVENUE AND COSTS IN
Solutions to complete revenue and cost accounting of construction contracts
To accurately reflect the costs and revenues of construction contracts in line with the company's development trends, the construction industry, and international economic integration, it is essential to address key aspects of accounting for revenue and expenses in construction activities.
To reduce risks when transitioning from a fixed-price contract, companies should explore negotiating with investors for a hybrid contract that combines elements of both fixed-price and cost-plus contracts This approach can provide flexibility while ensuring that both parties' interests are protected.
To reduce potential disputes during contract execution, it is essential for the Company to not only adhere to standard terms but also to carefully outline and specify key agreements within the contract at the time of signing.
- Each party's liability for the property under construction
- Each party's liability for the terms of the contract
- Conditions for changing the contract value
Understanding the conditions for modifying a contract's value during its execution is crucial for all parties involved This clarity helps minimize potential disputes throughout the contract's implementation Additionally, it ensures that the construction contract is managed effectively, facilitating accurate cost and revenue estimates for the completed work.
The Company must thoroughly investigate the requirements for signing the construction contract as outlined in Circular 04/2005/TT-BXD, which serves as a crucial legal framework detailing the payment procedures between the investor and the contractor.
3.1.2.1 About determining the revenue content of a construction contract
Accurately determining the revenue from a construction contract is essential for the company to assess the total profit generated while ensuring that the information remains honest and beneficial as provided by the accountant The revenue recognized from a construction contract must encompass specific elements to reflect the true financial performance of the project.
- Revenue recorded in the original contract
- Increase or decrease amounts when performing contracts, bonuses and other payments if these amounts are likely to change the revenue, and can be reliably determined, including:
Revenue changes due to the investor's request for the scope of work performed in the contract Investors agree to adjust revenue in the case of price fluctuations during construction
Additional bonuses paid by the investor to the Company if the Company meets or exceeds the requirements Not into account 711 as the Company does till now
If a contractor does not adhere to the project schedule or breaches the quality assurance standards outlined in the contract, they may face penalties These penalties will be deducted from the total revenue of the construction contract.
Any additional payments received by the contractor from the investor or another party, intended to cover costs not included in the original contract price, should be accurately reflected in the revenue of the contract.
3.1.2.2 About the accounting for revenue of construction contract:
The Company's accounting methods for recognizing revenue from construction contracts align closely with current regulations However, to enhance compliance with evolving standards and regulatory changes, certain adjustments to the accounting process should be considered.
After the investor approves the price list, the Company will use it to generate a VAT invoice The accountant will then summarize the completed construction work for the period using the VAT invoice, the accepted price list, and the record of acceptance Revenue will be recorded based on the VAT invoices and the price list approved by the investors.
3.1.2.3 About the method of determining the revenue of a construction contract
At the conclusion of each accounting period, as stipulated in the contractual agreement, both the Company and the investor must conduct an inventory count to assess the amount of work completed This assessment will rely on pre-agreed technical stops, and the investor is required to sign off on the completed work, thereby committing to pay the Company the corresponding revenue The Company will then apply the agreed-upon price to the price list, generate VAT invoices based on this list, and record the revenue for the work completed under the construction contract.
In addition to the current methods for determining revenue and costs of completed work, the Company can explore various alternative determination methods tailored to specific types of contracts.
When an enterprise engages in a construction contract with a fixed cost, which includes both non-negotiable prices and adjustable prices, the revenue is calculated using a specific formula.
Total contract revenue is recognized up to the specified time
Total estimated cost of the completed work volume up to the specified time
Total estimated cost of the contract x
Total estimated revenue of the contract
This method is ideal for large-scale projects like hydroelectric construction, which involve numerous work items, substantial workloads, and complex construction techniques Due to the challenges in accurately collecting actual costs, it is essential to rely on estimated costs for budgeting and planning.
Revenue recognized in a period is determined by the following formula:
Contract revenue is recognized in the period
= Total contract revenue is recognized up to the specified time
- Accumulated revenue of the contract has been recorded in the previous period
When implementing this method, it is essential for the Company to reach a prior agreement with the investor regarding the revenue determination method for signed construction contracts The estimated revenue for each period serves as the foundation for billing customers and making accounting entries, as well as determining the immediate payment amounts that investors owe to the enterprises based on contractual commitments.
- In the case of an enterprise applying a construction contract with an additional cost, the estimated revenue of the contract is made in the following cases:
Conditions for implementing solutions and recommendations
In my opinion, these conditions must exist both from the State and the authorities and from the business
3.3.1 From the State and the authorities
These conditions are of a macro nature and must be carried out from the Government to the relevant authorities Things to do are:
The legal environment significantly influences overall economic growth and the development of businesses It is essential for the State and relevant authorities to review and refine legal documents pertaining to accounting and financial operations of enterprises, ensuring consistency across these regulations.
The Ministry of Finance must review and revise the existing accounting regime due to significant discrepancies between the Accounting Law, Accounting Standards, and current practices Additionally, Vietnam is set to adopt IFRS in the near future to align with global accounting standards.
The Ministry of Construction must persist in updating and refining regulations concerning construction contracts, as well as establishing norms and unit cost estimates for each province and city This initiative aims to enhance legal frameworks in the construction sector, thereby facilitating greater operational flexibility and efficiency for construction enterprises.
Pay attention to human factors
To build a skilled team of accountants and auditors that meets the demands of the market economy, it is essential to create a supportive work environment that fosters career development and qualification enhancement This initiative will help Vietnamese accounting professionals integrate into regional and global markets The government and relevant authorities must expand training formats while ensuring stringent oversight of training content to maintain quality Universities should introduce essential new subjects related to international accounting standards and practices from developed economies, enabling students to acquire the necessary knowledge for their future careers.
It is necessary to organize the inspection and control of the quality of accounting information
To enhance the professional qualifications of accounting, particularly in revenue and construction cost accounting, the State must implement thorough inspections and quality controls This includes clearly defining the responsibilities of management agencies in overseeing accounting practices within businesses Additionally, strengthening the Vietnam Accounting Association is essential for establishing it as a credible professional organization in the fields of accounting and auditing.
3.3.2 From Ho Chi Minh Museum Construction JSC
The Company serves as the primary platform for directly managing revenue and cost accounting related to construction contracts To enhance its operations, it is essential for the Company to not only study accounting standards for construction contracts but also to adhere to the guiding documents issued by the Ministry of Finance and to consult relevant materials from the Ministry of Construction.
- Recognizing the role, importance and effectiveness of applying VAS 15 to the accounting of revenues and expenses of construction contracts
- Mastering, understanding and applying flexibly and effectively VAS 15 and policies, regimes, circulars related to accounting in general and joint accounting revenues and expenses of construction contracts in particular
Organize training programs for managers and accountants to stay updated on the latest accounting standards, policies, and regulations in the construction sector Focus on the gradual implementation of IFRS 15 – Contracts with Customers, specifically in accounting for revenue and expenses related to construction activities.
To ensure effective accounting practices within the Company, management and accounting personnel must adopt a proactive and positive approach by continuously researching and updating their knowledge of relevant standards, policies, and regulations This commitment to learning is essential for aligning with the evolving economic landscape and market trends.
- Facilitate equipping other material conditions to help accountants improve their ability to update and apply effectively new standards and policies
Chapter 3 of the thesis examines the essential requirements for accounting revenue and expenses related to construction contracts, grounded in both theoretical studies and the practical realities of the Company’s accounting practices It proposes solutions to enhance the accuracy of revenue and cost accounting for construction contracts while also analyzing the necessary conditions and measures for implementation by both state authorities and the Company.
This thesis analyzes the theoretical framework of revenue and expense accounting for construction activities within the Company, taking into account the current financial and economic conditions It highlights the necessity for improved design and implementation of revenue and cost accounting for construction contracts Consequently, the thesis proposes several solutions aimed at enhancing the accounting of revenues and expenses in construction activities, focusing on practical approaches from a financial accounting perspective.
To effectively manage revenue accounting for construction activities, it is essential to accurately determine the revenue components of construction contracts This involves recognizing and recording revenue in compliance with established accounting standards for construction contracts.
+ Completing accounting of construction cost of construction activities
+ Completing the disclosure of information related to construction activities on
The thesis also offers a number of recommendations to implement solutions from the State and the authorities, and towards the Company
As construction enterprises continue to evolve, effective management of revenue and expenses related to construction contracts is crucial for enhancing competitiveness The adoption of VAS 15 - Construction Contract enables these enterprises to refine their accounting practices, ensuring accurate tracking of construction activity finances This alignment with international standards not only facilitates compliance with governance requirements but also supports businesses in navigating the complexities of economic integration.
The completion of accounting for revenue and costs in construction contracts at Ho Chi Minh Museum Construction Joint Stock Company, guided by PhD Nguyen Bich Ngoc, has led to significant advancements in compliance with Vietnam Accounting Standard 15 This graduate thesis highlights the essential contributions made to enhance the accuracy and efficiency of financial reporting in the construction sector.
- Systematize some basic theoretical issues about revenue and cost accounting in construction enterprises according to VAS 15 - Construction contract These are important theoretical basis for research and implementation in reality
- Analyze and assess the status of determining the content of revenue and costs of construction contracts and the reality of revenue and costs accounting
This thesis offers various solutions and recommendations for effectively completing construction contracts, focusing on the agreed-upon terms It emphasizes the importance of clearly defining the content and methods for recording expenses and revenues related to construction activities Additionally, it outlines the appropriate accounting practices and presentation of information pertaining to construction activities in financial statements.
Despite limited awareness and experience, the thesis inevitably faces shortcomings The author eagerly anticipates constructive feedback and guidance from instructors to enhance the quality of the work.
Bộ Tài chính (2003), Luật kế toán, hệ thống chuẩn mực kế toán Việt Nam, Hà Nội
Bộ Tài chính (2006), Hệ thống kế toán Việt Nam - Quyết định 15/2006/QĐ-BTC ngày 20/3/2006, Nxb Tài chính, Hà Nội
Bộ Tài chính (2009), 26 chuẩn mực kế toán Việt Nam và toàn bộ thông tư hướng dẫn các chuẩn mực, Nxb Thống kê, Hà Nội
Bộ Xây dựng (2007), Thông tư số 06/2007/TT-BXD ngày 25/7/2007 hướng dẫn hợp đồng trong hoạt động xây dựng, Hà Nội
Hà Nội, ngày 17 tháng 09 năm 2018
HỢP ĐỒNG THI CÔNG XÂY DỰNG
Dự án HUD BUILDING NHATRANG bao gồm tổ hợp chung cư và văn phòng, với gói thầu XD-Thân-ĐC chịu trách nhiệm thi công xây dựng kết cấu phần thân, hoàn thiện các hạng mục điện nước, điều hòa thông gió, tăng áp, sân vườn, cổng hàng rào và máy phát điện dự phòng Dự án tọa lạc tại số 04, Nguyễn Thiện Thuật, TP Nha Trang, tỉnh Khánh Hòa.
TỔNG CÔNG TY ĐẦU TƯ PHÁT TRIỂN NHÀ VÀ ĐÔ THỊ
CÔNG TY CỔ PHẦN XÂY DỰNG BẢO TÀNG HỒ CHÍ MINH
CÔNG TY CỔ PHẦN ĐẦU TƯ & XÂY LẮP ĐIỆN NƯỚC HUD 3.1
PHẦN 1 - CÁC CĂN CỨ KÝ KẾT HỢP ĐỒNG
Phần 2 của hợp đồng bao gồm các điều khoản và điều kiện quan trọng như sau: Điều 1 định nghĩa và diễn giải các thuật ngữ trong hợp đồng Điều 2 quy định hồ sơ hợp đồng và thứ tự ưu tiên Điều 3 nêu rõ quy trình trao đổi thông tin Điều 4 xác định luật và ngôn ngữ sử dụng Điều 5 đảm bảo thực hiện hợp đồng và bảo lãnh tạm ứng Điều 6 mô tả nội dung và khối lượng công việc Điều 7 yêu cầu chất lượng sản phẩm, nghiệm thu và bàn giao Điều 8 quy định thời gian và tiến độ thực hiện hợp đồng Điều 9 đề cập đến giá hợp đồng, tạm ứng và thanh toán Điều 10 quy định điều chỉnh giá hợp đồng Điều 11 và 12 nêu rõ quyền và nghĩa vụ chung của bên A và bên B Điều 13 quy định quyền và nghĩa vụ của nhà tư vấn giám sát thi công Điều 14 đề cập đến nhà thầu phụ Điều 15 nêu rõ an toàn lao động, bảo vệ môi trường và phòng chống cháy nổ Điều 16 quy định về điện, nước và an ninh công trường Điều 17 và 18 quy định về tạm ngừng và chấm dứt hợp đồng bởi bên A và bên B Điều 19 đề cập đến bảo hiểm và bảo hành Điều 20 quy định về rủi ro và bất khả kháng Điều 21 quy định về phạt vi phạm hợp đồng Điều 22 quy định về thanh lý hợp đồng Điều 23 nêu rõ quy trình khiếu nại và giải quyết tranh chấp Điều 24 xác định hiệu lực của hợp đồng Cuối cùng, Điều 25 nêu rõ các điều khoản chung.
PHẦN 1 - CÁC CĂN CỨ KÝ KẾT HỢP ĐỒNG
Căn cứ Luật Xây dựng số 50/2014/QH13 ngày 18/6/2014 của Quốc hội; Căn cứ Luật Đấu thầu số 43/2013/QH13 ngày 26/11/2013 của Quốc hội;
Căn cứ Nghị định số 37/2015/NĐ-CP ngày 22/4/2015 của Chính phủ quy định chi tiết về hợp đồng xây dựng;
Căn cứ Nghị định số 46/2015/NĐ-CP ngày 12/5/2015 của Chính phủ về quản lý chất lượng và bảo trì công trình xây dựng;
Căn cứ Nghị định 59/2015/NĐ-CP ngày 18/6/2015 quy định về quản lý dự án đầu tư xây dựng;
Căn cứ Thông tư số 09/2016/TT-BXD ngày 10/3/2016 của Bộ Xây dựng hướng dẫn hợp đồng thi công xây dựng công trình;
Căn cứ Quyết định số: ngày tháng 9 năm 2018 của Tổng giám đốc
Tổng công ty Đầu tư phát triển nhà và đô thị đã phê duyệt kết quả lựa chọn nhà thầu cho gói thầu XD-Thân-ĐC, bao gồm thi công xây dựng kết cấu phần thân, hoàn thiện, hệ thống điện nước, điều hòa thông gió, tăng áp, sân vườn, cổng hàng rào và máy phát điện dự phòng cho dự án Tổ hợp chung cư và văn phòng HUD BUILDING NHA TRANG.
Dựa trên biên bản thương thảo hợp đồng ngày 12 tháng 9 năm 2018 giữa Tổng công ty Đầu tư phát triển nhà và đô thị và Liên danh Công ty cổ phần xây dựng Bảo tàng Hồ Chí Minh cùng Công ty cổ phần Đầu tư & xây lắp điện nước HUD3.1, gói XD-Thân-ĐC sẽ thực hiện thi công xây dựng kết cấu phần thân, hoàn thiện, điện nước, điều hòa thông gió, tăng áp, sân vườn, cổng hàng rào và máy phát điện dự phòng cho dự án Tổ hợp chung cư và văn phòng HUD BUILDING NHA TRANG.
PHẦN 2 - CÁC ĐIỀU KHOẢN VÀ ĐIỀU KIỆN CỦA HỢP ĐỒNG
Hôm nay, ngày 17 tháng 9 năm 2018 tại trụ sở Tổng công ty Đầu tư phát triển nhà và đô thị, chúng tôi gồm các bên dưới đây:
1 Chủ đầu tư (Bên giao thầu): Tổng công ty Đầu tư phát triển nhà và đô thị (gọi tắt là bên A)
- Địa chỉ : Tầng 28 - 32 Tòa nhà HUD TOWER, số 37, đường Lê Văn
Lương, P Nhân Chính, Q Thanh Xuân, Tp Hà Nội
- Đại diện là : Ông LÊ QUANG HIỆP
- Chức vụ : Phó Tổng Giám đốc
- Tài khoản : 21110000001860 tại Ngân hàng TMCP Đầu tư và Phát triển Việt
Nam - Chi nhánh Hà Nội
- Giấy Ủy quyền : Số 715/UQ-HUD ngày 05/4/2018 của Tổng Giám đốc Tổng công ty Đầu tư phát triển nhà và đô thị
Nhà thầu cho dự án là Liên danh giữa Công ty cổ phần xây dựng Bảo tàng Hồ Chí Minh và Công ty cổ phần Đầu tư & xây lắp điện nước HUD3.1, được gọi tắt là bên B.
2.1 Đại diện liên danh: Công ty cổ phần xây dựng Bảo tàng Hồ Chí Minh
- Địa chỉ : Số 381, Đội Cấn, P Liễu Giai, Q Ba Đình, Hà Nội
- Đại diện là : Ông PHẠM MINH ĐỨC
- Chức vụ : Tổng Giám đốc Công ty
- Tài khoản số : 0687 0406 678 9999 tại Ngân hàng TMCP Quốc tế Việt Nam -
Thành viên liên danh: Công ty cổ phần Đầu tư & xây lắp điện nước HUD3.1
- Địa chỉ : Tầng 2, Tòa nhà HUD3 Tower, số 121-123 đường Tô Hiệu, phường Nguyễn Trãi, Quận Hà Đông, thành phố Hà Nội
- Đại diện là : Ông CAO VĂN ĐẠO
- Chức vụ : Giám đốc Công ty
- Tài khoản số : 45010002412920 tại Ngân hàng TMCP Đầu tư và Phát triển Việt Nam - Chi nhánh Hà Tây
HAI BÊN THỎA THUẬN KÝ KẾT HỢP ĐỒNGVỚICÁCĐIỀUKHOẢN SAU: Điều 2 Hồ sơ hợp đồng và thứ tự ưu tiên
Hồ sơ hợp đồng bao gồm các căn cứ để ký kết, điều khoản và điều kiện của hợp đồng, cùng với các phụ lục và tài liệu liên quan.
- Quyết định phê duyệt kết quả lựa chọn nhà thầu;
- Hồ sơ mời thầu và các tài liệu bổ sung HSMT (nếu có) của Bên A;
- Các bản vẽ thiết kế và các chỉ dẫn kỹ thuật;
- Hồ sơ dự thầu và các văn bản làm rõ hồ sơ dự thầu của Bên B;
- Biên bản đàm phán hợp đồng, các văn bản sửa đổi, bổ sung hợp đồng;
- Các tài liệu khác có liên quan
2.2 Thứ tự ưu tiên của các tài liệu:
Hợp đồng bao gồm các tài liệu cấu thành có quan hệ thống nhất và giải thích tương hỗ Các bên tham gia đồng ý về thứ tự ưu tiên của các tài liệu này, được quy định tại khoản 2.1 Điều 5 quy định về bảo đảm thực hiện hợp đồng và bảo lãnh tạm ứng.
5.1 Bảo đảm thực hiện hợp đồng:
Bên nhận thầu cần nộp thư bảo lãnh bảo đảm thực hiện hợp đồng với giá trị 5% trước khi hợp đồng có hiệu lực Mỗi thành viên trong Liên danh phải đảm bảo thực hiện hợp đồng tương ứng với phần việc của mình Thư bảo lãnh này phải được phát hành bởi một ngân hàng hợp pháp tại Việt Nam, theo mẫu quy định trong hồ sơ mời thầu hoặc mẫu khác được chủ đầu tư chấp thuận.
Thời gian hiệu lực của bảo đảm thực hiện hợp đồng bắt đầu từ ngày hợp đồng có hiệu lực và kéo dài cho đến khi công trình được nghiệm thu Sau đó, nhà thầu sẽ chuyển sang thực hiện nghĩa vụ bảo hành theo quy định pháp luật.
Hợp đồng đã được ký kết và Bên giao thầu đã tiến hành nghiệm thu, chuyển sang nghĩa vụ bảo hành công trình Nếu các Điều Khoản bảo đảm thực hiện hợp đồng quy định rõ ngày hết hạn, nhưng Bên nhận thầu chưa hoàn thành nghĩa vụ vào 10 ngày trước hạn, Bên nhận thầu sẽ cần gia hạn thời gian giá trị của bảo đảm thực hiện hợp đồng cho đến khi công việc hoàn tất và mọi sai sót được sửa chữa.
Bên nhận thầu sẽ không được hoàn lại bảo đảm thực hiện hợp đồng nếu từ chối thực hiện hợp đồng đã có hiệu lực hoặc chậm tiến độ do lỗi của mình, đồng thời từ chối gia hạn hiệu lực của bảo đảm thực hiện.
Bên giao thầu phải hoàn trả bảo đảm thực hiện hợp đồng cho nhà thầu trong vòng 15 ngày kể từ khi công trình được bàn giao và nghiệm thu, đồng thời nhà thầu bắt đầu thực hiện nghĩa vụ bảo hành theo quy định.
5.2 Bảo lãnh tạm ứng hợp đồng:
Trước khi Bên A tiến hành tạm ứng, Bên B cần nộp bảo lãnh tạm ứng với giá trị bằng số tiền tạm ứng theo quy định tại Khoản 9.2 Điều 9 của Hợp đồng Mỗi thành viên liên danh sẽ thực hiện bảo lãnh tạm ứng tương ứng với số tiền được tạm ứng Thư bảo lãnh tạm ứng phải được phát hành bởi một ngân hàng hợp pháp tại Việt Nam, theo mẫu quy định trong Hồ sơ mời thầu hoặc một mẫu khác được chủ đầu tư chấp thuận.
Thời gian hiệu lực của bảo lãnh tạm ứng hợp đồng kéo dài cho đến khi Bên A thu hồi toàn bộ số tiền tạm ứng Giá trị bảo lãnh sẽ được khấu trừ tương ứng với số tiền tạm ứng đã thu hồi sau mỗi lần thanh toán.
Bên B sẽ thực hiện thi công toàn bộ gói thầu XD-Thân-ĐC cho dự án Tổ hợp chung cư và văn phòng HUD BUILDING NHA TRANG, bao gồm xây dựng kết cấu phần thân, hoàn thiện, điện nước, điều hòa thông gió, tăng áp, sân vườn, cổng hàng rào và máy phát điện dự phòng Tất cả công việc sẽ tuân thủ hồ sơ thiết kế đã được duyệt, bao gồm cả phần sửa đổi được Bên A chấp thuận, đồng thời đảm bảo tiến độ, kỹ thuật, vật liệu xây dựng và chất lượng công trình theo quy định trong hồ sơ mời thầu của Bên A.
Hồ sơ dự thầu và các phụ lục kèm theo biên bản thương thảo hợp đồng
Bên B phải đảm bảo kết quả của công việc thực hiện là cung cấp cho Bên