fixed assets accounting of the national phytopharma joint stock company

> Tangible Fixed Assets recognition criteria: Assets recognized as tangible fixed assets must satisfy all of the following 4 recognition criteria: - Certainly obtain future economic bene

i UNIVERSITY OF ECONOMICS AND LAWS

FACULTY OF ACCOUNTING AND AUDITING

GRADUATION THESIS

FIXED ASSETS ACCOUNTING OF THE

NATIONAL PHYTOPHARMA JOINT-STOCK

COMPANY

Supervisor: Nguyen Hoang Dieu Hien Student: Nguyen Ngoc Thao Uyen Student’s ID: K174050626 Class: K17405CA

TPHCM, 06/2021

i

INTERNSHIP DIARY

General Information

Eull name: NGUYÊN NGỌC THẢO UYEN

Class: K17405CA Student’s ID: K174050626

Date of birth: July 15", 1999

Supervisor: NGUYEN HOANG DIEU HIEN

Company’s Name: The National Phytopharma Joint-Stock Company

Address: Bahamas Tower - Diamond Island, No 1 Street 104, Binh Trung Tay Ward,

District 2

Internship Department: Finance — Accounting

Internship Instructor: Truong Tién Phat

Nguyễn Thị Thúy An

Internship Position: General Accounting

Internship Schedule: Dec 7, 2020 to Feb 28", 2021

Student’s

assessment

Learning about the Company Get used to the job,

Ị Dec 7 — Dec 18% | _ Greetings and get acquainted grasped the

with everybody in the Finance - company culture

- Get familiar with how to use the

printer: print, copy, scan

documents to send to customers

At first, the work

become easier

- Check the VAT invoice with

data on the system is the same or

Jan 27" — Jan 29" | not Well Accomplished

-Sort invoices by invoice number -Check the VAT invoice with Feb 1% —Feb 5" | data on the system is the same or | Well Accomplished

not -Check the VAT invoice with Feb 15" — Feb data on the system is the same or

-Sort invoices by invoice number

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TABLE OF CONTENT

CHAPTER 1: INTRODUCTION ABOUT THE NATIONAL PHYTOPHARMA

1.1 Business OV€TVICW LH HH HH HH HH HH HH HH KH KH LH KH KH KH kh kh ĐH KH KH ĐH ĐH ĐH 3 1.1.1 General information ccc ác cà cà cà TT H HH HH HH HH HH HH HH 3 1.1.2 Business” QbJeCfIVGS LH HH Hà Hà Hà HH HH hà hà hà rà ri 3 1.1.3 Business’ FUn€fIOTIS kh HH HT TH HH TH HH nh 3 1.2 OrBan1zafiOn SÍTUCLT€ TH HH TH TH HH Hàn HH kh 4 1.2.1 General Meeting of SharehỌ€TS sgk 4 1.2.2 Board OŸ ÏDIT€CẨOTS - HH Hà TH TH TH TT HH HH Chế 4 1.2.3 General DIT©CEOT : ác Sàn TH TH HH HH HH HH HH HH HH Hà Hà 4 1.2.4 Deputy General [DIT€COT LH HH TH HH TH nh 4

IS ca ốc nh ố ằ.ằ.ằ 5 1.2.6 Administration DeparẨI€II - LH HH HH HH kh 5 1.2.7 Finance and Accounting Depart€IIL cà nh rệt 5 1.2.8 Import and Export DeparLI€IIL - ác TH HH TH Tnhh 5 1.2.9 Storage DepaTfImeTn( : ác cà cà TT HH TH HH HH HH HH HH HH HH 5 I0 5 n9 .ỐẦ 5 IEE.evuiii i0 8n n n ằ 5 1.3.1 Accounting SÍTUCfLT€ ch HH TH TH TH nh 5

1.3.2 Accounting ÍUCEIOTIS - s12 TH HH HT HH kh 7 1.3.3 Accounting DỌIGI©S cv SH HT HH HH HH Hinh hy 10 1.3.4 Accounting VOUCH€S ác HH nh TH HH TH HH kh hy 10 1.3.5 Accounting OCUIIES - 1 TH TH HH TH Hà hy 11

2.1 Definition of Elxed aSSefS cà HH HH HH HH Hà kh kh kh kh kh 13 2.1.1 Tangible Fixed assets: According to VAS Ồ nh HH ghi 13 2.1.2 Intangible Fixed assefs: According to VAS 4 uc nh HH ghi 13 2.1.3 Another document affects Fixed assets: Circular 45/2013/TT-BTC 14 2.2 Classification of FA oŸ the buSITI©SS L1 LH HH HH HH HH HH HH, 16 2.2.1 Classification according to the ÍOTI cv 16 2.2.2 Classification by OWI€TShID - cà TH HH HH Ho Hàn 17 2.2.3 Based on the sources OŸ ÍormafiON ác hà HH TH TH HH HH HH HH HH HH, 17 2.2.4 Classification by eCOROmIC LISS TH TH HH Thư rhn 17 2.2.5 Classification according to usage SI{UAfÏOII Sàn HH ghi 18 2.2.6 Classification according to the DUTDOS€ OŸ US© Sàn nh rên 18 CHAPTER 3: ACCOUNTING FOR ARISING ECONOMIC TRANSACTIONS

3.1 Increase in Fixed assets transactions 8CCOUTTIHE ch nen 20 3.1.1 Tangible Fixed aSS€{S COSÍS HH nh HH TH HH HH HH kh 20 3.1.2 Booking Entries PfOC€dLIT€S nh TH HH TH HH HH kh 20 3.1.3 S€§ ACCOUTIES HS HH HH HT HH HH 21 3.1.4 Accounting of Fixed asS€fS fTađSACOIN SH HH nến 21

3.2 Depreciation Of Elxed aSS©fS LH HH HH TH HH HH nhà 23 3.2.1 Useful lIÍG - kh Hà Hà HH HH Hà kh kh kh CC hà hà hà ri 23 3.2.2 Depreclation methO( cv HH HH HH Hàn 24 3.2.3 S€§ ACCOUTIES LH HH HH HH HH TH HH HT HH HH 27 3.2.3 HIlusfraf€ CaSG Là HH HH HH HH HH HH kh kh Hà như 28 3.3 Accounting for reduced Fixed a$SGfS ch TH HH TH HH kế 28 3.3.1 The Companyˆs poliey Tangible FIxed assets liquidation .- 28 3.3.2 Carrying amount oŸ Flxed aSS©fS à Sàn HH HH HH HH Hi 29 3.3.3 S€S ACCOUTIES LH HH HH HH HT HH HH 29 3.3.4 IIlustrate related dOCUIm€NI -.- án SH TH HH HH HH HH HH 30 3.4 Elxed asseft repalr and upøTad€ aCCOUnIHE - ch HH kiến 31 3.4.1 Repaired Flxed aSS€ES LH HH TH HH HH HH HH kh 31 3.4.2 Accounting for regular repair and amOorfiZ8fION sài srxe 31 3.4.3 Fixed asset overhaul accounfant 1s not upgraded In nafUfe - - - 33 3.4.4 Accounting for major repairs of fixed assets in upgrading «0.0.00 eee 35 CHAPTER 4: CONCLUSION AND RECOMMENDA TION .-.-<- 36 4.1 CONCÏUSIOH Sà Sà Sàn kh HH HH HH HH HH HH kh KH KH KH KH kh KH ĐH ĐH ĐH 36 4.2 Advantages in Fixed asS€{ aCCOUTiITNE ác LH HH TH Hàng 36 4.3 Disadvantages in Fixed aSS€{ aCCOUnTE HH HH HH Hết 37 4.4 RecommenndatiON - ó- cà Sàn kì Hà KH HH HH KH KH KH 37

Appendix 1: Tables and FIBLI€S Gv nh TH TH HH TH HH rệt xII

Appendix 2 - PHIẾU ĐÁNH GIÁ KHÓA LUẬN TÓT NGHIỆP CỦA GVHD - Đề Tài: KẺ TOÁN QUẢN TRỊ - Lọ tt E11 Tà E11 TT TH HH HH Hy xxx

Appendix 3 - PHIẾU ĐÁNH GIÁ KHÓA LUẬN TÓT NGHIỆP CỦA GVPB - Dé Tài: KẺ TOÁN QUẢN TRỊ - c c Sìn tEEx SE TT KH TT HH HH ty XXXVi Appendix 4 - PHIẾU ĐÁNH GIÁ KHÓA LUẬN TÓT NGHIỆP CỦA HỘI ĐÔNG -

Đề Tài: KẾ TOÁN QUẢN TRỊ, :- 56 S2S1SE SE E E11 EEEEE1 1101211111 XXXiX

xi LIST OF FIGURE & TABLE

Figure | Phytopharma’s organization structure

Figure 2 Phytopharma’s accounting structure

Figure 3 Phytopharma’s accounting documents

Figure 4/1 The order 0082003460

Figure 4/2 The order 0082003460

Figure 4/3 The order 0082003460

Figure 5 VAT invoice 0045522-PT/18P

Figure 6/1 Contract 08912/18P

Figure 6/2 Contract 08912/18P

Figure 6/3 Contract 08912/18P

Figure 6/4 Contract 08912/18P

Figure 7/1 Delivery record

Figure 7/2 Delivery record

Figure 7/3 Delivery record

Figure 8/1 Application for liquidation of fixed assets

Figure 8/2 Application for liquidation of fixed assets

Figure 9 Fixed assets Disposal Form

Table 1 General Journal

Table 2 General Ledger of TFA - Transportation

Table 3 General Journal of TFA

Table 4 General Journal of the last quarter 2018

Table 5 General Ledger of Other TFA

Table 6 General Journal of the third quarter of 2018

Table 7 General Ledger of Other TFA

xii LIST OF ABBREVIATIONS

Abbreviation Explanation

JSC Joint - Stock Company

VAS Vietnamese Accounting Standard

IFRS International Financial Report Standard

INTRODUCTION

1 Introduction

Vietnam joined the World Trade Organization — WTO, so there are many opportunities for investment and business expansion of domestic enterprises is increasingly high Besides, in the process of integration and development, we also have to deal with many challenges To effectively operate with the right strategy, Vietnamese businesses must pay attention to accounting work For stable and growing business, the enterprises always attend and improve the accounting apparatus to suit the development trend economy Because accounting information is essential for managers to make strategies and business plan decisions

During the operation process, the Companies are proactive about technological innovation, especially using and managing Fixed Assets This is a big problem that needs

to be solved when scientific technology continuously develops, if Fixed Assets are not exploited and effectively used, it will become out of date and not as useful as desire Fixed Assets is one of the most important factors in production and trade process of organizations and individuals Activities related to Fixed Assets are well managed, which helps businesses to catch the state of Fixed Assets to have timely decisions, as well as support business result, reduce expenses and increase ability competition

Having an internship at The National Phytopharma Joint-Stock Company, I found this

to be a good opportunity to learn and improve practical knowledge about the process of fixed assets accounting of a particular enterprise Therefore, I decided to choose the topic

“Fixed Assets accounting of The National Phytopharma Joint-Stock Company" to be the subject of my Graduation Thesis clarifying that importance as well as learn more about the rich practical expertise that the topic brings

2 Objective of Thesis

- Illustrate the accounting process for tangible fixed assets at the company

- Analyzing and evaluating how tangible fixed assets are managed

- Comment, evaluate and give recommendations for the company's tangible fixed asset accounting process

The Thesis was prepared from March 1, 2021 to May 5, 2021

5 Content of the Thesis

Besides the Introduction and Conclusion, my Graduation Thesis includes 4 chapters with the main content as below:

Chapter 1: Introduction about The National Phytopharma Joint-Stock Company Chapter 2: Theoretical Framework

Chapter 3: Accounting for arising economic transactions related to Fixed assets Chapter 4: Conclusion and recommendation

CHAPTER 1: INTRODUCTION ABOUT THE NATIONAL PHYTOPHARMA

JOINT-STOCK COMPANY

1.1 Business overview

1.1.1 General information

- Company full name: The National Phytopharma Joint-Stock Company

- Short name: Phytopharma

- Location: No 24, Nguyen Thi Nghia Street, Ben Thanh Ward, District 1, Ho Chi

The company was established to mobilize and use capital effectively in:

- Develop domestic and foreign production and business in medicine and pharmaceutical products to serve for disease prevention and treatment to serve the care and strengthening healthy for the people

- Business expansion in other areas with the aim of increasing profits and creating jobs stability; increase dividends for shareholders; contribute to the State Budget and to develop the Company

1.1.3 Business’ Functions

The National Phytopharma Joint-Stock Company has the main function (that) providing pharmaceuticals, cosmetics, medical equipment in the form of wholesale and retail to serve the needs of treatment, contributing to improve health for people all over the country

The unit also carries out import entrustment for other enterprises that have demand for products in the health sector but cannot afford import conditions The company also exports essential oils, aromas, herbs, ingredients and ingredients of southeastern pharmaceutical to foreign markets

1.2 Organization structure

Figure 1: Phytopharma’s organization structure

1.2.1 General Meeting of Shareholders

General Meeting of Shareholders is the highest decision-making of the Company, including all shareholders who own or represent shares contributed to the Company 1.2.2 Board of Directors

Board of Directors is the highest management body of the Company that has full authority to decide all issues related to the goals and interests of the Company 1.2.3 General Director

General Director is the person who runs the daily operations of the Company and is responsible to the Board of Directors for the implementation of assigned rights and duties The General Director of the Company is appointed by the Board of Directors 1.2.4 Deputy General Director

Deputy General Director is person that in charge of business and_ technical organization, responsible to the General Director for assigned powers

1.2.5 Supervisory Board

Supervisory Board: supervises the Board of Directors, General Director in the management and administration of the Company Reasonably and legally check the recording and make accounting books, financial statements

1.2.6 Administration Department

Administration Department: specializes in organizing, establishing operating divisions

at the Company, drafting regulations, legal measures, commendation and implementation guidance in the Company This department also recruits personnel for the departments in the Company

1.2.7 Finance and Accounting Department

Finance and Accounting Department: recording transactions, managing assets, capital sources, bookkeeping and performing obligations to the state

1.2.8 Import and Export Department

Import and Export Department: import and export goods, all products that the Company sells Thereby summarising, monitoring, reporting the construction and implementation of annual business plans to provide for the Company

1.2.9 Storage Department

Storage Department: manage the warehouse, the situation of the inventory, the organization of preservation and storage of goods and materials The warehouse department must ensure the quantity and quality of goods and products in the warehouse

to avoid loss or damage

6 results business and other economic activities related to production and business activities in the period

- Based on the characteristics of the organization and management, the company has organized the accounting work in a centralized form undertaken by the accounting and finance department from the stage of gathering initial data recording to calculation and

| BANK ACCOUNTANT ie CASH ACCOUNTANT |

| RECEIVABLES ACCOUNTANT -L LIABILITIES ACCOUNTANT |

| ADVANCE ACCOUNTANT LW PAYMENT ACCOUNTANT |

| INTERNAL DEBT ACCOUNTANT Í ZUELLIG ACCOUNTANT |

Figure 2: Phytopharma’s accounting structure

1.3.2 Accounting functions

e Chief of Accountant:

- The Chief of Accountant is the person who assists the General Director in directing all the accounting, economic information statistics and accounting work according to the accounting system prescribed by the Ministry of Finance

- Guide the accounting department's employees to implement accounting regimes, books, record keeping, double inventory comparison in each department

- Complete reports issued by state authorities and internal reports as requested by the Board of Directors of the Company

e Deputy Chief of Accountant:

- Organize to record, reflect, synthesize data on import, export and consumption of products, types of capital, types of enterprises, determine business results, payments to

banks, with state, with customers

- Record books, make balance sheets, and report monthly business results of the Company

- Check payment vouchers daily

- Sign and approve invoices and documents under the authorization of the finance director

day, the cashier must make an inventory of the actual balance of the fund and compare the book's figures with the cash accounting book Cash balance reports to room leaders

e Commodity Accountant

- Based on the receipt of goods, receipt of goods, check the actual quantity of received goods, surplus goods, shortage goods waiting for processing

- Determine the cost of goods imported and exported in the month

- Check inventory before shipping Receipt of import and export bills

- Make monthly inventory, check, compare, make reports on goods import-export- inventory between books and reality, to confirm with the storekeeper

- Regularly check and compare debts with customers

- Prepare reports on debt according to regulations

e Advance accountant

- Tracking advance according to each subject

- Check documents for payment requests, advance refunds

- Timely and accurately update data, advance payments

e Internal debt Accountant

- Develop and timely supplement regulations: salary, allowance and benefits of the company Record and synthesize data on the number of employees, working time as a basis for salary calculation

- Directly pay salaries, allowances, benefits, salary deductions and distribute these amounts to the relevant employers

e Cash Accountant

- Cash accounting tracks, supervises, opens daily accounting books

- At the end of the accounting day and the treasurer carries out an inventory, comparing the actual balance sheet with data of the cash register and cash book

- Regularly check and compare debts with customers

- Prepare reports on debt according to regulations

e Payment Accountant

- Track debt for imported goods, goods purchased and sold domestically

- Coordinate with import and export units regularly urge customers to pay for goods, taxes and other expenses on time for the Company

- Track interest payments for customers

- Regularly check data, compare with related debt departments

- Make statistical reports according to management requirements

e Zuellig Accountant

1.3.3 Accounting policies

- The fiscal year of the firm begins annually on Ist January to 31st December The firm’s accounting policies are regulated in accordance with the Circulate No 200/2014/TT-BTC enact on 22nd December 2014 and other related Circulate of the Ministry of Finance

- The firm practices the Vietnamese Accounting Standard (VAS) and other policies allowed by the government

- Currency: The Company uses Vietnam Dong (VND) money system

- VAT is calculated and paid by the Tax credit method

- Depreciation Evaluation method: Straight-line with Decision No 206/2009 / QD- BTC dated 2009 of the Ministry of Finance

- Inventory are recorded by the perpetual inventory count method and recognized at the lower of cost or NRV

- Inventory is calculated by first in first out method

- The Company did not have Provision for devaluation of inventory

1.3.4 Accounting vouchers

- Payroll documents: Timesheet, payroll report, bonus record, statement of salary

deduction, Insurances record, etc

- Inventory: Goods receipt, goods dispatch, stock counting record, purchase request, etc

- Purchasing goods and services: VAT invoice, selling invoice, sales order, etc

- Monetary document: receipt note, payment note, advance request, advance payment note, invoice, etc

- Fixed assets: handover record, statement of fixed assets disposal, evaluate and

allocation depreciation statement

- Debit note, credit note, payment order, etc.

11 1.3.5 Accounting documenfs

In order to match with the model of accounting apparatus, the Finance and Accounting Department organizes the accounting in the form of vouchers, all data is processed on computers through the application of EFFECT software combined with Excel application software is used to record all arising economic transactions In order

to facilitate the inspection, combining detailed bookkeeping by each accounting

section can save time, logic, faster and accurate data

Figure 3: Phytopharma’s accounting documents

Every day, based on valid source documents, the accountant proceeds to enter data into the computer The computer will automatically process data on detailed books, bookkeeping vouchers, and cash books

12

At the end of the month, on the basis of the detailed books, the accountant makes a

detailed summary sheet after comparing with the general ledger, and then a financial report will be made

1.3.6 Accounting report

Financial Statements: the deadline is 3 months after the end of the fiscal year for conducting the final report which including:

- Accounting Trial Balances

- Business’ Result Determination

- Statement of Cash Flow

- Financial Statement Explanation

Taxation Report: Submit before the deadline claimed by the Government

- Profit Tax Report

- PIT Report

- VAT Report

Management Report: Published after the authorization of the Financial Statement

13 CHAPTER 2: THEORETICAL FRAMEWORK

2.1 Definition of Fixed assets

Assets are resources that the business can control and plan to bring economic benefits in the future

2.1.1 Tangible Fixed assets: According to VAS 03

> Definition: Tangible Fixed Assets are assets of a material form held by

an enterprise to use for production and business activities in accordance with the recognition standards of Tangible Fixed Assets

> Tangible Fixed Assets recognition criteria:

Assets recognized as tangible fixed assets must satisfy all of the following 4 recognition criteria:

- Certainly obtain future economic benefits from the use of that asset;

- Costs of assets must be reliably determined;

- Estimated usage time is over Í year

- Having sufficient value criteria according to current regulations

2.1.2 Intangible Fixed assets: According to VAS 04

> Definition: Intangible Fixed Assets are assets that have no physical form but have the value determined and are held, used by the enterprise, used in production, business, service provision or leased to other entities in accordance with standards recognition of intangible fixed assets

> Intangible Fixed Assets determination and recording the initial value:

- An intangible asset recognized as an intangible asset must simultaneously satisfy Definition of an intangible asset and the following 4 recognition criteria:

« Certainly, future economic benefits will be obtained from that asset;

« Costs of assets must be reliably determined;

« Estimated usage time is over 1 year;

« Having sufficient value criteria according to current regulations

- The enterprise must determine the degree of certainty that future economic benefits will be obtained by using reasonable and sound assumptions about the economic conditions that exist during their useful life benefits of that property

14

- Intangible fixed assets must be determined at their original cost

2.1.3 Another document affects Fixed assets: Circular 45/2013/TT-BTC

On April 25, 2013, the Ministry of Finance issued Circular No 45/2013 / TT-BTC guiding the governance regime management, use and depreciation of fixed assets This Circular takes effect from the date June 10, 2013; Applied from fiscal year 2013 and replaces Circular No 203/2009 / TT-BTC dated October 20, 2009, the Ministry of Finance guides the regime of management, use and depreciation of fixed assets concentration The following is new points of Circular 45 / 2013 / TT-BTC compared with Circular 203/2009/TT-BTC:

» Standards and identification of FA

As stated at Point c, Clause 1, Article 3: “Cost of fixed assets can be measured reliably and with a value of 30.000.000 VND or more (previously defined as

10.000.000 VND or more)

Adding Clause 3, Article 3 and adding a number of expenses other than intangible assets: ., "spending purchase fees for obtaining and using technical documents, patents, technology transfer permits, trademarks or goodwill are not intangible assets, but are amortized over the course of financial expenses business for a period not exceeding 3 years according to the provisions of the Law on Corporate Income Tax.” Supplement to Clause 4, Article 3: “For joint stock companies converted from state- owned companies according to regulations in the Decrees of the Government issued before the Decree No 59/2011 / ND-CP dated 18/7/2011 of the Government on transforming 100% state-owned enterprises into joint-stock companies with valuable business advantages into the enterprise value when determining the enterprise value for equitization according to the property method and if approved by a competent authority according to regulations, the value of business advantage shall be distributed according to regulations Decree No 138/2012 / TT-BTC dated 20/8/2012 of the Ministry of Finance guiding the distribution of advantage value doing business for joint-stock companies converted from state-owned companies”

>» Conditions for land use rights to be recognized as intangible

15 Point d, Clause 2, Article 4 specifies each case intangible fixed asset is land use right are not recognized as intangible fixed assets:

- Intangible fixed assets are land use rights, including: Land use rights assigned

by the State with the collection of land use fees land use or legal transfer of land use rights (including definite land use rights term, Jand use rights indefinitely); Right to

use leased land before the effective date of Land Law in 2003, the land rental has been

paid for the entire lease term or the land rental has been prepaid for many years the remaining paid land lease term is at least five years and a certificate is issued by the competent authority land use right certification

- The cost of a fixed asset being the land use right is determined to be the total amount spent for the right to use legal land plus (+) expenses for site clearance compensation, leveling, registration fees (no includes out-of-pocket costs to construct structures on land); or is the value of land use rights received capital

- Land use rights not recognized as intangible fixed assets include: Land use rights assigned by the State collection of land use fees; Rent land with one-off rental payment for the entire lease term (after the date of land lease effect of the 2003 Land Law, not being granted a land use right certificate) then money land lease is amortized gradually into business expenses according to the number of years of land lease; Rent land with annual rental payment the land rent shall be recorded into business expenses

in the corresponding period the annual land rental payment

- For types of property such as house, land for sale or for business by a real estate company

- The enterprise is not recognized as a fixed asset and is not amortized

> Principle of FA depreciation:

To add Clause 10 and Clause 11 to Article 9 as follows:

- For the basic construction works completed and put into use, the enterprise has increased the accounting Fixed assets are calculated according to the provisional prices due to the fact that the settlement has not yet been made When finalizing the basic construction works There is a difference between the provisional value and the settlement value, the enterprise must adjust the original the price of fixed assets according to the settlement value approved by a competent authority Business is not readjust the amount of depreciation expense deducted from the time fixed assets are

16 completed, handed over and put into place used up to the time the settlement is approved Depreciation expense after the settlement time is determined on the basis of taking the approved settlement value of fixed assets minus the amount depreciated up

to date of Fixed Assets settlement approval point divides the remaining time of depreciation of fixed assets according to regulations

- For fixed assets, the enterprise is monitored, managed and depreciated according to Circular No.203/2009 / TT-BTC are now not eligible for cost of fixed assets as provided for in Article 2 of this Circular, the residual value of these assets is allocated to production and business costs of the enterprise, the time of distribution shall not exceed 3 years from the effective date of this Circular

2.2 Classification of FA of the business

To meet management and accounting requirements, Fixed Assets are classified according to the following different forms:

2.2.1 Classification according to the form

Tangible Fixed Assets (TFA) are classified according to the group with the same nature and purpose in the production and business of the interprise, including:

- House, building materials;

- Devices;

- Means of transport, transmission equipment;

- Equipment, management tools;

- Garden perennial, for working animals and for produce

- Other tangible fixed assets

Usually, Intangible Fixed Assets (IFA) are classified as follows:

- Land use rights

- Publishing rights

- Copyright, License of invention

- Brand

- Software

17

- Other intangible fixed assets

2.2.2 Classification by ownership

Based on the ownership of FA, FA are divided into:

- Self - owned FA: are FA that are built, purchased and formed from the state budget or superior level, loan capital, joint venture capital, enterprise's funds, and fixed assets donated These are fixed assets owned by the enterprise and reflected on the balance sheet of the enterprise

- The outsourced fixed asset: is an asset that is leased to use for a certain period

of time under the lease contract Depending on the terms of the lease contract, the leased fixed asset is divided into the financial lease fixed asset and the operating lease fixed asset

> Classification of fixed assets by ownership helps the management and organization of the appropriate accounting for each type of fixed assets, contributing to the rational and efficient use of fixed assets in the enterprise

2.2.3 Based on the sources of formation

Based on the source of formation, the fixed assets in the enterprise can be divided into two categories:

- Fixed assets are formed from equity sources

- Fixed assets formed from liabilities

>» This classification helps the manager to see which source of the enterprise's

fixed assets is formed, then take measures to track, manage and use the fixed assets in

the most effective way

2.2.4 Classification by economic uses

According to this classification criterion, an enterprise's fixed assets are divided into two categories:

- The fixed assets used in production and business: are tangible and intangible fixed assets that directly participate in the production and business process of enterprises Including: buildings, structures, transmission equipment, production machinery and equipment, means of transport; Fixed assets without other physical

18

- Fixed assets used outside production and business: are fixed assets used for public welfare, not in nature of production and business Including: houses, facilities for cultural activities, sports, housing and collective welfare works

>» This classification helps the manager clearly see the structure and the effects of fixed assets, in the enterprise's production and business process, create favorable conditions for management and use of fixed assets and calculating depreciation correctly

2.2.5 Classification according to usage situation

According to this classification criteria, fixed assets of enterprises are divided into 3 categories:

- Fixed assets in use are fixed assets being used for production and business activities or other activities of the enterprise such as welfare activities, career, security and national defense

- Unused fixed assets are fixed assets necessary for production and business activities or other activities of the enterprise, but not currently in use, and are being reserved for later use

- Fixed assets that are not in use and awaiting liquidation are assets that are unnecessary or incompatible with the production and business tasks of the enterprise, and need to be liquidated or sold to recover the initial investment

>» This classification helps managers see how effective they are to use fixed assets

of the enterprise, thereby taking measures to further improve their efficiency 2.2.6 Classification according to the purpose of use

According to this classification criterion, an enterprise's fixed assets are divided into the following three categories:

- Fixed assets used for business purposes: are intangible fixed assets or tangible fixed assets directly involved in the production and business process of enterprises, including: land use rights, enterprise establishment expenses, store location , product

labels, buildings, structures, machinery, equipment of vehicles, transmission

equipment, equipment, management tools, perennial orchards, working animals and (or) for products, other fixed assets not listed in the 5 above categories such as pictures, art works

- Fixed assets are used for welfare, non-business, security and defense purposes

19

- Fixed assets are preserved and kept for the State, for other businesses

>» This classification helps the manager to see the structure of fixed assets according to its use purposes, then take measures to manage fixed assets according to use purposes in the most effective way

20 CHAPTER 3: ACCOUNTING FOR ARISING ECONOMIC TRANSACTIONS

RELATED TO FIXED ASSETS 3.1 Increase in Fixed assets transactions accounting

3.1.1 Tangible Fixed assets costs

The cost of a Fixed asset due to procurement includes the actual purchase price payable (minus commercial discounts and discounts), non-deductible taxes, fees and other expenses directly attributable to the deposit of the asset ready for use (these costs are typically shipping, storage, installation and connection costs, customs duties and other related charges.)

Cost of FA = Actual purchased price + Taxes + Directly related expenses —

Discount

In which:

- Actual purchased price actual is the price on VAT invoice, sale invoice

- Taxes: excluding taxes to be refunded

- Directly related expenses to be spent up to the time the Fixed Assets are ready

for use, such as costs for installation; registration fee; expenses for transportation,

loading and unloading; cost of upgrading and other directly related expenses 3.1.2 Booking Entries Procedures

After the request for buying fixed assets is approved by authorized persons, the buying department will review the request, find out about the item, get a quotation and send it to the accounting department This quotation must compile all information about the cost of putting the asset in the ready-to-use state together with information about the part using the fixed asset or the purpose of that fixed asset From here, the procedures that the accountant needs to do will be:

- The chief finance accountant (CFO) reviews the quotation with the full description of Tangible Fixed assets, and decides whether it is considered a Tangible Fixed assets and whether related expenses are included in the cost of Tangible Fixed

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- If the assets to be purchased are assessed as Tangible Fixed assets, the accountant of the fixed assets will create an asset code for that asset Typically, the asset code includes 8 digits xxxxxxx-x

- After the shipping department receives enough goods, delivery notes, invoices and orders are sent to the Accounting department At this time, the debt accountant

will record the debt based on documents including: orders, invoices, contracts, and

receipt of fixed assets Right now Tangible Fixed assets is credited

- Finally, the accounting department stores documents

3.1.3 Uses accounts

Account 211 “Tangible Fixed assets” is used to reflect current value and increase

or decrease of all tangible fixed assets of an enterprise according to their cost Details of 211 at Phytopharma:

- Account 21139000: Tangible Fixed assets — Transportation

- Account 21159000: Tangible Fixed assets — Equipment & machine

- Account 21189000: Tangible Fixed assets — Others

Account 133 “VAT deducted” Details of 133 when purchasing Fixed assets at Phytopharma:

- Account 13319100: VAT for imported goods has not been deducted

- Account 13329000: VAT deducted of goods & services

Account 331 “Account payables” Details of 331 when purchasing Fixed assets at Phytopharma

- Account 33119100: Account payables to domestic sellers

- Account 33119200: Account payables to foreign sellers

3.1.4 Accounting of Fixed assets transaction

3.1.4.1 Accounting transaction due to procurement

e Based on accounting invoices, determine cost of fixed assets and record:

Dr 211 — Tangible fixed assets (purchase price excluding VAT)

Dr 133 — VAT deducted (1332) (If any and deductible)

Cr 111, 112, 311

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e If fixed assets are procured with construction investment fund or investment and development fund of the business used in production and business, the accountant must record:

Dr 414 — Investment and development fund

Dr 441 — Construction investment fund

Cr 411 — Working capital

® Incase of purchase of tangible fixed assets by deferred payment

- Immediately put them into use for construction

Dr 211 - Tangible fixed assets (cost according to the purchase price for immediate payment)

Dr 133 — VAT deducted (1332) (If any)

Dr 242 — Long-term prepaid expenses (the difference between the total payable amount minus immediate purchase price minus VAT (if any))

Cr 331 — Account payables (The total price)

- Pay the seller periodically

Dr 331 — Account payables

Cr 111, 112 (both the price and interest on deferred payment)

- Periodically, calculating to expenses according to the amount of interest payable on deferred payment or installment payment of each period, the following accounts shall be recorded:

Dr 635 — Financial expenses

Cr 242 — Long-term prepaid expenses

e Incase of purchase of a tangible fixed asset that is a house or architecture associated with land use rights and put into use immediately for business and production activities, the following accounts shall be recorded:

Dr 211 — Tangible fixed assets (cost of house, architecture)

(Dr 213 — Intangible fixed assets)

Dr 133 — VAT deducted (if any)

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Cr 411 — Working capital

2.1.4.3 Accounting transaction due to sponsor, donate or present TFA

Dr 211 — Tangible Fixed assets

3.2.1.1 Initial useful life

The useful life of assets is applied with VAS standards In addition, each company also establishes a list of Tangible Fixed assets with useful life that confirm with the conditions of the country where the company is located In which, the useful life of each asset class represents the average useful life of all assets of the same type, which

is why Phytopharma classifies fixed assets by same function

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3.2.1.2 Useful life of Fixed assets after upgrading

In the case of upgrading fixed assets, the company do not specify the useful life of each group as well as the type of fixed asset after the upgrade After Tangible Fixed assets is upgraded to increase economic benefits for the business, the system will recalculate the number of years of use according to the following formula:

Useful life after upgrading = Depreciated time + Remaining depreciation time after the upgrades

Depreciation time is calculated from the time the fixed asset is put into use to the time the fixed asset is completely upgraded

3.2.2 Depreciation method

3.2.2.1 The straight-line depreciation method

Straight — line depreciation is a very common, and the simplest, method of calculating depreciation expense In straight-line depreciation, the expense amount is the same every year over the useful life of the asset

Depreciation Formula for the Straight - Line Method:

Depreciation Expense = (Cost — Salvage value) / Useful life

Example:

Consider a piece of equipment that costs 25.000.000 with an estimated useful life of

8 years and don’t have salvage value The depreciation expense per year for this equipment would be as follows:

Depreciation Expense = (25.000.000 — 0) / 8 = 3.125.000 per year

3.2.2.2 Double Declining Balance Depreciation Method

Compared to other depreciation methods, double-declining-balance depreciation results in a larger amount expensed in the earlier years as opposed to the later years of an asset’s useful life The method reflects the fact that assets are typically more productive in their early years than in their later years — also, the practical fact that any asset (think of buying a car) loses more of its value in the first few years of its

25 use With the double-declining-balance method, the depreciation factor is 2x that of the straight-line expense method

Depreciation formula for the double-declining balance method:

Periodic Depreciation Expense = Beginning book value x Rate of depreciation Example:

Consider a piece of property, plant, and equipment (PP&E) that costs 25.000.000, with an estimated useful life of 8 years and a 2.500.000 salvage value

>» The beginning book value of the asset is filled in at the beginning of year 1 and the salvage value is filled in at the end of year 8

>» The rate of depreciation (Rate) is calculated as follows:

Expense = (100% / Useful life of asset) x 2

> Subtract the expense from the beginning book value to arrive at the ending book value For example, 25.000.000 — 6.250.000 = 18.750.000 ending book value at the end of the first year

>» The ending book value for that year is the beginning book value for the following year For example, the year 1 ending book value of 18.750.000 would be the year 2 beginning book value Repeat this until the last year of useful life

3.2.2.3 Units of Production Depreciation Method

The units-of-production depreciation method depreciates assets based on the total number of hours used or the total number of units to be produced by using the asset,

over its useful life

The formula for the units-of-production method:

26 Depreciation Expense = (Number of units produced / Life in number of units) x (Cost — Salvage value)

Example:

Consider a machine that costs 25.000.000, with an estimated total unit production of

100 million and don’t have salvage value During the first quarter of activity, the machine produced 4 million units

To calculate the depreciation expense using the formula above:

Depreciation Expense = (4 million / 100 million) x (25.000.000 — 0) = 1.000.000 3.2.2.4 Sum-of-the- Years-Digits Depreciation Method

The sum-of-the-years-digits method is one of the accelerated depreciation methods

A higher expense is incurred in the early years and a lower expense in the latter years

of the asset’s useful life

In the sum-of-the-years digits depreciation method, the remaining life of an asset is divided by the sum of the years and then multiplied by the depreciating base to determine the depreciation expense

The depreciation formula for the sum-of-the-years-digits method:

Depreciation Expense = (Remaining life / Sum of the years digits) x (Cost — Salvage value)

Consider the following example to more easily understand the concept of the sum- of-the-years-digits depreciation method

Example:

Consider a piece of equipment that costs 25.000.000 and has an estimated useful life

of 8 years and don’t have salvage value

> The depreciation base is constant throughout the years and is calculated as follows:

Depreciation Base = Cost — Salvage value

Depreciation Base = 25.000.000 — 0 = 25.000.000

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>» The remaining life is simply the remaining life of the asset For example, at the beginning of the year, the asset has a remaining life of 8 years The following year, the asset has a remaining life of 7 years, etc

> RL/SYD is “remaining life divided by sum of the years.” In this example, the asset has a useful life of 8 years Therefore, the sum of the years would be 1+ 2 +3 + 44+5+4+6+7+4 8 = 36 years The remaining life in the beginning of year 1 is 8

Therefore, the RM / SYD = 8 / 36 = 0.2222

> The RL / SYD number is multiplied by the depreciating base to determine the expense for that year

>» The same is done for the following years In the beginning of year 2, RL /SYD would be 7 / 36 = 0.1944

0.1944 x 25.000.000 = 4.860.000 expense for year 2

3.2.3 Uses accounts

Account 214 “Depreciation of Fixed assets” reflect the increase or decrease in depreciation of fixed assets in the period of use The detailed account 214 relates to depreciation of TFA at Phytopharma:

- Account 21413000: Tangible Fixed assets depreciation - Transportation

- Account 21415000: Tangible Fixed assets depreciation - Equipment & machine

- Account 21418000: Tangible Fixed assets depreciation — Others

Account 642 “General and administrative expenses” related to depreciation of Tangible Fixed assets at Phytopharma:

- Account 64249101: Administrative expense for house & architectural depreciation

- Account 64249301: Administrative expense for Other Tangible Fixed assets depreciation

Similarly for General operation cost (Account 627), selling expenses (account 641), and so on there will be other subsidiary ledger related to depreciation of Fixed

28 assets If the Fixed assets serve the departments for any purpose, the account ledger will be recognized

the cost of VND 67,545,000 According to the table of useful life of Fixed assets in

Appendix 02, the useful life of VNO15322 is three years Accordingly, we calculate: Average annual depreciation = : * 67.545.000 = 22.515.000 VNĐ

Average monthly depreciation = — = 1.876.250 VNĐ

e Transaction:

Based on the company's documents, this transaction is accounted for as follows:s

Dr 64249301 — Fixed assets depreciation 1.876.250

Cr 21418000 — Tangible Fixed assets depreciation 1.876.250 3.3 Accounting for reduced Fixed assets

3.3.1 The Company’s policy Tangible Fixed assets liquidation

When the company deems that an in-use fixed asset is no longer economically ineffective, or technically outdated, it will either transfer the assets internally or liquidate or sell them Accordingly, when the company carries out the internal transfer,

it includes the following cases: transfer between departments within the same company; transfers between factories; between the entities in the corporation In case the company decides to liquidate or sell, it is likely that the capital will be recovered and used for more effective business purposes However, based on property status, the Company can decide to dismantle or destroy assets without generating any other