analysis for accounts receivable and accounts payable performance at tan thanh dat industrial equipment import export company limited

MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATION SKL012806 GRADUATION THESIS ACCOUNTING INSTRUCTOR: PHAM HIEU STUDENT: NGUYEN HOAI BAO PHUON

Account 131

(Source: The author synthesizes based on Circular No 200/2014/TT-BTC)

According to Circular No 48/2019/TT-BTC dated August 8, 2019 of the Ministry of Finance, provisions for doubtful accounts receivable refer to reserves for the portion of the

27 value lost on overdue receivables or similar items that are likely not to be recovered within the agreed-upon timeframe that customers commit to paying

The purpose of establishing these provisions is to anticipate and record a sum of money not yet disbursed to ensure that the financial resources of the enterprise are sufficient to compensate for adverse situations that may arise during the operating year Additionally, it ensures adherence to the accounting principle of prudence and appropriateness

• Provisions for doubtful accounts receivable are established by the enterprise in the following situations:

- Overdue receivables according to the signed sales contracts between the two parties

- Receivables not yet due for payment, but the debtor has lost the ability to pay due to bankruptcy, absconding, disappearance, undergoing dissolution procedures, etc

When seeking evidence of unpaid amounts, it is essential to procure an original document such as economic contracts, loan agreements, debt commitments, reconciliation minutes of accounts payable, or other relevant documentation to support the existence of the obligation These documents serve as tangible proof of the outstanding debt and can be used to establish the legal basis for pursuing payment.

- There must be sufficient evidence to determine the debt as doubtful: Receivables overdue for payment for 6 months or more, and the enterprise has taken measures to recover the debt but has not been successful Receivables not yet due for payment, but the enterprise has evidence confirming the inability of the debtor to repay the debt

According to Article 2 of the Law on Value-added tax No 13/2008/QH12: “Value Added Tax (VAT) is a tax calculated on the additional value of goods and services arising

28 in the process from production, circulation to consumption It is a document for accounting purposes for recording, tracking deducted VAT invoices.”

According to Article 10 of the Law on Value-added tax No 13/2008/QH12, businesses may deduct input VAT from the total VAT amount stated on VAT invoices for purchases of goods and services used in production and business activities subject to VAT.

Taxable entities: Goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from foreign organizations and individuals), except for goods that are exempt from VAT (as regulated in Article 5 of the VAT Law No 31/2013; Article 4 of Circular 219/2013, supplemented by Law 71/2014 dated 26/11/2014)

Taxpayers of VAT: All organizations and individuals engaged in production, business activities subject to VAT, and importers of goods subject to VAT

VAT calculation using the deduction method:

- Applicable to businesses that fully comply with accounting, invoice, and document regulations as stipulated by accounting, invoice, and document laws

- Registration and declaration using the deduction method for VAT

According to Article 19 of Circular 200/2014/TT-BTC stipulating certain accounting principles for deductible VAT as follows:

- This account is used to reflect the deductible input VAT, already deducted, and remaining deductible VAT of the enterprise

- Accountants must separately record deductible input VAT and non-deductible input VAT In cases where separate accounting cannot be conducted, the input VAT shall be

29 recorded in account 1331 At the end of the period, accountants must determine the deductible and non-deductible VAT in accordance with VAT laws

Non-deductible input VAT excludes itself from various cost categories such as purchased assets, cost of goods sold, production expenses, and business expenses, based on specific circumstances.

- The determination of deductible input VAT, declaration, settlement, and tax payment must comply with the provisions of VAT laws

2.2.2.4 Account structure and documents used

Accountant uses “Account 133 - Deductible Value Added Tax” for recording

Account 133 - Deductible Value Added Tax

Opening balance: Initial balance of input VAT not deducted and not refunded

- Transfer of non-deductible input VAT

- Input VAT of goods which are returned or offered discounts

Closing balance: Remaining deductible input VAT, refundable input VAT which has not been refunded by government budget

(Source: The author synthesizes based on Section 2, Article 19 of Circular

- List of invoices and documents for purchased and sold goods and services

- Report on invoice usage status

Account used: Account 1331 – Deductible VAT of goods or services: recording deductible input VAT of materials, goods or services bought to used in production of goods or provision of services subject to VAT using credit-invoice method

2.2.2.5 Accounting flowchart of Deductible VAT

Account 133

Source: The author synthesizes based on Circular No 200/2014/TT-BTC

According to Nguyen Tuan Duy (2010), Financial Accounting Textbook: “Other receivables refer to amounts owed to a business outside of the receivables mentioned above, such as compensation for damages, temporary loans or advances, expenses paid on behalf of units for import and export agency, receivables arising from state-owned company privatization, dividend interest, profit receivables from financial investment activities, etc.”

The accounting principles for account 138 (Other receivables) according to Article 21 of Circular 200/2014/TT-BTC are as follows:

This account is used to record debt receivables other than account 131, 136 and payment of debts, containing:

- Value of shortage of assets detected, but the reasons are not uncovered awaiting resolution;

- Material compensation for losses or damage to materials, goods or capital, etc caused by individuals or groups (inside or outside enterprise);

- Expenditures on public activities, projects, investment in capital investment, production or business shall be recovered because they are not approved by competent agency;

- Expenditures on behalf of a third party required recovery, such as banking fees, customs inspection fees, delivery expenses, material handling expenses, taxes, etc

- Receivables arising from equitization of state-owned enterprises, such as: equitization costs, allowance for unemployed, support for re-training provided for employees in the equalized enterprises, etc

- Loan interests, dividends, profits receivables from financial investment;

Accountant uses: “Account 138 - Other receivables” for recording

Opening balance: Other outstanding debts

- Value of assets in shortage awaiting resolution;

- Receivables from individuals or groups

(inside or outside enterprise) for assets in shortage whose reasons are uncovered and there is a resolution report

- Receivables from equitization of state- owned enterprises;

- Loan interests, deposit interests, dividends or profits receivables from financial investment;

- Expenditures on behalf of a third party subject to recovery, debts receivables;

- Revaluation of receivables in foreign currencies (if the foreign currency rates rise against VND)

- Transfer value of assets in shortage to relevant accounts according to resolution decision;

- Transfer receivables to equitization of state-owned enterprises;

- Collected amounts of other debts receivables

- Revaluation of receivables in foreign currencies (if the foreign currency rates fall against VND)

Closing balance: Non-collected amounts of other debts receivables.

The company uses two accounts for accounting: Account 1381 and Account 1388

- Account 1381 – “Shortage of assets awaiting resolution”: Indicates the value of assets that are missing and still under investigation

- Account 1388 – “Other receivables”: Indicates the receivables of the enterprise other than the receivables accounted for in accounts 131, 133, 1381, including dividends, profits, earnings, compensation fees, etc

2.2.3.4 Accounting flowchart of Other receivables

Account 138

According to Ban Van Doan (2013), Financial Accounting Textbook: “Trade payable is the current obligation of the enterprise arising from the purchase transactions regarding materials, equipment, tools, goods, services, etc., from suppliers that the enterprise must settle from its own resources.”

According to Article 50 of Circular 200/2014/TT-BTC: “Trade payables include commercial amounts payable arisen from purchase of goods, services or asset and the seller

36 is independent with the buyer, including amounts payables between parent company and subsidiaries, joint ventures or associates) Amounts payable include amounts payable when importing through the trustee (in the import trust transaction).”

The accounting principles for account 331 (Trade payables) according to Article 51 of Circular 200/2014/TT-BTC are as follows:

- To reflect the payment status of the enterprise’s payables to suppliers of materials, goods, service providers, sellers of fixed assets, real estate, and financial investments under signed economic contracts

- To reflect the payment status of payables to main and subcontractors in construction Immediate payment transactions are not reflected in this account

- For items received, stocked, but still lacking invoices by the end of the month, provisional pricing is used for recording, and adjustments are made to the actual price upon receipt of invoices or official price notifications from the seller

- When detailing these transactions, the accountant must clearly record any payment discounts, trade discounts, or reductions in the selling price provided by the seller or supplier if not reflected in the purchase invoice

2.3.1.3 Account structure and supporting documents

Accountant uses: “Account 331: Trade Payables” for recording

Opening balance: Amount payable to suppliers at the beginning of the period

- Amounts paid to sellers, suppliers or contractors

- Prepayment to sellers, suppliers, contractors but materials, goods, services and constructions are not received

- Amounts of sales approved by sellers;

- Payment discounts and trade discounts which the sellers approve for enterprises to deduct from trade payables;

- Value of materials or goods in shortage or inferior quality which are received back by the sellers

- Re-evaluation of trade payables in foreign currencies (if the foreign currency rate falls against VND)

- Amounts payable to sellers, suppliers or contractors

- Adjustment of negative difference between provisional price and actual price of amount of materials, goods and services when the invoice or notification of official price is received

- Re-evaluation of trade payables in foreign currencies (if the foreign currency rate rises against VND)

Prepayment to sellers or payment in excess of payables to sellers

Closing balance: Outstanding balance payable to sellers, suppliers or contractors

2.3.1.4 Accounting flowchart of Trade payables

Account 331

2.3.2 Taxes and other payables to the State

According to Ban Van Doan (2013), Financial Accounting Textbook:

Complying with legal obligations, businesses must remit specific payments to the state These remittances include mandatory taxes such as VAT, special consumption tax, export tax, import tax, and corporate income tax Additionally, fees and charges as prescribed by the state are also payable by enterprises These payments contribute to the government's revenue and support the provision of essential public services Failure to comply with tax and other payable obligations may result in penalties and legal consequences for businesses.

Calculation of VAT amount to be remitted using the deduction method:

According to Article 12 of Circular 219/2013/TT-BTC: The formula for calculating VAT amount to be remitted using the deduction method is as follows:

VAT amount to be remitted

= VAT output - VAT input deducted

VAT output = Total VAT on goods, services sold as stated on the

VAT input deducted = Total VAT on invoices for goods, services purchased, documents for VAT payment on imported goods

VAT on goods, services sold as stated on the

VAT rate on goods, services x

Price subject to VAT on goods, services sold

According to Article 52 of Circular 200/2014/TT-BTC are as follows:

- This account is used to reflect the relationship between enterprises and the State regarding taxes, fees, charges, and other amounts to be paid, paid, or still to be paid to the State budget in the accounting year

- Enterprises proactively calculate, determine, and declare taxes, fees, levies, and other amounts payable to the state according to the prescribed laws They promptly reflect these in the accounting records of taxes payable, paid, deducted, and refunded

- For taxes refunded or reduced, accounting must clearly distinguish whether the tax refunded or reduced was paid at the purchasing stage or is due at the selling stage Detailed tracking accounts must be opened to monitor each tax, fee, levy, and amount payable, paid, and still outstanding

Accountant uses: “Account 333: Taxes and other payables to the State” for recording

Account 333: Taxes and other payables to the State

Opening balance: Initial tax amount to be paid

- Taxes, fees, charges and other amounts payable or paid amount to the government budget

- Taxes deducted from taxes payables

- VAT of sales returns and sales rebates

- Output VAT and VAT on import goods payable;

- Taxes, fees, charges and other payables to the government budget;

Closing balance: Taxes, fees, charges and other payables to the government budget;

- List of invoices for services sold form 01-1/GTGT, etc

Account used: Account 33311 – output VAT: Recording amount of output VAT, output deductible VAT, VAT on sales return or sales rebates, VAT payable, paid VAT and outstanding VAT payable of products, goods or services rendered during a period

2.3.2.5 Accounting flowchart of Taxes and other payables to the State

Account 333

Other payables refer to amounts owed outside of typical payments to suppliers, tax authorities, employees, or internal parties These include liabilities for unidentified assets, social insurance, health insurance, and unemployment insurance, as well as yet-to-be-realized revenue and other unspecified debts (Ban Van Doan, 2013).

According to Article 50 of Circular 200/2014/TT-BTC:

“Other payables include non-commercial amounts payable, or amounts payable relating to trading in goods or services:

- Payables relating to financial expenses, such as: interests payable, dividends payable and profits payable, financial investment expenses payable;

- Payables paid by another party; payables which the trustor receives from relevant entities to pay for import-export trust transactions;

- Non-commercial payables, such as: borrowings payable, fines payable, compensation payable, assets in surplus awaiting resolution, payables related to social insurance, health insurance, unemployment insurance, or union funds, etc.”

The accounting principle for account 338 (Other payables) according to Article 57 of Circular 200/2014/TT-BTC is as follows:

Account 332, "Other Liabilities," records payments of accounts payable excluding those in group 33 (331-337) It also accounts for unearned revenues from services rendered to customers and price discrepancies in purchase and leaseback transactions (finance and operating leases).

- Value of assets in surplus whose reasons are not uncovered awaiting resolution of competent agency; Value of assets in surplus to be returned to individuals, groups (inside and outside units) as prescribed in the decision of competent agency written in resolution report, if the reasons were determined

- Appropriated amount and payment for social insurance, health insurance, and unemployment insurance and trade union fees;

- Amount of profits or dividends payable to owners;

- Temporary loans or borrowing of materials or goods, capital contributed to BCC which does not require a new legal entity

- Amounts received on behalf of a third party payable or amounts received from the trustor to pay import duty, export duty or VAT on imported goods and pay on behalf of the trustor;

- Pre-payment for financial lease, infrastructure, interests of capital loans or purchase of debt instruments collected from clients during several accounting periods

- Amount payables for sale of shares of state capital when equitizating a wholly-state- owned enterprise.”

2.3.3.3 Account structure and Documents used

Accountant uses: “Account 338: Other payables” for recording

Table 2.6 Structure of account 338 Account 338: Other payables

Opening balance: Amount of other payables

- Transfer the value of surplus assets to related accounts as per decision recorded in the handling minutes;

- Social insurance, health insurance, unemployment insurance, trade union fees already paid

- Unrealized turnover calculated for each accounting period; refund of advance

- Value of surplus assets awaiting processing (cause not clearly identified); Value of surplus assets to be paid to individuals, groups as per decision recorded in the handling minutes due to immediate identification of the cause;

- Deduct social insurance, health insurance, unemployment insurance, union fees from production costs,

45 payments to customers when discontinuing the leasing of assets;

- Other amounts paid and settled business expenses, or deduct from employees' salaries;

- Not yet realized revenue arising in the period;

Closing balance: Other amounts still payable, still to be paid

The company uses six accounts for accounting:

Account 3381, "Assets in Surplus Awaiting Resolution," is used to temporarily record the value of surplus assets whose surplus status is still under investigation Once the reasons for the surplus are determined and a resolution report is issued, the assets will be transferred to their appropriate accounts, rather than remaining in account 3381.

- Account 3382 - Trade Union fees: records accruement and payment of trade union fees at units

- Account 3383 - Social insurance: records accruement and payment of social insurance at units

- Account 3384 - Health insurance: records accruement and payment of health insurance at units

- Account 3386 - Unemployment insurance: records accruement and payment of unemployment insurance at units

- Account 3388 - Other payables: records other payables of the unit other than payables recorded to accounts from 3381 to 3387

2.3.3.4 Accounting flowchart of Other payables

Account 338

2.4 Evaluation indicators for financial management effectiveness

2.4.1 Indicators for evaluating the efficiency of production and business investment

According to Kotane & Kuzmina (2012): “The evaluation of small-companies performance includes financial and non-financial indicators of companies The main source of information about financial indicators of business activities is the financial statements of a company; basing on them there is performed the evaluation of the company’s business activities and financial status The evaluation of small companies business performance and financial status have a significant role in making financial managerial decisions, as it help assessing the risks and potential benefits planning the perspective performance of the company.”

According to Nguyen Xuan Quyet (2021), Business Activity Analysis Textbook, the author compiling business activity evaluation indices:

Inventory turnover ratio is an important index to measure the turnover rate of inventory in a certain period This index gives the average number of inventory turnovers in a year A high inventory turnover ratio can indicate that a business is effectively managing inventory and is able to optimize working capital However, it should be noted that the inventory turnover ratio needs to be considered in conjunction with other factors such as business model and industry to get a comprehensive view of inventory management effectiveness The inventory turnover ratio is calculated using the following formula:

Inventory turnover ratio = Cost of goods sold

Accounts receivable turnover is the number of times per year that a business collects its average accounts receivable The ratio is used to evaluate the ability of a company to efficiently issue credit to its customers and collect funds from them in a timely manner

Accounts receivable turnover = Net Annual Credit Sales

The accounts payable turnover ratio is a short-term liquidity measure used to quantify the rate at which a company pays off its suppliers Accounts payable turnover shows how many times a company pays off its accounts payable during a period

Accounts payable is short-term debt that a company owes to its suppliers The accounts payable turnover ratio shows how efficient a company is at paying its suppliers and short-term debts

Cost of goods sold + Ending inventory − Beginning inventory

The working capital cycle is a crucial indicator of a business's cash flow efficiency It measures the time taken to convert net working capital (current assets minus current liabilities) into cash Businesses aim to optimize this cycle by expediting inventory sales, collecting customer revenue promptly, and delaying bill payments By managing these factors effectively, companies can enhance their cash flow and maintain financial stability.

2.4.2 Indicators for evaluating liquidity ratios

According to Saleem & Rehman (2011): “Liquidity management is very important for every organization that means to pay current obligations on business, the payment obligations include operating and financial expenses that are short term but maturing long term debt Liquidity ratios are used for liquidity management in every organization in the form of current ratio, quick ratio and Acid test ratio that greatly affect on profitability of organization.”

The current liquidity ratio reflects the company’s ability to cover its short-term obligations by comparing the total current assets to the total current liabilities from a firm’s Balance Sheet

The quick ratio is an indicator of a company’s short-term liquidity position and measures a company’s ability to meet its short-term obligations with its most liquid assets

Quick ratio = Current assets − Inventories

The cash ratio takes the test of liquidity even further This ratio only considers a company’s most liquid assets – cash and marketable securities They are the assets that are most readily available to a company to pay short-term obligations

In Chapter 2: “Theoretical basis of accounts receivable and accounts payable”, the author provides a brief summary of the theory and definition of accounts receivable and payable Here, the accountant must accurately record each transaction according to what has been learned, such as accounts and methods Through this, in order to apply the discussed theoretical basis, we will move on to the practical aspect in Chapter 3: “Current status of accounts receivable and accountss payable performance at Tan Thanh Dat Industrial Equipment Import Export Company Limited”

CHAPTER 3: CURRENT STATUS OF ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE PERFORMANCE AT TAN THANH DAT INDUSTRIAL

EQUIPMENT IMPORT EXPORT COMPANY LIMITED

3.1 Current status of some accounts receivable transactions at Tan Thanh Dat Industrial Equipment Import Export Co., Ltd

3.1.1 Current status of trade receivables

When there is a business transaction related to account trade receivables, the accountant will rely on the original documents (invoices, receipts, credit notes, etc.) to verify the accuracy of the documents, then record them in the accounting software and monitor customer debts With the assistance of the software, the data will be automatically updated in the Receivables Ledger and other related ledgers The original documents will be kept and organized for storage

Accounting cycle account 131

Process of reconciling accounts receivable

Step 1: The accountant prints out relevant documents to send to customers to review and confirm accounts receivable:

- Accounts receivable reconciliation report: for customers to confirm the accounts receivable and send back to the company

- Accounts receivable notification/detailed accounts receivable ledger: for customers to check and reconcile in case of discrepancies

Step 2: In case of discrepancies, make corrections to align with the actual situation

- Scenario 1: Mixing up accounts receivable between customers => Correct the document, select the correct customer

- Scenario 2: Recording accounts receivable/revenue prematurely before meeting recognition criteria => Reverse the journal entry recording that revenue

- Scenario 3: Incorrectly booking accounts receivable/revenue in the period: booking in the next period instead of the current one and vice versa => Correct the dates on the documents to reflect the actual situation

Step 3: The accounting department keeps the confirmed accounts receivable reconciliation report from customers for financial reporting and settlement purposes

Transaction 1: On July 20, 2023, the company sold U100 Steel, V Steel, Stainless

Steel to Swater Kankyo Limited Company (Room 405, Ocean Park Building, No 1 Dao Duy Anh Street, Phuong Mai Ward, Dong Da District, Hanoi City) without receiving payment in the amount of 42.785.975 VND (price excluding 10% VAT)

- Goods dispatched note No 410 (Appendix 2)

- VAT Invoice Serial 1C23TTD No 410 (Appendix 3)

Transaction 2: On July 31, 2023, the company sold Aluminum Coil, Galvanized Steel,

Stainless Steel 304 to Yuong Hsin Industrial Water Treatment Chemical Company Limited (No 3 Street, Song May Industrial Park, Bac Son Commune, Trang Bom District, Dong Nai Province) without receiving payment in the amount of 130.108.003 VND (price excluding 10% VAT)

Transaction 3: On August 7, 2023, the company sold Stainless Steel, White Reducing

Tee, etc to Viet Long Toan Trading Limited Company (No 12L7, Binh Duong Residential Area, Long Binh Tan Ward, Bien Hoa City, Dong Nai Province) without receiving payment in the amount of 41.009.091 VND (price excluding 10% VAT)

Transaction 4: On August 10, 2023, the company sold Carbon Steel Flanges, Welding

Cups, Welding Elbows, etc to Cu Nang Limited Company (2nd Floor, 141/5, Zone 2, Tan Bien Ward, Bien Hoa City, Dong Nai Province) without receiving payment in the amount of 27.450.000 VND (price excluding 10% VAT)

Transaction 5: On August 12, 2023, the company sold Seamless Pipes, U100 Steel,

Stainless Steel to Hoa Ich Mechanical and Electrical Limited Company (LKC3-03, Block C3, A16A Street, Thu Duc Service Urban Area, Don Thuan Commune, Trang Bang Town, Tay Province) without receiving payment in the amount of 74.996.633 VND (price excluding 10% VAT)

Figure 3.1 Receivables Ledger 3.1.2 Current status of deductible Value Added Tax

Procedure for recording input VAT:

Every day, the accountant processes input invoices and documents, then enters the data into the SMART PRO software system After data entry, the VAT input invoice register is exported to an Excel file and cross-checked with the invoices to ensure accuracy If any errors are found, they are corrected directly in the software and the data is backed up for reporting purposes

Transaction 1: On August 1, 2023, Le Gia Trading and Services Materials Company

Limited (26/12E Xuan Thoi Dong 1, Xuan Thoi Dong Commune, Hoc Mon District, Ho Chi Minh City) provided:

- Teflon gasket 50A with a value of 913.600 VND (price excluding 8% VAT)

- Teflon gasket 100A with a value of 1.187.000 VND (price excluding 8% VAT)

- VAT Invoice Serial 1C23TLG No 1657 (Appendix 16)

- Goods received note No 60/01 (Appendix 17)

Transaction 2: On August 4, 2023, Kim Thien Phuc Company Limited (89/9 Street

No 2, Ward 16, Go Vap District, Ho Chi Minh City) provided:

- Mineral fiber insulation tube with silver 22*25*1000 with a value of 1.200.000 VND (price excluding 8% VAT)

- VAT Invoice Serial 1C23TTP No 1345 (Appendix 18)

Transaction 3: On August 8, 2023, Bien Hoa Hot Dip Galvanizing Company Limited

(B1/13, Zone 5, An Bình Ward, Bien Hoa City, Dong Nai Province) provided Galvanized flange surface treatment with a value of 2.527.778 VND (price excluding 8% VAT)

- VAT Invoice Serial 1C23TNN No 2816 (Appendix 20)

Transaction 4: On September 5, 2023, Kim Dong Steel Company Limited (i18A,

Zone 5, Tan Hiep Ward, Bien Hoa City, Dong Nai Province) provided Steel plate with a value of 9.282.000 VND (price excluding 10% VAT)

- VAT Invoice Serial 1C23TKD No 1258 (Appendix 22)

Transaction 5: On September 9, 2023, Lien Tien Trading and Services Company

Limited (23 Nguyễn Thi, Ward 13, District 5, Ho Chi Minh City) provided T190 temperature measuring instruments with a value of 1.885.000 VND (price excluding 8% VAT)

- VAT Invoice Serial 1C23TLT No 1694 (Appendix 24)

3.1.3 Current status of other receivables

Procedure for recording other receivables:

The accountant consolidates payment vouchers, debt notes, inventory check reports, etc., then proceeds to input data into the SMART PRO software system At the end of the quarter, year: the accountant performs the closing entries, balance transfers to prepare the financial statements

Transaction 1: On August 23, 2023, the company received money from other accounts receivable, with an amount of 5.000.000 VND

Original document: Receipt voucher No PT-08/12 (Appendix 26)

Figure 3.2 General ledger for account 1388

3.2 Current status of some accounts payable transactions at Tan Thanh Dat Industrial Equipment Import Export Company Limited

3.2.1 Current status of trade accounts payable

When there are transactions related to trade accounts payable, the accountant will rely on original documents (invoices, payment vouchers, debt notes, etc.) to verify and record them in the accounting software, and proceed to track the detailed accounts payable on the payables ledger With the assistance of SMART PRO accounting software, the data will be automatically transferred to the nominal ledger account 331 and other related books The original documents will be kept and organized in the department

Flowchart 3.6 Process of reconciling accounts payable Process of reconciling accounts payable at the end of the period

Step 1: The accountant prints the relevant documents to send to the suppliers for reconciliation and confirmation of accounts payable:

- Accounts payable reconciliation report: Request the suppliers to confirm the accounts payable and send it back to the company

- Payables ledger: For the suppliers to check and reconcile in case of discrepancies

Step 2: In case of discrepancies, make necessary adjustments to reflect the actual situation The following scenarios may occur:

- Scenario 1: The accounting department fails to record a transaction due to delayed transfer of documents or oversight, in which case a supplementary journal entry will be made

- Scenario 2: The accounting department records a transaction without an invoice or supporting documents, in which case the previously recorded transaction will be deleted

- Scenario 3: Accounts payable are mistakenly recorded under the wrong supplier, in which case the documents will be corrected to select the correct supplier

Step 3: After receiving the confirmed accounts payable reconciliation report from the supplier, the accounting department will keep it for the purpose of financial statement preparation

Transaction 1: On July 12, 2023, purchased Inox 304 from Luc Dong Tam Limited

Liability Company (No 25A, Group 1, Dong Street, Phuoc Tan Ward, Bien Hoa City, Dong Nai Province) for an amount of 18.589.092 VND (price excluding 10% VAT)

- VAT Invoice Serial 1C23TDT No 1518 (Appendix 28)

Transaction 2: On July 17, 2023, purchased goods from Sieu Viet Steel Import Export Company Limited (No 157, National Highway 1A, Group 3, Binh Chieu Ward, Thu Duc City, Ho Chi Minh City)

- Purchased 48.3mm x 3.68mm x 6m seamless steel pipes for an amount of 2.275.363 VND (price excluding 10% VAT)

- VAT Invoice Serial 1C23TSV No 1912 (Appendix 30)

Transaction 3: On July 19, 2023, purchased goods from Nhi Anh Phat Limited

Liability Company (No 663, Hanoi Boulevard, Long Binh Ward, Bien Hoa City, Dong Nai Province)

- Purchased galvanized pipes for an amount of 250.566 405 VND (price excluding 10% VAT)

- Purchased galvanized steel boxes for an amount of 205.932.340 VND (price excluding 10% VAT)

- Purchased seamless pipes for an amount of 43.636.400 VND (price excluding 10% VAT)

- Purchased V steel for an amount of 70.687.130 VND (price excluding 10% VAT)

- VAT Invoice Serial 1C23TAP No 1654 (Appendix 32)

Transaction 4: On August 8, 2023, purchased stainless steel pipes from Hoang Kim

Stainless Steel Manufacturing and Trading Limited Liability Company (43 Dinh Liet, Phu Tho Hoa Ward, Tan Phu District, Ho Chi Minh City) for an amount of 20.032.479 VND (price excluding 10% VAT)

- VAT Invoice Serial C23TYY No 591 (Appendix 34)

Transaction 5: On August 11, 2023, purchased stainless steel from Luc Dong Tam

Limited Liability Company (No 25A, Group 1, Dong Street, Phuoc Tan Ward, Bien Hoa City, Dong Nai Province) for an amount of 175.257.090 VND (price excluding 10% VAT)

- VAT Invoice Serial C23TDT No 1802 (Appendix 36)

Figure 3.3 Payables ledger 3.2.2 Current status of Taxes and other payables to the State

Procedure for recording output VAT:

Every day, the accountant consolidates output invoices and documents, then proceeds to enter the data into the SMART PRO software system After the data entry process, the VAT invoice register is exported to an Excel file and cross-checked with the invoices to ensure accuracy If any errors are detected, they are corrected directly in the software and the data is backed up for reporting purposes

Transaction 1: On July 7, 2023, sold Zinc Flake, Galvanized Steel, and Galvanized

Pipes to HANA ENG VINA Co., Ltd (No 79, Group 9, Zone 2, Tam Hiệp Ward, Bien Hoa City, Dong Nai Province) for a cash amount of 2.898.183 VND (price excluding 10% VAT)

- Receipt voucher No PT-07/07 on July 7, 2023 (Appendix 37)

Transaction 2: On July 11, 2023, sold Galvanized Pipes to Be Ta Gas Co., Ltd (No

01, Zone 2, Ha Noi Boulevard, Long Binh Ward, Bien Hoa City, Dong Nai Province) for a cash amount of 3.780.016 VND (price excluding 10% VAT)

Transaction 3: On August 2, 2023, sold Ball Valves to Thanh Anh Industrial Trading and Services Co., Ltd (No 25/2A, Group 34B, Zone 7, Tan Phong Ward, Bien Hoa City, Dong Nai Province) for a cash amount of 3.540.000 VND (price excluding 8% VAT)

- Receipt voucher No PT-08/02 on August 2, 2023 (Appendix 41)

Transaction 4: On August 7, 2023, sold Silver-Coated Mineral Wool Insulation to

Tan Cuong Phat Mechanical - Construction - Trade Co., Ltd (1464, Group 17, Vuon Dua Zone, Phuoc Tan Ward, Bien Hoa City, Dong Nai Province) for a cash amount of 6.300.000 VND (price excluding 8% VAT)

Transaction 5: On August 7, 2023, sold Flanges to Phan Nhan Group Co., Ltd (No

656 National Highway 1A, Zone 4, Tan Hiep Ward, Bien Hoa City, Dong Nai Province) for a cash amount of 2.000.000 VND (price excluding 10% VAT)

3.2.3 Current status of other payables

During the accounting process, the accountant compiles salary payment data and enters it into the SMART PRO software system Subsequently, the accounting department executes closing and balance transfer procedures to prepare financial statements at the conclusion of each quarter and year.

Transaction 1: On August 31, 2023, based on the Salary payment sheet (Appendix

47), the accountant records salary deductions for the production department and the management department (deducted from employee salaries) as follows:

47), the accountant records salary deductions for the management department (paid by the company) as follows:

- Inventory inspection repr report, etc

47), the accountant records salary deductions for the production department (paid by the company) as follows:

3.3 Analysis of accounts receivable and payable performance at Tan Thanh Dat Industrial Equipment Import Export Co., Ltd

3.3.1 Analysis of accounts receivable and payable performance

According to Bragg (2012), financial ratio analysis is the process of determining and interpreting the relationships between items in financial statements to provide an accurate assessment of a company’s operating results and financial condition

According to Lee and Cheng (2009), financial statement analysis is an essential and important part of the broader field of business analysis, while business analysis is the process of evaluating the economic prospects and risks of a company, including analyzing

75 the business environment, strategy, financial situation, and operational efficiency of the company

Based on the figures in the Balance Sheet and Statement of Comprehensive Income for the year 2022, the author calculated the following indicators:

The result of the calculation is positive, it typically indicates that the company’s operations are effectively financing themselves and that the company is efficiently managing its working capital It suggests that the company has sufficient working capital to cover its short-term obligations and may indicate effective inventory management, sales collection procedures, and payment terms with suppliers

Evaluation of the company’s ability to pay:

A high ratio (>1) indicates that the company has a high ability to pay its debts on time

A high ratio ensures that the company’s payment ability and liquidity are high

Process of reconciling accounts payable

Every day, the accountant consolidates output invoices and documents, then proceeds to enter the data into the SMART PRO software system After the data entry process, the VAT invoice register is exported to an Excel file and cross-checked with the invoices to ensure accuracy If any errors are detected, they are corrected directly in the software and the data is backed up for reporting purposes

The accountant consolidates salary payment tables, etc., then proceeds to enter the data into the SMART PRO software system At the end of the quarter or year, the accounting department performs closing and balance transfer to prepare financial statements

3.3 Analysis of accounts receivable and payable performance at Tan Thanh Dat Industrial Equipment Import Export Co., Ltd

The result of the calculation is positive, it typically indicates that the company’s operations are effectively financing themselves and that the company is efficiently managing its working capital It suggests that the company has sufficient working capital to cover its short-term obligations and may indicate effective inventory management, sales collection procedures, and payment terms with suppliers

Tan Thanh Dat Company's current ratio is below the 2022 Industrial Machinery average, indicating potential difficulties in meeting short-term debt obligations This could result in elevated borrowing costs or diminished creditworthiness, as the company may be perceived as having a higher risk of default.

The current ratio is 1,26, higher than the Industrial Machinery average in 2023 (current ratio = 1,19), signifies improved short-term financial health and a stronger ability to meet obligations as they come due It reflects positively on the organization's liquidity position and its capacity to cover short-term liabilities

A quick ratio less than 1 means that the company’s ability to pay off all short-term debts in a short period of time is not possible In other words, the company will have difficulties in quickly paying off short-term debts

The quick ratio is lower than the Industrial Machinery average in 2022 (quick ratio 0,96), indicating that the company has fewer liquid assets compared to short-term liabilities than its competitors in the same industry This can have negative consequences such as poor liquidity, higher financial risk, and reduced financial flexibility for the business

The quick ratio in 2023 is 0,62, lower than the Industrial Machinery average in 2023 (quick ratio = 0,71), indicating that managers may need to reassess their business strategy, manage finances more carefully, optimize operational processes, and/or find ways to

77 increase income and reduce expenses Additionally, establishing an effective debt management plan can help improve quick ratio

A cash ratio less than 1 means that the company has more short-term debts than cash and cash equivalents This implies that currently, the company does not have enough cash to repay short-term debts

The cash ratio is higher than the Industrial Machinery average in 2022 (cash ratio 0,25) suggests that the company has a greater proportion of cash and cash equivalents compared to its industry counterparts

The cash ratio is 0,37, higher than the Industrial Machinery average in 2023 (cash ratio = 0,11) provides a cushion against unexpected expenses or downturns in business conditions However, excessively high cash ratios might suggest that the organization is not effectively utilizing its resources and could consider reinvesting excess cash to generate higher returns

3.3.2 The role of aging report

According to Juma (2023), an aging report, or accounts receivable aging report, is a financial tool that lists a company’s outstanding invoice amounts and corresponding due dates This type of financial reporting aims to track how long customers have owed invoices to identify potential collection issues or make decisions about credit terms The information in the report enables the accountant to determine a company's credit policy It helps business owners manage their cash flow and improve their financial health

Accounting cycle account 338

Reason for choosing the topic

According to the World Bank’s Global Economic Outlook report for June 2023, the global economy is still struggling amidst the prolonged impact of multiple negative shocks such as the Covid-19 pandemic, the conflict between Russia and Ukraine, and tighter monetary policies to curb inflation The strategies that contributed to the global economic recovery in the early months of 2023 are expected to diminish in the later months of the year This indicates that global economic activity for the entire year of 2023 will slow down, reflecting a significant deceleration in developed economies

Vietnam's economic recovery faces challenges due to domestic and external factors, with the International Monetary Fund (IMF) projecting a slowdown from 8% growth in 2022 to 4.7% in 2023 Policies must prioritize financial and macroeconomic stability, while accelerating reforms, to mitigate short-term volatility and support sustainable economic development.

In a market mechanism with the participation of various economic entities as it is now, businesses face risks and challenges, requiring constant innovation to improve their strengths, define operational goals and business strategies that are suitable for their capabilities, and have production and capital utilization plans to achieve optimal efficiency

To achieve this, accounting work in the enterprise plays a crucial role in helping managers grasp the financial situation of the company

The increase or decrease in accounts receivable and payable has a significant impact on arranging the capital structure to ensure the normal business operations as well as the impact on business efficiency According to Jindal (2017), the management of receivables is a significant component of a firm’s working capital management Presentstudy empirically examines the effect of efficiency of receivables management, measured by debtor’s turnover ratio, in the commercial vehicle industry in India on the firm’s profitability Profitability was measured using Return on Capital Employed The findings

2 indicate a significant positive relationship between debtor’s turnover ratio and profitability of the firm This implies that receivables management should be a key focus point for improving profitability in this industry Besides, Gyasi Sah (2021) emphasizes the importance of receivables management on the performance of small and medium enterprises, especially in the economic context of Ghana, where these enterprises are located, contributing significantly to job creation and economic stability Managing receivables not only helps optimize cash flow but is also a decisive factor in the success or failure of a business

Effectively managing accounts receivable and payable will help managers accurately assess the financial situation in terms of payment ability and capital mobilization, thereby contributing to the growth of the company's profits According to Tahirli (2017), despite the fact that accounts receivable management is quite a complex time consuming and difficult task, its proper management has its own ways of solutions which gives positive results to the company overall The realisation of solutions on the way to the accounts receivable management is considered as one the main priorities of the company and its mistreatment would bring up to the failure of financial tasks

Recognizing the importance of accounting for accounts receivable and payable in enterprises, the author has decided to study the topic: “Analysis for accounts receivable and accounts payable performance at Tan Thanh Dat Industrial Equipment Import Export Company Limited” as the subject of graduation thesis.

Object and research objectives

- Understand the overview of Tan Thanh Dat Industrial Equipment Import Export Company Limited in terms of business sectors, organizational structure, management apparatus, etc

- Theoretical basis of accounts receivable and accounts payable

- Understand the current status of accounts payable and accounts receivable at the company, related processes, documents, and relevant ledgers

- Provide evaluation and comments on the accounts payable and accounts receivable at the company and thereby make proposals and recommendations to contribute to improving the accounting of payables and receivables at the company to enhance the efficiency of the company’s business operations.

Research scope

Research space: The topic is researched and implemented at Tan Thanh Dat Industrial Equipment Import Export Company Limited

- Internship period: from July 2023 to September 2023

- Data collection time for research: From 2022 to 2023 at Tan Thanh Dat Industrial Equipment Import Export Company Limited.

Research methods

- Interview method: Directly ask the accountant about issues related to accounts payable and accounts receivable; invoices, documents, ledgers to serve research and thesis

- Observation method: Observe the work processes, accounting organization to understand the invoice processing procedures, accounting for transactions arising in the software, etc

- Synthesis, analysis method: Collect data, synthesize and analyze to provide evaluation and recommendations on accounting at the company in general and accounting of accounts receivable and accounts payable in particular at the company.

Structure of the thesis

In addition to the introduction, conclusion, and appendices, the graduation thesis:

“Analysis for accounts receivable and accounts payable performance at Tan Thanh Dat Industrial Equipment Import Export Company Limited” is divided into 4 chapters:

Chapter 1: Introduction about Tan Thanh Dat Industrial Equipment Import Export Company Limited

Chapter 2: Theoretical basis of accounts receivable and accounts payable

Chapter 3: Current status of accounts receivable and accounts payable performance at Tan Thanh Dat Industrial Equipment Import Export Company Limited

Chapter 4: Comments and recommendations for accounts receivable and accounts payable at Tan Thanh Dat Industrial Equipment Import Export Company Limited

INTRODUCTION ABOUT TAN THANH DAT INDUSTRIAL

General introduction about Tan Thanh Dat Industrial Equipment Import Export

Company name: Tan Thanh Dat Industrial Equipment Import Export Company

Abbreviated name: TAN THANH DAT INDUSTRIAL CO., LTD

Address: No 725, Hanoi Highway, Quarter 3, Long Binh Ward, Bien Hoa City, Dong

- Mechanical; Metal treatment and coating (except plating, except powder coating)

- Installation of industrial machinery and equipment (except plating and mechanical processing)

- Electrical system installation (except plating and mechanical processing)

- Installation of water supply and drainage systems, heating and air conditioning (except plating and mechanical processing)

- Selling spare parts and auxiliary parts of cars and other motor vehicles

- Selling spare parts and auxiliary parts of motorbikes and motorbikes

- Wholesale of other machinery, equipment and spare parts

- Wholesale of solid, liquid, gas fuels and related products

- Wholesale of metals and metal ores (Except gold bars)

- Wholesale of materials and other installation equipment in construction

- Other specialized wholesale not yet classified

- Retailing motor fuel in specialized stores

- Retailing of hardware, paint, glass and other installation equipment in construction in specialized stores

- Retail sale of household electrical appliances, beds, cabinets, tables, chairs and similar furniture, lamps and electric light sets, other household appliances not elsewhere classified in specialized stores

The company sells a number of main products such as:

- Valves and pipe fittings of many different brands

- Cast pipes, Hoa Phat welded pipes, black boxes, zinc boxes, SUS 316,304,201 stainless steel pipes

- Flanges according to standards ANSI, PN16, 20K, JIS 10K, BS 5k

- Machining as required for flanges, cylinders and pipe bending

- Bolts, sockets, screws, threaded rods, connecting rods made of 304, 201, black steel, all kinds of polish

- Lead gasket, PTFE gasket, white rubber gasket, black rubber gasket, rubber sheet, asbestos sheet

- Additional supplies included with orders of paint, welding rods, grinding wheels, cutting stones

Figure 1.1 Logo of Tan Thanh Dat Industrial Equipment Import Export Co.,Ltd

Realizing the trend of industrialization and the need to use industrial equipment and spare parts in many factories, Ms Vo Thi Thuy decided to establish Tan Thanh Dat Industrial Equipment Import Export Co., Ltd specializing in providing equipment products serving the manufacturing industry

Tan Thanh Dat Industrial Equipment Import Export Co., Ltd operates under a license issued by the Department of Planning and Investment of Dong Nai province on January 22,

2019 The company’s initial capital is 2.000.000.000 VND with 1 Head office (including office and warehouse) Since the early days of establishment, the company’s number of employees has been less than 10 people However, up to now, the number of employees at the company has increased to more than 25 people

Established in 2019, Tan Thanh Dat Company has rapidly expanded in the Wholesale of machinery, equipment, and spare parts industry Despite operating for a mere 5 years, the company has secured a substantial market presence, earning the trust of renowned domestic and international clients This success is evidenced by the numerous high-value orders the company has received, leading to a solid foundation in the industry.

The company’s products are consumed everywhere, from domestic to foreign markets:

- Domestic market: Domestic provinces from North to South with all the company’s products But the main markets are still Ho Chi Minh City and Dong Nai

- Foreign markets: Russia, China, Korea,

Tan Thanh Dat has the function of organizing the purchase, sale, import and export of machinery and equipment to serve the industry

In addition, the company also cooperates and invests with other companies to expand the market and optimize business efficiency to increase profits for businesses and enrich the country

The company operates under the direct sales method, directly contacting customers to capture information, create relationships and reputation with partners Since then, the company’s reputation has increased and more customers have come to it

- Production and business activities according to the provisions of law with business lines granted business certificates by the Department of Planning and Investment of Dong Nai province

- Fulfill financial obligations to state agencies and tax authorities

- Fulfill the responsibilities and obligations of the business to customers according to the signed contract

- Ensure capital development and maximize profits

- Improve the quality of life of employees

Tan Thanh Dat Industrial Equipment Import Export Co., Ltd aims to become one of the leading companies in the field of import-export and supply of industrial equipment within the next 10 years With a commitment to bringing the best products and services to customers, the company is proud to be a trusted partner of many domestic and foreign businesses

With headquarters located in Dong Nai, the company has built an extensive distribution network, helping to quickly and effectively meet all customer needs nationwide

The company’s customer service staff is always willing to listen and support, ensuring all customer requests and questions are answered in the best way

Tan Thanh Dat has a mission associated with the interests of many parties, always striving to find and maximize the highest value and benefits for:

Tan Thanh Dat maintains reliable partnerships with leading domestic manufacturers, to ensure a continuous and diverse supply source

The company views customers as the center of all business activities, committed to constantly improving and enhancing service quality to meet all customer expectations and requirements

Providing comprehensive solutions, quality machinery and equipment Prioritize quality products with high environmental protection, while still ensuring product productivity and quality

Become a reputable distributor for companies and agents, always accompanying on the path of developing business networks and enhancing brands From there, contributing to the overall development of Vietnam's industry

Strengthen and increase credibility as well as demonstrate the expectations placed on the company by major partners

Bringing sustainable value to all Tan Thanh Dat employees Create a friendly working environment, promoting the spirit of freedom, democracy, solidarity and professionalism at work

The company is committed to providing only the highest quality products that are reliable and meet strict industry standards

With passion, professionalism and dedication, Tan Thanh Dat Industrial Equipment Import Export Co., Ltd hopes to become a reliable partner and top choice in the field of industrial equipment

Tan Thanh Dat is actively building its team and corporate culture to be ready to change and accept new things to develop better, aiming to meet the increasing needs of customers and partners desiring to develop in harmony with the environment and surrounding community The company enhances the application of modern technology in production to protect the environment Accompanying partners and customers in the development process; train, develop and improve the income of officials and employees

1.1.6 Advantages and disadvantages of the business

- The company has been in the industry for a long time and has built a reputable brand

- Having a considerable distribution network help the company access various customers and markets

- There's a trend towards environmentally friendly products or energy-saving solutions, the company can capitalize on this to develop new products

- Building relationships with manufacturers, suppliers, and clients can lead to repeat business and ongoing partnerships

- The company cannot control production costs, it may affect profitability and product competitiveness

- The company relies heavily on a few key suppliers, a disruption could pose risks in the supply chain

- In a competitive market, Tan Thanh Dat Co., Ltd cannot compete on price or quality, this could be a weakness

- The distribution network is limited, it may affect market access and growth potential.

Management apparatus

Diagram 1.1 Organizational diagram of Tan Thanh Dat Co., Ltd

(Source: Human Resources Department at Tan Thanh Dat Industrial Equipment

1.2.2 Functions and tasks of departments

- Determine the company’s goals, development orientation and mission

- Create business plans and general strategic directions for the entire company

- Manage all operations and be responsible for sales, profits, development orientation and growth of the company

- Manage and supervise all activities of employees, department leaders, directly direct and meet with important partners of the business

- Support the Director in various managerial tasks, including decision-making, planning, and overseeing operations

- Ensure established company goals and strategic plans are being met

- Analyze and monitor employee progress towards achieving set goals

- Plan, post recruitment ads, and deploy communication campaigns to recruit suitable personnel

- Manage labor contracts, personnel records and related documents

- Grasp the working situation of personnel, thereby having an overview and details of personnel fluctuations and come up with a stabilization plan

- Track and monitor employee timekeeping, view salary slips online, and maximize stationery costs Implement welfare benefits, leave work or contract expiration according to regulations

- Store and manage procedures, labor contracts, certificates of merit, procedures for accepting jobs or terminating labor contracts

- Prepare invoices and other documents related to sales and service provision, collect customer payments, monitor delinquent accounts to ensure payments are made

- Check supplier invoices, make payments to suppliers and agents on time

- Calculate total salary as well as deduct income tax, social insurance, health insurance, unemployment insurance and other employee contributions

- Provide reliable financial information to shareholders of the business, showing current figures on revenue, profits, assets and business expansion capabilities

- Research and develop strategies to access the market, attract customers, maintain and expand relationships with customers

- Make detailed plans for business activities, including processes, production schedules, quality and quantity of goods sources, team allocation, production workshops, etc

- Set up information, documents, and product quotes to work with customers

- Take full responsibility for the company's business activities before the Board of Directors.

Accounting apparatus

Diagram 1.2 Accounting apparatus diagram Tan Thanh Dat Co., Ltd

(Source: Finance - Accounting Department at Tan Thanh Dat Industrial Equipment

1.3.2 Functions and tasks of Finance - Accounting Department

- Manage employees in the accounting department, ensuring employees will fully participate in accounting training programs and complete assigned tasks

To maintain optimal business performance, it is crucial to monitor employee progress and productivity, proactively addressing financial challenges By analyzing potential risks and reporting them promptly to the Board of Directors, timely measures can be implemented to mitigate financial impact This proactive approach not only saves time but also effectively reduces costs, ultimately contributing to the organization's long-term stability and financial health.

- Directly manage books and approve revenues and expenditures

- Disseminate financial plans of leaders to the accounting department

- Participate in analysis and evaluation of financial and business plans

- At the end of the month, the chief accountant is responsible for checking the final settlement report prepared by the general accountant to report to leaders

- Check the validity and legality of accounting documents related to arising economic operations and record them in relevant books Determine arising transaction accounts, check the balance between general and detailed accounting data

- Compare data between units, aggregate and detailed data

- Print general and detailed accounting books for the company

- Store the company's accounting books and documents according to regulations

- Prepare periodic tax reports, periodic financial reports and unexpected management financial statements when required Prepare periodic corporate income tax and personal income tax finalization

- Responsible for explaining data when there is an inspection and request from superiors

- Check the cash book, compare it with the original documents Make sure the data must be accurate

- Based on payment documents to check the reasonableness and validity, ensure the data is accurate and consistent

- Monitor debts of shareholders, customers, employees and urge debt collection; track bank deposits; Manage and verify the legality of revenue and expenditure documents

- Pay salaries to employees, pay external expenses Responsible for tracking advances in the business, making payment plans and contacting suppliers when related issues arise

- Monitor details of each receivable and payable debt by each subject, regularly conduct comparison checks, and urge payments to be "timely."

- Check and compare periodically or at the end of the month each arising debt, receivables and payables, and remaining receivables and payables

- Monitor both in original currency and conversion in "Vietnamese Dong" for receivables originating in foreign currencies At the end of the period, the balance must be adjusted according to the actual exchange rate

1.3.3 The current accounting policies in the company

Accounting period: The Company’s fiscal year begins on January 1 and ends on December 31 every year

Monetary unit: The currency used in accounting is Vietnam Dong (VND) because most operations are performed in VND currency

Accounting regime: The company applies Vietnamese Accounting Standards, Vietnamese Enterprise Accounting Regime issued under Circular No 200/2014/TT-BTC dated December 22, 2014 and other circulars guiding the implementation of accounting standards of the Ministry of Finance in preparing and presenting financial statements

Method of calculating ex-warehousing price: Ex-warehousing price is calculated according to the first-in, first-out method and is accounted for by the regular declaration method

Accounting method Fixed assets: Tangible fixed assets are depreciated using the straight-line method over their estimated useful life

Tools and equipment already put into use are allocated to expenses using the straight- line method with an allocation period of no more than 03 years

Value added tax calculation method: The company pays VAT according to the deduction method

Currently Tan Thanh Dat Co., Ltd apply computer accounting and organize accounting books in the form of General Journal according to Circular 200/2014/TT-BTC Including the following main types of books: Accounting ledger, General journal, General ledger, Subsidiary ledger

: Enter daily data : Print books and reports at the end of the month and year : Comparative test

Daily: Based on the accounting documents or the Summary table of similar accounting vouchers of the same type, determine the Debit account and Credit account to enter data into the computer according to the tables and forms provided available design With today’s application of smart accounting software, accountants only need to enter operational content such as purchases, sales, warehouse deliveries, and the software will automatically calculate accounts and automatically enter them into the general accounting book (Ledger or Journal - Ledger ) and related detailed accounting books and cards

Summary table of similar accounting vouchers

Diagram 1.3 Computer accounting bookkeeping cycle at the company

(Source: Finance - Accounting Department at Tan Thanh Dat Industrial Equipment

At the end of the month: The accountant performs book closing operations and prepares financial reports The software will automatically compare aggregate data with detailed data and issue warnings/error detection Automatically compare aggregate data with detailed data, ensuring the accuracy and truthfulness of entered information Accountants can print and check data between accounting books and financial reports

At the end of the year: Print general ledger, subsidiary ledger; Carry out legal procedures according to regulations

1.3.3.3 Financial reporting system used at the company

Currently, the company is applying the financial reporting system according to Circular No 200/2014/TT-BTC issued by the Ministry of Finance including the following

- Balance Sheet Form No B01 – DN

- Statement of Comprehensive Income Form No B02 – DN

- Statement of Cash Flows Form No B03 – DN

- Notes to Financial Statements Form No B09 – DN

The company uses SMART PRO 5.2 accounting software

Figure 1.2 The company’s main working screen on SMART PRO software

Applying SMART PRO accounting software to accounting work at the company since

2019 has helped make accounting activities more effective as well as process accurate information in a timely manner Accounting work is all done on software from the stage of creating documents, processing to the final stage of preparing financial reports

Features of SMART PRO accounting software:

- The advantage of SMART PRO accounting software is that all the financial data including journal entries, financial statements, and reports is online Whatever invoice, record, or entry is created, it is all stored under layers of encryption in the cloud Easily accessible by anyone that has the right permission

This software streamlines data management by offering automated data backups organized by date Users can safeguard their data in various formats, including Excel and Access, ensuring their information is protected against potential data loss The intuitive recovery process empowers users to effortlessly restore lost data, eliminating concerns about inadvertent deletions or corruptions.

- When using accounting software, if newly created journal entries don’t balance, the system will notify users immediately and highlight the potential error

Chapter 1 gave an overview of Tan Thanh Dat Industrial Equipment Import Export Company Limited Introducing the company address, business sectors, formation and development of the company State the company’s vision and mission in the future Besides, chapter 1 also analyzes the details about the organizational system, functions, and tasks of each department in the company, especially the functions and duties of finance - accounting department, the accounting regimes, policies, forms, and accounting software applied at the company

THEORETICAL BASIS OF ACCOUNTS RECEIVABLE AND

Concepts and tasks of Receivables and Payables Accounting

2.1.1 The general theory of accounts receivable

According to Vo Van Nhi (2018), Financial Accounting textbook, published by the Ho Chi Minh City Economics Publisher: “Accounts receivable is an important part of a company’s assets, arising in the course of its operations when providing products, goods, services as well as in some other cases related to a portion of the company’s capital temporarily occupied such as short-term loans, advances to affiliates or superiors, unprocessed missing asset values ”

According to Yousem & Beauchamp (2008), Radiology Business Practice: How to Succeed: “Accounts receivable is the accounting record that monitors the request and the receipt of payment from a customer for the goods or services provided It will ultimately be converted into some amount of cash As such, AR falls into the category of assets, that is, the business owns them and there is clearly a value.”

Accounts receivable are tracked by the company through the following accounts:

2.1.2 The general theory of accounts payable

According to Ngo The Chi & Truong Thi Thuy (2013), Financial Accounting textbook, published by Finance Publisher: “Accounts payable: These are debts arising in the process of production and business that the enterprise must pay to units, economic organizations,

22 or individuals such as: loans payable, amounts payable to suppliers, amounts payable to be remitted to the State, to employees, to superior authorities, and other payable amounts.”

According to Yousem & Beauchamp (2008), Radiology Business Practice: How to Succeed: “Accounts payable is considered a liability account as it keeps track of all funds a business owner is liable for when transacting with a third party A company records the outflow of money it owes to vendors and suppliers for goods and services it received on credit.”

Accounts payable are tracked by the company through the following accounts:

- Taxes and other payables to the State

2.1.3 Tasks of Receivables and Payables Accounting

- Process payments and invoices, ensuring accuracy and adherence to company policies and procedures

- Reconcile accounts payable and receivable, resolve discrepancies, and address outstanding balances

- Monitor and manage outstanding accounts, proactively following up on overdue payments and coordinating with relevant stakeholders

- Resolve discrepancies and issues related to accounts payable/receivable, working collaboratively with internal teams and external parties

- Maintain organized filing systems, ensuring easy retrieval and compliance with record-keeping requirements

- Monitor and meet payment deadlines, coordinating with internal teams and external vendors.

Accounting for accounts receivable

Trade receivables, as defined in Article 17 of Circular 200/2014/TT-BTC, encompass commercial receivables resulting from purchase-sale transactions, such as sales, services, or asset transfers between enterprises and independent buyers These receivables include receivables from exported goods facilitated by a trustee on behalf of the trustor.

According to Article 18 of Circular No 200/2014/TT-BTC stipulates some accounting principles for accounts 131 (Trade receivables) are as follows:

- To reflect on the accounts receivable of the enterprise from customers for money for providing services between the enterprise and the buyer

- The object of receivables is customers who have economic relations with the enterprise regarding the provision of services

- Clearly classify the debts into: Can be paid on time, difficult to collect debts or unable to recover, thereby setting aside provisions for difficult-to-collect debts and proposing measures to deal with uncollectible debts

- In cases of service provision agreements between the enterprise and customers, the buyer may request the customer to reduce the price

Accountant uses “Account 131 - Trade receivable” for recording

Opening balance: The amount received from customer

- Trade receivables generating within a tax period from sale of goods, investment property, fixed assets, services or financial investments

- Extra cash payable to customers

- Discounts offered to customers after customers receive goods and lodge complaints;

- Sales of returned goods (with or without VAT)

Closing balance: Remaining trade receivables

Amounts of advance or collected amounts which are larger than trade receivables

2.2.1.4 Accounting flowchart of trade receivable

(Source: The author synthesizes based on Circular No 200/2014/TT-BTC)

According to Circular No 48/2019/TT-BTC dated August 8, 2019 of the Ministry of Finance, provisions for doubtful accounts receivable refer to reserves for the portion of the

27 value lost on overdue receivables or similar items that are likely not to be recovered within the agreed-upon timeframe that customers commit to paying

The purpose of establishing these provisions is to anticipate and record a sum of money not yet disbursed to ensure that the financial resources of the enterprise are sufficient to compensate for adverse situations that may arise during the operating year Additionally, it ensures adherence to the accounting principle of prudence and appropriateness

• Provisions for doubtful accounts receivable are established by the enterprise in the following situations:

- Overdue receivables according to the signed sales contracts between the two parties

- Receivables not yet due for payment, but the debtor has lost the ability to pay due to bankruptcy, absconding, disappearance, undergoing dissolution procedures, etc

- There must be one of the original documents indicating the unpaid amount, such as: economic contracts, loan agreements, debt commitments, reconciliation minutes of accounts payable, and other relevant documents if available

- There must be sufficient evidence to determine the debt as doubtful: Receivables overdue for payment for 6 months or more, and the enterprise has taken measures to recover the debt but has not been successful Receivables not yet due for payment, but the enterprise has evidence confirming the inability of the debtor to repay the debt

According to Article 2 of the Law on Value-added tax No 13/2008/QH12: “Value Added Tax (VAT) is a tax calculated on the additional value of goods and services arising

28 in the process from production, circulation to consumption It is a document for accounting purposes for recording, tracking deducted VAT invoices.”

According to Article 10 of the Law on Value-added tax No 13/2008/QH12: “The input VAT is deducted by the total VAT amount stated on the VAT invoice for the purchase of goods and services used for production and business activities subject to VAT.”

Taxable entities: Goods and services used for production, business, and consumption in Vietnam (including goods and services purchased from foreign organizations and individuals), except for goods that are exempt from VAT (as regulated in Article 5 of the VAT Law No 31/2013; Article 4 of Circular 219/2013, supplemented by Law 71/2014 dated 26/11/2014)

Taxpayers of VAT: All organizations and individuals engaged in production, business activities subject to VAT, and importers of goods subject to VAT

VAT calculation using the deduction method:

- Applicable to businesses that fully comply with accounting, invoice, and document regulations as stipulated by accounting, invoice, and document laws

- Registration and declaration using the deduction method for VAT

According to Article 19 of Circular 200/2014/TT-BTC stipulating certain accounting principles for deductible VAT as follows:

- This account is used to reflect the deductible input VAT, already deducted, and remaining deductible VAT of the enterprise

- Accountants must separately record deductible input VAT and non-deductible input VAT In cases where separate accounting cannot be conducted, the input VAT shall be

29 recorded in account 1331 At the end of the period, accountants must determine the deductible and non-deductible VAT in accordance with VAT laws

- The input VAT that is not deductible is not included in the cost of purchased assets, cost of goods sold, or production and business expenses, depending on each specific case

- The determination of deductible input VAT, declaration, settlement, and tax payment must comply with the provisions of VAT laws

Accountant uses “Account 133 - Deductible Value Added Tax” for recording

Account 133 - Deductible Value Added Tax

Opening balance: Initial balance of input VAT not deducted and not refunded

- Transfer of non-deductible input VAT

- Input VAT of goods which are returned or offered discounts

Closing balance: Remaining deductible input VAT, refundable input VAT which has not been refunded by government budget

- List of invoices and documents for purchased and sold goods and services

- Report on invoice usage status

Account 1331, "Deductible VAT of Goods or Services," is used to record the deductible input VAT associated with materials, goods, or services purchased for use in the production of goods or provision of services subject to VAT This account is utilized under the credit-invoice method of VAT accounting.