accounting liabilities and completing debt management process at bid one member company limited

77 Table 4.5: Monitoring table of contracts and export declaration forms at BID MTVCo., Ltd...79 Table 4.6: Report on accounts receivable by aging at the company ...81 Table 4.7: Report

GENERAL INTRODUCTION ABOUT BID MTV COMPANY LIMITED

Company overview

Table 1.1: General information about BID MTV Company Limited

- Company name BID ONE MEMBER COMPANY LIMITED

- Abbreviated name BID MTV CO.,LTD

- Address 5/12 Quarter 5, Tan Thoi Nhat 8 Street, Tan Thoi Nhat

Ward, District 12, Ho Chi Minh City, Vietnam.

- Legal representative Le Van Quan

- Type of enterprise: Non-state limited liability company

- Line of business: Wholesale of machinery, equipment and other machine spare parts

1.1.2 Formation process and fields of operation

BID MTV Company Limited has been operating since July 2022 Mainly trading in machinery and equipment, especially industrial textile machines and raw materials used in the textile industry Although the company has just been established, its team has expertise and extensive experience in the field of buying and selling textile machines.

Trading in specialized machinery and equipment in the textile industry, BID is gradually building a new and rapid development step in the coming time With the motto of always bringing prestige, each product of BID company is always repaired and refurbished in the most complete way before being sold to domestic and foreign areas.

Currently, BID's customers have spread to other countries such as India, Indonesia, Japan,

The company has the function of selecting customers, then purchasing used machines at optimal prices for refurbishment Trading and supplying industrial textile machinery and equipment in domestic and foreign markets In addition, the company also provides other components or industrial machinery.

− Register your business and do business in the right registered profession.

− Register for tax code, declare and pay taxes according to law.

− Accounting for arising transactions according to accounting standards and principles.

− Responsible for the unit's operating results, responsible to customers and the law for the products and services provided by the unit.

− Fully implement rights and obligations for employees according to the provisions of the Labor Code, ensuring employees participate in the management of the unit.

− Comply with regulations on inspection and examination of competent state management agencies according to the provisions of law.

− Implement and fulfill economic obligations to the state according to regulations.

With a large textile market across countries, the demand for related machinery and equipment is very potential With mainly customers coming from abroad, that is also a strength for the company This is an opportunity to develop the brand and the company's reputation can spread more quickly At the same time, there is support from the state for export, when subject to an export tax rate of 0% But that strength also comes with more challenges When customers are foreign, the company has barriers such as: language, culture, how to keep in contact or some legal documents needed in the documents trading transactions Therefore, in the future BID MTV CompanyLimited determines the goal to promote the existing advantages of the company to connect and expand the market to other countries with the quality of products and reputation of the BID brand At the same time, overcoming difficult limitations contributes to high economic efficiency.

Management apparatus

Although the company is relatively small in scale, the organizational structure is still divided into specific departments as follows:

Diagram 1.1: Management apparatus of BID MTV Company Limited

(Source: At Human resources Department of BID MTV Co.,Ltd.)

1.2.2 Functions and tasks of departments

The company includes the owner, director and 4 departments Each department in the company has its own functions and tasks:

− The company owner is the representative with the highest authority in the unit.They must bear responsibilities and obligations related to other debts and assets within the company's capital In addition, the company owner also decides on all charters, business development strategies or management structure of the company.

− Director: is the executive who supports the owner in matters of business strategy and company development Manage daily operations of departments to implement strategy In addition, the director must also be responsible before the law for exercising his or her rights and obligations.

− Human Resources Department: undertakes the work of taking care of the lives and rights of workers Responsible for recruitment and training to ensure staff quality.

At the same time, participate in administrative work and contribute to related strategies for the company.

− Accounting Department: accurately and promptly record and reflect arising economic operations Check and monitor all economic and financial activities in the company Provide accounting data and information to prepare financial reports according to the requirements of the Finance Law and advise owners and directors on related issues.

− Business Department: is a quite important department for the company, responsible for finding and promoting products to customers, advising the board of directors on market development issues Coordinate closely with other departments to increase revenue and profits to help the company grow.

− Technical Department - Warehouse: After purchased goods will be stored at the warehouse Because BID MTV Company Limited is a commercial enterprise, this place is where the staff works to repair and refurbish machines before selling them to customers.

Accounting apparatus

Diagram 1.2: Accounting structure of BID MTV Company Limited

(Source: At Accounting Department of BID MTV Co., Ltd.)

1.3.2 Functions and tasks of accounting operations

− Being the leader in supervising and checking the work process of accounting staff.

− Advise and assist the board of directors in organizing and directing the company's financial and accounting work.

− Periodically report the results of business activities to the company's leadership.

− At the end of the period, prepare a report to analyze and evaluate the production and business situation of the unit and make a business plan for the next period.

− Responsible for the time and quality of preparing VAT, CIT and PIT declarations. Check for reasonableness and validity before submitting for signature Directly work and resolve issues with tax authorities.

− Responsible to the company's board of directors for accounting work, as well as data on financial and accounting reports.

− Responsible for preparing customs declarations, import-export documents and accounting business results.

− Update foreign exchange rates regularly throughout the day.

− Resolve issues related to documents, ensuring goods for sale are cleared through customs.

− Control and monitor the amount of inventory, plan for purchasing and sales needs.

− Fully update relevant original documents and records to perform data storage and entry.

− Responsible for tracking and monitoring payment status to customers and suppliers.

− Promote and make plans to collect debts from customers or pay suppliers when payment is due to avoid misappropriation of capital.

− Complete and timely detailed accounting for receivables and payables, specifically tracking each payment according to the sales contract.

− Regularly check cases where debtors have close relationships and large balances

− Advise the board of directors on how to resolve bad debt cases.

− Prepare reports related to receivables and payables

− Carry out cash collection and disbursement procedures based on receipts and payment slips approved by the board of directors and chief accountant.

− Sign to confirm procedures for receiving and disbursing cash to the company.

− At the end of the period, collect accounting documents to close and store documents according to regulations.

− At the end of the period, conduct a fund inventory.

1.3.3 Accounting regime applied at the company

BID MTV Company Limited performs accounting in compliance with Vietnam Accounting Law (as prescribed), Vietnam Accounting Standards, Circular 200/2014/TT-BTC guiding the accounting regime of enterprises and other companies relevant legal regulations Some characteristics of legal regulations and accounting policies applied by the company are as follows:

− The company's accounting year begins on january 1 and ends on december 31 every year.

− The currency used in accounting records is Vietnamese Dong For foreign currencies, the company uses the exchange rate announced by the Bank at the time of the transaction to convert into Vietnamese Dong.

− About tax: The company applies VAT calculation using the deduction method.

File tax reports, submit VAT and PIT declarations quarterly.

− For fixed assets (fixed assets): the company records fixed assets at their original cost and uses the straight-line depreciation method.

− Accounting for inventory using the perpetual inventory method Calculate the ex- warehouse price using the cumulative weighted average method.

BID MTV Company Limited uses computer accounting and organizes books in the form of a general journal.

Diagram 1.3: Accounting book recording sequence according to computer accounting form

(Source: At Accounting Department of BID MTV Co., Ltd.)

Enter data daily Print books and reports at the end of the month and year Compare and check

- Every day, when economic transactions arise, accountants will collect, check and

Accounting documents Summary table of accounting voucher of the same type

- Management accounting reports classify original documents.

- Determine necessary information, corresponding accounts enter data into accounting software according to forms available in the software.

- After being declared, the data will automatically be updated in the relevant detailed accounting books.

- Whenever necessary, accountants can compare and check data between the general ledger and details of each account to monitor and review the accuracy of data entered into the machine.

- At the end of each period, month or quarter, accountants can also export financial statements for comparison and printing and closing books as prescribed.

− The company uses Smart Pro accounting software with a clear and easy-to-see interface.

− Smart Pro accounting software is used mainly in small and medium sized businesses With not too high cost and the advantages of ease of use and user friendliness.

− Although the software is not designed with each module and operating part in detail But I was able to open many portfolios to view; allows viewing or editing multiple documents at the same time.

− Suitable for many types of businesses: service, trade, manufacturing,

− In particular, the software always promptly updates information about new tax laws of the Ministry of Finance Always improving to bring the most optimal efficiency to users.

− Smart Pro accounting software includes main menus with the following basic functions:

 Enter arising transactions: used to enter all arising transactions and view the original voucher book

 Category system: declare opening balance, view categories of goods or legal entities,

 Financial reports: declare targets, view and print financial statements

 Tax report: view and export a list of goods and services purchased and sold Check input and output VAT.

 Accounting books: print all types of documents and books in the form of a general diary.

 Debt book: print debt reports by detailed object, contract, project or invoice.

 Inventory book: print inventory import and export reports or details of each type of goods.

 Project: declare, process transfers and calculate cost for the project.

 Analysis book: print analytical report templates according to management accounting.

 There are also a number of other support tool functions such as: system maintenance, salaries, fixed assets, expenses waiting for allocation and month-end processing.

Figure 1.1: Main interface of Smart Pro accounting software

In chapter 1, the author gave a general introduction to BID MTV CompanyLimited including basic information about the company, its formation process, the fields the company is operating in, its functions and tasks and the company's future development goals At the same time, the organizational structure and tasks of the management apparatus and each department in the company were also clearly presented., brief introduction to the accounting regime and accounting form that the company is applying.

CHAPTER 2: THEORETICAL FOUNDATIONS OF LIABILITY

General issues on liabilities

During the business operations of an enterprise, payment relationships will arise between the enterprise and buyers and sellers, among units, and within the company. Based on these relationships, accounts receivable or payable will arise, which is referred to as accounts liabilities Accounts liabilities include receivables, payables, and payment relationships.

2.1.2 Role/Duties of accounting for liabilities

– Role: The debt accounting department plays a major role in debt collection and repayment effectively and on time to ensure the financial needs of the business Good debt management is a necessary issue that affects the development and survival of a business.

– Duties: Debt accounting mainly includes: recording, controlling and reporting. Mission details are as follows:

+ First: check and classify documents Calculate, record, and determine accounts receivable and payable in a timely, complete, and accurate manner according to each subject and each operation arising at the enterprise.

+ Second: monitor and be proactive in payments and debt reminders Monitor and implement compliance with legal regulations, sales regulations, and credit limits. Analyze and control the company's financial situation Specifically:

◦ Monitor and check deadlines for payment of outstanding debts.

◦ Debt reminder, collection of due receivables.

◦ Provide timely warnings about overdue debts to have a handling plan.

◦ Provision for debts according to regulations.

+ Third: Summarize and prepare periodic reports on the debt situation by subject for the board of directors to make management decisions Advise the board of directors on payment or debt collection plans for each group of customers Propose solutions and correct decisions in business operations.

Debt includes 2 items: receivable debts and payable debts

Accounting for accounts receivable

Accounts receivable refers to the amount of money that stakeholders owe to the organization from goods and services provided but not yet paid in full Therefore, accounts receivable management requires implementing procedures to monitor the successful operation of this account.

+ Classification by nature: Including trade receivables and other receivables.

+ Classification by debt collection period: Including short-term receivables and long- term receivables.

Table 2.1: Classification of Receivables by term

Short-term receivables Long-term receivables

These are debts with a repayment period not exceeding 12 months or within a normal business cycle at the reporting date.

A debt whose maturity is greater than 12 months or beyond a normal business cycle at the time of reporting.

- Debts receivable include a number of items such as:

∙ Value added tax is deductible

∙ Pay in advance to the seller

∙ Provision for bad receivable debts

Accounts receivable is the amount of money that customers owe to a business for products, goods, or services that have been provided but not yet paid for This is the largest portion of accounts receivable, regularly occurring and also facing the most risks among the accounts receivable generated in the business.

− Accounts receivable from customers are monitored and detailed accounting is required according to the payment terms, the receivable entity, and each payment.

− Does not reflect cash sales transactions.

− Accountants must classify debts into: debts due on time, difficult-to-collect debts, or non-recoverable debts in order to establish a basis for setting up provisions or taking appropriate measures.

− For customer receivables denominated in foreign currency, it is necessary to monitor both in Vietnamese dong and in the original currency When preparing financial statements, reevaluate receivables denominated in foreign currency in accordance with legal regulations.

− If the business delivers goods, services, or real estate investments not in accordance with the agreement in the contract, the buyer has the right to request a price reduction or return the goods.

− Use account 131 to reflect accounts receivable and customer payment status for sales recognized in the period.

− The immediate collection transactions are not reflected in this account.

− Account 131 is a mixed account, therefore it can have both a debit balance and a credit balance.

− The detailed balances of each individual in account 131 at the end of the period are brought forward to the general account and are not offset When presented in the balance sheet, if the balance on the Debit side will be classified under the item

"Accounts Receivable from Customers" under Assets Conversely, if it is on theCredit side, it will be classified under the item "Customer Advances" under the

− Structure of the account receivable from customers

- The amount receivable from customers arising in the period when the enterprise determines sales made in the period.

- The amount of excess funds to be refunded to the customer.

- At the time of preparing the financial statements, reassess the accounts receivable from customers denominated in foreign currency (in cases where the foreign exchange rate is higher than the rate recorded in the accounting books).

- The amount of debt paid by the customer.

- Items such as: sales discounts, trade discounts, cash discounts for customers deducted from accounts receivable from customers

- At the time of preparing the financial statements, reevaluate accounts receivable from customers in foreign currency (in cases where the exchange rate is lower than the accounting book rate)

- Amount still receivable from customers

- Amount customers advance or amount already received exceeds the amount receivable from customers

Diagram 2.1: Structure of account 131 - Account receivable from customers

(Source: Based on Circular No 200/2014/TT-BTC)

2.2.1.4 Accounting methods for some key transactions

Diagram 2.2: T-account diagram account 131 - Accounts receivable from customers

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

2.2.2 Accounting for foreign currency transactions

2.2.2.1 Some general concepts about foreign currency

Foreign currency can be understood as the currency of a country, another territory, or a common currency in the European Union and other common currencies used in international and regional payments.

(According to article 1, Article 2 Circular 07/2012/TT-NHNN)

Exchange rate is the ratio between the value of a unit of currency of one country to the unit of currency of another country.

Exchange rate difference is the difference arising from actual exchange or conversion of the same amount of foreign currency into accounting currency units at different exchange rates.

(According to Article 69 Circular 200/2014/TT-BTC)

According to Article 69, Circular 200/2014/TT-BTC and Clause 3, Article 1, Circular 53/2016/TT-BTC amending and supplementing Article 69/2014/TT-BTC, exchange rate differences arise in the following cases:

− Actual buying, selling, exchanging, and settling of economic transactions arising in foreign currency during the period (exchange rate differences already implemented)

− Review the items denominated in foreign currency at the time of preparing the financial statements (unrealized exchange rate differences).

− Convert the financial statements prepared in foreign currency to Vietnamese Dong.

2.2.2.2 Classification and regulation of exchange rates

When recording transactions in foreign currency occurring during the period, two types of exchange rates are determined: the actual transaction exchange rate and the book exchange rate. a Actual transaction exchange rate:

- The actual transaction exchange rate for buying and selling foreign currency: The rate agreed upon in the contract for buying and selling foreign currency between the enterprise and the commercial bank.

- In cases where the contract does not specify the payment rate, the enterprise records the accounting entries based on the principle:

+ The actual transaction exchange rate for capital contribution or receipt of capital contribution: The rate at which the enterprise buys foreign currency from the bank where the investor opens an account to receive capital on the date of capital contribution;

+ The actual transaction exchange rate for recognizing accounts receivable: The buying rate of the commercial bank where the enterprise designates the customer to pay at the time the transaction occurs;

+ The actual transaction exchange rate for recognizing accounts payable: The selling rate of the commercial bank where the enterprise plans to transact at the time the transaction occurs.

+ For transactions to purchase assets or expenses paid immediately in foreign currency (not through payable accounts), the actual transaction exchange rate is the buying rate of the commercial bank where the enterprise makes the payment.

(Based on Article 69 of Circular 200/2014/TT-BTC) b Book exchange rate

Based on Article 69 of Circular 200/2014/TT-BTC, the principles for determining the book exchange rate are as follows:

- Designated book exchange rate: The rate when recovering accounts receivable, deposits, guarantees, or settling accounts payable in foreign currency, determined at the exchange rate at the time the transaction occurs or at the end-of-period revaluation of each object.

- Portable weighted average book exchange rate: The rate used at the Credit side when paying in foreign currency, determined based on the total value reflected at the Debit side divided by the actual amount of foreign currency at the time of payment.

2.2.2.3 Accounting methods for some key transactions

- Revenue recognition for exports consists of the following 3 main cases:

(1) Case of revenue generated in foreign currency not received immediately, then customer pays in foreign currency.

(2) Case of selling goods receiving advance payment from customer in foreign currency, then delivering goods later.

(3) Case of revenue generated and received immediately in foreign currency.

Diagram 2.3: T-account diagram of account 131 - Receivables from customers in foreign currency

2.2.3 Provision for bad receivable debts

Provision for doubtful debts is the provision for the loss value of overdue receivables and receivables not yet due for payment but unlikely to be recovered on time.

( Based on circular 200/2014/TT-BTC)

Principles of accounting for provision for doubtful debts a) When preparing financial statements, enterprises identify doubtful receivables and similar nature investments held until the due date for the purpose of making or reversing provision for doubtful debts. b) Enterprises make provision for doubtful debts when:

(Actual transaction exchange rate) Loss

Revenue and other income at the time of economic transaction generating revenue

When customer pays in foreign currency

When selling goods to offset advance payment

When receiving advance payment from customer

When customer pays immediately in foreign currency

(Book exchange rate) (Actual transaction exchange rate) (Book

Accounting for accounts payable

According to Accounting Standard No 01 in the Vietnam Accounting Standards System issued and announced under Decision No 165/2002/QD-BTC dated December

31, 2002 of the Minister of Finance: Payables are A present obligation of an enterprise arising from past transactions and events for which the enterprise must pay from its

Account 2293- Provision for bad receivable debts

Reclassify the provision for hard-to- collect accounts receivable.

Delete hard-to-collect accounts receivable.

The provision for doubtful debts is included in the business management expenses (at the end of the accounting year).

Provision for doubtful debts difficult to collect as of the end of the period. own resources Payables arising from past transactions and events, such as unpaid purchases of goods, unpaid services, loans, goods warranty commitments, contractual obligations, payables employees, taxes payable, other payables.

+ Classification by nature: Including loans, trade payables, and other payables.

+ Classification by payment term: Including short-term liabilities and debt liabilities long term payment

Table 2.2: Classification of Payables by term

Short-term payables Long-term payables

Short-term payables is a liability that must be repaid within one year or within a normal business cycle if the business cycle exceeds 12 months.

A long-term payables is a debt that is due in more than one year or beyond a normal business cycle if the business cycle exceeds 12 months.

Liabilities to be paid include some items such as:

 The buyer pays in advance.

 Taxes and state obligations to be paid.

 Liabilities must be settled, must be paid separately.

 Long-term debt due for repayment.

 Receive deposits, long-term bets.

2.3.1 Accounting for accounts payable to suppliers

According to Circular No 200/2014/TT/BTC dated December 22, 2014 of theMinistry of Finance guiding the corporate accounting regime, payables to sellers include trade payables arising from purchase transactions goods, services, assets and the seller is an independent unit from the buyer (including payables between the parent company and its subsidiaries, joint ventures and affiliated companies).

− Do not reflect immediate purchase and payment transactions in this account.

− Monitor and record in detail the debts by each entity, each payment, and classify them into short-term debts and long-term debts to base on the remaining term at the end of the period in the financial statements.

− For debts payable to foreign currency suppliers, it is necessary to monitor both in Vietnamese dong and the original currency At the time of preparing the financial statements, reevaluate the foreign currency payables at the actual exchange rate at the evaluation time as prescribed by law.

− Accounting must clearly account for items such as: payment discounts, seller's sales discounts, supplier's invoices for purchases.

- To reflect the payment relationship with the seller, accountants use account 331.

- The immediate payment transactions are not reflected in this account.

- Account 331 is a dual-account, so it can have both a debit balance and a credit balance Accounting should not offset the total credit and debit balances on the balance sheet, but should only offset when the same supplier is involved.

- The detailed balance of each object of account 331 at the end of the period is brought to the balance sheet if the balance on the Debit side will be classified under the item:

"Advance payment to suppliers" on the Asset side Conversely, if it is on the Credit side, it will be classified under the item: "Payable to suppliers" on the Equity side.

- Structure of the account payable to suppliers:

- Amount paid to suppliers for materials, goods, services, subcontractors for construction works

- Discounts accepted by suppliers for the enterprise

- Payment discounts, trade discounts accepted by suppliers deducted from the amount payable to suppliers

- At the time of preparing the Financial

Statements, reevaluate the amounts payable to suppliers in foreign currency

(in case the foreign exchange rate decreases compared to the Vietnamese

- Amounts payable to suppliers of goods and services.

- When adjusting the price difference between estimated price and actual price.

- At the time of preparing the Financial Statements, reevaluate the amounts receivable from customers in foreign currency (in case the foreign exchange rate increases compared to the accounting exchange rate)

- Amounts paid exceed the amounts payable to suppliers

- Amounts still to be paid to suppliers

Diagram 2.5: Structure of account 331- Accounts payable to suppliers

(Source: Based on Circular No 200/2014/TT-BTC)

2.3.1.4 Accounting methods for some key transactions

Diagram 2.6: T-account diagram account 331 - Accounts payable to suppliers

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

Analysis of debt situation and ability to pay

Analysis of liquidity ratios and solvency plays an important role as well as their profound impact on assessing the financial health and financial efficiency of the company The relationship between these ratios affects short-term liquidity and long- term solvency, ultimately contributing to the decision-making process of the company and investors Specific indices for each industry will provide appropriate insights in different fields.

Liquidity ratios, such as current ratio and quick ratio, are related to the improvement of short-term financial stability Additionally, a lower debt-to-equity ratio and a higher interest coverage ratio signal a stronger long-term financial stability.

These interrelated ratios are crucial for both businesses and investors For businesses, they serve as tools in shaping the current financial landscape, providing practical guidance in building financial strategies, liquidity status, and balanced payment ability They help manage risks and enhance investor confidence For investors, these findings aid in making more informed decisions, promoting risk assessment and investment portfolio diversification.

2.4.1.1 Analysis of accounts receivable situation

Receivables are a type of asset in the asset section of the balance sheet When taking the ratio of receivables to total assets, it shows the impact of receivables on total assets and reflects the proportion of capital occupied in the total assets of the business. Comparing this ratio over the years can also reveal the effectiveness of debt recovery at the company The formula for calculating the receivables ratio is as follows:

Accounts receivable ratio = Accounts Receivable

This index shows the reasonableness of the receivables balance and the effectiveness of the policies applied to customers Receivables turnover indicates how many times receivables are collected in a business cycle and is calculated by the following formula:

Receivable turnover ratio = Net Sales

* In the formula above, the average receivables balance is calculated as follows:

Average receivables balance = Receivables (beginning of year + end of year)

- A high turnover ratio indicates that customers pay debts quickly, and the company is less capital-constrained Conversely, a low ratio implies that the company is slow in collecting receivables with a risk of customers occupying capital.

- However, if the ratio is too high, especially higher than other companies in the same industry, the company may risk losing customers, affecting the volume of sales due to tight payment terms requiring immediate settlement Customers may seek competitive alternatives for longer payment terms.

The average collection period is an indicator reflecting the average time to collect receivables This indicator is calculated as follows:

Average collection period = The analysis period

* The analysis period is typically one year, equivalent to 365 days.

- The shorter the cash collection period, the faster the inventory turnover, indicating that the company is less capital constrained Conversely, a longer cash collection period implies slower inventory turnover, potentially leading to capital constraints by customers.

- However, a short average collection period may create financial pressure for customers, affecting their consumption ability or competitiveness On the other hand, a long debt collection period will impact cash flow and business operations of the company It may increase difficult-to-collect receivables and reduce capital recovery capability.

This indicator reflects the level of misappropriation of capital by an enterprise and shows how much of the enterprise's total assets are funded by misappropriated capital.

Accounts payable ratio = Accounts payable

The turnover of accounts payable indicates how many times a company pays its suppliers in a year and is calculated by dividing the total value of purchases by the average accounts payable.

Payables turnover ratio = Credit purchases

- If this index is high, it means the payables turnover is large, proving that the business pays debts quickly, and the company takes up less capital from suppliers On the contrary, if this index is low, it means that the company is misappropriating the supplier's capital when the debt repayment period to the supplier is slow, posing potential risks to liquidity.

- By appropriating capital, the company can take advantage of capital resources. However, it is also necessary to consider maintaining the reputation of the payment relationship with the seller.

The average payment period is an indicator reflecting the average time to pay accounts payable This indicator is calculated as follows:

Average payment period = The analysis period

* Where: The analysis period is typically one year, equivalent to 365 days.

This indicator is inversely proportional to the payables turnover ratio A smaller turnover ratio implies longer payment periods for debts Conversely, a larger turnover ratio indicates earlier debt payments by the company.

2.4.1.3 Ratio of Accounts Receivable to Accounts Payable

This ratio reflects receivables compared to payables or in other words, the amount the business appropriates compared to the amount appropriated, calculated according to the following formula:

Ratio of Accounts Receivable to Accounts Payable = Total accounts receivable

- If this ratio is greater than 1, the portion of the appropriated enterprise capital is greater than the amount of appropriated capital.

- If this ratio is less than 1, it reflects a positive financial situation of the enterprise, the portion of capital appropriated by the enterprise is smaller than the amount of appropriated capital However, this result on the other hand shows that businesses have to appropriate capital from other businesses, leading to a prolonged debt situation. Therefore, to more accurately assess the financial situation at the enterprise, it is necessary to analyze more indicators to determine the ability to pay these debts.

The general solvency ratio reflects the overall ability of the enterprise to pay off debts in the short and long term It can be understood as how many units of debt can be guaranteed by the enterprise's assets The formula is:

General solvency ratio = Total assets

Total accounts payable General solvency ratiohas 2 levels of expression:

- IfGeneral solvency ratio> 1: The enterprise has the ability to pay debts well with the total amount of current assets However, the enterprise needs to review the ability to use capital, which may not be high if this coefficient is too high.

CURRENT STATUS OF ACCOUNTS RECEIVABLE AND

Accounts receivable from customers

Accounting for customer receivables reflects receivable debts (but does not reflect immediately collected transactions) and also shows the customer's payment status to the company.

For customers who frequently transact or have large debts At the end of each month, the accountant checks and compares the increase or decrease in receivables and the remaining receivables Especially in cases of prepayment by customers, it is necessary to carefully monitor the customer's remaining debt or accompanying valid documents.

In addition, it is necessary to monitor the current exchange rate or original currency of debts originating in foreign currencies Usually at the end of each month, the accountant will adjust the exchange rate balance according to each declaration.

At BID MTV Co., Ltd customer receivables (Account 131) are accounted for by each customer and each payment.

3.1.1 Documents and accounting books used

− Credit note from the bank

− Account used: Account 131 "Receivable from customers" (do not open a level 2 account, but only open details for each object) to facilitate the management and monitoring of customer debt.

− Books used: detailed book account 131, ledger account 131

− Book to monitor details of customer receivable accounts

3.1.2 Procedure for circulating documents and recording accounting books

Diagram 3.1: Sales process at BID MTV Co., Ltd

(Source: at BID MTV Co., Ltd)

After the Sales department finds the customer, it will send information to the Accounting department Next, the Accounting department will briefly check customer information as well as the amount of inventory in stock.

Grasping the above information, the two parties proceed to draw up agreements and terms in the contract BID MTV Co., Ltd 's products are mostly exported and customers are mainly foreigners To ensure safety and avoid risks during the payment process, BID company has a policy of asking customers to deposit a portion of the order value in advance Depending on the value of the order, the percentage of the customer's request to pay in advance will vary based on the following table:

Table 3.1: Basic norms for advance payment requests from customers

Recommended level of advance payment

35.000< Value≤ 60.000 50% after receiving PI, 50% after receiving copy of B/L

> 60.000 30% after receiving PI, 70% after receiving copy of B/L

(Source: at BID MTV Co., Ltd)

If the contract has been signed and approved by the board of directors and the buyer, the sales department will prepare a goods delivery note and send it to the accounting department The accountant will prepare VAT invoices on the company's

Receive orders and sign off contracts

Receive money electronic invoice software The generated VAT invoice will be printed and bound for internal storage at the company, and the file will be stored in two formats: PDF or XML by electronic means for necessary purposes or delivered to customers (if customers request).

Based on the prepared invoice, the accountant will record an increase in customer receivables.

The accountant will regularly update and regularly monitor the amount and deadline of receivables When receiving a credit note or receipt due to the customer paying for the goods, the accountant records a decrease in the customer's receivables.

Based on the original documents, the accountant records an increase or decrease in customer receivables After completing the above steps, all entered data will automatically be transferred to the general journal and then automatically updated to the ledger Account 131, from there you can follow the detailed Book of Account 131 - Details for each customer, balance sheet or other related accounting books to finally synthesize to produce a complete financial report correction.

Diagram 3.2: Sequence of circulating documents and accounts receivable books

(Source: At Accounting department BID MTV Co., Ltd)

Transaction 1: On May 9 2023, Sales to Phuc Nguyen Technical TransportProduction Trading and Services Co., Ltd under invoice 00000012 used 5-chamber industrial washing machine system Order value excluding VAT is 399.500.000 VND, VAT 10%.

− Attached documents: Invoice No 00000012 (APPX1.1.1), Delivery note No. 001/05 (APPX1.1.2), Contract No PN-001 (APPX1.1.3)

− Accounting books: detailed book Account 131 – Phuc Nguyen Technical Transportation Production Trading Service Company Limited, Ledger Account

Figure 3.1: Detailed book of account 131 of Phuc Nguyen Technical Transport

Production, Trading and Services Company Limited

Transaction 2: On April 18, 2023, Received a Credit Notice from Asia Commercial Joint Stock Bank (ACB) for the amount of 14.975 USD with 25 USD as the wire transfer fee to be borne by the seller regarding EASTERN GHATS INTERNATIONAL PTE LTD's 100% prepayment of goods according to Contract EAST/BID/0323/2023 with order value of 15.000 USD.

 With ACB Bank's foreign currency transfer exchange rate as of April 18, 2023, it is (Transfer buying, selling exchange rate respectively: 23.360 VND, 23.650 VND)

 Attached documents: Bank credit note (APPX1.2.1), Telegraphic Transfer (APPX1.2.2), EAST/BID/0323/2023 contract (APPX1.2.3)

 Accounting books: Detailed book Account 131 – EASTERN GHATS INTERNATIONAL PTE LTD, Ledger Account 131, General journal

Figure 3.2: Detailed book of account 131 of EASTERN GHATS INTERNATIONAL

Transaction 3: On May 12, 2023, proceed to export goods at transaction 2 With Customs Declaration number 305522667721.

− With ACB Bank's foreign currency transfer exchange rate as of May 12, 2023, it is (Transfer buying exchange rate: 23,310 VND/ Transfer selling exchange rate: 23,600 VND)

− Attached documents: Delivery note No 004/05 (APPX1.3.1), Customs Declaration No 305522667721 (APPX1.3.2), Container list (APPX1.3.3), Commercial invoice No 0323/2023 (APPX1.3.4), Packing List No 0323/2023/01 (APPX1.3.5), VAT Invoice No 00000015 (APPX1.3.6)

− Accounting books: Ledger Account 131, Detailed book Account 131 – EASTERN GHATS INTERNATIONAL PTE LTD, General journal

Figure 3.3: Detailed book of account 131 of EASTERN GHATS INTERNATIONAL

Transaction 4: On February 15, 2023, D.F.F TEXTILES paid 29,700 USD including a bank credit note of 29,695 USD with a Telegraphic Transfer of 5 USD for the seller's fee.

 With ACB Bank's foreign currency transfer exchange rate as of February 15, 2023, it is (Transfer buying exchange rate: 23,480 VND/ Transfer selling exchange rate: 23,760 VND)

 Attached documents: Bank credit note (APPX1.4.1), Telegraphic Transfer (APPX1.4.2), PI Contract No.0118-23 (APPX1.4.3)

 Accounting books: Ledger Account 131, Detailed book Account 131 - D.F.F TEXTILES, General journal

Figure 3.4: Detailed book of Account 131 of D.F.F TEXTILES

Transaction 5:On May 31, 2023, conduct an assessment of exchange rate differences on export declaration number 305459104700 of an export order for VRV FABRICS

+ Receive notification from ACB bank about the customer who has paid 54,000 USD in advance via ACB bank

+ Actual exchange rate at ACB bank (buying rate: 23,380 VND, selling rate: 23,660 VND)

+ Attached documents: Bank credit note (APPX1.5.1), Telegraphic Transfer (APPX1.5.2), Contract VRV-BID/0322/2023 (APPX1.5.3)

+ Exporting textile machines to VRV FABRICS PRIVATE LIMITED

+ Actual exchange rate at ACB bank (buying rate: 23,300 VND, buying rate : 23,590 VND)

+ Attached documents: Delivery note (APPX1.5.4), Export declaration (APPX1.5.5), Commercial invoice (APPX1.5.6), Bill Of Landing (APPX1.5.7), Packing List (APPX1.5.8), List of Containers (APPX1.5.9), VAT Invoice No 00000011 (APPX1.5.10)

+ Receive a credit notice from ACB bank for the amount of 126,000 for the customer to pay the remaining amount

+ Actual exchange rate at the bank (buying rate: 23,300 VND, selling rate: 23,590 VND)

+ Attached documents: Bank credit note (APPX1.5.11), Telegraphic Transfer (APPX1.5.12)

+ Accounting books: Ledger Account 131, Detailed book Account 131 – VRV FABRICS PRIVATE LIMITED, General journal

- Receive part of the payment in advance (March 24, 2023)

Cr 131 (VRV FABRICS PRIVATE LIMITED) 1,262,520,000

+ Record revenue received in advance:

Dr 131 (VRV FABRICS PRIVATE LIMITED) 1,262,520,000

Dr 131 (VRV FABRICS PRIVATE LIMITED) 2.935.800.000 (126.000*23.300)

+ Record cost off goods sold:

 Customers pay the rest (May 5, 2023)

Cr 131 (VRV FABRICS PRIVATE LIMITED) 2.935.800.000

- Assessment of exchange rate differences

Because the exchange rate on April 12, 2023 is equal to the exchange rate on May 5,

2023 so there is no exchange rate difference

Figure 3.5: Detailed book of Account 131 of VRV FABRICS PRIVATE LIMITED

CÔNG TY TNHH BID MTV Mẫu số S03b-DN

5/12 KP5, Đường Tân Thới Nhất 8, P.Tân Thới Nhất, Quận

(Ban hành theo TT số 200/2014/TT-BTC ngày 22-12-2014 của Bộ Tài Chính)

Mã hiệu :131 - Phải thu khách hàng

Ghi sổ Số Ngày Nợ Có

D.F.F TEXTILES tt tiền máy cho BID MTV (29695 USD x 23480)

15/02/23 PKT.056/02 15/02/23 Điện chuyển tiền cho hđ 10 và

HĐ số PTE LT-INVOICE NO:0323/2023 của số tiền

VRV FABRICS PRIVATE LIMITED tt tiền cho BID MTV (54000USD x 23380)

'Máy dệt kiếm khổ 190cm dệt không thoi, c/s: 6kW,380V, Model: Gammax, Hiệu: Picanol, năm sx: 2002

EASTERN GHATS INTERNATIONAL TT (14975usd*23360) PTE LT- INVOICE NO:0323/2023 -PHI NNG: USD25 theo hđ 20221212-DD/BID-hàng thanh lý

18/04/23 PKT0036/04 18/04/23 Điện chuyển tiền cho hđ 10 và

HĐ số PTE LT-INVOICE 6428 584.000

VRV FABRICS PRIVATE TT D2 INV NO03222023 ST (126.000USD*23300)

09/05/23 HDBR.12 09/05/23 Hệ thống máy giặt công nghiệp

5 buồng đã qua sử dụng 5111 399.500.000

09/05/23 HDBR.12 09/05/23 Thuế GTGT đầu ra HĐ:

Máy ghép dùng để ghép sợi, c/s:

4,5kWh,380V, Model: RCB - D30 (RSB-D30), Hiệu: Rieter (15000USD*23280)

Accounts payable to suppliers

Accounts payable to supplies reflects purchases of goods or services or prepayments to suppliers These two clauses need to be separated into specific details according to each other At the end of the period, put specific targets into the balance sheet in two different assets and capital sources However, payables to supplies do not reflect transactions that have been paid immediately by any form of payment and also show the company's payment status to suppliers Depending on the terms that the company and the seller have agreed on in the contract, the form and payment term will vary.

At BID MTV Co., Ltd, liabilities are recorded for by each supplier and each payment.

3.2.1 Documents and accounting books used

− Account used: Account 331 "Payable to suppliers" (do not open a level 2 account, but only open details for each object) to facilitate management and tracking of payments to suppliers.

− Books used: detailed book account 331

− Book to monitor details of suppliers payable accounts

3.2.2 Procedure for circulating documents and recording accounting books

Diagram 3.3: Purchasing process at BID MTV Co.Ltd

(Source: at BID MTV Co., Ltd)

When there is a need to purchase goods, the Business Department prepares a purchase request form and sends it to the director If approved by the director, the sales department will select the supplier and request a quote to select the appropriate supplier Identifying the supplier, the purchasing department will base on that to create an order or contract agreement between the two parties and send it to the director for confirmation and then send it to the supplier.

After the supplier receives the order, it will prepare documents as well as goods with the correct quantity and model according to the information on the VAT invoice.

When the supplier delivers goods to the warehouse, the warehouse department receives the goods and prepares a warehouse receipt for the goods.

At this time, the supplier sends a VAT invoice to confirm payment as well as some related documents The accountant begins to check and record an increase in payables to suppliers.

At the payment deadline, if paying by bank transfer, the accountant will prepare a payment order, and if in cash, will create a payment voucher depending on the payment method on the invoice or the contract agreed between the two parties Next, the accountant records a decrease in payables to suppliers.

Based on the original documents, the accountant records the increase or decrease in payables to the seller The software automatically updates the general journal and then automatically updates the ledger account 331, from there the ledger can be tracked Account 331 details - Details for each supplier, balance sheet or other related accounting books to finally synthesize to produce a complete financial report.

Diagram 3.4: Sequence of circulating documents and accounts payable books

(Source: at BID MTV Co., Ltd)

Transaction 1:Good received note No 002/02: warehouse of textile machinery goods purchased from Dai Dong Vietnam Co., Ltd according to VAT invoice No 00000156 dated March 11, 2023 Attached is Sales Contract No 20230202-DD/BID with the amount of 6,743,880,000 VND (including 10% VAT) Haven't paid the seller yet.

− Attached documents: VAT invoice No 00000156 (APPX2.1.1), Warehouse receipt No 002/02 (APPX2.1.2), Purchase contract No 20230202 (APPX2.1.3)

− Accounting books: Ledger Account 331, detailed book Account 331 – Dai Dong Vietnam Co., Ltd., General journal

Figure 3.6: Detailed book of account 331 of Dai Dong Vietnam Co., Ltd

Transaction 2: BID MTV Company Limited purchased from the service the costs of shipping goods for sale from DBL Forwarding Company Limited with a total tax-free amount of 6,873,000 VND on June 19, 2023, with 10% VAT.

− Attached documents: VAT invoice No 00000118 (APPX2.2.1), Principle Contract

− Accounting books: Ledger account 331, detailed book account 331 – DBL Forwarding Company Limited, general journal

Figure 3.7: Detailed book of Account 331 of DBL Forwarding Company Limited

Transaction 3: On June 2, 2023, purchased plane tickets for employees on business trips of VIETNAM AIRLINES CORPORATION - JSC according to invoice number

1034891 with a total amount of 1,207,000 VND.

 Attached documents: VAT invoice No 1034891 (APPX2.3.1), Flight ticket (APPX2.3.2), Business trip decision No 094/QDDCT-23 (APPX2.3.3)

 Accounting books: Ledger Account 331, detailed book Account 331 - VIETNAM AIRLINES CORPORATION - JSC, General journal

Figure 3.8: Detailed book of Account 331 of VIETNAM AIRLINES CORPORATION

Transaction 4: BID MTV Company Limited advanced to Dong Quang Textile JointStock Company the amount of 1,000,000,000 VND according to sales contract number:

DND-23-0023 Receive a debt notice from Vietcombank for the amount of 1,000,330,000 VND on January 13, 2023.

 Attached documents: Transaction document No 1301235058.032142 (APPX2.4.1), sales contract No.: DND-23-0023 (APPX2.4.2)

 Accounting books: Ledger Account 331, detailed book Account 331 – Dong Quang Textile Joint Stock Company, General Journal Book

Figure 3.9: Detailed book of Account 331 of Dong Quang Textile Joint Stock

Transaction 5:On April 14, 2023, pay the remaining amount to Thu Huong Company Limited according to invoice number 00000008 dated April 12, 2023.

 Attached documents: Invoice No 00000008 (APPX2.5.1), Payment Order(APPX2.5.2), Sales contract No TH- BID/042023/HDMB (APPX2.5.3), Contract principles No 8 MT - TH/2022 (APPX2.5.4)

 Accounting books: Ledger account 331, detailed book account 331 - Thu Huong Company Limited, general journal

Figure 3.10: Detailed book of Account 331 of Thu Huong Company Limited

CÔNG TY TNHH BID MTV Mẫu số S03b-DN

5/12 KP5, Đường Tân Thới Nhất 8, P.Tân Thới Nhất,

(Ban hành theo TT số 200/2014/TT-BTC ngày 22-12-2014 của Bộ Tài Chính)

Mã hiệu :331 - Phải trả cho người bán

Ghi sổ Số Ngày Nợ Có

13/01/23 CTNH.014/01 13/01/23 Cty BID MTV tt tạm ứng HD: DND

23 0023 cho cty Dệt Đông Quang 11212 1.000.000.000

Máy dệt thoi Vamatex Silver DT, xuất xứ:TQ, model:H2600, năm sx:2009, khổ: 1900mm-2600mm theo hđ 20221212-DD/BID-hàng thanh lý

11/03/23 PNK.002/02 11/03/23 Thuế GTGT mua vào HĐ số :00000156,11/03/23 1331 613.080.000

HBCTY BID MTV TT DOT 2 THEO

HD SO 8 NGAY 12.04.2023 - CTY TNHH THU HUONG

02/06/23 PKT.002/06 02/06/23 Thuế GTGT mua vào HĐ số :1034891,02/06/23 1331 98.909

19/06/23 PKT.021/06 19/06/23 Thuế GTGT mua vào HĐ số :00000118,19/06/23 1331 687.300

Table 3.4: General journal of the company from 1/1/2023 to 30/06/2023

CÔNG TY TNHH BID MTV Mẫu số: S03A-DN

5/12 KP5, Đường Tân Thới Nhất 8,

P.Tân Thới Nhất, Quận 12, Tp.HCM

(Ban hành theo TT số 200/2014/TT-BTC

Mã số thuế : 0317395815 ngày 22/12/2014 của Bộ Tài Chính)

Chứng từ Diễn giải Số hiệu

Phát sinh trong kỳ (Vnd)

Số hiệu Ngày Nợ Có

13/01/23 CTNH.014/01 13/01/23 Cty BID MTV tt tạm ứng HD: DND

23 0023 cho cty Dệt Đông Quang 1.000.000.000 1.000.000.000 Phải trả cho người bán 331 1.000.000.000

15/02/23 CTNH.024/02 15/02/23 D.F.F TEXTILES tt tiền máy cho

BID MTV (29695 USD x 23480) 697.238.600 697.238.600 Ngân hàng ACB - 1090969798

Phải thu của khách hàng 131 697.238.600

D.F.F TEXTILES tt tiền máy và ứ ng trước tiền cho HĐ số 0118-23 cho BID MTV (29695 USD x

(USD) 11224 697.238.600 Điện chuyển tiền cho số tiền 29695 usd (5* 23480) 6428 117.400

Phải thu của khách hàng 131 697.356.000

Máy dệt thoi Vamatex Silver DT, xu ất xứ:TQ, model:H2600, năm sx:2009, khổ: 1900mm-2600mm theo hđ 20221212-DD/BID-hàng thanh lý

Giá mua hàng hóa 1561 6.130.800.000Thuế GTGT được khấu trừ 1331 613.080.000

Phải trả cho người bán 331 6.743.880.000

'VRV FABRICS PRIVATE LIMITED tt tiền cho BID MTV (54000USD x 23380)

Phải thu của khách hàng 131 1.262.520.000

Xuất kho theo HĐ số : 305459104700+HD00000010,12/04/

Máy dệt kiếm khổ 190cm dệt không thoi, c/s: 6kW,380V, Model:

Gammax, Hiệu: Picanol, năm sx:

Phải thu của khách hàng 131 4.198.320.000

Doanh thu bán hàng hóa 5111 4.198.320.000

HBCTY BID MTV TT DOT 2 THEO HD SO 8 NGAY 12.04.2023

Phải trả cho người bán 331 499.956.000 Ngân hàng ACB-975969798 (VND) 11213 499.956.000

EASTERN GHATS INTERNATIONAL TT (14975usd*23360) PTE LT- INVOICE NO:0323/2023 -PHI NNG: USD25.-

(USD) 11224 349.816.000 Điện chuyển tiền cho số tiền 29695 usd (25* 23480) 6428 584.000

Phải thu của khách hàng 131 350.400.000

VRV FABRICS PRIVATE TT D2 INV NO03222023 ST (126.000USD*23300)

Phải thu của khách hàng 131 2.935.800.000

09/05/23 HDBR.12 09/05/23 Hệ thống máy giặt công nghiệp 5 bu ồng đã qua sử 439.450.000 439.450.000

Phải thu của khách hàng 131 439.450.000

Doanh thu bán hàng hóa 5111 399.500.000

09/05/23 PXK.001/05 09/05/23 Xuất kho theo HĐ số :

Máy ghép dùng để ghép sợi, c/s:

4,5kWh,380V, Model: RCB -D30 (RSB-D30), Hiệu: Rieter (15000USD*23280)

Phải thu của khách hàng 131 350.400.000

Doanh thu bán hàng hóa 5111 350.400.000

Chi phí dịch vụ mua ngoài 6427 1.108.091 Thuế GTGT được khấu trừ 1331 98.909

Phải trả cho người bán 331 1.207.000

12/06/23 PXK.001/06 12/06/23 Xuất kho theo HĐ số :

Chi phí dịch vụ mua ngoài 6417 6.873.000 Thuế GTGT được khấu trừ 1331 687.300

Phải trả cho người bán 331 7.560.300

Người lập Kế toán trưởng Giám đốc

Analyze the debt situation and solvency

The increase or decrease in accounts receivable from customers and payable to suppliers accounts for the majority of accounts receivable and payable at BID, greatly affecting the structure of financial statements and business efficiency To see more clearly the effectiveness of debt management and the financial picture at BID MTV Company Limited, the author analyzed common financial indicators including: analyzing the situation of receivables, debts payout, payout ratio, and a few other related ratios.

+ 2022 financial statements: from the company's establishment July 2022 to December 2022

+ Provisional financial statements for 2023: From January 2023 to June 2023 (APPX3)

Accounts receivable ratio = Accounts Receivable

21.302.643.048 ≈10,68% Based on this index, it reflects the extent to which customers pay very quickly This also proves that the company has built a solid reputation with customers for product quality as well as the brand that BID company aims for.

Receivable turnover ratio = Net Sales

=> Receivable Turnover in Days = 365/ 6,6211 ≈52 (days)

The above receivable turnover ratio means that BID MTV Co., Ltd must collect money nearly 7 times/year, the average estimated time is 52 days for sales.

This ratio reflects the seller's level of capital appropriation The indicator shows how much of the total assets is funded by appropriated capital.

Accounts payable ratio = Accounts payable

In which: Accounts payable = Liabilities – Short-term and long-term loans.

The debt to total assets ratio calculated above means that the majority of the company's assets are financed 67,93% by debt, which also reflects the percentage of debt that is misappropriated But the company is still able to stay solvent by using its available assets However, this coefficient is still smaller when compared to the industry average coefficient of 0,73 It is implicitly understood that the company has the ability to be financially independent, however, it is necessary to consider the plan to utilize capital in the form of borrowing because when debt is not excluded, the company's payables ratio has decreased There is a change, specifically 0,72 almost equal to the industry average coefficient.

This turnover ratio evaluates the company's debts and the efficiency of its debt payments.

Payables turnover ratio = Credit purchases

In which: Credit purchases = Ending inventory + COGS - Beginning Inventory

=> Payables Turnover in Days = 365/ 1,83 ≈200 (days)

Based on the debt turnover ratio, it means that BID MTV Co., Ltd pays nearly 2 times/year, the average estimated time is 200 days.

3.3.3 Ratio of accounts receivable to accounts payable

Calculation formula: Total accounts receivable

We can see that the above ratio < 1 reflects that the capital the company is occupying is much larger than the capital of the enterprise being appropriated.

 Compare the ratio of receivables and payables from 2022 - 2023

Table 3.5: Summary table analyzing the debt situation in 2023

Assessment criteria The begin of the year

End of the year Disparity

Ratio of accounts receivable to accounts payable 48% 15% -33%

Chart 3.1: Debt analysis coefficient in 2022, 2023From the above data, it can be seen that the coefficient at the end of the year has changed compared to the beginning of the year The receivables system in 2023 will decrease more than 2 times compared to 2022 because total assets in 2023 have increased nearly 2 times compared to the beginning of the year (increasing from12.873.884.734 VND to 21.302.643.048) while the total Receivables on the balance sheet decreased compared to 2022 (from 3.291.803.690 VND to 3.376.095.376 VND).This shows that many customers can meet the payment and debt collection ability at the company, and the strict management of the applied payment policy has been more effective when the ratio of receivables in 2023 decreased by 14% compared to 2022.

At the same time, total payables increased by 16% compared to the previous year and there was a change in structure with an increase in short-term debt and a decrease in long-term debt compared to 2022, reflecting high liquidity and in the short term The company needs to prepare enough current assets to offset the total value of short-term debts when they become due.

In short, the amount of capital appropriated by the enterprise decreases and the amount of capital appropriated by the company increases when the ratio of receivables to payables this year is 33% higher than last year.

 Compare BID company's receivables and payables ratios with the industry average

The company's receivable turnover ratio in 2023 is 2 times higher than the industry average ratio (6,62 > 3,14) This means that the company has the ability to collect debt quickly, with the collection time for receivables faster than the industry average of 64 days The reason is because the company applies a policy requiring customers to pay in advance Because the company specializes in selling high-value equipment, when signing any contract, the customer must advance a part of the contract value, then the customer will then pay the remaining amount in the contract according to each stage of completion in many different installments In addition, the

Chart 3.3: Average receivables and payables time of BID MTV Co., Ltd and industry average in 2023 Chart 3.2: Receivable and payable turnover chart of BID MTV Co., Ltd and industry average in 2023 company has an effective cash flow management policy from tracking due receivables, which will reduce the time needed to collect payments That way, the company can improve cash flow and ensure it has enough money needed to pay expenses and payables to suppliers when purchasing goods.

The company's accounts payable turnover ratio is quite low (only 1,83) compared to the average ratio of the equipment supply industry (average industry ratio

= 3,38) Inversely proportional to the low payables turnover ratio, it means that the payment time to suppliers at BID MTV Co., Ltd lasts up to 200 days while the industry average is only 102 days The reason is that the debt payment policy also affects this ratio because the company's business machinery items are of great value, so almost all of them are in the form of deferred payments to suppliers In addition, accounts payable are left in inventory, leading to a situation where businesses have not been able to pay suppliers, causing accounts payable to increase This is influenced by the company's business cycle The time period from when a business purchases raw materials and goods to when it sells products is quite long, leading to debt repayment time higher than the industry average.

General solvency ratio= Total assets

15.282.651.034 ≈ 1,39 For one dong of debt to be paid, BID company has 1,39 dong of assets to ensure debt repayment From the above ratios of 1,39 > 1, it can be seen that the business has the ability to pay its debts.

To clearly evaluate the relationship between total short-term assets and short-term liabilities We consider the current ratio to ensure that short-term assets such as cash, receivables or inventory are converted into actual cash compared to the amounts that need to be paid during the period.

This ratio shows that the company still has current solvency but is not high Because the index 1,407 < 2 proves that the business is likely not able to promptly pay off all short-term debts if the Due early, assets reserved for business or other activities do not have much surplus.

To better understand a business's ability to pay short-term debts with highly liquid assets We consider the coefficient including capital in cash and cash equivalents, receivables, short-term financial investments and some other short-term assets excluding inventory.

Quick Ratio = Current Assets – Inventory

≈ 0,766 The coefficient above 0,766 < 1 proves that the ability to repay debt is not high because short-term advance payments from buyers account for the majority of total short-term debt So the payment of short-term debts mainly depends on inventory factors.

Cash and cash equivalents are the most liquid assets In order to measure the level of mobilization of current assets of the company, we calculate the cash ratio:

Cash Ratio = Cash + Cash Equivalents

The BID company's cash ratio of 0,406 means that the company only has enough cash to pay off 40,6% of its short-term debt Analyzing more deeply, the cash ratio is nearly

2 times smaller than the quick ratio Once again it can be affirmed that the company's current assets are not high, but short-term assets depend greatly on inventory.

COMMENTS AND RECOMMENDATIONS

Facility comments

− Based on the accounting regime according to Circular 200/2014/TT-BTC issued on December 22, 2014.

− Apply analysis of debt and solvency criteria to evaluate debt collection or ability to pay payables Reflects the effectiveness of financial activities at the enterprise.

− At the same time, based on the actual internship period at BID MTV Co., Ltd, the author has had time to understand accounting work in general as well as debt in particular The author gives comments on the company's strengths and weaknesses.

To propose recommendations and solutions to improve the accounting apparatus or liabilities accounting work.

Comment

The company's staff is diverse in age and has high levels of expertise in specific fields Self-conscious, friendly and enthusiastic working style and attitude towards colleagues in the company With the motto of always respecting and valuing customer interests, our staff always works hard to create goodwill and build good relationships with customers.

As for the accounting department staff, they all have professional qualifications and are always learning to improve their skills and experience Update changes to newly issued regulations Along with the elements of carefulness, honesty and flexibility, the emotions in reality.

Each department has its own responsibilities but is always closely linked to ensure each other's work is carried out on schedule At the same time, we always work together to find the best direction and plan for the company's business and development.

Regarding management, each department has its own management by the department head and is under the general management of the board of directors.

Therefore, there is clarity in the management of operations within the company.

Due to the small size of the company, the apparatus and staff at BID MTV Co., Ltd are tightly organized Create conditions to develop employees' abilities and improve their qualifications.

From the stage of contract formation to the import and export of goods, each level will be directly linked to each other to unify expertise as well as circulate and store necessary documents.

In general, the management apparatus is strictly organized Employees at all levels always comply with the regulations and circulars issued by the Ministry of Finance Comply with obligations to the State.

− With the development of science and technology, the company has also applied Smart Pro accounting software to the process of data entry and accounting book reporting Helps the company update and process information quickly to provide necessary information to management levels when needed.

− Applying appropriate bookkeeping documents contributes to building accounting work quickly, scientifically and strictly Improve efficiency in collecting documents, accounting operations and financial management.

− With a bank account, the company opens detailed accounts of each bank (ACB, Vietcombank, Vietinbank, ) and each different currency (VND, USD, EUR), helping to follow debt payments or debt recovery in a more specific and clear way. The company has applied payment via bank transfer for amounts over 20 million according to Clause 10, Article 1, Circular No 26/2015/TT-BTC.

− Accounting arising transactions seriously, collecting enough information from books for storage Debt accounting monitors the regular increase or decrease in accounts receivable and payable to ensure collection and payment of due amounts.

− Customers are often known customers, so debt collection is easy and quick The company has a policy of requiring deposit collection in advance in the contract to benefit the company's recovery and increase implementation responsibility between the two parties.

− Exchange rate differences and payment differences have a material impact on a business's profits, so accountants monitor and update this amount regularly in relation to the company's cash flow and operations.

− In general, the company has the ability to collect debts quite well and at the same time has a positive financial situation in paying its payables.

For a small-scale company, the staff is still modest Therefore, each employee can hold many positions at the same time Therefore, during the working process accounting circulars, regulations and terms have not been updated promptly.

− The company applies payment by TT for all orders Although it has its own advantages, it also has high potential risks Payment amounts are mainly based on the customer's side If an error occurs with the goods during the process, or the customer does not receive the goods, the company will incur costs related to the shipment Simultaneously, slow capital recovery affects the company's operating efficiency.

− There are often delays in document circulation, missing customer information and approval signatures, leading to untimely handling of debt issues at the end of the month Accountants have to spend a lot of time collecting, arranging and storing documents.

− Accounts receivable and payable are only tracked by accountants on one side without accurate reconciliation between the two sides This situation may affect the amount payable and receivable on both sides.

− The company's assets and customer payables depend largely on inventory. However, the company still does not have a detailed and strict inventory management policy.

− Customers making combined payments for orders or advance payments for multiple orders together leads to accounting having to separate, reconcile and collect debts, which takes more time In cases where many transactions like the above arise, accounting must review all data and payment documents for each order and contract for each advance payment are very inadequate and even impossible.

Recommendations

− Assign responsibility to the accountant to periodically update and monitor changes in accounting work Notify and disseminate to other departments to comply with regulations.

− The application of a TT payment form to a customer leads to binding in the form of payment.

Table 4.1: Comparing advantages & disadvantages of payment methods by

- Payment and document processing procedures are fast and not overly complex.

-Payment costs are more economical

- If the seller applies the method of transferring money in advance, it will be more convenient throughout the transaction process.

- In this method of money transfer, the bank will act as an intermediary to carry out the transaction without any legal constraints.

-Receive payment immediately when the

- The seller can be more assured, ensuring the receipt of payment as the bank will be the one to carry out the payment in accordance with the provisions in the letter of credit.

- The bank is the party responsible for making payments in accordance with the credit terms in any case.

- Addressing the issue of delays in document transfer to the maximum extent.

- When the documents are sent to the issuing bank, payment will be made buyer transfers the payment immediately.

- It is a highly reliable and secure method in international transactions.

- Conceal some risks because of having to rely on the buyer's ability to pay.

- If applying the form of payment after, the seller will be at a disadvantage because the goods have been shipped but the ability to recover money has not been ensured.

- This method is not guaranteed by the bank, mainly based on trust between the seller and the buyer.

- More complex payment procedures. The tasks of preparing and presenting documents must be careful and in accordance with regulations.

- Higher payment costs -Payment time must wait for the bank's confirmation process.

For some new customers who do not have high credibility or large orders, the company needs to consider and understand the form of payment by LC to avoid market limitations due to the payment method while also being more assured in debt recovery from customers.

−The Board of Directors proposes solutions to overcome delays in circulating specific documents such as:

◦ Decentralize authority to the head of each department to control the validity and completeness of related documents.

◦ The maximum time to provide documents from each department to the accounting department when necessary is the 25th of each month This is the time when accountants will synthesize documents for reporting and book keeping.

◦ The chief accountant is the final synthesizer and reports progress to the board of directors.

◦ Disciplinary action if intentionally delaying work progress: For the first violation, a warning will be issued to each department in charge The second time it happens, we will remind the entire company If the violation continues, measures to reduce individual benefits will be applied In addition to sanctions, the board of directors should also encourage and reward each department that completes its responsibilities and work schedule.

- At the end of the month, send a debt reconciliation record to ask the customer to confirm so that both parties can conveniently track the exact amount and promote payment from customers, avoid risks or resolve discrepancies that occur if available in a timely manner.

Diagram 4.1: Month-end debt reconciliation process

− The sales department plans to predict customer purchasing needs or encourage customers to order in advance to facilitate the preparation of goods for sale In addition, one of the factors that help businesses want to shorten the capital cycle length is to reduce storage time, which means reducing storage costs Furthermore, reducing inventory turnover increases cash and cash equivalents, helping leaders have a more general view to make separate policies on inventory to ensure solvency and working capital cash when there are urgent debts at the enterprise Tracking and managing inventory to predict business performance contributes to ensuring the quality of goods when delivered and improving reputation in the eyes of customers Furthermore, reducing inventory turnover time and increasing accounts payable turnover time increases cash and cash equivalents.

Because BID company's inventory has different levels of importance and value, the ABC analysis method is built on the basis of the Pareto principle, with this method helping managers have a clear view Overview and priority orientation depending on the nature of each inventory group, thereby maintaining a reasonable amount of inventory and being ready to supply goods according to customer requests.

To classify inventory into product groups, we rely on the following criteria:

Table 4.2: Criteria for classifying inventory groups

Play a key role in corporate revenue The value usually accounts for 60% - 70% of the total value of stored goods

Accounts for an average annual value, usually fluctuating from 20% - 25% of the total value of reserve goods.

Has small value, accounting for about 10% -15% of the total value of reserve goods Quantity scale

Accounts for about 10%-15% of total reserves

Accounts for about 25%-30% of total reserves

Accounts for about55% - 65% of total reserves.

Table 4.3: Grouping inventory at the company according to the ABC method

Type of materials and goods Quantity

Hệ thống máy mắc sợi 5

Hệ thống bộ cầu trục 3 827.299.962 A

Hệ thống trạm làm lạnh 2 810.400.000 A

Hệ thống máy giặt công nghiệp 3 841.590.000 A

Hóa chất trong ngành dệt nhuộm 33 187,317,900 C

Chart 4.1: The chart shows the inventory at BID MTV Co., Ltd according to the ABC method After arranging and classifying goods, measures need to be applied to monitor and optimize the product portfolio The author proposes solutions according to each product group as follows:

Table 4.4: Table of proposed solutions for each inventory group

High-value raw materials and inventory need strict and accurate control.

Need to check once a month.

Raw materials and inventory have moderate value and need to be controlled at a good level Inspection time is about every

Raw materials and inventory are not of great value and need to be controlled at a simpler and more flexible level Should be checked every 5 months.

Solution - Need to ensure inventory to meet

- Company should not keep a large inventory of this

- Focus and invest in promotional strategies and resources in products to improve quality and expand market share.

- Build good relationships with suppliers of this product group. inventory.

- Monitor and look for opportunities to enhance the value of this product group.

- Can refer to other suppliers to optimize profits. group of products, but only maintain a minimum amount of inventory.

- Company should not focus and invest too much in this product group.

- Search and diversify suppliers to optimize purchasing prices and save costs.

- This product group can be used in combination with product groups A and B

− When drawing up a sales contract between two parties, the company tells customers to consider noting down the payments for each different order This is convenient for the tracking process of both parties Especially improve the foreign language skills and expertise of staff when communicating with foreign guests skillfully and professionally If the customer does not clearly note the payments, the accountant will separate and allocate the correct amount to each contract and order as recommended next.

− Accountants need to separately track each payment from foreign customers inExcel based on each contract or customs declaration Tracking on Excel will not cost you anything and will also help accountants save more time in reconciling and more closely monitoring gross payment transactions Clearly separate "advance payments from buyers" and "customer receivables" to track each contract and export declaration Avoid offsetting between contracts and customers In particular,this tracking also provides faster and clearer data when performing VAT refunds at businesses.

Table 4.5: Monitoring table of contracts and export declaration forms at BID MTV Co., Ltd.

CÔNG TY TNHH BID MTV

5/12 KP5, Đường Tân Thới Nhất 8, P.Tân Thới Nhất, Quận 12, Tp.HCM

BẢNG THEO DÕI HỢP ĐỒNG VÀ TKHQ XUẤT KHẨU Đến ngày 30/06/2023

Hợp đồng Tờ khai hàng hoá xuất khẩu

Hoá đơn thương mại Hoá đơn GTGT Chứng từ thanh toán Đã thanh toán Còn nợ

HĐ Ngày HĐ Ngoại tệ Đv tiền tệ TK số Ngày TK Số Ngày Số Ngày

Phí VNĐ Ngoại tệ Ngoại tệ

− Classify specific receivables and payables for each entity with different short- term and long-term periods To ensure timely payment and recovery of debts, the author proposes the company to prepare a detailed aging report In addition, the aging report provides an overview of the financial situation of receivables and payables, the impact level, and the cash flow needs of the company.

The structure of the aging report for receivables and payables is divided into 3 groups of debt terms:

◦ No due date: are debts with no specified repayment or collection time

◦ Pre-due debts: are debts paid before the due date divided into time ranges

0-30 days 31-60 days 61-90 days 91-120 days Over 120 days

◦ Overdue debts: are debts that have exceeded the payment deadline also divided into time ranges 0-30 days

31-60 days61-90 days91-120 daysOver 120 days

Table 4.6: Report on accounts receivable by aging at the company

CÔNG TY TNHH BID MTV

5/12 KP5, Đường Tân Thới Nhất 8, P.Tân Thới Nhất, Quận 12, Tp.HCM

CHI TIẾT CÔNG NỢ PHẢI THU THEO TUỔI NỢ

Mã KH Tên KH Địa chỉ Tổng nợ

Nợ trước hạn Nợ quá hạn

Cụm Công nghiệp Ngãi Giao, Thị trấn Ngãi Giao, Huyện Châu Đức, Bà Rịa, Vũng Tàu.

101-1603, SINCHON GRAN-XI, 175 DAEHEUNG-RO, MAPO-

EL BORG EGYPT, 1 DAMRO EL MAHALLA

101-1603, SINCHON GRAN-XI, 175 DAEHEUNG-RO, MAPO-

Table 4.7: Report on accounts payable by aging at the company CÔNG TY TNHH BID MTV

5/12 KP5, Đường Tân Thới Nhất 8, P.Tân Thới Nhất, Quận 12, Tp.HCM

CHI TIẾT CÔNG NỢ PHẢI TRẢ THEO TUỔI NỢ

Mã KH Tên KH Địa chỉ Tổng nợ Không có hạn nợ Nợ trước hạn Nợ quá hạn

Thôn Quan Độ, Xã Văn Môn, Huyện Yên Phong, Tỉnh Bắc Ninh, Việt Nam

Lô E11, E12, E15, E16 khu công nghiệp Việt Hương

Xã Bến Cát, Bình Dương

QUANG Ấp Bình Tiền 2, Xã Đức Hòa Hạ, Huyện Đức Hoà, Tỉnh Long An, Việt Nam

445 Huỳnh Văn Bánh - Phường 13 - Quận Phú Nhuận - TP.Hồ Chí Minh

735, ấp 5, Xã Đức Hòa Đông, Huyện Đức Hoà, Tỉnh Long An, Việt Nam

167 Lưu Hữu Phước, Phường 15, Quận 8, TP Hồ Chí Minh

TP Hồ Chí Minh, Việt Nam

- The author proposes applying technology to the automated debt collection process:

Automated debt collection is a system that uses technology and algorithms to manage and automate various processes related to debt collection The difference between technology-enabled debt recovery and manual work is as follows:

Table 4.8: Comparison between debt collection using technology versus manual work

Time On average, it takes an accounts receivable accountant about 15-20 minutes to perform the reconciliation process and send debt collection emails to a customer Therefore, receiving feedback on results is slower.

Handling multiple tasks simultaneously and completing them much faster than humans Processing data automatically and in batches saves significant time, allowing businesses to allocate these resources to other business areas while using humans to work directly with customers to handle difficult debt collection.

Efficiency Due to slow response, the debt recovery process is prolonged, leading to low recovery efficiency.

This increased speed and efficiency can help the company recover debts faster, improve cash flow, and reduce bad debt risks.

Accuracy Not yet highly accurate, prone to confusion and errors among multiple pieces of information, customers with each other Prone to errors and fraud.

The system is applied to provide borrowers with detailed information about the debt, analyze reports accurately and objectively Minimize errors and fraud.

Monitoring Accountants must automatically control at the maximum level while completing all steps in the

Automatic control, update with minimal human supervision Along with accurate analysis helps detect and alert unusual

Check the status of business operations

Send emails automatically Call phone

SYSTEM debt collection process points.

Reaction There is no consistency in the documents and communication information.Slower reaction

Debtors usually react faster to reminders and automatic communication information because they are more consistent.

Other It is possible to automate additional operational parts such as: debt reconciliation, inventory management, accounts payable, invoices

The debt collection process applies automatic technology.

Diagram 4.2: The debt collection process applies automatic technology.

- The input data includes: customer information, amount of money, payment method and contact details, payment deadlines according to contracts.

- The system will automatically: determine the outstanding debts to be collected based on real-time analysis of received and overdue payments.

- Automatically send personalized payment reminder emails.

- Automatically make debt collection calls.

- Monitor real-time received and outstanding repayments.

- Based on the degree of overdue, amount of debt, prioritize debts for recovery based on debt deadlines, debt amount, value, and risk of the debt, the system will analyze and provide a summary debt collection report.

After obtaining the report analyzing the company's debt status, the accounting department and the leadership will continue to process some cases that have not yet recovered debts as follows:

Diagram 4.3 Next customer receivable debt collection process

Yes No Classification and identification of debt recovery objects: Customer debts are classified into 3 groups with different debt collection measures as follows:

Make provisions, ask for senior support

Group of customers paying on time

Table 4.9: Solutions for customers classified by group

Group of customers paying on time

Customer groups need attention High-risk customer group

Customers belong to the group of short- term debt and prepayment

Customers in the overdue debt group (Overdue less than

180 days, non- payment and feedback on debt repayment information)

Customers in the group of bad debts (overdue for more than 180 days or in a state of absconding or bankruptcy)

Need to maintain good relationships with customers

Need rigid solutions with flexible debt collection policies.

Negotiate and communicate directly with customers: Use flexible skills that are both soft and tough depending on the situation.