Cost and revenue accounting and r ndetermination of business results at tuan r nloc thang company limited

1 CHAPTER 1: BASIC THEORY OF REVENUE AND COST ACCOUNTING ORGANIZATION AND DETERMINATION OF BUSINESS RESULTS...4 1.1 THE NEED TO ORGANIZE REVENUE AND EXPENSE ACCOUNTING AND DETERMINE BUSI

GRADUATE THESIS

COST AND REVENUE ACCOUNTING AND

DETERMINATION OF BUSINESS RESULTS AT TUAN

LOC THANG COMPANY LIMITED

INTRUCTOR: Ms NGUYỄN HOÀNG DIỆU HIỀN STUDENT NAME: LÊ TIẾN LONG

STUDENT CODE: K184050680 CLASS: K18405CA

TP.HCM, 05/2022 FACULTY OF ACCOUNTING AND

AUDITING

To complete this thesis, I would like to thank the accounting and auditing faculty staffand the lecturers at the University of Economics and Law They have impartedvaluable knowledge to me during my study practice at school

I want to thank the Board of Directors, departments, and employees of Tuan LocThang Limited Liability Company for creating all favourable conditions for me toconduct field research to complete the thesis

In particular, I also express my sincerest and deepest gratitude to Ms Nguyen HoangDien Hien, who wholeheartedly guided and helped me complete the thesis

"Accounting of revenue, expenses and business results" business at Tuan Loc ThangCompany Limited."

I sincerely thank you!

Ho Chi Minh City, May 2022

Le Tien Long

Table of content

ACKNOWLEDGEMENT I TABLE OF CONTENT II TABLE OF FIGURES IV

INTRODUCTION 1

CHAPTER 1: BASIC THEORY OF REVENUE AND COST ACCOUNTING ORGANIZATION AND DETERMINATION OF BUSINESS RESULTS 4

1.1 THE NEED TO ORGANIZE REVENUE AND EXPENSE ACCOUNTING AND DETERMINE BUSINESS RESULTS IN ENTERPRISES 4

1.2 REQUIREMENTS AND TASKS OF REVENUE AND COST ACCOUNTING AND DETERMINATION OF BUSINESS RESULTS IN AN ENTERPRISE 5

1.3 SOME BASIC CONCEPTS RELATED TO REVENUE,EXPENSES AND DETERMINING BUSINESS RESULTS 6

1.3.1 Revenue 6

1.3.2 The deduction from revenue 8

1.3.3 Expense 9

1.3.4 Determine business results 11

1.4 THE CONTENT OF ACCOUNTING FOR REVENUE,EXPENSES AND BUSINESS RESULTS IN ENTERPRISES 11

1.4.1 Accounting for sales and service provision 11

1.4.2 Revenue accounting for financial activities 13

1.4.3 Other income accounting 14

1.5 ACCOUNTING EXPENSE 14

1.5.1 Cost of Goods Sold Accounting 14

1.5.2 Financial expense 18

1.5.3 Selling expense 19

1.5.4 General and administrative expense 20

1.5.5 Other expense 21

1.6 ACCOUNTING FOR BUSINESS RESULTS 22

1.6.1 Accounting for business income tax expenses 22

1.6.2 Accounting for business results 23

CHAPTER 2: THE STATUS OF ACCOUNTING ORGANIZATION OF REVENUE, COSTS AND DETERMINATION OF BUSINESS RESULTS AT THE COMPANY 24

2.1 GENERAL CHARACTERISTICS AFFECTING REVENUE AND COST ACCOUNTING AND DETERMINING BUSINESS RESULTS AT THECOMPANY 24

2.1.1 History of establishment and development of the Company 24

2.1.2 Organizational characteristics of the management apparatus at the Company 24 2.1.3 Organizational characteristics of the accounting apparatus and accounting policies applied at the Company 26

2.2 ACTUAL SITUATION OF REVENUE AND EXPENSE ACCOUNTING ORGANIZATION AT THECOMPANY 26

2.2.1 Accounting gross revenue 26

2.2.1.1 Accounting vouchers and rotation of accounting vouchers 26

2.2.1.2 Account 27

2.2.1.3 Process of Accounting 28

2.2.2 Cost accounting 29

2.2.2.1 Accounting cost of good sold 29

2.2.2.2 Principles of recording cost of goods sold 29

2.2.2.3 Account and Process of Accounting 29

Some transaction occurred at company 29

2.2.3 Accounting selling expense 30

2.2.3.1 Documents and procedures 30

2.2.3.2 Account and Process of Accounting 30

Some transaction occurred at company 30

2.2.4 Accounting General and administrative expenses 31

2.2.4.1 Documents 31

2.2.4.2 Account and Process of Accounting 32

2.2.5 Accounting for revenue from financial activities 32

2.3 ACCOUNTING IDENTIFIED BUSINESS RESULTS 33

2.3.1 Documents 33

2.3.2 Account and Process of Accounting 33

CHAPTER 3: SOME RECOMMENDATIONS FOR FINISHING THE ACCOUNTING ORGANIZATION, REVENUE, COSTS AND RESULTS BUSINESS 36

3.1 ASSESS THE CURRENT STATUS OF ACCOUNTING WORK IN GENERAL AND REVENUE, EXPENSES AND DETERMINE BUSINESS RESULTS IN PARTICULAR AT THECOMPANY 36

3.1.1 Advantage 36

3.1.2 Defect 38

3.2 THE CAUSE OF THE LIMITATIONS 39

3.3 SOME SOLUTIONS TO COMPLETE REVENUE,COST AND RESULT ACCOUNTING BUSINESS 39

3.4 TUANLOCTHANGCO., LTD.'S IMPLEMENTATION CONDITIONS FOR IMPROVING REVENUE AND COST ACCOUNTING AND DETERMINING BUSINESS RESULTS 42

CONCLUSION 42

REFERENCES 44

APPENDIX 45

Table of figures

Figure 1 1 Chart of accounting for sales and service 45

Figure 1 2 Accounting for revenue from financial activities 46

Figure 1 3 Other income accounting 47

Figure 1 4 Cost of goods sold (according to periodic inventory method) 48

Figure 1 5 Financial expense accounting chart 49

Figure 1 6 General and adminstrative expense accounting process 50

Figure 1 7 Chart of accounting expenses for corporate income tax 51

Figure 1 8 Determine business result accounting process 52

Figure 2 1 Company structure 25

Figure 2 2 The process of accounting entries to Subsidiary ledger, Account Ledger 511 28

Figure 2 3 The process of accounting entries to the Subsidiary ledger, Account 632 Ledger 29

Figure 2 4 The process of accounting entries to the Subsidiary ledger, Account Ledger 641 30

Figure 2 5 The process of accounting entries to the Subsidiary ledger 642, Account Ledger 642 32

Figure 2 6 The process of accounting entries to the Subsidiary ledger , Account 911

33

1.The urgency of the subject

Today, as the global economy has progressed in steps of increasing magnitude,Vietnam's economy is also steadily progressing along the trend of integration with theglobal economy Enterprises' business operations are becoming more diverse, rich, andenergetic, necessitating the State's laws and economic policies to innovate in order tomatch the economy's development In today's open economy, businesses mustconstantly improve their market competitiveness in order to survive and grow Theseare also the reasons for businesses to constantly enhance their manufacturing processesand business management to suit each strategy and stage of the business's operation.Each enterprise must not only be self-sufficient in terms of production and businessprocesses, but also understand how to optimise its potential in order to attain thehighest level of economic efficiency At each level of development, company leadersmust have business and management plans that are appropriate for the country's andthe world's economic conditions Accounting is one of the most important andindispensable tools for effective management Businesses must capture necessary andaccurate information and data from the accounting department, in addition to usingtrade promotion methods to accelerate consumption with the ultimate goal ofmaximising profits assist managers in having an accurate understanding of theenterprise's commercial status Following that, relevant management decisions aremade in order to improve the effectiveness of the enterprise's business management,which can then publicly reveal financial information in order to attract investors Inline with this tendency, accounting is constantly improving and evolving in terms ofcontent, procedures, and organisational form in order to fulfil the growing demands ofcompany management The accounting department is an essential aspect of every firm,

as it is involved in economic and financial activities, is in charge of the informationorganisation system, and serves as a foundation for making economic decisions.Accounting allows firms to determine which markets and products sell the mostsuccessfully This not only ensures that firms can compete in a dynamic market, butalso that they can meet their financial objectives such as revenue, profit, reputation,and so on In particular, businesses operating in the field of commerce and services ingeneral and Tuan Loc Thang Limited Liability Company in particular must try harder

to demonstrate their position in the process of integration with the economy domestic,regional and global economy Over the years of operation, the Company has graduallyasserted itself in the market and perfecting the accounting of revenue, expenses andbusiness results is a matter of practical significance That not only helps managerscome up with effective measures to consume goods, conserve capital, speed up capitalturnover, bring businesses high economic efficiency, but also help businesses standfirm on the global market competitive market Therefore, improving and furtherperfecting the accounting of revenues, costs and business results in commercialenterprises in particular is always set out with the aim of scientific and reasonableorganization, as a basis for Accounting information provided ensures correctness andreliability Stemming from the above importance and through actually learning aboutaccounting at Tuan Loc Thang Limited Liability Company, I chose to research thetopic "Accounting of revenue, expenses and business results at the Company limitedliability Tuan Loc Thang” as the subject of the graduation thesis

1 The purpose of the topic

- General reasoning about revenue and cost accounting and determination business

results in the enterprise

- Describe the current status of revenue and cost accounting and determine the resultsbusiness results at Tuan Loc Thang Ltd

- Propose several solutions to improve the organization of revenue and cost accountingand determine business results in Tuan Loc Thang Ltd

3 Object and scope of research

- Research object of the thesis: Accounting of revenues, costs and business results in

commercial enterprises from the perspective of financial accounting at Tuan LocThang Ltd

- Research scope

+ Content: Researching revenue, cost and business results accounting from theperspective of financial accounting

+ Place: At Tuan Loc Thang Ltd

+ Time: Data was collected from 2019-2021

5 Research Methods

5.1 Documentary research methods

The thesis studies secondary documents, including:

+ Documents and textbooks on accounting theory of revenue, costs and businessresults

+ Research results of other related documents

+ Books and reports related to accounting of revenue, expenses and business results atTuan Loc Thang Company

5.2 Methods of collecting and processing information

- Investigate, interview, and discuss directly with the accountant at the accounting

department in Tuan Loc Thang Ltd about the content issues of revenue, cost andbusiness results accounting of the Company from the perspective of financialaccounting

- Directly observe the process of performing accounting operations of cost, revenueand business results at the Company

- The thesis also applies specific methods in the research process such as inductive,interpretive, comparative, statistical methods to analyze theoretical and practicalproblems On that basis, evaluate and draw conclusions from which to make suitableand feasible complete solutions

6 Structure of the thesis.

The structure of the thesis, in addition to the introduction and conclusion, includes 03internal chapters content:

Chapter 1: Theoretical basis of revenue and cost accounting organization and

determination business results in small and medium enterprises

Chapter 2: Actual situation of revenue and cost accounting organization and

determination of results business results at Tuan Loc Thang Ltd

Chapter 3: Some recommendations to improve the organization of revenue

accounting, expenses and determine business results at the Tuan Loc Thang company

CHAPTER 1: BASIC THEORY OF REVENUE AND COST ACCOUNTING ORGANIZATION AND DETERMINATION OF BUSINESS RESULTS

1.1 The need to organize revenue and expense accounting and determine business results in enterprises

Accounting is an excellent instrument for adequately managing the operation ofmanufacturing and business in general and revenue, expenses, and determiningbusiness outcomes in particular Establishing scientific and acceptable accountingactivity is one of the most significant information-providing bases for soundproduction and company direction and management Businesses must continuallyimprove their accounting job in general, accounting for income and costs anddetermining new business outcomes Consequently, coordinating Revenue and costaccounting and deciding business outcomes with businesses is critical to assistingmanagers in understanding the operation condition and efficiently promotingcommercial firm efficiency

For enterprises: The organization of revenue and expense accounting and

determining business results helps enterprises to collect, process and provideinformation for managers to see and evaluate their business activities, on that basis tomake decisions and development direction as well as improve the operationalefficiency of the enterprise

For investors: Information on revenue, expenses and determination of results business

results is the basis for investors to evaluate enterprises' production and businessefficiency, thereby making the right investment decisions

For administrative intermediaries: For banks, when it comes to financial leasing

companies, the accounting of revenue, expenses and determination of business results

is a persistent condition for them to conduct an appraisal and assessment of thefinancial situation to decide whether to lease the business Does that business borrow

or not?

For macroeconomic management agencies of the economy: They base on data on

revenue, expenses and determination of business results of enterprises Tax authoritiesdetermine receivables and ensure revenue for the State budget On that basis, national

policymakers propose solutions for economic development, creating conditions forbusinesses to operate through monetary policy, tax policy and price subsidies

1.2 Requirements and tasks of revenue and cost accounting and determination of business results in an enterprise

Requirements of revenue and expense accounting and determination of business results business

Management of sales operations in an enterprise is the process of managing goods interms of quantity, quality and value of sold goods Specific payment is as follows:

- Management of quantity: the value of goods for sale, including the management ofeach buyer, each consignment, and each group of goods

- Price management includes planning for monitoring, price implementation for thenext period's plan

- Managing the collection of sales proceeds and determining business results: goodsales management will facilitate good business results management Thereby limitingbusiness risks as well as preventing the risk of goods loss, ensuring the accuracy of thegiven data

Duties of revenue and expense accounting and determination of business results business

- Fully reflect and record the current situation and changes in quantity, types,specifications, models, etc., for each type of sold goods and services

- Reflect and record fully and promptly the revenue, revenue deductions and allexpenses incurred in the period so that at the end of the period, revenue and fees can

be collected, thereby determining the business results

- Regularly and continuously monitor the increase and decrease in revenue from salesand service provision, revenue from financial activities and income

other

- Detailed and separate tracking of each type of revenue, including internal revenue, toreflect timely, detailed and complete business results as a basis for making financialstatements

- Detailed tracking of deductions for revenue, receivables and expenses of eachbusiness operation, and at the same time, monitor and urge receivables from customers

- Accurately determine business results and monitor the performance of obligations tothe State.

- Provide accurate and timely accounting information to prepare financial statementsand periodically analyze business activities related to revenue and determine businessresults

- Determine the process of document circulation on revenue accounting and determinebusiness results

- Make recommendations and measures to improve sales and determine businessresults, provide management with the necessary information to develop specific plans

to improve the performance of the company enterprise

1.3 Some basic concepts related to revenue, expenses and determining business results

According to Circular 200/2014/TT-BTC issued on December 22, 2014, Revenue is aneconomic benefit obtained that increases the owner's equity of the enterprise, exceptfor the additional contribution of shareholders Revenue is recognized at the time ofthe transaction, when it is probable that economic benefits will flow to each other,measured at the fair value of the amounts entitled, regardless of whether cash has beencollected or collected

Depending on management requirements, the following main criteria can be used

to classify revenue

 According to the relationship with the business organization system

According to this criterion, sales revenue includes two types: internal and externalsales revenue.

- Internal sales revenue: is the revenue of sales volume within the organizationalsystem of the enterprise, such as internal consumption among affiliated units in theCorporation

- Outbound sales: is the total revenue of the volume of products and goods theenterprise has sold to customers outside the enterprise

This classification will help enterprises accurately determine their business results andprovide accurate information to prepare consolidated financial statements of the group,the whole industry

 According to the source of activity

According to this criterion, revenue is divided into revenue from selling goods andproviding services (under average production and business activities), revenue fromfinancial activities, and other revenue

- Revenue from the sale of goods and provision of services: is the total amount

received or will be received from transactions and operations generating revenue fromselling products, goods and providing services to customers, including additionalcharges in addition to the selling price (if any)

Financial Income: Including income related to financial activities such as interest,including loan interest, deferred payment interest, bond investment interest, bill of

exchange, and payment discount Due to the purchase of goods and services Incomefrom property rental, dividends, distributed profits, foreign exchange rate difference.

- Other Income: The income contributing to increasing equity from activities otherthan revenue-generating activities Other income of the enterprise includes:

+ Income from sale and liquidation of fixed assets

+ Differences in profit due to revaluation of materials, goods and fixed assets used tocontribute capital to joint ventures, investments in associates, and other long-terminvestments

- Income from sale and sublease of properties

+ Collecting money issued by the customer's breach of the contract

+ Collection of bad debts that have been written off

+ The state budget refunds taxes

+ Collection of payable debts whose creditors cannot be identified

+ Bonuses of customers related to the consumption of goods, products and services arenot included in the revenue (if any)

1.3.2 The deduction from revenue

Trade discount: Trade discount is the revenue; the business offers discounts to

customers who buy in bulk The discount can be incurred on the volume of eachshipment purchased by the customer or on the total cumulative volume of goodspurchased by the customer at a particular time, depending on the discount policyseller's trade

Sales discount: A sales discount is a deduction for the buyer due to all or some of the

items being of low quality, incorrect specifications, or out-of-date tastes

Sale returns: The block value is the returned sales value The client refuses to pay for

the number of products sold that have been decided to be sold for grounds such asbreach of promises, breach of economic contracts, missing items, poor quality, andimproper type specifications When the firm acknowledges the value of returned itemssold, it records a corresponding drop in the period's cost of goods sold

 Special consumption tax, export tax, value added tax charged by the direct method:

- The export tax: is a tax paid on all products and services purchased, sold, or tradedwith foreign nations when they are exported from Vietnam

- A special consumption tax: is a tax applied on the sales of businesses thatmanufacture and deal in various unique commodities that the government discourages.

- VAT: computed by the direct method: is a tax that estimates the value increase inproducts and services during the production-to-consumption process As a result, theamount of VAT payable in the period matches the income identified

1.3.3 Expense

According to Vietnamese Accounting Standard No 01 (VAS01 – General Standard):

“Expense is the total value of items that reduce economic benefits in an accountingperiod in the form of outlays and deductions from accounts assets or incurringliabilities resulting in a decrease in equity, excluding distributions to shareholders orowners.”

From the perspective of financial accounting, costs are seen as actual expensesincurred in connection with the production and business activities, including costsincurred in the average production and business process and other costs to obtain aparticular type of product or service Costs are quantified and expressed in the form of

a cash outlay, depreciation of fixed assets, a service debt, tax debt, etc These expensesare recognized by accounting based on accounting vouchers Accurate accountingevidencing they are arising in production and business activities of the enterprise

Expense classification

 Classification of costs by function

Business expenses in a commercial enterprise include:

- Cost of goods sold: is the cost of goods sold in the period It includes the cost of allitems directly or indirectly related to the purchase of the goods/services sold

- Selling expenses: All expense are all actual expenses incurred in consuming goodsand providing services, including the costs of offering, introducing goods, salescommissions, and goods warranty Goods, costs of storage, packaging, operation

- General and administrative expenses: All expenses are related to businessmanagement, administrative management, and general management of the entireenterprise

- Financial operating expenses: includes expenses or losses related to financialactivities such as interest expenses, cost of capital contribution to joint ventures, losses

on foreign exchange differences, and loss on the transfer of funds capital transfer…

- Other expenses: include expenses other than business expenses incurred in theordinary course of business activities of the enterprise, such as costs of liquidation,sale of assets, and fines due to violations of Breach of contract

Production and business expenses: including the cost of goods sold, operatingexpenses, general and administrative expense

classification according to this criterion includes:

- Salary and based allowances: Reflecting the total amount of wages and based allowances payable to employees in the enterprise

salary Expenses for social insurance, health insurance, unemployment insurance, and labourunions: Reflects the portion of social insurance, health insurance, and trade unionfunds deducted at the prescribed rate on the total salary and wage allowance payable toemployees in the period Enterprise

- Depreciation expense reflects the total amount of depreciation payable in all fixedassets used for business activities in the accounting period

- Expenses for services purchased from outside: Including costs associated withservices purchased from outside provided for business activities in the accountingperiod of the enterprise, such as electricity and water service prices and home propertyinsurance, advertising media

- Other cash expenses: includes all other business expenses in cash not yet reflected inthe above factors that enterprises usually have to pay directly in the accounting period

 Classified by relationship to activity level:

There are three types of costs: variable, fixed, and mixed costs

- Variable costs: These are costs proportional to the level of activity The level ofactivity can be the number of goods consumed

- Fixed costs: These are costs that do not change within the limits of the size of the

activity Nevertheless, if considered per unit of activity level, it is inverselyproportional to activity level

- Mixed costs: These are costs that include both variable and fixed costs Mixed costsoften manifest as fixed costs at the basic level of operations when mixed costs includevariable costs beyond the primary level

1.3.4 Determine business results

Business results indicate the extent to which the goals set forth by enterprises in anindustry are achieved Business results include:

- Gross profit result: is the difference between net revenue and cost of goods sold(including products, goods, investment properties and services, expenses related to realestate business) Investments include depreciation expenses, repair and upgrade costs,operating lease expenses, liquidation costs, and sales of investment properties

- Financial performance is the difference between financial revenue and financialexpenses

- Net profit equals the sum of gross profit and financial results minus operatingexpenses, including selling and administrative expenses

- Other operating results are the difference between other income and other expenses

- Profit before tax equals the sum of net profit from operating activities and otheroperating results

- Corporate income tax (CIT) is a direct tax levied on the taxable income of enterprises,including income from production and trading activities of goods and services andother incomes as prescribed by law

- Profit after tax is the remaining profit after deducting corporate income tax (CIT)payable

1.4 The content of accounting for revenue, expenses and business results in enterprises

Currently, the content of accounting for revenue, expenses and business results inenterprises is carried out according to Circular 200/2014/TT-BTC issued on 22/12/

2014 by the Ministry of Finance in general and commercial enterprises

1.4.1 Accounting for sales and service provision

Accounting vouchers

- VAT invoice

- Common sales invoices

- Payment table for agent and consignment goods

- Shop card

- Other relevant accounting vouchers such as return receipts

Account

Account 511 – Revenue from the sale of goods and provision of services This account

is opened for details of level 2 accounts to track detailed sales and service providerrevenues

Account 511 - Revenue from sales and service provision has:

- Account 5111 - Sales of goods

- Account 5112 - Sales of finished products

- Account 5113 -Revenue - Rendering Services

- Account 5114 -Revenue - Price Subsidized

- Account 5117 -Revenue - Sales of Investment Properties

- Account 5118 -Revenue - Others

Goods and services have been sold, but the quality and technical specifications are notqualified The buyer refuses to pay and sends them back to the seller or requests adiscount approved by the enterprise, or the buyer receives a trade discount Salesdeductions are tracked in account 521 - Revenue deductions and details under tier 2accounts,

Account 5211 – Trade discounts,

Account 5212 –Sales Allowances

Account 5213 –Sales Returnss

At the end of the period, it is transferred to Account 511 – Sales and service provision

to calculate net revenue

Accounting method

- Based on the VAT invoice, sales invoice (copy 3) and payment documents (receiptslip, credit note, etc.), the accountant shall record it in Account 511 – Revenue fromsales and service provider of the enterprise Reflects output VAT payable to Account

3331 – VAT payable (if any) reflects the amount received to

Account 111 – Cash on Hand,

Account 112 – Cash in Bank,

Account 131 – Accounts Receivable/ Trade Receivables

- If there are deductions from sales and service providers in the period Accountantsrecord the following:

+ The purchase and sale contract shall agree on commercial discounts, sales discounts,and returned goods to record the Deducting sales according to the selling price,

excluding VAT The payable output VAT amount is reduced to the discounted value,returned, or discounted goods sold Simultaneously, cash capital is lowered inproportion to the total payment price or receivables from consumers in proportion tothe total payment price.

+ At the same time, cash capital is reduced correspondingly to the total payment price

or receivables from customers corresponding to the total payment price

- At the end of the period, determine the special consumption tax (SCT) and export taxpayable Based on the excise tax declaration, the customs declaration, the accountantreflects the reduced sales and service provider revenue in the period according to thepayable excise tax and export tax amount and, at the same time, the tax payable to theagency State increases accordingly

- At the end of the period, trade discounts, sales discounts, and sales returns arededucted from sales and service providers by the number of trade discounts, salesdiscounts, and returned goods

- At the end of the period, net revenue is transferred to the income determinationaccount

Figure 1.1: Chart of accounting for sales and service provision (Appendix 1, page 44)

Accounting books used:

-Subsidiary ledger

-General journal

- Ledger account 511

1.4.2 Revenue accounting for financial activities

Financial income comprises interest, royalties, dividends, dispersed profits, and otherfinancial activities that are deemed realised during the period, regardless of the actualamount of such revenue collected or to be collected

Accounting vouchers

- Sales invoices

- Invoice of VAT

- Credit note

•User account: Account 515 – Revenue from financial activities This account is used

to record income from interest, royalties, dividends, distributed profits and revenuefrom financial activities of the business

1.4.3 Other income accounting

Other income is income that is not normally generated at the business

Accounting vouchers: Receipts, invoices for liquidation of fixed assets…

Account 711: Other income This account reflects the income of activities other than

activities that generate revenue for the business

- Revenues from fixed asset liquidation and sale, as well as the residual value ofliquidated or sold fixed assets (if any)

- Profit difference due to revaluation of products and fixed assets used to contributemoney to joint ventures, associate investments, and other long-term investments

- Collect fines due to customers' breach of economic contracts

1.5.1 Cost of Goods Sold Accounting

Definition: Cost of goods sold in a commercial enterprise is the original price of

goods sold in a period and amortized purchasing costs

- The first-in-first-out (FIFO) approach

Cost of goods purchase includes costs directly related to the process of purchasinggoods, such as insurance costs, warehouse rent, yard rental, transportation costs,loading and unloading, etc preserving and transporting goods from the point ofpurchase to the enterprise's warehouse; natural losses in the norm arising in the process

Account 632 - Cost of goods sold This account reflects the actual cost of goods sold

or the actual cost of completed services, determined to be sold, and other amountsincluded in the cost of goods sold to determine business results business during theperiod

Accounting process

Method of Perpetual Inventory

- When selling finished products, goods and services, they are determined to have beensold in the period

Dr 632 - Cost of goods sold

Cr - There are accounts 154, 155, 156, 157,…

- Reflect expenses directly charged to cost of goods sold

+ Reflect the cost of raw materials, materials, labor costs in excess of normal levelsand unallocated fixed manufacturing overheads that are included in the cost of goodssold in the period

Dr 632 - Cost of goods sold

Cr 154 - Production and business expenses in progress.

- Reflect the loss, loss of inventory after deducting compensation caused by personalliability.

Dr 632 – Cost of goods sold

Cr - There are accounts 152, 153, 156, 158,…

- Reflecting the cost of self-construction of fixed assets in excess of the normal level,which is not included in the historical cost of the completed tangible fixed assets

Dr 632 – Cost of goods sold

The accountant makes additional deductions for the difference Take note:

Dr 632 – Cost of goods sold

Cr 229 – Provision for property loss (2294)

+ In case the amount of provision for devaluation of inventories to be made in thisperiod < the amount made in the previous period

The accountant reverses the difference

Dr 229 - Provision for property loss (2294)

Cr 632 - Cost of goods sold

- Economic operations related to investment real estate business activities

Periodically, depreciate investment properties currently under operating lease

Dr 632 - Cost of goods sold (Details of investment property business expenses)

Cr 2147 - Depreciation of investment property

- When costs related to investment property are incurred after initial recognition

+ If the conditions for recording an increase in the value of investment property arenot satisfied

Dr 632 - Cost of goods sold (Details of investment property business expenses)

Dr 242 - Prepaid expenses (if amortization is required)

Cr 111, 112, 152, 153, 334,…

- Expenses related to operating lease of investment real estate

Dr 632 - Cost of goods sold (Details of investment property business expenses)

Dr 632 – Cost of goods sold (residual value of investment property)

Cr 217 – First real estate (original cost)

- Expenses for sale and liquidation of investment properties incurred

Dr 632 – Cost of goods sold (Details of investment property business expenses)

Dr 133 – Deductible value-added tax (if any)

Cr 111, 112, 331,…

- Goods sold are returned to the warehouse

Dr 155, 156

Cr 632 – Cost of goods sold

- Where a trade discount or rebate is received after the purchase

Based on the fluctuation of inventory, to allocate the amount of trade discount orsale discount to be entitled to based on the unsold inventory, the quantity sold forconstruction investment or determined determined to be consumed during the period

“Determination of business results”

Dr 911 – Determination of business results

Cr 632 – cost of goods sold

Periodic inventory method

- Accounting for inventory according to the periodic inventory method, the inventoryaccounting accounts will only be used at the beginning of the period (using theopening balance transfer) and at the end of the period (using the ending balancetransfer).

- At the beginning of the closing period, when the value of inventory at the beginning

of the period is transferred, the following accounts shall be recorded:

Accounting vouchers: Payment slip, bank's debit note, loan contract

Account: Account 635 - Financial expenses.

- This account reflects expenses related to capital activities, financial investmentactivities and transactions of a corporate financial nature

- Expenses incurred in connection with financial investments, joint ventures, associates,and investments in subsidiaries (costs of holding, liquidation, transfer of investments,investment losses, etc.)

- Expenses incurred as a result of lending capital

- Costs associated with the acquisition and selling of foreign currency

- Interest charge on a non-capitalized business loan, payment discount when sellingitems, giving labour, and delivering services

- The difference in loss while purchasing and selling foreign money, as well as the loss

on the difference in foreign exchange rates

- Provisions for financial investment depreciation…

Accounting vouchers: Salary payment sheet, Warehouse delivery note, fixed asset

depreciation allocation table, invoices, payment slips…

Account 641 - Selling expenses This account reflects all expenses related to the

process of selling goods and providing services Including: cost of sales staff, cost oftools and supplies, cost of depreciation of fixed assets, cost of services purchased fromoutside, other cash expenses

Account 641 - Selling expenses has

- Account 6411 - Labour expenses

- Account 6412 - Materials and packaging expense

- Account 6413 - Supplies expense

- Account 6414 - Depreciation of fixed assets

- Account 6415 - Warranty expenses

- Account 6417 - Services from outside

- Account 6418 - Other cash expense

Accounting process

- According to the current prescribed rate, the cost of salaries and allowances of salesstaff and deductions - Based on the timesheet, the table of salary distribution andsocial insurance, the table of salary payment and social insurance, etc., the accountantreflects the salary costs and deductions according to the sales staff's salary and salesexpenses, and at the same time reflects the increase in the salary payable to employees

corresponding to the salary payable to the sales staff, other payables and payablescorresponding to the increase in the amount of social insurance, health insurance,unemployment insurance, and labour accident payable to the agency such as Insurance,Trade Union superior - Fixed asset depreciation expense: periodically, based on thefixed asset depreciation schedule and allocation, the accountant records thedepreciation expense of fixed assets in the sales department according to the amountallocated to selling expenses and, at the same time, reflects the cost of fixed assets acorresponding increase in depreciation of fixed assets -In case the enterprise hasattached a repair warranty for damage caused by manufacturing that was detectedduring the goods warranty period The enterprise must determine each level of repaircost for the entire warranty obligation When making a provision, the cost of repairand warranty of products and goods must be paid An increase in the provision forpayables is recorded as the most reasonable estimate of the amount required to settlethe present obligation at the end of the annual or interim period Selling costs increaseaccordingly - Expenses for services purchased from outside, expenses in othercurrencies for the sale process: water, electricity, telephone… Based on VAT invoices,payment documents (Payment slips, Debt notices ), the cost of sales is recorded at thepurchase price excluding VAT, input VAT is deducted accordingly ( if any), at thesame time, cash and cash in the bank are recorded according to the total payment price(if cash is paid immediately), and payable to the seller according to the total paymentprice (if not yet paid)

Accounting books

- Subsidiary ledger 641

- General journals

- Ledger account 641

1.5.4 General and administrative expense

Enterprise administration expenses are related to administrative and administrativework at the enterprise-wide scale In addition, administrative expenses also includeexpenses that cannot be recorded in the expense mentioned above items

Accounting vouchers: Salary payment sheet, Warehouse delivery note, allocation

sheet, depreciation of fixed assets, invoices, payment slips…

Account 642 - General and administrative expense

This account reflects all expenses related to business activities, administrativemanagement and some other items of general nature of the whole enterprise, includingSalary, allowances, and salary deductions belonging to the department businessmanagement, cost of office supplies, depreciation expense of fixed assets, taxes, fees,charges, provision expenses such as provisions for doubtful debts, provision forpayables, expenses for services purchased from outside to serve the whole enterprise,other expenses in cash

- Account 6421 - Salary expense

- Account 6422 - Supplies expense

- Account 6423 - Stationary and office supplies

- Account 6424 - Depreciation expenses

- Account 6425 - Taxes, fees and license

- Account 6426 - Bad debts and allowance expense

- Account 6427 - Service from outside

- Account 6428 - Other cash expense

Other expenses include expenses other than production and business expenses incurred

in the normal course of business activities of the enterprise

Accounting vouchers: Payment slip, Debit note from the bank, VAT invoice, Minutes

of liquidation of fixed assets

Account 811 - Other expenses This account reflects expenses of activities other than

business activities that generate revenue for the enterprise, including the Cost ofliquidation and sale of fixed assets and the residual value of liquidated or sold fixedassets (if applicable) Have), loss difference due to revaluation of goods, fixed assetsare taken to contribute capital to joint ventures, investments in associates, long-term

investments, fines for breach of economic contracts, tax penalties, arrears taxes andother expenses.

Accounting process

- Cost of liquidation and sale of fixed assets + Based on the minutes of liquidation offixed assets, minutes of handing over of assets, etc., accountants record other expensesaccording to the residual value of the assets, depreciation of assets according to theaccumulated depreciation of the assets, and at the same time reflect them Reflect acorresponding decrease in the cost of the asset - Fines for breach of economiccontracts, tax penalties, tax arrears: Based on economic contracts, payment slips, debtnotices, etc., accountants shall record other expenses of the enterprise according to theamount of compensation, tax penalties, tax arrears, etc., and at the same time, cash andcash in the bank The amount of acceptable payment or tax payable to the state budgetincreases according to the tax penalty Other payable amounts increase according tothe amount of tax arrears

Accounting books

- Subsidiary ledger 811

- General journals

- Ledger account 811

1.6 Accounting for business results

1.6.1 Accounting for business income tax expenses

Account 8211 – Current corporate income tax expenses This account reflects the

amount of corporate income tax payable on taxable income for the year and theapplicable corporate tax rate

Accounting process

- Quarterly, the accountant shall base on the corporate income tax return to record thetemporarily payable orporate income tax(CIT) amount into the orporate incometax(CIT )expense

- If the current CIT payable temporarily in a year is smaller than the payable amount ofthat year, the accountant shall record the payable CIT amount in addition to the currentCIT expense Suppose the temporarily payable current CIT amount in a year is moreconsiderable than the payable amount for that year The accountant must record a

reduction in current CIT expense as the difference between the temporarily payablecurrent income tax amount in the significant year than payable.

1.6.2 Accounting for business results

Formula for determining business results

 Gross profit =Net sale – Cost of goods sold

 Profit from business activities = Gross profit + Financial income – Financial expenses – General and administrative expense

 Profit from other activities = Other income – Other expense

 Profit before tax = Net profit from operating activities Sales + Profit from other activities

 Profit after tax CIT = Profit before tax - Expense CIT

Account 911 – Determination of business results This account is used to identify and

record the business results and other activities of an enterprise in an annual accountingperiod The results of business activities must be accounted for in detail according toeach type of activity (production, processing, trading, service and financial activities )

In each type of business activity, it may be necessary to make detailed accounting foreach type of goods, each category, each type of business, type of service

CHAPTER 2: THE STATUS OF ACCOUNTING

DETERMINATION OF BUSINESS RESULTS AT THE COMPANY

2.1 General characteristics affecting revenue and cost accounting and determining business results at the Company

2.1.1 History of establishment and development of the Company

- Name of company: Tuan Loc Thang company limited

- Head office: Loc Thang Town, Bao Lam District, Lam Dong Province, Vietnam

MST:5801020695

- Tuan Loc Thang is known as a company with 100% Vietnamese investment capital,known as an investor and distributor of highly specialized auto parts, serving diverseneeds of customers

- TUAN LOC THANG Company Limited was established on April 27, 2011, withbusiness license number 0308229554 issued by the Department of Planning andInvestment of Lam Dong Province

- Authorized capital is: 6,000,000,000 VND

- Although the company has just been established since 2011, it has not been longsince, but with the company's policy of "belief and trust" of customers about thequality of goods and the convenience of products Therefore, the company has a strongfoothold in the car market

2.1.2 Organizational characteristics of the management apparatus at the Company

Figure 2 1 Company structure

Function and duties of each department

 Director

Execute the operation and management of the Company's business activities;concretize the company's overall aims As the legal representative of the company, youwill be responsible for participating in the signing of pertinent documents anddeveloping the development plan and strategy

expansion of business

 Accounting department

-Responsible for comprehensive financial management collect and providecomprehensive financial performance and economic information, strictly abide bystate policies on economic and financial management, violate financial discipline

 Human resources department

Responsible for advising the Director and performing the following 4 tasks:

- Human resource organization, labor management organization, data on the quantityand quality of employees, human resource planning to serve the Company, andstringent maintenance of complete personnel records

- Advise the Director on personnel matters, including recruitment and business rules

- Overseeing and inspecting the application of salary regimes and policies, as well associal and health insurance, promotion, and salary increases

- Administrative clerical work: assuring administrative functions such as archiving,monitoring, and synthesizing the Company's whole operation status, as well aspreparing official dispatches and documents

- Assemble essential documents for Director meetings Verify the document's legalitybefore submitting it to the Director for approval

 Sale department

- Having the responsibility of advising the director on the company's business position

in the most effective manner possible, and being in charge of the company's purchaseand selling of items Conduct market research and develop a strategy for purchasingand selling items in order to maximize business efficiency The sales department isresponsible for gathering market data on prices, customer needs, and competition inorder to make informed purchasing and selling decisions Additionally, the salesdepartment is accountable for capital management, supply chain management, andplanned consumption of goods Create revenue streams on a quarterly and monthlybasis.The sales department makes investment and development proposals, as well asideas for expanding the sales network and distribution channels, for examination andapproval by superiors

Design the company's logo and product packaging to be eye-catching and beautiful

2.1.3 Organizational characteristics of the accounting apparatus and accounting policies applied at the Company

2.2 Actual situation of revenue and expense accounting organization at the Company

2.2.1 Accounting gross revenue

2.2.1.1 Accounting vouchers and rotation of accounting vouchers

Types of vouchers and invoices that the company uses as a basis for revenuerecognition:

- Goods delivery note

- Value added tax

- Economic contract between the company and the partner

When customers need to order spare parts, buy cars or repair services, they willcontact the sales department The sales department will be responsible for sending aquotation to the customer if the customer accepts the requested price Confirm order

quantity and customer order The sales department drafts the purchase and salecontract and sends it to the customer to sign for confirmation and stamp Each partykeeps 01 copy.

- For spare parts: Following the agreement that the Company will deliver the items tothe buyer, the two parties will confirm the actual status of the purchase and sale andthe key persons

- For repair services: Customers will bring the car into the Company, the salesdepartment will receive it and transfer it to the relevant service departments

- For vehicles purchase: Customers will be advised by a staff member after choosing acar, deposit and complete some procedures and wait for the day to receive the car.After delivery, the storekeeper and the buyer sign the link Copy 2 is handed over tothe buyer as a travel document and recorded in the accounting book of the buyer Thethird copy warehouse keepers keep it for recording in the warehouse card and transfer

it to the accountant for bookkeeping and payment procedures (if the customer is notpaid)

Suppose there is no change with the contract In that case, the accounting departmentwill check and compare the vouchers of delivery notes, economic contracts, minutes ofacceptance and issue a financial invoice to the customer to sign the invoice Contact 01

to save, Contact 02 to send to customers, Contact 03 companies as payment documents

- If the customer pays immediately, the accounting department will make a paymentreceipt consisting of 3 copies Contact 01 keeps the voucher, and copy 02 is sent to thepayer Copy 03 is kept in the receipt book

- After delivering the goods to the buyer, if the customer pays by bank transfer, theBank will send a Credit Notice to the Company

2.2.1.3 Process of Accounting

Figure 2 2 The process of accounting entries to Subsidiary ledger, Account Ledger 511

Some transactions arising at the company in 2020 are as follows:

According to VAT invoice number 0000010 dated in 2020 selling spare parts toThượng Hải Company Limited and customers paying by bank transfer

Based on the VAT invoice, the ex-warehousing note, the accountant shall make thegeneral journal entry as follows:

Transaction 1: On June 30, 2020, The company sells and installs the front fork for

30,000,000, the battery for 4,000,000 and the voltronic oil change for 3,000,000 for thecar of Thuong Hai company with VAT 10%

Dr 1121 40,700,000

Cr 5111 37,000,000

Cr 3331 3,700,000

Transaction 2: On July 25, 2020, the company sell and install soft close for

19,500,000 for a car of new client with VAT 10%

Dr 1111 21,450,000

Cr 5111 19,500,000

Cr 3331 1,950,000

Transaction 3: On July 27, 2020, the company sell Motor Mount for 8,000,000 for car

of Thuong Hai company

Dr 131 8,800,000

Cr 5111 8,000,000

(Attachment to Appendix 9 – 10, page 53 – 60)

2.2.2 Cost accounting

2.2.2.1 Accounting cost of good sold

-Sale or purchase contact: After reaching an agreement, both parties sign the purchase

or sale contract, clearly stating the goods requirements, price, payment method,payment term, transaction location, and means of transportation

- The orders: The basis for performing transactions is the proof of complaints (if any).The goods import and export documents used at the company include good receiptnotes, warehouse card, good delivery notes

 Import - export - inventory report

- At the end of the month, the accountant collects good receipts notes, good deliverynotes, cum internal transportation and reports Import - Export - Finished goodsinventory to determine the cost of goods sold in the month

2.2.2.2 Principles of recording cost of goods sold

- Cost of goods sold at the company is the cost of goods sold, direct costs of servicesrendered, and other expenses that are included in or recorded as a reduction in cost ofgoods sold in the reporting period

2.2.2.3 Account and Process of Accounting

Account: 632 “Cost of goods sold”

Figure 2 3 The process of accounting entries to the Subsidiary ledger, Account 632 Ledger

Some transaction occurred at company

Transaction 1: On June 30, 2020, Acountant recorded Cost of good sold of Font fork

as 18,000,000, battery as 2,200,000 and Voltronic oil as 1,800,000

Dr 632 18,000,000

(Attachment to Appendix 11, page 60)

2.2.3 Accounting selling expense

2.2.3.1 Documents and procedures

- The company uses the following documents: Purchasing request, payment request,payment slip, payroll, invoices purchased from outside to serve the sales department

2.2.3.2 Account and Process of Accounting

- Based on the arising economic transaction documents related to the consumption ofgoods and finished products such as delivery notes payment slips, the accountantopens the monitoring book and records it in the General Journal

- At the end of the month, the cost of goods sold is transferred to Account 911 todetermine business results

To record selling expenses, the company uses account 641 in accordance withregulations of the Ministry of Finance

Figure 2 4 The process of accounting entries to the Subsidiary ledger, Account Ledger 641

Some transaction occurred at company

- When receiving the payment proposal from the sales department, the accountantprepares the payment slip transfers the payment slip to the chief accountant and theboard of directors for approval Then the payment accountant transfers it to thetreasurer to proceed.

- After that, the accountant enters the data into the General Journal, Subsidiary ledger 641

- From General Journal to Ledger Account 641

Some transaction occurred at company in 2020

Transaction 1: According to invoice number 0000388 dated April 14, 2020, the

company spends 1,800,000 to renew website services, 10% VAT, pay in cash

Dr 6418 1,800,000

Cr 1111 1,980,000

Transaction 2: According to voucher No 1953199 dated June 28, 2020, the company

spends 1,468,526 VND for phone calls for sales staff, 10% VAT, paid in cash

Dr 6418 1,468,526

Cr 1111 1,615,378

Transaction 3: According to voucher number 0000146 dated August 29, 2020, the

company spends money on advertising services in newspapers for 5,000,000 VND,10% VAT, paid in cash

Dr 6418 5,000,000

Cr 1111 5,500,000

(Attachment to Appendix 12, page 62)

2.2.4 Accounting General and administrative expenses

2.2.4.2 Account and Process of Accounting

To account for General and administrative expenses, the company uses account 642

"General and administrative expenses" in accordance with regulations of the Ministry

(Attachment to Appendix 13, page 65)

2.2.5 Accounting for revenue from financial activities

Some transaction occurred at company in 2020

Based on the notice No 4 dated January 25, 2020 of Agribank, the interest rate ondemand deposits is 73,674 VNĐ

Dr 1121 73,674