accounting for sales and business result in hino motors vietnam, ltd and suggestions for improvement

Hồ Thị Thùy Phương – CQ46/51.03 ABSTRACT In the modern economic world, especially when the number of bankrupt enterprises is rising, accounting for sales and business result has become

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MINISTRY OF FINANCE ACADEMY OF FINANCE

Topic: “Accounting for sales and business result in HINO MOTORS

Vietnam, Ltd and suggestions for improvement”

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MINISTRY OF FINANCE ACADEMY OF FINANCE

Topic: “Accounting for sales and business result in HINO MOTORS

Vietnam, Ltd and suggestions for improvement”

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Hồ Thị Thùy Phương – CQ46/51.03

DECLARATION

I hereby declare that this thesis is my own work and effort and that has not been submitted anywhere for any award Where other sources of information have been used, they have been acknowledged

The data and results described in the thesis are derived from the actual situation of the practice company

Hanoi, 30 April, 2012 Student

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ACKNOWLEDGEMENT

Firstly, I am deeply indebted to my supervisor MBA Nguyen Thi Thuy Trang whose help, stimulating suggestions and encouragement helped me all the time of research for and writing of this thesis

I also want to thank Hino Motors Vietnam, Ltd for giving me permission to commence this thesis in the first instance, to do the necessary research work and to use departmental data

I have furthermore to thank the former Vice Director and Finance Manager

as well as all seniors at Hino Motors Vietnam, Ltd who gave and confirmed this permission and encouraged me to go ahead with my thesis

My friends from Foreign Language Faculty also supported me in my thesis I want to thank them for all their help, support, interest and valuable hints

Especially, I would like to give my special thanks to my family whose patient love enabled me to complete this work

Finally, because of limitation of time and knowledge, mistakes are unavoidable, so I wish to have more opportunities I also wish to receive more contribution and suggestions to make my thesis better

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ABSTRACT

In the modern economic world, especially when the number of bankrupt enterprises is rising, accounting for sales and business result has become more and more important, for every company in general, and for Hino Motors Vietnam, Ltd

in particular Therefore, my thesis with the topic “Accounting for sales and business result in Hino Motors Vietnam, Ltd and suggestions for improvement” will point out the importance of having a healthily and effective accounting department for sales and business result

The main content is reflected in three chapters The first chapter is about the literature review for every company, mainly showing what accounts are involved

in calculating business result, its definitions and accounting entries In chapter 2,

by taking a scenario in Hino Motors Vietnam, Ltd, the thesis focuses on a real accounting practice for sales and business result From that, chapter 3 points out the company’s strengths and weaknesses and suggests some solutions to improve the current accounting system in Hino Motors Vietnam, Ltd

In conclusion, the thesis has already been complete in comparison with proposed objectives and targets in the introduction

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TABLE OF CONTENT

Part I: Introduction 1

1 Rationale 1

2 Aims of the study 1

3 Subject and scope of the study 2

4 Introduction of the main content 2

Part II: Main content 3

Chapter 1: Literature Review 3

1.1 Overview 3

1.1.1 Characteristics of goods 3

1.1.2 Managerial requirements 3

1.1.3 Funtions of accounting for sales and business result 4

1.1.4 Methods of sales 5

1.2 Accounting entries for sales and business result 6

1.2.1 Accounting for Cost of Goods Sold (COGS) 6

1.2.2 Accounting for Sales and Sales Deductions 8

1.2.3 Accounting for Selling and Administration expenses 11

1.2.4 Accounting for Financial Expenses and Incomes 12

1.2.5 Accounting for Other Expenses and Incomes and Corporate Income Tax Expense 13

1.2.6 Accounting for business result 14

1.3 Preparing financial statements 15

1.4 Systems of Accounting forms 15

1.5 Computerized accounting for sales and business result 17

Chapter 2: Current situation of accounting for sales and business result in HINO MOTORS Vietnam, Ltd 18

2.1 Overview about Hino Motors Vietnam, Ltd 18

2.1.1 History 18

2.1.2 Business field and products 18

2.1.3 Organizational structure 19

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2.1.4 Characteristics of accounting department 19

2.2 Current situation of accounting for sales and business result in Hino Motors Vietnam, Ltd 21

2.2.1 List of main products 21

2.2.2 Main selling method at Hino Motors Vietnam, Ltd 22

2.2.3 Current situation of accounting for sales and business result 23

2.2.3.1 Accounting for Cost of Goods Sold (COGS) 23

2.2.3.2 Accounting for Sales and Sales Deductions 26

2.2.3.3 Accounting for Selling and Administration Expenses 32

2.2.3.4 Accounting for Business result 36

2.2.3.5 Income Statement 38

2.3 General conclusion about accounting performance for sales and business result in Hino Motors Vietnam, Ltd 39

Chapter 3: Some suggestions for improving the accounting system for sales and business result in HINO MOTORS Vietnam, Ltd 40

3.1 Evaluation of accounting for sales and business result in Hino Motors Vietnam, Ltd 40

3.1.1 Strong points 40

3.1.2 Weaknesses 41

3.2 Importance and requirements for improving the accounting system for sales and business result 42

3.2.1 Importance 42

3.2.2 Requirements 43

3.2.3 Orientation 43

3.4 Some suggestions for improving the accounting system for sales and business result in Hino Motors Vietnam, Ltd 45

3.3.1.Updating the accounting software 45

3.3.2 Allocating tasks effectively to accountants 45

3.3.3.Opening third-level accounts 46

3.3.4.Improving the Sales Discount accounts 47

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3.3.5.Improving the preparation of accounting reports 47

Part III: Conclusion 51

References

Appendixes

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Hồ Thị Thùy Phương – CQ46/51.03 Page 1

Besides, the very first objective of every enterprise is making a profit, so calculating business result in general and sales revenue in particular is very important in both forms of accuracy and timeliness It’s the reason why efficient and effective accounting management for sales and business result plays an important role in the accounting system

Hino Motors Vietnam, Ltd is a manufacturer of heavy and medium – sized trucks This field is rather new in Vietnam with competitive markets It is now one of leading companies in this field Therefore, maintaining its current position and being the market leader is more important than ever

From this situation, Hino Motors Vietnam, Ltd must have a flexible and effective sales campaign with a well-performed accounting system for sales and business result Because of the importance of accounting for sales and business result, I chose “Accounting for sales and business result in HINO MOTORS

Vietnam, Ltd and suggestions for improvement” as my graduation thesis topic

2 Aims of the study

My study has three objectives:

First, it is to contribute to the background theory of accounting for sales and business result, which is done by pointing out definitions, accounts used and accounting entries for each account related to determining business result in a manufacturing company

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Second, it is to illustrate how a company does accounting for sales and business result by taking the scenario at Hino Motors Vietnam, Ltd as a case for study

Third, it is to review the company’s achievements and limitations and to suggest possible solutions to improve the accounting performance for sales and business result in the future

3 Subjects and scope of the study

3.1 Subjects of the study

My study mainly focuses on sales, selling expenses, administration expenses, some other related expenses and incomes, and net income – their definitions, accounts used to do accounting and accounting entries

Besides, it is also about preparing accounting reports in which net income and retained earnings are reflected

3.2 Scope of the study

- Time: Accounting fiscal year from 1/4/2009 to 21/12/2012 (Quarter III of the fiscal year form 1/4/2011 to 31/3/2012)

- Space: Hino Motors Vietnam, Ltd

4 Introduction of the main content

Apart from the introduction, conclusion, references and documents attached, the main content is divided into three chapters as follows:

Chapter 1: Literature Review

Chapter 2: Current situation of accounting for sales and business result in

HINO MOTORS Vietnam, Ltd Chapter 3: Some suggestions for improving the accounting system for sales and

business result in HINO MOTORS Vietnam, Ltd

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Part II: Main content

Chapter 1: Literature Review

1.1 Overview

1.1.1 Characteristics of goods

In general, goods are finished products of the final manufacturing stage and have been approved to be qualified to put in stock or sell

Different goods, in different types, have some following characteristics:

- Goods are finished products of the final manufacturing stage by the manufacturer itself or by outsourcing

- Finished products are considered as goods only after being approved to

be qualified

- Goods have to be put into stock

Goods includes finished goods, semi-finished goods (or work-in-process), materials and services to customers Among them, finished goods are the main products of a manufacturing company

To have more understanding, we must distinguish between finished goods and products:

Level

of

limit

Finished goods are the final result of a

certain manufacturing process with a

certain technology in a company-scope

Products are results of manufacturing and service providing process in general

Scope The concept of product is larger than finished goods, because products include both

finished goods and semi-finished goods

1.1.2 Managerial requirements for accounting for sales and business result Sales are the transfer of the goods usage right attached with the decision-making power from the seller to the buyer In addition, sales are recognized when the customer makes payment or agrees to pay

Sales are in the final stage of a business process It is the transfer of capital form, from capital in products to capital in monetary or in payment Therefore, the

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faster the sales process happens, the shorter the business cycle is, the faster the capital turnover is, and the more profit it brings to the company

When a sales takes place, the company gains revenue and other incomes which are the total economic benefits for the company in the accounting period Besides, some expenses must be paid, which decreases the economic benefits of the company in the same period These expenses include out-of-pocket money and deductions such as discounts

After a sales process, the company must determine the business result, by comparing incomes with expenses Afterwards, the net income will be allocated effectively as targeted and as regulated

If the company only has one revenue gain and one expense payment, it does not need any sales management However, almost all companies have more than one transaction each day Therefore, in order to be well managed, the company must have a single department to record, track, and report all of the sale transactions daily From these requirements, accounting for sales and business result is established

1.1.3 Functions of accounting for sales and business result

In order for requirements of managing goods, sales, determination of business result and division of net income to be met, accounting for sales and business result has to execute some following missions of:

- Fully, timely, accurately reflecting and recording occurred transactions and movements of each type of goods and products under quantity, quality, model and value;

- Fully, timely, accurately reflecting and recording sales, sales deductions and expenses of each business activity, as well as following and supervising customers’ receivables;

- Accurately calculating and reporting results of each transaction;

- Monitoring the implementation of state obligations and division process

of business result;

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- Interpreting accounting reports to information users Accounting information must be accurate, easy-to-read and useful

Therefore, accounting for sales and business result must follow current regulated accounting standards, as well as be adaptable with the current status of the company’s accounting system

Besides, if carried out effectively, these above professions will put a hand into increasing the accounting productivity in general Thanks to that, accounting information will be helpful for directors and managers in making sound decisions, which will raise the business profitability

1.1.4 Methods of sales

Sales is the process of delivering goods to customers There are two typical methods of sales, including direct sales and sales through agents (consignment sales)

1.1.4.1 Direct sales

Direct sales is the method of delivery to the buyer directly at the warehouse

of the enterprise Goods when delivered to customers must be paid or agreed to pay After this package of goods is brought out of stock, the seller company will lose the ownership power of such goods This method includes whole sales and retail sales

- Whole sales: is the method of delivery of goods to manufaturing and/or trading companies to put into the producing process as input materials or to consigned for sales or sell directly Therefore, the wholesalers are very various, such as domestic or foreign or join-venture manufacturers, traders, or even private enterprises Chracteristics of whole sales:

The most typical characteristic is that goods are still in distribution phase, not in consumption

Secondly, goods are often bought in large quantity and in different kinds of payment

Before a sale, the buyer will assign someone to be at the seller’s warehouse During the sales, the assigned person will check the quantity, quality, model and value of the goods package, and sign in realted vouchers and invoices After that, when the buyer pays or agrees to pay (with valid documents and signatures), the

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buyer will record the transaction as sales revenue as well as state obligations (such

as output VAT)

Accountants use VAT Invoices, Sales Contract and Delivery Orders set by the company This VAT Invoice may have 3 or 5 Copies (Liens) dependent on the company’s requirements.

- Retail sales: is the method of delivery of goods direclty to the end consumers – the final destination of the distribution phase The retailers are all Vietnamese citizens or foreigners, regardless of their class and nationality Characteristics of retail sales:

Goods are in consumption phase, not in distribution The usge value of goods are being implemented

Retail goods are often bought in small quantity, and with immediate payment, usually in cash

1.1.4.2 Sales through agents (Consignment sales)

It is the method of delivery through the channel of agents Different from direct sales, after the package of goods is brought out of stock, it still belongs to the company and is not considered to be in consumption phase The company only records sales revenue when the agent reports to sell such goods When goods are sold, the company must pay commissions for the agent which is considered as a selling expense

Sales of goods on consignment for agents are recorded as sales revenue only when:

- The company has received money payment from the customers;

- The customer has received his package of goods and agrees to pay;

- The customer has advanced the amount of purchase payment of the package of goods;

- The package of goods on consignment is paid via bank

1.2 Accounting entries for sales and business result

1.2.1 Accounting for Cost of goods sold (COGS)

1.2.1.1 Definition

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Expense of finished goods and merchandise goods sold (shortly called cost of goods sold) is the expense of goods determined at the time they are sold out According to VAS 2 - Inventory, cost of goods sold can be calculated by the following methods:

- Specific identification method

- Average expense method

- First-in, First-out method

- Last-in, First-out method

1.2.1.2 Calculating COGS

Cost of goods

sold (COGS) =

Expense of Goods out of stock

+ Selling Expenses +

Administration Expenses

For manufacturing companies: The value of goods for sale from stock or finished goods for direct sales not through warehouse is considered as cost of goods sold

1.2.1.3 Accounting entries for Cost of goods sold (COGS)

For sales through agents (consignment sales)

Accounts used

 157 – Goods on consignment This account reflects the current available amount and changes of value of goods on consignment The ending balance of this account determines the volume of goods which are not in consumption (which means the goods are in the agent’s stock).

 Others: 632 – Cost of goods sold, 156 – Finished goods…

Accounting entry

 For perpetual inventory method (see Flowchart 01)

 For periodic inventory method (see Flowchart 02)

For direct sales

Account used

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 632 – Cost of goods sold This account reflects the value of goods and services which were sold and afterwards, the transfer of ending balance to account 911 – net income

 Others: 156 – Finished goods, 911 – Net income…

Accounting treatment

 For perpetual inventory method (see Flowchart 03)

 For periodic inventory method (see Flowchart 04)

1.2.2 Accounting for Sales and Sales Deductions

1.2.2.1 Accounting for Sales

1.2.2.1.1 Sales revenue

Types of revenues: Sales revenue; Revenue from rendering services; Revenue from deposit interest, selling copyrights, dividends, and distributed profit; and Revenue from trading real estates

Sales revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result

in increases in equity, other than increases relating to contributions from equity participants

Net sales is determined by sales revenue after deducting sales deductions including trade discounts, sale allowances, and sales returns

1.2.2.1.2 Sales recognition principles

Sales revenue is recognized only when meeting all recognition conditions stipulated in Vietnamese Accounting Standards (VAS) No 14: Sales and other incomes

Revenue from the sale of goods shall be recognized when all the following conditions have been satisfied:

The entity has transferred to the buyer the significant risks and rewards of ownership

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It is probable that the economic benefits associated with the transaction will flow to the entity; and

The expenses incurred or to be incurred in respect of the transaction can be measured reliably

1.2.2.1.3 Accounting vouchers and invoices used

- VAT invoice

- Normal sales invoice

- Payment voucher of goods on consignment

- Other payment vouchers

For direct sales

For company applying deduction/subtraction VAT method (see Flowchart 05)

For company applying direct VAT method (see Flowchart 06)

For sales through agents (see Flowchart 07)

1.2.2.2 Accounting for Sales Deductions

1.2.2.2.1 Trade discount

- Definition: Trade discount is the amount of money that enterprise credited or paid to customers who bought goods and services in large volume in accordance with the agreement that the seller will give trade discount to the buyer

- Accounts used

521 – Trade discount This account has no beginning and ending balance

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- Accounts used

531 – Sales return This account reflects the volume of goods which are returned due to the company’s mistakes Account 531 has no balance

- Accounts used: 532 – Sales allowances This account only reflects the volume

of sales allowances out of the VAT invoice according to the agreement between sellers and buyers Price deductions written in VAT invoices are not considered as a sales allowance.

- Accounting entry (see Flowchart 10)

1.2.2.2.4 Tax payables (VAT, Export Duty, Excise Duty)

- Definition:

VAT (Value Added Tax) is an indirect tax calculated on the added/increased value

of goods and services, arising in the production, distribution and consumption phases;

Export duty is calculated by Custom Office on the price written in the export contract at the border gate, usually FOB (Free On Board) price and export duty rate This price is exchanged into Vietnamese Dong according to the average exchange rate in the inter-bank foreign exchange market, announced by SBV (State Bank of Vietnam) at the time of exporting;

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Excise duty (also called Special Consumption Tax) is levied on the profit of some special types of goods and services stipulated by the Government in order to limit the consumption speed because these goods and services are unnecessary or harmful to life such as wine, beer, cigarettes… The excise duty base is the price with export duty or price without VAT

- Accounts used

3331 – VAT payable

3332 – Excise duty payable

3333 – Custom duties payable

- Accounting entry (see Flowchart 11)

1.2.3 Accounting for Selling and Administration Expenses

1.2.3.1 Accounting for Selling Expenses

1.2.3.1.1 Definition:

Selling expenses are all expenses incurred in relation to selling process of goods and services

1.2.3.1.2 Content of selling expenses

Sale staff salary expense; Packaging and indirect material expense;

Depreciation expense; Warranty expense; Rendered services; and other expenses

1.2.3.1.3 Principles of collection and allocation of selling expenses

Selling expenses when actually incurred will be collected as selling expenses Besides, selling expenses can be collected as fixed and variable selling expenses At the end of the period, selling expenses will be transferred, allocated to determine the business result Allocation criteria may be cost of goods sold or sales revenue

1.2.3.1.4 Accounts used

- 641 – Selling expenses This account has no balance

- Others: 111, 131, 334, 152…

1.2.3.1.5 Accounting entry (see Flowchart 12)

1.2.3.2 Accounting for Administration Expenses

1.2.3.2.1 Definition

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Administration expenses are all expenses incurred in relation to such activities as businesses, administration management, and others which are carried out in the company in general

1.2.3.2.2 Content of administration expenses

Officer’s salary expense; Office tools; Depreciation; Tax, fees and charges; Provision expense; Service rendered; and others

- 642 – Administration expenses This account has no balance

- Others: 111, 131, 334, 152…

1.2.4 Accounting for Financial Expense and Income

1.2.4.1 Accounting for Financial Expense

Financial expenses are all expenses incurred in relation to financial activities

of the company, such as borrowings…

1.2.4.1.2 Contents of financial expenses

- Expenses related to financial investments such as: loss from investments, other expenses which are not capitalized in the investments

- Borrowing expenses such as: interest

- Expenses related to foreign currencies translation, loss from foreign exchange rate difference

- Provision for financial investments

- Other expenses related to financial activities

- 635 – Financial expenses This account has no balance

- Others: 111, 131, 334, 129…

1.2.4.2 Accounting for Financial Income

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Financial incomes are all incomes gained in relation to financial activities of the company, such as borrowings…

1.2.4.1.6 Contents of financial incomes

- Interest income such as: loan interest, deposit interest…

- Capital gain from disposing financial investments

- Distributed dividend and profit

- Gain from foreign exchange difference

1.2.5 Accounting for Other Expenses and Incomes and Corporate

Income Tax Expense

1.2.5.1 Accounting for Other Expenses

1.2.5.1.1 Content of other expenses

- Expenses from disposal and liquidation of fixed assets and their net book value

- Losses from revaluation of materials, goods and fixed asset which are contributed in joint ventures, associates…

- Compensation for breaches of contracts;

1.2.5.2 Accounting for Other Incomes

1.2.5.2.1 Content of other incomes

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- Proceed of disposal of fixed asset;

- Gains from the revaluation materials, goods and fixed asset that are used

to contribute or invest into associates or other long-term investment;

- Gains from contract compensation by the customers;

- Tax refund from the State Budget;

- Accounts unidentifiable as to whom they are payable;

- Sales-related tips or awards (if any offered by suppliers which are not included in sales)

- Gifts or donations in cash or in kind by organizations and individuals;

- Other incomes

- 711 – Other incomes This account has no balance

- Others: 111, 112, 331, 3387…

1.2.5.3 Accounting for Corporate Income Tax Expense

1.2.5.3.1 Content of corporate income tax expense

- Each quarter, based on the tax declaration, the accountant records estimated current income tax into current income tax expense

- At the end of fiscal year, if the estimated income tax is less than the actual current income tax to be paid, the accountant should record additional tax into current income tax expense In case estimated income tax is higher than actual income tax to be paid for the year, the accountants should decrease the current income tax expense by the difference between the estimated income tax and the actual income tax payable

- If the entity detects immaterial errors relating to income tax payable of the previous year the accountants should record the increase or decrease

of the income tax payable of the previous year in current income tax of the current year

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- At the end of the fiscal year, the accountants should transfer the current income tax to determine operation result

- 821 – Corporate income tax expense

1.2.6 Accounting for Business result

1.2.6.1 Definition

Business result is the final result of the normal activities and other activities during the accounting period Business result in a certain period may be profit or loss In case of loss, business result will be compensated as regulated and decided

by responsible authorities In case of profit, business result will be allocated as regulated by the financial regime

1.2.6.2 Accounts used

- 911 – Net income

- 421 – Retained earnings

1.2.6.3 Accounting entry (see Flowchart 18)

1.3 Preparing financial statements

1.3.1 Preparing a balance sheet

Information related to accounting for sales and business result is displayed under item Retained earnings, code 420

1.3.2 Preparing an income statement

Information related to accounting for sales and business result is displayed under following items:

- Revenue from sales of goods and rendering of services, code 01

- Revenue deductions, code 02

- Net revenue from sales of goods and rendering of services, code 10

- Cost of goods sold, code 11

- Selling expenses, code 24

- Administration expenses, code 25

- Corporate income tax expense, code 51

- Profit after tax, code 60

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1.4 Systems of Accounting forms

There are 4 systems of accounting forms: General journal; Journal voucher; General journal voucher; and Journal - Ledger

1.4.1 General journal

- The most typical characteristic is that this system uses General journal book to record all economic and financial activities in time order and in the relationship with correspondent accounts, then uses information in Genral journal to open related ledgers for related accounts

- System of books: Normal daily journal, General journal, Ledgers for necessary accounts, and Detail accounts

- Accounting for sales and business result often uses following books: Sales journal; General journal; Ledgers for Acc 511, 641, 642 , 911; Sales detail book; and Detail payment book with customers…

1.4.2 Journal voucher

- The most typical characteristic is that all economic and financial activities

of the company reflected in original vouchers will be classified, accumulated and formed into the journal voucher book, and then ledgers for related accounts will be prepared based on the journal voucher

- Using this form, recording under time order is separate from recording under systematical order

- System of books: Journal voucher; Ledgers for necessary accounts; and Detail books

- Accounting for sales and business result often uses following books: Journal voucher; Ledgers for Acc 511, 641, 642, 911…; Sales detail book; Detail payment book with customers

1.4.3 General journal voucher

- This form’s characteristic is that all economic and financial activities reflected in original vouchers are all classified to record in general journal voucher, then at the end of the fiscal year, information will be collected from general journal voucher to ledgers of related accounts

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- System of books: General journal vouchers; Ledgers for necessary accounts; Detail accounting books; and Others: Allocation table, list table for calculation…

- Accounting for sales and business result uses following books: General journal voucher; Ledgers for 511, 641, 642, 911…; Detail sales book; and Detail payment book with customers

1.4.4 Journal - Ledger

- The most typical characteristic of this form is that Journal - Ledger is used as the only general book to record all economic and financial activities chronologically and systematically

- System of books: Journal - Ledger; Detail books

- Accounting for sales and business result uses following books: Journal - Ledger; Detail sales book; Detail payment book with customers

1.5 Computerized accounting for sales and business result

The history of establishment of a system for checking the availability and movement of assets, controlling all economic relationships, along with the development of information technology has proved that computerized accounting

is essential Accounting softwares are now with high speed, diversity and performance Applying computerized accounting system create a certain belief in the certainty and unique differences for business activities Therefore, at the moment, most of all enterprises are using computerized accounting

well-For accounting for sales and business result, applying suitable accounting software is very important because it will bring following benefits if applied promptly:

- Helping the accounting process for sales and business result faster, more comfortable, and timelier;

- Calculating cost of goods sold precisely and saving a lot of time and effort;

- Recording information fully, precisely and safely because users can create passwords for sensitive and protectable information

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However, computerized accounting must be carried out in accordance with regulated standards and principles, as well as adaptable with characteristics, nature, and scope of every enterprise Besides, it is necessary to ensure the synchronization

between company’s infrastructure and computing level of accountants

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HINO MOTORS Vietnam, Ltd was established in June 1996, on the basis of

a joint venture between Hino Motors Corporation of Japan; Corporation Automotive Vietnam and Japan's Sumitomo Corporation Its slogan is “Brand for a Pioneer”

Total paid-in capital was 8,111,000 US dollars, with about 100 employees and 22 Hino agents all over the country

The following is the contact details of Hino Motors Vietnam, Ltd:

Hino Motors Vietnam, Ltd Headquarters: Hoang Liet, Hoang Mai District, Hanoi Tel: +84-4-3-8616017

Fax: +84-4-3-8616018 Website: http://xetaihino.vn/

2.1.2 Business Field and Products

Hino Motors Vietnam, Ltd’s is in manufacturing business field and produces medium and large-sized trucks Up to now, it is a leading truck manufacturer in Vietnam and is a member of Vietnam’s Association of Automobile Manufacturers (VAMA)

Since its foundation, Hino Motors Vietnam has tried to implement all activities under the motto of the company's dedication to career development; a prosperous society; and improvement of the living standards of Vietnamese people

by providing the highest quality products, and to contribute to building a new era

To realize these objectives, Hino Motors Vietnam always pioritizes Hino truck users as the first with the highest quality products and best services, and

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always maintains a quality management system in all technological processes implemented by the company

2.1.3 Organizational structure

2.1.4 Characteristics of accounting department

2.1.4.1 Structure of accounting department

One of the five persons in accounting department is chief accountant and the rets are in charge of different responsibilities

2.1.4.2 Accounting form

Hino Motors Vietnam, Ltd applies the accounting form of general journal and uses the accounting software Mankichi Kanjo System (MKS) The process of recording, classifying and preparing accounting reports is all computerized

In HCMC

In Hanoi

General Director

Vice Director ctor

Board of directors

Controlling board

For services For sales

Accountin

g Dept

Production Dept

Servi

ce Dept

Sales Dept

Administratio

n Dept Spare part

Dept

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Here is the start-up screen of Mankichi Kanjo System

2.1.4.3 Accounting regime and policies applied

- Hino Motors Vietnam, Ltd is applying the accounting regime stated in Decision No 15/2006 – QĐ – BTC dated March 20, 2006 by Ministry of Finance

- The company’s fiscal year starts on April 1st

and ends on March 31rd of each year

- Currency unit used is Vietnam Dong (VND) All issues related to US dollar (USD) or Japan Yens (JPY) are converted into Vietnam Dong (VND)

- The inventory costing method applied is weighted average

- The company uses the periodic accounting system

- Hino Motors Vietnam, Ltd is applying the deduction VAT method for VAT declaration and calculation

2.1.4.4 System of accounting vouchers

- For cash: Receipt voucher, payment voucher…

- For inventory: Goods receipt note, Goods dispatches note…

- For fixed assets: Fixed assets delivery and receipt notes, fixed assets disposal minutes…

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- For wages and salaries: Time sheet, payroll slip…

- For sales: VAT receipt, journal voucher…

2.1.4.5 System of accounting invoices

Hino Motors Vietnam, Ltd is using VAT invoices (Form 01GTKT-5LL-01) issued by itself in accordance with the official Dispatch No 8316/CT-QLAC dated May 24th, 2009 by Hanoi Tax Office

2.1.4.6 System of accounting books

Accounting books for sales and business result include: Sales journal, general journal, ledger book for accounts 511, 632, 641, 642…

2.1.4.7 System of accounting reports

- Balance sheet (Form B01 – DN)

- Income Statement (Form B02 – DN)

- Cash Flow Statement (Form B03 – DN)

- Notes to Financial Statements (Form B09 – DN)

2.2 Current situation of accounting for sales and business result in HINO MOTORS Vietnam, Ltd

2.2.1 List of main products

Hino Motors Vietnam, Ltd is an independent legal entity, which has businesses in producing and selling heavy and medium-sized trucks The following

is the list of main products manufactured and sold by Hino Motors Vietnam, Ltd:

Model FG FG8JPSB 15,100 Red, white, orange, blue,

gray FG8JJSB

Model FM FM8JNSA 24,000 Red, white, orange, blue,

gray FM2PKSM

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FM2PKSD

Model FL FL8JTSA 24,000 Red, white, orange, blue,

gray Model FL

Super Long

2.2.2 Main selling method at HINO MOTORS Vietnam, Ltd

The main selling method at HMV is sales through agents, not direct sales Therefore, operating expenses include selling expenses, administrative expenses

Hino Motors Vietnam, Ltd has a wide range of agents and after sales service providers all over the country as follows:

No City/Province Name of selling agents Names of after sales service

providers

1 Hanoi

North Star Motors and specialized equipments Company Limited

North Star Motors and specialized equipments Company Limited Viet Dang Motors Trade And

Service Co., Ltd

Viet Dang Motors Trade And Service Co.,Ltd

Lexim Co., Ltd Lexim Co., Ltd

Salvage Center

4 Ho Chi Minh Truong Long Engineering And

Auto Joint Stock Company

Truong Long Engineering And Auto Joint Stock Company

No 2 Auto Transport Joint

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2.2.3 Current situation of accounting for sales and business result

2.2.3.1 Accounting for Cost of goods sold (COGS)

- Vouchers used: Goods receipt note, Goods dispatch and internal delivery

note, VAT invoice…

- Accounts used: 632 – Cost of goods sold

- Accounting books used: In-out report, general journal, detailed ledger book for account 632…

No 2 Auto Transport Joint Stock Co (COVATO 2)

Stock Co (COVATO 2) Transport Construction Mechanical Joint Stock Company (TRACOMECO)

5 Da Nang South Middle Thai Thinh Nam

Co., Ltd

6 Can Tho

Truong Long Engineering And Auto Joint Stock Company – Can Tho Branch

7 Long An Minh Man Hino Motors, Ltd Minh Man Hino Motors, Ltd

Ltd – Tien Giang Branch

10 Buon Ma Thuot Thai Hoa Co., Ltd Thai Hoa Co., Ltd

11 Ca Mau Dai Phat Tin Trading

Company Limited

Dai Phat Tin Trading Company Limited

13 Lam Dong Tay Nguyen Hino Motors Co.,

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- Inventory costing method: Weighted average

- Accounting system: Periodic

- Content: Cost of goods sold is reflected in the In-out report, in terms of

quantity and value for each type of products However, Hino Motors Vietnam, Ltd applies the inventory costing method of weighted average; therefore this table is prepared at the end of each month Monthly, at the last day, the assigned accountant will calculate cost of goods sold based on the number and value of beginning balance and goods purchased during the month

- Calculation of cost of goods sold

COGS = Units of goods sold * Weighted – average unit expense

goods + Units of goods purchased

- Steps of accounting for cost of goods sold

 Step 1: Issuing goods receipt note and goods dispatch and internal delivery note

For goods into warehouse

When goods are brought to the warehouse’s gate, the storekeeper will check the quantity, quality and value of goods based on VAT invoices and related documents After that, the statistician will prepare and sign in the goods receipt note This voucher is printed in two copies: The first one is to save in warehouse, and the other is sent to accounting department

For goods out of stock

In case of goods for sales, only after VAT invoice, sales contract and related appendixes are checked by the storekeeper, will goods be brought out of stock

In case of goods for internal use, a warehouse officer will issue an internal bill Goods for internal use will be calculated according to specific identification method This case is very rare

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 Step 2: Tagging stock card

Based on warehouse receipt, internal bill and VAT invoice, the warehouse officer will write into the stock card for more effective management Stock card is issued for each type of products

Here is a sample of stock card

 Step 3: Preparing In-out report

In this report, the warehouse officer will calculate the book ending balance based on the beginning balance and the amount of goods purchased during the month This task is done at the end of each month by the warehouse officer

Here is a sample of In-out report

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 Step 4: Sending all papers to accounting department

After collecting all relevant information and figures, the warehouse officer will send all of them to the accounting department The assigned accountant will record cost of goods sold in general journal at the end of each month

2.2.3.2 Accounting for Sales and Sales Deductions

2.2.3.2.1 Accounting for sales

- Vouchers used: VAT invoice, Sales contract, Delivery order…

HINO MOTORS VIETNAM, LTD.

Hoang Liet Ward, Hoang Mai District, Hanoi Tax code: 0100114272

Unit: Unit Page 1 of 1

2

From 12/01/2011 to 12/31/2011

Voucher No.

Description Amount Balance

Beginning balance of March 2012

TOTAL

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- Accounts used: 511 – Sales revenue, 131 – Receivables from customers,

3331 – Output VAT…

- Accounting books used: Sales journal, general journal, journal voucher…

- Steps of accounting for sales

 Step 1: Invoice issuance

When the accountant responsible for sales and invoice issuances receives the package of delivery order (see sample 1), sales contract (see sample 2), transportation vehicles insurance slip (see sample 3) and related appendixes, he/she will issue VAT invoices These invoices will be duplicated in 5 copies:

Here is the sample of VAT invoice issued by Hino Motors Vietnam, Ltd

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(Date)

STT Đơn vị tính Số lượng Thành tiền

1,603,000,000

Tổng tiền hàng (Amount) : 1,603,000,000

Tiền thuế GTGT (VAT amount) : 160,300,000

Tổng tiền thanh toán (Total amount) : 1,763,300,000

Thuế suất GTGT (VAT rate) :

Trụ sở: Hoàng Liệt, Hoàng M ai, Hà Nội

Ô tô tải Hino

Ngày 31 tháng 12 năm 2011

Người lập hóa đơn/Ký, ghi rõ họ tên

(Prepared by/sign,full name) (Customer/sign, full name)

M ã số thuế (Tax code): 0100114272

Liên 3: Lưu tại phòng kế toán

(Copy 3: Accounting department)

Giám đốc/Ký, đóng dấu, ghi rõ họ tên

(Commodity description)

Đơn giá

(Unit price)

2

043257 - The Bank of Tokyo-Mitsubishi UFJ, Ltd Hanoi Branch

Số tài khoản (Bank account No.) :

CÔNG TY LIÊN DOANH TNHH HINO MOTORS VIỆT NAM

Họ tên người mua hàng:

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 Step 2: Computerized voucher input

After issuing VAT invoices, the accountant responsible for sales will open the accounting software and start to input necessary journal vouchers

Accounting entries

For sales of vehicles

Debit 1311100 – Account receivables

Credit 5112100 – Vehicles sales Credit 3331100 – VAT out-put

For sales of spare parts

Credit 5111100 – Spare parts sales Credit 3331100 – VAT out-put

For sales of services

Credit 5113100 – Services sales Credit 3331100 – VAT out-put

For sales of others

Credit 3331100 – VAT out-put Credit 5111800 - Goods sales others/5112800 - Finished product sales others/5113800 - Services sales others/5122000 - Internal Sale - Finished product sales

Here is the detailed ledger book for account 511

(Note: Hino Motors Vietnam, Ltd use the term Opposite for Counter

Account However, it’s not totally accurate Therefore, from now on, I use the term Counter Account in my thesis)

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Hồ Thị Thùy Phương – CQ46/51.03 Page 31

Hoang Liet Ward, Hoang Mai District, Hanoi Tax code: 0100114272

Unit: VND Page 1 of 1

4,902,094,673

Financial Manage r

(Sign, full name)

LEDGER DETAIL FOR SALES REVENUE (Acc 511)

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