Accounting for sales and evaluation business results in TOYOTA motor vietnam, ltd

Main selling method at TOYOTA motor Vietnam, Ltd ……….47 2.2.3 Current situation of accounting for sales and business results………48 2.2.3.1 Accounting for Cost of Goods Sold COGS ………..….48

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, 2015

Student

Trần Thị Ngọc Ánh

Firstly, I would like to express my very great thankfulness to all lecturers in English for Finance and Accounting Faculty at Academy of Finance for their professional guidance and valuable support

Especially, I would like to show my deep gratitude to my research supervisor, Ms Cao Phuong Thao, for her patient guidance, enthusiastic encouragement and useful critiques during the planning and development of my graduation thesis and for her assistance in keeping my progress on schedule

I also want to thank TOYOTA motor 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 TOYOTA motor Vietnam, Ltd who gave and confirmed this permission and encouraged me to go ahead with my thesis

Especially, I would like to give my special thanks to my family whose patient love

enabled me to complete this work and my friends from Foreign Language Faculty for all their help, support, interest and valuable hints

Finally, because of limitation of time and knowledge, mistakes are unavoidable, so I wish

to receive more contribution and suggestions to make my thesis better

In the modern economic world, especially when the number of bankrupt enterprises is rising, accounting for sales and business results has become more and more important to every company in general, and TOYOTA motor Vietnam in particular Therefore, I choose the topic “Accounting for sales and Evaluation of business results in TOYOTA motor Vietnam, Ltd” for my graduation thesis It will point out the importance of having

an effective accounting department for sales and business results

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 results, its definitions and accounting entries In chapter 2, by taking a scenario

in TOYOTA motor Vietnam, Ltd, the thesis focuses in a real accounting practice for salesand business results From that, chapter 3 shows the company’s strengths and weaknessesand suggests some solutions to improve the current accounting system in TOYOTA motor Vietnam, Ltd

In conclusion, the thesis has already been complete in comparison with proposed

objectives and targets in the introduction

LIST OF CHARTS & SAMPLES Flowcharts

1 Flowchart 01 – Accounting entry for COGS under perpetual inventory method (for sales through agents)

2 Flowchart 02 – Accounting entry for COGS under periodic inventory method (for salesthrough agents)

3 Flowchart 03 – Accounting entry for COGS under perpetual inventory method (for direct sales)

4 Flowchart 04 – Accounting entry for COGS under periodic inventory method (for direct sales)

5 Flowchart 05 – Accounting entry for direct sales (for company applying

deduction/subtraction VAT method)

6 Flowchart 06 – Accounting entry for direct sales (for company applying direct VAT method)

7 Flowchart 07 – Accounting entry for sales through agents

8 Flowchart 08 – Accounting entry for trade discount

9 Flowchart 09 – Accounting entry for sales returns

10 Flowchart 10 – Accounting entry for sales allowances

11 Flowchart 11 – Accounting entry for tax payables

12 Flowchart 12 – Accounting entry for selling expenses

13 Flowchart 13 – Accounting entry for administration expenses

14 Flowchart 14 – Accounting entry for financial expenses

15 Flowchart 15 – Accounting entry for financial incomes

16 Flowchart 16 – Accounting entry for other expenses

17 Flowchart 17 – Accounting entry for other incomes

18 Flowchart 18 – Accounting entry for business result

Samples

1.Sample 01- General journal of COGs (Acc 632)

2 Sample 02- General ledger of COGs (Acc 632)

3 Sample 03- Delivery order

4 Sample 04- VAT invoices

5 Sample 05- General journal of Revenue (Acc 511)

6 Sample 06- General ledger of Revenue (Acc 511)

7 Sample 07- Telecommunication service invoice (VAT)

8 Sample 08- General journal of Selling expenses (Acc 641)

9 Sample 09- General ledger of selling expenses (acc 641)

10 Sample 10- Nguyet Anh restaurant invoice

11 Sample 11- General journal of Administration expenses (Acc 642)

12 Sample 12- General ledger of Administration expenses (Acc 642)

13 Sample 13- General ledger of Net income (Acc 911)

14 Sample 14- Income Statement

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 I: LITERATURE OVERVIEW……….3

1.1 Overview ………3

1.1.1 Characteristics of goods ……… 3

1.1.2 Managerial requirements……….4

1.1.3 Functions of accounting for sales and business results………4

1.1.4 Methods of sales……… 5

1.2 Accounting entries for sales and business results……… 7

1.2.1 Accounting for Cost of Goods Sold (COGS)………7

1.2.2 Accounting for Sales and Sales Deductions……….7

1.2.3 Accounting for Selling and Administration expenses……….19

1.2.4 Accounting for Financial Expenses and Incomes ………24

1.2.5 Accounting for Other Expenses and Incomes and Corporate Income Tax Expense……….29

1.2.6 Accounting for business results………33

1.3 Preparing financial statements ………35

1.4 Systems of Accounting forms ……… 35

1.5 Computerized accounting for sales and business results ……… 37

CHAPTER II: CURRENT SITUATION OF ACCOUNTING FOR SALES AND EVALUATION OF BUSINESS RESULTSS IN TOYOTA MOTOR VIETNAM, LTD………39

2.1 Overview about TOYOTA motor Vietnam, Ltd ………39

2.1.1 History ……… 39

2.1.2 Business field and products ……… 40

2.1.3 Organizational structure………41

2.1.4 Characteristics of accounting department ……….42

2.2 Current situation of accounting for sales and business results in TOYOTA motor Vietnam, Ltd……….45

2.2.1 List of main products……… 46

2.2.2 Main selling method at TOYOTA motor Vietnam, Ltd ……….47

2.2.3 Current situation of accounting for sales and business results………48

2.2.3.1 Accounting for Cost of Goods Sold (COGS) ……… ….48

2.2.3.2 Accounting for Sales and Sales Deductions ……….52

2.2.3.3 Accounting for Selling and Administration Expenses……… 57

2.2.3.4 Accounting for Business results……….61

2.2.3.5 Income Statement ……… ……63

2.3 General conclusion about accounting performance for sales and business results in TOYOTA motor Vietnam, Ltd ………64

CHAPTER III: SOME SUGGESTION FOR IMPROVING THE ACCOUNTING SYSTEM FOR SALES AND BUSINESS RESULTS IN TOYOTA MOTOR VIETNAM, LTD………65

3.1 Evaluation of accounting for sales and business results in TOYOTA motor Vietnam, Ltd………65

3.1.1 Strong points ……… 65

3.1.2 Weaknesses ………66

3.2 Importance and requirements for improving the accounting system for sales and business results ……… 68

3.2.1 Importance ……… 68

3.2.2 Requirements ……… 68

3.2.3 Orientation………69

3.3 Some suggestions for improving the accounting system for sales and business results in TOYOTA motor Vietnam, Ltd……….70 PART III: CONCLUSION……….75

References

Appendixes

PART I: INTRODUCTION

1 Rationale

In this modern economic world with many newly established enterprises which follows a more competitive economic environment, every company must be flexible and active in their businesses, make as many profits as possible; else they will fall into bankruptcy In order to gain profits, they must realize the importance of sales and distribution phase because of its creating incomes to offset incurred expenses, then determining the

profitability of the company Besides, the very first objective of every enterprise is

making a profit, so calculating business results 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 results plays an important role in the accounting system TOYOTA motor Vietnam, Ltd is a manufacturer of

vehicles and automobile parts This field is not 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, TOYOTA motor Vietnam, Ltd must have a flexible and effective sales

campaign with a well-performed accounting system for sales and business results

Because of the importance of accounting for sales and business results, I chose

“Accounting for sales and evaluation business results in TOYOTA motor Vietnam, Ltd”

as my graduation thesis topic

2 Aims of the study

My study has three objectives:

Firstly, it is to contribute to the background theory of accounting for sales and business results, which is done by pointing out definitions, accounts used and accounting entries for each account related to determining business results in a manufacturing company.Secondly, it is to illustrate how a company does accounting for sales and business results

by taking the scenario at TOYOTA motor Vietnam, Ltd as a case for study

Thirdly, it is to review the company’s achievements and limitations and to suggest

possible solutions to improve the accounting performance for sales and business results inthe future

3 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

4 Scope of the study

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

- Space: TOYOTA motor Vietnam, Ltd

5 Methodology

- The company uses the periodic accounting system, and the inventory costing method applied is weighted average

- The company is applying the deduction VAT method for VAT declaration and

calculation Depreciation uses the straight line method

6 Organization of the study

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

CHAPTER I: Literature overview

CHAPTER II: Current situation of accounting for sales and business results in TOYOTA motor Vietnam, Ltd

CHAPTER III: Some suggestions for improving the accounting system for sales and business results in TOYOTA motor Vietnam, Ltd

PART II: MAIN CONTENT

CHAPTER I: LITERATURE OVERVIEW 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 finished goods

semi-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 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 moneyand 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;

- 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

- Whole sales: is the method of delivery of goods to manufacturing 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 Characteristics 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 related vouchers and invoices After that, when the buyer pays or agrees to pay (with valid documents and

signatures), the 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 directly 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 value of goods is 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

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

1.2.1.3 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 accountdetermines 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)

Flowchart 01 – Accounting entry for COGS under perpetual inventory method (for sales through agents)

Acc 156 Acc 157 Acc 156

(1) Sales of finished goods from warehouse

(2) Sales of goods directly to agents not through warehouse

(3) Goods on consignment are returned back

(4) Cost of goods sold transferred to Acc 632 at the end of the period

 For periodic inventory method (see Flowchart 02)

Flowchart 02 – Accounting entry for COGS under periodic inventory method (for sales through agents)

Acc 157 Acc 632

(1)

(2)Flowchart 02 explanations:

(1) The beginning balance of goods on consignment transferred to Acc 632 at the beginning of the period

(2) The value of goods on consignment in the period but have not been sold ye

For direct sales

 Account used

 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)

Flowchart 03 – Accounting entry for COGS under perpetual inventory method (for direct sales)

Acc 156 (2) Acc 632

(1)

Acc 911 (3)

Flowchart 03 explanations:

(1) The amount of goods for direct sales from warehouse

(2) The value of goods on consignment in the period which are returned back to the warehouse

(3) Cost of goods sold transferred to Acc 911 at the end of the period

 For periodic inventory method (see Flowchart 04)

Flowchart 04 – Accounting entry for COGS under periodic inventory method (for direct sales)

(1) The ending balance of finished goods in stock transferred to Acc 611

(2) The value of goods issued to sell in the period

(3) Transfer the value of goods in transit and goods on consignment

(4) At the end of the period, value of goods sold transferred to Acc 632

(5) Transfer cost of goods sold to Acc 911

(6) The value of goods return

1.2.2 Accounting for Sales and Sales Deductions

1.2.2.1 Accounting for Sales

a 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 are determined by sales revenue after deducting sales deductions including trade discounts, sale allowances, and sales returns

b 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 of the goods;

 The entity retains neither continuing managerial involvement to the degree usuallyassociated with ownership nor effective control over the goods sold;

 The amount of revenue can be measured reliably;

 It is probable that the economic benefits associated with the transaction will flow

- 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)

Flowchart 05 – Accounting entry for direct sales (for company applying

deduction/subtraction VAT method)

Acc 511 Acc 111, 112, 131,…

(1) Acc 3331

Flowchart 06 – Accounting entry for direct sales (for company applying direct VAT method)

Acc 3331 Acc 511 Acc 111, 112, 131

(2) (1)

Flowchart 06 explanations:

(1) Sales of goods (with VAT)

(2) VAT payable

For sales through agents (see Flowchart 07)

Flowchart 07 – Accounting entry for sales through agents

Acc 511 Acc 111, 112, 131 Acc 331 Acc 641

Acc 3331

Flowchart 07 explanations:

(1) Sales of goods (with VAT)

(2) Sales commissions payable to agents (as selling expenses)

1.2.2.2 Accounting for Sales Deductions

a 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

 Others: 111, 112, 131, 3331…

- Accounting entry (see Flowchart 08)

Flowchart 08 – Accounting entry for trade discounts

Acc 111, 112, 131 Acc 521 Acc 511

Acc 3331

(2)

Flowchart 08 explanations:

(1) Value of trade discounts (without VAT)

(2) VAT payable of trade discounts

(3) At the end of the period, transfer the ending temporary balance of trade discounts to Acc 511

- 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 Others: 111, 112, 131….

- Accounting entry (see Flowchart 09)

Flowchart 09 – Accounting entry for sales returns

Acc 111, 112, 131 Acc 531 Acc 511

(1) Value of sales return (without VAT)

(2) VAT payable of sales return

(3) Put the volume of goods returned into warehouse

(4) Incurred selling expense of goods returned

(5) At the end of the period, transfer the ending temporary balance of sales return to Acc 511

c Sales allowances

- Definition: Sales allowance is a reduction made when the goods are not the same

specifications as those mentioned in the economic contract

- 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 deductionswritten in VAT invoices are not considered as a sales allowance

- Accounting entry (see Flowchart 10)

Flowchart 10 – Accounting entry for sales allowances

Acc 111, 112, 131 Acc 532 Acc 511

(1) (3)

Acc 3331 (2)

Flowchart 10 explanations:

(1) Value of sales allowances (without VAT)

(2) VAT payable of sales allowances

(3) At the end of the period, transfer the ending temporary balance of sales allowances to Acc 511

c 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

- Accounts used

 3331 – VAT payable

 3332 – Excise duty payable

 3333 – Custom duties payable

- Accounting entry (see Flowchart 11)

Flowchart 11 – Accounting entry for tax payables

Acc 111, 112, 131 Acc 3331, 3332, 3333 Acc 511

(1) (2)

Flowchart 11 explanations:

(1) Value of tax payables paid to state budget

(2) At the end of the period, transfer the ending temporary balance of tax payables to Acc

511 to determine net sales

1.2.3 Accounting for Selling and Administration Expenses

1.2.3.1 Accounting for Selling Expenses

a Definition:

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

b 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 expense

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 theperiod, selling expenses will be transferred, allocated to determine the business result Allocation criteria may be cost of goods sold or sales revenue

Flowchart 12 – Accounting entry for selling expenses

Acc 334, 338,… Acc 641 Acc 911

Flowchart 12 explanations:

(1) Selling staff’s salary, wages and related social insurance, health insurance, trade union fees…

(2) Expenses and allocation expenses of supplies and tools

(3) Deprecation of fixed assets used for selling and distribution purposes

(4) Provisions for warranty expenses or warranty expenses incurred without previous provision

(5) Services and other expenses in cash

(6) Reducing selling expenses (Reserve provision…)

(7) Selling expenses allocated and transferred to determine operation result

1.2.3.2 Accounting for Administration Expenses

a Definition

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

b Content of administration expenses

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

Flowchart 13 – Accounting entry for administration expenses

Acc 334, 338,… Acc 642 Acc 911

Flowchart 13 explanations:

(1) Office staff’s salary, wages and related social insurance, health insurance, trade union fees…

(2) Expenses and allocation expenses of supplies and tools

(3) Deprecation of fixed assets used for general administration purposes

(4) Business tax, land rentals and other fees

(5) Provisions for doubtful debts and other provision payables for business restructuring, loss from risky contracts

(6) Services rendered and cash expenses

(7) Provision reserved

(8) Reducing administration expenses

(9) Administration expenses allocated and transferred to determine operation result

1.2.4 Accounting for Financial Expense and Income

1.2.4.1 Accounting for Financial Expense

a Definition

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

b 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

c Accounts used

- 635 – Financial expenses This account has no balance.

- Others: 111, 131, 334, 129…

d Accounting entry (see Flowchart 14)

Flowchart 14 – Accounting entry for financial expenses

Acc 413 Acc 635 Acc 911

Flowchart 14 explanations:

(1) Recording losses of foreign exchanges difference incurred due to revaluation of monetary items based on foreign currencies at the end of the year

(2) Recording loses due to selling and disposing financial investments

(3) Recording payment discounts paid

(4) Provision for short and long term investments

(5) Interest paid, allocation of prepaid interests

(6) Losses of foreign exchange incurred due to transactions arising during the period.(7) Financial investments provision reserved

(8) Administration expenses allocated and transferred to determine operation result

1.2.4.2 Accounting for Financial Income

a Definition

Financial incomes are all incomes gained in relation to financial activities of the

company, such as borrowings…

b 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

Flowchart 15 – Accounting entry for financial incomes

Acc 911 Acc 515 Acc 111, 112,…

Acc 413

(6)

Flowchart 15 explanations:

(1) Gain from selling and disposing financial investments

(2) Dividend and profit gained in form of new investments

(3) Payment discount gained

(4) Gains from foreign exchange difference incurred during the accounting period

(5) Allocating and recognizing pre – received financial income

(6) Gains of foreign exchange difference incurred from revaluating monetary items based

on foreign currencies at the end of the fiscal year

(7) Transferring financial income to determine operation result

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

1.2.5.1 Accounting for Other Expenses

a 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;

Flowchart 16 – Accounting entry for other expenses

Flowchart 16 explanations:

(1) Other expenses in cash arising

(2) Net book value of disposed fixed assets

(3) Other expenses due to disposing and selling fixed assets

(4) Penalty due to breaking business contracts of tax penalty

(5) Difference of revaluation price lower than net book value of the fixed assets brought

to invest in joint ventures or associates

(6) Other expenses reduced

(7) Transferring other expenses to determine operation result

1.2.5.2 Accounting for Other Incomes

a Content of other incomes

- 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;

Flowchart 17 – Accounting entry for other incomes

Acc 911 Acc 711 Acc 111, 112,…

(7) (1)

Acc 3331

Acc 111, 112,…(2)

Acc 111, 152(3)

Acc 331, 338(4)

Acc(5)

Acc 352(6)

Flowchart 17 explanations:

(1) Proceeds from disposal or sale of fixed assets

(2) Penalty gained from partners who break business contracts

(3) Account receivable which previously – deleted is recovered in the period

(4) Account payables to un-known creditors

(5) Allocation of pre - received income

(6) Construction warranty provision reversed

(7) Transferring other income to determine operation result

1.2.5.3 Accounting for Corporate Income Tax Expense

a 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 taxexpense 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 yearthe accountants should record the increase or decrease of the income tax payable of the previous year in current income tax of the current year

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

b Accounts used

- 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 financialregime