MINISTRY OF FINANCE

--------

 

 

No. 200/2014/TT-BTC

SOCIALIST REPUBLIC OF VIETNAM

Independence - Freedom – Happiness

---------------

 

Hanoi, December 22, 2014

 

CIRCULAR

ON GUIDELINES FOR ACCOUNTING POLICIES FOR ENTERPRISES

 

Pursuant to the Law on Accounting dated June 17, 2003; 

Pursuant to the Decree No. 129/2004/NĐ-CP dated May 31, 2004 of the Government on guidelines for the Law on Accounting in the business operation.;

Pursuant to the Government's Decree No. 215/2013/NĐ-CP dated December 23, 2013 defining the functions, tasks, entitlements and organizational structure of the Ministry of Finance; 

At the request of Director of the Department of Audit and Accounting Regulation, 

The Minister of Finance issues a Circular on guidelines for accounting policies for enterprises.

 

Chapter I

GENERAL PROVISIONS 

Article 1. Regulated entities 

This Circular promulgates accounting policies applying to enterprises in every business lines and every economic sector.  Small and medium-sized enterprises applying the accounting policies for small and medium-sized enterprises may apply regulations in this Circular for accounting.

Article 2. Scope

This Circular promulgates bookkeeping, preparation and presentation of financial statements, not applying to determination of tax liabilities of enterprises to government budget. 

Article 3. Monetary unit in accounting

“Monetary unit in accounting” means Vietnamese dong (national sign: “đ”; international sign: “VND”) used for bookkeeping, preparation and presentation of financial statements of enterprises. If an accounting unit that mainly receives revenues and pays expenses in foreign currencies, provided that it conforms to standards prescribed in Article 4 of this Circular may choose a type of foreign currencies as a monetary unit for bookkeeping.

Article 4. Selection of monetary unit in accounting

1. Any enterprise that mainly receive revenues and pays expenses in foreign currencies shall base on regulations of the Law on accounting for consideration of selection of monetary unit in accounting and take legal responsibility. When selecting the monetary unit in accounting, the enterprise must notify supervisory tax authority.

2. The monetary unit in accounting means a monetary unit meeting requirements below:

a) It is mainly used in sales, provisions of services of the enterprise, which have great impact on selling prices and service fees and it is normally used as posting prices and used for payments; and 

b) It is mainly used in purchases of goods or services, which have great impact on labor costs, materials costs and other production costs or operating costs and it is normally used for payments of that costs.

3. The following factors may also be considered as evidence of monetary unit in accounting of the enterprise:

a) The monetary unit used in mobilization of financial resources (such as issuance of shares or bonds);

b) The monetary unit which is regularly collected from business operation and accumulated.

4. The monetary unit in accounting reflects transactions, events, condition pertaining to the operation of the enterprise. After choosing the certain monetary unit in accounting, the enterprise shall not change it unless there are major changes in the transactions, events or condition.

Article 5. Conversion of financial statements made in foreign currency into Vietnamese dong 

1. If an enterprise uses a foreign currency as monetary unit in accounting, it must not only prepare a financial statement in foreign currency but also converse their financial statement into Vietnamese dong when announcing and submitting the financial statement to regulatory authorities.

2. Rules for conversion of financial statements made in foreign currency into Vietnamese dong, comparison information between them shall be reported in accordance with Chapter III of this Circular.

3. When converting the financial statement made in foreign currency into Vietnamese dong, the enterprise must clarify the impact (if any) on the financial statement due to the conversion in the Description of financial statement.

Article 6. Audit of financial statements using foreign currency as monetary unit in accounting  

The lawful financial statement used to announce and submit to Vietnamese competent agencies is a financial statement made in Vietnamese dong and audited.

Article 7. Changes in monetary unit in accounting

If there are major changes in managerial and business operations leading to the monetary unit in accounting used in economic transactions failing to satisfy the requirements specified in Clause 2 and 3 of Article 4 of this Circular, enterprises may change their monetary units in accounting. The change of a monetary unit for bookkeeping to another may be effected only at the beginning of a new fiscal year.  The enterprise must notify supervisory tax authority of the change in monetary unit in accounting within 10 working days after the final day of the fiscal year.

Article 8. Rights and obligations of enterprises pertaining to organization of accounting in dependent accounting units having no legal status (hereinafter referred to as dependent accounting unit)

1. Enterprises must organize their accounting structures and accounting task delegation of dependent accounting unit in conformity with their operation and management requirements and not contrary to regulations of law.

2. The following accounts shall be kept records by dependent accounting units having accounting divisions according to the decision issued by the enterprise: 

a) Operating capital granted by the enterprise: the operating capital shall be recorded to liabilities or owner's equity according to the decision of the enterprise;

b) Transactions in sale, purchase or circulation of goods or services intra-company: revenues or costs of goods sold only are separately recorded in every dependent accounting unit if such circulation creates added value in the goods or services. The recording of revenues from internal transactions to the financial statement does not depend on the format of accounting records (invoices or internal transaction documents);

c) Task delegation: Depending on centralized or decentralized accounting model, the dependent accounting units may record undistributed post-tax profit or record revenues and expenses.

Article 9. Registration for amendments to Accounting policies

1. Chart of accounts

a) According to chart of accounts of accounting policies for enterprises issued together with this Circular, the enterprise shall apply and detail chart of accounts in conformity with requirements pertaining business and management of every business line and unit, provided that it conforms to content, structure and method of accounting of equivalent ledger accounts.

b) If the enterprise need to add accounts or sub-accounts or modify accounts or sub-accounts about names, signs, content and accounting methods, the approval issued by the Ministry of Finance before the supplement or modification is required.

c) The enterprise may open sub-accounts or sub-sub accounts if the Chart of accounts prescribed in Appendix 1 of this Circular does not regulate such accounts without the approval of the Ministry of Finance.

2. Financial statements

a) According to forms and contents of items of the financial statement prescribed in Appendix 2 of this Circular, the enterprise shall detail the items (available) of the financial statement system in conformity with operation and management of every business line and unit.

b) If the enterprise need to add or modify names, signs, content of items of the financial statement, the approval issued by the Ministry of Finance before the supplement or modification is required.

3. Accounting documents and accounting records

a) All accounting documents are optional, enterprise may use forms issued together with Appendix No. 3 of this Circular or design their forms in conformity with their operation and management provided that their forms satisfy all requirements as prescribed in the Law on Accounting and their amended documents.

b) All forms of accounting records (including Ledgers or Journals) are optional. The enterprise may apply the forms as prescribed in Appendix No. 4 of this Circular or amendments to forms or accounting cards in conformity with their operation and management provided that they are sufficient, clear and easy to control. 

Article 10. Accounting policies applying to foreign contractors

1. Foreign contractors having permanent resident facilities in Vietnam which are not an independent unit having legal status shall carry out accounting policies in Vietnam as follows: 

a) There are particular contractors eligible for particular accounting policy issued by the Ministry of Finance;

b) Contractors not eligible for particular accounting policy issued by the Ministry of Finance may whether fully and partly apply Accounting policies for Vietnamese enterprises in conformity with their operation and management.

c) If the contractor applies Accounting policies for Vietnamese companies fully, it is required to apply during the fiscal year.

d) The contractor must notify the tax authority of the accounting policy applied within 90 days from the date on which it runs business in Vietnam. If there is any change in applying of accounting policy, the contractor must notify the tax authority within 15 working days from the date on which the change occurs.

2. Foreign contractor must keep records of every contract license, every transaction in details to settle contract and make tax declaration.

3. If a foreign contractor who applies fully Accounting policies for Vietnamese companies wishes to supplement or modify the policies, it is required to comply with Article 9 of this Circular and obtain approval issued by the Ministry of Finance. Within 15 working days from the date on which the sufficient documents are received, the Ministry of Finance must send response on registration of amendments of accounting policies to the foreign contractor.

Chapter II

CHART OF ACCOUNTS

Article 11. Rules for cash accounting 

1. The accountant must keep records of revenues, expenses, dispatching or receiving of cash funds or foreign currencies in the Journals and then calculate the fund balance and every account in the bank at all times for verification. 

2. Deposits made by other enterprises or individuals in the enterprise shall be managed and recorded similarly to money of the enterprise.

3. When obtaining revenues or paying for expenses, the receipt or payment slips with sufficient signatures are required as prescribed in regulations on accounting source documents.

4. The accountant must keep records of cash according to currency in details when generating transactions in foreign currencies, the foreign currencies shall be converted into VND following rules below:

- Debit accounts shall apply actual exchange rates;

- Credit accounts shall apply weight average bookkeeping rates;

5. When preparing financial statements as prescribed, the enterprise must re-evaluate balance of foreign currencies and monetary gold according to actual exchange rates.

Article 12. Account 111 – Cash on hand

1. Rules for accounting

a) This account is used to record revenues, expenses and balance of the enterprise’s fund, including: Vietnamese dong, foreign currencies and monetary gold. Only received, dispatched or inventoried cash, foreign currencies, monetary gold shall be recorded to account 111 “Cash”. If the receipts are transferred immediately to bank (not through enterprise ‘cash fund), these amounts shall not be recorded to Dr 111 “cash”, but recorded to Dr 113 “cash in transit”.

b) Cash deposits made by other enterprises and individuals shall be managed and recorded similarly to monetary assets of the enterprise. 

c) When receiving or dispatching cash fund, receipt slips, payment slips with signatures of payees and payers, competent persons are required in accordance with accounting source document.  Deposit order and payment order must be attached in special cases.

d) The accountant of cash fund must write a Cash daybook and record all day-to-day financial transactions: revenues, expenses, dispatch or receiving of cash funds, foreign currencies and then calculate the fund balance at all times.

dd) The cashier shall be responsible for management, receiving and dispatch of the cash fund. The cashier must verify the actual cash balance, then collate the figures between cash fund book and cash ledger every day. If there is any difference, the accountant and the cashier must verify them again in order to uncover reasons and propose solutions for the differences.

e) When entering into transactions in foreign currencies, the accountant shall convert the foreign currencies into VND according to the following rules:

-  Actual exchange rate shall be applied to Dr 1112. If the foreign currencies are withdrawn from banks to pay in the cash fund, the bookkeeping rate of account 1122 shall be applied;

-  Weighted average rate shall be applied to Cr 1112 

The actual exchange rate shall be determined as prescribed in guidelines for account 413 - Differences between exchange rates and relevant accounts.

g) Monetary gold recorded in this account is gold used for value storage, not including the gold recorded to inventory account and used as raw materials for production of goods for sale. The management and use of monetary gold shall comply with regulations of law in force.

h) Whenever preparing financial statements as prescribed, the enterprise must re-evaluate the balance of foreign currencies and monetary gold following the rules below:

-  The actual exchange rate applied in the re-evaluation of the balance of foreign currencies in cash is the foreign currency-selling rate of the commercial bank where the enterprise regularly enters into transactions (chosen by the enterprise) at the time in which the financial statement is prepared.

- The monetary gold shall be re-evaluated according to the buying prices on the domestic market at the time in which the financial statement is prepared. The buying prices on the domestic market are prices announced by the State bank. In case the State bank fails to announce gold buying-prices, the buying-prices announced by enterprise entitled to trade in gold as prescribed shall be chosen. 

2. STRUCTURE AND CONTENTS OF ACCOUNT 111 – CASH

Debit:

- Received cash, foreign currency or monetary gold;

- Cash, foreign currency or monetary gold in excess detected under verification;

- Exchange differences due to re-evaluation of foreign currency balance at the reporting time (if foreign currency rate rises against VND);

- Differences due to re-evaluation of monetary gold at the reporting time.

Credit:

- Dispatched cash, foreign currency or monetary gold;

- Cash, foreign currency or monetary gold in deficit detected under verification;

- Exchange rate differences due to re-evaluation of foreign currency balance at the reporting time (if foreign currency rate falls against VND);

- Differences due to re-evaluation of monetary gold at the reporting time.

Debit balance:

Inventoried cash, foreign currency or monetary gold at the reporting time;

Account 111 – Cash, comprises 3 sub-accounts:

- Account 1111 – VND: reflecting revenues, expenses, balance in VND of the cash fund.

- Account 1112 – Foreign currencies: reflecting revenues, expenses, exchange rate differences and foreign currency balance of cash fund which is converted into VND.

- Account 1113 – Monetary gold reflecting the fluctuation and value of monetary gold of the enterprise’s fund.

3. Method of accounting for several major transactions

3.1. When selling products, goods or providing services for immediate cash, the following accounts shall be recorded:

a) With regard to products, goods, investment property subject to VAT, special excise duty, import duty, environmental protection tax, revenues according to the tax-exclusive selling prices shall be recorded as follows (indirect taxes payable must be separated, including VAT payable using subtraction method: 

Dr 111 – Cash (total payment)

Cr 511 – Revenues (tax-exclusive prices)

Cr 333 – Taxes and other payables to the State.

b) In case it fails to separate the taxes payable, the taxes payable must be included in the revenues.  Tax liabilities and the decrease in revenues shall be recorded as follows:

Dr 511 – Revenues 

Cr 333 – Taxes and other payables to the State.

3.2 When receiving payments of allowance or subsidy in cash from government budget, the following accounts shall be recorded:

Dr 111 - Cash

Cr 333 – Taxes and other payables to the State (3339).

3.3. When generating financial income or other incomes in cash, the following accounts shall be recorded:

Dr 111 – Cash (total payment)

Cr 515 – Financial income (prices excluding VAT)

Cr 711 – Other incomes (prices excluding VAT)

Cr 3331 – VAT payable (33311).

3.4. When withdrawing cash in bank to pay in cash fund; applying for long-term or short-term loans in cash (VND or foreign currency according to actual exchange rates), the following accounts shall be recorded:

Dr 111 – Cash (1111, 1112)

Cr 112 – Cash in bank (1121, 1122)

Cr 341 - Financial loan and financial lease liabilities (3411).

3.5. When recovering amounts receivables, granting loans, making deposits in cash; receiving deposits in cash from other enterprises, the following accounts shall be recorded:

Dr 111 – Cash (1111, 1112)

Cr 128, 131, 136, 138, 141, 244, 344.

3.6. When selling short-term or long-term investment and collect cash, the accountant shall record the difference between collected amount of money and cost price of investment (according to weighted average method) to financial income or financial expenses, the following accounts shall be recorded:

Dr 111 – Cash (1111, 1112)

Dr 635 - Financial expenses

Cr 121 – Trading securities (cost price)

Cr 221, 222, 228 (cost price)

Cr 515 – Financial income.

3.7. When receiving stakes in cash of owners, the following accounts shall be recorded:

Dr 111 - Cash

Cr 411 – Owner's invested equity.

3.8. When receiving money of contracting parties of Business Cooperation Contract (BCC) without establishment of legal entity to cover general operation, the following accounts shall be recorded:

Dr 111 - Cash

Cr 338 - Other payables.

3.9. When dispatching cash fund then crediting to bank’s accounts or depositing, the following accounts shall be recorded:

Dr 112 – Cash in bank

Dr 244 – Pledge, mortgage or deposit 

Cr 111 – Cash.

3.10. When dispatching cash fund to buy securities, granting loans or investing in subsidiary companies or joint-venture companies, the following accounts shall be recorded:

Dr 121, 128, 221, 222, 228

Cr 111 – Cash.

3.11. When dispatching cash fund to buy inventory (using regularly declared method), buying fixed assets, spending on capital investment, the following accounts shall be recorded:

- If input VAT is eligible for deduction, the buying price excluding VAT shall be recorded as follows:

Dr 151, 152, 153, 156, 157, 211, 213, 241

Dr 133 – Deductible VAT (1331)

Cr 111 – Cash. 

- If input VAT is not eligible for deduction, the buying price including VAT shall be recorded as follow:

3.12. When dispatching cash fund to buy inventory (using periodically declared method), if input VAT is eligible for deduction, the following accounts shall be recorded:

Dr 611 – Good purchase (6111, 6112)

Dr 133 – Deductible VAT (1331)

Cr 111 – Cash.

If input VAT is not eligible for deduction, the buying price including VAT shall be recorded as follows: 

3.13. When buying raw materials immediately used in business in cash, if input VAT is eligible for deduction, the following accounts shall be recorded:

Dr 621, 623, 627, 641, 642, etc.

Dr 133 – Deductible VAT (1331)

Cr 111 – Cash.

If input VAT is not eligible for deduction, the costs including VAT shall be recorded.

3.14. When dispatching cash fund to pay amounts payable, the following accounts shall be recorded:

Dr 331, 333, 334, 335, 336, 338, 341

Cr 111 – Cash.

3.15. When dispatching cash fund for financial activities or other activities, the following accounts shall be recorded:

Dr 635, 811, etc.

Dr 133 – Deductible VAT (if any) 

Cr 111 – Cash.

3.16. If the cash deficit is detected under verification without reasons, the following accounts shall be recorded:

Dr 138 – Other receivables (1381)

Cr 111 – Cash.

3.17. If the cash excess is detected under verification without reasons, the following accounts shall be recorded:

Dr 111 - Cash

Cr 338 - Other payables (3381).

3.18. Accounting contract of resale of Government bonds: in accordance with Account 171 – Trading in Government bonds.

3.19. Foreign currency related-transactions in cash.

a) When buying goods or services in foreign currencies in cash.

- If losses on exchange rates are generated, the following accounts shall be recorded:

Dr 151,152,153,156,157,211,213,241, 623, 627, 641, 642, 133, etc. (according to actual exchange rates on the transaction date)

Dr 635 - Financial expenses (losses on exchange rates)

Cr 111 (1112) (according to bookkeeping rates).

- If profits on exchange rates are generated, the following accounts shall be recorded: 0}

Dr 151,152,153,156,157,211,213,241, 623, 627, 641, 642, 133, etc. (according to actual exchange rates on the transaction date)

Cr 111 (1112) (according to bookkeeping rates).

Cr 515 – Financial income (profits on exchange rates).

b) When paying debts payable in foreign currencies:

- If losses on exchange rates are generated, the following accounts shall be recorded:

Dr 331, 335, 336, 338, 341, etc. (according to bookkeeping rates).

Dr 635 - Financial expenses (loss of exchange rate)

Cr 111 (1112) (according to bookkeeping rates).

- If profits on exchange rates are generated, the following accounts shall be recorded:

Dr 331, 336, 341, etc. (according to bookkeeping rates).

Cr 515 – Financial income (profits on exchange rates).

Cr 111 (1112) (according to bookkeeping rates).

- When paying advances in foreign currencies to sellers, the Debit account – Trade payables shall apply actual exchange rates at the prepayment time, the following accounts shall be recorded:

Dr 331 – Trade payables (actual exchange rates)

Dr 635 - Financial expenses (losses on exchange rates)

Cr 111 (1112) (according to bookkeeping rates).

Cr 515 – Financial income (profits on exchange rates).

c) When generating revenues or other incomes in foreign currencies in cash, the following accounts shall be recorded:

Dr 111 (1112) (actual exchange rates)

Cr 511, 515, 711, etc. (actual exchange rates).

d) When collecting debts receivables in foreign currencies:

- If losses on exchange rates are generated, the following accounts shall be recorded: 

Dr 111 (1112) (according to actual exchange rates on the transaction dates)

Dr 635 - Financial expenses (losses on exchange rates)

Cr 131, 136, 138, etc. (according to bookkeeping rates).

- If profits on exchange rates are generated, the following accounts shall be recorded:

Dr 111 (1112) (according to actual exchange rates on the transaction dates)

Cr 515 – Financial income (profits on exchange rates).

Cr 131, 136, 138, etc. (according to bookkeeping rates).

- When paying advances in foreign currency to sellers, the Credit account – Trade receivables shall apply actual exchange rates at the pre-receipt time, the following accounts shall be recorded:

Dr 111 (1112) (actual exchange rates at the pre-receipt time)

Cr 111 (1112) (actual exchange rates at the pre-receipt time)

3.20. The actual exchange rates (selling rates of banks) shall be used to re-evaluate foreign currencies in cash at the time in which the financial statements are prepared:

- If the foreign currency rate rises against VND, the profits on exchange rate shall be recorded as follows:

Dr 111 (1112)

Cr 413 - Exchange differences (4131).

- If the foreign currency rate falls against VND, the losses on exchange rates shall be recorded as follows:

Dr 413 - Exchange differences (4131)

Cr 111 (1112).

- After balancing profits or losses on exchange rates generating due to re-verification, the differences in profits or losses shall be transferred to financial income (if profits are larger than losses) or to financial expenses (if profits are smaller than losses).

3.21. Re-evaluation of monetary gold

- If re-evaluated value of monetary gold generates profits, financial income shall be recorded as follows:

Dr 1113 – Monetary gold (according to domestic buying prices) 

Cr 515 – Financial income.

- If re-evaluated value of monetary gold generates losses, financial income shall be recorded as follows:

Dr 635 - Financial expenses

Cr 1113 – Monetary gold (according to domestic buying prices) 

Article 13. Account 112 – Cash in bank

1. Rules for accounting

This account shall be used to record current amounts and increases and decreases in demand deposits of the enterprise in a bank. Credit notes, debit notes or bank statements enclosed with original documents (payment order, collection order, depository transfer check, certified check, etc) shall be recorded to Account 112 "Cash in bank".

a) When receiving documents sent from the bank, the accountant must collate them with enclosed original documents. If there is any difference between figures in enterprise's ledger, in original documents and in the bank’s documents, the enterprise must notify the bank to collate, verify and promptly handle. At the end of the month, if it fails to uncover the reasons for differences, the accountant shall record according to the bank's figures stated in debit notes, credit notes or bank's statements. The difference (if any) shall be recorded to Dr 138 “Other receivables” (1388) (if the accountant’s figures are larger than the bank’s figures) or recorded to Cr 338 “Other payables” (3388) (if the accountant's figures are smaller than the bank’s figures). In the following month, the reasons shall be kept collating, verifying and uncovering to adjust the figures.

b) With regard to enterprises having dependent accounting organizations or departments, they may open collection-only accounts, payment-only accounts or appropriate payment accounts serving the transactions or payments. The accountant must keep records of every type of deposits in details (VND, foreign currencies).

c) It is required to record particularly the deposits conformable to every account in bank for verification and collation.

d) The bank overdrafts are not recorded as “-“(negative sign) on bank deposit accounts, they shall be recorded similarly to bank loans. 

dd) When entering into transactions in foreign currencies, foreign currencies shall be converted into VND according to the following rules:

- Dr 1122 applies actual exchange rate. If the cash fund is withdrawn to send to banks, they must be converted into VND according to bookkeeping rates of account 1112.

- Cr 1122 applies weighted average rates.

The actual exchange rate shall be determined as prescribed in guidelines for account 413 - Differentials between exchange rates and relevant accounts.

e) Monetary gold recorded in this account is the gold used for value storage, not including the gold recorded to inventory account used as raw materials for production of goods for sale. The management and use of monetary gold shall comply with regulations of law in force.

g) Whenever preparing financial statements as prescribed, the enterprise must re-evaluate the balance of foreign currency and monetary gold following the rules below:

- The actual exchange rates applied when re-evaluating the balance of cash in bank in foreign currency is the foreign currency-buying rate of the commercial bank where the enterprise opens foreign currency account   at the time in which the financial statement is prepared. In case the enterprise has multiple foreign currency accounts in different banks and their buying rates are not considerately different, a buying rate of any bank may be chosen as the basis for re-valuation.

- The monetary gold shall be re-evaluated according to the buying prices on the domestic market at the time in which the financial statement is prepared. The prices on the domestic market are prices announced by the State bank. In case the State bank fails to announce gold buying-prices, the buying-prices announced by enterprise entitled to trade in gold as prescribed. 

2. Structure and contents of account 112 – Cash in bank

Debit:

- Deposited VND, foreign currencies or monetary gold;

- Exchange rate differences due to re-evaluation of foreign currency balance at the reporting time (if foreign currency rate rises against VND).

- Positive differences due to re-evaluation of monetary gold at the reporting time.

Credit:

- Withdrawn VND, foreign currencies or monetary gold;

- Exchange rate differences due to re-evaluation of foreign currency balance at the end of accounting period (if foreign currency rate falls against VND);

- Negative differences due to re-evaluation of monetary gold at the reporting time.

Debit balance:

Actual deposited VND, foreign currencies or monetary gold at the reporting time.

Account 112 – Cash in bank, comprises 3 sub-accounts:

- Account 1121 – VND: reflecting deposits, withdrawals and balance in the bank in VND. 

- Account 1122 – Foreign currency: reflecting deposits, withdrawals and balance in the bank in foreign currencies converting into VND.

- Account 1123 – Monetary gold: reflecting the fluctuation and value of monetary gold deposited in the bank of the enterprise at the reporting time.

3. Method of accounting for several major transactions

3.1. When selling products, goods or providing services for immediate cash using cash in bank, the following accounts shall be recorded as follow:

a) With regard to products, goods, investment property subject to indirect taxes (VAT, special excise duty, import duty, environmental protection tax), the revenues according to the tax-exclusive selling prices shall be recorded as follows (indirect taxes payable must be separated, including VAT payable using subtraction method):

Dr 112 – Cash in bank (total payment)

Cr 511 – Revenues (tax-exclusive prices)

Cr 333 – Taxes and other payables to the State.

b) In case it fails to separate the taxes payable, the accountant shall record the revenue including the taxes payable. 

Tax liabilities and the decrease in revenues shall be recorded as follows:

Dr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

3.2. When receiving payments of allowance or subsidy by cash in bank from government budget, the following accounts shall be recorded:

Dr 112 – Cash in bank 

Cr 333 – Taxes and other payables to the State (3339).

3.3. When generating financial income or other incomes in cash in bank, the following accounts shall be recorded: 

Dr 112 – Cash in bank (total payment)

Cr 515 – Financial income (prices excluding VAT)

Cr 711 – Other incomes (prices excluding VAT)

Cr 3331 – VAT payable (33311).

3.4. When dispatching cash fund to deposit in bank’s accounts, the following accounts shall be recorded:

Dr 112 – Cash in bank 

Cr 111 - Cash

3.5. When receiving an advance or any customer pays debts using wire transfer, according to the credit note of the bank, the following accounts shall be recorded: 

Dr 112 – Cash in bank 

Cr 131 – Customers receivable

Cr 113 – Cash in transit

3.6. When recovering amounts receivables, granting loans, making deposits by cash in bank; receiving deposits in cash from other enterprises, the following accounts shall be recorded:

Dr 112 – Cash in bank (1121, 1122)

Cr 128, 131, 136, 141, 244, 344.

3.7. When selling short-term or long-term investment by cash in bank, the difference between collected amount of money and cost price of investment (according to weighted average method) shall be recorded to financial income or financial expenses as follows: 

Dr 112 – Cash in bank (1121, 1122)

Dr 635 - Financial expenses

Cr 121 - Trading securities (cost price)

Cr 221, 222, 228 (cost price)

Cr 515 – Financial income.

3.8. When receiving stakes in cash of owners, the following accounts shall be recorded:

Dr 112 – Cash in bank 

Cr 411 – Owner's invested equity. 

3.9. When receiving money of contracting parties of Business Cooperation Contract (BCC) without establishment of legal entity to cover general operation, the following accounts shall be recorded:

Dr 112 – Cash in bank 

Cr 338 – Others payable.

3.10. When withdrawing cash in bank to pay in cash fund then crediting to bank’s accounts or depositing, the following accounts shall be recorded:

Cr 111 - Cash

Dr 244 - Pledge, mortgage, deposits.

Cr 112 – Cash in bank.

3.11. When buying securities, granting loans or investing in subsidiary companies or joint-venture companies by cash in bank, the following accounts shall be recorded:

Dr 121, 128, 221, 222, 228

Cr 112 – Cash in bank.

3.12. When buying inventory (using regularly declared method), buying fixed assets, spending on capital investment by cash in bank, the following accounts shall be recorded:

- If input VAT is eligible for deduction, the buying price excluding VAT shall be recorded as follows:

Dr 151, 152, 153, 156, 157, 211, 213, 241

Dr 133 – Deductible VAT (1331)

Cr 112 – Cash in bank.

- If input VAT is not eligible for deduction, the buying price including VAT shall be recorded as follow:

3.13. When buying inventory by cash in bank (using periodically declared method), if input VAT is eligible for deduction, the following accounts shall be recorded:

Dr 611 – Good purchases (6111, 6112)

Dr 133 – Deductible VAT (1331)

Cr 112 – Cash in bank.

If input VAT is not eligible for deduction, the buying price including VAT shall be recorded.

3.14. When buying raw materials immediately used in business by cash in bank, if input VAT is eligible for deduction, the following accounts shall be recorded:

Dr 621, 623, 627, 641, 642, etc.

Dr 133 – Deductible VAT (1331)

Cr 112 – Cash in bank.

If input VAT is not eligible for deduction, the cost including VAT shall be recorded.

3.15. When paying amounts payable, the following accounts shall be recorded:

Dr 331, 333, 334, 335, 336, 338, 341

Cr 112 – Cash in bank.

3.14. When paying financial expenses or other expenses, the following accounts shall be recorded:

Dr 635, 811, etc.

Dr 133 – Deductible VAT (if any) 

Cr 112 – Cash in bank.

3.17. When paying stakes or dividends or profits to contributing partners, paying welfare fund by cash in bank, the following accounts shall be recorded:

Dr 411 - Owner’s equity. 

Dr 421 - Unallocated post-tax profits 

Dr 353 - Welfare fund 

Cr 112 – Cash in bank.

3.18. When paying commercial discounts, sales rebates or sales returns accounts, the following accounts shall be recorded:

Dr 521 – Revenue deductions

Dr 3331- – VAT payable (33311).

Cr 112 – Cash in bank.

3.19. Accounting contract of resale of Government bonds: in accordance with Account 171 – Trading in Government bonds.

3.20. Foreign currency related-transactions: the accounting methods applying to foreign currency-related transactions by cash in bank shall be carried out similarly to those in cash (refer to account 111).

3.21. Accounting for re-evaluation of monetary gold

- If the re-evaluation price of monetary gold generates profits, the following accounts shall be recorded:

Dr 1123 – Monetary gold (according to domestic buying prices)

Cr 515 – Financial income.

- If the re-evaluation price of monetary gold generates losses, the following accounts shall be recorded:

Dr 635 - Financial expenses

Cr 1123 – Monetary gold (according to domestic buying prices).

Article 14. Account 113 – Cash in transit

1. Rules for accounting

This account shall be used to record amounts of money which an enterprise paid to the State bank, the State Treasury, or transferred by post to a bank, but no credit note or confirmation of payment to other enterprises has been received; or the enterprise made wire transfer from their bank account to other enterprises, but no debit note or bank statement has been received.

Cash in transit includes VND and foreign currencies which are transited in following cases:

- Collecting cash or checks then paying directly in a bank;

- Making postal remittance in order to pay other enterprises;

- Collecting revenues from good sales then transferring to Treasuries to pay taxes (payment collected from purchaser shall be transferred to State Treasury by the enterprise).

2. Structure and contents of account 113 – Cash in transit

Debit:

- Cash or checks in VND, or foreign currencies which are paid to a bank or transferred to a bank by post, but the credit note has not been received;

- Exchange rate differences due to re-evaluation of foreign currency balance at the reporting time.

Credit:

- The amounts of money transferred to account 112 – Cash in bank, or relevant accounts;

- Exchange rate differences due to re-evaluation of foreign currency balance at the reporting time.

Debit balance:

The amounts of money in transit at the reporting time.

Account 113 – Cash in transit, comprises 2 sub-accounts:

- Account 1131 – amounts in VND: recording amounts in VND in transit.

- Account 1132 – Foreign currencies: recording foreign currencies in transit.

3. Accounting methods for several major transactions:

a) When collecting money from good sales or customers' debts or other incomes in cash or check then transferring to the bank (not via the fund), but the credit note of bank has been received, the following accounts shall be recorded:

Dr 113 – Cash in transit (1131, 1132)

Cr 131 – Customers receivable (of customers' debts)

Cr 511 – Revenues

Cr 515 – Financial income.

Cr 711 – Other incomes

Cr 3331 – VAT payable (33311) (if any).

b) When dispatching cash fund to deposit in bank’s accounts but the credit note of bank has not been received, the following accounts shall be recorded:

Dr 113 – Cash in transit (1131, 1132)

Cr 111 – Cash (1111, 1112).

c) Completing wire transfer from bank’s accounts to pay creditors, but the debit note of the bank has not been received; the following accounts shall be recorded:

Dr 113 – Cash in transit (1131, 1132)

Cr 112 – Cash in bank (1121, 1122).

d) When a customer pays an advance of good purchase in check, the enterprise has paid check to a bank, but the credit note of bank has not been received, the following accounts shall be recorded:

Dr 113 – Cash in transit (1131, 1132)

Cr 131 – Customers receivable.

dd) When the cash in transit has been credited in the deposit account of the enterprise and the credit note is received; the following accounts shall be recorded:

Dr 112 – Cash in bank (1121, 1122)

Cr 113 – Cash in transit (1131, 1132).

e) When the cash in transit has been transferred to sellers or service provider and the debit not is received, the following accounts shall be recorded:

Dr 331 – Trade payables

Cr 113 – Cash in transit (1131, 1132).

g) The re-evaluation of foreign currency balance in transit shall be carried out similarly to foreign currency balance in cash (refer to account 111)

Article 15. Account 121 - Trading securities

1. Rules for accounting

a) This account is used to record the sales, purchases and payments of securities as prescribed which are held for business purposes (including over-12-month matured securities which are traded for profits). Trading securities include:

- Shares, bonds listed on securities market; 

- Securities and other financial instruments.

This account is not used to record the held to maturity investment, such as: loans under agreements, cash in bank, bonds, commercial papers, treasury bills, exchange bills,…held to maturity date.

b) Trading securities must be recorded in the ledger according to original prices: buying prices plus (+) buying costs (if any) (brokerage, transactions, information provision, taxes, bank's fees and charges. The basis price of trading securities shall be determined according to fair value of payments at the time in which the transaction takes place the trading securities shall be recorded when the investors acquire ownership, in particular:

- Listed securities are recorded at the time of matching (T+0);

- Unlisted securities are recorded at the time in which the ownership is acquired as prescribed in regulations of law.

c) At the end of the fiscal year, if the market prices of trading securities devalue against their original prices, the provisions for devaluation shall be made.

d) The enterprise must record incomes from investment in trading securities sufficiently and promptly. The dividends paid in the period before investment date shall be recorded as a decrease in value of investment. When the investor receives additional shares without paying money to joint-stock companies using share premium, the funds belong to owners’ equity and unallocated post-tax profits (dividends are allocated by shares) to issue additional shares, the investor only observes the quantity of additional shares according to the presentation of financial statement, not records the received share value, not records financial income and not records the investment value in joint-stock companies. 

With regard to enterprises whose charter capital is wholly held by the state, the accounting for dividends allocated by shares shall comply with regulations on wholly-state-owned enterprises.

dd) Before any share is exchanged, its value must be determined according to fair value on the exchanging date. The determination of fair value of shares shall comply with regulations below:

- Regarding shares of listed companies, fair value of their shares are closing prices listed on the securities market on the exchange date. In case the securities market closes transaction on the exchange date, the fair value of shares is closing prices of the session preceding the exchange date. 

- Regarding unlisted shares permitted to transact on the UPCOM, the fair value of shares are closing prices of UPCOM on the exchange date. In case the UPCOM closes transactions on the exchange date, the fair value of shares is closing prices of the session preceding the exchange date. 

- With regard to other unlisted shares, the fair value of shares is prices dealt by contracting parties or book value at the exchange date.

e) The accountant must keep records of every type of trading securities holding by the enterprise in details (according to every security; every entity, face value, actual buying price or every type of currency used for investment, etc).

g) When liquidating or transferring trading securities (according to every type of security), the cost price shall be determined according to mobile weighted average method (weighted average for every purchase).

2. Structure and contents of account 121 – Trading securities

Debit: Trading security buying-value.

Credit: trading security selling-value.

Debit balance: Trading security value at the reporting time.

Account 121 - Trading securities, comprises 3 sub-accounts:

- Account 1211 – Shares: recording the purchases or sales of shares for profits.

- Account 1212 – Bonds: recording the purchases, sales and payments of bonds for profits.

- Account 1218 – Securities and other financial instruments: recording the purchases or sales of securities and other financial instruments as prescribed for profits, such as fund certificates, stock options, warrants, call options, put options, futures contracts, commercial papers, etc. This account also records the purchases or sales of other valuable papers including commercial papers or bill of exchange for profits.

3. Accounting methods for several major transactions:

a) When buying trading securities, according to buying costs (buying prices plus (+) costs of brokerage, transaction, information, bank fees or charges, etc), the following accounts shall be recorded:

Dr 121 – Trading securities

Cr 111, 112, 331

Cr 141 - Advance

Cr 244 - Pledge, mortgage, deposits.

b) When collecting interests of bonds and other securities periodically:

- If the received interests are used for purchases of additional bonds or treasury bills, the following accounts shall be recorded:

Dr 121 – Trading securities

Cr 515 – Financial income.

- When receiving interests in cash, the following accounts shall be recorded:

Dr 111, 112, 138, etc.

Cr 515 – Financial income.

- When receive investment interests including the investment interests accrued before re-buy that investment, that interests must be allocated. Only the interests of periods in which the enterprise buys that investment shall be recorded to financial income; the interests accrued before the enterprise re-buys that investments shall be recorded to as a decrease in value of such investment as follows: 

Dr 111, 112, 138, etc (total collected interests)

Cr 121 – Trading securities (interests accrued before the enterprise re-buys the investment)

Cr 515 – Financial income (interests after the enterprise buys the investment).

c) Accounting for dividends or divided profits:

- If the dividends are received after the investment date, the following accounts shall be recorded:

Dr 111, 112, etc.

Dr 138 – Others receivable (deferred payments)

Cr 515 – Financial income.

- If the dividends are received before the investment date, the following accounts shall be recorded:

Dr 111, 112, 138, etc (total collected interests)

Cr 121 – Trading securities (interests accrued before the enterprise re-buys the investment)

- When receiving dividends or profits used for recording of increase in state capital, they shall not be recorded to financial income, but they shall be recorded to devaluation of financial investment, the following accounts shall be recorded:

Dr 112, 138

Cr 121 – Trading securities.

d) When transferring trading securities, according to securities sale prices:

- If the profits generate, the following accounts shall be recorded:

Dr 111, 112, 131, etc (total payment price)

Cr 121 - Trading securities (weight average cost price)

Cr 515 – Financial income. (Positive difference between the buying price and the cost price).

- If the losses generate, the following accounts shall be recorded:

Dr 111, 112, 131, (total payment prices)

Dr 635 – Financial income. (negative difference between the buying price and the cost price).

Cr 121 - Trading securities (weight average cost price)

- Expenditures on security sales, the following accounts shall be recorded:

Dr 635 - Financial expenses

Cr 111, 112, 331, etc.

dd) When withdrawing or paying matured trading securities, the following accounts shall be recorded:

Dr 111, 112, 131

Cr 121 – Trading securities.

Cr 515 – Financial income.

e) If the enterprise transfers the trading securities in the form of share exchange, the enterprise must determine the fair value of shares received at the exchange time. The difference (if any) between fair value of shares received and book value of shares used for exchange shall be recorded to financial income (in case of profits) or financial expenses (in case of losses).

- If the share exchange generates profits, the following accounts shall be recorded:

Dr 121 – Trading securities (fair value of shares received)

Cr 121 - Trading securities (book value of shares used for exchange according to weight average method)

Cr 515 - Financial income (positive difference between the fair value of shares received and the book value of shares used for exchange) 

- If the share exchange generates losses, the following accounts shall be recorded:

Dr 121 – Trading securities (fair value of shares received)

Dr 635 - Financial income (negative difference between the fair value of shares received and the book value of shares used for exchange) 

Cr 121 - Trading securities (book value of shares used for exchange according to weight average method)

g) When re-evaluating balance of securities in conformity with definition of accounts derived from foreign currencies (bonds, commercial papers in foreign currencies, etc).

- If the profits generate, the following accounts shall be recorded:

Dr 121 – Trading securities (1212, 1218)

Cr 413 - Exchange rate differences. 

- If the losses generate, the following accounts shall be recorded:

Dr 413 - Exchange rate differences. 

Cr 121 – Trading securities (1212, 1218).

Article 16. Account 128 – Held to maturity investments

1. Rules for accounting

a) This account is used to record current amounts and increases and decreases in held to maturity investments (other than trading securities), such as: term deposits (including treasury bills, promissory notes), bonds, preference shares which the issuer is required to re-buy them in a certain time in the future and held to maturity loans to earn profits periodically and other held to maturity investments.

This account shall not record bonds and debt securities held for sales (recorded to account 121 – Trading securities)

b) The accountant must keep records of every held to maturity investment in details according to every term, entity, type of currency or quantity, etc. When preparing financial statements, the accountant shall base on remaining term (under 12 months or 12 months and longer from the reporting time) to record those to short-term accounts or long-term accounts. 

c) The enterprise must record deposit interests, loan interests, profits or losses on liquidation or transfer of held to maturity investments to financial income sufficiently and promptly.

d) With regard to held to maturity investments, if it fails to make provisions for doubtful debts as prescribed, the accountant must evaluate the recovery. If it is evident that a part or all of investment is unable to recover, the accountant shall record the losses to financial expenses within the fiscal year. In case it is unreliable to determine the losses, the accountant is entitled not to record them to revaluation of investment, but the recovery of investment must be reported on the financial statements.

dd) When the financial statement is prepared, the accountant must re-evaluate investment classified as accounts derived from foreign currencies according to actual exchange rates at the end of the accounting period:

- Exchange rates applying to deposits in foreign currencies are buying-exchange rates of the bank where the enterprise opens its deposit account;

- Exchange rates applying to other held to maturity investments are buying-exchange rates of the bank where the enterprise regularly enters into transactions (chosen by the enterprise).

2. Structure and contents of account 128 – Held to maturity investments

Debit:

Value of held to maturity investments increases.

Credit:

Value of held to maturity investments decreases.

Debit balance:

Value of current held to maturity investments at the reporting time.

Account 128 – Held to maturity investments comprises 3 sub-accounts:

- Account 1281 - Term deposits: recording the increases, decreases and balance of term deposits.

- Account 1282 - Bonds: recording the increases, decreases and balance of bonds which it intends to hold till maturity.

- Account 1283 – Loans: recording the increases, decreases and balance of loans under agreements which are not transacted on the market similarly to securities. According to every contract, loans under agreements may be recovered fully on the maturity date or recovered periodically.

- Account 1288 – Other held to maturity investments: recording the increases, decreases and balance of other held to maturity investments (other than bank deposits, bonds and loans), such as preference shares which the issuer is required to re-buy them in a certain time in the future, commercial papers.

3. Accounting methods for several major transactions:

3.1. When making term deposits, granting loans, buying held to maturity investments, the following accounts shall be recorded:

Dr 128 – Held to maturity investments 

Cr 111, 112.

3.2. When collecting deposit interests, bond interests or loan interests periodically, the following accounts shall be recorded:

Dr 138 - Other receivables (1388)

Cr 128 – Held to maturity investments (interest included in principal)

Cr 515 - Financial income.

3.3. When recovering held to maturity investments, the following accounts shall be recorded:

Dr 111, 112, 131, 152, 156, 211, etc (according to fair value)

Dr 635 - Financial expenses (in case of losses) 

Cr 128 – Held to maturity investments (book value)

Cr 515 - Financial income (in case of profits).

3.4. When investing held to maturity investments in subsidiary companies, joint-venture companies, the following accounts shall be recorded:

Dr 221, 222 (according to fair value)

Dr 635 - Financial expenses (in case of losses) 

Cr 128 – Held to maturity investments (book value)

Cr relevant accounts (if the additional investment is required)

Cr 515 - Financial income (in case of profits).

3.5. Accounting for transactions of held to maturity bonds:

a) Buying bonds and receiving interests in advance:

- When buying bonds and receiving interests in advance, the following accounts shall be recorded:

Dr 128 – Held to maturity investments (1282)

Cr 111, 112, etc (actual amounts of money)

Cr 3387 – Unearned revenues (interests received in advance).

- When calculating and transferring interests of tax period according to interests receivable periodically, the following accounts shall be recorded:

Dr 3387 - Unearned revenues

Cr 515 - Financial income.

- When recovering original prices of bonds on the maturity date, the following accounts shall be recorded:

Cr 111, 112, etc.

Cr 128 – Held to maturity investments (1282).

b) Buying bonds and receiving interests periodically:

- When buying bonds, the following accounts shall be recorded:

Dr 128 – Held to maturity investments (1282)

Cr 111, 112, etc.

- When receiving bond interests periodically, the following accounts shall be recorded:

Dr 111, 112, 138, etc.

Cr 515 - Financial income.

- When recovering original prices of bonds on the maturity date, the following accounts shall be recorded:

Cr 111, 112, etc.

Cr 128 – Held to maturity investments (1282).

c) Buying bonds and receiving deferred interests:

- When buying bonds, the following accounts shall be recorded:

Dr 128 – Held to maturity investments (1282)

Cr 111, 112, etc.

- When calculating interests and recording revenues according to the interests receivable periodically, the following accounts shall be recorded:

Dr 138 - Other receivables (1388)

Cr 515 - Financial income.

- When recovering principal and interests of bonds on the maturity date, the following accounts shall be recorded:

Cr 111, 112, etc.

Cr 128 – Held to maturity investments (1282).

Cr 138 - Other receivables (1388) (interests of previous tax period)

Cr 515 - Financial income (regarding interests on maturity date).

3.6. Accounting for losses due to failure of recovery of held to maturity investments which are not made provisions for doubtful debts;

If it is evident that a part or all of investment are unable to recover (the issuer is insolvent or goes into bankruptcy. If the losses are determined reliably, the negative difference between recoverable value and book value shall be recorded to financial expenses as follows: 

Dr 635 - Financial expenses 

Cr 128 – Held to maturity investments (1281, 1282, and 1288).

- After recording the losses, if it is evident that the losses are recoverable, the positive difference between recoverable value and book value shall be recorded to financial expenses as follows: 

Dr 128 – Held to maturity investments (1281, 1282, and 1288).

Cr 635 - Financial expenses 

3.7. When re-evaluating balance of held to maturity investments which are classified accounts derived from foreign currencies, the following accounts shall be recorded:

- In case of profits, the following accounts shall be recorded:

Dr 128 – Held to maturity investments 

Cr 413 – Exchange rate differences.

- In case of losses, the following accounts shall be recorded:

Dr 413 – Exchange rate differences.

Cr 128 – Held to maturity investments.

Article 17. Rules for accounting for receivables

1. The receivables shall be kept records in details according to period receivables, entities receivables, types of currency receivable and other factors according to requirements for management.

2. The amounts receivable shall be classified into trade receivables, intra-company receivables, and other receivables following rules below:

a) Trade receivables include commercial receivables generating from purchase-sale related transactions, such as: receivables from sales, services, liquidation or transfer of assets (fixed assets, investment property, and financial investments) between enterprises and buyers (independent unit against buyers, including receivables between parent companies and subsidiary companies or joint-venture companies). Those receivables include receivables from sale of exported goods given by the trustor through the trustee;

b) Intra-company receivables include receivables between superior organizations and affiliated organizations having no legal status and dependent cost-accounting.

c) Other receivables include non-commercial or non-trading receivables, such as:

- Receivables generating financial income, such as: receivables from loan interests, deposit interests, dividends and divided profits;

- Payment on behalf of a third party eligible for recovery; receivables on behalf of the trustor which are collected by the trustee 

- Non-commercial receivables include borrowed assets, fine receivables, compensation, assets in shortage awaiting resolution, etc. 

3. When preparing financial statements, the receivables shall be classified into short-term receivables or long-term receivables according to their remaining terms. Receivables items of balance sheet may include amounts recorded to other than receivables, such as: loans recorded to account 1283; deposits recorded to account 244, advance recorded to account 141, etc. The provisions for doubtful debts shall be determined according to the items which are classified into short-term receivables and long-term receivables of the balance sheet.

4. The receivables conformable to definition of accounts derived from foreign currencies (refer to account 413 – Exchange rate differences) must be re-evaluated at the closing tax period when preparing financial statements.

Article 18. Account 131 – Trade receivables

1. Rules for accounting

a) This account is used to record receivables and payments of receivables of customers from goods, investment properties, fixed assets, financial investment or services. This account is also used to record receivables from contractors and contract awarder related to finished infrastructure development. This account is not used to record immediate cash.

b) The customer receivables must be recorded specifically to every entity, every receivables item and monitor the recovery terms (above 12 months or not exceeding 12 months from the reporting time) and keep record for every payment. Receivable entities are customers entering into transactions in purchase of goods, provisions of services, including fixed assets, investment property or other financial investments with the enterprise.

c) The export trustor shall record receivables for sale of exported goods from export trustee to above account similarly to normal transactions in sales or services.

d) When recording this account, the debts shall be classified into coverable debts, doubtful debts or bad debts to determine provisions for doubtful debts or solutions for bad debts.

dd) If the goods, investment property or services are provided unconformity with agreements between the enterprise and customers, the customers may request the enterprise to discount the goods or they may return the received goods.

e) The enterprise must monitor debts receivable of customers according to every currency. Receivables in foreign currencies shall follow rules below:

- When trade receivables generate (Dr 131), those receivables shall be converted into VND according to actual exchange rates at the generating time (buying rates of the commercial bank where the customers repays the debts). With regard to the advance received from the buyers, when criteria for recognition of revenues are met, the Dr 131 shall apply the specific identification bookkeeping rate.

- When recover trade receivables (Cr 131), the accountant must convert them into VND according to actual bookkeeping rate for every type of debtors (if the debtors enter into multiple transactions, the actual bookkeeping rate shall equal weight average rate applying to those transactions). With regard to advance received from buyers, the Cr 131 shall apply actual exchange rates (the rate recorded to the Debit account - Cash) at the receiving time;

- The enterprise must re-evaluate trade receivables derived from foreign currencies at the times in which the financial statements are prepared as prescribed.  The actual exchange rates applying to revaluation of trade receivables are foreign currency-buying rates of the commercial bank where the customers make payment, which is appointed by the enterprise when preparing financial statements. In case the enterprise has multiple receivables and enters into transactions in the multiple banks, they may choose the buying rate of any bank of those commercial banks. Units in a group shall apply a common rate defined by the parent company (provided that it closes to the actual exchange rates) to re-evaluate trade receivables derived from foreign currencies arising from transactions of internal group.

2. Structure and contents of account 131 – Trade receivables

Debit:

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

- Extra cash payable to customers.

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

Credit:

- Customers' repayment;

- Advances received from customers.

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

- Sales of returned goods (with or without VAT).

- Amount of payment discounts and trade discounts offered to buyers.

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

Debit balance:

Remaining trade receivables.

This account may have credit balance Credit balance records amounts of advance or collected amounts which are larger than trade receivables according to every specific entity. When preparing balance sheet, it is required to record specific balance according to every receivable of this account to items "Asset" and "Equity".

3. Accounting methods for several major transactions:

3.1. When selling goods or providing services without collecting immediate cash (including receivables from sales of exported goods of trustors), the following accounts shall be recorded:

a) Regarding goods, services, investment property subject to VAT, Special excise duty, import tax or environment protection tax, the revenues from goods and services without taxes shall be recorded as follows (above indirect taxes must be separated when recording, including VAT payable using subtraction method):

Dr 131 – Trade receivables (total payment)

Cr 511 - Revenues (tax-exclusive prices)

Cr 333 – Taxes and other payables to the State.

b) In case it fails to separate the taxes payable, the taxes payable must be included in the revenues. Tax liabilities and the decrease in revenues shall be recorded as follows:

Dr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

3.2. Accounting for returned goods.

Dr 5213 – Returned goods (prices without taxes)

Dr 333 – Taxes and other payables to the State (VAT of returned goods, clarifying each type of taxes)

Cr 131 – Trade receivables.

3.3. Accounting for trade discounts and sales rebates

a) In case the amounts of trade discounts or sales rebates are stated in the invoices, the prices excluding above discounts (recording according to net revenues) and amounts of trade discounts or sales rebates shall not be separately recorded;

b) In case the amounts of trade discounts or sales rebates are not stated in the invoices because the customers are not eligible for those discounts, the revenues shall be recorded the prices including discounts (gross revenues) After recording revenues, if the customers are eligible for above discounts, these discounts shall be recorded separately so that a decrease in revenue shall be recorded periodically as follows: 

Dr 521 – Revenue deductions (5211, 5212) (tax-exclusive prices)

Dr 333 – Taxes and other payables to the State (VAT of trade discounts or sales rebates)

Cr 131 – Trade receivables (total amounts of discounts).

3.4. The payment discounts payable to the buyers, excluding debts receivables, the following accounts shall be recorded:

Dr 111 - Cash

Dr 112 – Cash in bank

Dr 635 - Financial expenses (amounts of payment discounts)

Cr 131 – Trade receivables.

3.5. When receiving payment of customers (including interests of debts – if any) or receiving advance of customers according to agreements on sale of goods or provision of services, the following accounts shall be recorded:

Dr 111, 112, etc.

Cr 131 – Trade receivables.

Cr 515 - Financial income (profits).

When receiving advance in foreign currencies, the Cr 131 shall apply actual exchange rates at the receiving time (buying rates of the bank)

3.6. Method of accounting for contractor’s receivables from customers related to construction contract:

a) In case the contractor may make payment following the schedule under the construction contract:

- If the result of performance of construction contract is estimated reliably, the following accounts shall be recorded  according to documents on revenues in proportion to finished work (other than invoices) determined by the contractor:

Dr 337 – Payment under schedule of construction contract

Cr 511 – Revenues.

- According to the invoices issued following the schedule, the amounts which are paid by customers shall be recorded as follows:

Cr 131 – Trade receivables.

Dr 337 – Payment under schedule of construction contract

Cr 3331 – VAT payable (33311).

b) In case the construction contract regulates that the contractor shall be paid according to their workload, when the result of performance of construction contract is determined reliably and certified by customers, the finished work must be stated in the invoices and certified, the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 511 – Revenues.

Cr 3331 – VAT payable (33311).

c) When collecting the bonus paid to the contractor by customer because the performance of construction contract reaches or overshoots the specific targets mentioned in the contract, the following accounts shall be recorded:

Dr 131- – Trade receivables.

Cr 511 – Revenues.

Cr 3331 – VAT payable (33311).

d) When collecting the compensation paid by customers or other contracting parties to cover the costs not including in the value of contract (the delay or mistakes of customers and disputes about changes in contract performance), the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 511 – Revenues.

Cr 3331 – VAT payable (33311).

dd) When collecting payment for finished works or advance from customers, the following accounts shall be recorded:

Cr 111, 112, etc.

Cr 131 – Trade receivables.

3.7. In case the customer makes payment in goods instead of cash (in the form of barter), according to the value of materials or exchanged goods (according to fair value stated in the VAT invoice or sales invoice of customers) which is deducted from customers' debt receivables, and the following accounts shall be recorded: 

Dr 152 - Materials

Dr 153 - Tools

Dr 156 - Goods

Dr 611 – Good purchases (inventory accounted by periodical verification method)

Dr 133 – Deductible VAT (if any) 

Cr 131 – Trade receivables.

3.8. When eliminating doubtful debts unable to recover according to the report on debt relief, the following accounts shall be recorded:

Dr 229 – Provision for asset losses (2293) (amounts of provision)

Dr 642 – Enterprise administrative expenses (amounts of non-provision)

Cr 131 – Trade receivables.

3.9. When collecting entrustment fees from the export/import trustees, the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 511 – Revenues (5113)

Cr 3331 – VAT payable (33311).

3.10. When preparing financial statements, the outstanding debt in foreign currencies of customers shall be evaluated according to actual exchange rates at the time in which the financial statements are prepared:

- If the foreign currency rates rise against VND rates, the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 413 – Exchange rate differences (4131).

- If the foreign currency rates fall against VND rates, the following accounts shall be recorded:

Dr 413 – Exchange rate differences (4131).

Cr 131 – Trade receivables.

Article 19. Account 133 – Deductible VAT

1. Rules for accounting

a) This account is used to record input VAT which are deductible, deducted and shall be deducted of the enterprise.

b) The deductible input VAT and non-deductible input VAT must be recorded separately. In case they fail to be recorded separately, the input VAT shall be recorded to account 133. At the end of the tax period, the deductible input VAT and non-deductible input VAT shall be determined in accordance with regulations of law on VAT.

c) The non-deductible input VAT shall be recorded to value of assets, costs of goods sold or production or operation costs according to specific cases.

d) The input VAT eligible for deduction, declaration or tax payment shall be determined in accordance with regulations of law on VAT.

2. Structure and contents of account 133 – Deductible VAT

Debit:

Deductible VAT.

Credit:

- Deducted VAT.

- Transfer of non-deductible input VAT.

- Input VAT of goods which are returned or offered discounts;

- Refunded input VAT.

Debit balance:

Remaining deductible input VAT, refundable input VAT which has not been refunded by government budget.

Account 133 – Deductible VAT, comprises 2 sub-accounts:

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

- Account 1332 – Deductible VAT of fixed assets: recording deductible input VAT of fixed assets bought to use in production of goods or provision of services subject to VAT using credit-invoice method, or of the purchase of investment property.

3. Accounting methods for several major transactions:

3.1. When buying inventory, fixed assets, investment property, if the input VAT is deductible, the following accounts shall be recorded:

Dr 152, 153, 156, 211, 213, 217, 611 (prices excluding VAT)

Dr 133 – Deductible VAT (1331, 1332) 

Cr 111, 112, 331, etc. (total payment).

3.2. When buying materials, goods or tools, if the input VAT is deductible, the following accounts shall be recorded:

Dr 621, 623, 627, 641, 642, 241, 241, etc. (VAT-exclusive prices)

Dr 133 – Deductible VAT (1331) 

Cr 111, 112, 331, etc. (total payment).

3.3. When buying goods and buying them to customers immediately (without inventory), if the input VAT is deductible, the following accounts shall be recorded:

Dr 632 – Costs of goods sold (prices not excluding VAT)

Dr 133 – Deductible VAT (1331) 

Cr 111, 112, 331, etc. (total payment).

3.4. When importing materials, goods, fixed assets:

- Accounting for value of import materials, goods or fixed assets including total amount payable to sellers (according to actual exchange rates), import tax, special excise duty, environment protection tax payable (if any), transport expenses, the following accounts shall be recorded:

Dr 152, 153, 156, 211, etc.

Cr 331 – Trade payables

Cr 3331 – VAT payable (33312) (if the input VAT of imported goods are not deductible)

Cr 3332 - Special excise duty.

Cr 3333 – Export or import tax (specific import tax)

Cr 33381 - Environment protection tax 

Cr 111, 112, etc.

- If the input VAT of imported goods is not deductible, the following accounts shall be recorded:

Dr 133 – Deductible VAT (1331, 1332) 

Cr 333 – Taxes and other payables to the State (33312).

3.5. With regard to returned goods or goods offering discounts due to their degradation: According to documents on sales returns and relevant documents, the value of returned goods or purchased goods eligible for sales rebate and the non-deductible input VAT) shall be recorded as follows:

Dr 111, 112, 331 (total payment).

Cr 133 – Deductible VAT (input VAT of returned goods or discounted goods)

Cr 152, 153, 156, 211, etc. (prices not excluding VAT).

3.6. With regard to deductible input VAT unable to record separately:

a) When buying materials, goods or fixed assets, the following accounts shall be recorded:

Dr 152, 153, 156, 211, 213 (prices excluding VAT)

Dr 133 – Deductible VAT (input VAT) 

Cr 111, 112, 331, etc.

b) At the end of the tax period, the deductible input VAT and non-deductible input VAT shall be determined in accordance with regulations of law on VAT. The non-deductible input VAT shall be recorded to costs of goods sold in the accounting period, the following accounts shall be recorded:

Dr 632 – Costs of goods sold

Cr 133 – Deductible VAT (1331) 

3.7. With regard to input materials, goods or fixed assets which are damaged by natural disasters, conflagration, lost and covered by an organization or individual, if the input VAT of those goods are not deductible:

- If it fails to uncover the reason for damages, the following accounts shall be recorded:

Dr 138 - Other receivables (1381)

Cr 133 – Deductible VAT (1331, 1332) 

- If there is decision on compensation issued by the competent agency, the following accounts shall be recorded:

Cr 111, 334, etc. (amounts of compensation)

Dr 632 – Costs of goods sold (if they are recorded to costs)

Cr 138 - Other receivables (1381)

Cr 133 – Deductible VAT (if the reasons are uncovered and there is a resolution decision) 

3.8. At the end of the month, when determining the VAT payable in the tax period by deducting the deductible input VAT from output VAT, the following accounts shall be recorded:

Dr 3331 – VAT payable (33311).

Cr 133 – Deductible VAT.

3.9. When the input VAT of goods or services are refunded, the following accounts shall be recorded:

Dr 111, 112, etc.

Cr 133 – Deductible VAT (1331) 

Article 20. Account 136 – Intra-company receivables

1. Rules for accounting

a) This account is used to record receivables and payments of receivables between the parent company and affiliated units or between affiliated units. The affiliated units are dependent accounting units which have no legal status, but they have accounting divisions, such as branches, plants, or project management board, etc.

b) The transactions between the enterprise and dependent accounting units (members, plants) which have legal status shall not be recorded in this account, but they shall be recorded similarly to subsidiaries.

c) Content of intra-company receivables recorded to account 136:

- In the superior enterprise:

+ Capital, funds or funding allocated to affiliated units;

+ Amounts payable to superior enterprise by affiliated units as prescribed;

+ Amounts collected by affiliated units;

+ Amounts of expenses paid on behalf of affiliated units;

+ Amounts allocated to affiliated units to perform internal fixed works and receive value of fixed works

+ Other current receivables.

-  In the dependent accounting units: 

+ Amounts allocated by the superior enterprise which have not been received;

+ Value of goods or services transferred to superior enterprise or other affiliated units for sale; revenues from goods or services provided for the affiliated units;

+ Amounts collected by superior enterprise or other affiliated units;

+ Amounts paid for superior enterprise or other affiliated units;

+ Other current receivables.

d) Account 136 must be kept records of every inferior unit in details and every intra-company receivables must be separately monitored. The enterprise must take measure for intra-company receivables within the tax period.

dd) At the end of tax period, it is required to collate and certify incurred amounts or balance of account 136 “Intra-company receivables”, account 336 “Intra-company receivables” with affiliated units in the payment relationship must be verified, collated and certified. Offsetting for every account of each subsidiary in relationship, and offsetting account 136 "Intra-company receivables" against 336 "Internal payable" (for every entity). When comparing, if there is any difference, it is required to uncover reasons and adjust promptly.

2. Structure and contents of account 136 – Intra-company receivables

Debit:

- Operating capital provided for affiliated units;

- Funding allocated to project management board by investor; other amounts shall be recorded as increases in receivables of investor from project management board;

- Amounts paid on behalf of superior enterprise or other affiliated units;

- Amounts receivables collected by superior enterprise or amounts payable made by affiliated units;

- Amounts receivables collected by affiliated units, amounts payable provided by superior enterprise;

- Amounts receivables of goods or services between affiliated units.

- Other intra-company receivables.

Credit:

- Capital or fund recovery of affiliated units;

- Settlement of public funding allocated and used by affiliated units;

- Value of finished fixed assets transferred from project management board; other amounts shall be recorded as decreases in receivables of investor from project management board;

- Collected amounts of intra-company receivables.

- Offsetting intra-company receivables against intra-company payables of an entity.

Debit balance: Outstanding receivables from subsidiaries.

Account 136 – Intra-company receivables, comprises 4 sub-accounts:

- Account 1361 – Operating capital provided for affiliated units: This account is only opened by the superior enterprise to record current business capital of dependent accounting units allocated by the superior enterprise.

This account does not record capital which a parent company invests in their subsidiaries or capital which the enterprise invests in dependent accounting units having legal status. Above investment shall be recorded to account 221 “Investment in subsidiaries”.

- Account 1362 – Intra-company receivables for exchange differences: This account is only opened in enterprises which are investors establishing project management boards, used to record exchange differences transferred by the project management board.

- Account 1363 – Intra-company receivables for cost of loans eligible for capitalization: This account is only opened in enterprises which are investors establishing project management board, used to record capitalized borrowing costs incurring in project management board.

- Account 1368 – Other intra-company receivables: recording other receivables between affiliated units.

3. Accounting methods for several major transactions:

3.1. In dependent accounting units: 

a) When paying on behalf of the superior enterprise and other affiliated units, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 111, 112.

b) According to notification of welfare fund allocated by superior enterprise, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 353 - Welfare fund. 

c) When selling goods or providing services for subsidiaries in the enterprise, according to operation and task delegation in every unit:

- In case the dependent accounting unit is in charge of recording revenues, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 511 – Revenues (specific internal sale) 

Cr 333 – Taxes and other payables to the State.

Concurrently, the cost prices shall be recorded as follow:

Dr 632 – Costs of goods sold

Cr 154, 155, 156, etc.

- In case the dependent accounting unit is not in charge of recording revenues, value of goods or services provided for subsidiaries shall be recorded to internal receivables:

Dr 136 - Other receivables (1368)

Cr 154, 155, 156

Cr 333 – Taxes and other payables to the State.

dd) When receiving money, materials or assets from superior enterprise or other internal enterprises for amounts receivables, the following accounts shall be recorded:

Dr 111, 112, 152, 153, etc.

Cr 136 - Other receivables (1368).

e) When offsetting intra-company receivables against internal payables of the same entity, the following accounts shall be recorded:

Dr 336 - Other receivables (3368)

Cr 136 - Other receivables (1368).

3.2. In superior enterprise 

a) When a superior enterprise provides operating capital for inferior dependent accounting units having no legal status:

- If the business capital is in money, the following accounts shall be recorded:

Dr 1361 – Operating capital in affiliated units

Cr 111, 112.

If the business capital is fixed assets, the following accounts shall be recorded:

Dr 136 - Other receivables (residual value of fixed assets) (1361)

Dr 214 - Depreciation of fixed assets (value of depreciation of fixed assets)

Cr 211 – Tangible fixed assets (cost prices).

b) In case the dependent accounting units receive operating capital directly from government budget according to the authorization of superior enterprise, when the affiliated units receive capital, the superior enterprise shall record as follow:

Dr 136 - Other receivables (1361)

Cr 411 - Owner’s invested equity. 

c) When the superior enterprise provides public funding or projects to affiliated units, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 111, 112, 461, etc.

d) In case the dependent accounting unit is required to refund the business capital to the superior enterprise, when the superior enterprise receives the refund, the following accounts shall be recorded:

Dr 111, 112, etc.

Cr 136 - Other receivables (1361).

dd) According to report on operating capital paid to government budget by the dependent accounting unit under authorization of superior enterprise, the following accounts shall be recorded:

Dr 411 - Owner’s invested equity. 

Cr 136 - Other receivables (1361).

e) When selling goods or providing services for affiliated units in the enterprise, according to operation and gradation in every unit, the revenue may be recorded either at the time in which the goods or services are transferred to dependent accounting units or at the time in which the dependent accounting units sell goods or services:

- If the revenue is recorded when the goods or services are transferred to dependent accounting units, the following accounts shall be recorded: 

Dr 136 - Other receivables (1368)

Cr 511 – Revenues (specific internal sale) 

Cr 333 – Taxes and other payables to the State.

- If the revenue is not recorded when the goods or services are transferred to dependent accounting units, the following accounts shall be recorded:

+ When transferring goods or services:

Dr 136 - Other receivables (1368)

Cr 154, 155, 156

Cr 333 – Taxes and other payables to the State (if any).

+ When the dependent accounting unit notifies that it has sold their goods or services to a third party outside the enterprise, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 511 – Revenues.

Concurrently, the cost prices shall be recorded as follow:

Dr 632 – Costs of goods sold

Cr 136 - Other receivables (1368).

g) When collecting interest receivables arising from business or other operation of subsidiaries, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 421 – Unallocated profits.

h) When paying for dependent accounting units, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 111, 112, etc.

IWhen receiving the business interests from affiliated units or repayment of amounts paid on behalf of the affiliated units, the following accounts shall be recorded:

Cr 111, 112, etc.

Cr 136 - Other receivables (1368).

k) When offsetting intra-company receivables against internal payable of the same entity, the following accounts shall be recorded:

Dr 336 - Other receivables (3368)

Cr 136 - Other receivables (1368).

3.3. Accounting pertaining to investors establishing project management board

a) When an investor issues a decision on allocation of investment capital in money, materials or fixed assets to project management board, the following accounts shall be recorded:

Dr 136 - Other receivables (1361)

Dr 214 - Depreciation of fixed assets 

Cr 111, 112, 152

Cr 211 - Tangible fixed assets 

b) When project management boards transfer deposit interests from temporarily unused capital, the following accounts shall be recorded:

Dr 136 - Other receivables (1368)

Cr 515 - Financial income.

c) When the investor transfers the capitalized borrowings costs to project management board to the construction costs, the following accounts shall be recorded:

Dr 136 - Other receivables (1363)

Cr 111, 112, 242, 335.

d) When revenues, financial income or other incomes submitted by project management boards are received, the following accounts shall be recorded:

Dr 136 - Other receivables (1361, 1368)

Cr 515, 711.

dd) When project management boards transfer input VAT on purchases of materials, tools, fixed assets or services for project of investment to the investor for deduction, the following accounts shall be recorded:

Dr 133 – Deductible VAT

Cr 136 - Other receivables (1368).

e) When receiving cost prices for services, financial expenses or other expenses transferred by project management boards, the following accounts shall be recorded:

Dr 632, 635, 811, etc.

Cr 136 - Other receivables (1362, 1368).

g) When the project is finished and received, the following accounts shall be recorded:

- When receiving the building work which is settled, the investor shall record the value of the building work to settled price as follows:   

Dr 111, 112, 152, 153, 211, 213, 217, 1557

Dr 133 – Deductible VAT (if any) 

Cr 136 - Intra-company receivables (1361)

Cr 331, 333, etc. (debts payable, if any).

-  When receiving building work which is not settled, the investor shall record the value of the building work to estimated price. When the building work is settled, the value of the building work shall be adjusted to the settled price.

+ If the settled price is greater than the estimated price, the following accounts shall be recorded:

Dr 211, 213, 217, 1557

Cr, relevant accounts.

+ If the settled price is smaller than the estimated price, the following accounts shall be recorded:

Dr, relevant accounts.

Cr 211, 213, 217, 1557.

Article 21. Account 138 – Other receivables

1. Rules for accounting

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

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

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

- Non-monetary assets borrowed by other entities (if lending in money, the loan shall be recorded to account 1283);

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

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

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

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

- Other receivables.

2. Structure and contents of account 138 – Other receivables

Debit:

- Value of assets in shortage awaiting resolution;

- Receivables from individuals or groups (inside or outside enterprise) for assets in shortage whose reasons are uncovered and there is a resolution report,

- Receivables from equitization of state-owned enterprises;

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

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

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

Credit:

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

- Transfer receivables to equitization of state-owned enterprises;

- Collected amounts of other debts receivables.

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

Debit balance:

Non-collected amounts of other debts receivables.

This account may have balance in Credit side. The balance of Credit side records the positive difference between collected amounts and amounts receivables (in details).

Account 138 – Other receivables, comprises 3 sub-accounts:

- Account 1381 – Assets in shortage awaiting resolution: recording value of assets in shortage awaiting resolution.

In principle, whenever asset deficiency is detected, the reasons and the person in charge must be uncovered. The asset deficiency is only recorded to account 1381 if reasons for deficiency, losses or damage of assets in shortage awaiting resolution are not uncovered. In case the reasons for asset deficiency are uncovered and they are settled within a tax period, they shall be recorded to equivalent accounts, not recorded to account 1381. 

- Account 1385 – Equitization receivables: recording equitization receivables which the enterprise spends, such as: equitization costs, unemployment allowances, support for re-training of employees in the equitized enterprises, etc.

- Account 1388 – Other receivables: recording receivables of the enterprise other than amounts receivables recorded to accounts 131, 133, 136 and 1381, 1385, such as: dividends, profits or interests receivables; compensation receivables due to losses of money or assets; etc.

3. Accounting methods for several major transactions:

3.1. If the deficiency of tangible fixed assets for business are detected without reasons and pending settlement, the following accounts shall be recorded:

Dr 138 - Other receivables (1381) (residual value of fixed assets) 

Dr 214 - Depreciation of fixed assets (depreciation value)

Cr 211 - Tangible fixed assets (cost prices).

3.2. If the deficiency of tangible fixed assets for public, projects or welfare are detected without reasons and pending settlement, the decrease in fixed assets shall be recorded as follows: 

Dr 214 - Depreciation of fixed assets (depreciation value)

Dr 466 – Funding sources forming fixed assets (residual value) (fixed assets used for public or projects)

Dr 3533 – Welfare funds forming fixed assets (residual value) (fixed assets used for welfare)

Cr 211 – Tangible fixed assets (cost prices).

And the residual value of assets in shortage awaiting resolution shall be recorded as follows: 

Dr 138 - Other receivables (1381)

Cr 353 - Welfare fund (3532)

Cr 338 – Others payable (fixed assets for public or projects).

3.3. When the deficiency of cash balance, materials, goods, etc is detected:

a) If the reasons for deficiency are not uncovered and pending settlement, the following accounts shall be recorded:

Dr 138 - Other receivables (1381)

Cr 111, 152, 153, 155, 156.

b) If there is a written settlement of asset deficiency issued by the competent agency, the following accounts shall be recorded:

Dr 111 – Cash (individual or organization paying compensation)

Dr 1388 – Others receivables (individual or organization paying compensation)

Dr 334 – Amounts payable to employees (compensation offsetting against salaries)

Dr 632 – Costs of goods sold (value of depreciation of inventory after offsetting against compensation according to the written settlement)

Dr 811 - Other receivables (residual value of deficient fixed assets shall be accounted for losses of the enterprise)

Cr 1381 – Assets in shortage awaiting resolution.

c) If the reasons and persons in charge of asset deficiency are uncovered, the following accounts shall be recorded according to the reasons or persons in charge: 

Dr 1388 – Others receivables (1388 – Others receivables) (amounts of compensation)

Dr 334 – Amounts payable to employees (compensation offsetting against salaries)

Dr 632 – Costs of goods sold (value of depreciation of inventory after offsetting against compensation according to the written settlement)

Cr 621 – Direct material costs

Cr 627 - Factory overhead 

Cr 152, 153, 155, 156.

Cr 111, 112.

3.4. Temporary asset borrowings shall be recorded as follows: 

Dr 138 - Other receivables (1388)

Cr 152, 153, 155, 156, etc.

3.5. Expenditures on behalf of a third party subject to recovery, other receivables, and the following accounts shall be recorded as follows: 

Dr 138 - Other receivables (1388)

Cr, relevant accounts.

3.6. Accounting for trust transactions in import-export carried out by the trustee:

a) When the trustee pays for the trustor, the following accounts shall be recorded:

Dr 138 - Other receivables (1388) (if the trustor has not paid advance)

Dr 3388 - Other receivables (offsetting against payment of trustor)

Cr 111, 112, etc.

b) When the export trustor offsets against expenses paid on behalf of a third party, the export trustee shall record as follows: 

Dr 338 - Other receivables (3388)

Cr 138 - Other receivables (1388)

c) Transactions in export-import entrustment shall be accounted similarly to account 138 – Others receivables; VAT on imported goods, special excise duty, import duty carried out by the trustee and the trustor shall be accounted similarly to account 333 – Taxes and other payables to the State.

3.7. When determining loan interests, deposit interests, dividends or profits receivables, the following accounts shall be recorded:

Dr 111, 112, etc. (collected amounts)

Dr 138 - Other receivables (1388)

Cr 515 - Financial income. 

3.8. When collecting other debt receivables, the following accounts shall be recorded:

Dr 111 - Cash

Dr 112 – Cash in bank

Cr 138 - Other receivables (1388)

3.9. When receiving decision on solutions for other debt receivables unable to recover:

Dr 111 – Cash (compensation paid by individuals or groups)

Dr 334 – Amounts payable to employees (compensation offsetting against salaries)

Dr 229 – Provision for asset losses (2293) (using provision for doubtful debts, if applicable)

Dr 642 - Administrative expenses (recording to costs) 

Cr 138 - Other receivables (1388 – Other receivables).

3.10. When enterprises have sold other receivables (recording in balance sheet) to debt trading company, the following accounts shall be recorded:

Dr 111, 112, etc. (Collected amounts of sale of debts receivables)

Dr 229 – Provision for asset losses (2293) (using provision for bad debts for the differences)

Debit of relevant accounts (difference between original price of doubtful debt and collected amounts of sale of doubtful debt shall be covered by provision for doubtful debt)

Cr 138 - Other receivables (1388)

3.11. When incurring costs of equitization of state-owned enterprises, the following accounts shall be recorded:

Dr 1385- Equitization receivables (detail costs of equitization)

Cr 111, 112, 152, 331, etc.

3.12. When finishing equitization, the enterprise must send reports and make declaration of expenditures on equitization to agency deciding the equitization. Total costs of equitization, allowances for unemployment, re-training of employees, etc shall be deducted (-) from collected amounts of sale of state-owned stocks collected from equitization of state-owned enterprises, the following accounts shall be recorded:

Dr 3385 – Equitization payable (collected amounts of sale of state-owned stocks)

Cr 1385 – Equitization receivables.

3.13. With regard to expenditures on public activities, projects, investment in capital investment or business which is not approved by competent agency and subject to recovery, the following accounts shall be recorded:

Dr 138 - Other receivables

Cr 161, 241, 641, 642, etc.

3.14. When preparing financial statements, other outstanding debts receivables derived from foreign currencies shall apply actual exchange rates:

- If foreign currency rates rise against VND rates, the following accounts shall be recorded:

Dr 138 - Other receivables

Cr 413 – Exchange rate differences (4131).

- If foreign currency rates fall against VND rates, the following accounts shall be recorded:

Dr 413 – Exchange rate differences (4131)

Cr 138 - Other receivables

Article 22. Account 141 – Advances

1. Rules for accounting

a) This account is used to record advances of an enterprise paid to employees in the enterprise and payment of those advances.

b) Advance is an amount or material given to receivers to do business or deal with any approved tasks. The receivers must be employees working at the enterprise. The regular receivers (working in department of material provision, administration) must be appointed by Director in writing.

c) The receiver (individual or group) must take responsibility for received advance and use the advance for proper purposes and approved tasks. If the received advance is unused or remained, it is required to repay to the fund. The receiver shall not transfer the advance to others.

When finishing the tasks, the receiver must make an advance payment sheet (enclose with original documents) to pay fully received advance, used advance or difference between received advance and used advance (if any). If the unused advance is not repaid to the fund, the receiver's salary shall be deducted. If the expenditure is greater than the received advance, the enterprise shall give additional expenditure on the deficiency.

d) The advance of this tax period is only received if the advance of previous tax period is settled.  The accountant must keep records of receivers, receiving and payment of advances.

2. Structure and contents of account 141 – Advances

Debit:

Amounts of money or materials advanced to employees of the enterprise.

Credit:

- Paid advances;

- Unused advances which are required to repay to the fund or deducted from salaries;

- Unused materials which are re-stored. 

Debit balance:

Unpaid advances;

3. Accounting methods for several major transactions:

a) When advancing amounts of money or materials to employees of the enterprise, the following accounts shall be recorded:

Dr 141 - Advances

Cr 111, 112, 152, etc.

b) When finishing assignment, the receiver shall make the advance payment sheet enclosed with approved original documents for settlement of the advance; the following accounts shall be recorded:

Dr 152, 153, 156, 241, 331, 621, 623, 627, 642, etc.

Cr 141 – Advances.

c) Unused advances which are repaid to the fund, re-stored or deducted from the receiver’s salary, the following accounts shall be recorded:

Dr 111 - Cash

Dr 152 – Raw materials, materials

Dr 334 – Amounts payable to employees

Cr 141 – Advances.

d) If the approved actual expenditure is greater than received advance, the accountant shall make additional payment to the receiver; the following accounts shall be recorded: 

Dr 152, 153, 156, 241, 621, 622, 627, etc.

Cr 111 – Cash.

Article 23. Rules for accounting for inventory

1. Group of inventory accounts is used to record existing value and changes in inventory of the enterprise (if the enterprise accounts for inventory using regular declaration method) or record value of inventory in the opening or closing tax period (if the enterprise accounts for inventory using periodical declaration method).

2. Inventory of the enterprise is assets bought for production or sale in an ordinary course of business, including:

- Goods in transit;

- Raw materials, materials; tools;

- Unfinished goods;

- Commercial products, goods; consignments;

- Goods stored in tax-suspension warehouse of the enterprise.

With regard to unfinished goods, if their period of production or circulation exceeding a normal business cycle, they shall not be recorded to inventory in the balance sheet, but shall be recorded to long-term assets.

With regard to equipment and spare parts for replacement whose preserve period is more than 12 months or more than an ordinary course of business, they shall not be recorded to inventory in the balance sheet, but shall be recorded to long-term assets. 

3. The goods, materials, assets under agreement on keeping, deposit, import-export trust, processing,...which are not under ownership and control of the enterprise shall not be recorded to inventory.

4. Accounting for inventory must comply with regulations on Vietnamese accounting standard (VAS) “Inventory” when determining original prices of inventory, method for calculation of value of inventory, determination of net realizable value, making provision against devaluation of goods in stock and recording costs.

5. Rules for determination of original prices of inventory are applied specifically to every type of materials, goods, according to sources and time in which the prices are determined 

6. Non-refundable taxes which are recorded to value of inventory include: non-deductible input VAT on inventory, Special excise duty, import tax, environmental protection tax payable when buying inventory.

7. When buying inventory, if goods, equipment or spare parts for replacement are attached (provision for breakdown), the changeable goods, equipment or accessories shall be recorded according to fair value. The value of purchased goods shall equal total value of purchases goods minus (-) value of changeable goods, equipment or spare parts for replacement.

8. When selling inventory, the original prices of sold inventory shall be recorded to production cost within a tax period in conformity with relevant revenues which are recorded and in conformity with their nature of transactions. When releasing inventory for promotion or advertisement, the rules below shall be followed:

a) If the inventory are released for promotion or advertisement without collecting money, providing additional conditions (compulsory purchase of goods, etc), the value of inventory shall be recorded to selling expenses (goods for promotion or advertisement for detail);

b) If the inventory are released for promotion or advertisement with additional conditions that the customers are required to buy goods (e.g. buy two, get one free, etc) The collected amounts shall be allocated to revenues from complimentary products, the value of complimentary products shall be included in their cost (nature of transaction is sale rebates).

9. When determining value of closing inventory, the enterprise applies one of following methods:

a) Specific identification method: Specific identification method shall be applied according to actual value of every purchased good or every sold good, so that it is only applied to enterprises having a few items of products or stable and identifiable goods. 

b) Weighted average method: value of every inventory item shall equal mean value of each opening inventory item and value of each inventory item sold or produced in current period. Mean value may be calculated in every period or after import consignment, depending on specific conditions of every enterprise.

c) First in, first out method (FIFO): This method assumes that inventory purchased or manufactured first is sold first and newer inventory purchased or manufactured near the end of the accounting period remains unsold. According to this method, value of inventory sold shall apply prices of purchased inventory at or near the beginning of the accounting period; value of closing inventory shall apply prices of purchased inventory at or near the end of accounting period.

Every inventory costing method has their certain advantages and disadvantages. The accuracy and reliability of every method bases on management requirements, standards, professional competence and calculating equipment or means of information processing of the enterprise. And bases on preservation requirements, complexity of types, specifications and fluctuation of materials or goods of the enterprise.

10. Regarding inventory purchased in foreign currencies, value of received inventory shall base on actual exchange rates at the arising time (if the seller is received an advance, the value of received inventory shall be equivalent to the advance exchange rates. Import duty payable shall be determined according to exchange rates for calculation of import duty provided by customs authority as prescribed. Accounting for exchange differences shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.

11. At the end of the accounting period, if the inventory value is not recovered enough due to damage or out of fashion, decrease in selling prices or increase in cost of improvement or selling expenses, a decrease in original prices of inventory shall be recorded leading the equal between the original cost and net realizable value of inventory.  Net realizable value is selling price of inventory estimated in an ordinary course of business minus (-) estimated cost of product improvement or cost of consumption.

The decrease in original prices of inventory leading the equal between the original cost and net realizable value shall be covered by provision against devaluation of inventory.  The provision against devaluation of inventory is the positive difference between original cost and net realizable value of inventory. 

All differences between provision against devaluation of inventory made at the end of this accounting period must be greater than provision made at the end of previous accounting period, the deficiency or losses of inventory shall be recorded to production cost in the period after minus (-) compensation of individual or unallocated factory overhead. All differences between provision against devaluation of inventory made at the end of this accounting period must be greater than provision made at the end of previous accounting period, the deficiency or losses of inventory shall be recorded to production cost in the period after minus (-) compensation of individual or unallocated factory overhead.

12. Inventory value and inventory in kind must be specifically accounted for every kind, specification of goods or materials, management and use place, ensure the conformity between actual materials or goods and general ledger and ledger.

13. An enterprise (an accounting unit) may only apply one of two accounting methods for inventory: perpetual inventory system, periodic inventory system. The accounting method for inventory shall be selected at the enterprise according to characteristics, quantity, types of materials or goods and management requirements and in the accounting period.

Accounting methods for inventory.

a) Perpetual inventory system: Periodic inventory system is a method monitoring and keeps up-to-date inventory records to account for additions to, subtractions from or balance of inventory on the accounting records. When applying perpetual inventory system, inventory accounts shall be used to record current amounts, increase or decrease in materials or goods. Therefore, value of inventory on accounting record may be determined at any time in the accounting period.

At the end of accounting period, the physical inventory count shall be compared with inventory data in ledger. In principle, the actual inventory data must conform to inventory data in ledger. If there is any difference, it is required to uncover reasons and provide solutions. The perpetual inventory system is usually applied to manufacturing enterprise (industry, construction, etc) And commercial enterprises dealing in high value items such as machinery, equipment, engineering goods, high quality , etc.

b) Periodic inventory system:

- The periodic inventory system shall be used to update the ending inventory balance in the general ledger according to the physical inventory count and calculate cost of goods or materials sold following the formulary below:

Cost of goods sold

=

Beginning inventory

+

Purchases

-

Ending inventory

- According to periodic inventory system, any changes in materials or goods (additions to or subtractions from inventory) shall not be recorded to inventory accounts. Value of materials or goods purchased and added to inventory in the period shall be recorded to a separate account (account 611 “Purchases”).

- The physical inventory count and determination of cost of goods or materials sold (for production or for sale) shall be conducted at the end of accounting period and used as the basis for accounting of account 611 “Purchases”. When applying periodic inventory system, inventory accounts shall only used at the beginning of the accounting period (for transfer of opening balance) and at the ending of the accounting period (for recording actual ending inventory).

- This method is usually applied to enterprises trading in multiple types of goods or materials with different specification or models, low value, and those goods or materials are regularly sold for use or sale (retail outlets, etc). This method is simple and easy for accounting. But the accuracy of materials or goods sold is affected by the management of warehouses, depot.

Article 24. Account 151 – Goods in transit

1. Rules for accounting

a) This account is used to record value of goods, materials (raw materials, materials, tools; goods) purchased under ownership of the enterprise which are on the way of delivery, in ports, depot, bonded warehouses or have arrived at the enterprise but they are pending storing

b) Goods or materials under ownership of the enterprise, but not been stocked, including:

- Goods or materials purchased payment or acceptance of payment, but still in warehouses of seller, in ports, depot or on the way of delivery;

- Goods or materials arrived at the enterprise but still are verification for stock.

c) Goods in transit shall be recorded to account 151 according to original prices as prescribed in VAS “Inventory"

d) Every day, when receiving purchase invoices, but the goods are not stocked, the accountant shall not keep records but compare them with economic contract and store invoices in a separate dossier “Goods in transit”.

Within a month, if the goods are stocked, they shall be recorded to account 152 “Raw materials, materials”, account 153 “Tools", account 156 “Goods” or account 158 “tax-suspension warehouse goods” according to warehouse receipt and purchase invoices.

dd) If the goods are not arrived at the end of the month, they shall be recorded to account 152 "Goods purchased in transit” according to purchase invoices. The accountant must keep specific records of goods in transit according to every type of goods, materials, consignment or economic contracts.

2. Structure and contents of account 151 – Goods in transit

Debit:

- Value of goods or materials purchased in transit;

- Transfer of actual value of goods or materials purchased in transit at the end of the accounting period (if the enterprise accounts for inventories using periodic inventory system)

Credit:

- Value of goods or materials purchased in transit which are stored or delivered to customers;

- Transfer of actual value of goods or materials purchased in transit at the begin of the accounting period (if the enterprise accounts for inventories using periodic inventory system)

Debit balance: Value of goods or materials purchased in transit (not stored in the enterprise's warehouse).

3. Accounting methods for several major transactions:

a) The enterprise accounts for inventories using perpetual inventory system.

- At the end of accounting period, according to purchase invoices of goods purchased which are not stored in warehouse, if the input VAT is deductible, the following accounts shall be recorded:

Dr 151 - Goods in transit (prices without VAT)

Dr 133 – Deductible VAT

Cr 331 – Trade payables; or

Cr 111, 112, 141, etc.

- If the input VAT is not deductible, value of goods purchased shall include VAT

- Next month, when goods are stored in warehouse, according to invoices and warehouse receipts, the following accounts shall be recorded:

Dr 152 – Raw materials, materials

Dr 153 - Tools

Dr 156 - Goods

Cr 151 - Goods in transit.

- Next month, if the goods or materials purchased in transit which are not stored in warehouses but delivered to customers under economic contract at the seller's vehicle or warehouses, at ports, depot or delivered directly to customers, deposited at the agencies, the following accounts shall be recorded:

Dr 632 – Costs of goods sold; or 

Dr 157 – Goods dispatched for sale

Cr 151 - Goods in transit.

- In case the goods purchased in transit are in shortage detected immediately or at the ending inventory, according to report on shortage, the value of deficiency or losses of inventories shall be recorded as follows: 

Cr 1381 – Assets in shortage awaiting resolution.

Cr 151 - Goods in transit.

b) If the enterprise accounts for inventories using periodic inventory system.

- At the ending inventory, according to actual value of goods or material in transit which is transferred at the ending inventory before transferred actual value of goods or materials in transit at the beginning inventory, the following accounts shall be recorded:

Dr 611 – Purchase of goods

Cr 151 - Goods in transit.

- At the beginning inventory, according to result of inventory to determine actual value of goods or materials purchased but have not stored in warehouses (ending goods in transit), the following accounts shall be recorded:

Dr 151 - Goods in transit.

Cr 611 – Purchase of goods.

Article 25. Account 152 – Raw materials inventory

1. Rules for accounting

a) This account is used to record current cost or increase or decrease in cost of all component parts currently in enterprise’s stock. Raw materials of the enterprise are labor materials purchased outside or home-made processed for business. Raw materials or materials recorded to this account shall be classified as follows:

- Direct materials: These are materials incorporated into the final products. Hence, direct materials term shall accompany with a specific manufacturer. There is not direct or indirect materials term in the enterprises engaged in commerce or services. Direct materials also include semi-finished goods purchased for incorporation into the finished goods.

- Indirect materials: These are materials not incorporated into the final product, but which are combined with direct materials during the production process to change colors, tastes, shapes or increase in quality of the final product or facilitate production process, technology, packaging or preservation; or serve the operation.

- Fuels: These are any materials providing heat energy during the production process and facilitate the process of making usual product. Fuels can exist in liquid, solid and gas.

- Replaced supplies: These are any materials used for replacement or repair of machinery, equipment, vehicle, manufacturing tools or supplies, etc.

-  Materials and equipment for capital investment: These are materials and equipment used for capital investment. The construction equipment items for capital investment include equipment required installation, equipment required non-installation, tools, instruments and materials used to install in the capital investment projects.

b) The received, dispatched or inventoried raw materials recorded to account 152 shall be accounted according to historical costs as prescribed accounting standard “Inventory”. Historical costs of raw materials shall be determined according to every source.

- Historical costs of raw materials include: Buying costs stated in invoices, import duty, Special excise duty, import VAT, environmental protection tax payable (if any), cost of delivery, material handling, preservation, classification, insurance, etc; of raw materials from the supplier to the enterprise’s stock, expenses incurred from employees in charge of purchase, expenses incurred from independent department of purchase, other costs directly related to purchase of raw materials and natural deficiency within the quotas (if any):

+ If the VAT on imported goods is deductible, cost of raw materials purchased shall not include VAT. If the input VAT is not deductible, cost of raw materials purchased shall include VAT.

+ Accounting for raw materials purchased in foreign currencies shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.

- Historical cost of raw materials home-made processed includes: actual cost of materials for processing and cost of processing.

- Historical cost of raw materials processed under outsourcing agreement includes: actual cost of materials for outsourcing processing, cost of delivery from the enterprise to processing facility and vice versa, cost of outsourcing processing.

- Historical cost of raw materials contributed to joint venture or joint-stock companies is the cost which all parties involved in joint venture approve.

c) The cost of raw materials inventory shall be calculated according to one of following methods:

- Specific costing method;

- Weighted average method after receiving raw materials or at ending inventory;

- First in, first out method.

The enterprise must apply the chosen method throughout the accounting period.

d) The raw materials shall be specifically accounted according to every inventory, type, group, materials item. In case the enterprise uses the accounting cost in the recording of received or dispatched raw materials, at the end of the period, the difference coefficient between actual cost and accounting cost of the raw materials shall be determined according to following formula:

Difference coefficient between actual cost and accounting cost of raw materials 

=

Beginning inventory cost

+

Cost of raw materials purchased

Beginning inventory accounting cost

+

Accounting cost of raw materials purchased

 

Cost of raw materials sold

=

Accounting cost of raw materials sold

x

Difference coefficient between actual cost and accounting cost of raw materials 

dd) Raw materials not under ownership of the enterprise (raw materials kept or materials received for processing or materials received from the export-import trustor, etc) shall not be recorded to this account.

2. Structure and contents of account 152 – Raw materials

Debit:

- Actual cost of raw materials purchased, hand-made processed, outsourced, processed, received as contribution or received from other sources;

- Cost of raw materials excess detected when conducting physical inventory count;

- Transfer of actual cost of ending raw materials inventory (if the enterprise uses periodic inventory system)

Credit:

- Actual cost of raw materials sold for production, business, sale, outsourcing, or contribution as capital;

- Cost of raw materials returned to sellers or sales rebates

- Trade discount on raw materials purchased;

- Cost of raw materials detected lost when conducting physical inventory count;

- Transfer of actual cost of beginning raw materials inventory (if the enterprise uses periodic inventory system)

Debit balance:

Actual cost of ending raw materials inventory.

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

a) When buying raw materials to add to inventory, according to invoices, warehouse receipt and relevant documents recording received raw materials cost:

- If input VAT is deductible, the following accounts shall be recorded:

Dr 152 – Raw materials (cost without VAT)

Dr 133 – Deductible VAT (1331)

Cr 111, 112, 141, 331, etc.  (total payment)

- If the input VAT is not deductible, cost of raw materials shall include VAT.

b) Raw materials returned to sellers, trade discount or sales discount received when buying raw materials shall be accounted as follows: 

- When returning raw materials to sellers, the following accounts shall be recorded:

Cr 331 – Trade payables

Cr 152 – Raw materials 

Cr 133 – Deductible VAT 

- In case the trade discount or sales discount is discounted after buying raw materials (including fines for violations against economic contracts leading a decrease in payment made by the purchaser), the trade discount or sales discount shall be allocated according to the increase or decrease in raw materials, inventoried raw materials, dispatched raw materials for production or construction investment or consumed during a period:

Dr 111, 112, 331, etc. 

Cr 152 – Raw materials (if raw materials are still inventoried)

Cr 621, 623, 627, 154 (if raw materials are dispatched for production)

Cr 241 – Works-in-progress (if raw materials are dispatched for construction investment)

Cr 632 – Cost price of goods (if the product in which those raw materials are incorporated is determined as consumed during a period)

Cr 641, 642 (raw materials used for sale or management)

Cr 133 – Deductible VAT (1331) (if any).

c) In case the enterprise has received sales invoices but raw materials have not received in the enterprise’s stock, the sales invoices shall be archived in a separate dossier “Goods in transit”.

- Within a month, if the raw materials have been received in the enterprise’s stock, they shall be recorded to account 152 “Raw materials” according to sales invoices and warehouse receipt.

- At the end of the month, if the raw materials have not been received, they shall be accounted for temporary cost according to sales invoices:

Dr 151 – Goods in transit

Dr 133 – Deductible VAT (1331)

Cr 331 – Trade payables; or

Cr 111, 112, 141, etc. 

- Next month, if the raw materials have been received in the enterprise’s stock, the following accounts shall be recorded according to sales invoices and warehouse receipt:

Dr 152 – Raw materials 

Cr 151 – Goods in transit

d) When make payments to sellers, if the enterprise qualifies for payment discounts, those payment discounts shall be recorded to financial income as follows:

Cr 331 – Trade payables

Cr 515 – Financial income (payment discounts).

dd) Imported raw materials:

- When importing raw materials, the following accounts shall be recorded:

Dr 152 – Raw materials 

Cr 331 – Trade payables

Cr 3331 – Deductible VAT (33312) (if input VAT on imported goods are not deductible)

Cr 3332 – Special excise duty (if any).

Cr 3333 – Import/export duty (detail).

Cr 33381 – Environmental protection tax.

- If input VAT on imported goods is deductible, the following accounts shall be recorded:

Dr 133 – Deductible VAT 

Cr 3331 – Deductible VAT (33312).

- When buying raw materials, if the seller is receive an advance in foreign currencies, the cost of raw materials equivalent to the advance shall be recorded according to actual exchange rates at the time in which the advance is paid. The cost of raw materials not yet paid in foreign currencies shall be recorded according to actual exchange rates at the time in which the raw materials are purchased.

e) The expenditures on purchase, material handling, and transport of raw materials to the enterprise’s stock shall be recorded as follows: 

Dr 152 – Raw materials 

Dr 133 – Deductible VAT (1331)

Cr 111, 112, 141, 331, etc. 

g) Regarding raw materials processed under outsourcing agreement which is received in the enterprise’s stock:

- When dispatching raw materials to process, the following accounts shall be recorded:

Dr 154 - Work in progress

Cr 152 – Raw materials.

- When incurring cost of outsourcing, the following accounts shall be recorded:

Dr 154 - Work in progress

Dr 133 – Deductible VAT (1331) (if any).

Cr 111, 112, 131, 141, etc. 

- When re-receiving the out-sourced raw materials, the following accounts shall be recorded:

Dr 152 – Raw materials 

Cr 154 - Work in progress

h) Hand-made raw materials which are received in stock:

- When dispatching raw materials for self-processing, the following accounts shall be recorded:

Dr 154 - Work in progress

Cr 152 – Raw materials.

- When receiving handmade raw materials, the following accounts shall be recorded:

Dr 152 – Raw materials 

Cr 154 - Work in progress.

i) With regard to excess of raw materials detected under physical inventory count, if the reasons for excess are uncovered, it shall be the basis for accounting, if not, the cost of raw materials in excess shall be the basis for accounting:

Dr 152 – Raw materials 

Cr 338 – Other payable or receivables (3381).

- When there is a decision on settlement of raw materials in excess detected under physical inventory count, the following accounts shall be recorded: 

Dr 338 – Other payable or receivables (3381)

Cr, relevant accounts.

- If the raw materials in surplus belong to other enterprises and an increase in account 152 is not recorded, they shall not be recorded to account 338 (3381) but the enterprise shall actively keep records and state in the presentation of financial statements.

k) When dispatching raw materials for business, the following accounts shall be recorded:

Dr 621, 623, 627, 641, 642, etc. 

Cr 152 – Raw materials.

l) When dispatching raw materials for capital investment or major repair of fixed assets, the following accounts shall be recorded: 

Dr 241 – Construction in progress  

Cr 152 – Raw materials.

m) When contributing raw materials to subsidiaries, joint-venture companies, the following accounts shall be recorded:

Dr 221, 22 (according to re-evaluated value)

Dr 811 – Other costs (re-evaluated value is smaller than book value)

Cr 152 – Raw materials (according to book value)

Cr 711 – Other costs (re-evaluated value is greater than book value)

n) When dispatching raw materials to sell capital holding in subsidiaries, joint-venture companies, the following accounts shall be recorded:

- The revenues from sale of raw materials and investment in subsidiaries, joint-venture companies, and the following accounts shall be recorded:

Dr 221, 222 (according to fair value)

Cr 511 – Revenues from sale of merchandises and services rendered

Cr 3331 – Output VAT payable.

- Cost prices of raw materials used for purchase of capital contribution in subsidiaries, joint-venture companies shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 152 – Raw materials.

o) Raw materials in excess detected when conducting physical inventory count:

Every case in which the shortage of raw materials in stock or preservation is detected when conducting physical inventory count must be make reports and uncover the reasons and offenders. According to reports on physical inventory count and decision of competent agency, the accounting shall be recorded as follow:

- If figures on ledger are error or are not updated, they are required to be additionally provided or adjusted;

- If the cost of raw materials in deficiency is under deficiency quotas, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 152 – Raw materials.

- If the reasons for the deficiency or losses are uncovered pending settlement, the following accounts shall be recorded: 

Dr 138 – Other payable (1381—Assets in shortage awaiting resolution)

Cr 152 – Raw materials.

- When there is a decision on settlement, the following accounts shall be recorded: 

Dr 111 – Cash (compensation of offenders)

Dr 138 – Other receivables (1388) (compensation of offenders)

Dr 334 – Payables to employees (deducting salaries of offenders)

Dr 632 – Costs of goods sold (remaining value of shortage of raw materials which is included in the costs of goods sold)

Cr 138 – Other payable (1381—Assets in shortage awaiting resolution)

p) Unused raw materials or waste:

- When liquidating or selling raw materials or waste, cost prices shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 152 – Raw materials.

- Revenues from sale of raw materials or waste shall be recorded as follows: 

Dr 111, 112, 131.

Cr 511 – Revenues from sale of merchandises and services rendered (5118)

Cr 333 – Taxes and other payables to the State.

3.2. Enterprises using periodic inventory system.

a) At the beginning of accounting period, when transferring cost of beginning raw materials inventory, the following accounts shall be recorded: 

Dr 611 – Purchases

Cr 152 – Raw materials.

b) At the ending of accounting period, according to physical inventory count for ending raw materials inventory, the following accounts shall be recorded: 

Dr 152 – Raw materials 

Dr 611 – Purchases

Article 26. Account 153 – Tools and supplies

1. Rules for accounting

a) This account is used to record current value and fluctuation of tools and supplies of the enterprise. Tools and supplies are labor materials not satisfying requirements pertaining to value and use time prescribed in regulations of fixed assets. Thus, tools and supplies shall be managed and recorded similarly to raw materials or materials. According to regulations in force, the following labor materials shall be recorded tools and supplies if they fail to satisfy requirements for fixed assets:

- The scaffolding, formwork, tools, jigs used for construction manufacturing;

- Types of packaging enclosed with goods charged separately, but their value is depreciated during preservation of goods in transit and storage in the warehouses;

- Tools or supplies made of glass, porcelain, ceramic;

- Management facilities, office supplies;

- Clothing, footwear designed exclusively for work, etc.

b) Received dispatched or inventoried tools or supplies recorded to account 153 shall apply original prices. Rules for determination of original prices of received tools or supplies shall comply with regulations on raw materials or materials (refer to account 152).

c) The value of inventoried tools or supplies shall be calculated according to one of following three methods:

- First in – First out;

- Specific identification;

- Weight average.

d) Tools or supplies shall be accounted for according to every inventory, type, and group, type of tools or supplies. Dispatched tools or supplies for business or lease must be kept records of items and value according to using place, lease entities and persons in charge of compensation. The precious and worth tools or supplies must be preserved specially.

dd) With regard to tools and supplies holding low value used for business, they shall be recorded once to production cost.

e) In case the tools and supplies, reusable packaging materials or instruments for renting related to business in several accounting periods, they shall be recorded to account 242 “Prepaid expenses" and allocated to production cost.

g) Accounting for tools and supplies related to transactions in foreign currencies shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.

2. Structure and contents of account 153 – Tools and supplies 

Debit:

- Actual cost of received tools and supplies purchase, handmade, outsourced, or contributed as capital;

- Cost of received tools and supplies for lease;

- Actual cost of tools and supplies in excess detected when conducting physical inventory count;

- Transfer of actual cost of ending tools and supplies inventory (if the enterprise uses periodic inventory system)

Credit:

- Actual cost of dispatched tools and supplies for business, lease or contribution as capital;

- Trade discounts on tools and supplies purchased;

- Cost of tools and supplies returned to sellers or tools and supplies eligible for discounts;

- Cost of tools and supplies in deficiency detected when conducting physical inventory count;

- Transfer of actual cost of beginning tools and supplies inventory (if the enterprise uses periodic inventory system)

Debit balance: Actual cost of tools and supplies inventory.

Account 153 – Tools and supplies, comprises 4 sub-accounts: 

- Account 1531 – Tools and supplies: recording current cost and decrease or increase in tools and supplies.

- Account 1532 – Reusable packaging materials: recording current cost and decrease or increase in circulated packages used for business Reusable packaging materials is packaging designed for multiple reusability in business cycle. The cost of dispatched reusable packaging materials shall be allocated to production cost of multiple accounting periods.

- Account 1533 – Instruments for renting: recording current cost and decrease or increase in tools and supplies for renting. Only tools and supplies purchased for renting are recorded to this account, if not, they shall be recorded to account 1531. If those are used for enterprise’ operation, they shall be both recorded to an account and a sub-account.

- Account 1534 – Equipment and spare parts for replacement: recording current cost and decrease and increase in equipment and spare parts for replacement not meeting requirements pertaining to fixed assets for enterprise’s operation. Costs of equipment and spare parts for replacement dispatched entirely shall be recorded to operating costs or wholly allocated to operating costs if they are used as tools and supplies.

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

a) When buying tools and supplies to add to stock, if the input VAT is deductible, the cost of tools and supplies shall be recorded according to the VAT-exclusive prices, the following accounts shall be recorded according to invoices, warehouse receipts and relevant documents: 

Dr 153 – Tools and supplies (VAT-exclusive prices)

Dr 133 – Deductible VAT (input VAT) (1331)

Cr 111, 112, 141, 331, etc.  (total payment).

If the input VAT is not deductible, cost of input tools and supplies shall include VAT.

b) In case the trade discounts or sales rebates are received after buying tools and supplies (including fines for violations against economic contracts leading decrease in payment made by the purchaser), those discounts shall be allocated according to decrease or increase in tools and supplies (inventoried or dispatched tools and supplies for operation):

Dr 111, 112, 331, etc. 

Cr 153 – Tools and supplies (if those tools and supplies are still inventoried)

Cr 154 - Work in progress (if those tools and supplies are dispatched for operation)

Cr 641, 642 (if those tools and supplies are dispatched for sale or enterprise management)

Cr 242 – Prepaid expenses (if they are gradually allocated)

Cr 632 – Costs of goods sold (if the product in which those raw materials are incorporated is determined in an accounting period)

Cr 133 – Deductible VAT (1331) (if any).

c) When returning tools and supplies sold to sellers, the following accounts shall be recorded: 

Cr 331 – Trade payables

Cr 153 – Tools and supplies (cost of returned tools and supplies)

Cr 133 – Deductible VAT (if any) (input VAT on tools and supplies returned to sellers).

d) When accounting for payment discounts (if any), the following accounts shall be recorded: 

Cr 331 – Trade payables

Cr 515 - Financial income. 

dd) When dispatching tools and supplies for operation:

- If costs of tools and supplies, reusable packaging materials, instruments for renting relate to an accounting period, they shall be wholly recorded to operating expenses as follows: 

Dr 623, 627, 641, 642 

Cr 153 - Tools and supplies (1531, 1532).

- If costs of tools and supplies, reusable packaging materials, instruments for renting relate to more than one accounting period, they shall be gradually recorded to operating expenses as follows:

When dispatching tools and supplies, reusable packaging materials or instruments for renting, the following accounts shall be recorded: 

Dr 242 – Prepaid expenses

Cr 153 - Tools and supplies.

+ When distributing to costs of operation for every accounting period, the following accounts shall be recorded: 

Dr 623, 627, 641,642, etc. 

Cr 242 – Prepaid expenses.

- Revenues from tools and supplies for renting shall be recorded as follows:

Dr 111, 112, 131, etc. 

Cr 511 – Revenues from sale of merchandises and services rendered (5113)

Cr 3331 – Deductible VAT (33311).

- When receiving tools and supplies for renting, the following accounts shall be recorded: 

Dr 153 - Tools and supplies (1533)

Cr 242 – Prepaid expenses (residual value not recorded to expenses)

g) Imported tools and supplies:

- When importing tools and supplies, the following accounts shall be recorded: 

Dr 153 - Tools and supplies

Cr 331 – Trade payables

Cr 3331 – Deductible VAT (33312) (if input VAT on imported goods are not deductible)

Cr 3332 – Special excise duty (if any).

Cr 3333 – Import/export duty (detail on import duty).

Cr 33381 – Environmental protection tax.

- If input VAT on imported goods is deductible, the following accounts shall be recorded:

Dr 133 – Deductible VAT 

Cr 3331 – Deductible VAT (33312).

- When buying tools and supplies, if the seller is received an advance in foreign currencies, the cost of tools and supplies equivalent to the advance shall be recorded according to actual exchange rates at the time in which the advance is paid. The remaining cost of tools and supplies shall be recorded according to actual exchange rates at the time in which the tools and supplies are purchased.

h) When conducting physical inventory count, if it is detected that the tools and supplies are excess, deficient, lost or damaged, they shall be settled similarly to raw materials (refer to account 152).

i) Unused tools and supplies:

- When liquidating or selling tools and supplies, their costs shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 153 - Tools and supplies.

- Revenues from sale of tools and supplies shall be recorded as follows:

Dr 111, 112, 131.

Cr 511 – Revenues from sale of merchandises and services rendered (5118)

Cr 333 – Taxes and other payables to the State.

3.2. Enterprises using periodic inventory system.

a) At the beginning of accounting period, when transferring actual costs of beginning tools and supplies inventory, the following accounts shall be recorded: 

Dr 611 – Purchases

Cr 153 - Tools and supplies.

b) At the ending of accounting period, according to physical inventory count for ending tools and supplies inventory, the following accounts shall be recorded: 

Dr 153 - Tools and supplies

Cr 611 – Purchases.

Article 27. Account 154 - Work in progress

1. Rules for accounting

a) This account is used to record general operating costs to calculate prime costs of products or services in enterprises applying perpetual inventory system. In the enterprises applying perpetual inventory system, the account 154 is used to record actual costs of ending work in progress.

b) Account 154 “Work in progress” records operating costs incurred in an accounting period; operating costs of finished goods in an accounting period; beginning or ending work in progress of the main or secondary operation and outsourcing processing provided by manufacturers or service providers. This account also records operating costs of processing operation, or services rendered by commercial enterprises (if any).

c) The operating costs recorded to 154 shall be clarified according to places in which the costs incurred (workshops, production divisions, production groups, construction sites, etc); types, groups of products, or product parts; types of services or service stages.

d) Operating costs recorded to account 154 shall include following costs:

- Direct raw materials cost;

- Direct labor cost; 

- Costs of construction machinery (construction contracts);

- Factory overhead.

dd) The raw materials or labor costs exceed the normal rate and non-allocated fixed operating cost shall not be recorded to inventory cost but recorded to costs of goods sold of an accounting period.

e) At the end of the accounting period, it is required to distribute and transfer fixed factory overhead to processing cost for each product unit under common capacity (Cr 627, Dr 154). If actual capacity is smaller than common capacity, the fixed factory overhead shall be allocated to processing costs for each product unit under common capacity. The non-allocated fixed factory overhead (not included in prime cost) shall be recorded to costs of goods sold in an accounting period (Cr 627, Dr 632). All variable factories overhead shall be allocated to processing costs for each product unit according to actual costs incurred.

g) The following costs shall not be recorded to account 154:

- Selling expenses; 

- General administration expenses;

- Financial expenses;

- Other expenses; 

- Corporate income tax;

- Non-business expenses, project expenses;

-  Capital expenditure;

- Other expenses covered by other sources

2. Method for applying account 154 in industry 

a) Account 154 - “Work in progress” applying to industry is used to collect production costs and calculate prime cost of workshops, production divisions.  Regarding manufacturers using outsourcing for processing, labor, services or manufacturing, those costs are also recorded to account 154.

b) Only following costs shall be recorded to account 154:

- Direct raw materials cost for manufacture of products;

- Direct labor cost for manufacture of products;

- Factory overhead for direct manufacture of products.

c) In industrial enterprises, the account 154 shall be specifically recorded according to places in which the costs incurred (workshops, the production divisions), types or groups of products, products, or product parts.

d) Regarding manufacturers using outsourcing for processing, labor, services or manufacturing, those costs shall be recorded to account 154.

3. Method for applying account 154 in agriculture 

a) Account 154 - “Work in progress” applying to industry is used to collect total production costs and calculate prime cost of cultivation, processing of agricultural products or services. This account shall be specifically recorded according to agricultural lines of business (cultivation, animal husbandry, processing, etc), places in which costs incurred (workshops, production divisions, etc), kinds of sapling and products or services.

b) Actual prime cost of agricultural products shall be determined at the end of the crop year or at the end of the year. The prime cost shall be calculated in the year when the products are harvested. Hence, if the costs incur in this year, but products are harvested in the succeeding year, the prime cost shall be calculated in the latter year.

c) In cultivation, the costs shall be recorded according to 3 following plants:

- Short-day crops (rice, potatoes, cassava, etc);

- Multi-harvesting single plant (pineapples, bananas, etc);

- Perennial plants (teas, coffees, rubbers, peppers, fruit plants, etc).

For crops harvested two or three times in a year, or harvested one time in two years, or crops having both new planting and plant care in the same year,...the costs between two continuous crops, two areas, two continuous years,…shall be recorded according to actual condition,... 

d) The expenses incurred from land reclamation, planting and caring of perennial plants under capital investment, selling expenses, administrative expenses, financial activities or other expenses. 

dd) In principle, production costs of agriculture shall be recorded to Dr 154 “Work in progress” according to every expense object. Regarding the costs related to multiple recording entities, multiple crops or multiple periods, it shall be recorded to separate accounts, then recorded to prime cost of relevant products: cost of irrigation water, the cost of land preparation and planting of crops harvested several times (this cost does not belong to capital expenditure), etc. 

e) On the same acreage, if two or more short-term crops are intercropped, the costs incurred directly related to (such as seeds, cost of planting, harvesting, ...), costs incurred for several crops (cost plowing, irrigation, ...) shall be separately collected and allocated to every kind of plant according to their planting area or appropriate criteria. 

d) Regarding perennial plants, the progress from tillage, sowing, plant care to the onset of production (harvesting or bearing) shall be recorded to account 241 “Construction in progress” similarly to capital investment in requisition of fixed asset. Expenses incurred from perennial gardens during the operation shall include expenses incurred from plant care or harvesting process. 

h) When recording expenses of animal husbandry on the account 154, the following notes must be taken: 

- The expenses incurred from animal husbandry must be kept records in details for every type of husbandry (cattle farming, pig farming, etc), for every group or every type of livestock and poultry; 

- Young animals of basic livestock herd after maternal separation shall be kept records in details according to actual price; - Basic animals which are eliminated to be converted into large livestock, fattening animal shall be recorded to account 154 according to the remaining value of basic livestock;

- Cost prices in the animal husbandry are: 1 kg of milk, 1 standard calf, 1 kg of meat prices, the price of 1 kg of meat, the price of 1 day/ animal husbandry, etc. 

i) The direct material costs, labor costs in excess of normal rate, and fixed factory overheads which are unallocated, shall not be charged to product cost, but be charged to cost of goods sold of the accounting period.

4. Method for applying account 154 in services

a) Account 154 “Work in progress” shall apply to service providers, such as: transport, post office, tourism, services, etc.  This account is used to record total cost (direct raw materials, direct labor, and factory overheads) and prime cost of the service rendered.

b) Regarding transport industry, this account is used to record cost related to road transport (motorcars, trams, other non-motorized vehicle, etc.  rail transport, waterway, aerial transport, pipeline transport, etc.  Account 154 applying to transport sector must be kept records in details for every operation (passenger transport, freight transport, etc) Regarding every enterprise or service division.

c) During transport progress, the tires shall be replaced several times because they are worn out more quickly than the depreciation of the car, however, the value of the tires shall be depreciated steadily in every month instead of including in the cost of transport at once.  Therefore, the vehicular transport enterprise may appropriate cost of tires to transport cost (payables) as prescribed in financial regime in force every month.

d) The direct material costs, labor costs in excess of normal rate, and fixed factory overheads which are unallocated, shall not be charged to product cost, but be charged to cost of goods sold of the accounting period.

dd) Regarding tourism industry, this account is used to record every activity, such as: guided tours, hotel, tourism transport, etc. 

e) In the hotel business, the account 154 is used to record every type of service, such as: eating, drinking, accommodation, entertainment, other services (laundry, haircuts, telegram, sports, etc).

5. Method for applying account 154 in construction industry

a) Because the construction business only applies perpetual inventory system, not periodic inventory system, so that the account 154 is only used to record operating expenses used for determination of products or services of the construction enterprise.

b) The direct material costs, labor costs in excess of normal rate, and fixed factory overheads which are unallocated, shall not be charged to cost of building work, but be charged to cost of goods sold of the accounting period.

c) This account (in the construction industry) comprises 4 sub-accounts:

- Account 1541 – Construction: records costs, prime cost of construction products and value of construction in progress at the end of the period;

- Account 1542 – Other products: records costs, prime cost of other products and record value of other products in progress at the end of the period (finished goods, structural elements, etc);

- Account 1543 – Services:  records costs, prime cost of services and record cost of service in progress at the end of the period;

- Account 1544 – Construction warranty costs: records expenses incurred from construction warranty and actual installation arising in the period and the value of construction in progress under warranty at the end of the period.

d) The production cost, prime cost of the installation product must be recorded according to every building work, work item and cost item specified in the estimated construction price, including:

-  Materials cost;

- Labor cost;

- Costs of construction machinery;

- Overheads.

The factory overheads shall be recorded to Dr 1541 “Construction”: only include general costs incurred from the construction contractor or construction site. And the general administration cost of construction enterprise (as a part of overheads) shall be recorded to Dr 642 "General administration expenses ". Those expenses shall be transferred to Dr 911 “Income statement” and included in the prime cost of the construction product and sold during a period.

dd) The investor of the property construction shall use this account to record expenses incurred from construction of finished property. If the property is constructed for multiple purposes (office, lease or sale, for example mix-used buildings), it is required to follow rules below:

- If there are sufficient evidence for separate accounting or the portion of expenses incurred from property construction for sale (finished property) and expenses incurred from property construction for lease or office (fixed assets or investment property), the expenses incurred from construction of finished property shall be separately recorded to the account 154. The expenses incurred from construction of fixed assets or investment property shall be separately recorded to account 241 – Construction in progress.

- If the account is not recorded separately or the proportion of construction costs for components of finished property, fixed assets or property investments are determined, the costs incurred directly related to the investment construction shall be recorded to account 241. When the project is completed and put into use, the costs of construction investment shall be transferred in conformity with the nature of each asset according to the method of use of the asset.

6. Structure and contents of account 154 - Work in progress

Debit:

- Direct raw materials costs, direct labor costs, costs of construction machinery, factory overheads incurred in an accounting period which is related to manufacture of products and costs of services rendered;

- Direct raw materials costs, direct labor costs, costs of construction machinery, factory overheads incurred in an accounting period which is related to prime cost of internal fixed price;

- Transfer of ending work in progress (if the enterprise uses periodic inventory system).

Credit:

- Actual costs of manufactured products which are stocked transferred for sale, internal use or immediate use in capital investment;

- Cost prices of construction products finished and partially or completely transferred which are consumed during a period, or transferred to main construction contract unit (superior or internal contract unit), or cost price of finished construction products to be consumed.

- Actual expenses of services finished and provided for customers;

- Value of returned scraps, value of damaged products which are not repairable;

- Value of raw materials, materials, goods which are completely processed and returned to warehouse;

- Recording direct material costs, labor costs in excess of normal rate, and fixed factory overheads which are unallocated, will not be charged to inventory value, but must be charged to cost of goods sold of the accounting period. For enterprises manufacturing according to orders, or enterprises having long production cycle, fixed factory overheads are transferred to account 154 every accounting period. When products are finished then fixed factory overheads will be identified and not charged to value of inventory, but to costs of goods sold (Cr 154, Dr 632);

- Transferring work in process at beginning of period (in case business applies periodical inventory).

Debit balance: Ending work in progress.

7. Method of accounting for several major transactions in Industry sector

7.1. Accounting for inventory using perpetual inventory system

a) At the end of period, when transferring direct raw material expenses according to every expense object, the following accounts shall be recorded: 

Dr 154 – Work in progress

Dr 632 - Costs of goods sold (portion of direct material costs in excess of normal rate)

Cr 621 – Direct raw materials.

b) At the end of period, when transferring direct labor costs according to every expense object, the following accounts shall be recorded: 

Dr 154 – Work in progress

Dr 632 - Costs of goods sold (portion of direct labor costs in excess of normal rate)

Cr 622 – Direct labor costs.

c) In case actual product capacity is higher than or equal to normal capacity, at end of accounting period, computed, total factory overheads (including variable factory overheads and fixed factory overheads) shall be calculated, allocated and transferred according to every expense object, and the following accounts shall be recorded: 

Dr 154 – Work in progress

Cr 627 – Factory overheads.

d) In case actual product capacity is lower than normal capacity, fixed factory overheads shall be calculated and allocated to processing cost per unit of product at the normal capacity.  Unallocated factory overheads (positive deference between actual fixed factory overheads and fixed factory overheads charged to prime cost of product shall not be charged to prime cost of product) shall be recorded to costs of goods sold during a period as follows:

Dr 154 – Work in progress

Dr 632 – Costs of goods sold (portion of fixed factory overheads unallocated to prime cost of product)

Cr 627- – Factory overheads.

dd) Value of raw materials, materials outsourced for processing and returned to warehouse, the following accounts shall be recorded: 

Dr 152 – Raw materials 

Cr 154 – Work in progress

e) Value of unrepairable damaged products which was compensated by offender, the following accounts shall be recorded: 

Dr 138 – Other receivables (1388)

Dr 334 – Payables to employees.

Cr 154 – Work in progress

g) In an enterprise having long production and trade cycle, and direct material costs, direct labor costs, and factory overheads were transferred to Account 154 during an accounting period, then, the portion of direct material costs of direct labor costs in excess of normal rates, and portion of fixed factory overheads not charged to prime cost of product (not charged to value of inventory) shall be determined and recorded to costs of goods sold in the accounting period as follows:

Dr 632 - Costs of goods sold 

Cr 154 – Work in progress (when expenses are transferred from accounts 621, 622, 627 to account 154).

h) When delivering goods to inventory during a period, the prime costs of goods shall be recorded as follows: 

Dr 155 – Finished goods 

Cr 154 – Work in progress

i) In case finished goods are not stored but delivered for internal use or capital investment, the following accounts shall be recorded: 

Dr 641, 642, 241

Cr 154 – Work in progress

k) After dispatching raw materials to production, if any trade discount or sales rebate (including fines for violations against business contracts leading a decrease in payment of the purchaser) on such raw materials is received, a decrease in work in progress pertaining to trade discount or sales rebate corresponding to dispatched raw materials shall be recorded as follows: 

Dr 111, 112, 331, etc. 

Cr 154 – Work in progress (trade discounts or sales obtained equivalently to dispatched raw materials) 

Cr 133 – Deductible VAT (1331) (if any).

l) Accounting for experimental products:

- Production cost of experimental products shall be recorded to account 154 similarly to other products. When recovering (sale or liquidation) experimental products, the following accounts shall be recorded: 

Dr 111, 112, 131

Cr 154 – Work in progress

Cr 3331 – VAT payables (if any).

- Transferring difference between experimental production cost and amounts collected from sale or liquidation of experimental products:

+ If the experimental production cost is greater than the amounts collected from sale or liquidation of experimental products, an increase in value of construction asset shall be recorded as follows: 

Dr 241 – Construction in progress 

Cr 154 – Work in progress

+ If the experimental production cost is smaller than the amounts collected from sale or liquidation of experimental products, a decrease in value of construction asset shall be recorded as follows: 

Dr 154 – Work in progress

Cr 241 – Construction in progress 

m) In case finished goods are not stored but delivered directly to purchaser (water, electricity products), the following accounts shall be recorded: 

Dr 632 - Costs of goods sold 

Cr 154 – Work in progress

7.2. Accounting for inventory using periodic inventory system:

a) At the end of the accounting period, according to the actual physical inventory count, the actual value of work in progress shall be determined and transferred as follows: 

Dr 154 – Work in progress

Cr 631 – Production costs

b) At the beginning of accounting period, when transferring actual work in progress, the following accounts shall be recorded: 

Dr 631 – Production costs

Cr 154 – Work in progress

8. Method of accounting for several major transactions in Agriculture sector

8.1. Accounting for inventory using perpetual inventory system

a) At the end of accounting period, direct material costs shall be calculated and transferred according to operating expense object as follows: 

Dr 154 – Work in progress

Dr 632 - Costs of goods sold (portion of direct material costs in excess of normal rate)

Cr 621 – Direct raw materials.

b) At the end of accounting period, direct labor costs shall be calculated and transferred according to expense object as follows:

Dr 154 – Work in progress

Dr 632 - Costs of goods sold (portion of direct labor costs in excess of normal rate)

Cr 622 – Direct labor costs.

c) At the end of accounting period, factory overheads shall be calculated and transferred according to expense object as follows:

Dr 154 – Work in progress

Dr 632 – Costs of goods sold (portion of fixed factory overheads unallocated to prime cost of product)

Cr 627 – Factory overheads.

d) Value of returned subsidiary products shall be recorded as follows: 

Dr 152 – Raw materials 

Cr 154 – Work in progress

dd) Value of returned scraps, of raw materials and trade expenses outsourcing, and have been completely processed, returned to storehouse shall be recorded as follows: 

Dr 152 – Raw materials 

Cr 154 – Work in progress

e) Value of young domestic animals and raised domestic animals transferred to working animals or reproductive animals shall be recorded as follows: 

Dr 211 – Tangible fixed asset (2116)

Cr 154 – Work in progress

g) Actual production cost of output products, stored or immediately consumed shall be recorded as follows: 

Dr 155 – Finished goods 

Dr 632 - Costs of goods sold 

Cr 154 – Work in progress

h) Output products which are internally consumed without inventory shall be recorded as follows: 

Dr 641, 642, 241

Cr 154 – Work in progress

8.2. Accounting for inventory using periodic inventory system:

Accounting method for severed major trade activities at Account 154 in Agriculture is similar to that of Industry.

9. Method of accounting for several major transactions in Services sector

Accounting method for severed major trade activities at Account 154 in Services is similar to that of Industry. Notes:

a) Actual cost of service which is completed, transferred to purchased and determined as sale during a period shall be transferred as follows:

Dr 632 - Costs of goods sold 

Cr 154 – Work in progress

b) When using internal consumes service, the following accounts shall be recorded: 

Dr 641, 642.

Cr 154 – Work in progress

10. Method of accounting for several major transactions in Construction sector

10.1. Accounting method for collecting construction expenses (Dr 1541 “Construction”):

a) Accounting for items of direct raw materials:

- Items of direct raw materials consist of: Actual value of main materials, subsidiary materials, component parts on dismantled parts, circulating materials participating in formation of construction product substances, or support for implementation and performance of construction volume (not including subsidiary materials for machinery and operation facilities, and main materials expenses included in factory overheads).

- Accounting rules for items of direct raw materials: Raw materials or materials used for some work items must be charged directly to those work items according to original documents with actual volume of used materials, and with actual delivery price (weighted average price, FIFO price, and specific identification).

- At the end of accounting period or when construction is completed, residual materials inventory at production site (if any) shall be undergone physical inventory count to record as a decrease in costs of direct materials delivered for use in construction.

- If direct material costs for each building work or work item is not feasible to calculate in actual conditions, then the enterprise may apply material allocation method for consumed objects with reasonable criteria for (in proportion to consume quota on raw materials, etc).

- According to Table of materials allocated for each building work or work item, the following accounts shall be recorded: 

Dr 154 – Work in progress (material costs)

Dr 632 - Costs of goods sold (direct material costs in excess of normal rate)

Cr 621 – Direct raw materials.

b) Accounting for direct labor costs: similar to Industry sector

c) Accounting for costs of construction machinery

- Costs of construction machinery shall include: Expenses incurred from machinery operation to perform construction volume by machine. Operating machinery is a kind of machine served directly for construction. Such as, machinery operated by hydro steam engine, diesel, and petrol and by electricity, etc.  (including kinds of machine served for construction and assembly).

- Expenses of machinery operation consist of permanent expenses and temporary expenses. Permanent expenses for operation of machinery consist of: Expenses of labor handling machine, serving machine, etc; expenses of materials, of instruments and tools; depreciation expenses of fixed assets, expenses of outsourced services (small repairs, electricity and water expenses, trucks and machine expenses, etc); other expenses in cash.

- Temporary expenses for operation of machinery consist of: Expenses for great repairs of operating machine (maintenance overhaul, repairs of medium importance, etc) which are not eligible for recording as an increase in historical cost of operating machine; expenses for temporary works for operating machine (huts, sheds, platform, railway for machines). Temporary expenses of machine may incur in advance (debited Account 142 or Account 242), and they will be deferred to Account 623 “Operating machine expenses”, or incurred later, but they must be charged in advance to construction expenses during a period (because they relate to actual use of operating machines during the period).  In this case it is necessary to accrue expenses, Cr 332 “Provisions”, Dr 623 “Costs of construction machinery”.

- Expenses summary and calculation of costs of construction machinery must be separately recorded for each operating machine (see guidance on Account 623 “Costs of construction machinery”).

- According to Table of costs of construction machinery (actual expenses of machine shift) for every building work or work item, the following accounts shall be recorded: 

Dr 154 – Work in progress

Dr 632 - Costs of goods sold (costs in excess of normal rate) 

Cr 623 – Costs of construction machinery.  

d) Accounting for factory overheads: 

- Factory overheads record production costs of construction team or work sites, including: salaries of factory management staff, of construction teams and groups, social insurance and health insurance appropriation and trade union fees appropriation will be computed with regulated proportion on salaries payables for construction direct workers, operating machine operators, and management staffs of factories, teams and groups; fixed assets depreciation used for total activities of teams, and other related expenses of team activities, etc.  

When these expenses incur during a period, the following accounts shall be recorded: 

Dr 627 – Factory overheads.

Dr 133 – Deductible VAT (if any).

Cr 111, 112, 152, 153, 214, 242, 334, 338, etc.  

- When determining provisions for construction warranty, the following accounts shall be recorded: 

Dr 627 – Factory overheads. 

Cr 352 – Provisions.

- When incurring expenses incurred from repair and warranty of the construction, such as expenses incurred from direct raw materials, direct labor costs, costs of construction machinery, factory overheads, these expenses shall be recorded to relevant accounts, the following accounts shall be recorded: 

Dr 621 – Direct raw materials.

Dr 622 – Direct labor costs.

Dr 623 – Costs of construction machinery.

Dr 627 – Factory overheads.

Dr 133 – Deductible VAT (if any).

Cr 111, 112, 152, 153, 214, 242, 334, 338, etc. 

- At the end of the period, actual expenses incurred from direct raw materials, direct labor costs, costs of construction machinery, factory overheads related to repair and warranty of construction to record expenses incurred from repair and warranty and calculate prime cost of warranty, the following accounts shall be recorded: 

Dr 154 – Work in progress

Cr 621 – Direct raw materials.

Cr 622 – Direct labor costs.

Cr 623 – Costs of construction machinery.

Cr 627 – Factory overheads.

- When finishing repair or warranty of the construction and transferring them to customers, the following accounts shall be recorded: 

Dr 352 – Provisions.

Cr 154 – Work in progress

- When warranty on construction works expires, if the works are not warranted or the provisions for construction work warranty are greater than the actual costs incurred, the difference must be reverted, and then the following accounts shall be recorded: 

Dr 352 – Provisions.

Cr 711 – Other income.

- At the end of the accounting period, according to the Table of factory overheads allocation, the factory overheads shall be allocated and transferred to relevant building works or work items (equivalent to labor costs); the following accounts shall be recorded: 

Dr 154 – Work in progress

Dr 632 – Costs of goods sold (portion of fixed factory overheads unallocated to prime cost of construction)

Cr 627 – Factory overheads.

10.2. Method of accounting for and transferring construction expenses (Cr 1541 “Construction”):

a) Unrecoverable cost of the contract cannot be recovered (e.g., not enough legal enforcement such as there is doubts about its validity, or the contract that the customers cannot fulfill their obligations ...) must be recorded to expenses during the period as follows: 

Dr 632 - Costs of goods sold 

Cr 154 – Work in progress

b) Expenses directly related to every contract may be eligible for deduction if other receipts not including in the revenue of the contract. For example: receipts from sale of raw materials in surplus and disposal of machinery or equipment when terminating the construction contract:

- When delivering raw materials in surplus to inventory at the expiration of the construction contract, the following accounts shall be recorded: 

Dr 152 – Direct raw materials (according to original cost)

Cr 154 – Work in progress.

- When recovering scrap then delivering them to inventory, the following accounts shall be recorded: 

Dr 152 – Direct raw materials (according to recoverable cost)

Cr 154 – Work in progress.

- If the materials in surplus and recovered scrap which are sold without delivered to inventory, receipts from materials in surplus and scrap and a decrease in expenses shall be recorded as follows:

Dr 111, 112, 131, etc.  (total payment)

Cr 3331 – VAT payable (33311)

Cr 154 – Work in progress.

- Accounting for disposal of machinery or equipment specially used for construction contract and these fixed assets are depreciated fully on the expiry date of the construction contract:

+ The receipts from disposal of machinery or equipment shall be recorded as follows: 

Dr 111, 112, 131, etc. 

Cr 3331 – VAT payable (33311)

Cr 154 – Work in progress.

+ The expenses incurred from disposal of machinery or equipment (if any) shall be recorded as follows: 

Dr 154 – Work in progress

Dr 133 – Deductible VAT (1331).

Cr 111, 112, etc. 

+ A decrease in fully depreciated fixed assets which are special machinery or equipment shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets 

Cr 211 – Tangible fixed asset.

c) At the end of the accounting period, according to cost price of construction product actually finished and identified to be sold (partly transfer or completely transfer to project management board - Party A), or transferred to internal main contract business:

- In case transferring to Party A (including transfer of finished construction volume according to internal contract, if contract unit has separate account division), the following accounts shall be recorded: 

Dr 632 - Costs of goods sold 

Cr 154 – Work in progress (1541).

- In case construction product is finished to be sold (constructing houses for sales,...), or construction products finished but are not yet transferred, according to cost price of finished construction product to be sold, the following accounts shall be recorded: 

Dr 155 – Finished goods 

Cr 154 – Work in progress (1541).

- In case transferring finished construction product to main construction contract unit (superior, or internal unit - when implementing internal construction contract, contract unit has separate account division but only adjust account up to costs of construction production), the following accounts shall be recorded: 

Dr 352 – Intra-company receivables (3368)

Cr 154 – Work in progress (1541).

Article 28. Account 155 – Finished goods inventory 

1. Rules for accounting

a) This account is used to record current cost and decrease or increase in finished goods of the enterprise. Finished goods inventory are products which have been completely processed through manufacturing process of manufactured business, or products completely outsourced and verified as compliance with technical standards and stored.

In the transactions in export entrustment, this account is only used by trustor, not by trustee 

b) The finished goods manufactured by direct production divisions and indirect production divisions of the enterprise must be evaluated according to prime cost, including: direct raw materials cost, direct labor cost, factory overhead and direct relevant costs related to manufacture of products.

- Variable factory overhead shall be wholly allocated to processing cost of each product unit according to actual cost incurred within an accounting period.

- Fixed factory overhead shall be allocated to processing cost of each product unit according to common capacity of manufacturing machinery and equipment. Common capacity means common volume of products manufactured in the normal manufacturing condition.

- If the actual capacity is greater than common capacity, the fixed factory overhead shall be allocated to each unit according to actual costs incurred.

- If the actual capacity is lower than common capacity, the fixed factory overhead shall only be allocated to processing cost for each unit according to the common capacity. The non-allocated factory overhead shall be recorded to the cost for income output (recorded to costs of goods sold) within an accounting period.

c) The following costs shall not be recorded to prime costs of finished goods:

- Costs of raw materials, labor and other operating costs incurred exceeding normal rates;

- Cost of preservation of inventory deducted from cost of preservation of inventory for next manufacturing process and preservation cost as prescribed in Accounting standard “Inventory”;

- Selling expenses; 

- General administration expenses;

d) Finished goods processed under outsourcing agreement shall be evaluated according to actual prime cost of processing, including: direct raw materials cost, outsourcing cost and other costs related to outsourcing process.

dd) The cost of finished goods inventory shall be calculated according to one of following method: specific identification; weight average; or first in – first out.

e) In case the enterprise uses the periodic inventory system, the finished goods which are received and dispatched inventory shall be recorded daily according to accounting cost (may be planned prime cost or regulated inventory cost). At the end of the month, the actual prime cost of inventoried finished goods must be calculated and difference between actual prime cost and accounting cost of finished goods (including the difference of beginning finished goods) which is the basis for calculation of actual prime cost of received or dispatched finished goods within an accounting period (using the formula prescribed in account 152 “Raw materials”).

g) The finished goods shall be specifically accounted according to every inventory, type, group, finished good items.

2. Structure and contents of account 155 – Finished goods 

Debit:

- Cost of inventoried finished goods;

- Cost of finished goods in surplus under physical inventory count;

- Transfer of cost of ending finished goods inventory (if the enterprise uses periodic inventory system)

Credit:

- Actual cost of dispatched finished goods;

- Cost of finished goods in shortage under physical inventory count;

- Transfer of actual cost of beginning finished goods inventory (if the enterprise uses periodic inventory system)

Debit balance: Actual cost of ending finished goods inventory.

Account 155 – Finished products, comprises 2 sub-accounts:

- Account 1551 – Inventoried finished goods: recording current cost and decrease or increase in inventoried finished goods (other than finished goods which are real estate);

- Account 1557 – Finished goods – property: recording current cost and decrease or increase in Finished goods – property of the enterprise. Finished goods – property include: land use rights; housing; or housing and land use rights; infrastructure invested for the ordinary course of business 

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

3.1.1. When receiving finished goods manufactured by the enterprise or under outsourcing agreement, the following accounts shall be recorded:

Dr 155 – Finished goods 

Cr 154 - Work in progress.

3.1.2. When dispatching finished goods for sale to customers, the costs of finished goods sold shall be recorded as follows: 

a) Finished goods – non-real estate 

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

b) Finished goods – property (for building work invested by the enterprise)

b1) Original prices of Finished goods – property shall include total costs directly related to investment in construction of real estate (including costs of construction of infrastructure associated with the real estate) making the real estate available for sale.

b2) Costs related to investment in construction of real estate must be incurred costs which obtain acceptance report.

b3) In case the enterprise has not compiled documents on costs related to investment of construction of real estate, but the revenues from sale of the real estate generated, the enterprise may extract a portion of the cost to provisionally calculate costs of goods sold. When the documents are sufficiently compiled or the real estate is constructed wholly, the enterprise must settle total costs which are accrued from costs of goods sold The positive difference between accrued cost in advance and actually incurred cost shall be recorded as a decrease in costs of goods sold during the accounting period subject to settlement.

b4) The advanced costs deducted for provisional costs of Finished goods – property must follow the rules below:

- The enterprise may only accrue an advance of costs stated in the estimates for investment in construction, but there are not enough documents for acceptance and specific presentation of reasons, accrued expenses incurred from every work item within an accounting period.

-The enterprise may only accrue costs to calculate provisionally costs of goods sold for finished real estate, which is sold within an accounting period and qualify for recording revenues as prescribed in this Circular. 

- Provisional accrued expenses and actual cost incurred shall be recorded to costs of goods sold provided that they are equivalent to quota of cost according to total estimate cost of the portion of real estate which is sold (defined by area).

b5) Accounting method for costs of Finished goods – property sold.

- When selling the portion of finished goods, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

- When extracting costs to provisionally calculate costs of Finished goods – property sold within an accounting period, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 335 – Expenses payable.

- The actual cost of investment in construction incurred which have sufficient and accepted documents shall be compiled to calculate cost of investment in construction of real estate, the following accounts shall be recorded: 

Dr 154 - Work in progress

Dr 133 – Deductible VAT 

Cr, relevant accounts.

- When there are sufficient documents proved prepaid expenses incurred actually, decreases in prepaid expenses and work in progress shall be recorded as follows: 

Dr 335 – Expenses payable.

Cr 154 - Work in progress.

- When the whole project for real estate finishes, the final settlement must be made and a decrease in remaining prepaid expenses (if any) shall be recorded as follows: 

Dr 335 – Expenses payable.

Cr 154 - Work in progress.

Cr 632 – Costs of goods sold (the remaining prepaid expenses must be greater than actual expenses incurred).

3.1.3. When dispatching finished goods for sale or agencies, the following accounts shall be recorded: 

Dr 157 – Consignment goods (through agencies)

Cr 155 – Finished goods 

3.1.4. When a buyer returns finished goods sold: If the returned goods subject to VAT using credit-invoice method, revenues from goods returned (VAT-exclusive prices), and the following accounts shall be recorded: 

Dr 521 – Revenue deductions (5213)

Dr 3331 – VAT payable (33311).

Cr 111, 112, 131, etc.  (total cost of goods returned).

And the costs of finished goods sold which are delivered to inventory shall be recorded as follows: 

Dr 155 – Finished goods 

Cr 632 – Costs of goods sold.

3.1.5. Internal consumer goods shall be recorded as follows: 

Dr 641, 642, 241, 211 

Cr 155 – Finished goods 

3.1.6. Dispatching finished goods and transferring to dependent accounting units of the enterprise:

- In case the dependent accounting units are in charge of recording revenues, costs of goods, the costs of finished goods sold shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

- In case the dependent accounting unit is not in charge of recording revenues, costs of goods, the costs of products circulated intra-company shall be intra-company receivables and be recorded as follows: 

Dr 136 - Intra-company receivables

Cr 155 – Finished goods 

Cr 333 – Taxes and other payables to the State (in detail).

3.1.7 When contributing finished goods to subsidiaries, joint-venture companies as capital, the following accounts shall be recorded:

Dr 221, 22 (according to re-evaluated value)

Dr 811 – Other expenses (re-evaluated value is smaller than book value of finished goods)

Cr 155 – Finished goods 

Cr 711 – Other incomes (re-evaluated value is greater than book value of finished goods)

3.1.8 When dispatching finished goods to sell capital holding in subsidiaries, joint-venture companies, the following accounts shall be recorded:

- The revenues from sale of raw materials and investment in subsidiaries, joint-venture companies, and the following accounts shall be recorded:

Dr 221, 222 (according to fair value)

Cr 511- – Revenues

Cr 3331 – Output VAT payable.

- The costs of finished goods to sell capital holding in subsidiaries, joint-venture companies shall be recorded as follows:

Dr 632 – Costs of goods sold

Cr 155- – Finished goods 

3.1.9 Whenever the surplus or shortage of finished goods is detected under physical inventory count, it is required to make report and uncover reasons and look for offender(s). According to reports on physical inventory count and decision of competent agency, the accounting shall be recorded as follow:

- If the surplus or shortage of finished goods caused by errors or are not updated, they are required to be additionally provided or adjusted on the accounting records;

- In case it fails to uncover reasons for surplus or shortage, it shall be pending for settlement:

+ If the finished goods are surplus, the following accounts shall be recorded: 

Dr 155 – Finished goods (according to fair value)

Cr 338 – Other payables or receivables (3381).

When there is a decision of settlement made by the competent agency, the following accounts shall be recorded: 

Dr 338 – Other payables or receivables.

Cr, relevant accounts.

+ If the finished goods are deficient, the following accounts shall be recorded: 

Dr 138 – Other payables (1381 – Assets in shortage awaiting resolution)

Cr 155 – Finished goods 

- When there is a decision on settlement made by the competent agency, the following accounts shall be recorded: 

Dr 111, 112, etc.  (if the offender pays compensation in cash)

Dr 334 – Payables to employees (deducting salaries of offenders)

Dr 138 – Other receivables (1388) (compensation of offenders)

Dr 632 – Costs of goods sold (remaining shortage after offsetting against compensation)

Cr 138 - Other receivables (1381).

3.1.10 When the enterprise uses products for giving, promotion or advertisement (under law on commerce):

a) If the products are manufactured for giving, promotion or advertisement without collecting money or any additional conditions (compulsory purchase of goods, etc), the costs of products shall be recorded to selling expenses as follows (goods for promotion or advertisement for detail):

Dr 641 – Selling expenses

Cr 155 – Finished goods (production cost of products).

b) If the products are manufactured for promotion or advertisement with additional conditions that the customers are required to buy goods (e.g. buy two, get one free, etc) The collected amounts of moneys shall be recorded to revenues (including promotion goods), costs of promotion goods shall be recorded to costs of goods sold (nature of transaction is a decrease in good costs).

- When dispatching promotion goods, the costs of promotion goods shall be recorded to costs of goods sold as follows: 

Dr 632 – Cost prices of goods sold (prime cost)

Cr 155 – Finished goods 

- When receiving revenues from promotion goods shall be recorded to goods sold and promotion goods as follows: 

Dr 111, 112, 131, etc. 

Cr 511 – Revenues

Cr 3331 – Deductible VAT (33311) (if any).

c) If products manufactured for giving staff using welfare fund, the revenues and costs of goods shall be recorded similarly to ordinary selling transactions as follows: 

- The products for giving to staff and employees shall be recorded to costs of goods sold:

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

- Products for giving using welfare fund shall be recorded to revenues as follows:

Cr 353 - Welfare fund (total payment)

Cr 511 – Revenues

Cr 3331 – Deductible VAT (33311) (if any).

3.1.11. Paying salaries to employees by products

- The revenues from products for paying salaries to employees shall be recorded as follows: 

Dr 334 – Payables to employees (total costs)

Cr 511 – Revenues

Cr 3331 – VAT payable (33311).

Cr 3335 – Deductible VAT (if any).

- The cost of products for paying salaries to employees shall be recorded to costs of goods sold as follows: 

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

3.1.12. When liquidating or selling unused finished goods, their costs shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

3.2. Enterprises using periodic inventory system.

a) At the beginning inventory, according to the physical inventory count of finished goods which are transferred from previous ending inventory, the beginning finished goods inventory shall be recorded to account 632 “Costs of goods sold” as follows: 

Dr 632 – Costs of goods sold

Cr 155 – Finished goods 

b) At the ending of accounting period, according to physical inventory count for finished goods inventory, the ending finished goods inventory shall be transferred as follows: 

Dr 155 – Finished goods 

Cr 632 – Costs of goods sold.

Article 29. Account 156 – Goods

1. Rules for accounting

a) This account is used to record current value and increase or decrease in merchandise inventory of an enterprise, including merchandise in inventories, properties held for sale.  Merchandise inventory is goods that have been purchased by an enterprise, with the intent of selling the goods to third parties (wholesale or retail). If the merchandise purchased for both sale and operation, it shall still be recorded to account 156 “Merchandise inventory”

In the import-export entrustment transaction, this account is only used by the trustor not by the trustee. Trading in merchandise inventory related to transactions in foreign currencies shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.

b) The following merchandise shall not be recorded to account 156 “Merchandise inventory”:

- Consignment goods sold or kept on behalf of other enterprises;

- Merchandise purchased for operation (recorded to account 152 “Raw materials", or account 153 “Tools and supplies", etc). 

c) The received, dispatched or inventoried merchandise inventory recorded to account 156 shall be accounted according to original prices as prescribed accounting standard “Inventory”. Historical cost of merchandise inventory purchased includes: Purchasing prices or incidental purchase costs (transport, material handling, preservation of merchandise from suppliers to the enterprise’s warehouse, insurance cost, etc), import duty, special excise tax, environmental protection tax (if any), VAT on imported goods (if they are not deductible). If the enterprise purchases merchandise for resale, but they must be processed, semi-processed, refurbished, classified for additional value and quick sale of merchandise, the merchandise cost shall include processing or semi-processing cost.

- The historical cost of merchandise purchased shall be calculated according to every input source and the purchasing price and incidental purchase cost shall be recorded separately.

- When determining cost of merchandise inventory, the enterprise may apply one of following methods:

+ First in - first out;

+ Specific identification;

+ Weight average;

- Some particular units (supermarkets or similar) may determine cost of ending inventory balances using retail inventory method. This method may be used in the retail to calculate cost of inventory in bulk of merchandise which vary promptly and have similar margin unable to use other method calculating original prices.  The original cost of merchandise inventory shall equal selling price of merchandise inventory minus (-) margin (reasonable rate). That is used with due account taken of merchandise pieces which has fallen to less than its original price Each retailer usually uses separate average rate of percent.

- The incidental purchase cost in an accounting period shall be charged to consume merchandise during the period and ending merchandise inventory. The incidental purchase cost shall be allocated according to specific condition of every enterprise, but it is required to be consistent.

d) When buying merchandise, if goods, equipment or accessories for replacement are attached (provision for breakdown), the goods, equipment or accessories for replacement shall be recorded with proper cost. Cost of imported goods is the price subtracted from cost of goods, equipment or accessories for replacement.

dd) The merchandise inventory shall be specifically accounted according to every inventory, type, group of merchandise items.

2. Structure and contents of account 156 – Merchandise inventory 

Debit:

- Cost of merchandise purchased stated in the sale invoice (including non-refundable taxes);

- Incidental purchase cost; 

- Cost of merchandise under outsourcing agreement (including input prices and processing cost);

- Cost of goods returned;

- Cost of merchandise inventory in surplus detected under physical inventory count;

- Transfer of ending merchandise inventory balances (if the enterprises use periodic inventory system);

- Cost of properties held to sale purchased or converted from investment property. 

Credit:

- Cost of dispatched merchandise for sale or sending to agents, affiliated enterprises; performance of outsourcing agreement, or for operation;

- Incidental purchase cost allocated to merchandise sold during the period; 

- Trade discount on merchandise purchased;

- Sale discount on merchandise purchased;

- Cost of goods returned;

- Cost of merchandise inventory in shortage detected under physical inventory count;

- Transfer of beginning merchandise inventory balances (if the enterprises use periodic inventory system);

- Cost of properties held to sale sold or converted into investment property, property used by the owner or fixed assets.

Debit balance:

- Cost of merchandise inventory purchases;

- Incidental purchase cost of merchandise inventory. 

Account 156 – Merchandise inventory, comprises 2 sub-accounts:

- Account 1561 – Purchase costs: recording current cost and decrease or increase in merchandise purchased and inventoried (according to purchase costs);

- Account 1562 – Incidental purchase costs: recording incidental purchase costs incurred relating to amounts of received merchandise during a period and the distribution of current incidental purchase costs in the period to amounts of merchandise purchased during a period and ending merchandise inventory balances (including inventoried merchandise and merchandise on consignment, unsold goods on consignment). The incidental purchase costs recorded in this account only include the costs directly related to the processing of purchasing merchandise, such as: insurance cost of merchandise, depot rents, etc, costs of transport, material handling, preservation of merchandise from supplier to the enterprise’s stock; normal losses incurred during processing of purchasing merchandise. 

- Account 1567 – Properties held for sale: recording current cost and decrease or increase in properties held for sale of the enterprise. Properties held for sale include: land use rights; housing; or housing and land use rights; infrastructure purchased for sale in the ordinary course of business; investment properties shall be recorded to inventory when the owner put them for sale.

a) Structure and contents of account 1561 – Purchase costs 

Debit:

- Purchased merchandise cost according to sales invoice (inventoried);

- Import duty or special excise tax on imported goods or VAT on imported goods, input VAT – if they are not deductible, imposed on inventoried merchandise purchased;

- Cost of inventoried merchandise subject to processing agreement, including: purchase costs and costs of processing;

- Cost of merchandise allocated as capital;

- Cost of inventoried goods returned;

- Cost of merchandise inventory in surplus detected under physical inventory count;

- Transfer of cost of ending merchandise inventory (if the enterprise uses periodic inventory system)

Credit:

- Actual cost of merchandise dispatched during a period (dispatch for sale, exchange, giving to agencies or dependent accounting units, internal use, capital contribution in joint-venture);

- Trade discount on merchandise purchased;

- Sale discount on merchandise purchased;

- Cost of goods returned;

- Costs of merchandise in shortage or losses;

- Transfer of beginning merchandise inventory balances (if the enterprises use periodic inventory system);

Debit balance: Actual cost of ending merchandise inventory.

b) Structure and contents of account 1562 – Incidental purchase costs 

Debit: Actual incidental purchase costs incurred relating to amounts of merchandise purchased and received in a period.

Credit: Incidental purchase costs of amounts of merchandise consumed during a period.

Debit balance: Ending incidental purchase cost balances.

c) Structure and contents of account 1567 – Properties held for sale  

Debit:

- Actual cost of properties held to sale;

-  Residual value of investment properties converted into property inventory;

- Cost of repair, renovation, upgrade of property for sale which is recorded as an increase in original cost of properties held for sale

Credit:

- Actual cost of properties held to sale during a period;

- Cost of properties held to sale converted into investment properties or fixed assets. 

Debit balance: Actual cost of ending properties held for sale balances.

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

3.1.1. Merchandise purchased and delivered to the enterprise’s warehouse, according to sales invoices, warehouse receipts and relevant documentary evidence:

a) When purchasing merchandise, if input VAT on merchandise is deductible, the following accounts shall be recorded:

Dr 156 – Merchandise inventory (1561) (detail in merchandise purchased and merchandise used as substitute provisional for damage)

Dr 1534 – Equipment and spare parts for replacement (fair value)

Dr 133 – Deductible VAT (1331) (input VAT) 

Cr 111, 112, 141, 331, etc.  (total payment).

If the input VAT is not deductible, value of merchandise purchased shall include VAT

b) Importing merchandise:

- When importing merchandise, the following accounts shall be recorded:

Dr 156 – Merchandise inventory 

Cr 331 – Trade payables

Cr 3331 – Deductible VAT (33312) (if input VAT on imported goods are not deductible)

Cr 3332 – Special excise duty (if any).

Cr 3333 – Import/export duty (detail on import duty).

Cr 33381 – Environmental protection tax.

- If input VAT on imported goods is deductible, the following accounts shall be recorded:

Dr 133 – Deductible VAT 

Cr 3331 – Deductible VAT (33312).

- When buying merchandise and prepaying the seller an advance in foreign currency, the cost of merchandise equivalent to the advance shall be recorded according to actual exchange rates at the time in which the prepayment is made The remaining cost of merchandise purchased in foreign currency shall be recorded according to actual exchange rates at the purchasing time.

- The merchandise purchase under import entrustment shall comply with regulations on account 331 – Trade payables

3.1.2. At the end of the accounting period, if the sales invoice sent by the seller is received but the merchandise has not been received, the following accounts shall be recorded:

Cr 151 – Goods in transit

Dr 133 – Deductible VAT (if any) 

Cr 111, 112, 331, etc. 

- Next accounting period, when the merchandise purchase in transit, the following accounts shall be recorded: 

Dr 156 – Merchandise inventory (1561)

Cr 151 – Goods in transit

3.1.3 In case the trade discounts or sales rebates are received after buying merchandise (including fines for violations against economic contracts leading decrease in payment made by the purchaser), those discounts shall be allocated according to decrease or increase in tools and supplies (inventoried or dispatched merchandise during a period):

Dr 111, 112, 331, etc. 

Cr 156 – Merchandise inventory (if merchandise are still inventoried)

Cr 632 – Costs of goods sold (if they are consumed during a period)

Cr 133 – Deductible VAT (1331) (if any).

3.1.4 Cost of merchandise purchased which is returned to sellers due to failure of specifications under economic contract, the following accounts shall be recorded: 

Cr 111, 112, etc.

Cr 331 – Trade payables

Cr 156 – Merchandise inventory (1561)

Cr 133 – Deductible VAT (1331) (if any).

3.1.5 Purchase costs of merchandise inventory shall be recorded as follows: 

Dr 156 – Merchandise inventory (1562)

Dr 133 – Deductible VAT (if any) 

Cr 111, 112, 141, 331, etc. 

3.1.6 When purchasing merchandise making deferred payment, the following accounts shall be recorded: 

Dr 156 – Merchandise inventory (cash prices)

Dr 133 – Deductible VAT (if any) 

Dr 242 – Prepaid expenses {interest on deferred payment is difference between total payment minus (-) cash prices deducted from VAT (if it is deductible)}

Cr 331 – Trade payables (total costs)

The interests on deferred payment shall be periodically recorded to financial expenses as follows: 

Dr 635 - Financial expenses 

Cr 242 – Prepaid expenses.

3.1.7. When purchasing properties held for sale, the purchase costs and incidental purchase costs of properties held for sale shall be recorded as follows: 

Dr 1567 – Properties held for sale (VAT-exclusive prices)

Dr 133 – Deductible VAT (1332)

Cr 111, 112, 331, etc. 

3.1.8. If the investment properties convert into inventory when the owner repairs, innovates or upgrades them for sale:

- When the owner repairs, innovates or upgrades investment properties for sale, the following accounts shall be recorded: 

Dr 156 – Merchandise inventory (1567) (residual value of investment properties)

Dr 214 - Depreciation of fixed assets (2147 – accrued depreciation)

Cr 217 – Investment properties (cost prices).

- When incurring costs of repair, renovation, upgrade of investment properties for sale, the following accounts shall be recorded: 

Dr 154 - Work in progress

Dr 133 – Deductible VAT 

Cr 111, 112, 152, 334, 331, etc. 

- When finishing the repair, innovation or upgrade of investment properties for sale, total cost shall be transferred and an increase in properties held for sale shall be recorded:

Dr 156 – Merchandise inventory (1567)

Cr 154 - Work in progress.

3.1.9 Value of goods for sale which are consumed shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory (1561)

Concurrently, sales revenues shall be recorded as follows:

- If indirect taxes are separable, the revenues shall be recorded follows:

Dr 111, 112, 131, etc.  (total payment).

Cr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

- If indirect taxes are not separable, the revenues including taxes shall be recorded. Tax liabilities and the decrease in revenues shall be periodically recorded as follows:

Dr 511 – Revenues (total payment)

Cr 333 – Taxes and other payables to the State.

3.1.10. Outsourcing agreement 

- When dispatching merchandise inventory to process, the following accounts shall be recorded:

Dr 154 - Work in progress

Cr 156 – Merchandise inventory (1561)

- When costs of processing incurred, the following accounts shall be recorded:

Dr 154 - Work in progress

Dr 133 – Deductible VAT (if any) 

Cr 111, 112, 331, etc. 

- When the processing is finished, the merchandise shall be received in inventory and the following accounts shall be recorded:

Dr 156 – Merchandise inventory (1561)

Cr 154 - Work in progress.

3.1.11. When dispatching merchandise to customers or agencies consigning companies, etc, the following accounts shall be recorded: 

Dr 157 – Goods on consignment

Cr 156 – Merchandise inventory (1561)

3.1.12. Dispatching merchandise inventory to dependent accounting units of the enterprise for sale:

- In case the dependent accounting units are in charge of recording revenues, costs of goods, the costs of merchandise sold shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory.

Concurrently, sales revenues shall be recorded as follows:

Dr 111, 112, 131, etc.  (total payment).

Cr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

- In case the dependent accounting unit is not in charge of recording revenues, costs of goods, the costs of products circulated intra-company shall be intra-company receivables, the following accounts shall be recorded: 

Dr 136 - Intra-company receivables

Cr 156 – Merchandise inventory.

Cr 333 – Taxes and other payables to the State.

3.1.13. When dispatching merchandise for internal use, the following accounts shall be recorded: 

Dr 641, 642, 241, 211 

Cr 156 – Merchandise inventory.

3.1.14. When the enterprise uses products for giving, promotion or advertisement (under law on commerce):

a) If the merchandise inventory is released for promotion or advertisement without collecting money, not providing additional conditions (compulsory purchase of goods, etc), the cost of merchandise inventory shall be recorded to selling expenses (detail in promotion or advertisement);

Dr 641- – Selling expenses

Cr 156 – Merchandise inventory (cost prices).

b) If the merchandise is released for promotion or advertisement with additional conditions that the customers are required to buy goods (e.g. buy two, get one free, etc) The collected amounts of moneys shall be recorded to revenues (including promotion goods), costs of promotion goods shall be recorded to costs of goods sold (nature of transaction is a decrease in good costs).

- When dispatching merchandise for promotion, the costs of promotion merchandise shall be recorded to costs of goods sold as follows: 

Dr 632 – Cost prices of goods sold (prime cost)

Cr 156 – Merchandise inventory.

- When receiving revenues from promotion merchandise, the collected amounts shall be recorded to goods sold and promotion goods as follows: 

Dr 111, 112, 131, etc. 

Cr 511 – Revenues

Cr 3331 – Deductible VAT (33311) (if any).

c) If merchandise purchased for giving staff using welfare fund, the revenues and costs of goods shall be recorded similarly to ordinary selling transactions as follows: 

- The cost of merchandise for giving to staff and employees shall be recorded to costs of goods sold:

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory.

- Merchandise for giving using welfare fund shall be recorded to revenues as follows:

Cr 353 - Welfare fund (total payment)

Cr 511 – Revenues

Cr 3331 – Deductible VAT (33311) (if any).

d) In case the enterprise is a commercial distributor receiving merchandise (non-payment) from manufacturers for promotion or advertisement given to customers of the manufacturer or distributor

- When receiving merchandise from manufacturer (non-payment) for promotion or advertisement given to customers, the distributor must keep track of amounts of merchandise items in their internal management system and present received merchandise items and merchandise items used for promotion on financial statement.

- When the promotion program closes, if the amounts of unused merchandise items for promotion are not returned to the manufacturer, the non-returned remaining unused merchandise items shall be recorded to other incomes as follows: 

Dr 156 – Merchandise inventory (according to fair value)

Cr 711 - Other income.

3.1.15. Paying salaries to employees by merchandise 

- Revenues shall be recorded as follows:

Dr 334 – Payables to employees (total costs)

Cr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

Cr 3335 – Personal income tax.

- The cost of merchandise for paying salaries to employees shall be recorded to costs of goods sold as follows: 

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory.

3.1.16 When contributing merchandise to subsidiaries, joint-venture companies as capital, and the following accounts shall be recorded:

Dr 221, 22 (according to re-evaluated value)

Dr 811 – Other expenses (re-evaluated value is smaller than book value of merchandise)

Cr 156 – Merchandise inventory.

Cr 711 – Other incomes (re-evaluated value is greater than book value of merchandise).

3.1.17. At the end of accounting period, when distributing incidental purchase costs of merchandise sold during a period, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory (1562)

3.1.18. When the surplus of merchandise is detected in any process of business, it is required to make a report and uncover reasons. According to the reasons uncovered, the surplus of merchandise shall be settled and accounted for as follows:

- If the reasons are mistakes in measuring or counting, failure to keep records, etc, the accounting record shall be adjusted.

- If the merchandise in surplus belong to other enterprises, the value of merchandise in surplus in the presentation of financial statements.

- In case it fails to uncover reasons for surplus, it shall be pending for settlement:

Dr 156 – Merchandise inventory 

Cr 338 – Other payables or receivables (3381).

- When there is a decision of settlement made by the competent agency, the following accounts shall be recorded: 

Dr 338 – Other payable or receivables (3381)

Cr, relevant accounts.

3.1.19. When the shortage of merchandise is detected in any process of business, it is required to make a report and uncover reasons. According to decision of competent agency, the shortage of merchandise shall be settled and accounted for as follows:

- In case it fails to uncover reasons for surplus, it shall be pending for settlement:

Dr 138 – Other payables (1381- – Assets in shortage awaiting resolution)

Cr 156 – Merchandise inventory.

- When there is a decision of settlement made by the competent agency, the following accounts shall be recorded: 

Cr 111, 112, etc. (the compensation is required if the offender is an individual)

Dr 334 – Payables to employees (the deducting in salaries is required if the offender is an individual)

Dr 138 – Other receivables (1388) (compensation of offenders)

Dr 632 – Costs of goods sold (residual value)

Cr 138 - Other receivables (1381).

3.1.20. If the properties held for sale are sold in a period, according to VAT invoice or sales invoice, transfer note of properties held for sale, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory (1567 – Properties held for sale)

Concurrently, revenues from sale of properties held for sale shall be recorded as follows:

Dr 111, 112, 131, etc. 

Cr 511 – Revenues from sale of merchandises and services rendered (5117)

Cr 3331 – Deductible VAT (33311) (if any).

3.1.21. When liquidating or selling unused merchandise, their costs shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 156 – Merchandise inventory.

3.2. Enterprises using periodic inventory system.

a) At the beginning of accounting period, according to the value of ending inventory of previous accounting period which is transferred to value of beginning inventory of current accounting period, the following accounts shall be recorded: 

Dr 611 – Purchases

Cr 156 – Merchandise inventory.

b) At the ending of accounting period:

- Conducting physical inventory count on quantity and cost of ending merchandise inventory. According to total cost of ending merchandise inventory, the following accounts shall be recorded: 

Dr 156 – Merchandise inventory 

Cr 611 – Purchases.

- According to total cost of merchandise sold, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 611 – Purchases.

Article 30. Account 157 – Goods on consignment 

1. Rules for accounting

a) Goods on consignment which are recorded to account 157 shall be accounted according to original prices as prescribed accounting standard “Inventory”. The account 157 “Goods on consignment” only records costs of goods or finished goods sent to customers or agents (consignees), services rendered transferred to customers under business contracts or orders by the enterprise (consignor), those goods are not determined as 'sold' (the goods or services on consignment are not recorded to sales revenues during a period).

b) The goods or finished goods recorded to this account are still under ownership of the consignor, they must be recorded in the accounting record in every consignment until they are sold.

c) The cost of transport, material handling, payment on behalf of customers, etc shall not be recorded to this account. The account 157 may record every type of goods, finished goods or services rendered on consignment to every customer or consignee.

2. Structure and contents of account 157 – Goods on consignment  

Debit:

- Cost of goods or finished goods on consignment sent to customers, consignees; or dependent accounting units;

- Cost of services rendered to customers, but they are not sold;

- Ending cost of goods or finished goods on consignment but they are not sold (if the consignor uses periodic inventory system).

Credit:

- Cost of goods, finished goods, services rendered on consignment which are sold;

- Cost of goods, finished goods or services on consignment which are returned;

- At the beginning of accounting period, cost of goods, finished goods, services rendered which are not sold and transferred (if the consignor uses periodic inventory system).

Debit balance:

Cost of goods, finished goods, services rendered on consignment which are sold during a period;

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

a) When consigning goods or finished goods to customers, consignees under economic contracts, according to delivery order, the following accounts shall be recorded: 

Dr 157 – Goods on consignment

Cr 156 – Merchandise inventory.

Cr 155 – Finished goods 

b) Cost of services rendered to customers, but they are not sold during a period, the following accounts shall be recorded: 

Dr 157 – Goods on consignment

Cr 154 - Work in progress.

c) When consigning goods or services to customers and they are sold during a period: 

- If the indirect taxes are not separable at the time in which the revenues are recorded, the revenues from sale of goods, finished goods or services (tax-exclusive prices) shall be recorded: 

Cr 131 – Trade receivables

Cr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

- If indirect taxes are not separable, the revenues including taxes shall be recorded. When paying indirect taxes, a decrease in revenues shall be periodically recorded as follows:

Dr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

- And the costs of finished goods sold which are delivered to inventory shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 157 – Goods on consignment.

d) If goods or finished goods are consigned for sale but they are returned;

- If those goods or finished goods are still merchantable or repairable, the following accounts shall be recorded: 

Dr 156 – Merchandise inventory; or

Dr 155 – Finished goods 

Cr 157 – Goods on consignment.

- If those goods or finished goods are not merchantable or repairable, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 157 – Goods on consignment.

3.2. Enterprises using periodic inventory system.

a) At the beginning of accounting period, if cost of goods or finished goods sent to customers are transferred but they are not sold during a period, or cost of goods or services consigned to customer but they are not sold during a period, the following accounts shall be recorded: 

Dr 611 – Purchases (for goods) 

Dr 632 – Costs of goods sold (for finished goods or services)

Cr 157 – Goods on consignment.

b) At the end of accounting period, according to the physical inventory count, the cost of goods, products (finished goods or semi-finished goods) or services rendered to customers; or consigned to consignees which are not sold at the ending accounting period:

- Cost of goods sent to customers but the payment is not accepted; goods consigned to consignees; or dependent accounting units shall not determined as sale at ending accounting period shall be recorded as follows: 

Dr 157 – Goods on consignment

Cr 611 – Purchases.

- At the end of accounting period, cost of finished goods provided for customers or goods on consignment; cost of services rendered to customers who are not sold shall be transferred as follows: 

Dr 157 – Goods on consignment

Cr 632 – Costs of goods sold.

Article 31. Account 158 – Goods in bonded warehouse 

1. Rules for accounting

a) This account is used to record current value and increase or decrease in goods delivered to bonded warehouse. Bonded warehouses are only applied to foreign-invested companies to serve the production of imported goods, subject to special customs supervision, in which the raw materials imported to serve the production shall be stored in the bonded warehouses and released from assessment and payment of import duties and other taxes.

b) Imported raw materials stored in bonded warehouse include raw materials provided for production and products of that enterprise.

c) The enterprise must keep records of quantity and value of every raw material and good whenever they are received or dispatched.

2. Structure and contents of account 158 – Goods in bonded warehouses 

Debit: Costs of raw materials, finished goods or goods delivered to bonded warehouse during a period.

Credit: Costs of raw materials, finished goods or goods dispatched from bonded warehouse during a period.

Debit balance: Costs of ending raw materials, finished goods or goods inventory balances in the bonded warehouse.

3. Accounting methods for several major transactions:

a) When importing raw materials for production of exported products, or processing of exported goods, if they are stored in a bonded warehouse, they shall be released from payment of import duty and VAT on imported goods and the following accounts shall be recorded: 

Dr 158 – Goods in bonded warehouses 

Cr 331 – Trade payables.

b) When dispatching raw materials in bonded warehouse for production or processing of exported goods, the following accounts shall be recorded:

Dr 621 – Direct material costs

Cr 158 – Goods in bonded warehouses. 

c) When delivering finished goods, exported goods or outward processing goods into bonded warehouse (if any), the following accounts shall be recorded: 

Dr 158 – Goods in bonded warehouses 

Cr 156, 155, etc.

d) When exporting goods in bonded warehouses (if any):

- The costs of exported goods in bonded warehouse shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 158 – Goods in bonded warehouses. 

- The revenues from sale of exported goods in bonded warehouse shall be recorded as follows: 

Dr 111, 112, 131, etc. 

Cr 511 – Revenues.

dd) If export rate is lower than deferred tax rate  of the enterprise subject to import duty and VAT on imported goods (if any) pertaining to difference between amounts of to-be-exported products and amounts of actually-exported products, the enterprise must pay import duty and VAT on imported goods (if any):

- When determining import duty payables (if any), the following accounts shall be recorded: 

Dr 632 – Costs of goods sold

Cr 333 – Taxes and amounts payable to the State (3333).

- When determining VAT on imported goods payables (if any), the following accounts shall be recorded: 

Dr 133 – Deductible VAT (1331)

Cr 333 – Taxes and amounts payable to the State (33312).

- When paying import duty and VAT on imported goods payables (if any), the following accounts shall be recorded: 

Dr 333 – Taxes and amounts payable to the State (3333, 33312).

Cr 111, 112, etc.

e) In case the enterprise is permitted to sell goods in bonded warehouses on Vietnam market by the competent agency, the enterprise must pay import duty and other taxes as prescribed.

- When the enterprise is permitted to use goods in bonded warehouses, it is required to follow procedures for dispatch of goods from bonded warehouse, receipt of goods or products to the enterprise's warehouse and pay taxes on those goods, and then the following accounts shall be recorded: 

Dr 155, 156

Cr 158 – Goods in bonded warehouses. 

- When determining import duty payables (if any), the following accounts shall be recorded: 

Dr 155, 156

Cr 333 – Taxes and amounts payable to the State (3333).

- When determining VAT on imported goods payables (if any), the following accounts shall be recorded: 

Dr 155, 156 (if they are not deductible)

Dr 133 – Deductible VAT (1331)

Cr 333 – Taxes and amounts payable to the State (33312).

- When paying import duty and VAT on imported goods, the following accounts shall be recorded: 

Dr 333 – Taxes and amounts payable to the State (33312, 3333).

Cr 111, 112, etc.

g) When selling goods in bonded warehouses on domestic market:

- The costs of goods in bonded warehouse sold shall be recorded as follows: 

Dr 632 – Costs of goods sold

Cr 158 – Goods in bonded warehouses. 

Concurrently, the import duty and VAT on imported goods pertaining to those products, goods or raw materials must be recorded.

- The revenues from sale of exported goods in bonded warehouse on domestic market shall be recorded as follows: 

Dr 111, 112, 131, etc. 

Cr 511 – Revenues from sale of goods and services

Cr 333 – Taxes and amounts payable to the State (33311).

h) In case the raw materials or goods delivered to bonded warehouse are damaged or degraded and failed to meet export requirements, they must be re-imported or destroyed:

- In case of re-import, the following accounts shall be recorded:

Dr 155, 156, etc.

Cr 158 – Goods in bonded warehouses. 

- Concurrently, paying the import duty and VAT on imported goods payables pertaining to those products, goods or raw materials, the taxes payable shall be recorded in entry (e); when paying taxes, the following accounts shall be recorded: 

Dr 333 – Taxes and amounts payable to the State (33312, 3333).

Cr 111, 112, etc. 

- In case of re-export (returns to sellers), the following accounts shall be recorded:

Dr 331 – Trade payables

Cr 158 – Goods in bonded warehouses 

- In case of destruction of goods or raw materials in bonded warehouses, the following accounts shall be recorded: 

Dr 632 - Costs of goods sold (destroyed goods or raw materials)

Cr 158 – Goods in bonded warehouses 

Article 32. Account 161 – Non-business expenditures 

1. Rules for accounting

a) This account is recorded to expenditures for non-business activities or projects (hereinafter referred to as non-business expenditures to perform economical, political or social tasks assigned by the State or superior enterprise other than business activities and for non-profit purposes. The non-business expenditures shall be covered by non-business or project funding granted by government budget or superior enterprise, or non-refundable grants. This account is used in enterprises having non-business activities or project activities (hereinafter referred to as non-business activities) which are covered by government budget or superior enterprises or received non-refundable grants, or the enterprises are permitted to collect non-business receipts to cover those expenses.

b) It is required to keep records of non-business expenditures according to every source of funding, fiscal year and governmental budgetary classification.

c) The non-business expenditures must be recorded in conformity with budget estimates and between accounting records and documents and financial statements.

d) This account shall record annual non-business expenditures of the enterprise, including both regular and irregular non-business expenditures as prescribed in financial regime in force.

dd) At the end of fiscal year, if the balance sheet is not approved, total non-business expenditures within the year shall be transferred from Cr 1612 "Current non-business expenditures” to Dr 1611 “Brought forward non-business expenditures” for observation until the balance sheet is approved. 

2. Structure and contents of account 161 – Non-business expenditures

Debit: Actual non-business expenditures incurred.

Credit:

- Non-business expenditures which are not recorded and required to be recovered;

- Non-business expenditures which are recorded and covered by non-business funds.

Debit balance: Non-business expenditures which are not recorded.

Account 161 – Non-business expenditures comprise 2 sub-accounts:

- Account 1611 – Brought forward non-business expenditures: recording non-business expenditures which are covered by non-business funds of the preceding year and not recorded.

- Account 1612 – Current non-business expenditures: recording non-business expenditures of current year.

3. Method of accounting for several major transactions:

a) When providing non-business expenditures uncovered by non-business funds, the following accounts shall be recorded: 

Dr 161 – Non-business expenditures (1612)

Cr 111, 112, etc. 

b) Salaries and other payables to employees of the enterprise, sellers or service providers shall be recorded as follows:

Dr 161 – Non-business expenditures (1612)

Cr 334 – Payables to employees

Cr 331 – Trade payables.

c) When dispatching raw materials, tools or supplies inventory for non-business activities, the following accounts shall be recorded: 

Dr 161 – Non-business expenditures (1612)

Cr 152 – Raw materials 

Cr 153 – Tools and supplies 

d) When receiving funding from superior enterprises or withdrawing non-business expenditure estimates to pay for non-business activities, the following accounts shall be recorded: 

Dr 161 – Non-business expenditures (1612)

Cr 461 – Non-business funds source.

If the non-business expenditure estimates are withdrawn, the enterprise must keep track of those expenditures in conformity with characteristics of the enterprise, etc. 

dd) When transferring major repairs of fixed assets for non-business activities, the following accounts shall be recorded: 

Dr 161 – Non-business expenditures (1612)

Cr 241 – Construction in progress (2413 – Major repairs of fixed assets).

e) When purchasing fixed assets or investing in capital investment for non-business activities covered by non-business funds:

- In case of purchasing fixed assets or finishing construction put into operation, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets 

Cr 111, 112, 331, 241, 461, etc. 

- And the following accounts shall be recorded: 

Dr 161 – Non-business expenditures (1612)

Cr 466 – Non-business funds used for fixed assets acquisitions.

When withdrawing non-business expenditure estimates for purchases of fixed assets, the enterprise must keep appropriate records.

g) When deducting social insurance, health insurance, unemployment insurance or union funds for non-business activities of the enterprise, the following accounts shall be recorded: 

Dr 161 – Non-business expenditures (1612)

Cr 338 – Other payables or receivables (3382, 3383, 3384, 3386).

h) At the end of fiscal year, if the financial report is not approved, the debit balances 1612 "Current non-business expenditures” shall be transferred to “Brought forward non-business expenditures”; the following accounts shall be recorded: 

Dr 1611 – Brought forward non-business expenditures 

Cr 1612 – Current non-business expenditures. 

i) When the financial report is approved, non-business expenditures covered by non-business funds shall be recorded as follows:

Dr 461 – Non-business funds source (4611 – Brought forward non-business funds source)

Cr 161 – Non-business expenditures (1611 – Brought forward non-business expenditures).

k) Non-business expenditures paid in contrary to regulations which are not approved by the competent agency and required to be recovered shall be recorded as follows: 

Dr 138 – Other receivables (1388)

Cr 161 – Non-business expenditures (1611 – Brought forward non-business expenditures).

Article 33. Account 171 – Government bonds purchased for resale 

1. Rules for accounting

a) This account is used to record transactions in government bonds purchased for resale incurred during a period. This account only records value of agreement on resale of Government bonds, not records coupons received by buyer on the behalf or seller in conformity with times specified in the agreement.

b) The enterprise must comply with regulations on types of transactions, deadlines for transactions and revenues from Government bonds in the resale transactions prescribed in financial regime in force on resale of Government bonds.

c) The buyer of bonds under resale agreement shall not record ‘coupon payment’ received from the seller to revenues account at the times during the term of repurchase agreement but record to other payables or receivables account.

2. Structure and contents of account 171 – Government bond repos (Repurchase agreements on Government bonds) 

Debit:

- Value of government bonds repurchased by seller at the maturity date of the agreement; 

- Value of government bonds purchased by the purchaser when the government bond repo takes effect;

-  Difference between the resale price and the original purchase price of Government bonds under the government bonds received by purchaser.

Credit:

- Value of Government bonds resold by the purchaser at the maturity date of the agreement; 

- Value of government bonds sold by the seller when the government bond repo takes effect;

- Difference between the original sale price and the repurchase price of Government bonds under the government bonds paid by the seller.

Debit balance: Value of government bonds held by the purchaser to the maturity.

Credit balance: Value of government bonds held by the seller to the maturity.

3. Method of accounting for several major transactions:

3.1. Accounting for government bonds’ sellers under repo

a) When the government bond repo takes effect, the following accounts shall be recorded: 

Dr 111, 112 (sale price)

Cr 171 – Government bond repos. 

b) Periodically, the seller shall distribute the difference between original sale prices and repurchase price of government bonds to expenses as follows: 

Dr 635 – Financial expenses (other than securities company)

Cr 171 – Government bond repos (distributing time in conformity with time of agreement)

c) On the maturity date of the government bond repo, the seller shall make payment specified in the government bond repo and receive those securities, and then the following accounts shall be recorded: 

Dr 171 – Government bond repos

Cr 111, 112 (repurchase price specified in the repo).

d) When the purchaser pays for coupons which the purchaser keeps on behalf of the seller at the times during the term of the repo, the seller shall record as follows: 

Dr 111, 112, 138

Cr 515 – Financial incomes (other than securities company) (numbers of coupon payments of bonds).

3.2. Accounting for government bonds’ purchasers under repo

a) When the agreement takes effect, according documents on cash disbursement and other documents, the following accounts shall be recorded: 

Dr 171 – Government bond repo

Cr 111, 112 (purchase price)

b) Periodically, the purchaser shall distribute the difference between original purchase price and resale price of government bonds to revenues as follows: 

Dr 171 – Government bond repo

Cr 515 – Financial incomes (other than securities company) (allocated according to duration of agreement).

c) When receiving coupon payments of bonds from the seller at the times during the term of the repo, the following accounts shall be recorded: 

Dr 111, 112, etc. 

Cr 338 – Other payables or receivables (3388).

d) When the agreement expires, the following accounts shall be recorded: 

Dr 111, 112, 138

Cr 171 – Government bond repo. 

Concurrently, when repaying coupons of bonds which the purchaser keeps on behalf of the seller at the times during the term of repo, the following accounts shall be recorded: 

Dr 338 – Other payables or receivables.

Cr 111, 112, etc. 

Article 34. Rules for accounting for fixed assets, investment properties and construction in progress 

1. Fixed assets, investment properties and construction in progress must be kept track, recorded, managed and used in accordance with regulations of law in force.

2. The source acquiring fixed assets shall be kept track to distribute depreciation costs following the rules below:

- If the fixed assets are acquired from loan capital or owner's equity for operation, their depreciation costs shall be allocated to operating costs; 

- If the fixed assets are acquired from welfare funds, science and technology development funds or funding source, their depreciation costs shall be recorded as decreases in such funds or funding source.

3. Fixed assets and investment properties shall be classified according to their use purposes. If there is an asset used for multiple purposes, e.g. a mixed-use building for offices, lease and sale, their fair value (every part) shall be estimated in conformity with their use purposes.

- If a major part of the asset is used for a specific purpose other than purposes of remaining parts, the total asset shall be classified according to that major part;

- If there is any change in function of parts of the asset, the asset shall be re-classified according to use purposes prescribed in relevant VAS.

4. When buying fixed assets, if they are bundled with equipment or spare parts for replacement (provision for break down), the equipment or spare parts for replacement shall be recorded separately with fair value. If equipment or spare parts for replacement meet requirements for fixed assets, they shall be recorded to fixed assets account, if not, they shall be recorded to inventory account. Historical cost of a fixed asset purchased shall equal total cost of the fixed asset minus (-) cost of equipment or spare parts for replacement.

5. Fixed assets, investment properties and construction in progress related to foreign currencies shall be accounted for in accordance with Article 69 – Guidance on accounting method for exchange rate differences.

Article 35. Account 211 – Tangible fixed assets 

1. Rules for accounting

a) This account is used to record current cost and decrease and increase in total tangible fixed assets of an enterprise according to their historical costs.

b) Tangible fixed assets mean assets in physical forms which are possessed by an enterprise for operation in conformity with the recognition criteria of tangible fixed assets.

c) Tangible fixed assets having independent structure, or separate parts associated in a system for performance of one or several functions, the system shall not be operated in case of lack of any part. An asset meeting all four recognition criteria below shall be treated as a fixed asset:

-  Future economic benefits will surely be obtained;

- Their historical cost has been determined reliably;

- Their useful life is at least 1 year;

- It meets all value criteria as prescribed in regulations in force.

In a system associated by separate parts, in which every part has different useful life and the system still operate normally regardless of lack of any part, if every part is managed and used separately and meets all four recognition criteria, they shall be treated as independent tangible fixed assets.

With regard to working animals or producing animals for production of commodities, if each animal species meets all four recognition criteria for fixed assets, they shall be treated as tangible fixed assets.

With regard to perennial gardens, if every garden or plant meets all four recognition criteria for fixed assets, they shall be treated as tangible fixed assets.

d) The costs of tangible fixed assets shall be recorded to account 211 according to their historical costs. The historical costs of each fixed asset must be keep records specifically. Depending on acquisition sources, the historical cost of a tangible fixed asset shall be determined as follows: 

d1) Historical costs of purchased tangible fixed assets include: purchase prices (deducted from trade discounts or rebates), taxes (excluding refundable taxes) and any directly-attributable expenses of putting such assets into ready-for-use state, such as site preparation, initial delivery and material handling, installation or testing costs (deducted (-) from any recoverable values on products or scraps from testing), professional fees and any other directly-attributable expenses. The interest cost from loans for purchase of completed fixed assets (fixed assets available for immediate use without construction investment) shall not be capitalized on historical costs of fixed assets.

- When purchasing fixed assets, if they are bundled with equipment or spare parts for replacement, such equipment or spare parts shall be determined and recorded separately according to their fair value. Historical cost of a fixed asset purchased shall equal total costs of putting the fixed asset into ready-for-use state minus (-) cost of equipment or spare parts for replacement.

Historical costs of tangible fixed assets purchased in instalment: equal purchase price (lump sum payment) plus (+) directly related costs of putting such assets into ready-for-use state (excluding refundable taxes). The difference between the instalment price and lump sum price shall be recorded to operating costs according to the payment schedule.

- Historical costs of fixed assets-properties: When buying properties, the value of land use right and properties on land shall be separated as prescribed. The properties on land shall be recorded to tangible fixed assets; land use rights shall be recorded to intangible fixed assets or prepaid expenses incurred from a case-by-case basis as prescribed.

d2) Historical costs of tangible fixed assets acquired from capital investment  

- Historical costs of fixed assets under contract awarding: equal settled costs of building works as prescribed in Regulations on investment and construction management in force plus (+) directly-attributable expenses and property transfer taxes (if any).  With regard to fixed assets which are working animals or producing animals, perennial gardens, their historical costs shall equal total actual costs covered their development up to putting them into use plus (+) directly related costs.

- Self-constructed or self-made tangible fixed assets:

The historical cost of self-constructed tangible fixed assets is the settled cost of the building work which is put into use. If the fixed asset is put into used but it is not settled, their historical cost shall be recorded to provisional cost and it shall be adjusted after settlement of the finished building work.

The historical cost of a self-made tangible fixed asset is the actual cost of tangible fixed assets plus (+) directly-attributable expenses of putting such fixed asset into ready-for-use state.

- In above both cases, the historical cost of the fixed asset includes installation and testing costs (deducted from any recoverable values on products or scraps from testing) Internal profits and unreasonable expenses (wasted raw materials, labor or other costs in excess of the normal levels arising in the self-constructed or self-made process) shall not be included in the historical cost of tangible fixed assets.

d3) The historical cost of a tangible fixed asset purchased in the form of exchange for a dissimilar tangible fixed asset or other assets shall be determined according to their fair value of the received tangible fixed assets, or the fair value of the exchanged ones, after adjusting the cash amounts or cash equivalents which are additionally paid or received plus (+) directly-attributable expenses of putting such asset into ready-for-use state (excluding refundable taxes).

The historical cost of a tangible fixed asset purchased in the form of exchange for similar one, or possibly formed through its sale in exchange for ownership of similar ones (similar assets are those with similar utilities, in the same business field and having equivalent value).  In both cases, no gain or loss is recorded during the exchange.  The historical cost of the received fixed asset shall be the residual value of the exchanged one. 

d4) The historical cost of a tangible fixed asset which is granted or transferred shall equal: residual value shall be recorded to fixed assets account in the accounting records of the donating or presenting enterprise or the value assessed by the Board of exchange or a professional appraisal organization as prescribed plus (+) directly-attributable expenses (transport, material handling, upgrade, installation, testing or registration property transfer taxes (if any), etc paid by the asset receiver up to time in which the fixed asset is put into ready-for-use state.

The historical cost of a tangible fixed asset transferred between dependent accounting units having no legal status of an enterprise shall be their historical cost recorded in the transferor in conformity with dossier on such fixed asset. The received unit shall record the fixed assets to their accounting records according to the historical cost, accumulated depreciation, residual value stated in the accounting records and dossier on such fixed asset. The costs related to donations of fixed assets between dependent accounting units having no legal status shall not be recorded an increase in historical cost of fixed assets but they shall be recorded to operating cost during a period.

d5) The historical cost of a tangible fixed asset contributed as capital or return of capital is the value assessed by founding members or shareholders or agreed by the enterprise and contributors or assessed by a professional appraisal organization as prescribed and approved by the founding members or shareholders.

d6) The historical cost of a tangible fixed asset which is donated or presented shall equal: actual value assessed by the Board of exchange or a professional appraisal organization plus (+) directly-attributable expenses (transport, material handling, installation, testing or property transfer taxes (if any), etc paid by the asset receiver up to time in which the fixed asset is put into ready-for-use state.

d7) The historical cost of a fixed asset purchased in foreign currencies shall comply with regulations in Article 69 – Guidance on accounting method for exchange rate differences.

dd) The historical cost of a tangible fixed asset shall only be modified in following cases:

- The fixed asset is undergone a re-evaluation as prescribed in regulations of the State;

- The fixed asset is constructed or equipped with additional parts;

- Parts of the tangible fixed asset are modified to extend their useful life or to increase their capacity;

- Parts of the tangible fixed asset are upgraded to substantially increase product quality;

- New technology process is adopted to reduce operating expenses;

- One or several parts of the tangible fixed asset shall be dismantled. 

Any case of increase or decrease in tangible fixed assets must be prepared exchange reports, liquidation reports on fixed assets and following procedures as prescribed. The accountant is responsible for preparation and completion of accounting records of fixed assets.

e) The repair and maintenance costs of a fixed asset shall not be recorded to fixed assets account but they are shall be recorded to expenses incurred during a period. With regard to those fixed assets subject to periodical repair or maintenance (power plants’ turbines, aircraft engines, etc), a provision payable shall be made and recorded to operating costs in a given period for the repair or maintenance.

g) Operating lease tangible fixed assets still are depreciated in accordance with VAS and financial policies in force.

h) The tangible fixed assets must be kept in details by every item of fixed assets, every type of fixed assets and every place in which they are used, managed or preserved.

2. Structure and contents of account 211 –Tangible fixed assets 

Debit:

- An increase in historical cost of the tangible fixed asset due to completed constructions, purchase, receipt of capital contribution, grant, donation, present, or surplus;

- An increase in historical cost of the fixed assets after adjustment due to additional construction or equipment, or upgrade;

- An increase in historical cost of the fixed assets due to re-evaluation.

Credit:

- An decrease in historical cost of the tangible fixed assets due to transfer to other enterprises, liquidation or contribution into joint venture, etc. 

- A decrease in historical cost of the fixed asset due to dismantlement of one or several parts; 

- A decrease in historical cost of the fixed asset due to re-evaluation.

Debit balance: Current historical costs of the fixed assets of the enterprise.

Account 211 –Tangible fixed assets comprises 6 sub-accounts:

- Account 2111 – Buildings and structures: records the cost of construction works, such as buildings, structures, hedges, basins, water towers, ground; or infrastructures, such as roads, bridges, railroads, peers, wharfs, etc. 

- Account 2112 – Machinery and equipment: records costs of machinery or equipment used in operation of an enterprise, including special-use machines; work machinery or equipment, technological lines and individual machines.

- Account 2113 – Means of transportation and transmitters: records costs of means of transport, including roads, rail, waterborne, waterway, air, pipes and transmitters.

- Account 2114 – Office equipment and furniture: records costs of equipment and furniture used in management, business and administrative management.

- Account 2115 – Perennial plants, working and producing animals: records costs of fixed assets such as perennial plants, working and producing animals. 

- Account 2118 – Other fixed assets:  records costs of other fixed assets not recorded to above sub-accounts.

3. Method of accounting for several major transactions

3.1. Accounting for increases in tangible fixed assets 

a) When receiving owner’s equity or capital in form of tangible fixed assets, the following accounts shall be recorded:  

Dr 211 – Tangible fixed assets (negotiable prices)

Cr 411 – Owner’s invested equity.

b) Purchased fixed assets:

- When purchasing a tangible fixed asset whose input VAT is deductible, according to documents on purchase of such fixed asset, the historical cost of the fixed asset shall be determined, accounting records and receipt slip of fixed asset shall be prepared and the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (VAT-exclusive prices)

Dr 133 – Deductible VAT (1332)

Cr 111, 112, etc. 

Cr 331 – Trade payables

Cr 341 – Borrowings and finance lease liabilities (3411).

- When purchasing tangible fixed assets bundled with equipment or spare parts for replacement, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (fixed asset purchased and equipment or spare parts for replacement treated as fixed assets in details)

Dr 153 – Tools and supplies (1534) (equipment or spare parts for replacement)

Dr 133 – Deductible VAT (1332)

Cr 111, 112, etc. 

Cr 331 – Trade payables

Cr 341 – Borrowings and finance lease liabilities (3411).

- If the input VAT is not deductible, the historical cost of the fixed asset includes VAT.

- If the fixed asset is purchased by capital expenditure used for operation, if the financial report is approved by the competent agency, an increase in operation capital and a decrease in capital shall be recorded as follows: 

Dr 441 – Capital expenditure funds 

Cr 411 – Owner’s invested equity.

c) When purchasing tangible fixed assets in deferred payment or instalment: 

- When purchasing tangible fixed assets in deferred payment or instalment and put them into use, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (historical cost – cash prices)

Dr 133 – Deductible VAT (1332) (if any) 

Dr 242 – Prepaid expenses (deferred interest equals (=) total payment minus (-) cash price and VAT (if any).

Cr 111, 112, 331. 

- When make periodical payment to sellers, the following accounts shall be recorded: 

Dr 331 – Trade payables

Cr 111, 112 (periodical payables, including periodical principal and interest in deferred payment or instalment payables).

- The interest in deferred payment or instalment payables shall be periodically recorded as follows:

Dr 635 – Financial expenses 

Cr 242 – Prepaid expenses.

d) When the enterprise receives donated or presented tangible fixed assets for put in use, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets 

Cr 711 - Other income.

Other directly-attributable expenses incurred from donated or presented tangible fixed assets shall be recorded to historical cost as follows: 

Dr 211 – Tangible fixed assets 

Cr 111, 112, 331, etc. 

dd) Self-made tangible fixed assets:

When converting self-made products of the enterprise to tangible fixed assets, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets 

Cr 155 – Finished goods (dispatched from inventories)

Cr 154 – Work in progress (put into use).

e) When purchasing tangible fixed assets in the form of exchange:

- Exchange between two similar tangible fixed assets: When receiving similar tangible fixed assets in exchange and put into use, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (historical cost of the received tangible fixed asset shall be recorded according to residual value of the exchanged fixed asset) 

Dr 214 – Depreciation of fixed asset (depreciation of exchanged fixed asset)

Cr 211 – Tangible fixed assets (historical cost of exchanged fixed asset)

- Exchange between two dissimilar tangible fixed assets:

+ When transferring the tangible fixed asset to exchanging entity, the following accounts shall be recorded: 

Dr 811 – Other expenses (residual value of exchanged fixed asset)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

+ And an increase in income shall be recorded due to exchange of fixed assets:

Dr 131 – Trade receivables (total payment)

Cr 711 – Other expenses (residual value of exchanged fixed asset)

Cr 3331 – VAT payables (33311) (if any) 

+ When receiving the fixed asset in exchange, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (residual value of received fixed asset)

Dr 133 – Deductible VAT (1332) (if any) 

Cr 131 – Trade receivables (total payment)

+ If it is required to collect additional payment because the cost of exchanged fixed asset is greater than the received fixed asset, the following accounts shall be recorded when the additional payment is received:

Dr 111, 112 (additional payment)

Cr 131 – Trade receivables.

+ If it is required to collect additional payment because the residual value of exchanged fixed asset is smaller than the received fixed asset, the following accounts shall be recorded when the additional payment is received:

Dr 131 – Trade receivables.

Cr 111, 112, etc. 

g) When purchasing fixed assets which are buildings, structures associated with land use rights put into use, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (historical cost – buildings, structures in details).

Dr 213 – Intangible fixed assets (historical cost – land use rights).

Dr 133 – Deductible VAT (if any) 

Cr 111, 112, 331, etc. 

h) Increase in tangible fixed assets due to completion of capital investment: In case the construction work or work items have been completed and put into use, but their capital expenditure has not been approved, the historical cost shall be provisionally determined according to actual capital expenditure in order to record the increase or decrease in fixed assets (for calculating and depreciating the fixed asset put into use). Once the settlement of capital expenditure is approved, if there is any difference with provisional value of the fixed asset, the increase or decrease in the difference shall be adjusted.

- In case the capital investment progress is recorded in the same accounting book system of the enterprise:

+ Upon the completion of the construction and putting assets into use, the following accounts shall be recorded: 

Dr 211 – Intangible fixed assets (historical cost).

Cr 241 – Construction in progress.

+ If the self-constructed assets documents not meet all recognition criteria for tangible fixed assets as prescribed in the accounting standard on tangible fixed assets, the following accounts shall be recorded: 

Dr 152, 153 (if they are materials, inventoried tools and supplies)

Cr 241 – Construction in progress.

- In case the capital investment progress is not recorded in the same accounting book system of the enterprise (investor has a project management board having its own accounting system to keep track of the capital investment progress): When receiving construction, the investor shall record as follows: 

Dr 111, 112, 152, 153, 211, 213

Cr 136 – Intra-company receivables 

Cr 331, 333, etc (accept receivables, if any)

- If the fixed asset is invested by capital expenditure, when the settlement is approved by the competent agency, an increase in owner's invested equity shall be recorded as follows: 

Dr 441 – Capital expenditure funds 

Cr 411 – Owner’s invested equity.

- Once the settlement is approved, if there is any difference between settled price and provisional price, the historical cost of the fixed asset shall be adjusted as follows: 

+ A decrease in historical cost shall be recorded as follows: 

Dr 138 – Trade receivables (amounts of recovery shall not be settled)

Cr 211 – Tangible fixed assets. 

+ An increase in historical cost shall be recorded as follows: 

Dr 211, 213, 217, 1557

Cr, relevant accounts. 

i) When receiving fixed assets from internal General company (without payment), the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (historical cost).

Cr 214 – Depreciation of fixed assets (depreciated value)

Cr 336, 411 (residual value). 

k) When putting fixed assets purchased by non-business funds into use in non-business activities, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets 

Cr 111, 112

Cr 241 – Construction in progress.

Cr 331 – Trade payables

Cr 461 – Non-business funds (4612).

An increase in non-business funds used for acquisition of the fixed asset shall be recorded as follows:

Dr 161 – Non-business expenditure (1612).

Cr 466 – Non-business funds used for fixed asset acquisitions.

When withdrawing estimates to purchase fixed assets, the enterprise shall keep records of them in the presentation of financial statements.

l) When putting fixed assets purchased by welfare funds into use in cultural and welfare fund, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets (total payment)

Cr 111, 112, 331, 3411, etc. 

- And, the following accounts shall be recorded: 

Dr 3532 – Welfare fund

Cr 3533 – Welfare funds used for fixed asset acquisitions.

m) Costs incurred after initial recognition of tangible fixed assets (repair, innovation or upgrade):

- When incurring costs of repair, innovation or upgrade after initial recognition of tangible fixed assets:

Dr 241 – Construction in progress.

Dr 133 – Deductible VAT (1332)

Cr 112, 152, 331, 334, etc. 

- Completion of repair, innovation or upgrade of fixed assets put into use:

+ If there is an increase in historical cost of tangible fixed assets, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets 

Cr 241 – Construction in progress.

+ If there is not an increase in historical cost of tangible fixed assets, the following accounts shall be recorded: 

Dr 623, 627, 641, 642 (if their value is small)

Cr 242 – Prepaid expenses. (if their value is great, they must be allocated gradually)

Cr 241 – Construction in progress.

3.2. Accounting for decreases in tangible fixed assets 

An decrease in historical cost of the tangible fixed assets due to sale, liquidation, losses, shortage detected under physical inventory count, contribution into joint venture or transfer to other enterprises, dismantlement of one or several parts, etc.  Any case of decrease in tangible fixed assets shall be followed procedures and exactly determined the losses and income (if any). According to relevant documents, every specific case shall be keep records as follows: 

3.2.1. In case of sale of fixed assets used for business or non-business activities: the purchased fixed asset is unnecessary or deems ineffective. The fixed asset must be purchase following procedures prescribed in regulations of law. According to receipt slip of the fixed asset and documents on sale of the fixed asset:

a) When selling fixed assets used for business, the following accounts shall be recorded: 

Dr 111, 112, 131, etc. 

Cr 711 – Other income (VAT-exclusive prices)

Cr 3331 – VAT payables (33311).

If the VAT is not separable, the other income shall include VAT. A decrease in VAT payables shall be recorded to other income.

- A decrease in purchased fixed asset shall be recorded according to receipt slip of fixed asset:

Dr 214 – Depreciation of fixed assets (2141) (depreciated value)

Dr 811 – Other expenses (residual value)

Cr 211 – Tangible fixed assets (historical cost).

- Costs related to sale of fixed assets shall be recorded to Dr 811 “Other expenses”.

b) In case of selling fixed assets used for non-business activities: 

- A decrease in sold fixed asset shall be recorded according to receipt slip of fixed asset as follows:

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

-Revenues and expenses related to sale of the fixed asset shall be recorded to relevant accounts as prescribed in regulations of competent agency.

c) In case of selling fixed assets used for culture or activities welfare: 

- A decrease in sold fixed asset shall be recorded according to receipt slip of fixed asset as follows: 

Dr 353 – Welfare fund (3533) (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

- Receipts from sale of the fixed asset shall be recorded as follows: 

Dr 111, 112, etc. 

Cr 353 – Welfare fund (3532)

Cr 333 – Taxes and other payables to the State (3331) (if any) 

- Expenditures on sale of the fixed asset shall be recorded as follows: 

Dr 353 – Welfare fund (3532)

Cr 111, 112, etc.

3.2.2. Liquidation of fixed assets: Liquidated fixed assets are damaged fixed assets impossible for use, obsolete fixed assets or not appropriate to operating activities. Once there is any fixed asset subject to liquidation, the enterprise must issue a decision on liquidation and establish a Liquidation board of fixed assets. The Liquidation board of fixed assets is responsible for carrying out liquidation of fixed assets following procedures as prescribed in financial management regime and make “Report on liquidation of fixed assets” as prescribed. The report shall be prepared into two copies, one copy shall be transferred to accounting department to record, and one copy shall be transferred to the department in charge of management and use of the fixed asset.

According to the report on liquidation of fixed asset and other documents on revenues and expenses incurred from liquidation of fixed assets, etc the liquidation of fixed asset shall be recorded similarly to sale of fixed assets.

3.2.3. When contributing tangible fixed assets as capital to subsidiaries, joint-venture companies, the following accounts shall be recorded: 

Dr 221, 222 (re-evaluated value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 811 – Other expenses (re-evaluated value is smaller than residual value of the fixed asset)

Cr 211 – Tangible fixed assets (historical cost).

Cr 711 – Other expenses (re-evaluated value is greater than residual value of the fixed asset)

3.2.4. Shortage or surplus of tangible fixed assets: The reason for any shortage or surplus of fixed assets must be uncovered.  The shortage or surplus must be accurately and promptly recorded according to “Report on physical inventory count of fixed assets” and Conclusion issued by the Inventory board according to specific reasons:

a) Surplus of fixed assets:

- If the surplus of fixed assets is detected due to unrecording, an increase in fixed assets shall be recorded according to dossier on fixed assets as follows: 

Dr 211 – Tangible fixed assets 

Cr 241, 331, 338, 411, etc. 

- If the fixed assets in surplus are being used, apart from recording the increase in tangible fixed assets, the depreciation value used for calculation and deduction of additional depreciation of fixed asset used for welfare, non-business or project purpose, the following accounts shall be recorded: 

Dr, operating costs (fixed assets used for business)

Dr 3533 – Welfare funds used for fixed asset acquisitions (used for welfare)

Dr 466 – Non-business funds used for fixed asset acquisitions.

Cr 214 – Depreciation of fixed assets (2141).

- If the fixed assets in surplus are fixed assets of other enterprises, the owner of such fixed assets must be notified. If it fails to determine the owner of such fixed assets, the superior agency and finance agency must be notified for handling (regarding state-owned enterprises) During handling period; those fixed assets shall be provisionally kept and monitored according to documents on physical inventory count.

b) Shortage of fixed assets: it is required to uncover reasons, offenders and handled as prescribed in financial regime in force.

- In case there is a decision on handling of shortage: the historical cost and depreciated value of such asset must be accurately determined according to approved “Report on handling of shortage of fixed assets” and dossier on fixed assets, then record an decrease in fixed assets and handle the residual value of the fixed assets. According to the decision on handling of shortage, the following accounts shall be recorded: 

+ The shortage of fixed assets used for business shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 111, 112, 334, 138 (1388) (if the offender is required to make compensation) 

Dr 411 – Owner’s invested equity (if the decrease in equity is permitted to be recorded)

Dr 811 – Other expenses (if the enterprise suffers losses)

Cr 211 – Tangible fixed assets. 

+ The shortage of fixed assets used for non-business activities shall be recorded as follows: 

A decrease in the fixed asset shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets must be recovered according to the decision on handling of shortage and the following accounts shall be recorded: 

Dr 111, 112 (if collecting money)

Dr 334 – Payables to employees (deducted from salaries of employees)

Cr, relevant accounts (according to report on handling).

+ The shortage of fixed assets used for culture or activities welfare shall be recorded as follows: 

A decrease in the fixed asset shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets must be recovered according to the decision on handling of shortage and the following accounts shall be recorded: 

Dr 111, 112 (if collecting money)

Dr 334 – Payables to employees (deducted from salaries of employees)

Cr 3532 – Welfare fund

- If the reasons for shortage of fixed assets are not uncovered and awaiting solutions:

+ The shortage of fixed assets used for business shall be recorded as follows: 

A decrease in fixed assets shall be recorded for residual value of the shortage of fixed assets:

Dr 214 – Depreciation of fixed assets (2141) (depreciated value)

Dr 811 – Other expenses (residual value)

Cr 211 – Tangible fixed assets (historical cost).

If there is a decision on handling of residual value of shortage of fixed assets, the following accounts shall be recorded: 

Dr 111, 112 (compensation)

Dr 138 – Other receivables (1388) (if the offender is required to make compensation) 

Dr 334 – Payables to employees (deducted from salaries of employees)

Dr 411 – Owner’s invested equity (if the decrease in equity is permitted to be recorded)

Dr 811 – Other expenses (if the enterprise suffers losses)

Cr 138 - Other income (1381).

+ The shortage of fixed assets used for non-business activities shall be recorded as follows: 

A decrease in the fixed asset shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets shall be recorded to account 1381 “Assets in shortage awaiting resolution” as follows: 

Dr 1381 – Assets in shortage awaiting resolution 

Cr 138 - Other payables or receivables.

When there is a decision on compensation for residual value of the shortage of fixed assets, the following accounts shall be recorded: 

Dr 111, 334, etc. 

Cr 1381 – Assets in shortage awaiting resolution 

Concurrently, the compensation for residual value of the shortage of fixed assets shall be recorded to relevant accounts according to the decision issued by the competent agency as follows:

Dr 138 - Other payables or receivables.

Cr, relevant accounts (333, 461, etc). 

+ The shortage in fixed assets used for culture or activities welfare shall be recorded as follows: 

A decrease in the fixed asset shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets shall be recorded to account 1381 “Assets in shortage awaiting resolution” as follows: 

Dr 1381 – Assets in shortage awaiting resolution 

Cr 3532 – Welfare fund

When there is a decision on compensation for residual value of the shortage of fixed assets, the following accounts shall be recorded: 

Dr 111, 334, etc. 

Cr 1381 – Assets in shortage awaiting resolution 

3.2.5. With regard to tools and supplies not meeting all recognition criteria of tangible fixed assets used for business, the following accounts shall be recorded: 

Dr 623, 627, 641, 642 (if their residual value is small)

Dr 242 – Prepaid expenses. (if their value is great, they must be allocated gradually)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost of fixed asset).

3.2.6. Accounting for sale and leaseback of tangible fixed assets which is operating lease (refer to account 811 or 711).

3.3. Accounting for tangible fixed assets under physical inventory count under evaluation of enterprises for equitization of wholly-state-owned enterprises 

a) Reports on physical inventory count: When receiving notification or decision on equitization of the competent agency, the equitized enterprise must conduct physical inventory count and classify tangible fixed assets under management and use of the enterprise at the time in which the enterprise is undergone evaluation.

- In case of shortage of tangible fixed assets, the following accounts shall be recorded: 

Dr 1381 – Assets in shortage awaiting resolution (residual value)

Dr 214 – Depreciation of fixed assets (cumulatively-depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

- In case of surplus of fixed assets: the enterprise shall keep records of surplus of fixed assets in the presentation of the financial statement  Once the reasons for surplus are uncovered and the decision on resolution to surplus is issued by the competent agency, they shall be recorded to relevant accounts in the balance sheet.

b) Accounting for surplus or shortage of tangible fixed assets under physical inventory count: the enterprise must uncover the reasons for the surplus or shortage and determine material responsibility for compensation taken by organizations or individuals as prescribed. The value of shortage of tangible fixed assets (deducted from compensation) shall be recorded to other expenses.

- With regard to shortage of assets detected under physical inventory count, according to “Report on resolution to shortage or surplus of assets under physical inventory count”, the following accounts shall be recorded: 

Dr 111 – Cash (individual or organization paying compensation)

Dr 1388 - Other receivables (individual or organization paying compensation)

Dr 334 – Payables to employees (deducted from salaries of employees)

Dr 811 – Other expenses (residual value of shortage of fixed assets detected under physical inventory count shall be recorded to losses of the enterprise)

Cr 1381 – Assets in shortage awaiting resolution.

- With regard to surplus of assets detected under physical inventory count, according to “Report on resolution to shortage or surplus of assets under physical inventory count”, the following accounts shall be recorded: 

Dr 3381 – Surplus of assets awaiting resolution.

Cr 331 – Trade payables (if the assets in surplus belong to sellers)

Cr 138 - Other payables or receivables (3388)

Cr 411 – Owner's invested equity (regarding tangible fixed assets impossible to uncover reasons and determine the owner).

c) Accounting for sale or liquidation of unnecessary assets or unsold assets pending liquidation: after receiving approval issued by agency deciding the equitization, the enterprise shall sell or liquidate assets as prescribed. The revenues, expenses and decreases in assets shall be recorded as follows:

- Revenues from sale or liquidation of unnecessary fixed assets or fixed assets pending liquidation shall be recorded as follows: 

Dr 111,112,131

Cr 711 - Other income.

Cr 3331 – VAT payables (if any). 

- Expenditures on sale or liquidation of unnecessary fixed assets or fixed assets pending liquidation shall be recorded as follows: 

Dr 811 – Other expenses

Dr 133 – Deductible VAT (if any) 

Cr 111, 112, 331. 

- Decreases in fixed assets which are sold or liquidated shall be recorded as follows: 

Dr 811 – Other expenses (residual value)

Dr 214 – Depreciation of fixed assets

Cr 211 – Tangible fixed assets. 

d) When the enterprise transfers tangible fixed assets which are unnecessary or pending liquidation as prescribed, the following accounts shall be recorded: 

Dr 411 – Owner’s invested equity.

Dr 214 – Depreciation of fixed assets

Cr 211 – Tangible fixed assets. 

dd) Accounting for transfer assets which are welfare constructions 

- When transferring housing of officials or employees of the enterprise invested by the welfare funds to real estate authority of the local government to manage, the following accounts shall be recorded: 

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

- If the equitized enterprise uses the welfare constructions invested by state capital for business, the following accounts shall be recorded: 

Dr 466 – Non-business funds used for fixed asset acquisitions.

Cr 411 – Owner’s invested equity.

e) Accounting for value of tangible fixed assets which are undergone re-valuation.

According to dossier on revaluation of the enterprise, the value of the tangible fixed assets shall equal: Increase in residual value of fixed asset which is recorded to Cr 412 - Differences upon asset revaluation; Decrease in residual value of fixed asset which is recorded to Dr 412 - Differences upon asset revaluation and such differences must be in details according to every fixed asset. In particular:

- In case the value of re-evaluated fixed asset is greater than book value and historical cost of the fixed asset or re-evaluated cumulative depreciation is greater than book value, the following accounts shall be recorded: 

Dr 211 – Historical costs of fixed assets (increase evaluation).

Cr 214 – Depreciation of fixed assets (increase evaluation).

Cr 412 - Differences upon asset revaluation (value of fixed asset in increase).

- In case the value of re-evaluated fixed asset is smaller than book value and historical cost of the fixed asset or re-evaluated cumulative depreciation is smaller than book value, the following accounts shall be recorded: 

Dr 214 – Depreciation of fixed assets (decrease evaluation).

Dr 412 - Differences upon asset revaluation (value of fixed asset in decrease).

Cr 211 – Historical costs of fixed assets (decrease evaluation).

The enterprise depreciates the fixed asset according to new historical cost determined after re-evaluation.

g) Transferring fixed assets to joint-stock companies

- Equitization of independent enterprises

With regard to equitization of independent enterprises, it is required to comply with regulations on transfer of assets, accounts payables and capital funds of joint-stock companies. All accounting documents, accounting records and financial statements of the equalized enterprise required archive shall be transferred to the joint-stock company for keep archiving.

- With equitization of dependent accounting enterprises of state-owned companies, groups, general companies, parent companies, or independent accounting companies of the general companies.

When transferring assets, accounts payables and capital funds to joint-stock companies, the value of tangible fixed assets transferred to the joint-stock company shall be recorded as follows according to receipt slip of assets, appendixes, relevant accounting records or documents.

Dr 411 – Owner’s invested equity.

Dr 214 – Depreciation of fixed assets (depreciated value).

Cr 211 – Tangible fixed assets.

Article 36. Account 212 – Financial lease fixed assets 

1. Rules for accounting

a) This account is used to record current value and increase and decrease in total financial lease fixed assets of an enterprise. This account is used to record historical costs of financial lease fixed assets of the lessee (such fixed assets are not under ownership of the enterprise, but the enterprise has legal liability to manage and use them similarly to their assets).

b) Financial lease: a lease that transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee. Ownership of the asset may be transferred at the end of the lease term.

c) Recognition of financial lease: a financial lease must satisfy at least one of five criteria below:

- Ownership of the asset is transferred to the lessee at the end of the lease term;

- At the inception of the lease, the lessee has an option to purchase the asset at a price which is expected to be sufficiently lower than the value at the end of the lease term;

-  The lease term is for the major part of the economic life of the asset even if title is not transferred;

- At the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset;

-  The leased assets are of a specialized nature such that only the lessee can use them without major modifications being made.

d) An asset lease shall be considered a financial lease if it meets at least one of three criteria below:

- If the lessee cancels the lease and compensates the losses caused by the cancellation of the lease to the lessor;

- Gains or losses from variation in the fair value of the residual value of the leased asset shall be borne by the lessee;

- The lessee has ability to continue the lease after the termination of the lease at a rent which is lower than the market rent. Leases of assets which are land use rights shall be classified as operating lease.

dd) Historical cost of a financial lease fixed asset shall equal fair value of the lease or present value of minimum lease payments amounts (in case the fair value is greater than present value of minimum lease payments amounts) plus (+) initial direct costs incurred in connection with financial leasing activities.

 If the input VAT is deductible, present value of minimum lease payments amounts shall not include VAT payables to the lessor.

When calculating the present value of minimum lease payments amounts, the enterprise may use the implicit interest rate, interest rate stated in the lease or the incremental borrowing interest rate of the lessee.

e) The non-deductible input VAT on the leased asset which is paid by the lessee on behalf of the lessor shall be recorded as follows:

- If the non-deductible input VAT is made a lump sum payment when recording the leased asset, the historical cost of the leased asset shall include VAT;

- If the non-deductible input VAT is paid instalment, it shall be recorded to operating cost during a period in conformity with depreciation costs of financial lease assets.

g) Operating lease fixed assets shall not be recorded to this account.

h) The lessee shall calculate, depreciate the fixed asset and charge to operating costs periodically in conformity with the depreciation policy applied to its owned-fixed assets in kind.  If it not sure that the lessee shall acquire the ownership of the asset at the end of the lease term, the leased asset shall be depreciated according to the lease term if the lease term is shorter than the useful life of the leased asset.

i) Account 212 shall be detailed to keep track of every type of leased fixed asset.

2. Structure and contents of account 212 – Financial lease fixed assets 

Debit: Increases in historical costs of the financial lease fixed assets.

Credit:  Decreases in historical costs of financial lease fixed assets due to returning to the lessor at the end of the lease term or buying and converting into the fixed assets of the enterprise.

Debit balance: Historical cost of existing financial lease fixed assets.

Account 212 – Financial lease fixed assets comprises 2 sub-accounts

- Account 2121 – Financial lease tangible fixed assets: records current value and increases and decreases in total financial lease tangible fixed assets of the enterprise;

- Account 2122 – Financial lease intangible fixed assets: records current value and increases and decreases in total financial lease intangible fixed assets of the enterprise.

3. Method of accounting for several major transactions

3.1. When incurring initial direct cost in connection with the financial lease asset before receiving the leased asset, such as: commission fees, legal fees, etc, the following accounts shall be recorded:  

Dr 242 – Prepaid expenses 

Cr 111, 112, etc. 

3.2. When paying an advance of the financial lease rent or deposit to secure the lease, the following accounts shall be recorded: 

Dr 341 – Borrowings and finance lease liabilities (3412) (prepaid lease payments)

Dr 244 – Mortgage, collaterals and deposits

Cr 111, 112, etc. 

3.3. When receiving a financial lease fixed asset, the value of the financial lease fixed assets (input VAT-exclusive prices) shall be recorded according to the lease and related documents, the following accounts shall be recorded:   

Dr 212 – Financial lease fixed assets (VAT-exclusive prices)

Cr 341 – Borrowings and finance lease liabilities (3412) (present value of minimum lease payments amounts or fair value of the leased asset, excluding refundable taxes).

Initial direct costs in connection with financial lease activities shall be recorded to the historical cost of the financial lease fixed assets as follows: 

Dr 212 – Financial lease fixed assets

Cr 242 – Prepaid expenses, or 

Cr 111, 112, etc.  (Direct costs in connection with financial lease activities incurred when receiving the financial lease asset).

3.4. Periodically, upon the receipt of the financial lease invoices:

When paying the principal and lease interest to the lessor, the following accounts shall be recorded: 

Dr 635 – Financial expenses (lease interest of current period)

Dr 341 – Borrowings and finance lease liabilities (3412) (lease principal of current period)

Cr 111, 112, etc. 

3.5. When receiving an invoice for input VAT sent by the lessor who is paid by the lessee:

a) If the VAT is deductible, the following accounts shall be recorded: 

Dr 133 – Deductible VAT (1332)

Cr 112 – Cash in bank (lump sum payment)

Cr 338 - Other payables (input VAT payables to the lessor).

b) If the VAT is not deductible, the following accounts shall be recorded: 

Dr 212 – Financial lease fixed assets (if the input VAT is not deductible and the VAT is paid lump sum when recording the financial lease fixed assets)

Dr 627, 641, 642 (if the non-deductible input VAT is paid whenever the invoice is received)

Cr 112 – Cash in bank (lump sum payment)

Cr 338 - Other payables (input VAT payables to the lessor).

3.6. When paying the commitment fees to the lessor, the following accounts shall be recorded: 

Dr 635 – Financial expenses.

Cr 111, 112, etc. 

3.7. When returning the financial lease fixed assets as mentioned in the lease to the lessor, a decrease in the value of the financial lease fixed assets shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (2142)

Cr 212 – Financial lease fixed assets.

3.8. If the lease prescribes that the lessee only rent a part of the value of the asset and buy it then, when the lessee receives the transfer of the ownership of the asset, a decrease in financial lease fixed assets and an increase in tangible fixed assets under ownership of the enterprise shall be recorded. When converting the financial lease asset to the asset under ownership of the enterprise, the following accounts shall be recorded: 

Dr 211 – Tangible fixed assets 

Cr 212 – Financial lease fixed assets (residual value of the financial lease fixed asset)

Cr 111, 112, etc.  (additional payables).

And, when transferring depreciated value, the following accounts shall be recorded: 

Dr 2142 – Depreciation of financial lease fixed assets

Cr 2141 – Depreciation of tangible fixed assets 

3.9. Accounting for sale and leaseback of financial lease fixed assets:

a) If the sale and leaseback gives the price which is greater than the residual value of the fixed asset:

- Accounting for the sale transaction (refer to account 711)

- Those entries recording leased assets and accounts payables in connection with finance lease shall comply with regulations from Point 3.1 to 3.6 of this Article.

- Periodically, the depreciation of the financial lease fixed asset shall be calculated, deducted and recorded to operating costs as follows:

Dr 623, 627, 641, 642, etc.  

Cr 2142 – Depreciation of financial lease fixed assets

- Periodically, when transferring the difference between the price and residual value of the leased back fixed asset (profit) to operating costs of the period over then lease term, the following accounts shall be recorded: 

Dr 3387 - Unearned revenue

Cr 623, 627, 641, 642, etc.  

b) If the sale and leaseback gives the price which is smaller than the residual value of the fixed asset:

- Accounting for the sale transaction (refer to account 711)

- Those entries recording leased assets and accounts payables in connection with finance lease, periodical rents shall comply with regulations from Point 3.1 to 3.6 of this Article.

- Periodically, when transferring the difference between the price and residual value of the leased back fixed asset (loss) to operating costs of the period over then lease term, the following accounts shall be recorded: 

Dr 623, 627, 641, 642, etc. 

Dr 242 – Prepaid expenses 

Article 37. Account 213 – Intangible fixed assets 

1. Rules for accounting

a) This account is used to record current value and increases and decreases in intangible fixed assets of the enterprise; Intangible fixed assets mean assets which have no physical form but the value of which can be determined and which are held and used by the enterprises in their business or leased to other entities in conformity with the recognition criteria of intangible fixed assets. 

b) Historical costs of intangible fixed assets means all costs incurred by the enterprises to acquire intangible fixed assets up to the time of putting these assets into use as expected. 

- The historical cost of an intangible fixed asset purchased separately shall equal its purchase price (minus (-) any trade discounts and rebates), taxes (excluding refundable taxes) and directly-attributable expenses incurred from putting the asset into use as expected;

- If the intangible fixed asset is purchased in instalment or deferred payment, their historical cost shall be recorded to the cash price. The difference between the deferred price and the cash price shall be recorded to operating costs according to the payment period, unless such difference is recorded to the historical cost of the intangible fixed assets (capitalization) as prescribed in VAS “Borrowing costs";

- If an intangible fixed asset is purchased in the form of exchange with another dissimilar intangible fixed asset, their value shall equal the fair value of the received asset or the fair value of the exchanged asset after adjustment. If the exchange and payment against documents is related to the capital ownership of the enterprise, the historical cost shall equal the fair value stated in such documents.

- The historical cost of an intangible fixed asset which is land use rights means an amount of money paid to acquire lawful land use rights (including expenses paid to the transferor or expenses incurred from compensation for land clearance, leveling of premises, property transfer taxes, etc) or an amount agreed by contracting parties when contributing capital. The land use rights shall be considered whether or not intangible fixed assets in accordance with regulations of relevant law provisions. 

- The historical cost of an intangible fixed asset granted by the State or presented shall equal the initial fair value plus (+) directly-attributable expenses incurred from putting the asset into use as expected.

- The historical cost of the intangible fixed assets transferred shall be the historical cost recorded in the accounting records of the receiver.

c) All actual expenses incurring during the development stage which fails to be recognized as intangible fixed asset shall be recorded to operating costs in the period. If the development stage of the asset meets recognition criteria of intangible fixed assets as prescribed in VAS “Intangible fixed assets”, expenses of the development stage shall be recorded to account 241 “Construction in progress” (2412). At the end of the development stage, those expenses incurred from historical cost of intangible fixed assets acquisitions during the development stage must be transferred to the Dr 213 "Intangible fixed assets".

d) During the operation process, it is required to depreciate and record the intangible fixed asset to the operating costs as prescribed in VAS for intangible fixed assets. With regard to fixed assets which are land use rights, only intangible fixed assets which are termed land use rights are depreciated.

dd) Costs related to intangible fixed assets, which are incurred after initial recognition, must be recognized as operating costs in the period; if they meet all two following criteria, an increase in the historical costs of the intangible fixed asset shall be recorded: 

- These costs can help intangible fixed assets generate more future economic benefits than the original operation evaluation; 

- These costs are appraised in a certain way and associated with a specific intangible asset. 

e) The costs incurred to generate future economic benefits for the enterprises include enterprise establishment cost, personnel-training cost and advertising cost incurred before the newly-set up enterprises start to operate, costs for the research stage, relocation cost, shall be recorded to operating costs in the period or gradually allocated into operating costs in the maximum period of three years. 

g) Costs related to intangible assets, which have been recorded by the enterprises to costs of determining the business operation results in the previous period, shall not be re-recorded to the historical cost of intangible fixed assets. 

h) Trademarks, brand names, distribution right, customers’ name list and similar items which are internally established in the enterprise shall not be recognized as intangible fixed assets. 

i) Intangible fixed assets shall be kept records in details according to every item in the “Fixed assets register”.

2. Structure and contents of account 213 – Intangible fixed assets 

Debit: Increases in historical costs of intangible fixed assets.

Credit: Decreases in historical costs of intangible fixed assets.

Debit balance: Historical costs of existing intangible fixed assets of the enterprise.

Account 213 – Intangible fixed assets comprise 7 sub-accounts:

- Account 2131 – Land use rights: records land use rights which are recognized as intangible fixed assets as prescribed.

Value of intangible fixed assets which are land use rights shall equal actual expenses directly related to land use rights, such as: money paid for the land use rights, expenses incurred from compensation, land clearance, leveling of premises (if the land use rights are acquired separately from any investment in buildings and structures on land), property transfer taxes (if any), etc. This account shall not record any expenses incurred from constructions on land.

- Account 2132 – Copy rights: records value of intangible fixed assets which are total actual expenses paid to acquire copyrights.

- Account 2133 – Patents and inventions: records value of intangible fixed assets which are total actual expenses paid to acquire patents and inventions.

- Account 2134 – Trademarks and trade names: records value of intangible fixed assets which are total actual expenses paid for trademarks of goods.

- Account 2135 – Computer software: records value of intangible fixed assets which are total actual expenses paid for computer software.

- Account 2136 - Licenses and franchises: records value of intangible fixed assets which are expenses incurred from licenses and franchises, such as: development permits, permits for production of new products, etc. 

- Account 2138 – Other intangible fixed assets: records value of other intangible fixed assets which are not recorded to above accounts.

3. Method of accounting for several major transactions

3.1. Purchase of intangible fixed assets:

- When purchasing intangible fixed assets used for business which are subject to VAT using credit-invoice method, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets (VAT-exclusive prices)

Dr 133 – Deductible VAT (1332)

Cr 112 – Cash in bank

Cr 141 - Advances 

Cr 331 – Trade payables

- When purchasing intangible fixed assets used for business which are not subject to VAT, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets (total payments)

Cr 112, 331, etc (total payments)

3.2. Purchase of intangible fixed assets in instalment or deferred payment:

- When purchasing intangible fixed assets used for business which are subject to VAT using credit-invoice method, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets (VAT-exclusive cash prices)

Dr 242 – Prepaid expenses 

(deferred interest shall equal (=) difference between total payment minus (-) cash price and input VAT (if any))

Dr 133 – Deductible VAT (1332)

Cr 111, 112

Cr 331 – Trade payables

- When purchasing intangible fixed assets used for business which are not subject to or subject to VAT using subtraction method, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets (VAT-exclusive cash prices)

Dr 242 – Prepaid expenses (deferred interest shall equal (=) difference between total payment minus (-) cash price)

Cr 331 – Trade payables (total payments).

- When paying the interest for purchase of intangible fixed assets in instalment or deferred payment periodically, the following accounts shall be recorded:

Dr 635 – Financial expenses.

Dr 242 – Prepaid expenses 

- When making payment to the seller, the following accounts shall be recorded: 

Dr 331 – Trade payables

Cr 111, 112, etc. 

3.3. Purchase of intangible fixed assets in the form of exchange

a) Exchange of two similar intangible fixed assets: When receiving an intangible fixed asset in exchange of a similar intangible fixed asset and putting into operation, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets (the historical cost of the received intangible fixed asset shall be recorded according to the residual value of the exchanged intangible fixed asset)

Dr 214 – Depreciation of fixed assets (2143) (depreciation of exchanged fixed asset)

Cr 213 – Intangible fixed assets (2143) (historical cost of exchanged fixed asset)

b) Exchange of two dissimilar intangible fixed assets:

- A decrease in the exchanged intangible fixed assets shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (depreciation value)

Dr 811 – Other expenses (residual value of the exchanged fixed asset)

Cr 213 – Intangible fixed assets (historical cost)

- And the revenue from exchange of fixed assets shall be recorded as follows:

Dr 131- – Trade receivables (total payments)

Cr 711 – Other income (fair value of exchanged fixed asset)

Cr 3331 –VAT payables (33311) (if any).

- An increase in the exchanged intangible fixed assets shall be recorded as follows: 

Dr 213 – Intangible fixed assets (fair value of the received fixed asset)

Dr 133 – Deductible VAT (1332) (if any) 

Cr 131 – Trade receivables (total payments).

3.4. Value of intangible fixed assets acquired intra-company in the development stage:

a) When incurring expenses in the development stage, if the results do not satisfy recognition criteria of intangible fixed assets, such expenses shall be recorded to operating costs within a period or prepaid expenses, the following accounts shall be recorded: 

Dr 242 – Prepaid expenses (for great value) or

Dr 642 – General administration expenses

Cr 111, 112, 152, 153, 331, etc.  

b) If the result of development stage satisfies recognition criteria of intangible fixed assets:

- When collecting actual expenses incurring in the development stage to add to the historical cost of the intangible fixed assets, the following accounts shall be recorded: 

Dr 241 – Construction in progress

Dr 133 – Deductible VAT (1332 - if any) 

Cr 111, 112, 152, 153, 331, etc. 

- When completing development stage, total actual expenses incurring which shall be recorded to the historical cost of the intangible fixed asset, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets 

Cr 241 – Construction in progress

3.5. When purchasing intangible fixed assets which are land use rights associated with buildings or structures on land, the intangible fixed assets which are land use rights and tangible fixed assets which are buildings or structures must be separately recorded as follows: 

Dr 211 – Tangible fixed assets (historical costs of buildings or structures)

Dr 213 – Intangible fixed assets (historical costs of land use rights)

Dr 133 – Deductible VAT (1332 - if any) 

Cr 111, 112, 331, etc.  

3.6. When an intangible fixed asset acquired by exchange of documents on capital ownership of joint-stock companies, the historical cost of such intangible fixed asset shall be the fair value stated in those documents, and the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets 

Cr 411 – Owner's invested equity.

3.7. Granted, donated or presented intangible fixed assets which are put into operation:

- When receiving a granted, donated or presented intangible fixed asset, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets 

Cr 711 – Other income

- When incurring expenses related to donated or presented intangible fixed assets, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets 

Cr 111, 112, etc. 

3.8. When receiving land use rights as capital, the following accounts shall be recorded according to dossiers on transfer of land use rights: 

Dr 213 – Intangible fixed assets 

Cr 411 – Owner's invested equity.

3.9. When converting use purposes of the investment properties which are land use rights to intangible fixed assets, the following accounts shall be recorded: 

Dr 213 – Intangible fixed assets (2131)

Cr 217 – Investment properties.

And when transferring cumulative depreciation of the investment properties to cumulative depreciation of the intangible fixed assets, the following accounts shall be recorded: 

Dr 2147 – Depreciation of investment properties

Cr 2143 – Depreciation of tangible fixed assets 

3.10. When investing in subsidiaries or joint-venture companies in the form of contribution of intangible fixed assets, according to re-evaluated value of intangible fixed assets:

a) In case the re-evaluated value is smaller than the residual value of the contributed intangible fixed asset, the following accounts shall be recorded: 

Dr 221, 222 (according to re-evaluated value)

Dr 214 – Depreciation of fixed assets (2143) (depreciation value)

Dr 811 – Other expenses (the negative difference between the re-evaluated and the residual value of the intangible fixed asset)

Cr 213 – Intangible fixed assets (historical cost).

b) In case the re-evaluated value is greater than the residual value of the contributed intangible fixed asset, the following accounts shall be recorded: 

Dr 221, 222 (according to re-evaluated value)

Dr 214 – Depreciation of fixed assets (2143) (depreciation value)

Cr 213 – Intangible fixed assets (historical cost).

Cr 711 – Other expenses (the positive difference between re-evaluated value and the residual value of the intangible fixed asset).

3.11. The sale or liquidation of intangible fixed assets shall be recorded similarly to the sale or liquidation of tangible fixed assets (refer to account 211).

Article 38. Account 214 – Depreciation of fixed assets 

1. Rules for accounting

a) This account is used to record increases or decreases in depreciation value and accumulated depreciation of fixed assets and investment properties due to deduction from depreciation of fixed assets, investment properties and other increases or decreases of depreciation of fixed assets or investment properties.

b) In principle, all fixed assets or investment properties of the enterprise for lease related to operation (including unused, unnecessary or liquidation-pending assets) must be depreciated as prescribed in regulations in force. The depreciation of fixed assets used for operation and depreciation of investment properties shall be recorded to operating costs within a period; depreciation of unused, unnecessary, or liquidation-pending fixed assets shall be recorded to other expenses. With regard to special cases not subject to depreciation (such as fixed assets for reservation or common use in society, etc), the enterprise must comply with regulations of law in force. It is not required to depreciate fixed assets used for non-business activities or welfare, only depreciation of such fixed asset are calculated and decreases in funds for those fixed assets acquisition are recorded.

c) Pursuant to regulations of law and management requests of the enterprise, one of methods of calculation or deduction of depreciation as prescribed in conformity with every fixed asset or investment property in order to develop business and ensure the recovery of payback promptly, sufficiently and in conformity with financial ability of the enterprise.

The depreciation method applying to every fixed asset or investment property must be conducted consistently and may be changed when there is any change in method of recovering economic benefits of the fixed asset or investment property.

d) The useful life and depreciation method must be re-considered at least at the end of every fiscal year.

If the estimated useful life of the asset is different significantly from previous estimated useful life, the useful life must be changed equivalently. The method of depreciation of fixed assets shall be changed once there is a significant change in payback of economic benefits of the fixed assets. In this case, the depreciation costs of the current year and succeeding years shall be adjusted and they shall be presented in the financial statements.

dd) If a fixed asset is fully depreciated (the capital is fully paid back), but it is still be used in operation, it shall not be kept depreciating. If a fixed asset is not fully depreciated (the capital is not fully paid back), but it is damaged or pending liquidation, it is required to uncover reasons, responsibility of groups or individuals for compensation; and the residual value of the fixed asset which is not paid back or compensated shall be compensated by the amounts collected from the liquidation of such fixed asset, the amounts of compensation shall be decided by the leaders of the enterprise. If the amounts collected from liquidation or compensation is not enough to compensate the residual value of the fixed asset which is not paid back or the value of the lost fixed asset, the remaining difference shall be considered loss from liquidation and recorded to other expenses. With regard to state-owned enterprises, they shall be handled according to current financial policies of the Government.

e) Regarding intangible fixed assets, depending on the effective period of time of such assets for depreciating from they are put into use (according to the contract, commitment or decision of the competent agency) Regarding intangible fixed assets which are land use rights, only term land use rights are depreciated. If it fails to determine useful life, they shall be not depreciated.

g) Regarding financial lease fixed assets, during the period in which the assets are used; the lessee must depreciate over the lease term and charge to operating costs in order to recover all capital.

h) Regarding investment properties for operating lease, they shall be depreciated and recorded to operating costs within a period. The enterprise may estimate the useful life and determine the appropriate depreciation method according to owner-occupied property in kind. If an investment property is held for capital appreciation, the enterprise shall not depreciate but determine the loss due to depreciation.

2. Structure and contents of account 214 – Depreciation of fixed assets  

Debit: Decreases in depreciation of fixed assets, investment properties because the fixed assets or investment properties are liquidated, sold, or transferred to other enterprises or contributed to other enterprises as capital.

Credit: Increases in depreciation of fixed assets or investment properties because the fixed assets or investment properties are depreciated.

Debit balance: Accumulated depreciation of existing fixed assets or investment properties of the enterprise.

Account 214 – Depreciation of fixed assets, comprise 4 sub-accounts:

- Account 2141 – Depreciation of tangible fixed assets: records the depreciation value of tangible fixed asset during the using period and other increases or decreases of tangible fixed assets.

- Account 2142 – Depreciation of financial lease fixed assets: records the depreciation value of tangible fixed asset during the using period and other increases or decreases of financial lease fixed assets.

- Account 2143 – Depreciation of intangible fixed assets: records the depreciation value of intangible fixed asset during the using period and other increases or decreases of intangible fixed assets.

- Account 2147 – Depreciation of investment properties: records depreciation value of investment properties used for operating lease of the enterprise.

3. Method of accounting for several major transactions

a) Periodically, when calculating, deducting and recording fixed assets to operating costs, the following accounts shall be recorded: 

Dr 623, 627, 641, 642, 811 

Cr 214 – Depreciation of fixed assets (appropriate sub-account)

b) When receiving used fixed assets which are transferred intra-company between dependent accounting units having no legal status, the following accounts shall be recorded: 

Cr 211 – Tangible fixed assets (historical cost).

Cr 336, 411 (residual value) 

Cr 214 – Depreciation of fixed assets (2141) (depreciation value)

c) Periodically, when deducting depreciation of investment properties for operating lease, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold (investment property operating expenses)

Cr 214 – Depreciation of fixed assets (2147)

d) If there is any decrease in fixed assets or investment properties, decreases in both historical costs of the fixed assets and depreciated value of the fixed assets or investment properties shall be recorded (refer to accounts 211, 213, and 217).

dd) When calculating depreciation value of fixed assets for non-business activities at the end of the fiscal year, the following accounts shall be recorded: 

Dr 466 – Non-business funds used for fixed asset acquisitions 

Cr 214 – Depreciation of fixed assets 

e) When calculating depreciation value of fixed assets for cultural activities or welfare at the end of the fiscal year, the following accounts shall be recorded: 

Dr 3533 – Welfare funds used for fixed asset acquisitions 

Cr 214 – Depreciation of fixed assets.

g) At the end of the fiscal year, the enterprise shall review the useful life and the depreciation methods for fixed assets, if there is any change in the depreciation rate, the depreciation recorded in the accounting records shall be adjusted as follows:

- If the depreciation rate rises against the depreciated amounts in the year leading an increase in the depreciation difference due to the adjustment of the depreciation methods or period, the following accounts shall be recorded: 

Dr 623, 627, 641, 642 (increase in depreciation difference)

Cr 214 – Depreciation of fixed assets (appropriate sub-account)

- If the depreciation rate falls against the depreciated amounts in the year leading a decrease in the depreciation difference due to the adjustment of the depreciation methods or period, the following accounts shall be recorded: 

Dr 214 – Depreciation of fixed assets (appropriate sub-account)

Cr 623, 627, 641, 642 (decrease in depreciation difference)

h) Accounting for value of tangible fixed assets which are undergone re-valuation: According to dossier on revaluation of the enterprise, the value of the tangible fixed assets shall equal: Increase in residual value of fixed asset which is recorded to Cr 412 -  Differences upon asset revaluation; Decrease in residual value of fixed asset which is recorded to Dr 412 - Differences upon asset revaluation and such differences must be recorded in details according to every fixed asset In particular:

- In case the value of re-evaluated fixed asset is greater than book value and historical cost of the fixed asset or re-evaluated accumulated depreciation is greater than book value, the following accounts shall be recorded:

Dr 211 - Historical costs of fixed assets (the increase value)

Cr 412 - Differences upon asset revaluation (value of additional assets)

Cr 214 – Depreciation of fixed assets (the increase value)

- In case the value of re-evaluated fixed asset is smaller than book value and historical cost of the fixed asset or re-evaluated accumulated depreciation is smaller than book value, the following accounts shall be recorded:

Dr 214 – Depreciation of fixed assets (the decrease value)

Dr 412 - Differences upon asset revaluation (value of additional assets)

Cr 211 - Historical costs of fixed assets (the decrease value)

The enterprise shall deduct depreciation of fixed assets according to new historical cost after re-evaluation. Time for re-evaluation of depreciation of fixed assets when evaluating a joint-stock company is the date on which the equitized enterprise is granted Certificate of Business registration of a joint-stock company.

i) Equitization of dependent accounting units of independent state-owned companies, groups, general companies, parent companies, independent accounting units of the general companies:

When transferring a fixed asset to the joint-stock company, an increase in asset transferred to joint-stock company shall be recorded, according to receipt slip of assets, special appendixes on transfer of assets to joint-stock company and relevant documents or accounting records: 

Dr 411 – Owner's invested equity (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211,213 (historical cost).

Article 39. Account 217 – Investment properties 

1. Rules for accounting

1.1 This account is used to record current value and increases or decreases in investment properties of an enterprise according to their historical costs, which is kept records similarly to fixed assets. Investment property includes land-use rights, a building or part of a building or both, infrastructure held by the owner or by the lessee under a finance lease to earn rentals or for capital appreciation, rather than for: 

- Use in the production or supply of goods or services or for administrative purposes; or 

- Sale in the ordinary course of business.

1.2. This account is used to record value of investment properties meeting recognition criteria of investment properties. Property held for sale in the ordinary course of business or in the process of construction or development for such sale, owner-occupied property, or property that is being constructed or developed for future use as investment property shall not be recorded to this account.

Investment property shall be recognized as an asset when the following conditions are met: 

- It is probable that the future economic benefits associated with the investment property will flow to the enterprise; and 

- The cost of the investment property can be measured reliably. 

1.3. An investment property shall be recorded in this account according to their cost.  Cost of an investment property means the amount of cash or cash equivalents paid or the fair value of other consideration given to acquire an investment property at the time of its acquisition or construction. 

- Depending on cases, cost of an investment property shall be determined as follows: 

The cost of a purchased investment property comprises its purchase price, and any directly-attributable expenses, such as: professional fees for legal services, property transfer taxes and other transaction costs, etc. 

+ If payment for an investment property is deferred, its cost is the cash price equivalent.  The difference between this amount and the total payments is recognized as interest expense over the period of credit, except when the difference is charged to cost of investment property in accordance with VAS “Borrowing Costs”;

+ The cost of a self-constructed investment property is its actual cost and directly-attributable expense on the date when the construction or development is completed;

+ If a finance lease property for operating lease meets recognition criteria of an investment property, the cost of such investment property at the initial lease shall comply with VAS “Leases”.

- The cost of an investment property is not increased by: 

+ Start-up costs (unless they are necessary to bring the property to its working condition); 

+ Initial operating losses incurred before the investment property achieves the planned level of occupancy; 

+ Abnormal amounts of wasted material, labor or other resources incurred in constructing or developing the property.

1.4. Subsequent expenditure relating to an investment property that has already been recognized should be added to the net-book value of the investment property when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing investment property, will flow to the enterprise and an increase in the cost of the investment property shall be recorded.

1.5. During the operating lease period, the investment property must be depreciated and recorded to business costs (including postponement period).  The enterprise may estimate the useful life and determine the appropriate depreciation method according to owner-occupied property in kind.

- In case the enterprise records revenue from total advances from investment property lease, total estimated cost equivalent to the revenue shall be recorded (including calculated depreciation in advance).

- The cost of an investment property includes: investment property depreciation expenses and directly-attributable expenses, such as: outsourcing expense, salaries of employees in charge of management of the leased property, depreciation expense on auxiliary construction serving the investment property lease.

1.6. Property held for capital appreciation shall not be depreciated. In case it is evident that the investment property falls against market fair value and the decrease is determined reliably, the decrease in cost of the investment property and the loss shall be recorded to costs of goods sold (similarly to provision for properties held for sale).

1.7. With regard to purchased investment properties which must be constructed, innovated or upgraded before being used for investment purpose, the value of the property, purchasing costs and constructing, innovating or upgrading costs shall be recorded to account 241 “Construction in progress”. Upon the construction, innovation or upgrading completes, the cost of the investment property must be determined and transferred to account 217 “Investment property".

1.8. The transfer from owner-occupied property to investment property or from investment property to owner-occupied property or inventory shall be made only if there is any change in use purpose as following cases:

- Investment property shall be converted into owner-occupied property when the owner begins to use this property;

- Investment property shall be converted into inventory when the owner begins to sell it;

- Owner-occupied property shall be converted into investment property when the owner finishes using that property and leasing it to other party for operation;

- Inventory shall be converted into investment property when the owner begins to lease it to other party for operation;

- Construction property shall be converted into investment property at the end of the construction period and put into investment period (during the construction period, it shall be recorded to VAS "Tangible fixed assets").

The transfer of use purpose between investment property and owner-occupied property or inventory does not change the book value of the transferred asset and the cost of the property for their evaluation or for preparation of financial statements.

1.9. When the enterprise decides to sell an investment property without repair, innovation or upgrading period, the investment property still be recorded to account 217 “Investment property” until it is sold (not converted into inventory).

1.10. The whole purchase price of an investment property shall be recorded to revenues (VAT-exclusive prices regarding enterprises subject to VAT using credit-invoice method). If payment for an investment property is deferred, the consideration received is recognized initially at the cash price equivalent (VAT-exclusive prices regarding enterprises subject to VAT using credit-invoice method). The difference between the nominal amount of the consideration and the cash price equivalent is recognized as interest revenue.

1.11. A decrease in investment property shall be recorded in following cases:

- Converting use purposes from investment property to inventory or owner-occupied property;

- Selling or disposing investment property;

- Returning investment property to the lessor at the end of the financial lease.

2. Structure and contents of account 217 – Investment property  

Debit: Increases in costs of investment property in the period.

Credit: Decreases in costs of investment property in the period.

Debit balance: Costs of existing investment property.

3. Method of accounting for several major transactions

3.1. Purchase of investment properties:

a) If the instalment payment is made and the input VAT is deductible, the following accounts shall be recorded:

Dr 217 – Investment property 

Dr 133 – Deductible VAT (1332)

Cr 111, 112.

If the VAT is not deductible, the historical cost of the investment property shall include VAT. 

b) If the deferred payment is made:

- And the input VAT is deductible; the following accounts shall be recorded: 

Dr 217 – Investment property (VAT-exclusive cash prices)

Dr 242 – Prepaid expenses (deferred interest shall equal (=) total payment minus (-) cash price minus (-) input VAT)

Dr 133 – Deductible VAT (1332)

Cr 331 – Trade payables

If the VAT is not deductible, the historical cost of the investment property shall include VAT. 

- Periodically, when calculating and allocating the interest payable of the purchased investment property in deferred payment, the following accounts shall be recorded: 

Dr 635 – Financial expenses.

Dr 242 – Prepaid expenses 

- When making payment to seller, the following accounts shall be recorded: 

Dr 331 – Trade payables

Cr 515 – Financial income (discount obtained due to early payment, if any)

Cr 111, 112, etc.

3.2. Acquisition of investment property due to completion of:

- When incurring construction expenses of investment property, they shall be recorded to Dr 241 “Construction in progress” according to relevant documents and materials (similarly to construction of tangible fixed assets, refer to account 211 “Tangible fixed asset”).

- When the construction in progress is completed and the investment asset is converted into investment property, the following accounts shall be recorded according to the transferred documents: 

Dr 217 – Investment property 

Cr 241 – Construction in progress.

3.3. When converting owner-occupied property or inventory to investment property, the following accounts shall be recorded according to documents on convert of use purposes: 

a) When converting a fixed asset into an investment property:

Dr 217 – Investment property 

Cr 211 – Tangible fixed asset, or 

Cr 213 – Intangible fixed assets.

And, when transferring accumulated depreciation, the following accounts shall be recorded: 

Dr 2141, 2143.

Cr 2147 – Depreciation of investment property (property for lease)

Cr 217 – Investment property (property held for capital appreciation).

b) When converting from inventory into investment property, the following accounts shall be recorded according to the documents on convert of use purposes: 

Dr 217 – Investment property 

Cr 1557, 1567.

If the investment property is used for lease, it shall be depreciated as prescribed. If the investment property is held for capital appreciation, it shall not be depreciated, but the decrease in the investment property shall be determined If the loss due to depreciation is determined reliably, the loss shall be recorded to costs of goods sold and the decrease in cost of the investment property shall be recorded.

3.4. When renting an asset under finance lease in order to lease them under one or multiple operating leases, if such asset meets recognition criteria of investment property:

a) According to financial lease and relevant documents, the following accounts shall be recorded: 

Dr 217 – Investment property 

Cr 111, 112, 3412. 

(Lease payments shall be made upon the receipt of financial lease invoice as prescribed in account 212 “Financial lease fixed assets”).

b) When the finance lease expires

- When returning financial lease investment property which is classified as investment property, the following accounts shall be recorded: 

Dr 2147 – Depreciation of investment properties

Dr 632- Costs of goods sold (difference between cost of the leased investment property and accumulated depreciation)

Cr 217 – Investment property (cost).

- When purchasing a financial lease investment property which is classified as an investment property, an increase in investment property (additional payables) shall be recorded as follows:  

Dr 217 – Investment property 

Cr 111, 112, etc

- When purchasing a financial lease property which is classified as an investment property used for operation or management of the enterprise, it shall be classified as an owner-occupied property and the following accounts shall be recorded: 

Dr 211 – Tangible fixed asset, or 

Dr 213 – Intangible fixed assets 

Cr 217 – Investment property 

Cr 111, 112, (additional payables).

And, when transferring accumulated depreciation, the following accounts shall be recorded: 

Dr 2147 – Depreciation of investment properties

Cr 2141, 2143.

3.5. When subsequent expenses relating to an investment property occur after initial recognition of investment property, if they satisfy the criteria to be capitalized or they are necessary to make the investment property to be ready for use, an increase in the cost of the investment property shall be recorded:

- When subsequent expenses (upgrading or innovating) relating to an investment property actually occurring after initial recognition of investment property shall be recorded as follows: 

Dr 241 – Construction in progress.

Dr 133 – Deductible VAT (1332)

Cr 111, 112, 152, 331, etc. 

- When completing upgrading, innovation, etc of investment property, an increase in the cost of the investment property shall be recorded as follows: 

Dr 217 – Investment property 

Cr 241 – Construction in progress.

3.6. Accounting for sale or disposal of investment property;

a) Recognition of revenue from sale or disposal of investment property:

- If the output VAT payable is separable when the investment property is sold or disposed, the following accounts shall be recorded: 

Dr 111, 112, 131 (total payment)

Cr 511 – Revenues (5117) (VAT-exclusive disposal prices) 

Cr 3331 – VAT payables (33311).

- If the output VAT payable is inseparable when the investment property is sold or disposed, the revenue shall include output VAT payable. Periodically, the VAT payables shall be determined and decreases in revenues shall be recorded as follows: 

Dr 511 - Revenues

Cr 3331 – VAT payables.

b) Decreases in the cost and residual value of sold or disposed investment property shall be recorded as follows: 

Dr 214 – Depreciation of fixed assets (2147 – Depreciation of investment property - if any)

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

Cr 217 – Investment property (cost of investment property).

3.7. Accounting for investment property lease

a) Revenues from investment property lease shall be recorded as follows: 

Dr 111, 112, 131

Cr 511 – Revenues (5117).

b) Recognition of the cost of investment property lease

- When collecting total cost of investment property, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold 

Cr 214 – Accumulated depreciation (2147)

Cr 111, 112, 331, etc. 

- If the total cost of investment property is not collected because a part of the project is not completed (leasing out the completed part), the cost shall be estimated similarly to estimating method applying to sale of property. 

3.7. Converting investment property into inventory or owner-occupied property:

a) If the investment property is converted into inventory when the owner decides to repair, innovate or upgrade it for sale:

- When there is a decision on repair, innovation or upgrade of investment property for sale, the residual value of the investment property shall be transferred to account 156 “Goods”, the following accounts shall be recorded: 

Dr 156 – Goods (Account 1567 – Residual value of investment property)

Dr 214 – Depreciation of fixed assets (2147 – accumulated depreciation - if any)

Cr 217 – Investment property (cost).

- When incurring expenses incurred from repair, innovation or upgrade for sale, the following accounts shall be recorded: 

Dr 154 – Work in progress

Dr 133 – Deductible VAT (if any) 

Cr 111, 112, 152, 334, 331, etc. 

- When the repairing, innovation and upgrading are completed for sale, all the expenses shall be added to the cost of the property for sale, the following accounts shall be recorded: 

Dr 156 – Goods (1567)

Cr 154 – Work in progress.

b) When converting investment property into owner-occupied property, the following accounts shall be recorded:

Dr 211, 213.

Cr 217 – Investment property.

And, the following accounts shall be recorded: 

Dr 2147 – Depreciation of investment properties (if any) 

Cr 2141, 2143.

3.8. If the investment property is held for capital appreciation, it shall not be depreciated, but the loss due to depreciation shall be determined (similarly to determination of provision for decline in value of properties held for sale). If the loss is determined reliably, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold 

Cr 217 – Investment property.

Article 40. Rules for accounting for investments in associates

1. Investments in associates include investments in subsidiaries, joint ventures and other investments for long-term held. The investment may be conducted in the following forms:

a) Investments in the form of capital contribution in associates (capital mobilized by the investee): in this form, the assets contributed by the contributor shall be recorded to balance sheet of the investee;

b) Investments in the form of purchase of capital contribution of other associates (purchase of owner’s equity): in this form, the assets of the buyer (the investor or transferee) shall be transferred to the seller (the transferor); they shall not be recorded to balance sheet of the unit issuing equity instruments (investee)

2. When investing by non-monetary assets, the investor must apply appropriate accounting method according to type of investment, in particular:

a) If a non-monetary asset is used for capital contribution, the investor must re-evaluate such asset under agreement. The difference between book value or residual value and re-evaluate price of the asset for capital contribution shall be recorded to other income or other expenses;

b) Sale of capital holding of other associates and payment of non-monetary asset to the transferor:

- If the non-monetary asset for payment is an inventory, the ethnic minorities shall account for them similarly to sale of inventories in the form of barter agreement (the revenue and cost of the inventory used for exchange with purchased capital holding shall be recorded);

- If the non-monetary asset for payment is a fixed asset or an investment property, the investor shall account for them similarly to sale of fixed assets or investment properties (revenue, other income or other expenses shall be recorded, etc);

- If the non-monetary asset for payment is an equity instrument (shares) or a debt instrument (bonds, receivables, etc), the investor shall account for them similarly to sale of investments (gains or losses shall be recorded to financial income or financial expenses).

3. The cost of an investment shall be recorded according to their original cost, including purchase price plus (+) directly-attributable expenses (if any), such as: transactions, brokerage, consultancy, auditing, fees, taxes and bank’s fees, etc. In case a non-monetary asset is invested, the cost of the investment shall be recorded according to the fair value of the non-monetary asset at the incurring time.

4. Every investment spread over each subsidiary, joint-venture company or other associate shall be kept records in details. A long-term financial investment shall be recorded when the ownership is acquired, in particular:

- Listed securities are recorded at the time of matching (T+0);

- Unlisted securities, other investments shall be recorded at the time in which the ownership is required as prescribed.

5. All dividends and profits allocated to the financial statement of the parent company must be kept records sufficiently and promptly. The dividends and profits shall be recorded as follows: 

a) Dividends and profits allocated in money or non-monetary asset after investment date shall be recorded to financial income according to the fair value on the date in which the dividends and profits are received;

b) Dividends and profits allocated in money or non-monetary asset before investment date shall not be recorded to financial income according to the fair value but they shall be recorded as a decrease in value of investment.

c) When determining value of the enterprise for equitization, if investments in other units are recorded as an increase equivalent to the portion of ownership of the equitized enterprise in the undistributed post-tax profits of the subsidiary, joint venture or associate, the equitized enterprise must record the increase in state capital as prescribed. When the equitized enterprise receives the dividends or profits which are used for evaluation of state capital, it shall not record financial income but record a decrease in value of investment.

d) If the dividends are received in the form of shares, it is required to follow rules below:

- Non-wholly-state-owned companies shall only keep track of number of shares stated in the financial statement, but not record an increase in value of investment and financial income.

- Wholly-state-owned companies shall comply with regulations of law on wholly-state-owned companies.

6. When liquidating or selling financial investments, their costs shall be determined according to mobile weighted average.

7. The enterprise is not required to classify investments in subsidiary, joint venture or associate into trade securities, unless it liquidated or sold those investments, leading losing control of subsidiary, losing jointly control over joint venture and no longer having significant influence on the associate.

8. The control, jointly control, significant influence shall be temporarily determined when the investments are initially recorded. In this case, those investments shall be recorded to investments in other units or trade securities, but not recorded to investments in subsidiary or joint venture or associate.

9. When preparing the financial statement, the enterprise must determine value of investment loss to create allocation for investment loss.

Article 41. Account 221 – Investments in subsidiaries

1. Rules for accounting 

a) This account is used to record current value and increases or decreases in capital directly invested in subsidiaries. Subsidiary is an entity which has  legal status, does independent accounting, and is controlled by another enterprise (parent company), (including associate companies of general company and other units having legal status and doing independent accounting).

b) The account 221 “Investments in subsidiaries” is only recorded if the investor holds over 50% voting shares in the subsidiary (except for the case prescribed in below Point c) and has significant influence on financial and operating activities to gain economic benefits from such activities. When the parent company has no longer influence on the subsidiary, a decrease in investment in the subsidiary shall be recorded. In case the investor temporarily holds over 50% voting shares in the subsidiary, but the investor does not intend to exercise that voting shares because their investment purpose is trading in equity instruments for profit (investment held for commercial purpose and the control right is temporary), such investment shall not be recorded to this account but to short-term investments.

c) When a parent company holds under 50% voting shares in a subsidiary, the following investments are still recorded to account 221 “Investments in subsidiaries” if there are other agreements:

- Other investors agree to give the parent company over 50% voting shares;

- The parent company has influence on financial or operating policies under agreed regulations;

- The parent company has right to assign or dismiss most of board of directors’ members or equivalent;

- The parent company has right to vote a majority of ballots at Board of Directors’ meetings or at equivalent management level’s meetings;

d) When buying an investment in a subsidiary in the business combination transaction, the buyer must determine the acquisition date, the cost of the business combination and follow accounting procedures as prescribed in VAS “Business combination”.

dd) Accounting for investments in subsidiaries must comply with rules prescribed in Article 40 of this Circular.

e) In case the parent company dissolves the subsidiary and merge all assets and liabilities of the subsidiary into the parent company (the parent company inherits all interests and liabilities of the subsidiary), the accounting shall be done according to rules below:

- A decrease in book value of investments in subsidiaries of the parent company shall be recorded,

- All assets or liabilities of the dissolved subsidiary shall be recorded to balance sheet of the parent company according to fair value on the date on which the subsidiary is merged into the parent company;

- The difference between the cost of investment in subsidiary and the fair value of assets and liabilities shall be recorded to financial income or financial expenses.

g) The profits shall be allocated to owners of the parent company according to non-allocated post-tax profits under ownership of the parent company on the consolidated financial statements. When allocating profits in cash, the enterprise must consider following issues:

- There is enough cash flow to allocate;

- The profits from negative goodwill shall not be allocated until disposal of the subsidiary;

- The profits from transactions related to revaluation (differences upon re-valuation of asset contributed as capital or financial instruments) shall not be allocated until disposal or sale of investments;

- The profits from applying equity capital method shall not allocate until such profits are received in cash or other assets from joint-venture companies.

d) The enterprise may not convert investments in subsidiaries into trade securities or other investments unless such investments are disposed leading out of control. The control right to the subsidiary shall not consider temporary even if the enterprise has intention of disposing the subsidiary in the future.

2. Structure and contents of account 221 – Investments in subsidiaries

Debit: Increases in actual value of investments in subsidiaries.

Credit: Decreases in actual value of investments in subsidiaries.

Debit balance: Actual value of existing investments in subsidiaries of the parent company.

3. Method of accounting for several major transactions

3.1. Capital contribution

a) When a parent company invests money in subsidiaries, the following accounts shall be recorded according to amounts of investments and directly-attributable expenses:

Dr 221 – Investments in subsidiaries

Cr 111, 112, 3411, etc. 

And every type of shares at face value shall be kept records in details (investments in subsidiaries in the form of purchase of shares).

b) Capital contribution in non-monetary assets:

When the parent company contributes capital to the subsidiary by inventory or a fixed asset (other than business combination transactions), the parent company must record the difference between book value (for materials or goods) or residual value (for fixed assets) and re-evaluated value of the contributed asset to other income or other expenses; when receiving the contributed asset, the subsidiary must record the increase in the owner's invested equity and received asset according to contractual price.

- In case the book value or the residual value of the contributed asset is smaller than re-evaluated value, the increase in asset shall be recorded to other income as follows: 

Dr 221 – Investments in subsidiaries

Dr 214 – Depreciation of fixed assets 

Cr 211, 213, 217 (contributing fixed assets or investment properties)

Cr 211, 213, 217 (contributing inventories)

Cr 711 – Other income (increase in difference of evaluation).

- In case the book value or the residual value of the contributed asset is greater than re-evaluated value, the decrease in asset shall be recorded to other expenses as follows: 

Dr 221 – Investments in subsidiaries

Dr 214 – Depreciation of fixed assets 

Dr 811 – Other expenses (decrease in difference of evaluation).

Cr 211, 213, 217 (contributing fixed assets or investment properties)

Cr 152, 153, 155, 156 (contributing inventories)

3.2. Purchase of capital contribution:

In this case, the cost of investment shall be determined in accordance with VAS “Business combination”. On acquisition date, the acquirer shall measure the cost of a business combination as the aggregate of the fair values, on the exchange date, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control rights of the acquiree plus (+) any costs directly attributable to the business combination. Concurrently, the acquirer, which is the parent company, shall record the acquirer’s interest in the subsidiary similarly to an investment in subsidiary.

a) If the trading in business combination is paid in cash or cash equivalent by the acquirer, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries

Cr 111, 112, 121, etc. 

b) If the trading in business combination is carried out by the acquirer ‘share issuance: 

- And issue price (according to fair value) of the share on the exchange date is greater than face value of the share; the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries (according to fair value)

Cr 4111 – Contributed capital (according to face value)

Cr 4112 – Capital surplus (positive difference between the fair value and the face value of the share).

- And issue price (according to fair value) of the shares on the exchange date are smaller than face value of the share, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries (according to fair value)

Dr 4112 – Capital surplus (negative difference between the fair value and the face value of the share).

Cr 4111 – Contributed capital (according to face value)

- Stock floatation cost actually induced will be recorded as follows: 

Dr 4112 – Capital surplus

Cr 111, 112, etc. 

c) If the trading in business combination is carried out by exchange of assets between the acquirer and the acquiree: 

- When exchanging fixed assets, a decrease in fixed assets shall be recorded as follows: 

Dr 811 – Other expenses (residual value of the exchanged fixed assets)

Dr 214 – Depreciation of fixed assets (depreciation value)

Cr 211 – Tangible fixed asset (cost).

And, an increase in other income and investments in subsidiaries due to exchange of fixed assets shall be recorded as follows: 

Dr 221 – Investments in subsidiaries (total payment)

Cr 711 – Other income (residual value of the exchanged fixed assets)

Cr 3331 – VAT payables (account 33311) (if any).

- When dispatching goods for exchange, the following accounts shall be recorded:  

Dr 632 – Costs of goods sold 

Cr 155, 156, etc. 

And, an increase in investments in subsidiaries and revenues shall be recorded as follows:  

Dr 221 – Investments in subsidiaries

Cr 511 - Revenues

Cr 333 – Taxes and other payables to the State (33311).

d) If the trading in business combination is carried out by the acquirer’s bond issuance: 

- When paying by bonds at par value, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries (according to fair value)

Cr 34311 - Par value of bonds.

- When paying by discount bonds, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries (according to fair value)

Dr 34312 – Bond discounts (discount amount)

Cr 34311 - Par value of bonds

- When paying by premium bonds, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries (according to fair value)

Cr 34311 - Par value of bonds.

Cr 34313 – Bond premiums (premium amount).

dd) Directly-attributable expenses to business combination such as legal services, price appraisal, etc, the following accounts shall be recorded by the acquirer: 

Dr 221 – Investments in subsidiaries

Cr 111, 112, 331, etc. 

3.3. Accounting for dividends or profits which are divided in cash or non-monetary assets (excluding receipt of dividends in shares):

a) When receiving notification of dividends or profits divided issued by the subsidiary after investment date, the following accounts shall be recorded: 

Dr 138 – Other receivables (1388)

Cr 515 – Financial income.

When receiving dividends or profits divided, the following accounts shall be recorded: 

Dr, relevant accounts (according to fair value)

Cr 138 – Other receivables (1388)

b) When receiving notification of dividends or profits divided before the date on which investments in subsidiaries are made, the following accounts shall be recorded: 

Dr 138 – Other receivables (1388)

Cr 221 – Investments in subsidiaries

c) When receiving the dividends or profits which are used for re-evaluation of cost of investments in subsidiaries in case of evaluation of the parent company for equitization, an increase in state capital shall be recorded as follows:

Dr 138 – Other receivables (1388)

Cr 221 – Investments in subsidiaries

3.4. When providing additional investment in order to convert investments in joint-venture companies or financial instruments into investments in subsidiaries, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries

Cr 121, 128, 222, 228 

Cr, relevant accounts (fair value of additional investment amounts)

3.5. When disposing a part or total investments in subsidiaries, the following accounts shall be recorded:

Dr, relevant accounts (fair value of collected amounts from disposal)

Dr 222 - Investments in joint ventures or associates (the subsidiary becomes a joint venture or an associate)

Dr 228 – Other investments (the subsidiary becomes ordinary investment)

Dr 635 – Financial expenses (for losses)

Cr 221 – Investments in subsidiaries (book value)

Cr 515 – Financial income (for gains).

3.6. When dissolving a subsidiary to merge all their assets and liabilities to their parent company, a decrease in investments in subsidiaries and assets or liabilities of the subsidiary according to the fair value on the merging date, the following accounts shall be recorded: 

Dr, accounts recording assets (according to fair value on the merging date)

Dr 635 – Financial expenses (positive difference between book value of the investment and the fair value of merged assets or liabilities)

Cr, accounts recording liabilities (according to fair value on the merging date)

Cr 221 – Investments in subsidiaries (book value)

Cr 515 – Financial expenses (negative difference between book value of the investment and the fair value of merged assets or liabilities)

Article 42. Account 222 – Investments in joint ventures or associates

1. Rules for accounting 

a) This account is used to record all equity contributed into a joint venture and an associate; recovery of invested equity in joint ventures or associates; gains or losses from investments in the joint venture or associate. This account shall not record transactions in the form of business cooperation contract (BCC) which does not require a legal entity.

- A joint venture is established by joint venturers who have joint control over financial and operating policies and it is an independent accounting unit having legal status. The joint venture must do accounting separately as prescribed in regulations of law on accounting in force, take responsibility for control of assets, liabilities, revenues, other income and expenses incurred. Each joint venturer shall receive a portion of operating outcome of the associate according to the joint venture agreement.

- An investment shall be classified as an investment in the associate when investors directly or indirectly hold from 20% to under 50% voting shares of the investee without any other agreement.

b) Accounting for investments in a joint venture must comply with rules prescribed in Article 40 of this Circular.

c) When the investor no longer has joint control, a decrease in investments in joint ventures shall be recorded; when the investor no longer has significant influence over associates, a decrease in investments in associates shall be recorded. 

d) Directly-attributable expenses to investments in joint ventures or associates shall be recorded to financial expenses within a period.

dd) When disposing, selling or recovering contributed capital in joint ventures or associates, a decrease in contributed capital shall be recorded according to recovered asset value. The difference between the fair value of recovered amounts and the book value of investments shall be recorded to financial income (gains) or financial expenses (losses).

e) Every investment spread over each joint venture or associate shall be kept records in details in every investment, disposal or sale.

2. Structure and contents of account 222 – Investments in joint ventures or associates 

Debit: Increases in investments in joint ventures or associates 

Credit: Decreases in investments in joint ventures or associates due to disposal, sale or recovery.

Debit balance: Ending balance of investments in joint ventures or associates.

3. Method of accounting for several major transactions

3.1. When contributing joint venture capital in cash to joint ventures or associates, the following accounts shall be recorded: 

Dr 222 - Investments in joint ventures or associates Cr 111, 112.

3.2. When incurring directly-attributable expenses to investments in joint ventures or associates (information, brokerage, transactions investment progress), the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates

Cr 111, 112.

3.3. In case the joint venturer contributes non-monetary assets to a joint venture or an associate:

When investing inventory or fixed assets in a joint venture or an associate, it is required to record the difference between book value (for materials or goods) or residual value (for fixed assets) and re-evaluated value of the contributed assets to other income or other expenses; when receiving the contributed assets, the joint venture or associate must record an increase in the owner's invested equity and received asset according to contractual price.

- In case the book value or the residual value of the contributed asset is smaller than re-evaluated value, an increase in asset shall be recorded to other income as follows: 

Dr 222 – Investments in joint ventures or associates

Dr 214 – Depreciation of fixed assets 

Cr 211, 213, 217 (contributing fixed assets or investment properties)

Cr 152, 153, 155, 156 (contributing inventories)

Cr 711 – Other income (increase in difference of evaluation).

- In case the book value or the residual value of the contributed asset is greater than re-evaluated value, a decrease in asset shall be recorded to other expenses as follows: 

Dr 222 – Investments in joint ventures or associates

Dr 214 – Depreciation of fixed assets 

Dr 811 – Other expenses (decrease in difference of evaluation).

Cr 211, 213, 217 (contributing fixed assets or investment properties)

Cr 152, 153, 155, 156 (contributing inventories)

3.4. Purchase of capital contribution in joint ventures or associates:

On acquisition date, the acquirer shall measure the cost of investments in the joint venture or associate as the aggregate of the fair values, on the exchange date, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control rights of the acquiree plus (+) any costs directly attributable to the purchase of capital contribution in the joint venture or associate.

- If the investments in the joint venture or associate are paid in cash or cash equivalent by the acquirer, the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates

Cr 111, 112, 121, etc. 

- If the investments in the joint venture or associate are carried out by the acquirer ‘share issuance: 

+ And issue price (according to fair value) of the share on the exchange date is greater than face value of the share; the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates (according to fair value)

Cr 4111 – Contributed capital (according to face value)

Cr 4112 – Capital surplus (positive difference between the fair value and the face value of the shares).

+ And issue price (according to fair value) of the share on the exchange date is smaller than face value of the share; the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates (according to fair value)

Dr 4112 – Capital surplus (negative difference between the fair value and the face value of the share).

Cr 4111 – Contributed capital (according to face value)

+ Stock floatation cost actually induced will be recorded as follows: 

Dr 4112 – Capital surplus

Cr 111, 112, etc. 

- If the investments in the joint venture or associate are paid by non-monetary assets: 

+ When exchanging fixed assets, a decrease in fixed assets shall be recorded as follows: 

Dr 811 – Other expenses (residual value of the exchanged fixed assets)

Dr 214 – Depreciation of fixed assets (depreciation value)

Cr 211 – Tangible fixed asset (cost).

And, an increase in other income and investments in joint ventures or associates due to exchange of fixed assets shall be recorded as follows: 

Dr 222 – Investments in joint ventures or associates (total payment)

Cr 711 – Other income (residual value of the exchanged fixed assets)

Cr 3331 – VAT payables (account 33311) (if any).

+ When dispatching goods for exchange, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold 

Cr 155, 156, etc. 

And, an increase in investments in joint ventures or associates and revenues shall be recorded as follows: 

Dr 222 – Investments in joint ventures or associates

Cr 511 - Revenues

Cr 333 – Taxes and other payables to the State (33311).

- If the investments in joint ventures or associates are carried out by the acquirer ‘share issuance: 

+ When paying by bonds at face value, the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates (according to fair value)

Cr 34311 - Face value of bonds.

+ When paying by discount bonds, the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates (according to fair value)

Dr 34312 – Bond discounts (discount amount)

Cr 34311 - Face value of bonds.

+ When paying by premium bonds, the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates (according to fair value)

Cr 34311 - Par value of bonds.

Cr 34313 – Bond premiums (premium amount).

+ Directly-attributable expenses to investments in joint ventures or associates such as legal services, price appraisal, etc, the following accounts shall be recorded by the acquirer: 

Dr 222 – Investments in joint ventures or associates

Cr 111, 112, 331, etc. 

3.5. When incurring attributable expenses to joint ventures or associates within a period, such as loan interests for capital contribution or other expenses, the following accounts shall be recorded:  

Dr 635 – Financial expenses 

Dr 133 – Deductible VAT (if any).

Cr 111, 112, 152, etc. 

3.6. Accounting for dividends or profits:

- When receiving notification of dividends or profits divided in cash from the joint venture or associate after the investment date, the following accounts shall be recorded: 

Dr 138 – Other receivables (1388)

Cr 515 – Financial income.

- When receiving dividends or profits before the investment date or the dividends or profits (divided in cash) are used for re-evaluation of value of investments in joint ventures or associates in case of evaluation of the enterprise for equitization, the following accounts shall be recorded: 

Dr 112, 138.

Cr 222 – Investments in joint ventures or associates

3.7. Accounting for disposal or sale of investments in joint ventures or associates:

Dr 111, 112, 131, 152, 153, 156, 211, 213, etc. 

Dr 228 – Other investment (significant influence no longer exists)

Dr 635 – Financial expenses (for losses)

Cr 222 – Investments in joint ventures or associates

Cr 515 – Financial income (for gains).

3.8. When incurring expenses incurred from disposal or sale of investments in joint ventures or associates, the following accounts shall be recorded: 

Dr 635 – Financial expenses 

Dr 133 – Deductible VAT 

Cr 111, 112, 331, etc. 

3.9. When providing additional investment in order to the joint venture or associate becoming a subsidiary and hold control rights, the following accounts shall be recorded: 

Dr 221 – Investments in subsidiaries

Cr 111, 112, etc. 

Cr 222 – Investments in joint ventures or associates

3.10. Accounting for joint venture capital in form of land use rights allocated by the State:

- When a Vietnamese enterprise is allocated land by the State to participate in joint venture with foreign enterprises in form of land use rights, water surface use rights, sea surface use rights, after receiving decision on allocation of land issued by the State and procedures for joint venture, the following accounts shall be recorded: 

Dr 222 – Investments in joint ventures or associates

Cr 411 – Owner’s invested equity (state capital in details).

- In case the Vietnamese enterprise is allocated land by the State to participate in joint venture, when transferring contributed capital:

+ When transferring joint venture capital to foreign parties and returning land use rights to the State, the following accounts shall be recorded: 

Dr 411 – Owner's invested equity

Cr 222 – Investments in joint ventures or associates.

+ If the party pays an asset other than land use rights to Vietnamese party (the joint venture changes to land lease), the following accounts shall be recorded: 

Dr 111, 112, etc.                                                                                                                                      

Cr 515 – Financial income.

- If the Vietnamese party transfers joint venture capital to the foreign party and returns land use rights and changes to land lease. The joint venture must record a decrease in land use rights and decrease in operating capital equivalent to land use rights. The capital shall be preserved or recorded increases depending on the following investments of the owner. Land rents paid by that enterprise shall not include in the owner’s equity but they shall be recorded to operating costs in the equivalent periods.

3.11. Accounting for trading between joint venturers and joint venture: similarly to accounting for trading with ordinary customers (unless the owner's equity method is applied).

Article 43. Account 228 – Other investments

1. Rules for accounting 

a) This account is used to record current value and increases or decreases in other investments (other than investments in subsidiaries, investments in joint ventures or associates), such as:

- Investments in equity of other entities but not control or joint control, or significant influence on the investee;

- Precious metals or gemstones which are not used as raw materials for production or trading; value paintings, photographs or documents which are not put into normal operation.

- Other investments.

The investments or capital contribution related to BBC which does not require a legal entity shall not be recorded to this account.

b) Other investments shall be kept records in details according to invested quantity or entities.

b) Accounting for other investments shall comply with rules prescribed in Article 40 of this Circular.

2. Structure and contents of account 228 – Other investments 

Debit: Increases in other investments.

Credit: Decreases in other investments.

Debit balance: Value of other existing investments at the reporting time.

Account 228 – “Other investments” comprises 2 sub-accounts:

- Account 2281 – Investments in equity of other entities: records investments in equity instruments which the enterprise has no right to hold control or joint control or significant influence on the investee.

- Account 2288 – Other investments: records investments in non-financial assets other than investment properties and others related to investment activities recorded in other accounts. Other investments may include precious metals or gemstones (not used as inventories), value paintings, photographs or documents (other than items classified as fixed assets), etc, which are not put into normal operation but they are purchased to held for capital appreciation.

3. Method of accounting for several major transactions

3.1. When the enterprise buys shares or contributes long-term capital but it has no right to hold control or joint control or significant influence on the investee:

a) In case of investment in cash

Dr 228 – Other investments (2281) (the original cost of investment + directly-attributable expenses incurred from investment activities, such as brokerage expenses, etc)

Cr 111, 112.

b) In case of investment by non-monetary assets:

- When contributing a non-monetary asset as capital, the following accounts shall be recorded according to re-evaluated value of materials, goods or fixed assets: 

Dr 228 – Other investments (2281)

Dr 214 – Depreciation of fixed assets (depreciation value)

Dr 811 – Other expenses (negative difference between re-evaluated value and the book value of materials or goods or residual value of fixed assets)

Cr 152, 153, 156, 211, 213, etc.  

Cr 711 – Other income (positive difference between re-evaluated value and the book value of materials or goods or residual value of fixed assets)

- In case of sale of capital contribution by non-monetary assets:

 + When exchanging fixed assets:

Dr 811 – Other expenses (residual value of the exchanged fixed assets)

Dr 214 – Depreciation of fixed assets (depreciation value)

Cr 211, 213 (cost). 

And, an increase in other income and long-term investments due to exchange of fixed assets shall be recorded as follows: 

Dr 22 – Other investments (2281) (total payment)

Cr 711 – Other income (residual value of received investment)

Cr 3331 – VAT payables (account 33311) (if any).

+ When dispatching goods for exchange, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold 

Cr 155, 156, etc. 

And, an increase in other investments and revenues shall be recorded as follows: 

Dr 22 – Other investments (2281) (total payment)

Cr 511 – Revenues (fair value of received investment)

Cr 333 – Taxes and other payables to the State (33311).

3.2. Accounting for dividends or profits which are divided in cash or non-monetary assets (excluding receipt of dividends in shares):

- When receiving notification of dividends or profits divided after the investment date, the following accounts shall be recorded: 

Dr 138 – Other receivables (1388)

Cr 515 – Financial income.

- When receiving notification of dividends or profits divided before the investment date, the following accounts shall be recorded: 

Dr 138 – Other receivables (1388)

Cr 228 – Other investments (2281)

- When receiving the dividends or profits which are used for re-evaluation of cost of investments in case of evaluation of the company for equitization, an increase in state capital shall be recorded as follows:

Dr 138 – Other receivables (1388)

Cr 228 – Other investments (2281)

3.3. When the investor no longer has control or joint control and significant influence over associates because it sells a part of investment to subsidiary, joint venture or associate, the following accounts shall be recorded: 

Dr 111, 112, 131, etc. 

Dr 228 – Other investments (2281)

Dr 635 – Financial expenses (for losses)

Cr 221, 222

Cr 515 – Financial income (for gains).

3.4. Disposal or sale of other investments:

- When earning profits from sale or disposal, the following accounts shall be recorded: 

Dr 111, 112,131, etc. 

Cr 228 – Other investments (book value)

Cr 515 – Financial income (sale price is greater than book value).

- When incurring losses from sale or disposal, the following accounts shall be recorded: 

Dr 111, 112,131, etc. 

Dr 635 – Financial expenses (sale price is smaller than book value)

Cr 228 – Other investments (book value).

3.5. When the investor contributes additional capital and becomes parent company which has joint control or significant influence, the following accounts shall be recorded: 

Dr 221, 222.

Cr 111, 112 (additional investment)

Cr 228 – Other investments 

Article 44. Accounting for BCC

1. Rules for accounting 

A BCC means a cooperation contract between two or more venturers in order to carry out specific business activities, but it does not require establishment of a new legal entity. Those activities may be jointly controlled by venturers under BCC (hereinafter referred to as venturers) or controlled by one of them.

1.2. BCC may be conducted under form of jointly controlled assets or jointly controlled operations. Contracting parties of BCC may agree to divide revenues, products or post-tax profits.

1.3. In any cases, when receiving money or assets from other entities in the BCC, they should be recorded to liabilities, not be recorded to owner's equity.

1.4. BCC in the form of jointly controlled assets

a) Jointly controlled asset under BCC mean any asset which is purchased or constructed by BCC venturers the purposes of the joint ventures.  Venturers shall record their portions in the jointly controlled assets to their assets account on their financial statements.

b) Each venturer may take a share of the output from the jointly controlled assets and each bears an agreed share of the expenses incurred.

c) A venturer must keep records in the same system of accounting records and record in its financial statements:

- Its share of the jointly controlled assets, classified according to the nature of the assets;

- Any liabilities that it has incurred;

- Its share of any liabilities incurred jointly with the other venturers in the relation to the joint venture;

- Any income from the sale or use of its share of the output of the venture, together with its share of any expenses incurred by the joint venture;

- Any expenses that is has incurred in respect of its interest in the joint venture.

With regard to fixed asset or investment property which is contributed to BCC and the ownership of the contributor is not transferred to the joint ownership of BCC venturers, the receiver shall keep records of assets without recording any increase in assets or business funds; the contributor shall not include a decrease in assets in the accounting records but keep records of the places of assets.

With regard to fixed asset or investment property which is contributed to BCC and the ownership of the contributor is transferred to the joint ownership; during construction of jointly controlled assets, the contributor shall include a decrease in assets in the accounting records and the value of assets shall be recorded to construction in progress. After putting jointly controlled assets into operation, the venturers shall record their increases in assets in conformity with their use purposes according to value of their assets' shares.

1.5. BCC in the form of jointly controlled operations 

a) BCC in the form of jointly controlled operations is a joint venture which does not require establishment of a new business entity. Venturers shall fulfill obligations and exercise rights according to the BCC. The joint venture activities may be carried out alongside other ordinary activities of each venture.

b) Each venture shall bear its own expenses incurred from its share in jointly controlled operations. The joint expenses (if any) shall be divided to venturers according to the BCC

c) A BCC venturer must include in accounting records and record in its financial statements:

- The assets of joint venture that it controls;

- The liabilities that it incurs;

- Its share of the income that it earns from the sale of goods or services by the joint venture;

- The expenses that it incurs.

d) When any joint expenses incur, they shall be kept records. If the BCC regulates joint expense allocation, a Table of joint expense allocation shall be made, certified and held by every venturer (original copy). Each venture shall account for joint expenses allocated from BCC according to the table of joint expense allocation together with lawful original documents.

e) In the BCC regulates shares of products, a Table of shares of products shall be made, certified quantity or specifications of shares of products from BCC and held by every venturer (original copy). When receiving products, the venturer must make two copies of receipt slips of products (or delivery order); one venturer shall hold one copy. The receipt slip of product shall be the basis for accounting records and disposal of contracts.

d) In case any joint expenses or income borne or earned by venturers under BCC, the venturers must comply with regulations on accounting similarly to jointly controlled operations.

1.6. BCC in the form of shares of post-tax profits

a) BCC in the form of shares of post-tax profits is usually in the form of jointly controlled operations or individually controlled operations. When giving shares of post-tax profits under BCC, all venturers shall appoint a venture to account for all transactions in BCC, record revenues, expenses, separately keep records of income statement of BCC and make tax declaration. When the venturers decide to enter into BCC in above form, they must consider the risks possibly take due to:

- Any expenses which is not included in the taxable expense due to failure in transfer of assets among venturers, for example:

+ Depreciation expenses incurred from several fixed assets are not accepted by the tax authority because the venturer fails to transfer ownership of the fixed assets to the venture in charge of accounting and tax declaration for BCC;

+ Several expenses of the venturers shall not be accepted by the tax authority because the input invoices do not state the name of the venture in charge of accounting and tax declaration for BCC;

+ Several expenses of the venturers which are unable to transfer to the venture in charge of accounting and tax declaration due barrier of law, for example, the venturer has an invoice of payment of land levies, but the law does not allow that venturer re-lease their land to the venture in charge of accounting and tax declaration, so that the land lease expense shall not be included in the expenses of BCC.

- Risks of policies:

+ The venturer in charge of accounting and tax declaration for BCC may incur accumulated losses, but the output of BCC activities must generate profits. In this case, the enterprise still be required to pay corporate income tax on BCC instead of offsetting BCC profits against other activities’ losses; if the BCC incurs losses but other activities generate profits, the enterprise may only offset a portion of the loss in proportion to its share of the BCC;

+ If other venturers put their fixed assets into operation of BCC, their depreciation expenses incurred from the fixed assets shall not be considered deductible expenses in the enterprise because they are not used in the enterprise’s operation (not conformity with revenues from other operations).

b) If the BCC regulates shares of post-tax profits, the venture in charge of accounting and tax declaration must do accounting following the rules below:

- If the BCC regulates that other venturers shall earn an amount of fixed profit regardless of output of BCC activities, in this case, the legal form of the contract is BCC, but it is a lease in the nature. In this case, the venturer in charge of accounting and tax declaration shall has right to administrate and govern the BCC activities, apply accounting method for lease to the contract, and include payables to other venturers in expenses incurred from determination of output of business within a period, in particular:

+ All revenues, expenses and post-tax profits of BCC shall be included in their income statements; earnings per share and financial standards shall be calculated according to total income, expenses and post-tax profits of BCC;

+ Total post-tax profits of BCC shall be included in the item “Undistributed post-tax profits” of the balance sheet, financial standards related to post-tax profit ratio which is calculated including total output of BCC.

+ Other venturers shall record their shares of BCC to revenues from lease.

- If the BCC regulates that other venturers of BCC may only be divided profits if the BCC activities generate profits and they must suffer losses, in this case, even though the legal form of BCC is post-tax profit division but the nature of BCC is division of revenues and expenses, they usually have rights, condition and ability to jointly control operation and cash flow of BCC. The venturer in charge of accounting and tax declaration must apply accounting method for shares of income under BCC to record revenues, expenses and business output within a period, and provide evidence for tax declaration to other venturers, in particular:

+ All revenues, expenses and shares of profits under BCC shall be included in their income statements; earnings per share and financial indicator shall only be calculated according to the revenues, expenses and profits stated in the income statements; the venturer in charge of tax declaration shall provide copies of documents on fulfillment in obligations of BCC to government budget in order to serve the tax declaration of other venturers of BCC;

+ Undistributed post-tax profits of the balance sheet only include shares of post-tax profit of each venturer.

+ Other venturers shall send reports on their shares of revenues and expenses whose tax liabilities are covered stated in the income statements to the tax authority in order to adjust their corporate income tax payables.

2. Method of accounting for BCC in the form of jointly controlled assets

2.1. In case venturers jointly buy jointly controlled assets, the following accounts shall be recorded according to actual amounts of money of each venturer: 

Dr 211, 213, 217 

Dr 133 – VAT payables (if any).

Cr 111, 112, 331, 341.

2.2. In case venturers construct jointly controlled assets themselves or cooperate with other entities to construct the jointly controlled assets, the following accounts shall be recorded according to actual expenses paid by each venturer: 

Dr 241 – Construction in progress (jointly controlled assets in details)

Dr 133 – VAT payables (if any).

Cr 111, 112, 152, 153, 155, 156, 211, 213, etc. 

Cr 331, 3411, etc.

2.3. When the construction works are completed and put into operation, the venturers must make declaration and divide the value of the jointly controlled assets. According to the report on shares of jointly controlled asset, venturers shall determine the fair value of each asset to keep records in accordance with regulations of law as follows: 

Dr 211, 213, 217 (fair value of shares of jointly controlled assets in details)

Dr 138 – Other receivables (un-approved and recoverable expenses)

Dr 811 – Other expenses (if the fair value of the share of asset is smaller than the construction expense)

Cr 241 – Construction in progress 

Cr 711 – Other expenses (if the fair value of the share of asset is greater than the construction expense)

2.4. The method of accounting for expenses or incomes borne or earned by the venturers under BCC in the form of jointly controlled assets and BCC which is converted into the form of jointly controlled operations shall be applied similarly to BCC in the form of jointly controlled operations.

3. Method of accounting for BCC in the form of jointly controlled operations.

3.1. Accounting for contributed capital of jointly controlled operations 

a) For the capital contributee

- According to the report on capital contribution of the venturer of jointly controlled BCC, the contributee shall record as follows: 

Dr 111, 112, 152, 155, 156, etc. 

Cr 138 – Other payables, receivables.

When returning contributed capital to venturers, reverse the above entry. If there is any difference between the fair value of returned asset and the value of contributed capital of venturers, such difference shall be recorded to other income or other expenses.

- If a fixed asset is received without any transfer of ownership, the contributee shall keep records of that asset in their administration system and record to asset held under a trust.

b) For the capital contributor

- According to the report on capital contribution of the venturer of jointly controlled BCC, the contributor shall record as follows: 

Dr 138 – Other receivables 

Cr 111, 112, 152, 155, 156, etc. 

When receiving contributed capital by the contributee, reverse the above entry. If there is any difference between the fair value of received asset and the value of contributed capital of venturers, such difference shall be recorded to other income or other expenses.

- If a fixed asset is received without any transfer of ownership, the contributor shall not record a decrease in fixed assets but keep records of that asset in their administration system and present the place where the asset is located.

3.2. Accounting for own expenses of each venturer

- According to relevant invoices or documents on own expenses borne by each venture in the jointly controlled operations, the following accounts shall be recorded: 

Dr 621, 622, 627, 641, 642 (BCC in details)

Dr 133 – VAT payables (if any).

Cr 111, 112, 331, etc. 

- When transferring separate expenses to add to operating expense of BCC at the end of the accounting period, the following accounts shall be recorded: 

Dr 154 – Work in progress (BCC in details)

Cr 621, 622, 627, (BCC in details)

3.3. Accounting for joint expenses borne by every venture:

a) In the venturer bearing joint expenses:

- When incurring joint expenses borne by every venture, the following accounts shall be recorded according to relevant invoices or documents:

Dr 621, 622, 627, 641, 642 (BCC in details)

Dr 133 – VAT payables (if any).

Cr 111, 112, 331, etc. 

- If the BCC regulates shares of joint expenses, a Table of shares of joint expenses shall be made and certified by all venturers, then the following accounts shall be recorded: 

Dr 138 – Other receivables (in details for every venturer)

Cr 133 – Deductible VAT (for input VAT).

Cr 3331 – VAT payables (if all amounts of input VAT on joint expenses are deductible, an increase in output VAT payable shall be recorded).

Cr 621, 622, 627, 641, 642. 

b) In the venturer whose joint expenses incurred from BCC are not accounted:

According to the Table of shares of joint expenses approved by the venturers (notified by a venturer bearing joint expenses), the following accounts shall be recorded: 

Dr 621, 622, 623, 641, 642 (BCC in details)

Dr 133 – VAT payables (if any).

Cr 338 – Other payables (in details for the venturer bearing joint expenses).

3.4. Accounting for products sharing agreement:

- When receiving shares of products from BCC and delivering them to inventory, the following accounts shall be recorded according to receipt slip, delivery order and relevant documents: 

Dr 152 – Raw materials (if the shares of products are not finished goods)

Dr 155 – Finished goods (if the shares of products are finished goods)

Dr 157 – Goods on consignment (if the shares of products are sold without delivering to inventories)

Cr 154 – Work in progress (including separate expenses and joint expenses borne by every venturers) (BCC in details)

- When receiving shares of products from BCC and putting them into production of other products, the following accounts shall be recorded according to receipt slip and relevant documents: 

Dr 621 – Direct raw materials costs

Cr 154 – Work in progress (including separate expenses and joint expenses borne by every venturers) (BCC in details)

- If the BCC regulates assigning a venturer to sell products instead of sharing products, after issuing invoices to the seller, transferring separate expenses and joint expenses borne by every venturers to costs of goods sold, the following accounts shall be recorded: 

Dr 632 – Costs of goods sold 

Cr 154 – Work in progress (including separate expenses and joint expenses borne by every venturers) (BCC in details)

3.5. Accounting for revenues from sale of products in case a venturer sells products under a trust and share revenues to other venturers:

a) For the seller:

- When selling products under the BCC, the sell must issue invoices for all sold products and total amounts of sale of products shall be recorded as follows: 

Dr 111, 112, 131, etc. 

Cr 338 – Other payables or receivables (BCC in details)

Cr 3331 – VAT payables (if any).

- According to provisions of the BCC and the table of revenue allocation, the shares of revenues received by each venture shall be recorded as follows: 

Dr 338 – Other payables or receivables (BCC in details)

Cr 511 – Revenues (interests earned by the seller under BCC).

- After comparing joint expenses borne by each venture and shares of revenues earned by each venture, the other receivables and the other payables shall be offset (in details for each venturer), then the following accounts shall be recorded: 

Dr 138 – Other payables, receivables.

Cr 138 – Other receivables

- When giving shares of products sold to other venturers (other than the seller), the following accounts shall be recorded: 

Dr 338 – Other payables or receivables (every venturers)

Cr 111, 112, etc. 

b) For other venturers (other than the seller):

- According to the table of revenue allocation certified by all venturers and documents provided by the seller, other venturers shall issue invoices of their shares of revenues and give them to the seller and the following accounts shall be recorded: 

Dr 138 – Other receivables (including VAT if output VAT is shared, in details for the sellers)

Cr 511 – Revenues (BCC in details and amounts of shares).

Cr 3331 – VAT payables (in case of sharing output VAT).

- When the venturers repay for sale of products, the following accounts shall be recorded according to the actual received amounts: 

Dr 111, 112, etc.  (amounts repaid by venturers)

Cr 138 – Other receivables (in details for every seller).

4. Method of accounting for BCC in the form of post-tax profits

4.1. In case venturers receive fixed shares regardless of business output of BCC (the venturer in charge of accounting and tax declaration shall control the BCC):

a) For the venturer in charge of accounting and tax declaration for BCC 

- When receiving money, materials or goods from capital contributors, the following accounts shall be recorded: 

Dr 112, 152, 156, etc. 

Cr 138 – Other payables, receivables.

- When incurring revenues or expenses incurred from BCC, the venturer in charge shall record total income or expenses similarly to their transactions as prescribed.

- When determining amounts payable to other venturers periodically under BCC, the following accounts shall be recorded: 

Dr 627, 641, 642

Cr 138 – Other payables, receivables.

- When returning amounts of money or materials contributed as capital, the following accounts shall be recorded: 

Dr 138 – Other payables, receivables.

Cr 112, 152, 156, etc. 

If there is any difference between the fair value of returned asset and the value of contributed capital of venturers, such difference shall be recorded to other income or other expenses.

b) For the venturer not in charge of accounting and tax declaration for BCC 

- When contributing capital to BCC, the following accounts shall be recorded: 

Dr 138 – Other receivables 

Cr 112, 152, 156, etc. 

- When receiving notification of shares of profits earned from BCC, the following accounts shall be recorded: 

Dr 138 – Other receivables 

Cr 511 – Revenues (5113)

- When receiving contributed capital, the following accounts shall be recorded: 

Dr 112, 152, 156, etc. 

Cr 138 – Other receivables

If there is any difference between the fair value of received asset and the value of contributed capital of venturers, such difference shall be recorded to other income or other expenses.

4.2. In case the venturers receive shares of profits depending on the business output of BCC (they have rights to jointly control BCC):

a) For the venturer in charge of accounting and tax declaration

a1) The recording of contributed capital and returning of contributed capital to venturers shall comply with Point 4.1.

a2) When recording revenues of BCC, total revenues included in accounting records in account 511 shall be the basis for comparison, explanation and determination of taxable revenues for BCC:

- Revenues for BCC shall be recorded as follows: 

Dr 112, 131.

Cr 511 - Revenues

Cr 3331 – VAT payables.

On the income statement, only shares of revenues are included in the item “Revenues”

- Periodically, a decrease in shares of revenues for BCC, the following accounts shall be recorded: 

Dr 511 - Revenues

Dr 3331 – VAT payables (if VAT is shared).

Cr 138 – Other payables, receivables.

a3) Total expenses incurred from accounting records shall be the basis for comparison and determination of taxable expenses of BCC:

- When incurring expenses of BCC, the following accounts shall be recorded: 

Dr 632, 641, 642, etc. 

Cr 112, 331, 154, 155, etc. 

On the income statement, only shares of revenues are included in the item “Expenses”

- Periodically, a decrease in expenses incurred from BCC borne by venturers, the following accounts shall be recorded: 

Dr 138 – Other receivables 

Cr 632, 641, 642.

- After determining the corporate income tax payables for BCC, the venturer in charge shall notify other venturers of amounts payable and the following accounts shall be recorded: 

Dr 8211 – Expenses incurred from corporate income tax (tax payables of the venturer in charge)

Dr 138 – Other receivables (tax payables of other venturers in the BCC)

Cr 3334 – Corporate income tax (total corporate income taxes payable)

- After comparing joint expenses borne by each venture and shares of revenues earned by each venture, the other receivables and the other payables shall be offset (in details for each venturer), then the following accounts shall be recorded: 

Dr 138 – Other payables, receivables.

Cr 138 – Other receivables

b) For the venturer not in charge of accounting and tax declaration 

- When contributing capital to BCC, the following accounts shall be recorded: 

Dr 138 – Other receivables 

Cr 112, 152, 156, etc. 

- According to the Table of shares of joint expenses approved by the venturers (notified by a venturer bearing joint expenses), the following accounts shall be recorded: 

Dr 621, 622, 623, 641, 642 (BCC in details)

Dr 133 – VAT payables (if any).

Cr 138 – Other payables, receivables.

- According to the amounts of corporate income tax payable notified by the venturer in charge, the following accounts shall be recorded:  

Dr 821 – Expenses incurred from corporate income tax in force

Cr 138 – Other payables, receivables.

- According to the table of shares of revenues certified by all venturers and documents provided by the seller, other venturers shall issue invoices of their shares of revenues and give them to the seller and the following accounts shall be recorded: 

Dr 138 – Other receivables (including VAT if output VAT is shared, in details for the seller)

Cr 511 – Revenues (BCC in details and amounts of shares).

Cr 3331 – VAT payables (if sharing output VAT).

- After comparing joint expenses borne by each venture and shares of revenues earned by each venture, the other receivables and the other payables shall be offset (in details for each venturer), then the following accounts shall be recorded: 

Dr 138 – Other payables, receivables.

Cr 138 – Other receivables

- When the venturers repay for sale of products, the following accounts shall be recorded according to the actual received amounts: 

Dr 111, 112, etc.  (amounts repaid by venturers)

Cr 138 – Other receivables (in details for every seller).

- When receiving contributed capital, the following accounts shall be recorded: 

Dr 112, 152, 156, etc. 

Cr 138 – Other receivables

If there is any difference between the fair value of received asset and the value of contributed capital of venturers, such difference shall be recorded to other income or other expenses.

Article 45. Account 229 – Allowances for impairment of assets

1. Rules for accounting 

This account is used to record current value and increases or decreases in allowance for impairment of assets, including:

a) Allowance for decline in value of trading securities: means an allowance for impairment caused by decline in value of trading securities of an enterprise;

b) Allowance for impairment of investments in other entities: means an allowance for impairment because the contributee (subsidiaries, joint ventures or associates) suffers losses leading the irrecoverability of the investor or allowance due to decline in investments in subsidiaries, joint ventures or associates.

- With regard to investments in a joint venture or an associate, the investor only create allowance due to the losses of the joint venture or the associate if the financial statement is not applied the owner's equity method for investments in joint ventures or associates.

- With regard to long-term investments (other than trade securities) not influencing significantly on the investee, the allowances shall be carried out as follows:

+ If an investment in listed shares or the fair value of the investment is determined reliably, the allowance shall be made according to the market value of the shares (similarly to allowance for decline in value of trading securities);

+ With regard to an investment whose fair value is not identifiable at the reporting time, the allowance shall be made according to the loss of the investee (allowance for impairment of investments in other entities)

c) Allowance for doubtful debts: means an allowance for receivables and other held for maturity investments which are similar to doubtful debts.

d) Allowance for decline in inventories: means an allowance for decline in inventories due to increases in net realizable value against original value of inventories.

1.2. Method of accounting for allowance for decline in value of trading securities 

a) The enterprise may create allowance for the probable impairment loss if it is evident that the market value of held for sale securities of the enterprise decline against the book value.

b) Requirements bases and allowance which is created or reverted shall comply with regulations of law.

c) The creating or reverting of allowance for decline in value of trading securities shall be carried out at the time in which the financial statement is prepared:

- If the allowance for current year is higher than the allowance in the accounting records, the enterprise shall create the additional difference of allowance and record it to financial expenses within a period.

- If the allowance for current year is lower than the unused allowance for previous year, the enterprise shall revert such difference and record a decrease in financial expenses.

1.3. Method of accounting for allowance for impairments in other entities 

a) If the investee is a parent company, the investor shall create an allowance for impairments in other entities according to the consolidated financial statement of such parent company. If the investee is an independent company having no subsidiary, the investor shall create an allowance for impairments in other entities according to the consolidated financial statement of such investee.

b) The creating or reverting of allowance for impairments in other entities shall be carried out at the time in which the financial statement for every investment is prepared:

- If the allowance for current year is higher than the allowance in the accounting records, the enterprise shall create the additional difference of allowance and record it to financial expenses within a period.

- If the allowance for current year is lower than the unused allowance for previous year, the enterprise shall revert such difference and record a decrease in financial expenses.

1.4. Method of accounting for allowance for doubtful debts  

a) When preparing financial statement, the enterprise shall determine doubtful debts and held to maturity investments whose nature is similar to doubtful debts to create or revert the allowance for doubtful debts.

b) The enterprise shall make an allowance for doubtful debts when:

- An overdue debt under an economic contract, a loan agreement, a contractual commitment or a promissory note has been demanded for several times, but it is unrecoverable. The time overdue of the doubtful debt requiring creation of the allowance shall be determined according to time in which the principal is repaid according to the sale contract, exclusive of the debt rescheduling between contracting parties;

- The debts are not due but the debtor is close to bankruptcy or undergone procedures for dissolution, or the debtor is missing or makes a getaway;

c) Requirements or bases for allowance for doubtful debts 

- Original documents or promissory note of the debtor about the outstanding debts, including: economic contracts, loan agreements, liquidation of contract, promissory note, etc. 

- The amounts of allowance for doubtful debts shall be created as prescribed in regulations in force.

- Other requirements as prescribed in regulations of law.

d) The establishing or reverting of allowance for doubtful debts shall be carried out at the time in which the financial statement is prepared:

- If the amount of allowance for doubtful debts at the end of current accounting period is greater than the allowance recorded in the accounting records, the positive difference shall be recorded to an increase in allowance and an increase in administrative expenses of the enterprise.

- If the amount of allowance for doubtful debts at the end of current accounting period is greater than the allowance recorded in the accounting records, the positive difference shall be recorded to an increase in allowance and an increase in administrative expenses of the enterprise.

e) With regard to doubtful debts for several years, if the enterprise fails to collect payment of debts regardless of all measures taken and they are bad debts, the enterprise shall sell that debts to Vietnam Asset Management Company (VAMC) or eliminate doubtful debts account on the accounting records. The elimination of doubtful debts account must be complied with regulations of law and the charter of the enterprise. These doubtful debts shall be monitored in the administration system of the enterprise and presented in the financial statement. After elimination, if the enterprise may collect payment of these doubtful debts, they shall be recorded to the account 711 "Other income".

1.5. Method of accounting for allowance for decline in inventories

a) The enterprise shall create an allowance for decline in inventories if it is evident that there is a decrease in net realizable value against the original cost of inventories. Allowance for decline in inventories means an estimated amount of decline in value of inventories against book value of inventories which is included in the operating cost in order to compensating actual damage caused by the decline.

b) The allowance for decline in inventories shall be created at the time in which the financial statement is prepared. The creation of allowance for decline in inventories must be complied in accordance with VAS “Inventories” and financial regime in force.

c) The allowance for decline in inventories shall be created according to every inventoried material or good. With regard to services in progress, the allowance for decline in inventories shall be created according to every service having their own prices.

d) Net realizable value (NRV) means the estimated selling price in the ordinary course of business minus (-) any cost to complete and to sell the goods. 

dd) When preparing financial statement, the creation of allowance for decline in inventories shall be determined according to quantity, original cost and NRV of every material, good or service in progress:

- If the amount of allowance for decline in inventories at the end of current accounting period is greater than the allowance for decline in inventories recorded in the accounting records, the positive difference shall be recorded to an increase in allowance and an increase in costs of goods sold.

- If the amount of allowance for decline in inventories at the end of current accounting period is smaller than the allowance for decline in inventories recorded in the accounting records, the negative difference shall be recorded to a decrease in allowance and a decrease in costs of goods sold.

2. Structure and contents of account 229 – Allowance for impairment of assets  

Debit: 

- Reverting negative difference between the allowance of this period and the unused allowance of previous period;

- Compensating for investments in other entities when the created allowance is compensated for the impairment loss.

- Compensating for the value of allowance for doubtful debts which is eliminated due to unrecoverability.

Credit: 

Creating allowances for impairment of assets at the time in which the financial statement is prepared.

Credit balance:  Ending allowance for impairment of assets.

Account 229 – Allowance for impairment of assets comprises 4 sub-accounts

Account 2291 – Allowance for decline in value of trading securities: this account is used to record creating or reverting of allowance for decline in value of trading securities.

Account 2292 – Allowance for impairments in other entities: this account is used to record creating or reverting of allowance for impairments suffered by an investor due the loss of the investee.

Account 2293 – Allowance for doubtful debts: This account is used to record creating or reverting of allowance for doubtful receivables and held to maturity investments.

Account 2294 – Allowance for decline in inventories: this account is used to record creating or reverting of allowance for decline in inventories.

3. Method of accounting for several major transactions

3.1. Method of accounting for allowance for decline in value of trading securities 

a) When preparing a financial statement, if the allowance created in this period is greater than the allowance created in the previous period, the difference between them shall be additionally created according to the variation in market value of trading securities and the following accounts shall be recorded: 

Dr 635 – Financial expenses 

Cr 229 – Allowance for impairment of assets (2291).

a) When preparing a financial statement, if the allowance created in this period is smaller than the allowance created in the previous period, the difference between them shall be reverted according to the variation in market value of trading securities and the following accounts shall be recorded: 

Dr 229 – Allowance for impairment of assets (2291).

Cr 635 – Financial expenses 

c) Accounting for allowance for decline in value of trading securities of an wholly-state-owned enterprise before it is converted into a joint-stock company: The remaining allowance for decline in value of trading securities after compensating for the impairment loss shall be recorded to an increase in state capital as follows: 

Dr 229 – Allowance for impairment of assets (2291).

Dr 635 – Financial expenses (amounts not covered by the allowance)

Cr 121 – Trading securities (amounts recorded to the decrease in the enterprise’s value)

Cr 411 – Owner's invested equity (created allowance is greater than the impairment loss).

3.2. Method of accounting for allowance for impairments in other entities 

a) When preparing a financial statement, if the allowance created in this period is smaller than the allowance created in the previous period, the difference between them shall be created and the following accounts shall be recorded: 

Dr 635 – Financial expenses 

Cr 229 – Allowance for impairment of assets (2292).

b) When preparing a financial statement, if the allowance created in this period is smaller than the allowance created in the previous period, the difference between them shall be reverted and the following accounts shall be recorded: 

Dr 229 – Allowance for impairment of assets (2292).

Cr 635 – Financial expenses 

c) When the impairment loss incurs, the investments are unrecoverable or recoverable with the cost which are lower than the original cost, if the enterprise use the allowance for decline in value of long-term investments to compensate for impairment losses of the long-term investment, the following accounts shall be recorded: 

Dr 111, 112, etc.  (if any) 

Dr 229 – Allowance for impairment of assets (2292) (created allowance)

Dr 635 – Financial expenses (amount not covered by the allowance)

Cr 221, 222, 228 (the original cost of investments suffering losses) 

d) The remaining allowance for decline in value of long-term investments after compensating for the impairment loss shall be recorded to an increase in state capital as follows when a wholly-state-owned enterprise is converted into a joint-stock company: 

Dr 229 – Allowance for impairment of assets (2292).

Cr 411 – Owner's invested equity.

3.3. Method of accounting for allowance for doubtful debts 

a) When preparing a financial statement, if the allowance for doubtful debts created in this period is greater than the unused allowance for doubtful debts created in the previous period, the difference between them shall be additionally created and the following accounts shall be recorded: 

Dr 642 – General administration expenses 

Cr 229 – Allowance for impairment of assets (2293).

b) When preparing a financial statement, if the allowance for doubtful debts created in this period is smaller than the unused allowance for doubtful debts created in the previous period, the difference between them shall be reverted and the following accounts shall be recorded: 

Dr 229 – Allowance for impairment of assets (2293).

Cr 642 – General administration expenses.

c) With regard to doubtful debts which are considered bad debts, the elimination of debts shall be carried out in accordance with regulations of law in force According to the decision on elimination of debts; the following accounts shall be recorded: 

Dr 111, 112, 331, 334, etc (organization or individual subject to compensation)

Dr 229 – Allowance for impairment of assets (2293) (created allowance)

Dr 642 – General administration expenses (amounts recorded to expenses)

Cr 131, 138, 128, 244, etc. 

d) With regard to doubtful debts which are eliminated, if they are recovered, the following accounts shall be recorded according to the actual value of the recovered debts: 

Dr 111, 112, etc. 

Cr 711 – Other income.

dd) With regard to overdue debts sold at contractual prices, the following accounts shall be recorded: 

- If there is not any allowance for overdue debts, the following accounts shall be recorded:  

Dr 111, 112 (according to contractual prices)

Dr 642 – General administration expenses (impairment loss from sale of debts)

Cr 131, 138,128, 244, etc. 

- If there is an allowance for overdue debts, but such allowance is not enough for compensating for impairment loss from sale of debts, the remaining loss shall be recorded to the general administration expenses as follows: 

Dr 111, 112 (according to contractual prices)

Dr 229 – Allowance for impairment of assets (2293) (created allowance)

Dr 642 – General administration expenses (impairment loss from sale of debts)

Cr 131, 138,128, 244, etc. 

e) Accounting for allowance for doubtful debts of a wholly-state-owned enterprise before it is converted into a joint-stock company: The remaining allowance for doubtful debts after compensating for the impairment loss shall be recorded to an increase in state capital as follows: 

Dr 229 – Allowance for impairment of assets (2293).

Cr 411 – Owner's invested equity.

3.4. Method of accounting for allowance for decline in inventories

a) When preparing a financial statement, if the allowance for decline in inventories created in this period is greater than the allowance created in the previous period, the difference between them shall be additionally created and the following accounts shall be recorded: 

Dr 632 – Costs of goods sold 

Cr 229 – Allowance for impairment of assets (2294).

b) When preparing a financial statement, if the allowance for decline in inventories created in this period is smaller than the allowance created in the previous period, the difference between them shall be converted and the following accounts shall be recorded: 

Dr 229 – Allowance for impairment of assets (2294).

Cr 632 – Costs of goods sold.

c) Accounting for allowance for decline in inventories regarding materials or goods which are destroyed after expiry date, degraded, deteriorates, or useless, the following accounts shall be recorded: 

Dr 229 – Allowance for impairment of assets (2292) (compensation covered by the allowance)

Dr 229 – Costs of goods sold (if the impairment loss is greater than the allowance)

Cr 152, 153, 155, 156. 

d) Accounting for allowance for decline in inventories before the wholly-state-owned enterprise is converted into a joint-stock company: The remaining allowance for decline in inventories after compensating for the impairment loss shall be recorded to an increase in state capital as follows: 

Dr 229 – Allowance for impairment of assets (2294).

Cr 411 – Owner's invested equity.

Article 46. Account 241 – Construction in progress 

1. Rules for accounting 

a) This account is only used in a non-project management board unit to record expenses of capital investment projects (including new acquisition of fixed assets, new construction, repairs, improvement, extension or refurbishment of construction), and settlement condition of capital investment projects in those enterprises having fixed assets acquisitions, capital investment, or major repairs of fixed assets.

Capital investment and major repairs of fixed assets of the enterprise may be carried out under contract awarding method and or self-constructed method. If the enterprise carries out capital investment under self-constructed method, this account must also record expenses incurred during construction or repair process.

Those units establishing project management board and accounting structure shall comply with regulations in the Circular No. 195/2012/TT-BTC on guidelines for Accounting standards for investors.

b) Expenses of capital investment projects are total necessary expenses of new construction, repairs, improvement, extension or technical refurbishment of construction. Expenses of capital investment are determined according to work volume, economic and technical indicators or quotas and state policies, and in conformity with objective factors of the market in every period and carried out with regulations in capital investment management.  Capital investment expenses include:

- Construction expenses;

- Equipment expenses.

- Compensation, support and resettlement expenses;

- General administration expenses;

- Construction consultancy expenses;

- Other expenses.

The account 241 is kept recorded in details for each building work, work item. Each work item must be specifically recorded every capital investment expenses and is observed on accrual basis from the commencement date until the date on which the building works or work items are finished and put into operation.

c) In capital investment, construction and equipment expenses are usually charged directly to every building work, general administration expenses and other expenses are usually common expenses. Investors must calculate and allocate general administration expenses and other expenses incurred from every building work according to following rules:

- General administration expenses and other expenses related directly to each building work shall be charged directly to that building work.

- General administration expenses and other common expenses generally related to many building works but not charged directly to every building work shall be allocated to every building work which is most appropriate.

d) In case the project is finished and put into operation, but project settlement report is not approved, the enterprise shall record an increase in fixed assets historical cost at provisional price (provisional price will be based on actual expenses disbursed to acquire the fixed assets) for depreciation, but then the provisional price shall be adjusted by the approved settlement price.

dd) Repair or maintenance expenses incurred from the fixed assets shall be directly recorded to operating costs within a period. If the repair or maintenance expenses incur periodically, an allowance payable may be created then the allowance shall be included in operating costs.

e) The investor of property construction shall use this account to record fixed asset construction expenses and investment property construction expenses. In case the property is used for multiple purposes (office, lease or sale, i.e. mixed-used building), the construction-directly attributable expenses still be recorded to the account 241. When the building work is completed and put into operation, the construction expenses shall be transferred in conformity with the nature of every asset according to method of use of asset.

g) Exchange rate differences arising from capital investment progress shall following rules below:

Exchange rate differences before operation:

+ Regarding wholly-state-owned enterprises performing tasks of security, national defense or macroeconomic stability, exchange rate differences arising before the operation shall be accumulatively recorded to the account 413 – Exchange rate differences. When the building work is put into operation, the exchange rate differences shall be gradually allocated from account 413 to account 515 – Financial income (in case of profits) or account 635 – Financial expenses (in case of losses). If the allocation may not expire the regulated duration, if the exchange rate loss is recorded to Dr 413, the income statement shall state zero profit (the enterprise may not both record exchange rate loss to the item – Exchange differences in the balance sheet and record post-tax profit in the income statement).

+ Regarding other enterprises, the exchange rate differences before the operation shall be recorded to financial income (in case of profits) or financial expenses (in case of losses), but not stated in the exchange rate difference on the account 413.

- Regarding exchange rate differences relating to capital investment when the enterprise put into operation (including new investment and extension investment):

All types of enterprises, including wholly-state-owned enterprises performing tasks of security, national defense or macroeconomic stability, exchange rate differences arising from capital investment (including new investment or extension investment) shall be recorded to financial income (in case of profits) or financial expenses (in case of losses), not recorded to exchange rate differences on the account 413.

h) If the project of investment is cancelled, the enterprise must dispose and recover the expenses incurred from the project. The difference between actual investment expenses and amounts collected from disposal shall be recorded to other expenses or the compensation of the organization or individual.

Account 241 – Construction in progress, comprise 3 sub-accounts:

- Account 2411: Fixed assets acquisition: records expenses of fixed assets acquisition and settlement of fixed assets expenses in case fixed assets must be assembled and operated for testing before put into use (including both new fixed assets acquisition or used fixed assets).  If acquired fixed assets need additional investment or furnishment before being use, then total expenses of additional investment or furnishment must be recorded to this account.

- Account 2412: Capital construction: records capital investment expenses and settlement of capital expenditure.  This account is kept records in details for each building work or work item (for each asset acquired though investment) and every capital investment expense incurred in each asset must be kept records in details.

- Account 2413: Major repairs of fixed assets: records major repairs expenses of fixed assets and settlement of major repairs expenses of fixed assets.  The expenses incurred in regular repairs of fixed assets shall not be recorded to this account, but be charged directly to operating costs within a period.

2. Structure and contents of account 241 – Construction in progress

Debit:

-  Expenses incurred from capital construction, purchase or major repairs of fixed assets (tangible fixed assets and intangible fixed assets);

- Expenses incurred from renovation or upgrading of fixed assets;

- Expenses incurred from sale of investment properties (in case construction investment stage is necessary);

- Expenses incurred from capital investment properties:

- Expenses incurred after initial recording of fixed assets or investment properties.

Credit:

- Value of fixed assets acquired from capital construction investment or sale which is put into operation.

- Value of rejected works and other expenses which were approved to be rejected and transferred when settlement report is approved.

- Value of major repairs of fixed assets which is completed and transferred when the settlement report is approved.

- Value of investment property acquired from capital construction which is finished.

- Transferring expenses incurred after initial recording of fixed assets or investment properties to related accounts.

Debit balance:

- Expenses incurred from construction investment project and major repairs of fixed assets in progress.

- Value of construction and major repairs of fixed assets which are finished, but have not been yet put into operation or settlement report is not yet approved.

- Value of construction of investment property in progress.

3. Method of accounting for several major transactions

3.1. Accounting for capital investment expenses

3.1.1. Advances paid to contractors

a) Advances in VND:

- When paying an advance in VND to a contractor, the following accounts shall be recorded: 

Dr 331 – Trade payables

Cr 112 – Cash in bank (1122) (weighted average book rates).

- When accepting completed the capital investment, the construction in progress expenses for advance amounts shall be recorded as follows: 

Dr 241 – Construction in progress 

Cr 331 – Trade payables.

b) Advances paid in foreign currencies:

- When paying an advance in foreign currency to a contractor according to the actual exchange rate at the payment time, the following accounts shall be recorded: 

Dr 331 – Trade payables (actual exchange rates)

Dr 635 – Financial expenses (if losses of exchange rates incur)

Cr 112 – Cash in bank (1122) (weighted average book rates).

Cr 515 – Financial expenses (if profits of exchange rates incur)

- When accepting completed the capital investment, the construction in progress expenses for advance amounts in foreign currency shall be recorded as follows according to the book exchange rates (actual exchange rates at the payment time):

Dr 241 – Construction in progress 

Cr 331 – Trade payables.

3.1.2 When receiving the completed capital investment or repaired fixed assets from the contractor, if the input VAT is deductible, the following accounts shall be recorded according to awarding contract, acceptance report or sale invoice: 

Dr 241 – Construction in progress (2412, 2413)

Dr 133 – Deductible VAT (1332) (if any) 

Cr 331 – Trade payables.

- If the input VAT is not deductible, the value of capital investment expenses in progress shall include VAT.

- If the awarding contract regulates that the contract is paid in foreign currencies, the amounts payable (after deducting from advance amounts) shall be recorded according to the actual exchange rates at the accepting time (selling exchange rates of the commercial bank where the enterprise regularly enters into transactions).

3.1.3. When buying capital investment equipment, if the input VAT is deductible, the following accounts shall be recorded according to invoices or warehouse receipt: 

Dr 152 – Raw materials (VAT-exclusive prices)

Dr 133 – Deductible VAT (1332) 

Cr 331 – Trade payables (total payment)

When transferring directly non-assembly equipments to working site for the contractor, the following accounts shall be recorded: 

Dr 241 – Construction in progress 

Dr 133 – Deductible VAT (1332) 

Cr 331 – Trade payab