Cost of goods sold (including goods, investment real estate and services, costs related to investment real estate business activities such as: depreciation costs, repair and upgrade costs, operating lease costs, liquidation costs, transfer of investment real estate), selling costs and business administration costs.
Financial performance: Is the difference between financial revenue and financial expenses.
Other operating results: Is the difference between other income and other expenses.
Thus, business performance is the final result of normal production and business activities and other financial and operational activities of an enterprise in a certain period, expressed in terms of profit or loss.
* The matching principle affects business results to reflect the correct business results. The recognition of revenue and expenses must be consistent with each other. When recognizing a revenue, a corresponding expense related to the generation of that revenue must be recognized. Costs corresponding to revenue include costs of the period in which the revenue is generated and costs of previous periods or expenses payable but related to the revenue of that period.
Thus, the costs recorded in a period are all costs related to generating revenue and income of that period regardless of which period the costs are indicated in.
Regulations on appropriate accounting between revenue and expenses to determine and correctly evaluate business results of each accounting period help managers make correct and effective business decisions.
1.1.3.2. Method of determining business results
The result of normal business operations is the difference between net revenue from sales and service provision and cost of goods sold, and revenue from financial activities and
Operating expenses, Sales expenses and Business administration expenses.
After an accounting period, businesses need to determine the results of business activities during the period with accuracy and timeliness.
Net revenue from sales and service= DT BH&CCDV- | DT deductions |
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Gross profit from sales and service provision = Net revenue from sales and service provision - Cost of goods sold
Net profit from business activities = Gross profit + (Financial revenue - Financial expenses) - (Sales expenses + Management expenses)
Other Profit = Other Income - Other Expenses
before tax
Total accounting profit= Operating Profit business | + Other profits |
Accounting profit after tax: Is the remaining profit after deducting corporate income tax or in other words, this is the final business result of the enterprise. If accounting profit after tax < 0 (the enterprise is at a loss), if profit after tax > 0 (the enterprise is profitable)
Accounting profit after tax = Accounting profit before tax - Corporate income tax expense
1.2. Accounting content of revenue, expenses and business results from a financial perspective
1.2.1. Accounting for sales revenue and service provision
a) Accounting documents
- Accounting for sales revenue and service provision using the following documents:
+ Economic contracts, commercial contracts, VAT invoices (for enterprises calculating VAT according to the deduction method), sales invoices (for enterprises calculating VAT according to the direct method), payment sheets for agents, consignees, counter cards, etc.
+ Payment documents: Receipt, transfer check, payment check, payment order, bank credit note, bank statement, etc.
+ Other related accounting documents such as returned goods receipt, etc.
- Accounting for financial income uses documents such as: receipts, credit notes, notices of dividends or distributed profits, documents on receiving interest, documents on foreign currency and securities trading...
b) User account
To reflect sales revenue and service provision, accountants use the following accounts:
- Account 511 - Sales revenue and service provision.
+ Content of account 511: This account is used to reflect the sales revenue and service provision of an enterprise in an accounting period, including sales revenue of goods, products and services to parent companies and subsidiaries in the same group.
To meet the information presentation needs in the business, revenue needs to be detailed as follows:
Sales revenue
Revenue from sales of finished products
Service revenue
Subsidy revenue
Revenue from investment real estate business
Other revenue (chart 1.3)
Accounting sequence for sales revenue and service provision (Diagram 1.1)
In addition, to reflect revenue deductions, accountants use account 521.
- Account 521 - Revenue deductions
+ Content of account 521: This account is used to reflect the amounts adjusted for deductions from sales revenue and service provision arising during the period, including: trade discounts, sales discounts and sales returns. This account does not reflect the following:
The tax is deducted from revenue as output VAT payable calculated by the direct method. This account has 03 level 2 accounts: Account 5211 - CKTM, Account 5212 - Returned goods, Account 5213 - Sales discounts.
- Trade discount is the amount of money a business reduces the listed price for customers who buy in large quantities.
- The value of returned goods is the value of the volume of goods sold that have been determined to be consumed and returned by customers and refused to pay because the products or goods are poor quality, have lost quality or do not meet the specifications specified in the economic contract.
- Sales discount is a deduction for the buyer due to poor quality products or goods or goods that do not meet the specifications specified in the economic contract.
The revenue reduction adjustment is made as follows:
+ Sales discounts, sales returns arising in the same period as the consumption of products, goods and services are adjusted to reduce revenue of the arising period;
+ In case products, goods and services have been consumed in previous periods, and only in the next period do they incur trade discounts, sales discounts or returned goods, the enterprise is allowed to record a reduction in revenue according to the following principles:
If products, goods, and services have been consumed in previous periods, and must be discounted, have trade receivables, or be returned in the next period but occur before the issuance of the financial statements, the accountant must consider this an adjusting event occurring after the date of the Balance Sheet and record a reduction in revenue on the financial statements of the reporting period (previous period).
In case products, goods and services must be discounted, have to be CKTM, or are returned after the financial statements are issued, the enterprise will record a reduction in revenue of the period in which they arise (the following period).
- The seller performs CKTM accounting according to the following principles:
+ In case the VAT invoice or sales invoice shows the trade discount for the buyer as a deduction from the amount the buyer must pay (the selling price reflected on the invoice is the price after deducting the trade discount), the enterprise (seller) does not use this account, the sales revenue is reflected according to the price after deducting the trade discount (net revenue).
+ Accountants must separately track the trade discount that the enterprise pays to the buyer but has not been reflected as a deduction from the amount payable on the invoice. In this case, the seller records the initial revenue at the price excluding trade discount (gross revenue).
- The seller shall perform accounting for sales discounts according to the following principles:
+ In case the VAT invoice or sales invoice shows the discount for the buyer as a deduction from the amount the buyer must pay (the selling price reflected on the invoice is the discounted price), the enterprise (seller) does not use this account, the sales revenue is reflected at the discounted price (net revenue).
+ Only reflect in this account the deductions due to approved discounts after selling goods (revenue has been recorded) and issuing invoices (off-invoice discounts) due to poor quality or degraded goods...
For returned goods, this account is used to reflect the value of products and goods returned by customers due to the following reasons: Violation of commitments, violation of economic contracts, poor quality goods, loss of quality, incorrect type or specifications.
Accountants must track in detail the trade receivables, sales discounts, and sales returns for each customer and each type of sales, such as: sales (products, goods), and service provision. At the end of the period, transfer all to account 511 -
"sales and service revenue" to determine the net revenue of the actual volume of products, goods and services performed in the reporting period .
1.2.2. Accounting for revenue deductions
( Diagram 1.2)
Accounting for financial activity revenue uses account 515 – Financial activity revenue
(Financial revenue). This account is used to reflect the revenue from interest, royalties, dividends, shared profits and other financial revenue of the enterprise. When using this account, the following regulations must be respected:
- For income from securities trading activities, revenue is recorded as the difference between the selling price greater than the original price, interest on bonds, bills or stocks.
- For income from foreign currency buying and selling activities, revenue is recorded as the difference in profit between the foreign currency selling price and the foreign currency buying price.
- For investment interest received from stock and bond investments, only the interest portion of the periods in which the enterprise repurchases this investment is recorded as revenue arising in the period, and investment interest received from accumulated investment interest before the enterprise repurchases that investment is recorded as a decrease in the original price of that bond and stock investment.
- For income from the sale of investments in subsidiaries, joint ventures, and associated companies, revenue recorded in account 515 is the difference between the selling price and the original price.
1.2.3. Accounting for cost of goods sold
1.2.1.1. Cost accounting
a) Accounting documents
GVHB accounting uses the following basic documents: warehouse delivery note, warehouse delivery note cum internal transport note, warehouse receipt note (in case of returned goods), accounting note and other related self-made documents.
Financial Expense Accounting: Depending on the Financial Expense item incurred, different documents are prepared and used such as: payment vouchers, bank debit notes, related original documents (exchange rate notices, documents on handling end-of-period exchange rate differences, etc.).
For accounting of Sales Costs and Enterprise Management Costs, depending on the Cost items, different documents are prepared and used such as: salary payment table, salary and social insurance allocation table, fixed asset depreciation calculation and allocation table, VAT invoice, sales invoice, warehouse delivery note, payment voucher, bank debt notice, etc.
b) User account
- GVHB accountant uses account 632 - "Cost of goods sold"
+ Content of account 632: This account is used to reflect the capital value of products, goods, services, investment real estate; production cost of construction products (for construction enterprises) sold during the period. In addition, this account is also used to reflect matters related to investment real estate business activities such as: Depreciation costs; Repair costs; Operating costs of investment real estate leasing (in case of small occurrence); Costs of transfer, liquidation of investment real estate, etc.
The provision for inventory price reduction is included in the cost of goods sold based on the quantity of inventory and the difference between the net realizable value being less than the original cost of inventory. When determining the volume of inventory with price reduction requiring provision, the accountant must exclude the volume of inventory for which a sales contract has been signed (with a net realizable value not lower than the book value) but has not been transferred to the customer if there is certain evidence that the customer will not abandon the contract.
- When selling products or goods with equipment or spare parts, the value of the equipment or spare parts is recorded in the cost of goods sold.
- For the value of inventory loss or damage, accountants must immediately calculate it into the cost of goods sold (after deducting compensation, if any).
- For direct material costs consumed in excess of normal levels, labor costs, and fixed general production costs not allocated to the value of products in stock, accountants must immediately calculate them into the cost of goods sold (after deducting compensation, if any) even when the products and goods have not been determined to be consumed.
- Import tax, special consumption tax, environmental protection tax included in the value of purchased goods, if when selling goods those taxes are refunded, they will be recorded as a reduction in cost of goods sold.
- Expenses that are not considered as corporate income tax expenses according to the provisions of the Tax Law but have full invoices and vouchers and have been accounted for correctly according to the Accounting Regime shall not be recorded as a reduction in accounting expenses but only adjusted in the corporate income tax finalization to increase the amount of corporate income tax payable.
The sequence of accounting for cost of goods sold is summarized (Diagram 1.4)
To collect and transfer financial operating expenses to determine business results, accounting uses account 635 - "Financial expenses".
- Financial Cost Accounting, accounting uses account 635 - Financial Cost.
+ Content of Account 635: This account reflects the financial operating expenses including expenses or losses related to financial investment activities, expenses for lending and borrowing capital, expenses for contributing capital to joint ventures and associations, losses on transferring short-term securities, expenses for selling securities; Provision for devaluation of trading securities, provision for investment losses in other entities, losses arising from selling foreign currencies, exchange rate losses...
Account 635 must be accounted for in detail for each cost item.
Do not record the following expenses in account 635: