Detailed Accounting Procedure for Cost of Goods Sold

Based on the bank credit notification document on the company's car sale revenue, the accountant makes the following entries:

Debit account 112: 451,000,000

Credit account 711: 410,000,000

Credit account 3331: 41,000,000

At the end of the period, the accountant transfers other income to account 911.

b. Cost accounting process

Accounting documents

(VAT invoice, warehouse delivery note, warehouse receipt,...)

General Journal

Accounting software

Detailed accounting book of cost of goods sold

Note:

Ledger

Daily Record

Cost of goods sold summary table

* Accounting procedure for cost of goods sold: After receiving the payment for goods, the accountant writes a VAT invoice and creates a warehouse delivery note. The warehouse keeper, based on the received warehouse delivery note, prepares and delivers the goods in the warehouse to the customer or the shipping department. The entire value of goods purchased for sale is reflected in account 156 "Goods". When selling goods, the value of goods sold is transferred to account 632 "Cost of goods sold". Every day, the accountant, based on invoices, warehouse receipts, and warehouse delivery notes, calculates the data on the balance sheet of goods import and export inventory to calculate the cost of goods and at the same time reflects the software on the transactions related to accounts 632 and 156. After the data is fully entered into the software, it will be used to create detailed and summary books to serve management purposes such as: general journal, detailed books and general ledger accounts 156 and 632.

End of month recording Reconciliation relationship

Diagram 2.6. Detailed accounting sequence for cost of goods sold

Example 5:According to the data of Example 1, the accountant records the cost of goods sold in the software. Based on the detailed book of raw materials and tools (Appendix 2.13), the accountant determines the unit price of goods issued from the warehouse and then creates the warehouse release note PXK 08/12

(Appendix 2.2). The company applies the average method at the end of the period to calculate the cost of goods sold. When selling goods, the cost of goods sold is calculated at the exact value of the goods (including the purchase price and the allocated purchase cost, if any). Based on the Warehouse Delivery Note and the code of the goods sold, the accountant records the cost of goods sold. Based on PXK08/12, the accountant determines the cost of goods sold.

Debit account 632: 16,440,000

Credit account 156: 16,440,000

At the end of the period, transfer the cost of goods sold to account 911.

From there, record in the General Journal, based on the entered data, we have the books showing the cost of goods sold as follows: Detailed book and general ledger account 632 (appendix 2.14).

* Accounting procedure for sales expenses: Every day, when economic transactions arise, accountants base on the documents collected in the accounting department such as: VAT invoices (purchase invoices, outside services), salary payment tables, fixed asset depreciation tables... to record, accountants will create payment orders (if payment is made by bank deposits), create documents (for unpaid debts), accountants collect, classify documents and enter them into the accounting software, the machine will automatically transfer data to the general ledger account 641 and the detailed account book for monitoring. At the end of the period, transfer to account 911 - Determine sales results.

Example 6:Based on the guest reception invoice dated December 19, 2019 (Appendix 2.15) , the accountant prepared UNC542 dated December 20, 2019 (Appendix 2.16) to pay Foodin Global Company Limited for the guest reception expenses of: VND 4,069,000, VAT 10%. The accountant recorded:

Debit account 6417: 4,069,000

Debit account 133: 406,900

Credit account 112: 4,475,900

At the end of the period, transfer sales expenses to account 911.

* Accounting procedure for business management costs: Every day, when economic transactions arise, accountants base on documents collected in the accounting department such as: VAT invoices (purchase invoices, outside services), salary payment tables, fixed asset depreciation tables... to record, accountants will create payment orders (if payment is made by bank deposits), create documents (for unpaid debts), accountants collect, classify documents and account for

Enter the accounting software, the machine will automatically transfer data to the general ledger Tk 642 and the detailed account book for tracking. At the end of the period, transfer to account 911 - Determine sales results.

Regarding depreciation of fixed assets: The company has used the average depreciation method (also known as straight-line depreciation). According to this method, the depreciation amount calculated for each period in the useful life of the asset is the same and is calculated according to the formula:

Fixed asset depreciation to be deducted in the period = Fixed asset depreciation to be deducted in the previous period + Fixed asset depreciation increased in the period - Fixed asset depreciation decreased in the period

Example 7:Based on the telephone bill dated December 5, 2019 (Appendix 2.17) , the accountant made UNC358 dated December 8, 2019 (Appendix 2.18) to pay VNPT Business Center - Hanoi to pay telecommunications fees for November 2019: 1,195,000 VND, VAT 10%.

Accounting:

Debit account 6427: 1,195,000

Debit account 1331: 119,500

Credit account 112: 1,314,500

At the end of the period, transfer business management expenses to account 911.

* Accounting chart of order of recording accounts 641, 642

Accounting documents

(VAT invoice, Salary summary, payment voucher...)

General Journal

Accounting software

Detailed accounting book account 641, 642

Ledger account 641,642

Summary table of selling expenses and business management expenses

Note: Record daily Record at the end of the month

Comparative relationship

Diagram 2.7. Detailed accounting sequence for sales expenses and business management expenses

* Accounting sequence for receivable and inventory provisions:

- For receivables provisions: At the end of the accounting year, in case the accountant determines that the receivable is a bad debt, the Accounting Department will consider setting up a provision based on the production and business plan. If the Company has enough resources to cover the provision that needs to be set up, the Company will set up a provision for bad debts and include it in the business management expenses of the period.

- With provisions for inventory price reduction: At the end of the accounting period, the Accountant shall make provisions for inventory price reduction when there is reliable evidence of a decrease in the net realizable value compared to the original price of the inventory at the end of that accounting period. In case at the end of the accounting period of this year, if the provision for inventory price reduction to be made is lower than the provision for inventory price reduction made at the end of the accounting period of the previous year, the larger difference must be reversed to reduce production and business expenses in the year and to ensure that the inventory value reflected in the financial statements is at the original price. If the provision for inventory price reduction was made at the end of the previous year, the additional amount must be made to ensure that the inventory value reflected in the financial statements is at the net realizable value.

- For example: At the end of the year, the accountant prepares a summary of customer receivables (Appendix 2.21) , we can see that the company still has many outstanding customer receivables, as of December 31, 2019, the company's customer receivables are 199,850,222,021 VND. To avoid payment risks, the accountant needs to consider which debts are bad debts, which debts are likely to be paid to have a solution and at the same time set aside a provision for doubtful debts for those bad debts.

- For example: On December 31, 2019, after arranging the import-export inventory data (Appendix 2.22) , it can be seen that most of the items in the company are still in stock. The accountant needs to make provisions for each type of goods to avoid sales risks. For example: The unit price of Truc Bach canned beer in the company's warehouse is 342.00 VND/box, the quantity in stock is 1,754 pieces, the value of the inventory is 617,408,000 VND, the accountant needs to make provisions for this type of beer. However, up to now, the accountant has not made provisions for this type of goods of the company.

* Accounting procedure for financial expenses: Every month, the accountant will receive the above accounting documents, the accountant will reflect the transactions of expenses related to financial activities in the general journal, detailed ledger, and general ledger.

635 and related account books. At the end of the period, balance on account 635 and transfer to account 911.

In 2019, Habeco Trading Company Limited did not have any activities related to financial expenses because the company's capital is 100% from Hanoi Beer - Alcohol - Beverage Corporation, so the company does not have any loans for production and business activities. If it wants to raise capital from outside the company, it needs approval from the parent company.

* Accounting procedure for other expenses : When other expense transactions arise, accountants will enter data into the program based on actual documents. The system will automatically update the corresponding accounts to enter data into the general journal, detailed ledger, general ledger account 811 and related account books.

Example 8:On December 20, 2019, the Company transferred and sold a 5-seat Ford Focus car , original price 831,754,760 VND, remaining value as of the transfer date is 360,316,163 VND. The Company sold to Mr. Hoang Manh Hung for 410,000,000 VND (price does not include 10% VAT). The Company has not yet collected the money. Based on the accounting documents entered, the accounting software will automatically update the data into the related books: general journal, ledger account 811 (appendix 2.24)

Based on the fixed asset liquidation minutes, the accountant records a reduction in fixed assets: Debit account 811: 471,438,597

Debit account 214: 360,316,163

Credit account 211: 831,754,760

* Accounting procedure for corporate income tax expenses : Currently, the Company is applying the corporate income tax rate of 20% according to current regulations. The Company accounts for corporate income tax according to Circular 200/2014/TT-BTC.

Corporate income tax payable

Total accounting profit

before tax (I)

Corporate income tax rate

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In which (I): The method of determining taxable income is as follows:

Taxable income

=	Taxable income	-	Tax-free income	+	Losses carried forward
+ Taxable income is determined as follows:
Taxable income	=	(Revenue)	-	Deductible expenses)	+	Other income

- Regarding tax declaration and payment, the Company shall comply with the guidance in Circular 151/2014/TT-BTC. The Company shall not submit a provisional corporate income tax declaration but shall only make provisional quarterly tax payments and finalize the tax at the end of the year. Accordingly, the Company shall be able to determine the actual expenses incurred during the tax period, so the provisional quarterly corporate income tax shall be based on the revenue and expenses incurred during that quarter.

- Quarterly, when determining provisional corporate income tax payment according to the provisions of the Corporate Income Tax Law.

+ At the end of the fiscal year, based on the actual corporate income tax payable during the year, the difference between the actual corporate income tax payable and the provisional corporate income tax payable is reflected.

+ Record an increase in current corporate income tax expense of the current year in case additional corporate income tax payable of previous years is discovered due to the discovery of immaterial errors of previous years.

- Reflects the amount of corporate income tax paid by the enterprise to the state budget.

- Record a reduction in current corporate income tax expense by the difference between the actual corporate income tax payable in the year in case the actual corporate income tax payable in the year is less than the provisional corporate income tax payable in the year. Or in case the corporate income tax payable is recorded as a reduction due to the discovery of immaterial errors in previous years, record a reduction in current corporate income tax expense in the current year.

- Determine the amount of corporate income tax payable for the whole year: Based on the business results recorded on the financial statements as total accounting profit before corporate income tax, the company will have to adjust some revenue and expense items to comply with the provisions of corporate income tax policy.

- Process of checking revenue and expenses, corporate income tax: Daily, the general accountant based on data on the system about output invoices (revenue), input invoices (expenses) performs comparison with accompanying documents, specifically:

+ Documents to determine total taxable revenue in the period include: sales revenue, financial revenue and other revenue: VAT invoices; credit notes; other documents..

+ Documents to collect reasonable and valid expenses at the Company include: Cost of goods sold, Sales and Enterprise Management Cost, Financial Cost, Other Costs: Sales invoices;

Invoices, vouchers, and expense items of the Company; invoices for purchased goods, payment statements, etc.

At the end of the year, the general accountant gathers all the figures of revenue and expense accounts in each quarter, compares and reviews them with the monthly VAT statements, adjusts the estimated non-deductible expenses in the quarter and adjusts the temporary differences between tax and accounting to determine taxable income and corporate income payable based on the tax rate applied in the year, makes declarations and submits the annual settlement declaration with financial reports. After the settlement, compare the corporate income tax payable with the provisional corporate income tax paid. If the tax payable is greater than the tax paid, additional payment is made. If the tax payable is less than the tax paid, the deduction data is transferred to the following year.

*Record and account for deferred corporate income tax expenses

Through a survey at the Company on the application of accounting accounts and financial statements of the Company in 2017, 2018 and 2019, only current corporate income tax arises, the Company does not arise accounts related to deferred income tax payable and deferred income tax assets, so they are not shown in the financial statements in general and the business performance report in particular.

- For example: - In the first quarter of 2018, the accountant calculated the Company's provisional corporate income tax as: VND 274,815,729

+ Accounting for provisional corporate income tax expense Debit account 8211: 274,815,729

Credit account 3334: 274,815,729

+ Accounting for the amount of tax temporarily paid Debit account 3334: 274,815,729

Credit account 1121: 274,815,729

+ With the provisional tax payment in the first quarter, at the end of the accounting period, the following is recorded: Debit account 334: 274,815,729

Credit account 8211: 274,815,729

c. Business results accounting process

* Accounting procedure for business results: The company uses Misa accounting software, so at the end of each month, the accountant only needs to enter the operation, the software will automatically perform the accounting entries for transferring revenue, transferring expenses, transferring corporate income tax expenses, calculating and transferring the profit after corporate income tax to the account.

account 911 to determine business results. The accounting software will automatically transfer the balance and enter the general ledger account 911 and related reports. At the end of each period, the general accountant prepares, prints and binds the financial statements.

Example 9 : Transferring sales revenue, cost of goods sold, selling expenses, and business management expenses incurred during the period. The accounting software relies on the incurred figures to transfer and transfer data to the general journal, ledger account 911 (appendix 2.25) and the Business Results Report (appendix 2.26).

- Accountants carry out transfers to determine sales results.

+ Transfer of cost of goods sold:

Debit account 911: 6,842,849,894,601

Credit account 632: 6,842,849,894,601

+ Transfer of sales expenses: Debit account 911: 446,893,494,156

Credit account 641: 446,893,494,156

+ Transfer of business management expenses: Debit account 911: 36,101,136,148

Credit account 642: 36,101,136,148

+ Transfer other expenses:

Debit account 911: 18,969,064,857

Credit account 811: 18,969,064,857

+ Transfer revenue deductions: Debit account 511: 60,356,327,563