of the fixed assets after upgrading. In this case, accounting is performed as follows:
- Entry 1: Reflects costs incurred during the upgrading process. Debit account 2413: Major repairs of fixed assets (Upgrade costs incurred)
Debit account 133: Deductible VAT (If any)
There are accounts 111, 112, 141, 152, 153, 214, 331, 334, ...: Payment accounts
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General Accounting for Increase and Decrease of Fixed Assets
related math
- Entry 2: Record the accumulated depreciation value of fixed assets according to the total actual repair and upgrade costs when the upgrade work is completed.
Debit account 214: Depreciation of fixed assets
Credit account 2413: Major repairs of fixed assets
* Completing accounting for asset leasing activities in construction enterprises: Special
The production and business activities of construction enterprises also show seasonality and depend on the volume of work (construction contracts) exploited. When the volume of work is low, to avoid wasting economic resources, construction enterprises can and should do business in leasing assets to cover costs and make a profit. In reality, leasing assets is a common business in enterprises in general, construction enterprises in particular. Therefore, the accounting of revenue and expenses arising in the process of leasing assets in enterprises and construction enterprises needs to be raised. Based on the current regulations of the Enterprise Accounting Regime (Incurred rental costs are recorded in General Production Cost Account 627, arising rental revenue is reflected in Service Revenue Account 5113) and the actual implementation in construction enterprises in accounting for asset leasing activities, the author of the Thesis proposes to complete the accounting for asset leasing activities in construction enterprises in the following direction:
Add accounts in the current accounting system to reflect
reflect the asset leasing business. Specifically, add account 624 - Operating lease expenses and account 514 - Operating lease revenue. Then, information on costs, revenues and asset leasing results will be reflected more clearly, separating the activities.
asset leasing activities with other production and business activities in the enterprise. Accounting method
Accounting for operating lease of assets in enterprises in general and construction enterprises in particular is performed as follows:
- Reflecting the costs incurred during the asset leasing process, based on related documents, the accountant records:
Debit account 624: Operating lease expenses
Debit account 133: Deductible VAT (If any)
Credit accounts 111, 112, 141, 142, 152, 153, 214, 242, 311, 331, 334: Accounts
related payments
- Reflects rental revenue according to rental contracts and VAT invoices issued to customers:
Debit account 111, 112, 131: Payment accounts (Total payment amount)
Credit account 514: Operating lease revenue (Price excluding VAT) Credit account 3331: VAT payable
- If the rental payment is received in advance for the entire term of the rental contract, based on the contract, VAT invoice and payment documents, the accountant records:
Debit account 111, 112, 131: Payment accounts (Total payment price) Credit account 3387: Unrealized revenue
Credit account 3331: VAT payable
- Based on the lease term and length of the enterprise's accounting period, the accounting period records rental revenue:
Debit account 3387: Unrealized revenue Credit account 514: Rental revenue
- At the end of the period, the accountant transfers the operating lease costs of assets: Debit account 154: Work in progress costs (Details of leasing activities)
Credit account 624: Operating lease expenses
- At the end of the period, transfer revenue from asset leasing activities: Debit account 514: Revenue from asset leasing activities
Credit account 911: Determine business results
* Complete accounting for liquidation of specialized construction machinery and equipment for a construction contract: Specialized construction machinery and equipment for a contract
Construction contracts include specialized machinery and equipment of a specific nature used for a project or construction contract. In terms of finance, the value of specialized machinery and equipment will be fully depreciated for the project or construction contract, and when the project is completed and the construction contract is completed, the specialized machinery and equipment will be liquidated. The enterprise accounting regime issued under Decision No. 15/2006/QD-BTC dated March 20, 2006 of the Minister of Finance stipulates that when liquidating specialized machinery and equipment for a construction contract, the income from liquidation is recorded as a decrease in production and business expenses in the account Unfinished production and business expenses 154, and the liquidation costs are recorded as an increase in production and business expenses in the account Unfinished production and business expenses 154. Such a regulation is clear and thoroughly follows the principle of appropriateness in accounting. However, in reality, the liquidation of specialized machinery and equipment often cannot be carried out immediately upon completion, handover and final settlement of the project, so accounting for project cost adjustments is not feasible; on the other hand, due to the characteristics of the project,
The point of construction business is that the product is unique, the cost price of the handed over project is also the cost price of the project, so the reduction of costs, cost price, cost price and increase of income are essentially the same. Therefore, the thesis proposes that the liquidation accounting of specialized machinery and equipment for a construction contract should be performed as follows:
- Entry 1: Write off specialized construction machinery and equipment for a contract.
The construction contract has been liquidated.
Debit account 214: Depreciation of fixed assets Credit account 211: Fixed assets
- Entry 2: Reflects the cost of liquidating specialized machinery and equipment. Debit account 811: Other expenses
Debit account 133: Deductible input VAT
Credit account 111, 112, 331: Related payment accounts
- Entry 3: Reflects income from liquidation of specialized machinery and equipment. Debit accounts 111, 112, 131: Related payment accounts
Credit account 711: Other income
Credit account 3331: Output VAT payable
* Perfecting the determination and accounting of business advantage value when restructuring enterprises in general, equitizing state-owned enterprises in particular: Equitization of state-owned enterprises, converting state-owned enterprises into joint stock companies is a correct policy of our Party and State. Equitization of state-owned enterprises aims to convert state-owned enterprises in which the State does not need to hold 100% of capital into multi-owned enterprises, mobilizing capital from all domestic and foreign organizations and individuals to increase financial capacity, innovate technology, innovate management methods, increase business efficiency for enterprises, reduce the burden on the state budget and improve the economic and social efficiency of the economy. In the equitization of state-owned enterprises, determining the value of enterprises (enterprise valuation) is an important and complicated task, affecting the economic interests of the State, enterprises, investors and employees in the enterprise. Enterprise valuation is the determination of the value of all existing assets of the equitized enterprise up to the time of conversion, including tangible and intangible assets. Among the assets involved in the enterprise valuation process is the value of business advantages. According to the provisions of Article 31, Decree No. 109/2007/ND-CP dated June 26, 2007 of the Government on the conversion of 100% state-owned enterprises into joint stock companies, the enterprise's business advantages include: geographical location, brand value, and development potential. According to the provisions of Circular 146/2007/TT-BTC dated December 6, 2007 guiding the implementation of a number of financial issues when converting 100% state-owned enterprises into joint stock companies as prescribed in Decree No. 109/2007/ND-CP dated June 26, 2007 of the Government, the value of the enterprise's business advantages calculated into the value of the equitized enterprise is determined by two methods: the method of determining according to the profit rate and interest rate of government bonds, the method of determining based on the advantage of geographical location and brand value. The value of the business advantages calculated into the enterprise value is the higher value when comparing the results of these two methods.
The value of business advantage based on profit margin and government bond interest rate is determined according to formula 3.3 and 3.4. The value of business advantage based on geographical location and brand value is determined according to formula 3.5:
Business advantage value
State capital value according to accounting books
=x
Average rate of return after tax on state capital
Interest rate on 5-year government bonds issued by the Ministry of Finance
-
(3.3)
cda DN
math at the time
Enterprise valuation point
army 3 years ago
time of appointment
Enterprise price
announced at the time
closest to the time
basket of enterprises
In there:
Average rate of return after tax on state capital in the 3 years before the time
Enterprise valuation point
Average profit after tax for 3 consecutive years prior to the time of enterprise valuation
= x 100
State capital according to the average accounting books of 3 consecutive years before the time
basket of enterprises
(3.4)
Value of business advantage of many enterprises
Advantage value
= +
Geographic location
Brand value
(3.5)
The value of geographical advantage does not depend on industry and business results.
is determined based on the geographical advantage value of the land plot of urban land type. The geographical advantage value of the land plot is the difference between the land price determined close to the actual land use right transfer price on the market under normal conditions (according to the provisions of Clause 12, Article 1 of Decree No. 123/2007/ND-CP dated July 27, 2007 of the Government on amending and supplementing a number of articles of Decree No. 188/2004/ND-CP dated November 16, 2004 on the method of determining land prices and price frames for land types) and the price decided and announced by the People's Committees of provinces and centrally run cities on January 1 of the year of implementing the enterprise basket. Brand value is determined on the basis of actual costs (advertising costs; domestic and international propaganda costs to promote and introduce products and companies; website construction costs...) that the enterprise has spent on inventing, building and protecting the enterprise's brand and trade name in the 10 years prior to the time of enterprise valuation or from the date of establishment for enterprises with less than 10 years of operation.
The above regulation creates consistency and convenience for state-owned enterprises in determining the value of business advantages included in the value of equitized enterprises. However, the above formula for determining the value of business advantages of enterprises still has some disadvantages.
unreasonable points, specifically as follows:
- The value of business advantage includes: geographical location value, brand value and development potential of the enterprise, while the formula for determining the value of business advantage according to profit margin and government bond interest rate based on the value of state capital according to accounting books at the time of enterprise valuation is not adequate because state capital does not comprehensively and comprehensively reflect the elements that make up the value of business advantage of the enterprise.
- In the case that in the years close to the time of equitization, the state-owned enterprise operates at a loss (the equitized enterprise still has state capital), the state-owned enterprise does not achieve a positive profit margin on state capital, which makes the formula for determining the value of the enterprise's business advantage no longer meaningful.
- State capital is invested in state-owned enterprises for socio-economic purposes, in which the profit-making goal plays an important role, while long-term government bonds are issued mainly to meet capital needs for the provision of non-profit public goods such as: investment in technical infrastructure for the economy, development of education, irrigation, health care... Therefore, determining the value of business advantages of enterprises when equitizing state-owned enterprises based on the interest rate of 5-year government bonds announced by the Ministry of Finance at the time closest to the time of enterprise valuation is unreasonable.
- Determining the geographical advantage value of a land plot to determine the business advantage value of an enterprise based on geographical location and brand value will not be feasible in cases where state-owned enterprises are headquartered in areas where the land is not urban land, making it difficult to determine the actual transfer price of the land plot on the market.
Business advantages need to be determined not only in the case of equitization of state-owned enterprises but also in other cases of enterprise reorganization such as: division, separation, consolidation, merger, conversion of type and acquisition of enterprises. Therefore,
Recognizing business advantages and determining the value of business advantages are very important in a market economy.
According to the authors Meigs & Meigs, Bettner, Whittington [49, pp.528-529], Business advantage, if not considered in the accounting sense, is most commonly understood as the benefit obtained from the promising reputation of the enterprise for customers. In the accounting aspect, business advantage is the present value of future income exceeding the normal profit level of the identifiable net asset value.
above average earnings can arise not only from customer relationships but also from other factors such as good management, production capacity and weak competition. The present value of future cash flows is the amount that investors are willing to pay today for the right to receive future cash flows. Net worth is the owner's equity in the business, determined by the difference between assets and liabilities. Goodwill is not an identifiable asset. The ability of a business to generate above average earnings is evidence of the existence of goodwill. Therefore, identifiable net worth is the amount of total assets, excluding goodwill, remaining after deducting liabilities.
In determining the value of goodwill, past above-average earnings play an important role. Investors' assessment of goodwill will vary with their projections of the future profitability of the business. Determining the fair value of goodwill for an operating business is a difficult and subjective task. The following two methods can be used to determine the value of goodwill.
- Method 1: Determine the value of business advantage by the price-to-earnings ratio method. This method determines the total value of the enterprise, then subtracts (-) the current market price of the enterprise's identifiable net assets. The value of the enterprise is usually determined through the price-to-earnings ratio of the company's shares (P/E). The price-to-earnings ratio of the shares reflects the current relationship between the market price of the shares and the enterprise's profits. Enterprise value
determined by the product of the P/E ratio and the average net income of a number of
years (usually 5 years). The formulas involved in determining the value of goodwill using this method are as follows:
Value
business advantage
Value
Value
= -
DN
Price to Value ratio
Present value of assets
Net profit
(3.6)
(3.7)
=
DN stock income
x average of enterprises
Price-to-Earnings Ratio of Stock
Earnings per share (EPS)
Market price of stock
=
Earnings per share Profit after tax of the enterprise
(3.8)
(3.9)
Average number of shares outstanding during the period
In the case of equitization of state-owned enterprises, the market price of shares can be determined based on the results of stock auctions or the market price of shares of equitized state-owned enterprises operating in the same field with a scale equivalent to the enterprise.
- Method 2: Capitalization method. This method determines the value of a business's business advantage by capitalizing excess earnings at a normal rate of return. Capitalizing profits is understood as dividing profits by the rate of return that investors desire. The result of this ratio reflects the maximum amount of capital needed to invest to earn
get the profit at that rate of return. This method has an inverse relationship between the rate of return used in capitalization and the value of goodwill.
Outstanding annual income
Value
business advantage
=
Desired rate of return
(3.10)
The limitation of the capitalization method is that it does not make provision for the recovery of the investment. This method implies that future years will generate