CIRCULAR

GUIDING THE AMENDMENTS AND SUPPLEMENTS TO THE ENTERPRISE ACCOUNTING REGIME

In order to ensure the compatibility between the enterprise accounting regime and the financial mechanism of the State enterprises promulgated together with Decree No.59/CP, the Ministry of Finance issued on March 20, 1997 Circular No.10-TC/CDKT, having guided the amendments and supplements to the enterprise accounting regime;

Pursuant to the Government’s Decree No.30/1998/ND-CP of May 13, 1998 detailing the implementation of the Enterprise Income Tax Law;

Pursuant to the Government’s Decree No.27/1999/ND-CP of April 20, 1999 amending and supplementing the Regulation on financial management and business cost-accounting at State enterprises promulgated together with Decree No.59/CP, the Ministry of Finance hereby guides the amendments and supplements to a number of points in the enterprise accounting regime as follows:

I. GUIDANCE ON AMENDMENTS AND SUPPLEMENTS TO THE ENTERPRISE ACCOUNTING REGIME

1. In cases where the expenses deducted in advance for overhauls of fixed assets, warranty for products and goods,... are larger than the actually paid amounts, the difference therebetween shall be written as follows:

Debit: Account 335 - Payable expenses

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2. Revenues from the payment discount in cases where the payments for the purchased goods are made ahead of payment deadlines and accepted by the seller shall be written as follows:

Debit: Account 111- Cash

Debit: Account 331 - To be paid to the seller

Credit: Account 711 - Income from financial operations

3. For the asset leasing activities with rentals received in advance for many years, the turnover of each year shall be the total rental amount divided by the number of years of asset lease. When receiving rental money paid in advance by the lessees for many accounting periods or years, the following shall be written:

a/ For units that calculate payable value added tax (VAT) by the tax deduction method:

- When receiving money paid in advance by the lessees for the leased assets, the accountants shall reflect the turnover generated in advance onto the credit side of Account 3387 at the price without VAT:

Debit: Accounts 111, 112,... (Total amount received in advance).

Credit: Account 3387 - Turnover received in advance (at the price without VAT).

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And at the same time, the accountants shall calculate and carry forward the turnover of the accounting period, writing:

Debit: Account 3387 - Turnover generated in advance

Credit: Account 511 - Sale turnover

- In the next accounting period, the accountants shall calculate and carry forward the turnover of such accounting period, writing:

Debit: Account 3387 - Turnover received in advance

Credit: Account 511 - Sale turnover

- The money amounts that must be refunded to the clients due to the non-performance of contracts for asset lease service supply shall be written as follows:

Debit: Account 3387 - Turnover received in advance (at the price without VAT).

Debit: Account 531 - Sold goods that are returned (in cases where the turnover in the period has already been recorded - at the price without VAT).

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Credit: Accounts 111, 112, 3388,... (total refunded amount).

b/ For units that calculate payable VAT by the direct method:

- When receiving money paid in advance by lessees for the leased assets, the accountants shall reflect the turnover received in advance onto the credit side of Account 3387 according to the total amount received in advance, writing:

Debit: Accounts 111, 112,... (Total amount received in advance).

Credit: Account 3387 - Turnover received in advance (According to the total amount received in advance).

And at the same time, the accountants shall calculate and carry forward the turnover of the accounting period, writing:

Debit: Account 3387 - Turnover received in advance.

Credit: Account 511 - Sale turnover.

- In the next accounting period, the accountants shall calculate and carry forward the turnover of such accounting period, writing:

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Credit: Account 511 - Sale turnover.

- The accountant shall reflect the payable VAT amount by the direct method, writing:

Debit: Account 642 - Enterprise management expenses (6425)

Credit: Account 3331 - Payable VAT (33311).

- The money amounts that must be refunded to the lessees due to the non-performance of contracts for asset lease service supply shall be written as follows:

Debit: Account 3387 - Turnover generated in advance.

Debit: Account 531 - Sold goods that are returned (in cases where turnover in the period has already been recorded).

Credit: Accounts 111, 112,... (total refunded amount).

And at the same time, the accountants shall reflect the reimbursed VAT amount corresponding to the value of asset lease service that has not been provided, writing:

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Credit: Account 721 - Irregular incomes, or

Credit: Account 642 - Enterprise management expenses (if the taxes have not been carried forward).

c/ When remitting enterprise income tax for the asset lease activities with rentals collected in advance into the State budget, the accountant shall write:

Debit: Account 3334 - Enterprise income tax

Credit: Accounts 111, 112,...

d/ For the asset leasing activities with rentals received in advance for many years, besides following the accounting processes prescribed above, the accountants shall also have to open detailed accounting books for monitoring the turnover received in advance and expenditures temporarily calculated for determining the payable enterprise income tax amount (including the expenses for leased asset depreciation, other expenses corresponding to the time and money amount received in advance and reserve amount equal to 5% of the total above-said expenditures). And at the same time, they shall have to make final settlement of leasing expenses actually arising as compared with the annual temporarily calculated expenses, for the purpose of determining and settling the annual income tax amount to be paid annually and toward the end of the lease term.

4. When products and goods subject to the VAT by the tax deduction method are delivered and used for donations and/or gifts, the accountants shall write:

a/ If donations and/or gifts are given in service of production and business activities that are liable to VAT by the tax deduction method, such as donations and gifts to delegates participating in the customers’ congress or employees� conferences, the accountants shall reflect the turnover of products and goods given as donations and/or gifts at the selling prices without VAT, writing:

Debit: Account 641 - Sale expenses

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Credit: Account 512 - Internal goods sale turnover

And at the same time, the accountants shall reflect the payable VAT amount eligible for deduction, writing:

Debit: Account 133 - Deductible VAT

Credit: Account 3331 - Payable VAT

b/ If donations and/or gifts are given in service of production and business activities that are liable to VAT by the direct method or not liable to VAT, such as donations and gifts to delegates participating in the customers’ conferences or employees’ congress, the accountants shall reflect the product turnover at the selling prices without VAT and the payable output VAT ineligible for deduction, writing:

Debit: Account 641 - Sale expenses

Debit: Account 642 - Enterprise management expenses

Credit: Account 3331 - Payable VAT

Credit: Account 512 - Internal goods sale turnover

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Debit: Account 431 - Reward and welfare funds

Credit: Account 3331 - Payable VAT

Credit: Account 512 - Internal goods sale turnover.

5. For products and goods liable to VAT by the direct method or not liable to VAT, when being delivered as donations and/or gifts, the accountants shall reflect the sale turnover at the payment price (with VAT), writing:

Debit: Accounts 641, 642, 431

Credit: Account 512 - Internal goods sale turnover.

6. Shift meal allowances to be paid to laborers taking part in the enterprises� business activities shall be written as follows:

Debit: Accounts 622, 627, 641, 642,...

Credit: Account 334 - To be paid to employees.

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Debit: Account 334 - To be paid to employees

Credit: Accounts 111, 112,...

7. Expenses for payable loan interests shall be written as follows:

Debit: Account 811 - Financial operation expenses

Credit: Accounts 111, 112,...

In cases where the amounts of interests on loans for capital construction must be paid while the projects are not yet completed and put to use, they shall be accounted into the capital construction investment expenses, writing:

Debit: Account 241 - Unfinished capital construction

Credit: Accounts 111, 112, 341,...

8. When the severance allowance for laborers, expenses for scientific research, research for technological renewal, innovations, training for raising of workers’ professional skills, environmental protection and for female laborers,... arise, they shall be written as follows:

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Debit: Account 642 - Enterprise management expenses

Debit: Account 133 - Deductible VAT (if any)

Credit: Accounts 111, 112, 331,...

b/ For units that calculate payable VAT by the direct method or not liable to VAT, when the above-said expenses arise, the accountants shall base themselves on the vouchers and invoices to reflect them into the enterprise management expenses according to payment price and the input VAT ineligible for deduction, writing:

Debit: Account 642 - Enterprise management expenses

Credit: Accounts 111, 112, 331,...

9. Expenses for discount paid to the goods and/or service purchasers when they make payments therefor in advance shall be written as follows:

Debit: Account 811 - Financial operation expenses

Credit: Accounts 131, 111, 112, ...

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1. This Circular shall apply to enterprises of all branches and economic sectors and takes effect as from the effective date of the Government’s Decree No.27/1999/ND-CP of April 20, 1999. The previous guidance of the Ministry of Finance on the enterprise accounting regime, which are contrary to this Circular’s provisions, are now annulled.

2. Any problems arising in the course of implementation shall be reported by the concerned units to the Ministry of Finance for study and solution.

FOR THE MINISTER OF FINANCE
VICE MINISTER




Pham Van Trong