Account 623 - Costs of operating machinery

1. Accounting Principles

This account is used to record the collecting and allocating costs of trucks and machinery operations directly for construction activity. In case business carry out construction of works by mixed method of which include manual and machinery operations.

b) In case business carries out construction of works completely by machinery, then Account 623 ― costs of operating machinery‖ shall not be used, but total direct costs of construction shall be posted to Accounts 621, 622, 627. c) Not accounting to Account 623 appropriation of social insurance, medical insurance, labor union fees, unemployment insurance computed on salary payables for workers handling trucks and machinery in operation. Part of machinery costs in excess of normal level is not added to costs of construction, but posted directly Account 632.

2. Structure and contents of account 623 - Costs of operating machinery

Debit side : Costs related to machinery operations (costs of materials for machinery operations, costs of salary and supplement to salary, wages of workers who handle machinery, costs of maintenance or repairing trucks and machinery in operations...). Costs of materials, costs of other services for operating trucks, machinery. Credit side :

- Transferring costs of operating truck and machinery to Dr 154 ―Work in process.

- Transferring cost of operating truck and machinery in excess over normal level to Account 632. Account 623 does not have ending balances. Account 623 - Costs of operating machinery comprises 6 sub - accounts: - Account 6231 - Costs of labor: Used to record main salaries and extra wages, supplement of wages payables for direct workers handling truck, machinery, serving machinery operation, such as: transportation, supplying fuel, materials, ... for truck and machinery operation. This account do not record appropriation of social insurance, medical insurance, labor union fees according to current regulations, which computed on salaries of workers handling truck and machinery. These appropriations are recorded on Account 627 ― general production costs‖.

- Account 6232 - Costs of materials: Used to record fuels (petrol, oil,...), other materials used for operating truck and machinery.

 - Account 6233 - Costs of production tools: Used to record instruments, tools relating to operations of truck and machinery.

- Account 6234 - Costs of depreciating machinery in operation: Used to record depreciation of truck and machinery in constructing works.

- Account 6237 - Costs of outsourced services: Used to record outsourced services such as repairing truck and machinery, insurance fees of truck and machinery; water and electricity, fixed asset rent, charges for subcontractors... - Account 6238 - Other cash expenses: Used to record explicit costs serving the operation of truck and machinery.

3. Method of accounting for several major transactions

Accounting truck and machinery operation costs which depend on types of machinery operation machinery fleet specialized in performing work volumes by machinery or assigning operation machinery for construction team or enterprise: If organizing separate operating truck and machinery fleet that is account gearing and has separate accounting unit then accounting will be carried out as follows.

- Accounting charges related to operation of truck and machinery, record : Dr 621, 622, 627 Cr 111, 112, 152, 331, 334, 214,...

- Accounting costs of operating truck and machinery and calculating the price of cases of truck and machinery at Account 154 ―Work in process‖ based on mortgage costs of machinery cases (Actual cost price or internal contract price) supplied for construction objects (construction, construction section); according to organizing manner of accounting work and relation between fleet of operating truck and machinery and construction unit. If business perform work by manner of supplying truck and machinery among internal departments, record: Dr 623 - Costs of operating machinery (6238 - other cash expenses) Cr 154 - Work in process.

If business perform work by manner of selling truck and machinery services among internal departments, record: Dr 623 - Costs of operating machinery (6238 - other cash expenses) Dr 133 - Deductible VAT (1331) (if any) Cr 333 - Taxes and payables for state (33311) ( VAT payable computed on internal selling price of cases of truck and machinery services) Cr 511 – Turnover from sale and service provision (details provided in the internal services).

b) If business has not separate truck and machinery fleet or has the fleet, but has not account team for the fleet, then total costs of operating truck and machinery (including permanent costs and temporary costs, such as supplement of salary, mobile supplement of operating truck and machinery) will be handled by accounting as follows:

- Basing on salaries, wages and other payables for workers operating and serving truck and machinery operation, record: Dr 623 - Costs of operating machinery (6231 - Costs of labor) Cr 334 - Wages payable

- When delivering materials, instruments, tools used for truck and machinery contract in the period, record: Dr 623 - Costs of operating machinery (6232 - Costs of materials) Cr 152,153.

- In case purchasing materials, instruments for direct use (not stored) for truck and machinery operation in the period, record : Dr 623 - Costs of operating machinery (6232) Dr 133 - Deductible VAT (1331) (of any) Cr 331, 111, 112,...

- Depreciating truck and machinery operated by truck and machinery fleet, record: Dr 623 - Costs of operating machinery (6234 - Depreciation cost of operating machinery) Cr 214 – Depreciation of fixed assets - Incurred costs of outsourced services (Repairing truck and machinery, water and electricity, fixed assets rent, charges for subs contractors,...), record : Dr 623 - Costs of operating machinery (6237) Dr 133 - Deductible VAT (1331) (of any) Cr 111, 112, 331,...

- Incurred cash expenses, record : Dr 623 - Costs of operating machinery (6238 - other cash expenses) Dr 133 - Deductible VAT (1331) (if eligible for VAT deduction) Cr 111,112,...

- Basing on allocating table of using truck and machinery (actual cost of truck or machinery shift computed for each construction, construction section, record: Dr 154 - Work in process (cost item of machinery operation) Dr 632 - Cost of goods sold (part in excess over normal level) Cr 623 - Costs of operating machinery.  

Source: Circular 200, Article 86