Account 631- Cost of production
1. Accounting Principles
This account is used to record costs summary of production and calculating cost price of products, services of production units in industry agriculture, forestry sectors, and business units of transportation, posts, tourism and hotel services..., in case business applies periodical inventory method
b) This account is not used in businesses applying perpetual inventory method
c) Only accounting at Account 631 types of operating costs as follows:
- Costs of raw materials, direct materials;
- Direct labor cost;
- Costs of operating machinery (in case of contraction business)
- Manufacturing overhead cost
d) Not accounting at Account 631 these types of expenses:
- Selling expenses ;
- General administration expenses;
- Financial costs ;
- Other expenses;
- Non –business expenses
dd) Costs of Department of production and trade supporting for production and business, costs price of goods, raw materials, materials and costs of outsourcing and manufacturing (outsourcing, or self processing and manufacturing) will also be recorded in Account 631.
e) Account 631 ―Cost of production‖ must be applied of detail accounting in periods of cost drivers (factory, term or group of production...), in periods of types, groups of products, services.
g) In Agriculture industry, actual cost price of product will be determined at end of season or at year-end cost price of product harvested in a year will be determined in that year, that is, if costs incurred in this year but products will be harvested in next year, then cost price will be determined in the next year.
- In plantation sector, costs must be applied of detailed accounting for three types of trees:
Short - term tree ;
One - time crops with many-time harvests ;
Perennial tree.
Trees which are cultivated 2, 3 crops during a year, or cultivated in this year but will be harvested in next year, or crops having both new planting area, and cultivated area in the same year, then accountants must base on actual situation to record, record clearly and separately costs of each crops, of each area, costs of last year, current year and the next year. Not recorded at Account 631 ―Cost of production items such as costs of new cultivation and cultivating long-term tree during period of capital construction.
Type of costs relating to many accounting objects, or relating to many crops, many periods, then these costs must be observed in details, and then allocating to cost price of each related product, such as: Costs of irrigation and draining, costs of preparing farmland and cultivation in the first year of one-time cultivated, many-time harvest trees (this cost is not belong to capital construction).
In the same cultivation area, if two or more kinds of short-term trees are planted, then costs incurred in relation directly to a specific kind of trees will be collected separately for that kind of tree (such as seeds, costs of planting, harvesting), overhead costs incurred for all kinds of trees (such as plough, rake, irrigating and draining water) will be collected separately and then allocated for each kind of tree according to panting area.
Perennial trees: Works from preparing land, planting, cultivating to the time harvesting products - will be considered as capital investment process to form fixed assets, and costs of these works are collected at Account 241 ―Construction in progress‖.
- Detailed accounting must be implemented for each breeding branches (cattle, pigs...), for each group or each type of domestic animals, poultry. And reproduce animal which transferred to big domestic animals will be applied accounting of salvage vale at Account 631 ―Cost of production‖.
h) Account 631 ―Cost of production‖ applying to transportation industry must be applied costs accounting in periods of activities (Transporting passengers, goods,...). In process of transportation, tyres are depreciated with faster rate than that of car, so tyres must be replaced many times, but value of replaced tyres are not computed to transportation costs immediately when replacing, but this values will be advance appropriated or deferred in costs of production and trade in the period.
In hotel industry, accounting of account 631 must be observed in details in periods of activities, such as: meals services, room services, entertainment services, other services (washing and ironing, hair cut, telegraph, massage...).

2. Structure and content of account 631 - Cost of production
Debit side :
- Beginning costs of work in process;
- Manufacturing costs actually generated during period
Credit side :
- Cost price of products stored in warehouse, finished services transferred to Account 631 ―Cost of goods sold‖.
- Costs of ending work in process transferred to Account 154 ―Work in process‖.
Account 631 does not have ending balances.

3. Method of accounting for several major transactions:
Transferring costs of production, trading, costs of unfinished services at beginning of period at Dr 631 ―Costs of production‖, record:
Dr 631 - Cost of production
Cr 154 - Work in process.
b) At end of account period, posting costs of raw materials, direct materials to account ―costs of production, record :
Dr 631 - Cost of production
Cr 621 - Direct materials costs
c) At end of account period, posting costs of direct labor to Acc 631 - ―costs of production‖, record:
Dr 631 - Cost of production
Cr 622 - Direct labor cost.
d) At end of period, calculating and posting overhead cost to Acc ―Costs of production‖ in periods of type of productions, labors, services, record:
Dr 631 - Cost of production
Dr 632 - Cost of goods sold (fixed manufacturing overhead cost is not unallocated)
Cr 627 – Manufacturing overhead cost
dd) At end of accounting period, carrying out inventory and determining value of unfinished goods Inventory and services at end of period, record:
Dr 154 – unfinished production, business cost
Cr 631 - Cost of production
e) Cost price of stored goods, finished service, record:
Dr 632 - Cost of goods sold
Cr 631 - Cost of production

Source: Circular 200, Article 88