Account 421 - Undistributed post-tax profits
1. Accounting principles
This account is used to record business results (profit, loss) after enterprise income tax and situation of income distribution or loss handling of enterprise.
b) Profit distribution on business activities of enterprises must be clear, explicit and comply with the current financial policy.
c) Detailed accounting of result from business activities for every fiscal year must be implemented (previous year, current year), concurrently monitor in details for every content of profit distribution of enterprises (appropriation of fund, supplementation of operating capital, distribution of dividends, profits for shareholders and investors).
d) When applying retroaction due to the accounting policy changes and adjusting retroaction of essential shortcomings of previous years, but discovered in current year which lead to adjustment of year-beginning balance of undistributed earnings, accountants must adjust a decrease or an increase in year-beginning balance of Account 4211 ―retained earnings of previous year‖ on the accounting book, and adjust a decrease or an increase in indicator ―retained earnings‖ on the
balance sheet, in accordance with regulations at accounting standard ―Accounting policy change, accounting estimation and shortcomings‖, and accounting standard ―Enterprise income tax‖.
dd) Parent companies are entitled to distribute profits to the owners which shall not exceed the undistributed post-tax profits on consolidated Financial statements after eliminating the impact of profits recorded from cheap purchase (negative goodwill). Where the undistributed post-tax profits on consolidated financial statements is higher than the undistributed post-tax profits on financial statement of the parent companies and if the profits decided to distribute exceed the undistributed post-tax profits on separate financial statement, the parent companies make distribution after transferring profits from subsidiary companies to the parent companies.
All enterprises, when distributing profits, must consider non-monetary items in undistributed post-tax profits that may affect cash flow and ability to pay dividends, profits of enterprises, such as:
- Interest due to revaluation of assets contributed as capital; revaluation of monetary items; revaluation of financial instruments;
- Other non-monetary items ...
e) In the operation of business cooperation contract (BCC) of division of post-tax profits, enterprises must monitor separately results of BCC as a basis for the distribution of profits or sharing losses for the parties. Enterprises which are the make payment and final declaration of tax for parties in BCC record the profits in proportion to the profits they receive, do not record all results of BCC on this account unless gaining the control right for BCC.
g) For the preferred dividends payable: Enterprise must eliminate preferred dividends payable under the nature of the preference shares and principles:
- If the preference shares classified are liabilities, accountants do not record dividends payable from undistributed post-tax profit ;
- If preference shares classified are owner‘s equity, preferential dividends payable are accounted for similar to the dividend payment of common shares.
h) Enterprises must monitor the internal management system of taxable losses and non-taxable losses, in which:
- Taxable losses are the losses set up by deductible expenses in determining taxable income;
- Non - taxable losses are the losses set up by non-deductible expenses in determining taxable income;
When transferring losses in accordance with the law, enterprises shall only transfer taxable losses as a basis of deduction of tax payable in the future.

2. Structure and contents of account 421 - Undistributed post-tax profits
Debit side:
- Loss amount on business activities of enterprises;
- Appropriation of fund of enterprises;
- Distributing dividends, profits for owners;
- Supplementing owner‘s capital;
Credit side:
- Real income amount on business activities of enterprises in period;
- Loss amount from subordinates granted additionally by seniors;
- Handling losses on business activities.
Account 421 may have Debit balance or Credit balance.
Debit balance: Loss amount on business activities which have not yet been settled
Credit balance: Undistributed or unused undistributed post-tax profits
Account 421 - Undistributed post-tax profits comprises 2 sub-accounts:
- Account 4211- Undistributed post-tax profits of previous year : Recording the result of business activities, situation of profit distribution or loss handling from previous years. Account 4211 is still used for recording of adjustment amount of increase or decrease in year beginning balance of Account 4211, when applying retroaction due to accounting policy change and retroactive adjustment of essential shortcomings in previous year, but have just been discovered in the current year.
Next year-beginning, accountants shall transfer year-beginning balance from Account 4212 ―undistributed post-tax profits of current year‖ to Account 4211 ―undistributed post-tax profits of previous year‖
- Account 4212- Undistributed post-tax profits of current year : Recording the result of business activities, situation of profit distribution or loss handling in current year.

3. Method of accounting for several major transactions

At end of account period, transferring the result of business activities:
- In case of profit, record:
Dr 911 – income summary
Cr 421 - undistributed post-tax profits (4212).
- In case of loss, record:
Dr 421 - undistributed post-tax profits (4212)
Cr 911 – income summary
b) When having the decision or notice for payment of dividend and profits distributed to owners, record:
Dr 421 - undistributed post-tax profits
Cr 338 – Other payables (3388).
When paying dividends and profits, record:
Dr 338 – Other payables (3388).
Cr 111,112,... (real payment amount)
c) In case a joint stock company pay dividends in shares (additional stock issue from undistributed post-tax profits), record:
Dr 421 - undistributed post-tax profits
Cr 4111- Contributions from owners (face value)
Cr 4112 - Share premium (differences between issue price higher than face value, if any)
d) Enterprises which are not joint stock companies when deciding to supplement owner‘s capital from business profits (retained profits of enterprises), record:
Dr 421 - undistributed post-tax profits
Cr 4111 - Contributions from owners.
dd) When setting up funds from the results of operations (retained profits of enterprises), record:
Dr 421 - undistributed post-tax profits
Cr 414 - development investment funds
Cr 418 - Other funds under owner‘s equity.
Cr 353 - bonus and welfare fund (3531, 3532, 3534).
e) At fiscal year-beginning, transferring undistributed post-tax profits of current year to undistributed post-tax profits of previous year, record:
- In case Account 4212 has Credit Balance (profit), record:
Dr 4212 - undistributed post-tax profits of current year
Dr 4211 - undistributed post-tax profits of current year of previous year.
- In case Account 4212 has Debit Balance (loss), record:
Dr 4211 - undistributed post-tax profits of current year of previous year
Dr 4212 - undistributed post-tax profits of current year
g) Accounting for handling of undistributed post-tax profits before transforming 100%-state-owned enterprises into joint-stock companies
- Accounting for handing of liabilities before transforming into joint-stock companies
For loans of state-owned commercial banks and the Vietnam Development Bank overdue but unable to be paid due to the loss of enterprises which have no state capital, enterprises must carry out procedures, application for rescheduling, freezing and remission of loans under the provisions of current law. When having decision on remission of loan, record:
Dr 335 - Expenses payable (interest from remitted loans)
Cr 421 - Undistributed post-tax profits (interest of loans recorded in expenses in previous terms remitted)
Cr 635 - financial expense (interest of loans recorded in expenses in current terms)
- Accounting for the difference between the actual value of the State capital at the time 100%-state-owned enterprises are transferred into joint-stock companies and the actual value of the State capital at the time of the valuation of enterprises.
In case the actual value of the State capital at the time enterprises are transformed into joint-stock companies is greater than the actual value of the State capital at the time of valuation of the enterprises, the increase difference (interest) must submitted to fund for support of arrangement of enterprises as prescribed by law (as in corporations, general companies, parent companies or fund for support of arrangement of enterprises in state capital and investment corporation ), record:
Dr 421 - undistributed post-tax profits
Cr 3385 - Payable for equitization.
If the actual value of the State capital at the time 100%-state-owned enterprises are transferred into joint-stock companies is lower than the State capital at the time of the valuation of enterprises, the decrease differences (loss) are recorded, record:
Dr 138 - Other receivables (1388)
Cr 421 - Undistributed post-tax profits.
If the difference decreases due to objective or subjective reasons, but due to force majeure or which persons in charge of compensation have no ability to perform the compensation and competent authorities consider and decide to use sum received from the sale of shares to offset losses after deducting the covered compensation (if any), record:
Dr 3385 - Payable for equitization.
Cr 421 - Undistributed post-tax profits.
- Accounting for changing undistributed post-tax profits into state capital in enterprises at the time enterprises are officially transformed into joint-stock companies: At the time enterprises are officially transformed into joint stock companies, accountants transfer the whole credit balance of undistributed post-tax profits to owner‘s capital, record:
Dr 421 - undistributed post-tax profits
Cr 411 - owner‘s capital

Source: Circular 200, Article 74