Account 131 – Trade receivables

1. Rules for accounting
2. a) This account is used to record receivables and payments of receivables of customers from goods, investment properties, fixed assets, financial investment or services. This account is also used to record receivables from contractors and contract awarder related to finished infrastructure development. This account is not used to record immediate cash.
3. b) The customer receivables must be recorded specifically to every entity, every receivables item and monitor the recovery terms (above 12 months or not exceeding 12 months from the reporting time) and keep record for every payment. Receivable entities are customers entering into transactions in purchase of goods, provisions of services, including fixed assets, investment property or other financial investments with the enterprise.
4. c) The export trustor shall record receivables for sale of exported goods from export trustee to above account similarly to normal transactions in sales or services.
5. d) When recording this account, the debts shall be classified into coverable debts, doubtful debts or bad debts to determine provisions for doubtful debts or solutions for bad debts.
6. dd) If the goods, investment property or services are provided unconformity with agreements between the enterprise and customers, the customers may request the enterprise to discount the goods or they may return the received goods.
7. e) The enterprise must monitor debts receivable of customers according to every currency. Receivables in foreign currencies shall follow rules below: - When trade receivables generate (Dr 131), those receivables shall be converted into VND according to actual exchange rates at the generating time (buying rates of the commercial bank where the customers repays the debts). With regard to the advance received from the buyers, when criteria for recognition of revenues are met, the Dr 131 shall apply the specific identification bookkeeping rate.

- When recover trade receivables (Cr 131), the accountant must convert them into VND according to actual bookkeeping rate for every type of debtors (if the debtors enter into multiple transactions, the actual bookkeeping rate shall equal weight average rate applying to those transactions). With regard to advance received from buyers, the Cr 131 shall apply actual exchange rates (the rate recorded to the Debit account - Cash) at the receiving time;

- The enterprise must re-evaluate trade receivables derived from foreign currencies at the times in which the financial statements are prepared as prescribed. The actual exchange rates applying to revaluation of trade receivables are foreign currency-buying rates of the commercial bank where the customers make payment, which is appointed by the enterprise when preparing financial statements. In case the enterprise has multiple receivables and enters into transactions in the multiple banks, they may choose the buying rate of any bank of those commercial banks. Units in a group shall apply a common rate defined by the parent company (provided that it closes to the actual exchange rates) to re-evaluate trade receivables derived from foreign currencies arising from transactions of internal group.

2. Structure and contents of account 131 – Trade receivables

Debit:

- Trade receivables generating within a tax period from sale of goods, investment property, fixed assets, services or financial investments;

- Extra cash payable to customers.

- Revaluation of receivables in foreign currencies (if the foreign currency rates rise against VND).

Credit:

- Customers' repayment;

- Advances received from customers.

- Discounts offered to customers after customers receive goods and lodge complaints;

- Sales of returned goods (with or without VAT).

- Amount of payment discounts and trade discounts offered to buyers.

- Revaluation of receivables in foreign currencies (if the foreign currency rates fall against VND).

Debit balance:

Remaining trade receivables.

This account may have credit balance Credit balance records amounts of advance or collected amounts which are larger than trade receivables according to every specific entity. When preparing balance sheet, it is required to record specific balance according to every receivable of this account to items "Asset" and "Equity".

3. Accounting methods for several major transactions:

3.1. When selling goods or providing services without collecting immediate cash (including receivables from sales of exported goods of trustors), the following accounts shall be recorded:

a) Regarding goods, services, investment property subject to VAT, Special excise duty, import tax or environment protection tax, the revenues from goods and services without taxes shall be recorded as follows (above indirect taxes must be separated when recording, including VAT payable using subtraction method):

Dr 131 – Trade receivables (total payment)

Cr 511 - Revenues (tax-exclusive prices)

Cr 333 – Taxes and other payables to the State.

b) In case it fails to separate the taxes payable, the taxes payable must be included in the revenues. Tax liabilities and the decrease in revenues shall be recorded as follows:

Dr 511 – Revenues

Cr 333 – Taxes and other payables to the State.

3.2. Accounting for returned goods.

Dr 5213 – Returned goods (prices without taxes)

Dr 333 – Taxes and other payables to the State (VAT of returned goods, clarifying each type of taxes)

Cr 131 – Trade receivables.

3.3. Accounting for trade discounts and sales rebates

a) In case the amounts of trade discounts or sales rebates are stated in the invoices, the prices excluding above discounts (recording according to net revenues) and amounts of trade discounts or sales rebates shall not be separately recorded;

b) In case the amounts of trade discounts or sales rebates are not stated in the invoices because the customers are not eligible for those discounts, the revenues shall be recorded the prices including discounts (gross revenues) After recording revenues, if the customers are eligible for above discounts, these discounts shall be recorded separately so that a decrease in revenue shall be recorded periodically as follows:

Dr 521 – Revenue deductions (5211, 5212) (tax-exclusive prices)

Dr 333 – Taxes and other payables to the State (VAT of trade discounts or sales rebates)

Cr 131 – Trade receivables (total amounts of discounts).

3.4. The payment discounts payable to the buyers, excluding debts receivables, the following accounts shall be recorded:

Dr 111 - Cash

Dr 112 – Cash in bank

Dr 635 - Financial expenses (amounts of payment discounts)

Cr 131 – Trade receivables.

3.5. When receiving payment of customers (including interests of debts – if any) or receiving advance of customers according to agreements on sale of goods or provision of services, the following accounts shall be recorded:

Dr 111, 112, etc.

Cr 131 – Trade receivables.

Cr 515 - Financial income (profits).

When receiving advance in foreign currencies, the Cr 131 shall apply actual exchange rates at the receiving time (buying rates of the bank)

3.6. Method of accounting for contractor‘s receivables from customers related to construction contract:

a) In case the contractor may make payment following the schedule under the construction contract:

- If the result of performance of construction contract is estimated reliably, the following accounts shall be recorded according to documents on revenues in proportion to finished work (other than invoices) determined by the contractor:

Dr 337 – Payment under schedule of construction contract

Cr 511 – Revenues.

- According to the invoices issued following the schedule, the amounts which are paid by customers shall be recorded as follows:

Cr 131 – Trade receivables.

Dr 337 – Payment under schedule of construction contract

Cr 3331 – VAT payable (33311).

b) In case the construction contract regulates that the contractor shall be paid according to their workload, when the result of performance of construction contract is determined reliably and certified by customers, the finished work must be stated in the invoices and certified, the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 511 – Revenues.

Cr 3331 – VAT payable (33311).

c) When collecting the bonus paid to the contractor by customer because the performance of construction contract reaches or overshoots the specific targets mentioned in the contract, the following accounts shall be recorded:

Dr 131- – Trade receivables.

Cr 511 – Revenues.

Cr 3331 – VAT payable (33311).

d) When collecting the compensation paid by customers or other contracting parties to cover the costs not including in the value of contract (the delay or mistakes of customers and disputes about changes in contract performance), the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 511 – Revenues.

Cr 3331 – VAT payable (33311).

đ) When collecting payment for finished works or advance from customers, the following accounts shall be recorded:

Cr 111, 112, etc.

Cr 131 – Trade receivables.

3.7. In case the customer makes payment in goods instead of cash (in the form of barter), according to the value of materials or exchanged goods (according to fair value stated in the VAT invoice or sales invoice of customers) which is deducted from customers' debt receivables, and the following accounts shall be recorded:

Dr 152 - Materials

Dr 153 - Tools

Dr 156 - Goods

Dr 611 – Good purchases (inventory accounted by periodical verification method)

Dr 133 – Deductible VAT (if any)

Cr 131 – Trade receivables.

3.8. When eliminating doubtful debts unable to recover according to the report on debt relief, the following accounts shall be recorded:

Dr 229 – Provision for asset losses (2293) (amounts of provision)

Dr 642 – Enterprise administrative expenses (amounts of non-provision)

Cr 131 – Trade receivables.

3.9. When collecting entrustment fees from the export/import trustees, the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 511 – Revenues (5113)

Cr 3331 – VAT payable (33311).

3.10. When preparing financial statements, the outstanding debt in foreign currencies of customers shall be evaluated according to actual exchange rates at the time in which the financial statements are prepared:

- If the foreign currency rates rise against VND rates, the following accounts shall be recorded:

Cr 131 – Trade receivables.

Cr 413 – Exchange rate differences (4131).

- If the foreign currency rates fall against VND rates, the following accounts shall be recorded:

Dr 413 – Exchange rate differences (4131).

Cr 131 – Trade receivables.

Source: Circular 200