Account 152 – Raw materials inventory  

1. Rules for accounting

a) This account is used to record current cost or increase or decrease in cost of all component parts currently in enterprise‘s stock. Raw materials of the enterprise are labor materials purchased outside or home-made processed for business. Raw materials or materials recorded to this account shall be classified as follows:

- Direct materials: These are materials incorporated into the final products. Hence, direct materials term shall accompany with a specific manufacturer. There is not direct or indirect materials term in the enterprises engaged in commerce or services. Direct materials also include semi-finished goods purchased for incorporation into the finished goods.

- Indirect materials: These are materials not incorporated into the final product, but which are combined with direct materials during the production process to change colors, tastes, shapes or increase in quality of the final product or facilitate production process, technology, packaging or preservation; or serve the operation.

- Fuels: These are any materials providing heat energy during the production process and facilitate the process of making usual product. Fuels can exist in liquid, solid and gas.

- Replaced supplies: These are any materials used for replacement or repair of machinery, equipment, vehicle, manufacturing tools or supplies, etc.

- Materials and equipment for capital investment: These are materials and equipment used for capital investment. The construction equipment items for capital investment include equipment required installation, equipment required non-installation, tools, instruments and materials used to install in the capital investment projects.

b) The received, dispatched or inventoried raw materials recorded to account 152 shall be accounted according to historical costs as prescribed accounting standard ―Inventory‖. Historical costs of raw materials shall be determined according to every source.

- Historical costs of raw materials include: Buying costs stated in invoices, import duty, Special excise duty, import VAT, environmental protection tax payable (if any), cost of delivery, material handling, preservation, classification, insurance, etc; of raw materials from the supplier to the enterprise’s stock, expenses incurred from employees in charge of purchase, expenses incurred from independent department of purchase, other costs directly related to purchase of raw materials and natural deficiency within the quotas (if any):

+ If the VAT on imported goods is deductible, cost of raw materials purchased shall not include VAT. If the input VAT is not deductible, cost of raw materials purchased shall include VAT.

+ Accounting for raw materials purchased in foreign currencies shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.

- Historical cost of raw materials home-made processed includes: actual cost of materials for processing and cost of processing.

- Historical cost of raw materials processed under outsourcing agreement includes: actual cost of materials for outsourcing processing, cost of delivery from the enterprise to processing facility and vice versa, cost of outsourcing processing.

- Historical cost of raw materials contributed to joint venture or joint-stock companies is the cost which all parties involved in joint venture approve.

c) The cost of raw materials inventory shall be calculated according to one of following methods:

- Specific costing method;

- Weighted average method after receiving raw materials or at ending inventory;

- First in, first out method. The enterprise must apply the chosen method throughout the accounting period.

d) The raw materials shall be specifically accounted according to every inventory, type, group, materials item. In case the enterprise uses the accounting cost in the recording of received or dispatched raw materials, at the end of the period, the difference coefficient between actual cost and accounting cost of the raw materials shall be determined according to following formula:  

    dd) Raw materials not under ownership of the enterprise (raw materials kept or materials received for processing or materials received from the export-import trustor, etc) shall not be recorded to this account.  

2. Structure and contents of account 152 – Raw materials

Debit:

- Actual cost of raw materials purchased, hand-made processed, outsourced, processed, received as contribution or received from other sources;

- Cost of raw materials excess detected when conducting physical inventory count;

- Transfer of actual cost of ending raw materials inventory (if the enterprise uses periodic inventory system)

Credit:

- Actual cost of raw materials sold for production, business, sale, outsourcing, or contribution as capital;

- Cost of raw materials returned to sellers or sales rebates

- Trade discount on raw materials purchased;

- Cost of raw materials detected lost when conducting physical inventory count;

- Transfer of actual cost of beginning raw materials inventory (if the enterprise uses periodic inventory system)

Debit balance: Actual cost of ending raw materials inventory.  

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

a) When buying raw materials to add to inventory, according to invoices, warehouse receipt and relevant documents recording received raw materials cost:

- If input VAT is deductible, the following accounts shall be recorded: Dr 152 – Raw materials (cost without VAT) Dr 133 – Deductible VAT (1331) Cr 111, 112, 141, 331, etc. (total payment)

- If the input VAT is not deductible, cost of raw materials shall include VAT.

b) Raw materials returned to sellers, trade discount or sales discount received when buying raw materials shall be accounted as follows:

- When returning raw materials to sellers, the following accounts shall be recorded: Cr 331 – Trade payables Cr 152 – Raw materials Cr 133 – Deductible VAT

- In case the trade discount or sales discount is discounted after buying raw materials (including fines for violations against economic contracts leading a decrease in payment made by the purchaser), the trade discount or sales discount shall be allocated according to the increase or decrease in raw materials, inventoried raw materials, dispatched raw materials for production or construction investment or consumed during a period: Dr 111, 112, 331, etc. Cr 152 – Raw materials (if raw materials are still inventoried) Cr 621, 623, 627, 154 (if raw materials are dispatched for production) Cr 241 – Works-in-progress (if raw materials are dispatched for construction investment) Cr 632 – Cost price of goods (if the product in which those raw materials are incorporated is determined as consumed during a period) Cr 641, 642 (raw materials used for sale or management) Cr 133 – Deductible VAT (1331) (if any).

c) In case the enterprise has received sales invoices but raw materials have not received in the enterprise‘s stock, the sales invoices shall be archived in a separate dossier ―Goods in transit‖.

- Within a month, if the raw materials have been received in the enterprise‘s stock, they shall be recorded to account 152 ―Raw materials‖ according to sales invoices and warehouse receipt.

- At the end of the month, if the raw materials have not been received, they shall be accounted for temporary cost according to sales invoices: Dr 151 – Goods in transit Dr 133 – Deductible VAT (1331) Cr 331 – Trade payables; or Cr 111, 112, 141, etc.

- Next month, if the raw materials have been received in the enterprise‘s stock, the following accounts shall be recorded according to sales invoices and warehouse receipt: Dr 152 – Raw materials Cr 151 – Goods in transit

d) When make payments to sellers, if the enterprise qualifies for payment discounts, those payment discounts shall be recorded to financial income as follows: Cr 331 – Trade payables Cr 515 – Financial income (payment discounts).

dd) Imported raw materials:

- When importing raw materials, the following accounts shall be recorded: Dr 152 – Raw materials Cr 331 – Trade payables Cr 3331 – Deductible VAT (33312) (if input VAT on imported goods are not deductible) Cr 3332 – Special excise duty (if any). Cr 3333 – Import/export duty (detail). Cr 33381 – Environmental protection tax.

- If input VAT on imported goods is deductible, the following accounts shall be recorded: Dr 133 – Deductible VAT Cr 3331 – Deductible VAT (33312).

- When buying raw materials, if the seller is receive an advance in foreign currencies, the cost of raw materials equivalent to the advance shall be recorded according to actual exchange rates at the time in which the advance is paid. The cost of raw materials not yet paid in foreign currencies shall be recorded according to actual exchange rates at the time in which the raw materials are purchased.

e) The expenditures on purchase, material handling, and transport of raw materials to the enterprise‘s stock shall be recorded as follows: Dr 152 – Raw materials Dr 133 – Deductible VAT (1331) Cr 111, 112, 141, 331, etc.

g) Regarding raw materials processed under outsourcing agreement which is received in the enterprise‘s stock: - When dispatching raw materials to process, the following accounts shall be recorded: Dr 154 - Work in progress Cr 152 – Raw materials.

- When incurring cost of outsourcing, the following accounts shall be recorded: Dr 154 - Work in progress Dr 133 – Deductible VAT (1331) (if any). Cr 111, 112, 131, 141, etc. - When re-receiving the out-sourced raw materials, the following accounts shall be recorded: Dr 152 – Raw materials Cr 154 - Work in progress h) Hand-made raw materials which are received in stock: - When dispatching raw materials for self-processing, the following accounts shall be recorded: Dr 154 - Work in progress Cr 152 – Raw materials.

- When receiving handmade raw materials, the following accounts shall be recorded: Dr 152 – Raw materials Cr 154 - Work in progress. i) With regard to excess of raw materials detected under physical inventory count, if the reasons for excess are uncovered, it shall be the basis for accounting, if not, the cost of raw materials in excess shall be the basis for accounting: Dr 152 – Raw materials Cr 338 – Other payable or receivables (3381).

- When there is a decision on settlement of raw materials in excess detected under physical inventory count, the following accounts shall be recorded: Dr 338 – Other payable or receivables (3381) Cr, relevant accounts.

- If the raw materials in surplus belong to other enterprises and an increase in account 152 is not recorded, they shall not be recorded to account 338 (3381) but the enterprise shall actively keep records and state in the presentation of financial statements.

k) When dispatching raw materials for business, the following accounts shall be recorded: Dr 621, 623, 627, 641, 642, etc. Cr 152 – Raw materials.

l) When dispatching raw materials for capital investment or major repair of fixed assets, the following accounts shall be recorded: Dr 241 – Construction in progress Cr 152 – Raw materials.

m) When contributing raw materials to subsidiaries, joint-venture companies, the following accounts shall be recorded:

Dr 221, 22 (according to re-evaluated value) Dr 811 – Other costs (re-evaluated value is smaller than book value) Cr 152 – Raw materials (according to book value) Cr 711 – Other costs (re-evaluated value is greater than book value) n) When dispatching raw materials to sell capital holding in subsidiaries, joint-venture companies, the following accounts shall be recorded:

- The revenues from sale of raw materials and investment in subsidiaries, joint-venture companies, and the following accounts shall be recorded: Dr 221, 222 (according to fair value) Cr 511 – Revenues from sale of merchandises and services rendered Cr 3331 – Output VAT payable.

- Cost prices of raw materials used for purchase of capital contribution in subsidiaries, joint-venture companies shall be recorded as follows: Dr 632 – Costs of goods sold Cr 152 – Raw materials.

o) Raw materials in excess detected when conducting physical inventory count: Every case in which the shortage of raw materials in stock or preservation is detected when conducting physical inventory count must be make reports and uncover the reasons and offenders. According to reports on physical inventory count and decision of competent agency, the accounting shall be recorded as follow:

- If figures on ledger are error or are not updated, they are required to be additionally provided or adjusted;

- If the cost of raw materials in deficiency is under deficiency quotas, the following accounts shall be recorded: Dr 632 – Costs of goods sold Cr 152 – Raw materials.

- If the reasons for the deficiency or losses are uncovered pending settlement, the following accounts shall be recorded: Dr 138 – Other payable (1381—Assets in shortage awaiting resolution) Cr 152 – Raw materials.

- When there is a decision on settlement, the following accounts shall be recorded: Dr 111 – Cash (compensation of offenders) Dr 138 – Other receivables (1388) (compensation of offenders) Dr 334 – Payables to employees (deducting salaries of offenders) Dr 632 – Costs of goods sold (remaining value of shortage of raw materials which is included in the costs of goods sold) Cr 138 – Other payable (1381—Assets in shortage awaiting resolution)

p) Unused raw materials or waste:

- When liquidating or selling raw materials or waste, cost prices shall be recorded as follows: Dr 632 – Costs of goods sold Cr 152 – Raw materials.

- Revenues from sale of raw materials or waste shall be recorded as follows: Dr 111, 112, 131. Cr 511 – Revenues from sale of merchandises and services rendered (5118) Cr 333 – Taxes and other payables to the State.

3.2. Enterprises using periodic inventory system.

a) At the beginning of accounting period, when transferring cost of beginning raw materials inventory, the following accounts shall be recorded: Dr 611 – Purchases Cr 152 – Raw materials.

b) At the ending of accounting period, according to physical inventory count for ending raw materials inventory, the following accounts shall be recorded: Dr 152 – Raw materials Dr 611 – Purchases  

Source: Circular 200