Account 153 – Tools and supplies

1. Rules for accounting

a) This account is used to record current value and fluctuation of tools and supplies of the enterprise. Tools and supplies are labor materials not satisfying requirements pertaining to value and use time prescribed in regulations of fixed assets. Thus, tools and supplies shall be managed and recorded similarly to raw materials or materials. According to regulations in force, the following labor materials shall be recorded tools and supplies if they fail to satisfy requirements for fixed assets:

- The scaffolding, formwork, tools, jigs used for construction manufacturing;

- Types of packaging enclosed with goods charged separately, but their value is depreciated during preservation of goods in transit and storage in the warehouses;

- Tools or supplies made of glass, porcelain, ceramic;

- Management facilities, office supplies;

- Clothing, footwear designed exclusively for work, etc.

b) Received dispatched or inventoried tools or supplies recorded to account 153 shall apply original prices. Rules for determination of original prices of received tools or supplies shall comply with regulations on raw materials or materials (refer to account 152).

c) The value of inventoried tools or supplies shall be calculated according to one of following three methods:

- First in – First out;

- Specific identification;

- Weight average.

d) Tools or supplies shall be accounted for according to every inventory, type, and group, type of tools or supplies. Dispatched tools or supplies for business or lease must be kept records of items and value according to using place, lease entities and persons in charge of compensation. The precious and worth tools or supplies must be preserved specially. dd) With regard to tools and supplies holding low value used for business, they shall be recorded once to production cost.

e) In case the tools and supplies, reusable packaging materials or instruments for renting related to business in several accounting periods, they shall be recorded to account 242 ―Prepaid expenses" and allocated to production cost.

g) Accounting for tools and supplies related to transactions in foreign currencies shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.  

2. Structure and contents of account 153 – Tools and supplies

Debit:

- Actual cost of received tools and supplies purchase, handmade, outsourced, or contributed as capital;

- Cost of received tools and supplies for lease;

- Actual cost of tools and supplies in excess detected when conducting physical inventory count;

- Transfer of actual cost of ending tools and supplies inventory (if the enterprise uses periodic inventory system)

Credit: - Actual cost of dispatched tools and supplies for business, lease or contribution as capital;

- Trade discounts on tools and supplies purchased;

- Cost of tools and supplies returned to sellers or tools and supplies eligible for discounts; - Cost of tools and supplies in deficiency detected when conducting physical inventory count;

- Transfer of actual cost of beginning tools and supplies inventory (if the enterprise uses periodic inventory system)

Debit balance: Actual cost of tools and supplies inventory.

Account 153 – Tools and supplies, comprises 4 sub-accounts:

- Account 1531 – Tools and supplies: recording current cost and decrease or increase in tools and supplies.

- Account 1532 – Reusable packaging materials: recording current cost and decrease or increase in circulated packages used for business Reusable packaging materials is packaging designed for multiple reusability in business cycle. The cost of dispatched reusable packaging materials shall be allocated to production cost of multiple accounting periods.

- Account 1533 – Instruments for renting: recording current cost and decrease or increase in tools and supplies for renting. Only tools and supplies purchased for renting are recorded to this account, if not, they shall be recorded to account 1531. If those are used for enterprise‘ operation, they shall be both recorded to an account and a sub-account.

- Account 1534 – Equipment and spare parts for replacement: recording current cost and decrease and increase in equipment and spare parts for replacement not meeting requirements pertaining to fixed assets for enterprise‘s operation. Costs of equipment and spare parts for replacement dispatched entirely shall be recorded to operating costs or wholly allocated to operating costs if they are used as tools and supplies.  

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

a) When buying tools and supplies to add to stock, if the input VAT is deductible, the cost of tools and supplies shall be recorded according to the VAT-exclusive prices, the following accounts shall be recorded according to invoices, warehouse receipts and relevant documents: Dr 153 – Tools and supplies (VAT-exclusive prices) Dr 133 – Deductible VAT (input VAT) (1331) Cr 111, 112, 141, 331, etc. (total payment). If the input VAT is not deductible, cost of input tools and supplies shall include VAT.

b) In case the trade discounts or sales rebates are received after buying tools and supplies (including fines for violations against economic contracts leading decrease in payment made by the purchaser), those discounts shall be allocated according to decrease or increase in tools and supplies (inventoried or dispatched tools and supplies for operation): Dr 111, 112, 331, etc. Cr 153 – Tools and supplies (if those tools and supplies are still inventoried) Cr 154 - Work in progress (if those tools and supplies are dispatched for operation) Cr 641, 642 (if those tools and supplies are dispatched for sale or enterprise management) Cr 242 – Prepaid expenses (if they are gradually allocated) Cr 632 – Costs of goods sold (if the product in which those raw materials are incorporated is determined in an accounting period) Cr 133 – Deductible VAT (1331) (if any).

c) When returning tools and supplies sold to sellers, the following accounts shall be recorded: Cr 331 – Trade payables Cr 153 – Tools and supplies (cost of returned tools and supplies) Cr 133 – Deductible VAT (if any) (input VAT on tools and supplies returned to sellers).

d) When accounting for payment discounts (if any), the following accounts shall be recorded: Cr 331 – Trade payables Cr 515 - Financial income.

dd) When dispatching tools and supplies for operation:

- If costs of tools and supplies, reusable packaging materials, instruments for renting relate to an accounting period, they shall be wholly recorded to operating expenses as follows: Dr 623, 627, 641, 642 Cr 153 - Tools and supplies (1531, 1532).

- If costs of tools and supplies, reusable packaging materials, instruments for renting relate to more than one accounting period, they shall be gradually recorded to operating expenses as follows: When dispatching tools and supplies, reusable packaging materials or instruments for renting, the following accounts shall be recorded: Dr 242 – Prepaid expenses Cr 153 - Tools and supplies.

+ When distributing to costs of operation for every accounting period, the following accounts shall be recorded: Dr 623, 627, 641,642, etc. Cr 242 – Prepaid expenses.

- Revenues from tools and supplies for renting shall be recorded as follows: Dr 111, 112, 131, etc. Cr 511 – Revenues from sale of merchandises and services rendered (5113) Cr 3331 – Deductible VAT (33311).

- When receiving tools and supplies for renting, the following accounts shall be recorded: Dr 153 - Tools and supplies (1533) Cr 242 – Prepaid expenses (residual value not recorded to expenses)

g) Imported tools and supplies:

- When importing tools and supplies, the following accounts shall be recorded: Dr 153 - Tools and supplies 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 on import duty). 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 tools and supplies, if the seller is received an advance in foreign currencies, the cost of tools and supplies equivalent to the advance shall be recorded according to actual exchange rates at the time in which the advance is paid. The remaining cost of tools and supplies shall be recorded according to actual exchange rates at the time in which the tools and supplies are purchased.

h) When conducting physical inventory count, if it is detected that the tools and supplies are excess, deficient, lost or damaged, they shall be settled similarly to raw materials (refer to account 152).

i) Unused tools and supplies:

- When liquidating or selling tools and supplies, their costs shall be recorded as follows: Dr 632 – Costs of goods sold Cr 153 - Tools and supplies.

- Revenues from sale of tools and supplies 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 actual costs of beginning tools and supplies inventory, the following accounts shall be recorded: Dr 611 – Purchases Cr 153 - Tools and supplies.

b) At the ending of accounting period, according to physical inventory count for ending tools and supplies inventory, the following accounts shall be recorded: Dr 153 - Tools and supplies Cr 611 – Purchases.  

Source: Circular 200