Account 155 – Finished goods inventory  

1. Rules for accounting

a) This account is used to record current cost and decrease or increase in finished goods of the enterprise. Finished goods inventory are products which have been completely processed through manufacturing process of manufactured business, or products completely outsourced and verified as compliance with technical standards and stored. In the transactions in export entrustment, this account is only used by trustor, not by trustee

b) The finished goods manufactured by direct production divisions and indirect production divisions of the enterprise must be evaluated according to prime cost, including: direct raw materials cost, direct labor cost, factory overhead and direct relevant costs related to manufacture of products.

- Variable factory overhead shall be wholly allocated to processing cost of each product unit according to actual cost incurred within an accounting period.

- Fixed factory overhead shall be allocated to processing cost of each product unit according to common capacity of manufacturing machinery and equipment. Common capacity means common volume of products manufactured in the normal manufacturing condition.

- If the actual capacity is greater than common capacity, the fixed factory overhead shall be allocated to each unit according to actual costs incurred.

- If the actual capacity is lower than common capacity, the fixed factory overhead shall only be allocated to processing cost for each unit according to the common capacity. The non-allocated factory overhead shall be recorded to the cost for income output (recorded to costs of goods sold) within an accounting period.

c) The following costs shall not be recorded to prime costs of finished goods:

- Costs of raw materials, labor and other operating costs incurred exceeding normal rates;

- Cost of preservation of inventory deducted from cost of preservation of inventory for next manufacturing process and preservation cost as prescribed in Accounting standard ―Inventory‖;

- Selling expenses; - General administration expenses;

d) Finished goods processed under outsourcing agreement shall be evaluated according to actual prime cost of processing, including: direct raw materials cost, outsourcing cost and other costs related to outsourcing process.

dd) The cost of finished goods inventory shall be calculated according to one of following method: specific identification; weight average; or first in – first out.

e) In case the enterprise uses the periodic inventory system, the finished goods which are received and dispatched inventory shall be recorded daily according to accounting cost (may be planned prime cost or regulated inventory cost). At the end of the month, the actual prime cost of inventoried finished goods must be calculated and difference between actual prime cost and accounting cost of finished goods (including the difference of beginning finished goods) which is the basis for calculation of actual prime cost of received or dispatched finished goods within an accounting period (using the formula prescribed in account 152 ―Raw materials‖).

g) The finished goods shall be specifically accounted according to every inventory, type, group, finished good items.  

2. Structure and contents of account 155 – Finished goods

Debit:

- Cost of inventoried finished goods;

- Cost of finished goods in surplus under physical inventory count;

- Transfer of cost of ending finished goods inventory (if the enterprise uses periodic inventory system)

Credit: - Actual cost of dispatched finished goods; - Cost of finished goods in shortage under physical inventory count;

- Transfer of actual cost of beginning finished goods inventory (if the enterprise uses periodic inventory system)

Debit balance: Actual cost of ending finished goods inventory.

Account 155 – Finished products, comprises 2 sub-accounts:

- Account 1551 – Inventoried finished goods: recording current cost and decrease or increase in inventoried finished goods (other than finished goods which are real estate);

- Account 1557 – Finished goods – property: recording current cost and decrease or increase in Finished goods – property of the enterprise. Finished goods – property include: land use rights; housing; or housing and land use rights; infrastructure invested for the ordinary course of business  

3. Accounting methods for several major transactions:

3.1. Enterprise using perpetual inventory system.

3.1.1. When receiving finished goods manufactured by the enterprise or under outsourcing agreement, the following accounts shall be recorded: Dr 155 – Finished goods Cr 154 - Work in progress.

3.1.2. When dispatching finished goods for sale to customers, the costs of finished goods sold shall be recorded as follows:

a) Finished goods – non-real estate Dr 632 – Costs of goods sold Cr 155 – Finished goods

b) Finished goods – property (for building work invested by the enterprise)

b1) Original prices of Finished goods – property shall include total costs directly related to investment in construction of real estate (including costs of construction of infrastructure associated with the real estate) making the real estate available for sale.

b2) Costs related to investment in construction of real estate must be incurred costs which obtain acceptance report.

b3) In case the enterprise has not compiled documents on costs related to investment of construction of real estate, but the revenues from sale of the real estate generated, the enterprise may extract a portion of the cost to provisionally calculate costs of goods sold. When the documents are sufficiently compiled or the real estate is constructed wholly, the enterprise must settle total costs which are accrued from costs of goods sold The positive difference between accrued cost in advance and actually incurred cost shall be recorded as a decrease in costs of goods sold during the accounting period subject to settlement.

b4) The advanced costs deducted for provisional costs of Finished goods – property must follow the rules below:

- The enterprise may only accrue an advance of costs stated in the estimates for investment in construction, but there are not enough documents for acceptance and specific presentation of reasons, accrued expenses incurred from every work item within an accounting period.

-The enterprise may only accrue costs to calculate provisionally costs of goods sold for finished real estate, which is sold within an accounting period and qualify for recording revenues as prescribed in this Circular.

- Provisional accrued expenses and actual cost incurred shall be recorded to costs of goods sold provided that they are equivalent to quota of cost according to total estimate cost of the portion of real estate which is sold (defined by area).

b5) Accounting method for costs of Finished goods – property sold. - When selling the portion of finished goods, the following accounts shall be recorded: Dr 632 – Costs of goods sold Cr 155 – Finished goods - When extracting costs to provisionally calculate costs of Finished goods – property sold within an accounting period, the following accounts shall be recorded: Dr 632 – Costs of goods sold Cr 335 – Expenses payable. - The actual cost of investment in construction incurred which have sufficient and accepted documents shall be compiled to calculate cost of investment in construction of real estate, the following accounts shall be recorded: Dr 154 - Work in progress Dr 133 – Deductible VAT Cr, relevant accounts. - When there are sufficient documents proved prepaid expenses incurred actually, decreases in prepaid expenses and work in progress shall be recorded as follows: Dr 335 – Expenses payable. Cr 154 - Work in progress. - When the whole project for real estate finishes, the final settlement must be made and a decrease in remaining prepaid expenses (if any) shall be recorded as follows: Dr 335 – Expenses payable. Cr 154 - Work in progress. Cr 632 – Costs of goods sold (the remaining prepaid expenses must be greater than actual expenses incurred).

3.1.3. When dispatching finished goods for sale or agencies, the following accounts shall be recorded: Dr 157 – Consignment goods (through agencies) Cr 155 – Finished goods

3.1.4. When a buyer returns finished goods sold: If the returned goods subject to VAT using credit-invoice method, revenues from goods returned (VAT-exclusive prices), and the following accounts shall be recorded: Dr 521 – Revenue deductions (5213) Dr 3331 – VAT payable (33311). Cr 111, 112, 131, etc. (total cost of goods returned). And the costs of finished goods sold which are delivered to inventory shall be recorded as follows: Dr 155 – Finished goods Cr 632 – Costs of goods sold.

3.1.5. Internal consumer goods shall be recorded as follows: Dr 641, 642, 241, 211 Cr 155 – Finished goods

3.1.6. Dispatching finished goods and transferring to dependent accounting units of the enterprise:

- In case the dependent accounting units are in charge of recording revenues, costs of goods, the costs of finished goods sold shall be recorded as follows: Dr 632 – Costs of goods sold Cr 155 – Finished goods

- In case the dependent accounting unit is not in charge of recording revenues, costs of goods, the costs of products circulated intra-company shall be intra-company receivables and be recorded as follows: Dr 136 - Intra-company receivables Cr 155 – Finished goods Cr 333 – Taxes and other payables to the State (in detail).

3.1.7 When contributing finished goods to subsidiaries, joint-venture companies as capital, the following accounts shall be recorded: Dr 221, 22 (according to re-evaluated value) Dr 811 – Other expenses (re-evaluated value is smaller than book value of finished goods) Cr 155 – Finished goods Cr 711 – Other incomes (re-evaluated value is greater than book value of finished goods)

3.1.8 When dispatching finished goods 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 Cr 3331 – Output VAT payable.

- The costs of finished goods to sell capital holding in subsidiaries, joint-venture companies shall be recorded as follows: Dr 632 – Costs of goods sold Cr 155- – Finished goods

3.1.9 Whenever the surplus or shortage of finished goods is detected under physical inventory count, it is required to make report and uncover reasons and look for offender(s). According to reports on physical inventory count and decision of competent agency, the accounting shall be recorded as follow:

- If the surplus or shortage of finished goods caused by errors or are not updated, they are required to be additionally provided or adjusted on the accounting records;

- In case it fails to uncover reasons for surplus or shortage, it shall be pending for settlement: + If the finished goods are surplus, the following accounts shall be recorded: Dr 155 – Finished goods (according to fair value) Cr 338 – Other payables or receivables (3381). When there is a decision of settlement made by the competent agency, the following accounts shall be recorded: Dr 338 – Other payables or receivables. Cr, relevant accounts.

+ If the finished goods are deficient, the following accounts shall be recorded: Dr 138 – Other payables (1381 – Assets in shortage awaiting resolution) Cr 155 – Finished goods - When there is a decision on settlement made by the competent agency, the following accounts shall be recorded: Dr 111, 112, etc. (if the offender pays compensation in cash) Dr 334 – Payables to employees (deducting salaries of offenders) Dr 138 – Other receivables (1388) (compensation of offenders) Dr 632 – Costs of goods sold (remaining shortage after offsetting against compensation) Cr 138 - Other receivables (1381).

3.1.10 When the enterprise uses products for giving, promotion or advertisement (under law on commerce):

a) If the products are manufactured for giving, promotion or advertisement without collecting money or any additional conditions (compulsory purchase of goods, etc), the costs of products shall be recorded to selling expenses as follows (goods for promotion or advertisement for detail): Dr 641 – Selling expenses Cr 155 – Finished goods (production cost of products).

b) If the products are manufactured for promotion or advertisement with additional conditions that the customers are required to buy goods (e.g. buy two, get one free, etc) The collected amounts of moneys shall be recorded to revenues (including promotion goods), costs of promotion goods shall be recorded to costs of goods sold (nature of transaction is a decrease in good costs). - When dispatching promotion goods, the costs of promotion goods shall be recorded to costs of goods sold as follows: Dr 632 – Cost prices of goods sold (prime cost) Cr 155 – Finished goods - When receiving revenues from promotion goods shall be recorded to goods sold and promotion goods as follows: Dr 111, 112, 131, etc. Cr 511 – Revenues Cr 3331 – Deductible VAT (33311) (if any).

c) If products manufactured for giving staff using welfare fund, the revenues and costs of goods shall be recorded similarly to ordinary selling transactions as follows: - The products for giving to staff and employees shall be recorded to costs of goods sold: Dr 632 – Costs of goods sold Cr 155 – Finished goods - Products for giving using welfare fund shall be recorded to revenues as follows: Cr 353 - Welfare fund (total payment) Cr 511 – Revenues Cr 3331 – Deductible VAT (33311) (if any).

3.1.11. Paying salaries to employees by products - The revenues from products for paying salaries to employees shall be recorded as follows: Dr 334 – Payables to employees (total costs) Cr 511 – Revenues Cr 3331 – VAT payable (33311). Cr 3335 – Deductible VAT (if any). - The cost of products for paying salaries to employees shall be recorded to costs of goods sold as follows: Dr 632 – Costs of goods sold Cr 155 – Finished goods 3.1.12. When liquidating or selling unused finished goods, their costs shall be recorded as follows: Dr 632 – Costs of goods sold Cr 155 – Finished goods

3.2. Enterprises using periodic inventory system. a) At the beginning inventory, according to the physical inventory count of finished goods which are transferred from previous ending inventory, the beginning finished goods inventory shall be recorded to account 632 ―Costs of goods sold‖ as follows: Dr 632 – Costs of goods sold Cr 155 – Finished goods b) At the ending of accounting period, according to physical inventory count for finished goods inventory, the ending finished goods inventory shall be transferred as follows: Dr 155 – Finished goods Cr 632 – Costs of goods sold.

Source: Circular 200