Account 156 – Goods
- Rules for accounting
a) This account is used to record current value and increase or decrease in merchandise inventory of an enterprise, including merchandise in inventories, properties held for sale. Merchandise inventory is goods that have been purchased by an enterprise, with the intent of selling the goods to third parties (wholesale or retail). If the merchandise purchased for both sale and operation, it shall still be recorded to account 156 ―Merchandise inventory‖
In the import-export entrustment transaction, this account is only used by the trustor not by the trustee. Trading in merchandise inventory related to transactions in foreign currencies shall comply with regulations of Article 69 – Guidelines for accounting method for exchange rate differences.
b) The following merchandise shall not be recorded to account 156 ―Merchandise inventory‖:
- Consignment goods sold or kept on behalf of other enterprises;
- Merchandise purchased for operation (recorded to account 152 ―Raw materials", or account 153 ―Tools and supplies", etc).
c) The received, dispatched or inventoried merchandise inventory recorded to account 156 shall be accounted according to original prices as prescribed accounting standard ―Inventory‖. Historical cost of merchandise inventory purchased includes: Purchasing prices or incidental purchase costs (transport, material handling, preservation of merchandise from suppliers to the enterprise‘s warehouse, insurance cost, etc), import duty, special excise tax, environmental protection tax (if any), VAT on imported goods (if they are not deductible). If the enterprise purchases merchandise for resale, but they must be processed, semi-processed, refurbished, classified for additional value and quick sale of merchandise, the merchandise cost shall include processing or semi-processing cost.
- The historical cost of merchandise purchased shall be calculated according to every input source and the purchasing price and incidental purchase cost shall be recorded separately.
- When determining cost of merchandise inventory, the enterprise may apply one of following methods:
+ First in - first out;
+ Specific identification;
+ Weight average;
- Some particular units (supermarkets or similar) may determine cost of ending inventory balances using retail inventory method. This method may be used in the retail to calculate cost of inventory in bulk of merchandise which vary promptly and have similar margin unable to use other method calculating original prices. The original cost of merchandise inventory shall equal selling price of merchandise inventory minus (-) margin (reasonable rate). That is used with due account taken of merchandise pieces which has fallen to less than its original price Each retailer usually uses separate average rate of percent.
- The incidental purchase cost in an accounting period shall be charged to consume merchandise during the period and ending merchandise inventory. The incidental purchase cost shall be allocated according to specific condition of every enterprise, but it is required to be consistent.
d) When buying merchandise, if goods, equipment or accessories for replacement are attached (provision for breakdown), the goods, equipment or accessories for replacement shall be recorded with proper cost. Cost of imported goods is the price subtracted from cost of goods, equipment or accessories for replacement.
dd) The merchandise inventory shall be specifically accounted according to every inventory, type, group of merchandise items.
- Structure and contents of account 156 – Merchandise inventory
Debit:
- Cost of merchandise purchased stated in the sale invoice (including non-refundable taxes);
- Incidental purchase cost;
- Cost of merchandise under outsourcing agreement (including input prices and processing cost);
- Cost of goods returned;
- Cost of merchandise inventory in surplus detected under physical inventory count;
- Transfer of ending merchandise inventory balances (if the enterprises use periodic inventory system);
- Cost of properties held to sale purchased or converted from investment property.
Credit:
- Cost of dispatched merchandise for sale or sending to agents, affiliated enterprises; performance of outsourcing agreement, or for operation;
- Incidental purchase cost allocated to merchandise sold during the period;
- Trade discount on merchandise purchased;
- Sale discount on merchandise purchased;
- Cost of goods returned;
- Cost of merchandise inventory in shortage detected under physical inventory count;
- Transfer of beginning merchandise inventory balances (if the enterprises use periodic inventory system);
- Cost of properties held to sale sold or converted into investment property, property used by the owner or fixed assets.
Debit balance:
- Cost of merchandise inventory purchases;
- Incidental purchase cost of merchandise inventory.
Account 156 – Merchandise inventory, comprises 2 sub-accounts:
- Account 1561 – Purchase costs: recording current cost and decrease or increase in merchandise purchased and inventoried (according to purchase costs);
- Account 1562 – Incidental purchase costs: recording incidental purchase costs incurred relating to amounts of received merchandise during a period and the distribution of current incidental purchase costs in the period to amounts of merchandise purchased during a period and ending merchandise inventory balances (including inventoried merchandise and merchandise on consignment, unsold goods on consignment). The incidental purchase costs recorded in this account only include the costs directly related to the processing of purchasing merchandise, such as: insurance cost of merchandise, depot rents, etc, costs of transport, material handling, preservation of merchandise from supplier to the enterprise‘s stock; normal losses incurred during processing of purchasing merchandise.
- Account 1567 – Properties held for sale: recording current cost and decrease or increase in properties held for sale of the enterprise. Properties held for sale include: land use rights; housing; or housing and land use rights; infrastructure purchased for sale in the ordinary course of business; investment properties shall be recorded to inventory when the owner put them for sale.
a) Structure and contents of account 1561 – Purchase costs
Debit:
- Purchased merchandise cost according to sales invoice (inventoried);
- Import duty or special excise tax on imported goods or VAT on imported goods, input VAT – if they are not deductible, imposed on inventoried merchandise purchased;
- Cost of inventoried merchandise subject to processing agreement, including: purchase costs and costs of processing;
- Cost of merchandise allocated as capital;
- Cost of inventoried goods returned;
- Cost of merchandise inventory in surplus detected under physical inventory count;
- Transfer of cost of ending merchandise inventory (if the enterprise uses periodic inventory system)
Credit:
- Actual cost of merchandise dispatched during a period (dispatch for sale, exchange, giving to agencies or dependent accounting units, internal use, capital contribution in joint-venture);
- Trade discount on merchandise purchased;
- Sale discount on merchandise purchased;
- Cost of goods returned;
- Costs of merchandise in shortage or losses;
- Transfer of beginning merchandise inventory balances (if the enterprises use periodic inventory system);
Debit balance: Actual cost of ending merchandise inventory.
b) Structure and contents of account 1562 – Incidental purchase costs
Debit: Actual incidental purchase costs incurred relating to amounts of merchandise purchased and received in a period.
Credit: Incidental purchase costs of amounts of merchandise consumed during a period.
Debit balance: Ending incidental purchase cost balances.
c) Structure and contents of account 1567 – Properties held for sale
Debit:
- Actual cost of properties held to sale;
- Residual value of investment properties converted into property inventory;
- Cost of repair, renovation, upgrade of property for sale which is recorded as an increase in original cost of properties held for sale
Credit:
- Actual cost of properties held to sale during a period;
- Cost of properties held to sale converted into investment properties or fixed assets.
Debit balance: Actual cost of ending properties held for sale balances.
- Accounting methods for several major transactions:
3.1. Enterprise using perpetual inventory system.
3.1.1. Merchandise purchased and delivered to the enterprise‘s warehouse, according to sales invoices, warehouse receipts and relevant documentary evidence:
a) When purchasing merchandise, if input VAT on merchandise is deductible, the following accounts shall be recorded:
Dr 156 – Merchandise inventory (1561) (detail in merchandise purchased and merchandise used as substitute provisional for damage)
Dr 1534 – Equipment and spare parts for replacement (fair value)
Dr 133 – Deductible VAT (1331) (input VAT)
Cr 111, 112, 141, 331, etc. (total payment).
If the input VAT is not deductible, value of merchandise purchased shall include VAT
b) Importing merchandise:
- When importing merchandise, the following accounts shall be recorded:
Dr 156 – Merchandise inventory
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 merchandise and prepaying the seller an advance in foreign currency, the cost of merchandise equivalent to the advance shall be recorded according to actual exchange rates at the time in which the prepayment is made The remaining cost of merchandise purchased in foreign currency shall be recorded according to actual exchange rates at the purchasing time.
- The merchandise purchase under import entrustment shall comply with regulations on account 331 – Trade payables
3.1.2. At the end of the accounting period, if the sales invoice sent by the seller is received but the merchandise has not been received, the following accounts shall be recorded:
Cr 151 – Goods in transit
Dr 133 – Deductible VAT (if any)
Cr 111, 112, 331, etc.
- Next accounting period, when the merchandise purchase in transit, the following accounts shall be recorded:
Dr 156 – Merchandise inventory (1561)
Cr 151 – Goods in transit
3.1.3 In case the trade discounts or sales rebates are received after buying merchandise (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 merchandise during a period):
Dr 111, 112, 331, etc.
Cr 156 – Merchandise inventory (if merchandise are still inventoried)
Cr 632 – Costs of goods sold (if they are consumed during a period)
Cr 133 – Deductible VAT (1331) (if any).
3.1.4 Cost of merchandise purchased which is returned to sellers due to failure of specifications under economic contract, the following accounts shall be recorded:
Cr 111, 112, etc.
Cr 331 – Trade payables
Cr 156 – Merchandise inventory (1561)
Cr 133 – Deductible VAT (1331) (if any).
3.1.5 Purchase costs of merchandise inventory shall be recorded as follows:
Dr 156 – Merchandise inventory (1562)
Dr 133 – Deductible VAT (if any)
Cr 111, 112, 141, 331, etc.
3.1.6 When purchasing merchandise making deferred payment, the following accounts shall be recorded:
Dr 156 – Merchandise inventory (cash prices)
Dr 133 – Deductible VAT (if any)
Dr 242 – Prepaid expenses {interest on deferred payment is difference between total payment minus (-) cash prices deducted from VAT (if it is deductible)}
Cr 331 – Trade payables (total costs)
The interests on deferred payment shall be periodically recorded to financial expenses as follows:
Dr 635 - Financial expenses
Cr 242 – Prepaid expenses.
3.1.7. When purchasing properties held for sale, the purchase costs and incidental purchase costs of properties held for sale shall be recorded as follows:
Dr 1567 – Properties held for sale (VAT-exclusive prices)
Dr 133 – Deductible VAT (1332)
Cr 111, 112, 331, etc.
3.1.8. If the investment properties convert into inventory when the owner repairs, innovates or upgrades them for sale:
- When the owner repairs, innovates or upgrades investment properties for sale, the following accounts shall be recorded:
Dr 156 – Merchandise inventory (1567) (residual value of investment properties)
Dr 214 - Depreciation of fixed assets (2147 – accrued depreciation)
Cr 217 – Investment properties (cost prices).
- When incurring costs of repair, renovation, upgrade of investment properties for sale, the following accounts shall be recorded:
Dr 154 - Work in progress
Dr 133 – Deductible VAT
Cr 111, 112, 152, 334, 331, etc.
- When finishing the repair, innovation or upgrade of investment properties for sale, total cost shall be transferred and an increase in properties held for sale shall be recorded:
Dr 156 – Merchandise inventory (1567)
Cr 154 - Work in progress.
3.1.9 Value of goods for sale which are consumed shall be recorded as follows:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory (1561)
Concurrently, sales revenues shall be recorded as follows:
- If indirect taxes are separable, the revenues shall be recorded follows:
Dr 111, 112, 131, etc. (total payment).
Cr 511 – Revenues
Cr 333 – Taxes and other payables to the State.
- If indirect taxes are not separable, the revenues including taxes shall be recorded. Tax liabilities and the decrease in revenues shall be periodically recorded as follows:
Dr 511 – Revenues (total payment)
Cr 333 – Taxes and other payables to the State.
3.1.10. Outsourcing agreement
- When dispatching merchandise inventory to process, the following accounts shall be recorded:
Dr 154 - Work in progress
Cr 156 – Merchandise inventory (1561)
- When costs of processing incurred, the following accounts shall be recorded:
Dr 154 - Work in progress
Dr 133 – Deductible VAT (if any)
Cr 111, 112, 331, etc.
- When the processing is finished, the merchandise shall be received in inventory and the following accounts shall be recorded:
Dr 156 – Merchandise inventory (1561)
Cr 154 - Work in progress.
3.1.11. When dispatching merchandise to customers or agencies consigning companies, etc, the following accounts shall be recorded:
Dr 157 – Goods on consignment
Cr 156 – Merchandise inventory (1561)
3.1.12. Dispatching merchandise inventory to dependent accounting units of the enterprise for sale:
- In case the dependent accounting units are in charge of recording revenues, costs of goods, the costs of merchandise sold shall be recorded as follows:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory.
Concurrently, sales revenues shall be recorded as follows:
Dr 111, 112, 131, etc. (total payment).
Cr 511 – Revenues
Cr 333 – Taxes and other payables to the State.
- 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, the following accounts shall be recorded:
Dr 136 - Intra-company receivables
Cr 156 – Merchandise inventory.
Cr 333 – Taxes and other payables to the State.
3.1.13. When dispatching merchandise for internal use, the following accounts shall be recorded:
Dr 641, 642, 241, 211
Cr 156 – Merchandise inventory.
3.1.14. When the enterprise uses products for giving, promotion or advertisement (under law on commerce):
a) If the merchandise inventory is released for promotion or advertisement without collecting money, not providing additional conditions (compulsory purchase of goods, etc), the cost of merchandise inventory shall be recorded to selling expenses (detail in promotion or advertisement);
Dr 641- – Selling expenses
Cr 156 – Merchandise inventory (cost prices).
b) If the merchandise is released 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 merchandise for promotion, the costs of promotion merchandise shall be recorded to costs of goods sold as follows:
Dr 632 – Cost prices of goods sold (prime cost)
Cr 156 – Merchandise inventory.
- When receiving revenues from promotion merchandise, the collected amounts 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 merchandise purchased for giving staff using welfare fund, the revenues and costs of goods shall be recorded similarly to ordinary selling transactions as follows:
- The cost of merchandise for giving to staff and employees shall be recorded to costs of goods sold:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory.
- Merchandise 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).
d) In case the enterprise is a commercial distributor receiving merchandise (non-payment) from manufacturers for promotion or advertisement given to customers of the manufacturer or distributor
- When receiving merchandise from manufacturer (non-payment) for promotion or advertisement given to customers, the distributor must keep track of amounts of merchandise items in their internal management system and present received merchandise items and merchandise items used for promotion on financial statement.
- When the promotion program closes, if the amounts of unused merchandise items for promotion are not returned to the manufacturer, the non-returned remaining unused merchandise items shall be recorded to other incomes as follows:
Dr 156 – Merchandise inventory (according to fair value)
Cr 711 - Other income.
3.1.15. Paying salaries to employees by merchandise
- Revenues shall be recorded as follows:
Dr 334 – Payables to employees (total costs)
Cr 511 – Revenues
Cr 333 – Taxes and other payables to the State.
Cr 3335 – Personal income tax.
- The cost of merchandise for paying salaries to employees shall be recorded to costs of goods sold as follows:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory.
3.1.16 When contributing merchandise to subsidiaries, joint-venture companies as capital, and 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 merchandise)
Cr 156 – Merchandise inventory.
Cr 711 – Other incomes (re-evaluated value is greater than book value of merchandise).
3.1.17. At the end of accounting period, when distributing incidental purchase costs of merchandise sold during a period, the following accounts shall be recorded:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory (1562)
3.1.18. When the surplus of merchandise is detected in any process of business, it is required to make a report and uncover reasons. According to the reasons uncovered, the surplus of merchandise shall be settled and accounted for as follows:
- If the reasons are mistakes in measuring or counting, failure to keep records, etc, the accounting record shall be adjusted.
- If the merchandise in surplus belong to other enterprises, the value of merchandise in surplus in the presentation of financial statements.
- In case it fails to uncover reasons for surplus, it shall be pending for settlement:
Dr 156 – Merchandise inventory
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 payable or receivables (3381)
Cr, relevant accounts.
3.1.19. When the shortage of merchandise is detected in any process of business, it is required to make a report and uncover reasons. According to decision of competent agency, the shortage of merchandise shall be settled and accounted for as follows:
- In case it fails to uncover reasons for surplus, it shall be pending for settlement:
Dr 138 – Other payables (1381- – Assets in shortage awaiting resolution)
Cr 156 – Merchandise inventory.
- When there is a decision of settlement made by the competent agency, the following accounts shall be recorded:
Cr 111, 112, etc. (the compensation is required if the offender is an individual)
Dr 334 – Payables to employees (the deducting in salaries is required if the offender is an individual)
Dr 138 – Other receivables (1388) (compensation of offenders)
Dr 632 – Costs of goods sold (residual value)
Cr 138 - Other receivables (1381).
3.1.20. If the properties held for sale are sold in a period, according to VAT invoice or sales invoice, transfer note of properties held for sale, the following accounts shall be recorded:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory (1567 – Properties held for sale)
Concurrently, revenues from sale of properties held for sale shall be recorded as follows:
Dr 111, 112, 131, etc.
Cr 511 – Revenues from sale of merchandises and services rendered (5117)
Cr 3331 – Deductible VAT (33311) (if any).
3.1.21. When liquidating or selling unused merchandise, their costs shall be recorded as follows:
Dr 632 – Costs of goods sold
Cr 156 – Merchandise inventory.
3.2. Enterprises using periodic inventory system.
a) At the beginning of accounting period, according to the value of ending inventory of previous accounting period which is transferred to value of beginning inventory of current accounting period, the following accounts shall be recorded:
Dr 611 – Purchases
Cr 156 – Merchandise inventory.
b) At the ending of accounting period:
- Conducting physical inventory count on quantity and cost of ending merchandise inventory. According to total cost of ending merchandise inventory, the following accounts shall be recorded:
Dr 156 – Merchandise inventory
Cr 611 – Purchases.
- According to total cost of merchandise sold, the following accounts shall be recorded:
Dr 632 – Costs of goods sold
Cr 611 – Purchases.
Source: Circular 200
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