Account 211 – Tangible fixed assets

1. Rules for accounting

a) This account is used to record current cost and decrease and increase in total tangible fixed assets of an enterprise according to their historical costs.

b) Tangible fixed assets mean assets in physical forms which are possessed by an enterprise for operation in conformity with the recognition criteria of tangible fixed assets.

c) Tangible fixed assets having independent structure, or separate parts associated in a system for performance of one or several functions, the system shall not be operated in case of lack of any part. An asset meeting all four recognition criteria below shall be treated as a fixed asset:

- Future economic benefits will surely be obtained;

- Their historical cost has been determined reliably;

- Their useful life is at least 1 year;

- It meets all value criteria as prescribed in regulations in force.

In a system associated by separate parts, in which every part has different useful life and the system still operate normally regardless of lack of any part, if every part is managed and used separately and meets all four recognition criteria, they shall be treated as independent tangible fixed assets.

With regard to working animals or producing animals for production of commodities, if each animal species meets all four recognition criteria for fixed assets, they shall be treated as tangible fixed assets.

With regard to perennial gardens, if every garden or plant meets all four recognition criteria for fixed assets, they shall be treated as tangible fixed assets.

d) The costs of tangible fixed assets shall be recorded to account 211 according to their historical costs. The historical costs of each fixed asset must be keep records specifically. Depending on acquisition sources, the historical cost of a tangible fixed asset shall be determined as follows:

d1) Historical costs of purchased tangible fixed assets include: purchase prices (deducted from trade discounts or rebates), taxes (excluding refundable taxes) and any directly-attributable expenses of putting such assets into ready-for-use state, such as site preparation, initial delivery and material handling, installation or testing costs (deducted (-) from any recoverable values on products or scraps from testing), professional fees and any other directly-attributable expenses. The interest cost from loans for purchase of completed fixed assets (fixed assets available for immediate use without construction investment) shall not be capitalized on historical costs of fixed assets.

- When purchasing fixed assets, if they are bundled with equipment or spare parts for replacement, such equipment or spare parts shall be determined and recorded separately according to their fair value. Historical cost of a fixed asset purchased shall equal total costs of putting the fixed asset into ready-for-use state minus (-) cost of equipment or spare parts for replacement.

- Historical costs of tangible fixed assets purchased in instalment: equal purchase price (lump sum payment) plus (+) directly related costs of putting such assets into ready-for-use state (excluding refundable taxes). The difference between the instalment price and lump sum price shall be recorded to operating costs according to the payment schedule.

- Historical costs of fixed assets-properties: When buying properties, the value of land use right and properties on land shall be separated as prescribed. The properties on land shall be recorded to tangible fixed assets; land use rights shall be recorded to intangible fixed assets or prepaid expenses incurred from a case-by-case basis as prescribed.

d2) Historical costs of tangible fixed assets acquired from capital investment

- Historical costs of fixed assets under contract awarding: equal settled costs of building works as prescribed in Regulations on investment and construction management in force plus (+) directly-attributable expenses and property transfer taxes (if any). With regard to fixed assets which are working animals or producing animals, perennial gardens, their historical costs shall equal total actual costs covered their development up to putting them into use plus (+) directly related costs.

- Self-constructed or self-made tangible fixed assets:

The historical cost of self-constructed tangible fixed assets is the settled cost of the building work which is put into use. If the fixed asset is put into used but it is not settled, their historical cost shall be recorded to provisional cost and it shall be adjusted after settlement of the finished building work.

The historical cost of a self-made tangible fixed asset is the actual cost of tangible fixed assets plus (+) directly-attributable expenses of putting such fixed asset into ready-for-use state.

- In above both cases, the historical cost of the fixed asset includes installation and testing costs (deducted from any recoverable values on products or scraps from testing) Internal profits and unreasonable expenses (wasted raw materials, labor or other costs in excess of the normal levels arising in the self-constructed or self-made process) shall not be included in the historical cost of tangible fixed assets.

d3) The historical cost of a tangible fixed asset purchased in the form of exchange for a dissimilar tangible fixed asset or other assets shall be determined according to their fair value of the received tangible fixed assets, or the fair value of the exchanged ones, after adjusting the cash amounts or cash equivalents which are additionally paid or received plus (+) directly-attributable expenses of putting such asset into ready-for-use state (excluding refundable taxes).

The historical cost of a tangible fixed asset purchased in the form of exchange for similar one, or possibly formed through its sale in exchange for ownership of similar ones (similar assets are those with similar utilities, in the same business field and having equivalent value). In both cases, no gain or loss is recorded during the exchange. The historical cost of the received fixed asset shall be the residual value of the exchanged one.

d4) The historical cost of a tangible fixed asset which is granted or transferred shall equal: residual value shall be recorded to fixed assets account in the accounting records of the donating or presenting enterprise or the value assessed by the Board of exchange or a professional appraisal organization as prescribed plus (+) directly-attributable expenses (transport, material handling, upgrade, installation, testing or registration property transfer taxes (if any), etc paid by the asset receiver up to time in which the fixed asset is put into ready-for-use state.

The historical cost of a tangible fixed asset transferred between dependent accounting units having no legal status of an enterprise shall be their historical cost recorded in the transferor in conformity with dossier on such fixed asset. The received unit shall record the fixed assets to their accounting records according to the historical cost, accumulated depreciation, residual value stated in the accounting records and dossier on such fixed asset. The costs related to donations of fixed assets between dependent accounting units having no legal status shall not be recorded an increase in historical cost of fixed assets but they shall be recorded to operating cost during a period.

d5) The historical cost of a tangible fixed asset contributed as capital or return of capital is the value assessed by founding members or shareholders or agreed by the enterprise and contributors or assessed by a professional appraisal organization as prescribed and approved by the founding members or shareholders.

d6) The historical cost of a tangible fixed asset which is donated or presented shall equal: actual value assessed by the Board of exchange or a professional appraisal organization plus (+) directly-attributable expenses (transport, material handling, installation, testing or property transfer taxes (if any), etc paid by the asset receiver up to time in which the fixed asset is put into ready-for-use state.

d7) The historical cost of a fixed asset purchased in foreign currencies shall comply with regulations in Article 69 – Guidance on accounting method for exchange rate differences.

dd) The historical cost of a tangible fixed asset shall only be modified in following cases:

- The fixed asset is undergone a re-evaluation as prescribed in regulations of the State;

- The fixed asset is constructed or equipped with additional parts;

- Parts of the tangible fixed asset are modified to extend their useful life or to increase their capacity;

- Parts of the tangible fixed asset are upgraded to substantially increase product quality;

- New technology process is adopted to reduce operating expenses;

- One or several parts of the tangible fixed asset shall be dismantled.

Any case of increase or decrease in tangible fixed assets must be prepared exchange reports, liquidation reports on fixed assets and following procedures as prescribed. The accountant is responsible for preparation and completion of accounting records of fixed assets.

e) The repair and maintenance costs of a fixed asset shall not be recorded to fixed assets account but they are shall be recorded to expenses incurred during a period. With regard to those fixed assets subject to periodical repair or maintenance (power plants‘ turbines, aircraft engines, etc), a provision payable shall be made and recorded to operating costs in a given period for the repair or maintenance.

1. g) Operating lease tangible fixed assets still are depreciated in accordance with VAS and financial policies in force.
2. h) The tangible fixed assets must be kept in details by every item of fixed assets, every type of fixed assets and every place in which they are used, managed or preserved.

 

2. Structure and contents of account 211 –Tangible fixed assets

Debit:

- An increase in historical cost of the tangible fixed asset due to completed constructions, purchase, receipt of capital contribution, grant, donation, present, or surplus;

- An increase in historical cost of the fixed assets after adjustment due to additional construction or equipment, or upgrade;

- An increase in historical cost of the fixed assets due to re-evaluation.

Credit:

- An decrease in historical cost of the tangible fixed assets due to transfer to other enterprises, liquidation or contribution into joint venture, etc.

- A decrease in historical cost of the fixed asset due to dismantlement of one or several parts;

- A decrease in historical cost of the fixed asset due to re-evaluation.

Debit balance: Current historical costs of the fixed assets of the enterprise.

Account 211 –Tangible fixed assets comprises 6 sub-accounts:

- Account 2111 – Buildings and structures: records the cost of construction works, such as buildings, structures, hedges, basins, water towers, ground; or infrastructures, such as roads, bridges, railroads, peers, wharfs, etc.

- Account 2112 – Machinery and equipment: records costs of machinery or equipment used in operation of an enterprise, including special-use machines; work machinery or equipment, technological lines and individual machines.

- Account 2113 – Means of transportation and transmitters: records costs of means of transport, including roads, rail, waterborne, waterway, air, pipes and transmitters.

- Account 2114 – Office equipment and furniture: records costs of equipment and furniture used in management, business and administrative management.

- Account 2115 – Perennial plants, working and producing animals: records costs of fixed assets such as perennial plants, working and producing animals.

- Account 2118 – Other fixed assets: records costs of other fixed assets not recorded to above sub-accounts.

 

3. Method of accounting for several major transactions

3.1. Accounting for increases in tangible fixed assets

a) When receiving owner‘s equity or capital in form of tangible fixed assets, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (negotiable prices)

Cr 411 – Owner‘s invested equity.

b) Purchased fixed assets:

- When purchasing a tangible fixed asset whose input VAT is deductible, according to documents on purchase of such fixed asset, the historical cost of the fixed asset shall be determined, accounting records and receipt slip of fixed asset shall be prepared and the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (VAT-exclusive prices)

Dr 133 – Deductible VAT (1332)

Cr 111, 112, etc.

Cr 331 – Trade payables

Cr 341 – Borrowings and finance lease liabilities (3411).

- When purchasing tangible fixed assets bundled with equipment or spare parts for replacement, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (fixed asset purchased and equipment or spare parts for replacement treated as fixed assets in details)

Dr 153 – Tools and supplies (1534) (equipment or spare parts for replacement)

Dr 133 – Deductible VAT (1332)

Cr 111, 112, etc.

Cr 331 – Trade payables

Cr 341 – Borrowings and finance lease liabilities (3411).

- If the input VAT is not deductible, the historical cost of the fixed asset includes VAT.

- If the fixed asset is purchased by capital expenditure used for operation, if the financial report is approved by the competent agency, an increase in operation capital and a decrease in capital shall be recorded as follows:

Dr 441 – Capital expenditure funds

Cr 411 – Owner‘s invested equity.

c) When purchasing tangible fixed assets in deferred payment or instalment:

- When purchasing tangible fixed assets in deferred payment or instalment and put them into use, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (historical cost – cash prices)

Dr 133 – Deductible VAT (1332) (if any)

Dr 242 – Prepaid expenses (deferred interest equals (=) total payment minus (-) cash price and VAT (if any).

Cr 111, 112, 331.

- When make periodical payment to sellers, the following accounts shall be recorded:

Dr 331 – Trade payables

Cr 111, 112 (periodical payables, including periodical principal and interest in deferred payment or instalment payables).

- The interest in deferred payment or instalment payables shall be periodically recorded as follows:

Dr 635 – Financial expenses

Cr 242 – Prepaid expenses.

d) When the enterprise receives donated or presented tangible fixed assets for put in use, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets

Cr 711 - Other income.

Other directly-attributable expenses incurred from donated or presented tangible fixed assets shall be recorded to historical cost as follows:

Dr 211 – Tangible fixed assets

Cr 111, 112, 331, etc.

dd) Self-made tangible fixed assets:

When converting self-made products of the enterprise to tangible fixed assets, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets

Cr 155 – Finished goods (dispatched from inventories)

Cr 154 – Work in progress (put into use).

e) When purchasing tangible fixed assets in the form of exchange:

- Exchange between two similar tangible fixed assets: When receiving similar tangible fixed assets in exchange and put into use, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (historical cost of the received tangible fixed asset shall be recorded according to residual value of the exchanged fixed asset)

Dr 214 – Depreciation of fixed asset (depreciation of exchanged fixed asset)

Cr 211 – Tangible fixed assets (historical cost of exchanged fixed asset)

- Exchange between two dissimilar tangible fixed assets:

+ When transferring the tangible fixed asset to exchanging entity, the following accounts shall be recorded:

Dr 811 – Other expenses (residual value of exchanged fixed asset)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

+ And an increase in income shall be recorded due to exchange of fixed assets:

Dr 131 – Trade receivables (total payment)

Cr 711 – Other expenses (residual value of exchanged fixed asset)

Cr 3331 – VAT payables (33311) (if any)

+ When receiving the fixed asset in exchange, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (residual value of received fixed asset)

Dr 133 – Deductible VAT (1332) (if any)

Cr 131 – Trade receivables (total payment)

+ If it is required to collect additional payment because the cost of exchanged fixed asset is greater than the received fixed asset, the following accounts shall be recorded when the additional payment is received:

Dr 111, 112 (additional payment)

Cr 131 – Trade receivables.

+ If it is required to collect additional payment because the residual value of exchanged fixed asset is smaller than the received fixed asset, the following accounts shall be recorded when the additional payment is received:

Dr 131 – Trade receivables.

Cr 111, 112, etc.

g) When purchasing fixed assets which are buildings, structures associated with land use rights put into use, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (historical cost – buildings, structures in details).

Dr 213 – Intangible fixed assets (historical cost – land use rights).

Dr 133 – Deductible VAT (if any)

Cr 111, 112, 331, etc.

h) Increase in tangible fixed assets due to completion of capital investment: In case the construction work or work items have been completed and put into use, but their capital expenditure has not been approved, the historical cost shall be provisionally determined according to actual capital expenditure in order to record the increase or decrease in fixed assets (for calculating and depreciating the fixed asset put into use). Once the settlement of capital expenditure is approved, if there is any difference with provisional value of the fixed asset, the increase or decrease in the difference shall be adjusted.

- In case the capital investment progress is recorded in the same accounting book system of the enterprise:

+ Upon the completion of the construction and putting assets into use, the following accounts shall be recorded:

Dr 211 – Intangible fixed assets (historical cost).

Cr 241 – Construction in progress.

+ If the self-constructed assets documents not meet all recognition criteria for tangible fixed assets as prescribed in the accounting standard on tangible fixed assets, the following accounts shall be recorded:

Dr 152, 153 (if they are materials, inventoried tools and supplies)

Cr 241 – Construction in progress.

- In case the capital investment progress is not recorded in the same accounting book system of the enterprise (investor has a project management board having its own accounting system to keep track of the capital investment progress): When receiving construction, the investor shall record as follows:

Dr 111, 112, 152, 153, 211, 213

Cr 136 – Intra-company receivables

Cr 331, 333, etc (accept receivables, if any)

- If the fixed asset is invested by capital expenditure, when the settlement is approved by the competent agency, an increase in owner's invested equity shall be recorded as follows:

Dr 441 – Capital expenditure funds

Cr 411 – Owner‘s invested equity.

- Once the settlement is approved, if there is any difference between settled price and provisional price, the historical cost of the fixed asset shall be adjusted as follows:

+ A decrease in historical cost shall be recorded as follows:

Dr 138 – Trade receivables (amounts of recovery shall not be settled)

Cr 211 – Tangible fixed assets.

+ An increase in historical cost shall be recorded as follows:

Dr 211, 213, 217, 1557

Cr, relevant accounts.

i) When receiving fixed assets from internal General company (without payment), the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (historical cost).

Cr 214 – Depreciation of fixed assets (depreciated value)

Cr 336, 411 (residual value).

k) When putting fixed assets purchased by non-business funds into use in non-business activities, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets

Cr 111, 112

Cr 241 – Construction in progress.

Cr 331 – Trade payables

Cr 461 – Non-business funds (4612).

An increase in non-business funds used for acquisition of the fixed asset shall be recorded as follows:

Dr 161 – Non-business expenditure (1612).

Cr 466 – Non-business funds used for fixed asset acquisitions.

When withdrawing estimates to purchase fixed assets, the enterprise shall keep records of them in the presentation of financial statements.

l) When putting fixed assets purchased by welfare funds into use in cultural and welfare fund, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets (total payment)

Cr 111, 112, 331, 3411, etc.

- And, the following accounts shall be recorded:

Dr 3532 – Welfare fund

Cr 3533 – Welfare funds used for fixed asset acquisitions.

m) Costs incurred after initial recognition of tangible fixed assets (repair, innovation or upgrade):

- When incurring costs of repair, innovation or upgrade after initial recognition of tangible fixed assets:

Dr 241 – Construction in progress.

Dr 133 – Deductible VAT (1332)

Cr 112, 152, 331, 334, etc.

- Completion of repair, innovation or upgrade of fixed assets put into use:

+ If there is an increase in historical cost of tangible fixed assets, the following accounts shall be recorded:

Dr 211 – Tangible fixed assets

Cr 241 – Construction in progress.

+ If there is not an increase in historical cost of tangible fixed assets, the following accounts shall be recorded:

Dr 623, 627, 641, 642 (if their value is small)

Cr 242 – Prepaid expenses. (if their value is great, they must be allocated gradually)

Cr 241 – Construction in progress.

3.2. Accounting for decreases in tangible fixed assets

An decrease in historical cost of the tangible fixed assets due to sale, liquidation, losses, shortage detected under physical inventory count, contribution into joint venture or transfer to other enterprises, dismantlement of one or several parts, etc. Any case of decrease in tangible fixed assets shall be followed procedures and exactly determined the losses and income (if any). According to relevant documents, every specific case shall be keep records as follows:

3.2.1. In case of sale of fixed assets used for business or non-business activities: the purchased fixed asset is unnecessary or deems ineffective. The fixed asset must be purchase following procedures prescribed in regulations of law. According to receipt slip of the fixed asset and documents on sale of the fixed asset:

a) When selling fixed assets used for business, the following accounts shall be recorded:

Dr 111, 112, 131, etc.

Cr 711 – Other income (VAT-exclusive prices)

Cr 3331 – VAT payables (33311).

If the VAT is not separable, the other income shall include VAT. A decrease in VAT payables shall be recorded to other income.

- A decrease in purchased fixed asset shall be recorded according to receipt slip of fixed asset:

Dr 214 – Depreciation of fixed assets (2141) (depreciated value)

Dr 811 – Other expenses (residual value)

Cr 211 – Tangible fixed assets (historical cost).

- Costs related to sale of fixed assets shall be recorded to Dr 811 ―Other expenses.

b) In case of selling fixed assets used for non-business activities:

- A decrease in sold fixed asset shall be recorded according to receipt slip of fixed asset as follows:

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

-Revenues and expenses related to sale of the fixed asset shall be recorded to relevant accounts as prescribed in regulations of competent agency.

c) In case of selling fixed assets used for culture or activities welfare:

- A decrease in sold fixed asset shall be recorded according to receipt slip of fixed asset as follows:

Dr 353 – Welfare fund (3533) (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

- Receipts from sale of the fixed asset shall be recorded as follows:

Dr 111, 112, etc.

Cr 353 – Welfare fund (3532)

Cr 333 – Taxes and other payables to the State (3331) (if any)

- Expenditures on sale of the fixed asset shall be recorded as follows:

Dr 353 – Welfare fund (3532)

Cr 111, 112, etc.

3.2.2. Liquidation of fixed assets: Liquidated fixed assets are damaged fixed assets impossible for use, obsolete fixed assets or not appropriate to operating activities. Once there is any fixed asset subject to liquidation, the enterprise must issue a decision on liquidation and establish a Liquidation board of fixed assets. The Liquidation board of fixed assets is responsible for carrying out liquidation of fixed assets following procedures as prescribed in financial management regime and make ―Report on liquidation of fixed assets‖ as prescribed. The report shall be prepared into two copies, one copy shall be transferred to accounting department to record, and one copy shall be transferred to the department in charge of management and use of the fixed asset.

According to the report on liquidation of fixed asset and other documents on revenues and expenses incurred from liquidation of fixed assets, etc the liquidation of fixed asset shall be recorded similarly to sale of fixed assets.

3.2.3. When contributing tangible fixed assets as capital to subsidiaries, joint-venture companies, the following accounts shall be recorded:

Dr 221, 222 (re-evaluated value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 811 – Other expenses (re-evaluated value is smaller than residual value of the fixed asset)

Cr 211 – Tangible fixed assets (historical cost).

Cr 711 – Other expenses (re-evaluated value is greater than residual value of the fixed asset)

3.2.4. Shortage or surplus of tangible fixed assets: The reason for any shortage or surplus of fixed assets must be uncovered. The shortage or surplus must be accurately and promptly recorded according to ―Report on physical inventory count of fixed assets‖ and Conclusion issued by the Inventory board according to specific reasons:

a) Surplus of fixed assets:

- If the surplus of fixed assets is detected due to unrecording, an increase in fixed assets shall be recorded according to dossier on fixed assets as follows:

Dr 211 – Tangible fixed assets

Cr 241, 331, 338, 411, etc.

- If the fixed assets in surplus are being used, apart from recording the increase in tangible fixed assets, the depreciation value used for calculation and deduction of additional depreciation of fixed asset used for welfare, non-business or project purpose, the following accounts shall be recorded:

Dr, operating costs (fixed assets used for business)

Dr 3533 – Welfare funds used for fixed asset acquisitions (used for welfare)

Dr 466 – Non-business funds used for fixed asset acquisitions.

Cr 214 – Depreciation of fixed assets (2141).

- If the fixed assets in surplus are fixed assets of other enterprises, the owner of such fixed assets must be notified. If it fails to determine the owner of such fixed assets, the superior agency and finance agency must be notified for handling (regarding state-owned enterprises) During handling period; those fixed assets shall be provisionally kept and monitored according to documents on physical inventory count.

b) Shortage of fixed assets: it is required to uncover reasons, offenders and handled as prescribed in financial regime in force.

- In case there is a decision on handling of shortage: the historical cost and depreciated value of such asset must be accurately determined according to approved ―Report on handling of shortage of fixed assets‖ and dossier on fixed assets, then record an decrease in fixed assets and handle the residual value of the fixed assets. According to the decision on handling of shortage, the following accounts shall be recorded:

+ The shortage of fixed assets used for business shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 111, 112, 334, 138 (1388) (if the offender is required to make compensation)

Dr 411 – Owner‘s invested equity (if the decrease in equity is permitted to be recorded)

Dr 811 – Other expenses (if the enterprise suffers losses)

Cr 211 – Tangible fixed assets.

+ The shortage of fixed assets used for non-business activities shall be recorded as follows:

A decrease in the fixed asset shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets must be recovered according to the decision on handling of shortage and the following accounts shall be recorded:

Dr 111, 112 (if collecting money)

Dr 334 – Payables to employees (deducted from salaries of employees)

Cr, relevant accounts (according to report on handling).

+ The shortage of fixed assets used for culture or activities welfare shall be recorded as follows:

A decrease in the fixed asset shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets must be recovered according to the decision on handling of shortage and the following accounts shall be recorded:

Dr 111, 112 (if collecting money)

Dr 334 – Payables to employees (deducted from salaries of employees)

Cr 3532 – Welfare fund

- If the reasons for shortage of fixed assets are not uncovered and awaiting solutions:

+ The shortage of fixed assets used for business shall be recorded as follows:

A decrease in fixed assets shall be recorded for residual value of the shortage of fixed assets:

Dr 214 – Depreciation of fixed assets (2141) (depreciated value)

Dr 811 – Other expenses (residual value)

Cr 211 – Tangible fixed assets (historical cost).

If there is a decision on handling of residual value of shortage of fixed assets, the following accounts shall be recorded:

Dr 111, 112 (compensation)

Dr 138 – Other receivables (1388) (if the offender is required to make compensation)

Dr 334 – Payables to employees (deducted from salaries of employees)

Dr 411 – Owner‘s invested equity (if the decrease in equity is permitted to be recorded)

Dr 811 – Other expenses (if the enterprise suffers losses)

Cr 138 - Other income (1381).

+ The shortage of fixed assets used for non-business activities shall be recorded as follows:

A decrease in the fixed asset shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 466 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets shall be recorded to account 1381 ―Assets in shortage awaiting resolution‖ as follows:

Dr 1381 – Assets in shortage awaiting resolution

Cr 138 - Other payables or receivables.

When there is a decision on compensation for residual value of the shortage of fixed assets, the following accounts shall be recorded:

Dr 111, 334, etc.

Cr 1381 – Assets in shortage awaiting resolution

Concurrently, the compensation for residual value of the shortage of fixed assets shall be recorded to relevant accounts according to the decision issued by the competent agency as follows:

Dr 138 - Other payables or receivables.

Cr, relevant accounts (333, 461, etc).

+ The shortage in fixed assets used for culture or activities welfare shall be recorded as follows:

A decrease in the fixed asset shall be recorded as follows:

Dr 214 – Depreciation of fixed assets (depreciated value)

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Cr 211 – Tangible fixed assets (historical cost).

The residual value of the shortage of fixed assets shall be recorded to account 1381 ―Assets in shortage awaiting resolution‖ as follows:

Dr 1381 – Assets in shortage awaiting resolution

Cr 3532 – Welfare fund

When there is a decision on compensation for residual value of the shortage of fixed assets, the following accounts shall be recorded:

Dr 111, 334, etc.

Cr 1381 – Assets in shortage awaiting resolution

3.2.5. With regard to tools and supplies not meeting all recognition criteria of tangible fixed assets used for business, the following accounts shall be recorded:

Dr 623, 627, 641, 642 (if their residual value is small)

Dr 242 – Prepaid expenses. (if their value is great, they must be allocated gradually)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost of fixed asset).

3.2.6. Accounting for sale and leaseback of tangible fixed assets which is operating lease (refer to account 811 or 711).

3.3. Accounting for tangible fixed assets under physical inventory count under evaluation of enterprises for equitization of wholly-state-owned enterprises

a) Reports on physical inventory count: When receiving notification or decision on equitization of the competent agency, the equitized enterprise must conduct physical inventory count and classify tangible fixed assets under management and use of the enterprise at the time in which the enterprise is undergone evaluation.

- In case of shortage of tangible fixed assets, the following accounts shall be recorded:

Dr 1381 – Assets in shortage awaiting resolution (residual value)

Dr 214 – Depreciation of fixed assets (cumulatively-depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

- In case of surplus of fixed assets: the enterprise shall keep records of surplus of fixed assets in the presentation of the financial statement Once the reasons for surplus are uncovered and the decision on resolution to surplus is issued by the competent agency, they shall be recorded to relevant accounts in the balance sheet.

b) Accounting for surplus or shortage of tangible fixed assets under physical inventory count: the enterprise must uncover the reasons for the surplus or shortage and determine material responsibility for compensation taken by organizations or individuals as prescribed. The value of shortage of tangible fixed assets (deducted from compensation) shall be recorded to other expenses.

- With regard to shortage of assets detected under physical inventory count, according to ―Report on resolution to shortage or surplus of assets under physical inventory count‖, the following accounts shall be recorded:

Dr 111 – Cash (individual or organization paying compensation)

Dr 1388 - Other receivables (individual or organization paying compensation)

Dr 334 – Payables to employees (deducted from salaries of employees)

Dr 811 – Other expenses (residual value of shortage of fixed assets detected under physical inventory count shall be recorded to losses of the enterprise)

Cr 1381 – Assets in shortage awaiting resolution.

- With regard to surplus of assets detected under physical inventory count, according to ―Report on resolution to shortage or surplus of assets under physical inventory count‖, the following accounts shall be recorded:

Dr 3381 – Surplus of assets awaiting resolution.

Cr 331 – Trade payables (if the assets in surplus belong to sellers)

Cr 138 - Other payables or receivables (3388)

Cr 411 – Owner's invested equity (regarding tangible fixed assets impossible to uncover reasons and determine the owner).

c) Accounting for sale or liquidation of unnecessary assets or unsold assets pending liquidation: after receiving approval issued by agency deciding the equitization, the enterprise shall sell or liquidate assets as prescribed. The revenues, expenses and decreases in assets shall be recorded as follows:

- Revenues from sale or liquidation of unnecessary fixed assets or fixed assets pending liquidation shall be recorded as follows:

Dr 111,112,131

Cr 711 - Other income.

Cr 3331 – VAT payables (if any).

- Expenditures on sale or liquidation of unnecessary fixed assets or fixed assets pending liquidation shall be recorded as follows:

Dr 811 – Other expenses

Dr 133 – Deductible VAT (if any)

Cr 111, 112, 331.

- Decreases in fixed assets which are sold or liquidated shall be recorded as follows:

Dr 811 – Other expenses (residual value)

Dr 214 – Depreciation of fixed assets

Cr 211 – Tangible fixed assets.

d) When the enterprise transfers tangible fixed assets which are unnecessary or pending liquidation as prescribed, the following accounts shall be recorded:

Dr 411 – Owner‘s invested equity.

Dr 214 – Depreciation of fixed assets

Cr 211 – Tangible fixed assets.

dd) Accounting for transfer assets which are welfare constructions - When transferring housing of officials or employees of the enterprise invested by the welfare funds to real estate authority of the local government to manage, the following accounts shall be recorded:

Dr 3533 – Funds used for fixed asset acquisitions (residual value)

Dr 214 – Depreciation of fixed assets (depreciated value)

Cr 211 – Tangible fixed assets (historical cost).

- If the equitized enterprise uses the welfare constructions invested by state capital for business, the following accounts shall be recorded:

Dr 466 – Non-business funds used for fixed asset acquisitions.

Cr 411 – Owner‘s invested equity.

e) Accounting for value of tangible fixed assets which are undergone re-valuation.

According to dossier on revaluation of the enterprise, the value of the tangible fixed assets shall equal: Increase in residual value of fixed asset which is recorded to Cr 412 - Differences upon asset revaluation; Decrease in residual value of fixed asset which is recorded to Dr 412 - Differences upon asset revaluation and such differences must be in details according to every fixed asset. In particular:

- In case the value of re-evaluated fixed asset is greater than book value and historical cost of the fixed asset or re-evaluated cumulative depreciation is greater than book value, the following accounts shall be recorded:

Dr 211 – Historical costs of fixed assets (increase evaluation).

Cr 214 – Depreciation of fixed assets (increase evaluation).

Cr 412 - Differences upon asset revaluation (value of fixed asset in increase).

- In case the value of re-evaluated fixed asset is smaller than book value and historical cost of the fixed asset or re-evaluated cumulative depreciation is smaller than book value, the following accounts shall be recorded:

Dr 214 – Depreciation of fixed assets (decrease evaluation).

Dr 412 - Differences upon asset revaluation (value of fixed asset in decrease).

Cr 211 – Historical costs of fixed assets (decrease evaluation).

The enterprise depreciates the fixed asset according to new historical cost determined after re-evaluation.

g) Transferring fixed assets to joint-stock companies

- Equitization of independent enterprises

With regard to equitization of independent enterprises, it is required to comply with regulations on transfer of assets, accounts payables and capital funds of joint-stock companies. All accounting documents, accounting records and financial statements of the equalized enterprise required archive shall be transferred to the joint-stock company for keep archiving.

- With equitization of dependent accounting enterprises of state-owned companies, groups, general companies, parent companies, or independent accounting companies of the general companies.

When transferring assets, accounts payables and capital funds to joint-stock companies, the value of tangible fixed assets transferred to the joint-stock company shall be recorded as follows according to receipt slip of assets, appendixes, relevant accounting records or documents.

Dr 411 – Owner‘s invested equity.

Dr 214 – Depreciation of fixed assets (depreciated value).

Cr 211 – Tangible fixed assets.

 

Source: Circular 200