Account 244 – Pledges, mortgages or deposits

1. Rules for accounting

a) This account is used to record a sum of money or something valuable that the enterprise uses for pledge, mortgage or deposit purpose in other enterprises or organizations in economic relation as prescribed.

b) The amounts of money or assets which are used for pledge, mortgage and deposit purpose shall be observed and promptly recovered after the agreement on pledge, mortgage or deposit expires. In case deposits which the enterprise is paid back are overdue to recover, the enterprise may create allowance for them similarly to doubtful debts.

c) The enterprise must keep track of pledges, mortgages or deposits according to each type, entity, term or currency. When preparing a financial statement, the amounts whose remaining term is less than 12 months shall be classified as short-term assets; These amounts whose remaining term is above 12 months shall be classified as long-term assets.

d) The assets used for pledge, mortgage or deposit purpose shall be recorded to the book value of the enterprise. The same price of a non-monetary asset used for pledge, mortgage or deposit purpose shall be recorded when it is dispatched from or delivered to inventory. If there are deposits in cash or cash equivalents which are paid back in foreign currencies, they shall be re-evaluated according to actual exchange rates on the date on which the financial statement is prepared (buying rate of the commercial bank where the enterprise regularly enters into transactions). Collaterals in the form of Certificates of ownership (i.e. property) shall not be recorded to a decrease in assets but they shall be kept records in the accounting records in details (collaterals in details) and presented in the financial statement.

2. Structure and contents of account 244 – Pledges, mortgages and deposits

Debit:

- Value of collaterals or cash deposits.

- Exchange rate differences due to re-evaluation of balance of deposits which are paid back in foreign currency at the reporting time (if the foreign currency rate rises against VND).

Credit:

- Value of collaterals or cash deposits which are paid back or paid;

- Deducted (fined) from cash deposits shall be charged to other expenses;

- Exchange rate differences due to re-evaluation of balance of deposits which paid back in foreign currency at the reporting time (if the foreign currency rate falls against VND).

Debit balance: Value of collaterals or cash deposits which are still under pledge, mortgage or deposit agreement.

3. Method of accounting for several major transactions

a) When using cash or cash in bank for deposit purpose, the following accounts shall be recorded:

Dr 244 – Pledge, mortgages and deposits

Cr 111, 112.

b) When using a fixed asset for pledge purpose, the following accounts shall be recorded:

Dr 244 – Pledge, mortgages and deposits (residual value)

Dr 214 – Depreciation of fixed assets (depreciation value)

Cr 211, 213 (historical cost).

If documents (certificate of ownership of land or property) are used for mortgage, they shall not be recorded to this account but they are not kept records in details.

c) When using other assets for pledge or mortgage purpose, the following accounts shall be recorded:

Dr 244 – Pledge, mortgages and deposits (in details)

Cr 152, 155, 156, etc.

d) Receiving collaterals or cash deposits:

- When receiving cash deposits, the following accounts shall be recorded:

Dr 111, 112.

Cr 244 – Pledge, mortgages and deposits.

- When receiving collaterals which are fixed assets, the following accounts shall be recorded:

Dr 211, 213 (historical cost of the fixed assets used for pledge purpose).

Cr 244 – Pledge, mortgages and deposits (residual value)

Cr 214 – Depreciation of fixed assets (depreciation value)

- When receiving other assets used for pledge or mortgage purpose, the following accounts shall be recorded:

Dr 152, 155, 156, etc.

Cr 244 – Pledge, mortgages and deposits (in details)

dd) If the enterprise fails to fulfill their commitment and faces fines for violations against the contract which are deducted from their cash deposits, the following accounts shall be recorded:

Dr 811 – Other expenses (deducted amount)

Cr 244 – Pledge, mortgages and deposits.

e) When using cash deposits to pay for the seller, the following accounts shall be recorded:

Dr 331 – Trade payables

Cr 244 – Pledge, mortgages and deposits.

g) When preparing a financial statement, if the deposits which are paid back derived from foreign currencies, they shall be evaluated according to actual exchange rates on the date on which the financial statement is prepared:

- If the foreign currency rate rises against VND, the following accounts shall be recorded:

Dr 244 – Pledge, mortgages and deposits

Cr 413 – Exchange rate differences (4131).

- If the foreign currency rate falls against VND, the following accounts shall be recorded:

Dr 413 – Exchange rate differences (4131).

Cr 244 – Pledge, mortgages and deposits.

Source: Circular 200