On November 22, 2014, the Ministry of Finance issued Circular 200/2014/TT-BTC, which provides guidance on the enterprise accounting regime, replacing Decision 15/2006/Đ-BTC dated March 20, 2006. The Circular 200 brought significant changes in both thinking and approach, posing challenges for accountants.
The method of recording and accounting for accrued expenses and provisions is one of the key areas of change, requiring a deep understanding to avoid mistakes.
Accounting is often referred to as the “language of business” because it not only helps businesses understand their financial situation but also supports effective decision-making.
This article will help accountants grasp the essence of these transactions, ensuring more accurate and optimal accounting.
01
Overview of the Nature
of Each account
Account 335 – Accrued Expenses is regulated in Article 54 of Circular 200/2014/TT-BTC as follows:
• Accrued expenses refer to amounts payable for goods or services received from suppliers or provided to customers during the reporting period but not yet paid due to the lack of an invoice or insufficient supporting documents (previously, according to Decision 15/2006, these payable amounts were not recorded in account 335 but in account 331).
• Accrued expenses for salaries and wages payable during the reporting period.
• Accrued expenses for production costs during the reporting period that need to be allocated, such as:
– Accrued expenses for costs during seasonal production shutdowns, which can be planned.
– Accrued expenses for interest on loans payable after the loan period or interest on bonds payable after maturity.
– Accrued expenses for inventory costs to calculate the cost of goods sold or real estate sold.
Account 352 – Provisions is regulated in Article 62 of Circular 200/2014/TT-BTC as follows:
• This account is used to record provisions for liabilities, the situation of provisioning, and the use of provisions in the enterprise.
• Provisions should only be recorded when the following conditions are met:
– The enterprise has a present obligation (legal or constructive obligation) arising from past events;
– The reduction in economic benefits that may result in the need to settle the liability;
– A reliable estimate can be made of the value of the liability.
02
Distinguishing between Account 335 and Account 352
Content
Account 352
Account 335
Current Liabilities
Provisions for payables are current liabilities but often have no specific payment date;
Accrued expenses are present obligations that are certain to be paid in time;
Amount to be paid
Provisions for payables are often estimated and the amount payable may not be determined with certainty (for example, provisions for product, goods, and construction warranty costs);
Payable expenses are expenses that can be determined with certainty;
Presentation on Financial Statements
Provisions for payables are presented separately from trade and other payables.
Accrued expenses are part of trade payables or other payables.
Principles of accounting for production and business costs in the period
Payables that have not yet arisen due to not having received goods or services but are calculated in advance into the production and business costs of this period to ensure that when they actually arise, they do not cause sudden changes in production and business costs and are reflected as provisions for payables.
Follow the principle of matching between revenue and expenses incurred during the period.
Time of recording
At the time of preparing financial statements.
In accordance with the time of determining the corresponding revenue in the accounting period or the time of arising of debt obligations.
Accounting
Provisions for payables are recorded in business management expenses, while provisions for product warranties are recorded in sales expenses and provisions for construction warranty costs are recorded in general production expenses.
Recorded in production and business expenses in the period in accordance with the content and nature of the expenses.
Note: Prepaid expenses should not be recorded in account 335 but should be recognized as a provision for liabilities, as follows:
+ Major repair costs for specific fixed assets, where the repair is cyclical in nature, allow businesses to prepay repair costs for the plan year or several subsequent years;
+ Warranty provisions for products, goods, construction projects, restructuring;
+ Other provisions for liabilities (as specified in account 352).
⇒ Therefore, in essence, when accounting determines whether to record a transaction in account 335 or account 352 – provisions for liabilities, it should depend on the “certainty” of the transaction, whether it will actually occur or not.
For a deeper understanding of how account 335 is applied in real-world accounting and the legal requirements, readers are invited to refer to the industry bulletin posted on our website. The bulletin provides an overview of the nature and specific regulations related to the recognition and accounting of payable expenses according to Circular 200/2014/TT-BTC.
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