6 accounting for manufacturing costs and finished construction works costing in tuan cuong construction joint stock company

Concepts, requirements for manufacturing costs and finished goods

Manufacturing costs and cost of finished goods

In an enterprise, three essential elements are required for production and business activities: labor materials, labor objects, and labor forces The production and business process involves utilizing these factors to generate products and services, leading to the associated costs incurred during this consumption.

Manufacturing cost encompasses the total expenses incurred by a business during the production process, including labor costs, physical materials, and other essential expenditures associated with creating or delivering goods and services over a specific timeframe.

Manufacturing costs are typically divided into three categories:

- Direct materials, which is the cost of the materials that are traceable to the product, such as the aluminum in beverage cans.

- Direct labor, which are the wages or salaries and fringe benefits earned by the individuals who are physically involved in converting raw materials into a finished product.

- Manufacturing overhead, which includes all of the other costs incurred in

Graduation thesis Mentor: Ph.D Nguyen Dao Tung the manufacturing activities These indirect costs include repairs and maintenance, depreciation of the manufacturing equipment, utilities, salaries of manufacturing supervisors, etc.

Manufacturing costs refer to the expenses incurred from the wastage of inputs during the production process for business purposes These costs vary based on the volume of production factors used and the price of each wasted unit Measured in monetary terms, manufacturing costs are assessed over a specific time frame.

The cost of finished goods encompasses all expenses related to labor, including living and physical labor, along with other associated costs, calculated based on the volume of completed labor and services Therefore, the cost of finished goods reflects the valuation of the various cost factors that are incorporated into the final products.

1.1.1.3 The relationship between manufacturing cost and cost of finished goods

Manufacturing costs and the cost of finished goods represent two aspects of the production and business process, reflecting the total loss of both living and materialized labor invested by businesses.

Manufacturing costs and the cost of finished goods differ in key ways Manufacturing costs encompass all expenses incurred over a specific timeframe—be it a month, quarter, or year—irrespective of product completion status Conversely, the cost of finished goods pertains specifically to the production costs attributed to completed products, reflecting expenses from prior periods and those transitioning into future periods For instance, prepaid expenses are incurred in one period, but only a portion is allocated to the cost of finished goods, with the remainder carried over to subsequent periods Additionally, some expenses may not have been incurred during the current period yet are still partially included in the cost of finished goods for that timeframe.

The difference in quantity and the relationship between manufacturing costs and cost of finished goods is reflected in the following formula for calculating the overall product price:

Manufacturing cost incurred in the period

Thus, manufacturing costs are the basis for building the cost of finished goods while cost of finished goods is the basis for building the selling prices.

In a stable selling price environment, an enterprise's ability to save or waste manufacturing costs directly influences the cost of finished goods, ultimately affecting profitability Therefore, cost-saving measures and reducing the cost of finished goods are essential ongoing tasks in economic management, enabling businesses to compete effectively in the market.

Graduation thesis Mentor: Ph.D Nguyen Dao Tung

Requirements for manufacturing costs and finished goods costing accounting

Cost accounting serves as a crucial management tool for businesses, particularly in overseeing manufacturing costs and the pricing of finished goods To effectively account for these costs, it is essential to identify the specific objects related to manufacturing expenses and finished goods, tailored to the unique conditions of the business Additionally, employing appropriate cost accounting methods and ensuring that the accounting process is organized, accurate, complete, and timely are vital for optimal financial management.

- Checking the implementation of production plans in each part of the enterprise.

To effectively determine the cost of finished goods, it is essential to analyze the enterprise's characteristics, production situation, and technological processes This involves identifying the appropriate cost collection objects and implementing suitable cost calculation methods tailored to the specific production characteristics of the business.

Effective organization of manufacturing costs involves systematically collecting and allocating expenses based on identified objects By employing appropriate methods, businesses can accurately calculate the actual costs associated with each object and product unit, ensuring compliance with regulations and maintaining precision throughout the process.

To ensure effective production management, it is essential to monitor the implementation of technical material consumption norms and cost estimates This practice promotes the economical and reasonable use of expenses, aligning with the requirements of business accounting.

Regularly review the execution of the production plan while focusing on reducing the costs of finished goods It is essential to explore potential opportunities and consistently aim for a reasonable decrease in these costs.

- Determining economic results in each department and the whole enterprise.

Effective expense verification within an organization significantly enhances cost management, ultimately leading to reduced finished goods costs This reduction is crucial for establishing a competitive advantage and serves as a foundation for setting selling prices, analyzing costs, and determining business performance Moreover, accurate accounting of manufacturing costs and finished goods is essential for management accounting, providing vital information for informed business management decisions.

Accounting for manufacturing costs and cost of finished goods needs to perform the following major tasks:

Recognizing the importance of accounting for manufacturing costs and finished goods is essential within the overall enterprise accounting system It is crucial to understand the relationship between various accounting departments, as the accurate tracking of cost factors serves as the foundation for effectively managing manufacturing costs and finished goods.

To effectively determine the objects of manufacturing cost accounting, it is essential to consider the characteristics of production and business organization, the production technology process, and the specific features of the products Additionally, the ability to account and the unique management requirements of the enterprise play a crucial role in selecting appropriate methods for gathering manufacturing costs This approach ensures that finished goods costing aligns with the enterprise's operational conditions and objectives.

To ensure effective financial management, it is crucial to systematically organize the accounting framework by clearly defining the responsibilities of each employee and relevant accounting departments, particularly focusing on the cost accounting department.

To effectively manage manufacturing costs and the pricing of finished goods, it is essential to organize vouchers, maintain initial accounting, and implement a systematic approach to accounts and accounting books This must be done in accordance with established accounting principles, standards, and regimes to meet the requirements for collecting and processing information accurately.

Effective organization of accounting reports on manufacturing costs and finished goods is essential for providing managers with the necessary information to make timely and informed decisions.

Manufacturing costs and finished goods costing accounting

Accounting for manufacturing costs

In industrial manufacturing, the overall manufacturing cost encompasses various types of expenses, each with distinct economic implications, objectives, and applications within the production process Consequently, the management requirements for these different cost categories vary significantly.

Effective production management and cost control require a detailed analysis beyond just total production costs It is essential to examine specific data for each type of cost, enabling comprehensive evaluation and oversight of all manufacturing expenses This approach allows for a thorough understanding of initial cost factors associated with each product and the specific locations where these costs are incurred.

Classifying manufacturing costs is essential for precise cost accounting and product pricing A systematic approach to this classification enhances not only the accuracy of manufacturing cost accounting and finished goods valuation but also serves as a vital foundation for effective cost planning, inspection, and analysis This strategic classification fosters economical and rational utilization of manufacturing costs, reduces finished goods expenses, and amplifies the significance of accounting practices in driving enterprise growth.

Depending on the management requirements, information providers, manufacturing cost is classified in the following ways:

* According to the nature of cost

Manufacturing costs are categorized based on their economic content, grouping similar cost types into distinct categories known as cost factors These cost factors encompass various components that contribute to the overall manufacturing expenses.

- Cost of raw materials and fuel: Including all expenses for the types of labor objects that are main materials, auxiliary materials and fuels.

Labor costs encompass all expenses related to employee compensation, including salaries, wages, and allowances These costs represent the total financial obligation a business has towards its employees during a specific period.

Social insurance, health insurance, unemployment insurance, and trade union fees are deducted from the salaries of officials and employees, as per current regulations The deductions include 25.5% for social insurance, 4.5% for health insurance, 2% for trade union funds, and 2% for unemployment insurance, all of which are calculated as expenses.

Fixed asset depreciation expense refers to the gradual reduction in value of fixed assets over time as they are utilized in production and business operations This depreciation value is transferred into the overall product value, and it is essential to deduct the depreciation cost for all fixed assets during the accounting period.

- Costs of other services: Including the total amount paid for services used in production and business activities provided by other units such as: payment of electricity, water, telephone…

- Other costs: They are the cash costs in addition to the above paid expenses such as license tax, land tax…

This classification is characterized by the original nature of all costs incurred in production and business activities, independent of their application or the specific product If a company produces a component of the material for its operations, the expenses associated with creating that material must be allocated to the relevant factors.

The classification outlined above clearly illustrates the cost of living and the tangible labor involved in all production and business expenses over a specific period for the enterprise It highlights the structure and proportion of each cost component within product and labor costs, providing a foundational basis for developing plans related to material supply and the mobilization and utilization of labor for statistical analysis by various factors.

* According to the function of cost (or according to finished goods cost items)

Every cost incurred in production and business activities serves a specific purpose and utility To effectively organize these costs, they are categorized into distinct expenditure items based on their economic use Each item encompasses only those expenses that share a common purpose and utility, regardless of their economic nature Consequently, all production and business costs for the period are classified into these specific expenditure categories.

Direct materials costs encompass the expenses associated with raw materials essential for the production of a company's products and services These costs exclude materials used for general production activities unrelated to specific products As a critical component of the overall product cost structure, raw materials significantly impact profitability Within the enterprise, material costs are meticulously tracked for each user, product type, and accounting method to ensure accurate financial reporting and management.

Graduation thesis Mentor: Ph.D Nguyen Dao Tung according to the perpetual inventory method.

Direct labor costs encompass the expenses associated with employees directly involved in manufacturing products and providing services This includes accounts payable for in-house laborers, as well as costs related to outsourced labor Key components of direct labor costs are salaries, wages, and additional benefits such as social insurance, medical insurance, labor union fees, and unemployment insurance.

Factory overhead costs encompass the expenses associated with maintaining the management structure within the workshop, as well as the operational costs of production teams These costs are essential for supporting overall production activities and include various common expenses incurred during the manufacturing process.

+ Labor costs of management staff in workshops, production teams.

+ Cost of materials used for general production needs in workshops, production teams.

+ Depreciation expense of fixed assets used for production in workshops, production teams

+ Expenses for tools and tools used in production in workshops, production teams.

+ Expenses for outsourcing services used in production in workshops, teams, production teams such as: electricity, water, telephone and rent repair expenses.

+ Amounts accrued with an agreement of the financial agency such as: fixing major fixed assets

+ Other cash expenses are expenses other than the above-mentioned expenses incurred in production workshops, teams: expenses for stationery, labor protection and working expenses

Manufacturing costs can be classified based on their use in managing production expenses, including raw material and fuel consumption norms, wage standards, and estimates for finished goods costing Accountants utilize this classification to compile the production costs associated with a product, serving as a benchmark for establishing production cost norms and planning future costs This approach also enables the analysis and evaluation of unreasonable cost items, facilitating the identification of measures to reduce various costs and ultimately lower the cost of finished goods.

In addition to the primary classification methods, manufacturing costs can also be categorized based on various criteria for effective management and accounting These classifications include differentiating costs into fixed and variable costs based on their relationship with production volume, as well as dividing costs into direct and indirect allocation costs according to the accounting method used for cost aggregation.

1.2.1.2 Management accounting and manufacturing costs accounting objects

Accounting for cost of finished goods

1.2.2.1 Cost of finished goods classification

To effectively address management needs, cost accounting, and pricing strategies, the costs of finished goods are categorized through various classification methods, each focusing on different calculation perspectives.

* According to finished goods costing range:

+ Total production cost: includes all the fixed and variable costs of direct materials costs, direct labor costs, factory overhead costs calculated for finished products.

+ Production cost according to variable cost: includes only variable costs of direct materials costs, direct labor costs, factory overhead costs calculated for finished products.

Production costs are determined by a fair allocation of fixed costs, encompassing all variable expenses associated with finished products This allocation is based on the actual operating level in relation to the designed capacity, ensuring an accurate reflection of costs incurred during production.

+ Total production cost according to variable cost: includes all variable costs (variable production expenses, variable sales costs, variable enterprise management costs) calculated for consumption products.

+ Total production cost of consumed products: includes production costs and other costs in addition to production costs calculated for consumption products.

1.2.2.2 Cost of finished goods objects

To accurately determine the total cost of finished goods and the unit cost for each item, accountants must analyze gathered manufacturing costs This process involves identifying the correct cost objects, defining the period for finished goods costing, and selecting the appropriate costing method.

To accurately assess the cost of finished goods, it is essential to consider various factors, including the characteristics of the products, the organizational structure of production, the specifics of the production technology process, and the management requirements of the enterprise.

Therefore, the specific objects of finished goods costing may be:

- Each complete product, work, order.

- Each detail, part of products.

Manufacturing costs gathering and finished goods costing share the same fundamental purpose, focusing on specific scopes and limits to collect production costs essential for effective management and analysis Their interrelationship underscores that accurately defining the parameters for manufacturing costs is crucial for determining the costs of finished goods within a business.

However, there are certain differences between these two concepts.

- Determining the object of manufacturing costs gathering is to determine the scope and limit of the accounting organization of production costs arising in the period.

- Determining the object of finished goods costing is to determine the scope and limit of costs related to the finished production results of the production process.

Manufacturing cost gathering serves as a foundation for establishing accounts and detailed records, facilitating the organization of initial documentation This process enables the collection of specific manufacturing cost data for each object, ultimately assisting enterprises in improving their cost inspection and achieving savings.

Finished goods costing is essential for creating detailed cost tables, selecting appropriate costing methods, and evaluating the effectiveness of price strategies and business operations.

Manufacturing cost aggregation can encompass multiple finished goods costing objects, and the reverse can also be true The choice of costing method depends on the relationship between these manufacturing cost gathering objects and the finished goods costing objects.

The period of finished goods costing refers to the timeframe in which the cost accounting department calculates the cost prices for finished goods This period should align with the characteristics of the product's production organization and its production cycle, which can vary from monthly to quarterly or coincide with the completion of the product's production cycle.

1.2.2.3 Costing methods of unfinished products

Unfinished products refer to items or jobs that are currently undergoing manufacturing or processing These products have completed certain stages of production but require additional processing to be transformed into finished goods.

The assessment of unfinished products involves calculating and determining the manufacturing costs associated with the volume of unfinished goods at the end of a specific period, following established principles.

To accurately calculate the cost of finished goods, it is crucial to assess the value of unfinished products at the end of the period This involves determining the manufacturing costs associated with these unfinished items An effective inventory must be organized to evaluate the volume of unfinished products, while also accurately measuring their level of completion in relation to the completed products at each production stage.

There are following unfinished products evaluating methods:

- Unfinished products evaluating methods according to norm production costs

- Unfinished products evaluating methods according to direct raw materials costs

- Unfinished products evaluating methods according to the volume of equivalent finished products

The finished goods costing method is a system utilized to determine the unit cost of finished products Companies select the appropriate costing method based on their specific cost accounting objectives and the characteristics of their finished goods Commonly employed methods for costing finished goods include various approaches tailored to meet the unique needs of each enterprise.

- Method of finished goods costing according to work

- Method of finished goods costing according to the production process

- The simple finished goods costing method

- Method of finished goods costing according to coefficient

- Method of finished goods costing according to ratio

- Method of finished goods costing eliminating the cost of producing by- products

- Method of finished goods costing by steps, including the costs of half finished goods

- Method of finished goods costing by steps, excluding the costs of half finished goods

 The simple finished goods costing method:

The total cost of finished goods: Z = Dđk + C - Dck

The unit cost of finished goods: z= Qht Z

In which: Z: The total cost of finished goods z: The unit cost of finished goods

Dđk: the value of unfinished products at the beginning of the period

C: manufacturing costs in the period

Dck: the value of unfinished products at the ending of the period

1.2.2.5 Accounting for manufacturing costs and finished goods costing

At the conclusion of the accounting period, accountants compile direct materials costs, direct labor costs, and factory overhead costs, subsequently consolidating these expenses to determine the total production costs for the entire enterprise.

Depending on whether the enterprise applies inventory accounting method by perpetual inventory method or periodic inventory method, the accounting account used will be different: Account 154 or Account 631.

 Manufacturing costs gathering in the enterprise applying perpetual method:

Flowchart 1.4: Manufacturing costs gathering in the enterprise applying perpetual method

Allocate, transfer direct labor cost

Allocate, transfer factory overhead cost

Cost of finished goods on consignment

Cost of finished goods sold immediately without inventory costs that exceed normal level

Direct labor costs that exceed normal level

Factory overheads that exceed normal level because machinery operates under capacity

Allocate, transfer using construction machines cost

 Accounting for manufacturing costs in the whole enterprise applying periodic method:

According to the periodic inventory method, the organization of accounting of cost items is the same as the perpetual inventory method, which is done on accounts:

- Account 623 - Using construction machines cost

Manufacturing costs gathering in the enterprise applying periodic method:

Acc 138, 811,111 Transfer beginning work in progress

Direct materials costs in the period

Transfer ending work in progress

Amounts that reduce cost of finished goods

Direct labor costs in excess of normal rate

Direct materials costs in excess of normal rate

Flowchart 1.5: Manufacturing costs gathering in the enterprise applying periodic method

Accounting books used for manufacturing costs and finished

The accountant compiles data from various documents, including material and salary allocation tables, as well as expense lists, to create comprehensive reports and statements This synthesis of information serves as a foundation for the accounting of related accounts.

Accounting books used for recording, monitoring manufacturing costs and finished goods costing include general accounting books and detail accounting books.

- General accounting books: depending on each accounting form, other accounting books are organized differently

Accounting books should be tailored to meet the specific needs of tracking manufacturing costs and calculating the expenses of finished goods Additionally, businesses have the flexibility to maintain detailed records based on administrative requirements, without being strictly bound to prescribed regulations.

Enterprises must utilize the accounting book system established or approved by the Ministry of Finance, while also incorporating specific criteria and requirements tailored for effective management accounting Any modifications or additions to the accounting book contents should not distort the prescribed criteria and must align with the management needs of the enterprise.

To effectively manage manufacturing costs and product costing, enterprises can establish detailed accounting records for accounts 621, 622, 627, 154, and 631, tailored to specific workshops, production teams, product types, and orders.

Accounting for manufacturing costs and finished goods costing

As businesses grow and expand their operations, the complexity of their accounting processes increases, leading to a higher volume of tasks for the accounting department To streamline these operations, many companies are now leveraging advanced technology to enhance their accounting functions The primary advantage of computerized accounting systems is that they automate accounting tasks through specialized software, significantly reducing manual input and minimizing errors in data processing.

Accounting software is developed based on one of four primary accounting methods, integrating elements from each While it may not fully replicate the manual recording process, it is essential for the software to provide all required accounting books and financial reports The design of the software corresponds to the specific accounting method it follows, resulting in books that differ from traditional manual accounting records.

Process of recording accounting books in the form of computerized accounting:

Synthesis of accounting vouchers of the same type

Figure 1.1: Computerized accounting form Note:

The interfaces and recording methods will be introduced deeply in each section of accounting in chapter 2

Enter data daily Report at the end of the month and the end of the year

MANUFACTURING COSTS AND FINISHED

Overview of the enterprise

2.1.1 General information of Tuan Cuong Construction Joint Stock Company

Tuan Cuong Construction Joint Stock Company operates as an independent economic entity with its own state designation and official stamp The company maintains its primary account at Sai Gon - Ha Noi Bank in Nghe.

Vietnamese name Công ty Cổ phần Xây dựng Tuấn Cường

Tuan Cuong Construction Joint Stock Company

Address No 17, Nguyen Du Street, Trung Do Ward - Vinh City

- Nghe An Province Phone number (+84) 383 855927

Email songpho1960@yahoo.com.vn

2.1.2 Functions and tasks of the enterprise

- Construction of civil engineering works such as housing construction,water supply and drainage systems, technical infrastructure of industrial

Ph.D Nguyen Dao Tung serves as a mentor for graduation theses, focusing on diverse areas including parks, urban and rural development, and lighting systems His expertise extends to industrial construction, irrigation, and hydroelectric projects, as well as the development of tracks and transformer stations up to 500 KV Additionally, he is involved in post and telecommunications, the construction of dikes and sea embankments, and the restoration and enhancement of sports, tourism, cultural, and historical sites.

- Construction of railway and road.

- Carry out specialized construction activities such as termite prevention for construction works, dams, trees; pressing concrete piles, treating foundations; dredging rivers, creeks and canals.

- Wholesale of construction materials and equipment in construction companies.

- Installing electrical system, water supply, drainage, heating and air conditioning systems

- Wholesale of machinery, electrical equipment, electrical materials, construction equipment, water supply and drainage, forestry, mining, trading camera equipment, alarm systems

2.1.3 The characteristic of management of the enterprise

2.1.3.1 Management structure of the enterprise

Figure 2.2: Model of management structure of the enterprise

Construction works quality inspection department

Board of operation director Board of supervisor

2.1.3.2 Functions and tasks of each department

The Shareholders Meeting serves as the supreme authority within a company, responsible for addressing and making critical decisions on key matters such as the company charter, electing Board of Directors members, determining production strategies, outlining development goals, setting annual dividends for shares, and deciding on the investment or sale of valuable company assets.

 Board of Supervisor: is the person who acts on behalf of shareholders to control the management and administration of all business activities of the company.

The Board of Management serves as the governing body of the company, responsible for making critical decisions that align with the company's objectives and interests This includes the authority to appoint or dismiss the company's Director, determine the overall and long-term development strategies, and approve investment plans and projects within their jurisdiction.

The Board of Operation Directors is tasked with managing the company and ensuring its effective organization Members of the board are elected during the General Meeting and serve a term of one year.

The Construction Works Quality Inspection Department is responsible for ensuring product quality before delivery to consumers, while also focusing on the research and improvement of that quality This department oversees the acceptance of raw materials, fuels, and input materials, as well as the quantity of dispatched products, ensuring strict compliance with regulations regarding their delivery Additionally, it synthesizes and analyzes data to propose and enhance quality management measures, and supervises the quality of constructions to guarantee adherence to safety and quality standards.

 Financial - Accounting Department : performs financial planning, cost calculation, debt recovery, interest accounting, payment of wages for workers, payment for customers…

 Construction supervision Department : has a very important function of organizing construction, ensuring the construction process takes place properly, ensuring constructions quality.

The Administration and Protection Department is primarily responsible for human resource management, ensuring the effective utilization of the workforce while overseeing the recruitment of new employees Additionally, it manages administrative tasks, including the organization of records, documents, and office equipment, as well as promoting emulation and communication within the company.

Effective management of materials and equipment in workshops is essential for meeting production goals By strictly adhering to labor and material management measures, we ensure the successful completion of assigned tasks Our commitment to quality guarantees that constructions not only fulfill customer requirements but also offer the most competitive pricing.

 Construction workers’ team: construction projects of the company

2.1.4 The accounting system in Tuan Cuong Construction Joint Stock Company

2.1.4.1 The organization of the accounting system at the company

Based on the actual situation of the enterprise, the company organizes the accounting system in the form of both centralization and decentralization as follows:

Figure 2.3: Accounting system in Tuan Cuong Construction Joint Stock

2.1.4.2 Duties of each accounting section

The Chief Accountant oversees the company's entire accounting operations, assisting the director in implementing accounting, statistical, and economic information systems in line with contemporary management practices This role involves managing departmental tasks and collaborating with relevant departments, while also ensuring accountability to the director and legal authorities for the company's financial and accounting responsibilities.

Payment accounting involves daily tracking of payment documents related to incurred expenses, ensuring an accurate reflection of cash capital utilization within the company It is essential for monitoring revenue and expenditure trends, as well as overseeing bank loans and managing debts with both customers and suppliers.

Accounting staffs at the warehouse

Accounting Materials, of Tools, and Fixed assets

Tax accounting is crucial for companies engaged in both import and export activities Tax accountants manage the preparation of import and export tax declarations with customs authorities, ensuring accurate monitoring and synthesis of taxes At the end of each month, they calculate taxes for declarations and identify deductible taxes Additionally, they are responsible for filing the corporate income tax return at year-end while continuously overseeing the company's tax compliance status.

Payroll accounting is essential for accurately calculating and allocating expenses related to salaries and wages It ensures proper management of deductions such as social insurance, health insurance, and trade union fees, adhering to both company policies and state regulations.

Effective accounting of materials, tools, and fixed assets is crucial for monitoring the inventory levels and transactions related to production and business operations Accountants must maintain detailed records and warehouse cards to accurately track the receipt and dispatch of various materials and tools, ensuring a clear overview of the inventory situation.

Accountants are responsible for accurately tracking and reflecting the current status and fluctuations of fixed assets across the enterprise and its departments They must ensure the safety of these assets while maximizing their utilization Detailed monitoring of each fixed asset is essential, and accountants are required to maintain comprehensive records in the fixed asset register At the end of each month, they prepare a depreciation allocation table for each asset to account for associated costs effectively.

Synthesis accounting plays a crucial role in tracking and calculating manufacturing costs, focusing on the monthly assessment of finished product costs It involves gathering production expenses, monitoring the input-output inventory of finished products, and managing the overall revenue accounting for the company Additionally, synthesis accounting prepares comprehensive reports for upper management, ensuring accurate financial oversight and decision-making.

Manufacturing costs and finished construction works costing

accounting in Tuan Cuong Construction Joint Stock Company

2.2.1 General points of manufacturing costs and finished construction works costing in the company

The company specializes in the production and trading of agricultural products, incorporating processing into its operations To effectively manage and account for expenses, the manufacturing costs are categorized into various types, reflecting the diverse economic properties and management needs involved in the production process.

 Based on the purpose and economic use of manufacturing costs, the company classifies manufacturing costs into:

- Cost of direct materials including expenses for: raw materials which are cement, concrete, broken stone, gravel, sand, …; raw materials that directly create products.

- Direct labor costs include expenses on salaries, allowances, social insurance, health insurance premiums, trade union fees of workers that directly produce products according to the current regime.

Manufacturing overheads encompass various expenses such as labor costs, materials, tools, and depreciation of fixed assets These costs also include other necessary expenditures incurred in workshops and warehouses, which are essential for the management and operation of the factory within the company.

 Based on the components of manufacturing costs, the company classifies manufacturing costs into:

- Cost of raw materials: Including the purchase price, the transportation costs of materials used in production activities during the period, purchase price, purchase expenses of materials used for production

Labor costs encompass the total expenses related to employee salaries, which include deductions for social insurance, health insurance, and trade union fees These costs are specifically associated with laborers working in various production areas, such as warehouses, storage workshops, and concentrated workshops.

- Expenses for services purchased from outside: This is the amount payable for services purchased from outside to serve the production activities of the enterprise: repair costs, electricity, …

- Other cash costs: Including cash costs incurred in the production process in addition to the above-mentioned cost factors.

The construction process at Tuan Cuong Construction Joint Stock Company is distinctive and tailored to the specific scope, consumer requirements, and detailed conditions of each project Nonetheless, it adheres to standard steps and fundamental principles The process consists of five main steps that ensure consistency and quality in construction.

 Recepting the construction works (based on the results of bidding)

 Construction Works ( Break Ground, Excavation, Foundation, Utilities, Framing, Roofing, Weather Resistant Barrier, Rough Plumbing, Mechanical Sytems, Lighting and Electrical, Air Sealing, Insulation, Drywall, Siding, Flooring, Tiling, Painting, Cabinets, Shelving, ).

 Completion and acceptance of the project

The primary focus of Tuan Cuong Construction Joint Stock Company in tracking manufacturing costs is to accurately gather the expenses associated with direct materials and direct labor for each construction project and machinery used.

2.2.1.3 Objects of finished construction works costing

In the construction industry, companies typically assess project costs based on current market prices prior to submitting bids As a result, the overall cost of construction is generally established before the actual building process begins.

To create successful construction bids, companies must adhere to specific rules, including generating precise cost estimates and submitting the most competitive bid among rivals The bidding process starts by thoroughly reviewing construction plans and conducting material quantity takeoffs to ensure accuracy.

2.2.2 Accounting for manufacturing costs in Tuan Cuong Construction Joint Stock Company

2.2.2.1 Accounting for direct material costs

In order to gather direct materials costs, the company accounting department uses documents such as:

In the production departments, specifically within warehouses, a voucher for supplies is created based on the construction plan, actual demand, and established material usage norms This voucher details the types and quantities of materials required, and it is signed and confirmed by the responsible individual in the production department.

"Request for materials" This form is made in 2 copies, 1 copy is kept in the warehouse, one is assigned to the storekeeper to write the Goods dispatches notes

Tuan Cuong Construction Joint Stock Company

Vinh City – Nghe An Province

No Name of items Unit Quantity Date

When processing requests for ex-warehousing materials and supplies, storekeepers verify the legitimacy and rationale of the vouchers before issuing good dispatch notes They meticulously compare the actual quantities of materials being dispatched against the records on these notes Additionally, storekeepers update stock cards to accurately track the quantities of each material during both receiving and dispatching processes.

Picture 2.2: Initial screen for inventory

Address: Tuan Cuong Construction JSC Form No: 02 – VT

(Issued in accordance with Circular No 200/2014 / TT BTC December 22, 2014 of the Ministry of Finance)

- Receivers: Mrs Thu - Address: Factory accounting D.Acc: 621

- Description: Serving 110 kV Hoang Mai power line project C.Acc: 152

- Pay out stock: Material warehouse.

- Attached voucher: 01 Request for materials.

At the end of the month, the storekeeper synthesizes the good dispatches notes, sends them to the accounting department, synthesizes into

“Material dispatches list” for each type of product produced in the month and for general production to import data into the machine.

No : 295 Products: Serving 110 kV Hoang Mai power line project

Date No Items Unit Quantity

Graduation thesis Mentor: Ph.D Nguyen Dao Tung 2.2.2.1.2 Accounts used for direct materials costs

Account 621 – Direct Materials Costs is utilized by accountants to track the expenses associated with raw materials directly used in construction projects during a specific period The account structure implemented by the business aligns precisely with the mandated regulations.

The company opens 3 second grade accounts for Account 621:

- Account 6211 - Cement, additives for cement and concrete (open details according to each product)

- Account 6212 - Construction glass (open details according to each product)

- Account 6213 - Ceramic tiles (opening details according to each product)

- Account 6214 - Construction sand and construction materials (opening details according to each product)

- Account 6215 - Others construction materials (opening details according to each product)

2.2.2.1.3 Accounting treatment for direct materials costs o Costing method for materials used

In the accounting department, materials warehousing operations are recorded based on goods receipt notes, with detailed accounting in the materials and tools ledger for each item The company employs the "Weighted Average Method" to determine the unit price of materials upon ex-warehousing, following a specific calculation formula.

Value of materials dispatched in the month =

Quantity of materials dispatched in the month x

Average price of materials dispatched in the month

Average price of materials dispatched in the month =

Actual cost of materials at the beginning of the month +

Actual cost of materials receipted during the month

Quantity of materials at the beginning of the month +

Quantity of materials receipted during the month

The computer will automatically calculate the unit price of materials dispatched in the month according to the above formulas

At the end of each month, the materials accounting team reviews the warehouse inventory by comparing the actual stock with the recorded amounts on the stock cards This process involves analyzing the actual inventory levels at both the beginning and end of the period and cross-referencing them with the detailed records of materials and tools to ensure accuracy and consistency.

After entering enough data into the computer, the accountant enters

In the box "Account", enter Account 1521,

Select "From" December 1, 2019 "to" December 31, 2019, Press "Print" to

Graduation thesis Mentor: Ph.D Nguyen Dao Tung extract the detail book of Account 152

Sample 2.4: Details book of materials

Tuan Cuong Construction JSC Form No : S10 – DN

Date No Description Unit Acc

Receipt quantity Debit Dispatch quantity Credit

13/12 116 Bought from Bim Son Cement distribution agent – Put into warehouse Kg 331 10,000 130,000,000 0 0

At the end of each month, materials accounting will input data from the "Material Dispatches List" provided by storekeepers into the computer system, detailing the various materials used for production Additionally, the company will dispatch main raw materials, specifically construction materials, which are also subject to VAT.

When dispatching auxiliary materials for production, accountants also base on the "Material dispatches list" established by the storekeeper to enter data into the computers.

Once the accountants enter fully data into the software, the program will automatically make entries to the arising operations.

The accountant clicks on the "Accounting books" to select "Details books", similar to the detailed book of Account 1521,

Press "Print" to print out the detail book of Account 6211 - Details of Serving 110 kV Hoang Mai power line project:

Sample 2.5: Details book of direct materials costs

Tuan Cuong Construction JSC Form No S10 – DN

Warehouse 03 Products: Serving 110 kV Hoang Mai power line project

Date No Description Unit Acc Ref Receipt quantity Debit Dispatch quantity Credit

31/12 0295 Serving 110 kV Hoang Mai power line project – Cement P400 Kg 1521 20,000 390,000,000 0 0

31/12 0295 Serving 110 kV Hoang Mai power line project – Sand Kg 1521 14,000 247,000,000 0 0

31/12 0295 Serving 110 kV Hoang Mai power line project – Concrete Kg 1521 400 96,000,000 0 0

31/12 0295 Serving 110 kV Hoang Mai power line project – Broken Stone Kg 1521 200 58,000,000 0 0

31/12 AL Transfer direct material costs Serving 110 kV Hoang Mai power line project

Each month, the company issues numbered recording vouchers starting from 01, 02, 03, and so on The FAST program automatically assigns these serial numbers Once accountants input all necessary data into the FAST accounting software, it seamlessly generates entries and updates the general ledger along with related detail books.

Finally, to see the ledger, from the initial screen, select "Financial statements" → "General Ledger":

In the box "Account": enter Account 621

In the box "From": enter December 1, 2019

In the box "To": enter December 31, 2019

Finally click "Print" to print the general ledger of Account 621

Sample 2.6: General ledgers of Account 621

Tuan Cuong Construction JSC Form No S02c1 – DN

Dispatching materials to serve 110 kV Hoang Mai power line project

Dispatching materials to Complete construction works at Nam Cam Industrial Park

31/12 Transfer direct Direct materials costs – Acc 6211 154 3,250,000,000

31/12 Transfer direct Direct materials costs – Acc 6212 154 1,200,000,000

31/12 Transfer direct Direct materials costs – Acc 6213 154 650,000,000

2.2.2.2 Accounting for direct labor costs

Tuan Cuong Construction Joint Stock Company utilizes a periodic salary payment system, which is determined by the accounting and timekeeping records to generate employee payroll.

SUGGESTIONS TO IMPROVE MANUFACTURING

Tiêu đề	Accounting For Manufacturing Costs And Finished Construction Works Costing In Tuan Cuong Construction Joint Stock Company
Tác giả	Nguyen Thuy Trinh
Người hướng dẫn	Ph.D Nguyen Dao Tung
Trường học	Tuan Cuong Construction Joint Stock Company
Chuyên ngành	Accounting
Thể loại	Graduation Thesis

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