[Luận văn bằng tiếng anh - GRADUATION THESIS] ACCOUNTING FOR PRODUCTION COST AND PRODUCT COSTING AT

MINISTRY OF FINANCE

ACADEMY OF FINANCE

ACCOUNTING FACULTY

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GRADUATION THESIS

ACCOUNTING FOR PRODUCTION COST AND PRODUCT COSTING

AT HANOI – HAI PHONG BEER JOINT STOCK COMPANY

Teacher : PhD. Thai Ba Cong

MSc. Nguyen Ba Linh

Hanoi – 2021

COMMITMENT

I hereby declare that the dissertation entitled “Cost accounting and product

cost calculation at Hanoi – Hai Phong Beer Joint Stock Company” is the

research work my own under the guidance of…, the data, the results stated in

the dissertation is honest, comes from the actual situation of Hanoi – Hai Phong

Beer Joint Stock Company.

Dissertation writer

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TABLE OF CONTENTS

INTRODUCTION...............................................................................................8

CHAPTER 1: THE GENERAL THEORY OF ACCOUNTING FOR

PRODUCTION COST AND PRODUCT COSTING AT

MANUFACTURING ENTERPRISES............................................................11

1.1. The need of accounting for production cost and product costing at

manufacturing enterprises............................................................................11

1.1.1. Concept, essence of production cost and product cost................................11

1.1.2. Management requirements for accounting for production costs and

product costing.......................................................................................................13

1.1.3. Tasks of accounting for production cost and product costing:..................14

1.2. Classification of production costs and product costs:.........................15

1.2.1. Classification of production costs:..............................................................15

1.2.2. Classification of product costs:....................................................................19

1.3. Objects of production cost accounting and product costing..............20

1.3.1. Objects of production cost accounting:.......................................................20

1.3.2. Objects of product costing............................................................................20

1.3.3. The relationship between objects of production cost accounting and

objects of product costing.......................................................................................21

1.4. Accounting for production costs according to the utility purpose of

costs.................................................................................................................21

1.4.1. Accounting for direct raw material costs....................................................21

1.4.2. Accounting for direct labour costs...............................................................23

1.4.3. Accounting for production overhead costs..................................................24

1.4.4. Accounting for production costs for the whole enterprise..........................26

1.5. Methods of valuing closing work in progress......................................28

1.5.1. Valuing closing work in progress based on direct material costs..............29

1.5.2. Valuing closing work in progress based on equivalent units.....................30

1.6. Product costing method in enterprises.................................................31

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1.7. Organization of production cost accounting and product costing in

terms of information technology application..............................................33

1.7.1 Functions and duties of production cost accounting and product costing

in terms of information technology application....................................................33

1.7.2. Principles and order of accounting for production cost and product

costing in terms of information technology application:......................................34

1.8. Accounting book to accumulate production costs and product costs:

.........................................................................................................................35

CHAPTER 2: ACTUAL SITUATION OF ACCOUNTING FOR

PRODUCTION COST AND PRODUCT COSTING AT HANOI – HAI

PHONG BEER JOINT STOCK COMPANY................................................38

2.1. Overview of Hanoi – Hai Phong Beer Joint Stock Company.............38

2.1.1. History of establishment and development of Hanoi – Hai Phong Beer

Joint Stock Company:............................................................................................38

2.1.1. Organizational characteristics of production and business activities in

Hanoi – Hai Phong Beer Joint Stock Company...................................................40

2.1.1 Organizational and management characteristics of Hanoi - Hai Phong

Beer Joint Stock Company.....................................................................................48

2.1.4. Organizational characteristics of accounting work at Hanoi – Hai

Phong Beer Joint Stock Company.........................................................................52

2.2. Actual situation of production cost accounting and product cost

calculation at Hanoi – Hai Phong Beer Joint Stock Company..................61

2.2.1. Objects and accounting methods for accumulating production costs:......61

2.2.2. Classifiaction of production costs:..............................................................61

2.2.3. Accounting for production cost:..................................................................62

2.2.4. Actual situation of product costing at Hanoi – Hai Phong Beer Joint

Stock Company.......................................................................................................98

2.3. General assessments of accounting for production cost and product

costing at Hanoi – Hai Phong Beer Joint Stock Company.....................112

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CHAPTER 3: SOME COMMENTS TO IMPROVE ACCOUNTING FOR

PRODUCTION COST AND PRODUCT COSTING AT HANOI – HAI

PHONG BEER JOINT STOCK COMPANY..............................................120

3.1. Development orientation of Hanoi – Hai Phong Beer Joint Stock

Company......................................................................................................120

3.2. Principles and requirements for improving accounting for

production cost and product costing at Hanoi – Hai Phong Joint Stock

Company......................................................................................................122

3.2.1. Principles for improving accounting for production cost and product

costing at Hanoi – Hai Phong Joint Stock Company.........................................124

3.2.2. Requirements for improving accounting for production cost and

product costing at Hanoi – Hai Phong Beer Joint Stock Company...................124

3.3. Solutions to improve accounting for production cost and product

costing at Hanoi – Hai Phong Beer Joint Stock Company......................125

CONCLUSION................................................................................................133

REFERENCES................................................................................................134

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LIST OF DIAGRAMS IN THE DISSERTATION

No. Name Page

1.1 Diagram of the major accounting transaction on direct raw

material cost 22

1.2 Diagram of the major accounting transaction on direct labor cost 24

1.3 Diagram of the major accounting transaction on production

overheads 25

1.4 Diagram of accounting of production cost of the whole

enterprise according to the perpetual inventory method 26

1.5 Diagram of accounting of production cost of the whole

enterprise according to the periodic inventory method 28

2.1 The stages of the beer production at the company 44

2.2 Technological process of beer production at the company 47

2.3 Organizational structure in the company 48

2.4 Organizational chart of the company’s accounting department 53

2.5 Accounting procedure on BRAVO 7 60

3.1 Accounting for loss due to unplanned damaged products 128

3.2 Accounting for loss due to planned damaged products 128

3.3 Accounting for production stoppage losses in the plan 129

3.4 Accounting for unplanned production stoppage losses 130

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LIST OF TABLES IN THE DISSERTATION

No. Name Pag

e

2.1 Table of raw material norm for the beer production 64

2.2 Payroll (Accounting department) 73

2.3 Payroll (Factory) 74

2.4 Allocation table insurance 75

2.5 Table of tools and supplies 86

2.6 Assets summary table 91

2.7 Table of costing 100

2.8 Table of costing and factors of increase and decrease 102

2.9 Price list and other factors (the norm method) 104

2.1

0

Planned product cost list according to actual output 106

2.1

1

Table of product costing of Hai Phong Beer 107

2.1

2

Table of product costing 107

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INTRODUCTION

1. The urgency of the research:

Our country’s economy is currently a market economy, enterprises that

want to exist and develop must satisfy market demand, or in other words,

businesses must comply with the law of supply and demand, the law of value

and especially the law of competition in the market. In order for the products to

stand firm in the market, companies must promote market research, change

product designs accordingly, improve product quality and reduce costs.

In order for their products to stand firm in the market, enterprises must

promote market research, change product designs accordingly, improve product

quality and reduce costs. In order to do that, companies must manage production

cost effectively, record cost fully and promptly to calculate production cost

accurately. From there, there are measures to help business improve their

competitive advantage in the market.

In terms of the whole economy, lowering the product cost of enterprises

brings about an increase in the economy's accumulation. Therefore, lowering

product costs is not only a matter of businesses but also a matter of concern for

the entire industry and society as a whole.

Doing a good job of gathering and calculating product costs will help

business calculate costs accurately to determine the business performance. At

the same time, it will provide necessary information for the management and

apparatus, so that managers can come up with appropriate strategic measures to

help companies use capital effectively and proactive in the business activities.

Aware of the importance of the problem, I chose the topic “Accounting for

production cost and product costing at Hanoi – Hai Phong Beer Joint Stock

Company” as the research topic for my thesis with the desire to find useful

solutions to contribute to the work of renewing management methods of Hanoi –

Hai Phong Beer Joint Stock Company.

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2. Research purpose:

Firstly, systematize the theoretical bases of accounting for production cost

and product costing.

Secondly, study the actual problems of accounting for production cost and

product costing at Hanoi – Hai Phong Beer Joint Stock Company, combine

comparision and contrast with the general theoretical basis of accounting system

to evaluate and comment on the current status of this accounting practice.

Thirdly, give conclusions and proposals to improve accounting for

production cost and product costing at Hanoi – Hai Phong Beer Joint Stock

Company, and at the same time provide conditions for the implementation of

those proposals.

3. Object and scope of the research:

- Object of the research: Accounting for production cost and product

costing at Hanoi – Hai Phong Beer Joint Stock Company.

- Scope of the research: Learn and evaluate the accounting for production

cost and product costing at Hanoi – Hai Phong Beer Joint Stock Company.

4. Research methods:

To study the issues raised, the author uses qualitative and quantitative

methods to research through specific tools and methods, which are data

collection and data analysis processing.

Primary data collection method:

- Interview method: The author uses this method to collect information on

accounting for production cost and product costing at Hanoi – Hai Phong Beer

Joint Stock Company.

- Methods of field research: The author directly observes at the accounting

department in general and production cost and product costing team in

particular. The author studies the behaviour of administrators and accountants

who practice accounting for production cost and product costing.

Secondary data collection method:

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Secondary data is pre-existing data that has been collected. Through

questionnaires, previous interviews or information obtained through researching

documents of Hanoi – Hai Phong Beer Joint Stock Company, newspapers,

internet... are used as the basis to analyze the current situation of the enterprise

in terms of assets, capital sources, business results and collect data on

production cost accounting and product cost calculation of the enterprise.

5. The structure of the thesis:

Apart from the introduction and conclusion, the content of the dissertation

consists of the following three chapters:

Chapter 1: The general theory of accounting for production cost and

product costing at manufacturing enterprises.

Chapter 2: Actual situation of accounting for production cost and

product costing at Hanoi – Hai Phong Beer Joint Stock Company.

Chapter 3: Some comments to improve accounting for production cost

and product costing at Hanoi – Hai Phong Beer Joint Stock Company.

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CHAPTER 1: THE GENERAL THEORY OF ACCOUNTING FOR

PRODUCTION COST AND PRODUCT COSTING AT

MANUFACTURING ENTERPRISES

1.1. The need of accounting for production cost and product costing

at manufacturing enterprises

1.1.1. Concept, essence of production cost and product cost

*) Production cost

In a company, in order to conduct production and business activities, there

must be three basic elements: means of labour, objects of labour and labour

power. The production and business activities is the process of consuming those

elements to create products and services. The consumption of these factors in

the process generates corresponding costs.

Costs of production is the monetary expression of all costs of living labour

and other necessary costs that the company have indicated in the process of

production or provide service in a certain period.

So, the essence of the cost of production is:

- Waste on inputs in the production process associated with business

purposes

- The amount of costs depends on the volume of factors of production

consumed during period and the price of a unit of wasted factors of production.

- Cost of production is measured in monetary terms and is determined over

a specified time period.

In brief, the essence of production cost is the value of costs elements

transferred into the finished product.

*) Product cost:

Product cost is the production cost calculated for a volume or a unit of

product completed by an enterprise under normal capacity conditions. All

expenses (incurred in the period, carried forward in the previous period) and

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accrued expenses related to the volume of finished goods will make up the

product cost target.

Product cost is a measure of value and is an important economic indicator

in the system of management indicators that help enterprises synthesize and

reflect the results of using assets in the process of production and business

activities as well as evaluating the results of applying the implemented solutions

in order to reduce costs and increase profits of their units.

*) Relationship between production cost and product cost:

In essence, production cost and product cost are two-sided expressions of

the production and business process, both of which are expressed in money of

the costs of labour cost that enterprises have spent.

However, production cost and product cost differ in scope and volume:

- In terms of scope: Talking about production cost is considering the waste

in the period, regardless the type of product, completed or not. And talking

about product cost is determining the most amount of specified production cost,

for a given quantity of finished goods.

For example, prepaid expense is an expense spent in the period and

effective for many periods. In order to keep the product price stable and

reasonable, only a part of this cost is included in the product cost and the the

remain must be allocated to the following period. In other words, the actual

payable expense has not been incurred in this period but is still partially

deducted from the product cost in the period.

- In terms of volume: Product cost in the period includes the opening work

in progress (WIP) and a part of the production cost incurred in the period:

Product

cost

=

Opening

WIP +

Production cost

incurred in the period - Closing WIP

Product cost is subjective, the limitation of costs included in the product

cost depends on the point of view of calculation determination of costs, revenue

and results as well as regulations of the current economic – financial

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management regime and the current accounting regime. Those attitudes and

regulations are sometimes not completyly consistent with the essence of cost

accounting and product cost calculation, requiring business managers to be fully

aware of how to use information for suitable.

1.1.2. Management requirements for accounting for production costs

and product costing

In management, although people use many different tools, in which,

accounting is always considered the most effective management tool. With its

function, accounting provides administrators with data on the costs of each

department as well as the whole enterprise to evaluate and analyze the situation

of implementing norms and estimating costs in the enterprise. From a

management perspective, managers need to know the composition of production

cost and product cost, thereby limiting the influence of negative factors,

promoting the influence of positive factors, using effectively labour, materials,

capital and constantly improving product quality and reducing product cost.

Especially, in an open economy with a wide variety of goods, the problem

that determines the existence of each business is the cost of products. Therefore,

in order to achieve the goal of lowering product costs, the accountants to

accumulate production costs and calculate product costs should meet the

following requirements:

- Regularly check the implementation of the production plan in the

production plant in the enterprise.

- Determining the correct object of the accumulation of production costs

and the object of product cost calculation.

- Gather and distribute each type of production cost according to the right

object by an appropriate method.

- Checking the consumption norms of materials, cost prediction

techniques to promote the economical and rational use of labour, materials and

capital to contribute to lowering product costs.

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- Accurately calculate full product cost and production cost.

- Check the implementation of the goal of reducing product costs

1.1.3. Tasks of accounting for production cost and product costing:

In corporate governance, production costs and product prices are

important economic indicators that are always concerned by managers because

they reflect the quality of production and business activities of enterprises.

Accurate and sufficient calculation of production costs and product costs is a

prerequisite for keeping business account, determining business results as well

as each product in an enterprise.

In order to well organize the accumulation of production costs and

calculate product costs, fully, honestly and promptly meet the requirements of

production costs management and product cost calculation, accountants need to

perform well the following tasks:

- Reflect fully, accurately and timely all actual production costs incurred

in the period

- Check the implementation of cost norms of materials, labour,… and

selling expenses, administrative expenses. Timely detection of deviations from

the norm, estimates of unplanned expenses, damages and loss in the production

process to propose timely preventive measures.

- Calculate accurately and timely all product costs, partial results as well

as the entire production and business activities of the enterprise.

- Check the implementation of the cost reduction plan of the company for

each product, each contract, outline the ability and measures to reduce costs in a

reasonable and effective way.

- Proper identification and timely payment of due contracts. Periodically

inspect and evaluate the volume of work in progress according to the prescribed

principles.

- Properly assess the results of production and business activities in each

contract of each department, team, and production team in a given period,

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