Accounting for sales revenue from A–Z right standard to avoid errors

This article Lac Viet Computing will provide detailed instructions, accompanied by examples illustrating the important notes so that you can immediately apply in practice, though businesses of every industry.

1. Accounting revenue and principles need to know

1.1 accounting what is revenue?

Accounting for revenue is the process of recognition, classification, tracking the revenue arising from the business activities of the business. Revenue is the primary measure to evaluate its ability to generate profits, operational efficiency of the business.

The type of revenue common include:

• Revenue sale of goods: arising from the sale of products or goods of the business. For example, A retail company phone recognize revenue as soon as the customer payment and receipt of goods.
• Revenues service provider: arise from the provision of professional services such as consulting, training, repair. For example: Business hr consulting revenue recognition upon completion of contract consulting for customers.
• Financial income: includes interest from bank deposits, dividends, profit from financial investments.
• Other sales: revenues generated outside business activities, such as collecting fines contract, sale of fixed assets.

Thus, the accounting of revenue not only is recorded sales revenue, which also includes all the terms that arise related to the economic activity of the enterprise. The correct classification helps financial statements accurately reflect the business situation, decision support effective governance.

1.2 principles of accounting revenue

To account sales, sales revenue, exactly, businesses need to adhere to the principles basic accounting follows:

Principles of revenue recognition:

• Time: revenue is recorded when product ownership or right to use of the service is transferred to the customer.
• Value: revenue should be determined by the actual price obtained, including discounts, rebates, if available.
• Conditions: The revenue accounts must have a legal basis, bills, vouchers valid.

Special cases:

• Revenue prepaid: When businesses get money but not yet implemented service provider account, this is recorded as liabilities (TK 338) and only convert to sales when done.
• Unrealized revenue: For example, service contracts, long-term, revenue is recorded according to progress made.

The correct application of this principle to help businesses avoid errors in accounting, sales management, sales effectiveness, ensure financial statements accurately reflect the actual situation.

2. Way of accounting for revenue in each business

2.1 accounting revenue sale of goods

Revenue sale of goods is the main revenues of the business, commercial manufacturing. This is the revenue arising from the transfer of ownership of goods to customers, with payment obligations. The proper recognition of sales revenue is the foundation important to assess business performance, VAT calculator, determine the profits subject to corporate INCOME tax.

When performing accounting, sales accounting should ensure the full invoice, vouchers and recorded the right time according to the provisions of accounting Standards in Vietnam (VAS 14 – revenue, other income).

How to account

When sales proceeds or grounded revenue recognition:

• Debt TK 111, 112, 131 (Cash/bank deposits/customer receivables)
• Have TK 511 – sales revenue
• Have TK 3331 – VAT payable (if subject to vat)

Business case sales suffered, accounting only recognize revenue upon delivery and customer acceptance of payment.

Illustrative example: company A sells to customers 1,000 products, the unit price 500,000, the total price before tax is vnd 500,000,000. VAT 10%. Payment via bank.

Accounting revenue recognition:

• Debt TK 112: 550.000.000
• Have TK 511: 500.000.000
• Have TK 3331: 50.000.000

Note when accounting

Discount trade discount: deductions revenue must be accounted for in the right account to ensure revenue recorded as net sales.

For example, a discount of 10 million:

• Debt TK 521
• Have TK 131

Sales returns: Upon receipt of returned goods due to technical error or incorrect requirements:

• Debt TK 5212 (sales returns)
• Have TK 131 (or 111,112)

Revenue recognition the wrong time is a common mistake that business risk tax. According to the General department of Taxation, 22% of the records check to detect deviations due to revenue recognition, the wrong states (source: gdt.gov.vn, inspection report 2023).

2.2. Accounting for revenue service provider

Revenue to provide services that arise when business complete each section, or the entire service obligations under the contract. Other than selling goods and service revenue is often recorded in-progress complete, particularly with regard to long-term contracts such as IT services, consulting, maintenance, transportation.

It is important in accounting for revenue service is to identify the correct section of work was completed to recognize revenue, respectively, avoiding noted ahead of schedule.

How to account

When completed services or partial services are customer approved:

• Debt TK 111, 112, 131
• Have TK 511 – Sales service provider
• Have TK 3331 – VAT output

If the contract is paid in advance, but the service has not completed:

• Debt TK 111,112
• Have TK 3387 – unrealized revenue

Illustrative example

Company B offers services hr consulting, contract price: 100,000,000, VAT 10%. Contract completion, clients transfer payment.

• Debt TK 112: 110.000.000
• Have TK 511: 100.000.000
• Have TK 3331: 10.000.000

Customer case 50% advance payment upon signing the contract:

• Debt TK 112: 55.000.000
• Have TK 3387: 55.000.000

When complete service revenue recognition:

• Debt TK 3387: 55.000.000
• Have TK 511: the 50,000,000
• Have TK 3331: 5.000.000

Note when accounting

• Service revenue should be recognised according to the percentage of completion, avoid notes the whole of the revenue as soon as your money.
• Collation of actual progress with acceptance test records to accurately account.
• With the contract on 1 year, need to set up tables allocate the revenue details under each month, or quarter.

2.3. Accounting financial revenue

Financial revenue is the revenue arising from investment activities financial of the business, such as interest on bank deposits, interest, dividends, profits from investments. This is the portion of revenue not derived from sales activities, providing service, but plays an important role in optimizing cash flow, improve the efficiency of use of funds.

For many business have the money idle or active investing financial strength, the accounting financial turnover is exactly what needed to properly assess the actual profit, control financial risks.

How to account

When business arising revenue finance:

• Debt TK 111, 112: If you receive cash right
• Debt TK 131: If the recorded accounts receivable but not yet earned money
• Have TK 515 – Doanh thu financial activities

A number of commonly encountered:

• Interest on bank deposits
• Interest on loan
• Exchange rate differences interest
• The dividend is divided
• Profit from financial investments short-term or long-term

Illustrative example

Get dividends 50,000,000 from associated companies

• Debt TK 131: the 50,000,000
• Have TK 515: the 50,000,000

Interest on bank deposits 8,000,000, received via bank account

• Debt TK 112: 8.000.000
• Have TK 515: 8.000.000

Business for short-term loans and collect interest 15,000,000

• Debt TK 111/112: 15.000.000
• Have TK 515: 15.000.000

Note when accounting

• Check out the full bank statement or calendar dividend to revenue recognition, the proper states.
• Non-accounting financial turnover in sales revenue in order to avoid bias when analyzing profit.
• For account of interest on delayed payment from the customer (penalties for breach of contract), need to re-classified into other sales not recorded in financial income.
• Under circular no. 200/2014/TT-BTC, revenue finance must be presented separately on the financial statements for the assessment of profitability analysis, investment efficiency.

2.4. Accounting of revenue other

Revenue other revenues not regular, not arising from the main business activities of the business. These amounts include: collecting fines contract, collect insurance compensation, autumn liquidation of fixed assets, collecting and selling scrap, collected by the customer for compensation...

Though not operate the focus, but other sales need to be accounted for correctly to avoid omission source of guaranteed financial reporting transparency.

How to account

When other sales:

• Debt TK 111, 112: If the money is right
• Debt TK 131: If the recorded accounts receivable
• Have TK 711 – other income

Some typical cases:

• Proceeds from disposal of fixed assets
• Collect penalties for breach of contract
• Income from insurance compensation
• Revenues from the sale of scrap

If related to the liquidation of fixed assets, the need to record the decrease in resource prices, decreased depreciation before recorded other income.

Illustrative example

Liquidation of old machinery price 200,000,000, customer account transfers

• Debt TK 112: 200.000.000
• Have TK 711: 200.000.000

Customers fined for breach of contract 20,000,000

• Debt TK 111: 20.000.000
• Have TK 711: 20.000.000

Selling scrap obtained 5,000,000

• Debt TK 111: 5.000.000
• Have TK 711: 5.000.000

Note when accounting

• Need to establish a full account of asset acceptance report or the decision to dispose of property before the recognition of revenue other.
• With fixed assets liquidation, accounting to record the decrease in fixed assets (TK 211/213), reduced wear and tear (TK 214) pre-recorded earnings.
• The amount of compensation from the insurance should have a proven record of damage (repair bill, memorandum of assessors,...).
• Do not confuse revenue other than accounting sales revenue, to avoid misleading the revenue structure when financial analysis.

3. Accounting for revenue under accounting standards in Vietnam (VAS/IFRS)

Accounting revenue by VAS and IFRS step is important for businesses to ensure financial statements properly reflect the business situation, compliance with legal regulations. The application of accounting standards suitable reducing the risk of errors, the optimal profit to support decision governance.

3.1. Compare VAS and IFRS on revenue recognition

Illustrative examples:
The company provides training services, long-term contracted 120 million, the time taken 6 months:

• According to VAS: revenue is recorded according to the progress made services can be divided by each month.
• Under IFRS: revenue is recorded based on the control over the progress of the contract, if the contract is divided into many service packs, each pack was recorded separately according to the value of the contract respectively.

3.2. Note the latest changes in legal regulations

• In the year 2024, the Ministry of Finance has updated guidance and recorded sales revenue to provide services, emphasizing revenues must be recorded right time and have the invoice voucher valid.
• The case of revenue received in advance (deposit, payment in advance long-term contract) must be recorded liabilities before moving on to the actual revenue, avoiding the recorded deviations lead to violations of VAT.
• Businesses need to keep track of changes in VAT, corporate INCOME tax related revenue, ensure accounting sales revenue accuracy, reduce the risk of penalties upon audit.

4. A number of accounting errors frequently encountered when accounting and how to fix

Accounting revenue is important profession, but many businesses still encounter the errors common, leading to financial reporting incorrect, tax risk, difficulties in managing cash flow.

Below are the common errors:

5. Optimal process accounting with accounting software, LV-DX Accounting

Software, LV-DX Accounting help business overcome the error accounting, revenue is often met thanks to the automatic features and standards:

• Automatic recognition of revenue by time: the System automatically classified sales, revenue, supply services, other sales according to the standard VAS/IFRS, risk reduction noted at the wrong time.
• Manage discount, returned goods: The discount, rebate, discount, returned goods is automatically deducted from revenue, help in accurate reporting.
• Transparency report, detailed analysis: revenue is split by type of service, each customer contracts; support management of cash flow, evaluate business performance.
• Updates new benchmark: LV-DX Accounting constantly updates the new rules on accounting for sales tax, VAT and corporate INCOME tax to help businesses comply with the law.

Book demo now LV-DX Accounting today for automatic accounting of revenue, controlling cash flow, the optimal effective financial management business.