Notes for accountants when closing the accounting books to avoid errors
Closing accounting books is a familiar action that anyone who works as an accountant must also perform monthly, quarterly and at the end of the year. However, if you do not follow the correct procedure or do not have the inspection steps, it will definitely be difficult to avoid errors. Here are some issues to check before preparing your financial statements and tax finalization to avoid future adjustments after future tax audits and inspections:
1. Cash on hand:
- Check cash on hand balance to avoid negative balance.
2. Cash at bank:
- Take the bank account statement and check the account balance on December 31 every year matches the balance on Account 112.
- Does the cash balance is large? to determine the reasonableness of interest expenses. If the cash balance is large, the interest is likely to be excluded from deductible expense.
- Bank balance verification: the principle is must match. The form of verification can be to send confirmation letter or to reconcile through the bank's sub-book.
3. Deductible VAT:
- Check how the balance at item 43 (the tax amount to be transferred to the next period) on the VAT declaration form compared with the balance in account 1331? If any monthly / quarterly invoice declares in that month / quarter, the result is equal. In contrast, the input invoice incorrectly declared in that month / quarter -> Debit balance of Account 1331 will be greater or smaller than the balance at item 43.
4. Accounts receivable and payable:
- Debt reconciliation: if there is a difference in a debt, it is necessary to find out the cause of the difference: due to the buyer or the seller. This is important because if you do not account in time, there may be tax risks (for example, if the revenue is recorded late, the corresponding tax arrears by the portion of the under-recognized revenue in the year, if the expense in this year is recorded in next year, such expenses are not in the correct period, leading to tax risk excluding expenses for the next year).
- Identifying bad debts and making a provision for bad debts according to regulations: Being overdue from 6 months to less than 12 months: 30%, from 1 year to less than 2 years: 50%; from 2 years to less than 3 years: 70%; from 3 years or more: full 100%. Accounting: Dr 642 / Cr 229. Documents for provisions are referenced in Circular 228, in which careful attention to the confirmation letter, which is the definitive document that is required for the expense to be deducted.
5. Advances:
Check and compare for refund if there is an advance but not yet reimbursed.
6. Inventory:
- Check whether the goods have been fully stocked? - Have the stock prices calculated yet?
- Do not over-export the existing amount of inventory.
- Compare goods in stock with customers.
- For companies with installation and construction activities: Balance of account 154 details must match the detailed cost book (For each specific project).
- Identify damaged inventory, decrease in value ... to set up the provision for devaluation of inventory. The table of appropriation and determination of the devaluating as the basis for provision must clearly detail the account, name and code of each inventory. Usually detailed units are right on inventory reports and records. Documents for setting up provisions for stock exchange must be strict according to Circular 228. If you do not meet the requirements of Circular 228, there is a high risk of inventory provision expenses is not deductible. Accounting: Dr 632 / Cr 229 (the difference between the amount to be made at the end of the year and the amount made last period)
7. Distribution of prepaid expenses:
- Check the allocation details of account 242 against the balance of account 242 on the Balance Sheet Accounts statement.
- What kind of cost is reasonable - what is not reasonable.
8. Fixed assets:
- The record of fixed assets is complete yet: Documents (invoices) proving the ownership. In case the property is an automobile or a house in the name of the company, the asset file must be complete in accordance with regulations.
Circular 45/2013 has regulations on each registration of depreciation if an asset arises, so all assets must be registered for depreciation (including businesses that have registered for the first time or have registered for the depreciation method).
- Has depreciated enough yet.
- Check the depreciation detail book with Account 214 balance on the Balance Sheet Account statement.
- The depreciation cost is reasonable - what is not reasonable.
- Carry out asset inventory and difference settlement (if any).
9. Tax payable:
- To compare the tax payment in the period with the tax office
- The license tax has accounted for expenses and had receipts for payment yet. Check account 3338.
- Value Added Tax (VAT) - declarations bases, tax payment receipts and accounting to see if it is correct and complete. - Check account 3331.
- Personal Income Tax (PIT) – declarations bases, tax payment receipts and accounting to see if it is correct and complete. Check account 3335.
- Corporate income tax (CIT) – declarations bases, tax payment receipts and accounting to see if it is correct and complete. Check account 3334. Notes to the entries Debit 821 / Credit 3334, Debit 3334 / Credit 111 when incurred quarterly or at the end of the year.
- Other taxes, if any, must be fully collected tax receipts for accounting.
10. Salary, Social Insurance, Health Insurance, Unemployment Insurance, Labor Union fee, PIT
- Salary accounting is complete yet. Check credit side of account 334 against your PIT Finalization and the two numbers must match.
- If there is insurance, the figures have been compared and matched with the Insurance Agency yet.
- Salary expense is a huge expense in enterprises, especially for production and construction enterprises. Therefore, it is necessary to make a sufficient PIT finalization.
- Register personal tax code for those who have not registered, dependents profile (if any) for PIT finalization: Note: resident / non-resident individuals (non-residents are usually foreigners, please refer to Circular 111 for more details on the concept of residence and non-residence); Terms of authorization for PIT finalization. Be noted that individuals who work at 2 or more places are not under the conditions of authorizing.
11. Loans and borrowings:
- Reviewing borrowings, including internal and external borrowing.
12. Revenue:
Revenue subject to CIT:
- Sales.
- Financial income.
- Other income.
- The assessment of exchange rate differences for each payment must have a track file to compare and record to account 515 if there is gain on the interest rate different of each payment.
Particularly for the assessment of exchange rate differences at the end of the period, the Interest difference is not the Taxable Revenue.
13. Cost of sales:
- For commercial activities: the cost base is the detailed book of Import and Export of goods. Check if the data, the formula on the data file are complete. Avoid incorrect jump or lack of formula that cause deviation in cost price.
- For commercial and production activities involving import and export activities: the COGS-calculating basis is the file to monitor the cost of imported goods and is the basis for checking and detecting errors in the implementation.
- For production activities: the basis for calculating cost is the production norm. Check that the input materials against the norm are negative? If so, we can flexibly adjust the norms. The general production costs in forming the cost must have valid invoices and documents.
- Have accounted, gathered, carried over the cost of sales yet.
- Check the COGS / Revenue ratio for this year compared to last year. If there is a sudden increase / decrease compared to the previous year, it must be reviewed.
14. Selling expenses, Administration expenses:
- Have reasonable and valid invoices and vouchers for the expenses.
- For expenses limited by tax regulation: hospitalities, conferences, ceremonies ... has exceeded 15% of the total deductible expenses (excluding cost of sales for commercial enterprises). If it is not yet excluded, all will be deductible. If it exceeds 15% of the total cost, a spreadsheet must be made to keep track of the deductible expenses, and easily check and compare.
15. Financial expenses:
- Check how much interest expense is in finance expense.
- If the cash is too much and financial expenses arise, this expense may be eliminated in the tax finalization (If the company cannot explain why this interest expense arises).
- The assessment of exchange rate differences for each payment must have a track file to compare and record to account 635 if there is a loss on the exchange rate difference of each payment.
- When assessing exchange rate differences at the end of the period, if any losses arise, these expenses will be excluded when calculating CIT
16. Transfer:
The transfer entry is supported by the software. However, it must be checked and review if it is found that accounts from category 5 to 9 still have balance. After completing reconciliation, put up the barcode at HTKK application:
- Annual financial reports:
+ Balance sheet Form B01 - DN.
+ Profit and Loss statement Form No. B02 - DN.
+ Cash flow statement Form B03 - DN.
+ Notes to the financial statements Form B09 - DN.
- PIT finalization report.
- Final CIT finalization report.
Pay annual corporate income tax, if there are profits, if there are losses in the previous years, then it is required to do additional work in Appendix 03-2A-TNDN to transfer the losses of the previous years.
In addition, tax accountants should pay attention to the following tasks to minimize unnecessary shortcomings:
1. The job at the beginning of the year that the tax accountant needs to do
- Declare and pay the license tax at the beginning of the year.
+ The deadline for paying license tax is January 31.
+ If the company is a newly established company, then submit the declaration and license tax within 30 days from the date of business license.
+ If the company has a change in capital, the deadline to submit the license tax declaration is December 31of changing year.
- Submit VAT and PIT return in December or the 4th quarter of the previous year. If declared monthly, the deadline is January 20. If quarterly, it is January 30.
- Submit the corporate income tax return for the 4th quarter of the preceding year
- Submit the report on the use of invoices in the 4th quarter of the preceding year
- Submit financial statements, CIT finalization, PIT finalization of the preceding year: The deadline is March 31.
2. Daily work to do
- Record, collect, process and store accounting invoices and documents:
+ When the enterprise has transactions, such as buying and selling goods... the job of the accountant is to collect all relevant invoices and documents (output, input) to use as a basis for tax declaration and accounting.
+ After the related invoices and vouchers have been compiled, the tax accountant must proceed with the processing and check whether the invoices are valid and reasonable or not.
+ If detecting that the VAT invoice is incorrectly written or the invoice is illegal, the accountant must immediately handle it according to the provisions of Circular 39/2014/TT-BTC and other relevant legal documents.
+ Make collection receipts, payment receipts, sales invoices, release notes... necessary for the day.
- Record the cash books, bank books, and other necessary books.
+ Note: The vouchers that are not used for bookkeeping, are kept for 5 years.
+ Vouchers for book entry and accounting are kept for 10 years.
+ Vouchers and records of special importance to be permanently preserved.
3. Monthly work
- Prepare monthly VAT declaration (if the company declares VAT on monthly basis).
- For output invoices, the month that arises must be listed in that month. Since January 1, 2014, input invoices are not subject to the restriction on declaration time but must be declared before the tax authority has an inspection decision.
- Prepare a monthly PIT return (If the enterprise declares VAT a monthly basis and has the PIT amount payable in the month).
- Make other tax returns, if any.
- Make monthly reports on the use of invoices (For newly established businesses less than 12 months).
- The deadline for submitting the declaration is the 20th of the preceding month
- Note: If there is a tax payable in a month, the deadline for submitting the declaration is also the deadline for paying tax
4. Quarterly work
- Make quarterly VAT declaration (If the company declares VAT quarterly)
- Prepare a temporary tax return for calculating CIT on quarterly basis.
- Make a quarterly report on the use of Invoices.
- Make quarterly PIT return (If the company declares on quarterly basis).
- The deadline for submitting the above declarations is the 30th of the first month of the following quarter.
5. Year-end work
- Prepare tax reports for the last month of the year and tax reports for the 4th quarter.
- Prepare annual PIT finalization report.
- Prepare annual CIT finalization report.
- Cash count, inventory and assets stocktaking, debt reconciliation.
- Make an accounting book, compare detailed books and general books.
- Prepare annual financial statements including: Balance Sheet, Profit and Loss Statement, Cash Flow statements, Notes to the financial statements, Balance Sheet Accounts statement.
- Print accounting books and vouchers and have them signed.
- Archive documents, vouchers, and accounting books.