[Luận văn bằng tiếng anh - GRADUATION THESIS] ACCOUNTING FOR PRODUCTION COST AND PRODUCT COSTING AT HANOI – HAI PHONG BEER JOINT STOCK COMPANY

MINISTRY OF FINANCE
ACADEMY OF FINANCE
ACCOUNTING FACULTY
-------***-------

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.
1.1
1.2
1.3
1.4
1.5
2.1
2.2
2.3
2.4
2.5
3.1
3.2
3.3

3.4

Name
Page
Diagram of the major accounting transaction on direct raw
22
material cost
Diagram of the major accounting transaction on direct labor cost 24
Diagram of the major accounting transaction on production
25
overheads
Diagram of accounting of production cost of the whole
26
enterprise according to the perpetual inventory method
Diagram of accounting of production cost of the whole
28
enterprise according to the periodic inventory method
The stages of the beer production at the company
44
Technological process of beer production at the company
47
Organizational structure in the company
48
Organizational chart of the company’s accounting department
53
Accounting procedure on BRAVO 7
60
Accounting for loss due to unplanned damaged products
128
Accounting for loss due to planned damaged products

128
Accounting for production stoppage losses in the plan
129
Accounting for unplanned production stoppage losses
130

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LIST OF TABLES IN THE DISSERTATION
No.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.1
0
2.1
1
2.1
2

Name
Table of raw material norm for the beer production
Payroll (Accounting department)

Payroll (Factory)
Allocation table insurance
Table of tools and supplies
Assets summary table
Table of costing
Table of costing and factors of increase and decrease
Price list and other factors (the norm method)
Planned product cost list according to actual output

Pag
e
64
73
74
75
86
91
100
102
104
106

Table of product costing of Hai Phong Beer

107

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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promptly make reports on production costs and product costs, provide Timely
accurate and useful information on production costs and product costs for
management requirements of business leaders.
1.2. Classification of production costs and product costs:
1.2.1. Classification of production costs:
In muanufacturing enterprises, production costs include many types with
different economic content, different purposes and use in the production process.
Therefore, the managemnet requirements for each type of expense are also
different. The management of production, the management of production cost
cannot only be based on date reflecting the aggregate production costs, but also
must be based on specific data of each separate type of cost to serve the
requirements for examining and analyzing the entire production cost or each of

their initial cost elements for each product, for each place where costs are
incurred.
Therefore, the classification of production costs is an indispensable
requirement for accurate accounting of production costs and product costing.
Classification of production costs in a scientific and unified manner is not only
important for the accounting work of production costs and product cost
calculation, but also an important premise for planning and checking. And
analyze the production costs of the entire enterprise, constantly promoting the
economical and rational use of production costs, lowering costs, further
promoting the role of accounting in the development of the enterprise.
Depending on the management requirements, information providers...,
production costs are classified in the following ways:
*) Classification of production costs by economic content (or by cost
elements):
According to this classification, based on the economic content of costs,
arrange cost with the same content into a category, and each category is called a
cost element. Production costs include the following cost elements:
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- Material costs:
Including all cost of labour objects such as main raw materials, auxiliary
materials, and fuel
- Labour costs:
Labour costs are the main salaries, supplementary salaries, wages and
allowances of a salary like nature that are included in the expenses that the
enterprise must pay to employees in the period
- Fixed assets depreciation cost:
In the process of using fixed assets, fixed assets are depreciated and the
depreciation value moves gradually into the product valued called fixed asset

depreciation. Depreciation costs of fixed assets must be deducted for all fixed
assets used for production and business in the period
- Outsourced service cost:
Including the entire amount to be returned for services used in production
and business activities provided by other units such as: payment for electricity,
water, telephone, …
- Other monetary cost:
Those are expense in cash in addition to the expense paid above such as
business license tax, land tax,…
The feature of this classification is that it is based on the original form of
all costs incurred for production and business activities, regardless of where
those costs are used, which products are used, if the enterprises themselves
produce them. If a part of raw materials can be produced and then used in
production, the costs to create those materials must be accounted for in related
factors. Therefore, through the above classification, we can clearly see the cost
of living labor and materialized labor in the entire costs of production and
business in a period of the enterprise and it also shows the structure, proportion
of each cost-constituting element in the cost of products and services, serving as
a basis for formulating a plan for supply of materials, a plan for mobilizing and
using labor in service of factor-by-factor statistics.
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*) Classification costs by economic use (or classigy costs by cost items)
Each cost factor incurred has certain purposes for production and business
activities. Based on the purpose and economic use of expenses to arrange into
different expense items. Each expense item includes only expenses with the
same purpose and use, regardless of economic content. According to this
classification, the entire production costs of business in the period are divided
into the following expense items:

Production cost:
- Direct raw material costs:
Includes cost of primary and secondary raw materials used to directly
manufacture the business’s products and services, it does not include costs of
raw material used for general production and non-production activities.
Raw materials are a factor that accounts for a large proportion in the
product cost structure. In companies, the cost of raw materials is accounted for
by each user, each type of product, and the accounting form of collecting raw
material costs is applied according to the regular declaration method.
- Direct labour costs:
These are salaries, wages and allowances
- Production overheads:
These are the costs of maintaining the management apparatus in the plant,
production team and the common costs for production activities in the factory.
These costs include:
+ Labour costs of management staff in plants and production teams.
+ Cost of materials used for general production needs in factory and
production teams.
+ Depreciation costs of fixed assets used for production
+ Expense for tools and instruments used for production.
+ Expenses for services purchased from outside used for production such
as electricity, water, telephone, ,…
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+ Advance deductions have been agreed upon by the financial authorities
such as: deductions for major repair of fixed assets,…
+ Other cash expenses are expenses other than those mentioned above
incurred in factory such as: expense for stationery, labour protection expense,
travel expense,…

Non-production cost:
- Selling expense: Selling expenses are the costs associated with
distributing, marketing and selling a product. Selling expenses can include:
+ Distribution costs such as logistics, shipping and insurance costs
+ Marketing costs such as advertising, website maintenance and spending
on social media
- Administration expenses: Administration expenses are expenses that are
necessary for normal business operations but that are not related to the cost of
goods or sales, such as salaries of office staff, insurance, and legal and
accounting costs.
Classification of costs according to the use of costs is effective in serving
the requirements of management of production costs according to norms
(consumption norms of raw materials, fuel, wages ...), according to estimates
costs, according to the cost plans. Accountants use this classification to gather
costs constituting the production cost of products and services, as a reference to
establish production costs norms and to plan production costs for the next
period. At the same time, through that, it is possible to analyze and evaluate
unreasonable cost items from which to find appropriate measures to reduce each
type of cost to lower costs.
In addition to the two main classifications above, for management and
accounting purposes, production costs can also be classified according to other
criteria such as: based on the relationship between production costs with
quantity, volume of finished product to divide production cost into fixed and
variable costs; based on the cost accounting method to divide costs into direct
costs and indirect amortized costs...
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1.2.2. Classification of product costs:
In the production of industrial products, in order to help research and

manage product costs well, we need to distinguish between different types of
costs.
1.2.2.1. Classification of product costs by time and cost calculation basis:
- Planned product cost: is the production cost of the product calculated on
the basis of the planned production cost and the planned volume.
- Standard product cost: is the product cost of a product calculated on the
basis of current cost norms and only calculated for a product unit.
- Actual product cost: is the product cost of the product calculated on the
basis of the acutal production cost incurred and accumulated by accountant and
the actual output of the product in the period.
1.2.2.2. Classification of product cost based on scope and component costs:
- Full factory cost include: production cost, selling expenses,
administrative expenses, or the variable production cost and fixed production
cost, selling expenses and administrative expenses. The cost of product is
determined only when the products have been sold and is used to determine the
sales results of the company. Full factory cost has an important meaning in
management so that the enterprise can determine whether the results of product
production are profit or loss. It plays a key role in long term strategic decision
maing, whether to discontinue or continue to produce a certain product.
- Full cost of sales: is the production cost that includes only variable
production costs including both direct variable costs and indirect variable costs.
In the variable costing method, fixed costs are charged immediately to the
income statement and not included in production cost. On the basis of full cost
of sales, the company will determine the profit and allow a simple modeling of
the cost – volume – profit relationship.

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1.3. Objects of production cost accounting and product costing

1.3.1. Objects of production cost accounting:
The object of production costs accounting is the scope and limits to which
production costs are aggregated under those ranges and limitations. The essence
of determining the accounting object of production costs is to determine where
the cost is caused (factory, production department, technology stage,…) or the
object to bear the cost (products, orders,…)
When determining the object of the production cost accounting, it must be
based on:
- Purpose of use of expenses
- Characteristics of production and business organization, production and
business management, production technology process, type of production.
- Ability, qualifications and management requirements of the company
The object of production cost accounting in the enterprises can be: each
product, product details, product group, order; each factory, production
technology stage; the entire production technology process, the whole
enterprise.
1.3.2. Objects of product costing
Object of product costing can be a finished good, a group of finished
goods, specific work or a service. Enterprises can rely on one or several of the
following bases to determine the appropriate costing object such as:
+ Characteristics of production organization and management
+ Characteristics of the production technology process
+ Management requirements of the business, conditions and qualifications
of accounting
If the manufacturing process is simple, the finished good at the end of the
production process is the object of product costing.

20