[Luận văn bằng tiếng anh - GRADUATION THESIS] ACCOUNTING FOR PRODUCTION COSTS AND PRODUCT COSTING AT 492 ONEMEMBER LIMITED LIABILITY COMPANY

MINISTRY OF FINANCE
ACADEMY OF FINANCE
----------

GRADUATION THESIS
TOPIC:
“ACCOUNTING FOR PRODUCTION COSTS AND PRODUCT
COSTING AT 492 ONE-MEMBER LIMITED LIABILITY
COMPANY”
Major

: Corporate Accounting

Mentor

: PhD Thai Ba Cong
MSc Nguyen Ba Linh

Hanoi – 2022

1


DECLARATION
I hereby declare that this thesis is my own work and effort and that has not
been submitted anywhere for any awards. Where other sources of information
have been used, they have been acknowledged.
The data and results described in the thesis are deried from the actual
position of the internship company.
Thesis: “Accounting for production costs and product costing at 492 OneMember Limited Liability Company”.
Ha Noi, February 21st, 2022.

Student

ACKNOWLEDGEMENT
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Firstly, I would like to express my vey great thankfulness to all lectures in
Accounting Faculty at Academy of Finance for their professional guidance and
valuable support.
Especially, I would like to show my deep gratitude to my supervisor, PhD
Thai Ba Cong and MSc Nguyen Ba Linh, for their patient guidance, enthusiastic
encouragement and useful critiques during the planning and development of my
Graduation Thesis and for thier assistance in keeping my progress on schedule.
I also want to thank 492 One Member Limited Company for giving me
permission to commence this thesis in the first instance, to do the necessary
research work and to use departmental data. I have furthermore to thank the
Director and Chief Accountant as well as all seniors at the company who gave
and confirmed this permission and encouraged me to go ahead with my thesis.
Finally, because of the limitation of time and knowledge, mistakes are
advoidable, so I wish ro receive more contribution and suggestions to make my
thesis better.

3


TABLE OF CONTENTS
Contents

ACKNOWLEDGEMENT....................................................................................................................3
LIST OF DIAGRAMS..........................................................................................................................6

LIST OF TABLES IN THE DISSERTATION...................................................................................6
LIST OF ABBREVIATIONS...............................................................................................................6
PREFACE..............................................................................................................................................7
1. Urgency of the topic......................................................................................................................7
2. Research purpose..........................................................................................................................7
3. Object and scope of the research..................................................................................................8
4. The research method of the topic.................................................................................................8
5. Thesis structure.............................................................................................................................8
CHAPTER 1: BASIC THEORIES ON ACCOUNTING FOR PRODUCTION COST AND
PRODUCT COSTING IN CONSTRUCTION ENTERPRISES.......................................................9
1.1. Necessity of accounting for production cost and product costing in enterprises...................9
1.1.1 Concept, nature of production cost and product cost......................................................10
1.1.2 Tasks of production cost accounting and product costing...............................................12
1.2. Classification of production costs and product costs.............................................................13
1.2.1. Classification of production costs.....................................................................................13
1.2.2 Product cost classification..................................................................................................14
1.2.2.1. Classification of product costs according to data and time of cost calculation..........14
1.2.2.2. Classification of product cost based on scope and component costs...........................15
1.3. Objects of production cost accounting and product costing..................................................15
1.3.1 Objects of production cost accounting..............................................................................15
1.3.2 Objects of Product costing.................................................................................................16
1.3.3 The relationship between objects of production cost accounting and objects of product
costing...........................................................................................................................................16
1.4 Accounting for production costs according to the utility purpose of costs............................17
1.4.1 Accounting for direct raw material costs..........................................................................17
1.4.2 Accounting for direct labor costs.......................................................................................19
1.4.3 Accounting for construction machine usage costs............................................................21
1.4.4. Accounting for production overhead costs......................................................................24
1.4.5. Accounting for production cost for the whole enterprise...............................................25
4

1.5 Methods of valuing closing work in progress..........................................................................27
1.5.1. Valuing closing work in progress according to the estimated cost.................................27
1.5.2 Valuing closing work in progress according to equivalent units.....................................28
1.5.3. Valuing closing work in progress based on direct materials cost...................................29
1.6. Product costing methods in enterprises..................................................................................29
1.7. Organization of production cost accounting and product costing in terms of information
technology application....................................................................................................................31
CONCLUSION OF CHAPTER 1......................................................................................................31
CHAPTER 2: ACTUAL SITUATION OF ACCOUNTING FOR PRODUCTION COSTS AND
PRODUCT COSTING AT 492 ONE-MEMBER LIMITED LIABILITY COMPANY................32
2.1. General overview of 492 One-Member Limited Liability Company....................................32
2.1.1. General introduction of 492 One-Member Limited Liability Company.......................32
2.1.2. Functions, duties, and business sectors............................................................................35
2.1.3. Organizational characteristics of the company's management apparatus....................37
2.1.4 Organizational characteristics of the company's accounting work................................41
2.2. Actual situation of production cost accounting and product cost calculation at the
company...........................................................................................................................................50
2.2.1. Cost Aggregation Objects and Cost object......................................................................50
2.2.2 Contents of production cost accounting and product costing at the company...............52
2.2.3. Product costing at 492 One Member Limited Liability Company...............................160
2.3. General assessment of the current state of cost accounting and product costing at the
company.........................................................................................................................................194
2.3.1. Advantages.......................................................................................................................194
2.3.2. Disadvantages..................................................................................................................196
CONCLUSION OF CHAPTER 2....................................................................................................198
CHAPTER 3: SOME SOLUTIONS TO IMPROVE ACCOUNTING FOR PRODUCTION
COST ACCOUNTING AND PRODUCT COSTING AT 492 ONE-MEMBER LIMITED
COMPANY........................................................................................................................................199

3.1. Development orientation of the company; principles and requirements for improvement
........................................................................................................................................................199
3.1.1. Development orientation of the company......................................................................199
3.1.2. Principles and requirements for improvement.............................................................200
3.2. Solutions to improve production cost accounting and product costing at 492 One Member
Limited Company..........................................................................................................................202
CONCLUSION OF CHAPTER 3....................................................................................................207
CONCLUSION..................................................................................................................................208
5


LIST OF DIAGRAMS
No.
1.1
1.2
1.3
1.4
2.1
2.2
2.3
2.4

Name
Diagram of the major accounting transaction on direct raw material
cost
Diagram of the major accounting transaction on direct labor cost
Diagram of the major accounting transaction on production
overheads
Diagram of accounting of production cost of the whole enterprise
according to the periodic inventory method

Organizational characteristics of the company's management
Diagram of the company's accounting work
Form of bookkeeping applied at the Company
The order of making accounting books on computer software

Page

LIST OF TABLES IN THE DISSERTATION
No.
2.1
2.2
2.3
2.4
2.5
2.6
2.7

Name
December 2020 payroll at Factory 921 – Indirect department
Daily checking 12/2020 at Factory 921 – Indirect department
December 2020 payroll at Factory 921 – Direct department
Daily checking 12/2020 at Factory 921 – Ddirect department
Construction machinery's description and major repair list
Summary table of production tools cost for every project
Summary of payment of production and business expenses in the
fourth quarter of 2020 – Team 926
2.8 Product cost calculation table
2.9 Information from the income statement

Page

LIST OF ABBREVIATIONS
Ac.
Co., LTD
VAT

Abbreviations

Full phrase

Account
One-Member Limited Liability Company
Value added tax
PREFACE
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1. Urgency of the topic
2020 and 2021 were the years of difficulties with the world economy in
general and Vietnam's economy in particular when heavily affected by the
pandemic. In today's volatile market economy, businesses that want to survive
and develop must have an appropriate and effective business method. An
inevitable rule in the market economy is competition, so businesses must find a
way to stand firm in the market; build a brand and develop the business further
to be able to bring its products to a large number of consumers; constantly
improve product quality to meet the increasing needs of users. Grasping the
context that the country is transforming on the road of industrialization and
modernization, all products from small to large have marked changes in both
form and quality, even research and development launched many new products
applied in life. In the construction business, expenses account for a fairly large

proportion (especially the cost of materials), which is an important indicator on
the income statement. Just a small change in cost can change the product's price
and profit of the business. Therefore, businesses must pay attention to the
preservation and use of cost savings but still have to ensure product quality. To
do that, the immediate problem is to make full and accurate accounting in the
business process. Accounting as a management tool must calculate and manage
how to meet that requirement. Therefore, I have chosen the research topic
“Accounting for production costs and calculating product costs at 491 OneMember Limited Liability Company” as the topic for my graduation thesis so
that I can better understand reality.
2. Research purpose
Systematize the general theory of accounting that collects production costs
and calculates product costs in enterprises.
- Describe and analyze the actual situation of accounting work of
gathering production costs and calculating product costs at 492 One Member
Limited Liability Company.
- Proposing several solutions to improve the accounting work of gathering
production costs and calculating product costs at 492 One Member Limited
Liability Company.
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3. Object and scope of the research
-Object: Accounting for production costs and product costing at 491 OneMember Limited Liability Company.
- Research scope:
+ The accounting work collects costs, calculates the cost of products in the
enterprise.
+Scope of space: 492 One-Member Limited Liability Company.
+Time range: from the 4th quarter of 2020 to the 4th quarter of 2021
4. The research method of the topic
In the thesis, a combination of research methods is used to apply the

knowledge learned in school to solve specific business and production tasks in
practice, which are:
+ Economic statistical method: Collecting data according to reference
sources and survey collected at 492 One-Member Limited Liability Company.
+ Methods of analyzing production and business activities.
+ Accounting method: Through professional methods of accounting to
collect data and documents, collect production costs and calculate product costs
of the bridge project Military Hospital 175.
+ Method of consulting experts: Consult with teachers in the accounting
department of the Academy of Finance on the contents related to accounting for
production costs and product costing, and sharing by the cost accountant at 492
One-Member Limited Liability Company.
5. Thesis structure
-Chapter 1: Basic theories on accounting for production cost and product
costing in construction enterprises.
-Chapter 2: Actual situation of accounting for production costs and
product costing at 492 One-Member Limited Liability Company.
-Chapter 3: Some solutions to improve accounting for production cost
accounting and product costing at 492 One-Member Limited Liability Company.
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CHAPTER 1:
BASIC THEORIES ON ACCOUNTING FOR
PRODUCTION COST AND PRODUCT COSTING IN CONSTRUCTION
ENTERPRISES.
1.1. Necessity of accounting for production cost and product costing in
enterprises
In the market economy, businesses that want to survive and develop must
know how to compete and take it as a driving force to gradually assert their

position. One of the most effective measures that businesses apply is to minimize
production costs and reduce production costs without reducing product quality.
The process of production and business activities is the process of
combining basic factors of production (labor, means of labor, and objects of
labor) to create necessary products to serve human needs. . In the process of that
combination, the basic elements are consumed creating the cost of doing
business. Attached to the cost of production and business is the cost of the
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product. Product cost is a monetary expression of the costs that enterprises have
spent regardless of the period related to the volume of products, which are
important economic indicators, reflecting the quality of production activities
business, so they are always the top concern of managers.
Clear and accurate accounting of production costs will help managers
clearly understand the costs to be spent on production and business activities.
From there, compare with the obtained results to determine the profit or loss of
the production and business activities. In addition, accounting for production and
business costs also helps managers be more proactive in production management
and discover unreasonable expenses, wasteful expenses, and ineffectiveness
results in production and business.
Recognizing the importance of collecting production costs and calculating
costs is the central stage of the entire accounting work of an enterprise.
Therefore, I decided to choose the topic: “Accounting for production costs and
product costing at 492 One-Member Limited Liability Company” as the topic of
my graduation thesis.
1.1.1 Concept, nature of production cost and product cost
a. Production cost
Every enterprise, no matter what field it operates in, must have all the
necessary elements: labor, labor materials, and labor objects. To ensure all these

factors, enterprises must spend corresponding expenses called production and
business costs.
The process of production activities in construction enterprises is a
combination of factors of labor, labor materials, labor objects of the production
process. into corresponding costs: corresponding to the use of fixed assets is the
depreciation expense of fixed assets, with the use of raw materials is the cost of
raw materials, with the use of labor is the cost of wages, wages… In a
commodity economy, all of the above costs are expressed in money. Thus, the
production and business costs of construction enterprises can be understood as
follows:

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Production cost is: Expression in money of all costs of living and
materialized labor and other costs that enterprises have spent to carry out
production activities in a certain period (month, quarter, year ).
The magnitude of the cost of production depends on two factors:
+ The volume of labor and production materials consumed in production
in a certain period.
+ The price of the means of production consumed and the wages of a unit
that generates fees.
The cost of construction and installation enterprises is always unique, that
is, businesses that jointly undertake the construction of a work or work item, but
with different management and production conditions, often produce products
with different results, structures and magnitudes. The individuality in costs
creates a difference in bids, which is a decisive factor for the success or failure of
contractors in the race to win contracts from investors.
b. Product cost
Product cost of a construction enterprise is expressed in money of all costs

that the enterprise spends to complete the volume of construction and installation
work as prescribed with the investor (in which the volume of construction work
is Installation is the volume of works calculated according to the in-kind criteria
included in the completed work design, the construction work may have reached
a reasonable technical stop where it can be tested and handed over and is
accepted for payment).
The content of the cost includes direct costs such as direct materials costs,
construction machine costs, labor costs, subcontracting costs, and indirect costs
such as general costs, management costs necessary to create the finished product.
(Production costs include: direct material costs, direct labor costs, construction
machine costs, overhead and subcontracting costs. The total cost includes
production costs plus administrative expenses allocated to the completed work).
Production costs and product costs are two aggregated indicators that
reflect the production and business situation of an enterprise. Firmly grasping the
items, cost factors, and components of the cost is the basis for enterprises to
strengthen the management of production and business in the right direction,
bringing high operational efficiency to the enterprise.
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1.1.2 Tasks of production cost accounting and product costing
Determining the right object to collect production costs and calculate the
cost following the actual conditions of the business, satisfying the requirements
set out by management, applying methods of aggregation, costing, and costing in
one reasonable scientific and technical way to ensure the adequate, timely and
accurate provision of necessary data for management. Detail:
+Determining the right object of collecting production costs following the
production organization in the enterprise and at the same time determining the
right object of cost calculation.
+Reflect fully, accurately, and promptly all actual production costs

incurred.
+Check the implementation of cost norms, materials, labor using
construction machines... and other cost estimates. Timely detection of deviations
from the estimated norm of unplanned expenses, damages, losses, and damages
in production to prevent timely.
+Accurately and promptly calculate the cost of construction and
installation products, which are completed services of the enterprise.
+Check the implementation of the enterprise's cost reduction according to
each project, work item, each type of product... outlining the ability and
reasonable and effective price reduction levels.
+Correctly determine, hand over and pay the completed construction and
installation work volume promptly. Periodically inspect and evaluate the
unfinished construction volume according to regulations.
+Properly evaluate the results of production and business activities of each
project, work item, each construction department, production team, etc. in a
given period. Timely making accounting reports on production costs and
calculating construction and installation costs. Provide accurate and quick
information on production costs and cost calculation to serve the management
requirements of business leaders.
1.2. Classification of production costs and product costs
1.2.1. Classification of production costs
1.2.1.1- Classification of production costs according to the cost elements.
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The entire cost of production and business of the enterprise is divided into
the following elements:
+Cost of raw materials and tools include: main materials, auxiliary
materials, fuel, construction equipment materials.
+Labor costs are all wages, social insurance, health insurance, union dues,

and other amounts payable to employees.
+Depreciation costs of fixed assets is the whole that must be depreciated
and deducted before repair costs major repair in a month for all types of fixed
assets in the enterprise.
+Outsourced service cost is the amount to be paid for services purchased
outside.
Outsourcing for production such as machine rental, water, electricity, etc.
+Other monetary costs are costs incurred in the process of production
activities in addition to the four cost factors mentioned above such as cash costs,
reception costs.
Classification according to this criterion helps us understand the structure
and proportion of each type of cost in production and business activities, helping
enterprises estimate production and business costs for the following period.
1.2.1.2. Classification of production costs according to the utility purpose of
the cost
According to these classifications, expenses that have the same purpose
and use are classified under the category of expenses. All construction costs are
divided into the production cost và non-production cost.
 Production cost:
- Direct raw material costs: The cost of main materials, auxiliary
materials, and circulating materials needed to create construction products.
- Direct labour costs: Costs of wages, allowances (mobile allowance,
responsibility allowance) of workers directly engaged in production and
construction.
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- Production overhead costs: Including salary of team management staff;
deductions according to the salary of social insurance, health insurance,
unemployment insurance, trade union expenses, workers directly producing

workers using construction machines, team management staff, costs of materials,
tools and tools, fixed assets depreciation expenses.
 Non-production costs:
- Selling expenses: are costs incurred to promote and market products to
customers. Any expense that is associated with selling a good or making a sale is
considered a selling expense.
- Administration expenses: These are expenses for the management
apparatus, related to the general operation of the whole enterprise such as:
depreciation costs of fixed assets serving the management apparatus, salaries and
allowances paid to the board of directors, management staff, cost of materials,
office supplies, fees, insurance, outsourcing costs for corporate offices
This classification has the effect of serving the requirements of managing
construction and installation costs according to estimates. Because in basic
construction activities, making project estimates, construction work items is an
indispensable stage of work.
1.2.2 Product cost classification
1.2.2.1. Classification of product costs according to data and time of cost
calculation
- Planned product cost: is the product cost calculated on the basis of
planned production costs and planned output.
- Standard product cost:  is the price calculated based on current cost
standards at each time in the planning period, so the normative cost usually
changes following the change of cost standards in the production process. By
comparing actual costs with standard costs, enterprises can control whether the
use of production costs is reasonable, not wasteful or not, thereby promptly
making an adjustment plan.
- Actual product cost: Is the product cost calculated on the basis of the
data of actual costs incurred in the period and the output of products exported in
the period.

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1.2.2.2. Classification of product cost based on scope and component costs
- Full factory cost: reflect all costs incurred related to the production and
manufacturing of products within the workshop, production department,
including direct material costs, direct labor costs and production overhead costs.
- Full cost of sales: reflect all costs incurred in connection with the
production and consumption of products.
1.3. Objects of production cost accounting and product costing
1.3.1 Objects of production cost accounting
The production cost aggregate object is the range or limit to which
production costs are incurred.
To determine the object of gathering production costs in each enterprise, it
is necessary to base on factors such as:
- Production properties, product manufacturing process characteristics (simple or
complex production).
- Type of production: single production, the mass production...
- Product features
- Requirements and management level of the business
- Unit of cost calculation applied in construction and installation enterprises.
Thus, the object of collecting production costs in each specific enterprise
can be identified as each product, product type, product details of the same type,
the entire technological process, each technological stage, each segment
workshop, each production team, each order, project, work item.
For construction and installation enterprises, due to the characteristics of
products, production organization, and production technology, the object of
production cost collection is usually identified as each work or work item.
1.3.2 Objects of Product costing

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Objects of cost calculation are products, jobs, and services produced by
enterprises, which need to be calculated cost and unit cost.
Unlike production cost accounting, cost calculation is the determination of
the actual price of each finished product. Determining the cost object is the first
job in the entire product costing work. The cost accounting department must
base itself on the production characteristics of the enterprise, the types of
products and services the enterprise produces, etc. to determine the appropriate
costing object. In construction and installation enterprises, the object of
collection of production costs, which can be works, work items, or completed
construction and handover volumes.
1.3.3 The relationship between objects of production cost accounting and
objects of product costing
In essence, the object of production cost aggregation and the object of
product costing are the same because they are both scopes to gather costs and
serve the same management, analysis, cost control, and pricing. But production
costs and costs are two different aspects of the production process, costs reflect a
non-production waste, and product costs reflect production results. 
However, determining the object of collecting production costs is the basis
for accounting in detail, recording general numbers, and allocating production
costs reasonably to help enterprises strengthen management and control. Check
the cost-saving and perform well on business accounting.
The identification of cost objects is the basis for accountants to make
product costing sheets (product details), select appropriate costing methods,
organize reasonable costing work, serve the management and inspection of the
implementation of the cost plan, and calculate the business efficiency of the
enterprise.
1.4 Accounting for production costs according to the utility purpose of costs

1.4.1 Accounting for direct raw material costs
Direct material cost is the total cost of actual materials used in the
construction production process such as main raw materials, auxiliary materials,
other materials, etc. for each project or work item, including costs. Formwork,
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scaffolding is used many times and do not include the value of the equipment to
be installed by the contractor, the value of the fuel used for construction
machines, and materials used for construction team management.
Direct material costs related to any work or work item shall be collected
according to the direct method for that work or work item. For material costs
related to many cost objects such as scaffolding and formwork, it must be
allocated to each object according to reasonable methods such as the number of
uses, cost norms, completed construction volume.
Accounting account used: Account 621 – the cost of direct materials
Accounting documents used:
+When exporting materials used for production and construction,
documents are usually used: receipt of materials, delivery note.
+When buying materials for immediate use without going through the
warehouse: Sales invoices, value-added invoices.
-Aggregation method.
+ Direct aggregation method: Direct costs should be collected directly for
each work, work item. On the basis of original documents reflecting the quantity
and value of materials exported for that work or work item.
+Indirect collection method: Materials related to many works, work items
in such case must be distributed according to a certain criterion.

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Diagram 1.1: Diagram of the major accounting transaction on direct raw
material cost

Annotation:
(1) Material used for directly manufacturing products and supplying
services
(2) Purchase of raw material (not through the company’s warehouse used
for manufacturing products and supplying services
(3) Returning unused material at the end of the accounting period
(4) Transferring the value of raw material exceeded the normal rates
(abnormal cost)
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(5) At the end of the accounting period, transfer (or allocate) the cost of
raw material to each cost center
At the end of the accounting period to calculate and determine the actual
materials used for each work, work item.
Actual
direct
material
cost in the
period

=

The value of
raw materials
put into use

The value of
unused
remaining raw
material at the
end of the period

-

-

The value of
recovered
scrap

1.4.2 Accounting for direct labor costs
In the construction and installation enterprises, direct labor costs do not
include allowances for team managers and office staff in the enterprise
management apparatus. Social insurance, health insurance, and union dues are
calculated on the wages of workers directly engaged in production and
construction.
Direct labor costs in construction enterprises include: Main salary, salary
allowances of direct construction workers, construction workers (transportation,
loading and unloading of materials, preparation workers construction and site
cleaning).
Accounting account used: Account 622 - direct labor costs.
Accounting documents used: are allocation table wages, payroll, salary
payment sheet, etc.
Direct labor costs are usually calculated directly for each project item.
Direct labor costs also include wages paid to outsourced workers.

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

Annotation:
(1) Salaries, wages, and allowances for direct employees
(2) Recognizing payroll compensations for direct employees
(3) Provision for annual leave
(4) Actual benefits payable to employees when leaving is taken
(5) At the end of the accounting period, transfer (or allocate) direct labor
cost to the cost center for calculating costs of products and services.
1.4.3 Accounting for construction machine usage costs
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