NATIONAL ECONOMICS UNIVERSITY

SCHOOL OF ACCOUNTING AND AUDITING

INDIVIDUAL ASSIGNMENT
TOPIC:
ACCOUNTING FOR NON-CURRENT ASSET ITEMS

Name: Trương Thành Dương

Class: Auditing CFAB 63
ID: 11219505
Supervisor: Dr. Nguyễn Hà Linh
 Introduction

Non-current assets, also referred to as long-term or fixed assets, play a crucial role
in fostering enduring growth and stability for both private and public sector
entities. These assets encompass property, plant, and equipment, intangible assets,
as well as long-term investments. Despite the shared characteristics of these assets
across the two sectors, the accounting procedures for non-current assets can vary
significantly. This essay seeks to examine and compare the accounting treatment of
non-current assets in private and public sector organizations. Through an
exploration of the resemblances and distinctions in how these assets are accounted
for, the objective is to enhance comprehension of the factors shaping financial
reporting practices in diverse sectors.
1. Introduction about the accounting treatment of non – current assets in
private sector
In the private sector of Vietnam, non-current assets are recognized and
accounted for in accordance with the Vietnamese Accounting Standards (VAS), in
particular VAS 03 and VAS 04 and documents guidance on the accounting of fixed
assets issued by the State. Non-current assets are assets that are expected to
provide economic benefits to the entity for a period of more than one year.
Examples of non-current assets include property, plant and equipment, intangible
assets, and investment property.

Upon initial recognition, non-current assets are measured at cost, which

includes all directly attributable costs of acquiring or constructing the asset.
Subsequently, non-current assets are measured at their carrying amount, which is
the cost less accumulated depreciation or impairment losses. Depreciation is
recognized over the useful life of the asset using the straight-line method or other
appropriate methods.

Impairment losses are recognized when the carrying amount of the non-
current asset exceeds its recoverable amount, which is the higher of its fair value
less costs of disposal and its value in use. When an impairment loss is recognized,
the carrying amount of the asset is reduced, and a loss is recognized in the income
statement.

Non-current assets are also subject to periodic revaluation, which involves

measuring the assets at their fair value at the revaluation date. Any resulting gain or
loss is recognized in other comprehensive income and accumulated in equity.
Revaluation may be carried out on an individual asset basis or on a class of assets.

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2. A comparison between the Accounting treatment for Non – current assets in
private sector and public sector

2.1. In public sector

a. Recognising non – current assets

When accountants encounter transactions that increase assets, they will use
the following criteria, which are based on the standards for recognizing fixed assets
as specified in VAS 03 and VAS 04, to determine how to record the acquisition of
the asset:

- The asset must be expected to provide economic benefits in the future.

- The historical cost of the asset can be reliably measured. For fixed assets that
were purchased or constructed, there are payment vouchers and invoices available,
making it easier to determine the asset's historical cost.

- The asset must have a useful life of at least one year.

- The acquisition of the asset must be in compliance with current regulations.

According to Circular No. 45/2013/TT-BTC, the minimum value of fixed assets
must be 30,000,000 VND or more.

b. Additions in non – current asset item

When buying fixed assets, accountants use the invoices for expenses
incurred to put the fixed asset into a usable condition to determine the initial cost.
The company calculates VAT using the deduction method, so the original cost of
the fixed asset includes the invoice price (excluding VAT) and the costs of
transportation, installation, and testing.

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 All documents related to increasing fixed assets are collected from the fixed
asset purchasing department and other related departments. These documents are
then sent to the accounting department, which uses them as the basis for recording
the increase in fixed assets by debiting accounts 211 and 213 and crediting the
corresponding accounts in the accounting software. After entering the data, it is
transferred to the fixed asset card, the detail number, numbered vouchers, fixed
asset ledger, and fixed asset summary table.

c. The reduction in non – current asset items

When managers decide to liquidate, they sell off old non-current assets and
the fixed asset accountant records the reduction in cost and accumulated
depreciation of the fixed assets, as well as the receipts and expenditures from the
sale transfer. This liquidation process is reflected as other income or other expenses
in the current period.

2.2. Characteristics of Accounting system according to Circular 107

Administrative units are required to adhere to the revenue and expenditure

estimates determined by authorized bodies. The State Treasury manages the
allocation of operating funds and monitors spending within these units, based on
the approved estimates provided by the entity and higher authorities. Public
administrative units primarily rely on funds from the state budget for their
operations.

a. State budget allocation through the decision on budget allocation:

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 Annually, the higher financial authority will allocate the estimated state
budget to the lower-ranking unit via the "Allocation Decision." The accountant will
then record the transaction in Debit account 008, while also submitting the
allocation decision to the State Treasury. The State Treasury will manage and
verify the assigned estimate figures in the budget management system, as well as
update the unit's account held within the Treasury.

b. State budget allocation through money order:

Allocation by money order is a method applied to expenditures that are

directly allocated by financial authorities to budget-using units, usually applied to
nonrecurring expenses and debt payment. The budget is issued by the order to pay
money to the deposit account at the Treasury of the unit (This account is the
deposit account of the unit opened at the Treasury - Monitored on account 112),
accounting. When it is time to make the expenditure, or at the request of the budget
beneficiary, the financial agency shall be responsible for inspecting and controlling
the content and nature of each expenditure, ensuring the conditions for granting.

2.3. Comparison:

According to to cirular 200, when a company purchases non-current assets,

it will record as follows:

Dr 211
Dr 133
Cr 112

But according to to circular 107, the purchase shall be recorded as follows:

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 Dr 211
Cr 366

Concurrently:

Cr 008

If a company has an asset liquidation transaction: For example, consider that

a company had a non – current asset with an original price of 1,350,000,000 VND,
using for 9 years. Accumulated depreciation at the time of sale is 945,000,000
VND, the residual value of the asset is 405,000,000 VND. The liquidation price is
415,000,000 VND (excluding VAT 10%). Total liquidation cost is 3,400,000 VND.
The company received payment through bank transfer.

According to circular 200:

1.

Dr 112 456,500,000
Cr 711 415,000,000
Cr 3331 41,500,000

2.

Dr 214 945,000,000
Dr 811 405,000,000
Cr 211 1,350,000,000

3.

Dr 811 3,400,000
Cr 112 3,400,000
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But if we follow the circular 107, the bookkeeping shall be as follows:

Dr 366 405,000,000
Dr 214 945,000,000
Cr 211 1,350,000,000

3. Evaluation and Conclusion:

After analyzing and drawing conclusions from the variations observed in the
company's accounting systems regarding the Non-Current Assets (NCA) items, in
accordance with Circular 107 mentioned earlier, the following analysis and
conclusions can be made:

In the accounting system used by public entities, a single entry to Account

008 is made whenever money is withdrawn. This is because administrative units
primarily rely on funds from the state budget, so it is essential to credit Account
008 in certain accounts. The main purpose of this accounting practice is to identify
the funding source for the activity. In contrast, for enterprises, funding can come
from the operating results of the company, which means that they do not follow a
single journal entry approach like the HCSN accounting system.

Furthermore, in the process of asset utilization, the public entity accounting

system requires a journal entry from account 366 to account 511 to indicate the
amount of "Revenues granted by the state budget" when recording depreciation. In
contrast, enterprises simply charge the depreciation expense and record the
accumulated depreciation during the period.

During the liquidation of fixed assets, public entities need to debit Account
366 (residual value) to accurately reflect the complete value of the liquidated
assets. However, this step is not necessary for enterprises.
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 Conversely, in the public sector, accountants are exempt from the necessity
to factor in profit or loss considerations during the process of asset liquidation, a
departure from the practices observed in private enterprises. The obligation to
record profit or loss entries when disposing of assets does not apply in the public
sector. This discrepancy stems from the fact that fixed assets within public entities
are provided by the state. Consequently, the accountant's role is confined to
monitoring and documenting alterations within this asset category, without
accounting for profit or loss stemming from other asset-related business activities.