Circular No. 40-TC/CĐKT guiding accounting for foreign currency receipts and payments

CIRCULAR

NUMBER 40/TC-CĐKT OF JULY 12, 1991 OF THE MINISTRY OF FINANCE GUIDING ACCOUNTING FOR RECEIPT AND EXPENDITURE IN FOREIGN CURRENCY

Since the State announced the abolition of internal settlement exchange rates, the conversion of foreign currency to Vietnamese dong for bookkeeping and accounting reports at units with foreign currency receipts and expenditures has been carried out differently, lacking consistency, and in many cases, not reflecting truthfully and violating accounting principles. To address this situation, the Ministry of Finance guides the accounting methods for foreign currency transactions at economic units as follows:

I. GENERAL PROVISIONS

1. Production and business units must record their books and prepare accounting reports using a unified monetary unit, which is the Vietnamese Dong issued by the Bank of Vietnam.

Foreign currency transactions that occur must be recorded in original currency and converted to Vietnamese Dong according to the principles set forth in this Circular.

2. The principle for converting to Vietnamese Dong for bookkeeping purposes is as follows:

- The value of fixed assets, raw materials, small tools, goods purchased in foreign currency shall be recorded in the accounting books in Vietnamese Dong based on the buying rate of foreign currency published by the Bank (hereinafter referred to as the Bank's buying rate) at the time of increasing such assets. During subsequent use, revaluation of assets purchased in foreign currency shall be conducted similarly to assets purchased in Vietnamese Dong.

- Direct foreign currency expenses and revenues (cash) shall be recorded in the accounting books in Vietnamese Dong based on the Bank's buying rate at the time of occurrence of such expenses and revenues.

- To simplify cash accounting for foreign currency (cash, bank deposits, funds in transit) and foreign currency receivables and payables (trade receivables and payables, loans) occurring daily, they shall be recorded in original currency and converted to Vietnamese Dong based on the accounting rate. The accounting rate is the Bank's buying rate at the beginning of each month (or quarter if there is little fluctuation). At the end of the month (or quarter), the accounting rate shall be adjusted according to the Bank's buying rate at that time and used as the accounting rate for the following month (or quarter). For units with few foreign currency transactions, recording shall be done based on the Bank's buying rate at the time of occurrence.

3. The difference between the accounting rate applied during the month (or quarter) and the Bank's buying rate at each occurrence of foreign currency, and the difference due to adjusting the accounting rate at the beginning of the month (or quarter) shall be reflected on Account 65 "Exchange Rate Differences and Price Indexes" (651 - Exchange Rate Differences). At year-end, the total of Account 65 shall be determined and processed according to the state capital preservation system.

4. For units receiving and spending multiple types of foreign currencies, the Bank's buying rate shall be used to determine the accounting rate for each type. For foreign currencies without a Bank's buying rate, they must first be converted to US dollars based on the exchange rate between that foreign currency and the US dollar reported by the Bank before converting to Vietnamese Dong.

II. METHODS OF ACCOUNTING FOR SOME MAJOR TRANSACTIONS

1. When purchasing assets, materials, goods..., record:

Debit Accounts 10, 21, 22, 23 - based on the Bank's buying rate

Credit Account 60 - "Settlement with Sellers" - based on the accounting rate.

Credit Account 65 - Exchange Rate Differences and Price Indexes (651)

(or debit Account 65 - 651: when the accounting rate is higher than the Bank's buying rate)

2. When incurring expenses, record:

Debit Accounts 30, 31, 34... based on the Bank's buying rate

Credit Account 60 - Settlement with Sellers - based on the accounting rate.

Credit Account 65 - Exchange Rate Differences and Price Indexes (651)

(or debit Account 65 - 651: when the accounting rate is higher than the Bank's buying rate).

3. Payment to sellers, record:

Debit Account 60 - Settlement with Sellers - based on the accounting rate.

Credit Accounts 50, 51, 90, 91, 92 - based on the accounting rate (simultaneously record the original currency).

4. Repayment of loans, record:

Debit Accounts 90, 91, 92 - based on the accounting rate

Credit Accounts 50, 51 - based on the accounting rate (simultaneously record the original currency).

5. When revenue occurs, record:

Debit Account 61 - Settlement with Buyers - based on the accounting rate (simultaneously record the original currency).

Credit Account 40 - Consumption and Results - based on the Bank's buying rate.

Credit Account 65 - Exchange Rate Differences and Price Indexes (651)

(or debit Account 65 (651): when the accounting rate is lower than the Bank's buying rate).

6. When receiving foreign currency, record:

Debit Accounts 50, 51 - based on the accounting rate.

Credit Account 61 - Settlement with Buyers - based on the accounting rate (simultaneously record the original currency).

In cases where the unit has receivables or payables in foreign currency but actually settles in Vietnamese Dong according to the agreed exchange rate, the accountant shall reduce the foreign currency receivable or payable based on the accounting rate, record the actual amount received or paid in Vietnamese Dong based on the agreed exchange rate, and reflect the difference between the accounting rate and the agreed exchange rate on Account 65 "Exchange Rate Differences and Price Indexes": (651).

7. When purchasing foreign currency, record:

Debit Accounts 50, 51, (503, 512) - based on the accounting rate (simultaneously record the original currency)

Credit Accounts 50, 51, (501, 511) - based on the actual purchase rate.

Credit Account 65 - Exchange Rate Differences and Price Indexes (651)

(or debit Account 65 (651): when the accounting rate is lower than the actual purchase rate).

8. When selling foreign currency, record:

Debit Accounts 50, 51, (501, 511) - based on the actual selling rate

Credit Accounts 50, 51, (503, 512) - based on the accounting rate (simultaneously record the original currency).

Credit Account 65 - Exchange Rate Differences and Price Indexes (651).

(or debit Account 65 (651): when the accounting rate is higher than the actual selling rate).

9. At the end of the month (or quarter) when adjusting the accounting rate, the accountant must determine the balance of cash and foreign currency receivables and payables to process.

- If the Bank's buying rate is higher than the current accounting rate, based on the difference, record:

Debit Accounts 50, 51, 52 and debit Accounts 60, 61, 62... (if there is a debit balance)

Credit Account 65 - Exchange Rate Differences and Price Indexes (651)

And:

Debit Account 65 - Exchange Rate Differences and Price Indexes (651)

Credit Accounts 60, 61...90, 91, 92 (if there is a credit balance)

- If the Bank's buying rate is lower than the current accounting rate, based on the difference, record:

Debit Account 65 - Exchange Rate Differences and Price Indexes (615)

Credit Accounts 50, 51, 52 and Credit Accounts 60, 61, 62... (if there is a debit balance)

And:

Debit Accounts 60, 61... 90, 91, 92 (if there is a credit balance)

Credit Account 65 - Exchange Rate Differences and Price Indexes (651).

10. At year-end, the exchange rate differences arising (sub-account 651 - exchange rate differences) if significant shall be handled separately, if minor, they shall be combined with the price index differences arising (sub-account 652 - price indexes) to determine the total exchange rate and price index differences (account 65) to be processed.

The handling of exchange rate differences in both cases above shall be carried out as follows:

- If sub-items 651, 652 or account 65 have a credit balance, meaning that the current capital value is higher than the source capital value, therefore, it must be based on the value of the sources of capital to be preserved according to the State's regulations. If the current value of the sources of capital is not sufficient compared to the amount required to be preserved, the unit shall use the exchange rate difference and price index to preserve the capital. The remaining exchange rate difference after preserving the full capital shall be considered as income in the accounting period of the unit.

When using the exchange rate difference and price index to preserve the capital, record:

Debit Account 65 - Exchange Rate Difference and Price Index.

Credit Accounts 80, 81.

When transferring the remaining difference into income, record:

Debit Account 65 - Exchange Rate Difference and Price Index.

Credit Account 70 - "income".

- If sub-items 651, 652 or account 65 have a debit balance, meaning that the current capital value of the unit is lower than the source capital value, therefore, the unit must calculate and make up for the difference according to the capital preservation regime prescribed. The exchange rate difference and price index (debit balance in Account 65) shall be transferred to Account 70 as a loss in the accounting period.

Accounting records:

Debit Account 70 "Income"

Credit Account 65 "Exchange Rate Difference and Price Index".

The above are some guidelines for accounting for foreign currency receipts and payments transactions. The Ministry of Finance requests all Ministries, The decision to switch the issuance of coats, overcoats, windbreakers, and down jackets to other uniforms for civil servants working at the National Market Management and Development Agency is decided by the Minister of Industry and Trade.People's Committees of provinces, cities, and centrally administered municipalities to guide and supervise subordinate units to implement uniformly from the date of issuance. During the implementation process, if there are difficulties, please promptly report to the Ministry of Finance for further study and guidance.