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Frequent accounting errors

Contents:

In accounting work, there are often unnecessary errors. Through this article, we want to summarize those so that accountants can learn from their work.


Tax accounting is no stranger to any business, because no matter how big or small the business is, it must also do tax accounting. Therefore, when an enterprise is established, it is imperative to have a tax accounting department in order for its business to operate and survive for a long time under the management of the law.


Thus, the tax accountant is in charge of the issues related to tax declaration in the business. The tax accounting department is a mandatory obligation of enterprises to the state. Due to tax accounting, the state can manage a multi-sector economy in the simplest and easiest way. On the contrary, when businesses report taxes, it will help stabilize their business, and tax reporting will be much more convenient when fully implemented.


Tax accounting always requires accuracy, carefulness, and detail because it has to work with many figures and invoices, and accounting documents. In the process of working, tax accountants are easy to make mistakes if they are not focused, especially for freshly graduated staff. Therefore, businesses need to pay attention to the process of recruiting accountants to avoid basic mistakes to help tax accounting work go smoothly.


About the profile with the customer

Normally, the customers could be the buyers or the output objects of an invoice. Therefore, the costs incurred with each customer need to be recorded accurately, the most important thing in the accounting is to consider whether the receipts from the customers are correct or not.

The opening of the tracking customer codes on the accounting software is not uniform, leading to the situation that a customer can be opened into many codes.

Or the debt accounting is confused from one customer code to another.


About the profile with the supplier

Businesses buy goods from both domestic and foreign suppliers, but the accountants are only aware that the records with invoices and payment documents are complete. This understanding leads to unnecessary mistakes and difficulties in the tax finalization process.

Thus, besides the purchase invoice, the accountant should pay attention to keep other documents such as contracts, customs declarations, handover minutes, packing list, ....

Errors related to balance sheets, cash flow statements, income statements are common in financial statements.


Financial statements are a picture that reflects the "health" of a business. However, unintentionally or intentionally, many enterprises have not yet fully complied with the provisions of accounting standards and legal documents related to the preparation and presentation of financial statements, leading to financial statements that provide misleading or incomplete views to the reader.


6 groups of “common errors” in the financial statements


Group 1: Error in form

The Accounting Law stipulates that the financial statements of an accounting unit must be expressed in Vietnam Dong (VND), but many financial statements use the unit of thousands of dong, which is inconsistent with the provisions of the Law on Accounting. , just makes it difficult to follow for readers. Even, many financial statements when published still lack the signatures of the director, chief accountant, scheduler, and preparation time.


Group 2: Errors related to balance sheet

  • On the target of “Cash and cash equivalents”, many businesses have “collected” even investments with a term of more than 3 months. This makes the company's cash and cash equivalents skyrocket.

  • Many businesses have securities investments but do not track in detail each type of short-term/long-term investment securities they are holding, leading to incorrect accounting of profits and losses when selling securities.

  • For the recognition of provision expenses,

  • The procedure for setting up a council to appraise the level of provisioning is not strictly followed by many enterprises, thereby not making or setting up improperly for provisions for doubtful debts, provision for loss of financial investments, provision for devaluation of inventory, etc.

  • •Many businesses also do not expect losses to make provision for undue receivable debts, but those entities have fallen into bankruptcy or are undergoing procedures for dissolution or failure to collect financial information before/after the audit of other long-term financial investment recipients and organizations to consider the need for provisioning.

  • With inventory, the item has a very large value in the total assets of many businesses, especially construction and installation enterprises, but the inventory work has not been done well at the time of closing the accounting books. financial statements, making this number unreliable. Many businesses apply inconsistent inventory valuation methods, which are not consistent with the announced accounting policies


Group 3: Errors related to the income statement

  • Business results of enterprises are the dominant factors in investors' decisions. However, there are still real estate businesses that apply standards on construction contracts (recognize revenue according to progress, similar to construction contractors). Or there are businesses that record revenue from shares received without payment because the joint-stock company issues additional shares from the share capital surplus, paying dividends in shares.

  • With regard to expenses, many enterprises change the depreciation method when there is no evidence that there is a change in the way of using and recovering assets in order to reduce the number of expenses to be depreciated in the year, thus, increase profit/reduce the loss on financial statements. Even the interest expense is not accounted for properly and sufficiently; ….


Group 4: Errors related to the statement of cash flows

Differences in liabilities for purchases of fixed assets and capital construction are not excluded from operating activities. Similar to the loan balance differences being presented by many businesses when calculating cash flow from operating activities. If so, the calculation of cash flow from financing activities will be inaccurate.


Group 5: Errors related to the notes to the financial statements

The notes to the financial statements in many cases do not disclose the items of material nature as prescribed by accounting standards such as loans of great value, methods of determining revenue, cost of goods associated with each specific type of business field of the enterprise,… making readers unable to have a clear and honest view of the business. Information about related parties is not presented or presented insufficiently in accordance with the accounting standards.


Group 6: Errors related to the consolidated financial statements

  • Not fully excluding receivables, payables, borrowings, loans, capital delivery relationships, revenue, cost of goods, unrealized profits and losses related to transactions of providing goods and services, fixed assets of internal transactions between the enterprise and its branch in the consolidated financial statements/or between the parent company and its subsidiaries, between member units of the same group.

  • Many enterprises rely on the reason of not being able to assemble the financial statements of the associates at the time of the consolidated financial statements to account for the investment in the associates using the historical cost method, instead of using the equity method, it may lead to the recognition of a loss when the associates are in a bad business situation.



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