General theory on accounting for payroll and salary deductions

INDEX PREFFACE PART I GENERAL THEORY ON ACCOUNTING FOR PAYROLL AND DEDUCTIONS FOM EMPLOYEES’ SALARIES 1 I-BASIC FEATURES OF PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES 1 1.Concept, features and the useful of payroll and deductions from employees’ salaries 1 1.1.Concept on salary 1 1.2.Deductions form employees’ salary 1 1.2.1.Social insurance fund 1 1.2.2.Health insurancce fund 2 1.2.3.Trade fees 2 2.Payroll funds and payroll regulations 3 2.1.Payroll funds 3 2.2. Salary system 4 2.2.1.Salary by hours 4 2.2.2.Salary by product 5 2.2.3.Other types of salary 7 II-CONTENTS OF PAYROLL ACCOUNTING AND DEDUCTIONS FROM SALARY 7 1.Contents of payroll accounting 7 1.1.Vouchers in use 7 1.2.Acounts in use 8 1.3.Methods of payroll accounting 8 2.Contents of deductions from employees’ salary 9 2.1.Vouchers and accounts in use 9 2.2. Accounts in use 10 2.3.Method of accounting for deductions from employees’s salaries 10 PART II THE REALITY OF PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 15 I-AN OVERVIEW OF SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 15 1.The formation and development of the company 15 2.Functions and primary missions of the company 15 3.The main features of the framework of organization 18 4.The main features of the company’s business activities 20 5.The main features of the company’s accounting system 20 5.1.Accounting system 20 5.2.Features of accounting task 23 II-THE MAIN FEATURES OF PAYROLL ACCOUNTING AND DEDUCTIONS FROM EMPLOYEES’ SALARY IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 26 1.Payroll accounting 26 1.1.Contents of payroll acounting 26 1.2.Forms of paying salary 26 1.3.Vourchers used for computing payroll 1.4.Accounts used for computing payroll 1.5.Methods of computing payroll 2.Contents of deductions from emplyees’s salaries in the company 27 2.1.Contents of deductions from employees’s salaries in the company 27 2.2.Accounts used in the company 2.3.Book-keeping registers used in the company 2.4.Order of accounting for deductions from employees’s salaries in the company PART III SOME CONSTRUCTIVE IDEAS TO BETTER THE ACOUNTING FOR PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 32 I-GENERAL COMMENTS ON ACCOUNTING FOR PAYROLL AND DEDUCTIONS FROM EMPLOYEES’S SALARIES 32 II-SHORTCOMINGS AND CONTRUCTIVES IDEAS TO MAKE GOOD PAYROLL ACCOUNTING’S SHORTCOMINGS 33 1.Shortcomings 33 2.Contructive idears to make good accounting’s shortcomings for payroll and deductions from employees’ salaries 34 CONCLUSION REFERENCE

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such as coeffictient and salary grade limit, product norm, time norm, work norm of the clerk and allowances which follow the rule of Government State. Salary unit price caculated bases on profit in plan. This method is applied in the multiple manufacturing company with detail labor norm, therefore it is difficult to define employees payable in the total costs, the method is caculated as follow: Total labor x Average salary Salary unit price = Total profit Salary unit price caculated on turnover: Total labor x Aaverage salary Salary unit price = Total profit 2.2. Salary system: 2.2.1. Salary by product This is the type of paying salary based upon on the working hours of the labor, hierarchy (title) and salary grade (salary ceefictient). This form mainly applied with indirect labor, stayble job or with direct labor without product norm. Monthly salary = The real days at work in a week x daily wage Monthnly salary x 12 months Weekly salary = 52 weeks Monthly salary Daily wage = The days work in a month Daily wage is the foundation to caculate social insurance, subsidy to pay the employees or on the meeting days, or the days they go on training Daily wages Hour wage = 8 hours Hour wage is the foundation to caculate subsidy for extra-work Simple hour wage = real time at work x unit price Hour wage with bonus included Substantially, this is the combination between Simlpe hour wage form with frequantly bonus form the payroll fund. The amount of bonus depends on the amonunt of finished work. Therefore, this type is more motivate, encourages employees than other ones . Though, this type not yet show the fact of the relation between employee ability and employee effectiveness 2.2.2. Salary by product Employees are paid bases on quantity, quanlity of their products, amount of works they have done and bases on the unit price caculated per work unit. Paying salary by product can be practised in difference ways - Paying salary by products directly to individual: this type is regularly applied to self-contained labor ,direct-working worker with work norm which can check and take over Salary payable = Unit price x finished works Salary by grade (wage by hours, by days) Unit price = Work norm by hour, day or month Or Unit price = Salary by grade x amount of product (wage by hour,by day) - Salary payable for indirect employees : this type is applied to indirect labor whose work have big effect on direct labor’s work, so that, to caculate salary it is necessary lying on quality, capacity, work result of the direct labor Salary unit price of x finished work of Salary = the sub-labor chief-worker - Salary by product of work-group : follows this type the company pays to the individual employee by group (unit, mill, …) then, payroll is distributed to each of the worker in the unit or group bases on basic salary and the real time each one at work. The formula to caculate as follow: Lt Li = x Ti Ki ∑ Ti x Ki In there: -Li: salary payable to worker i -Lt: salary payable to the unit -Ti: real time at work of the worker i -Ki: is the work grade of the worker i - Salary by piece-work: Salary payable to the group or worker is promised for awork norm, product norm under job-work unit price. If worker work in a group his salary will be paid by the mode salary payable to group - Salary by product with bonus included: Beside getting salary pay by direct product, the labor also gets bonus for raise productiveness, save material, higher product quality L x (M+H) Lth = L+ 100 In there: -Lth: salary by product with bonus included -L : salary by direct product -M: percent of salary exceed the set standard -H: percent of product exceed the set standard -Salary by progressive product: with this type, the labor is paid depends on the amount of direct products they have done added with the percent of progressive product which based on the rate of exceeding the set standard 2.2.3. Some other types of salary Beside the above modes, depends on the scale, conditions and features of the business organization then enterprise can applied these type of paying salary: - Salary pay for the final result - Salary by salary group fund - Salary pay by amplitude of set by standard II-CONTENTS OF ACCOUNTING FOR PAYROLL AND SALARY DEDUCTIONS 1. Content of payroll accounting 1.1 .Vouchers in use Form 01- LDTL- Time sheet Form 02- LDTL- Payroll Form 03- LDTL- Leaves paid by social insurance Form 04- LDTL- Social insurance payment voucher Form 05- LDTL- Bonuses payment voucher Form 06- LDTL- Certification of performance Form 07- LDTL- Overtime record Form 08- LDTL- Piece-work engagement contract Form 09- LDTL- Accident investigation report 1.2. Accounts in use ACCOUNT 334- PAYABLE TO EMPLOYEES This account records salaries, wages, social insurance and other payables that are due to the employee, as well as the payment of these liabilities. 1.3. Methods of payroll accounting Debit: - Record salaries, wages, bonuses, social insurance and other amounts which have been paid or advanced to the employees - To record deductions of salaries and wages from the employees salary. Credit: To record amounts payable to employees such as salaries, wages, bonus and social insurance. Credit balance: - Shows amount payable to employees such as salaries, wages, bonuses, and otherpayable to employees - This account can have a debit balance which show that the amount paid to employees was greater than what was payable.This account should be kept tract of under two headings: salaries payable and other payables. Major transactions: 1. To record salaries, wages, and other allowances which are payable to employes Dr.241- Construction in progress Dr.622- Direct labor cost Dr.627- Factory overhead costs (6271) Dr.641- Sellling expenses (6411) Dr.642. General and administration expenses (6421) Cr.334- Payable to employees 2. To record bonuses payable to employees Dr.431- Bonus and welfare fund Cr.334- Payable to employees 3. To record social insurance which must be paid to to the employees such as sick leave,pregnancy leave etc Dr.338- Other payable Cr.334- Payable to employees 4. To record annual leave which mist be paid to the employees Dr.627,641,642, or Dr.335- Accrured expenses payable Cr.334- Payable to employees 5. To record deductions from salaries and employees income such as advances, health insurance, indemnity, etc Dr.334- payable to employees Cr.141- Advances,or Cr.338- Other payable Cr.138 - Other receivable 6. To record the personal income taxes which must be paid to the state Dr.334- Payable to employees Cr.333- Taxes and other payable to the state budget 7. To record the payment to the employee Dr.334- Payable to employees Cr.111- Cash on hand Cr.112- Cash in bank 2. Contents of salary deductions accounting 2.1 . Vouchers in use Form 01- LDTL- Time-sheet Form 02- LDTL- Payroll Form 03- LDTL- Social insurance leave slip Form 04- LDTL- Social insurance payment sheet Form 05- LDTL- Bonus payment sheet Form 06- LDTL- Confirmation of finished products or work Form 07-LDTL- Over time record Form 08-LDTL- Lump-sum work contract Form 09- LDTL- Record of working accident examination 2.2. Accounts in use 338- OTHER PAYABLE This account is used to record the changes in other payable (which are not included in account 331 to 336) Content and scope of this account involes the following major transactions: 1. The value of asset surplus for which the reason has not been determinded and the company is awaiting the authorities decision. 2. The value of asset surplus payable to individuals or entities (internal and external) according to the authorities decision. 3. The recognition and payment for social insurance, health insurance and trade union fees. 4. Withholdings from employees’ salaries based on court’s decision (allowance for children when divorced, cour fees, compensation, etc). 5. Amount payable as a result of holding deposites of another entitiy. 6. Dividends payable to joint venture partners. 7. Amount payable for temporary borrowing of materials and /or money. 8. Amount received from consignors or their agents who are involed in the import, export business in order to pay export tax, import tax, duties, turnover tax etc. 9. Other amount payable or receivable. 2.3. Method of accounting for salary deductions Debit - Amount of social insurance which has been paid to an employee. - Trade union fees which have been paid by the entity. - Social insurance, health insuranse, and trade union fees which have been remitted to the authorities. Credit - Recognise social insurance, health insurance and trade union fees as business expenses of the current period. - Health insurance withheld from employees’ salary. - Injection from funds to cover over payment of social insurance and trade fees . Credit balance - Amount of social insurance, health insurance and trade union fees that are payable. This account may have a debit balance when the amount paid to the authorities exceeds the obligation or the company has overpaid social insurance and trade union fees and the over payment has not been reimbursed. Accounts for salary deductions is composed as follow: -Acount 3382- Trade union fees payable: to record recognition and payment for trade union fees -Acount 3383- Social insurance payable: to record recognition and payment for social insurance -Account 3384- Health insurance payable : to record recognition and payment for health insurance according to regulations Major transaction: - Monthly withholding of social insurance, health insurance and trade union fee Dr.241-Construction in progress Dr.622-Direct labor costs Dr.627-Factory overheadcosts Dr.642-General and administration expenses Cr.338-Other payable (3382-Trade union fees 3383- social insurance,3384-health insurance). - Caculate health insurance deducted from employees’ salaries. Dr.334-Payable to employees Cr.338-Other payable (3384) - Submit social insurance health insurance and trade union fees to authorities Dr.338-Opther payable Cr.111-Cash on hand Cr.112-Cash in bank - Caculate social insurance payable to employees Dr.338-Other payable (3382,3383) Cr.334-Payable to employees - To record spending out of the company’s social insurance and trade union fund Dr.338-Other payable(3382,3383) Cr.111-Cash on hand Cr112-cash in bank - To record a refund due to excessive payments made for social insurance and trade union fund which have been returned Dr.111-Cash on hand Dr.112-Cash in bank Cr.338-Other payable (3382,3383) (Appendix) PART II THE REALITY OF PAYROLL AND DUCTIONS FROM EMPLOYEES’ SALARY IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY I- OVERVIEW OF SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 1. The formation and the development of the company * NAME: Song Hong construction development and import-export company - ABBREVIATION: SHODEX * ADDRESS : 4th, 164 Lo Duc str, Hai Ba Trung dist, Ha Noi city * HEADQUARTERS: Song Hong construction corporation * FORM OF BUSINESS ORGANIZATION : stated-owned enterprise * SCOPE OF ACTIVITIES: construction and import-export * STAFF: 210, in there, officers: 30 Song Hong construction development and import-export company is state-owned enterprise, at the beginning it was a branch of construction and import-export company under Song Hong construction corporation. SHODEX at the time was a wholesaler, specialized in selling: aluminum, concrete, enameled tile, … for Song Hong Construction Corporation. The company did business mainly with Song Hong Aluminum joint-stock company, construction materials and concrete industry company. From the year 2001-2002, catching up with the national development and market demands the company officially expanded into the construction business. SHODEX has executed civil and industry construction projects. 2. Functions and primary mission of the company SHODEX business activity goals in 2003-2004-2005 are showed through figures on the table below: SONG HONG SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY SHODEX business activity goals in 2003-2004-2005 Type of currency :VND No Indicators 2003 2004 2005 1 2 3 4 5 6 Revenue from sales Pretax income Source of capital Staff Payroll fund Average wage per man 98.984.097.628 411.323.887 36.308.376.290 190 4.617.798.074 13.47.567 103.392.547.430 2.411.788.691 47.064.710.688 200 6.893.704.500 18.720.000 105.760.439.633 2.453.641.967 52.923.136.231 210 7.238.312.102 34.417.230 (Source: Accounting Department) According to SHODEX’s business activity goals, turnover of the company in the year 2003-2004-2005 has increased highly and steadily. Other figures such as pretax income , payroll fund … have gone up. These achievements have resulted from Board of management’s role in improving its management system as modernly and plainly, meets the company’s requirements and suits to current business activities. SHODEX’s main activities in fields such as civil, industry, transportation, investment nd development business and import-export business. Therefore, SHODEX’s main fields of activities in legal document are: * Executes construction projects such as: civil, industry, transportation, water supply and drainage, irrigation system, infrastructer projects * Executes power transmission lines, purchases and develops house * Transportation business, construction materials, unload material building and other goods * Hotel, restaurant and tourism business and other tourism services * Exploits ore for smelting , manufactures agriculture and forestry products * Import-export construction materials and equipment, foodstuff, other type of goods which permitted for exploiting and manufacturing One of the main business activities of SHOEX is executes construction such as:trasportation, industry, civil ۩ The main features of its executing process To have the construction projects well-done the company must applicate technology in executing the projects. Each project has its own way of executing but the technology process of SHODEX’s construction products can be generalized in these stages: Preparing stage: in this stage the company takes over floor-space and prepares all the factors which obeyed the execution design, makes plan for materials , equipments, sets up execution technology ,prepares manpower Executing stage: this stage obeys steps which set up by technical department in plan . Each construction project obeyed its own operating process which planned Finishing stage: This is the last step in technical process of the construction product . This includes: building power system, water supply system, door system, plaster, pave, cover, mastic, paint building which is in use . Then technical department along with its technicians supervise project and pieces of work which had already finished. After assuring construction quality the authorized manager of the project will prepare to delivery the building to the investor The construction process is illustrated in the following diagram: PREPARING EXECUTING finishing Some of remarkable construction projects of SHODEX are: rebuild Quang Ninh Geology Hotel, Cien Co 1 control house, National shooting training college, Soc Trang consultant camp, Tan De pre-stress concrete and traffic jam, repairing New power center, Ha Noi musical institute flat-block, Viet Ha beer company, Campuchia consultant engineer camp… 3. The main feature framework of organization Based on business field, basic mission of construction enterprise, the management system of SHODEX has been organized as the chart follows: (Appendix ) The departments’ roles in the organization: * Director is responsible for making major policy decisions, making decisions about the goals and activities that an individual, a group, a work unit or the overall organization will pursue in the future, monitoring progress and making needed changes * Construction deputy director: is responsible for reporting to the director, controlling administrative activities of civil and industry construction projects * Business and import-export deputy director: is supposed to do business and import-export goods, making strategies, searching suppliers and new market segments SHODEX has six functional departments with the members of 30 officers: - Technical department with 3 members, assists to director in supervising the fields such as making plan for projects’ schedule - Investment & planning department: with 2 members is functional department of SHODEX, plans production and construction investment of organization. By organizing to receive and collect necessary information, experting potential market and market demands then it give staff to the manager. Researching and making solutions to archive target. Managing materials fields, equipments and assets… - Labor department: with 3 members manages staff dossier, organizes and control manpower, assistant to the director in making plan, training & recruiting staff. It operates clerical work keeps organization’s secrets, keeps documents as archive , insect and control the implementation of the internal policy - Import-export business department: with 3 members assists to the director in making business and production plan, bringing into full play market price, making price-list for projects, making economy contracts - Financial accounting department: with 6 members, organizes expenses accounting or makes mobilizing source of capitals in order to assure projects is finished in time, checks liquidate with the Corporation, bank, customs, staff. Writes down, analysises business events, balances expenditures and incomes, makes regular reports. Organizes annual or sudden inspect follows the top-managers’ requirements, responsible for assisting to the director in financial management and organizes expenses accounting of the company - Southern representative office: is on duty of doing business activities in southern area - Construction units: are in charge of managing their units and organizing execution under their task, organize to sign internal economy contracts, liquidate hire by the price contract of the units. Bases on units’ schedule making production control plan to assuring the quality and punctuality in delivery time of product design, manages workers, security and hygienic. Leaders of a gang of construction are responsible for reporting directly to the director Construction units are the sectors where main business events occurred they are the bases to carry out vouchers: import vouchers, export vouchers, daily working table…it makes foundation for accounting in liquidate expenditures and calculates cost price 4. The main feature of the company’s business activities The National economy is on market economy, therefore, all the enterprises need to push up capacity, improve technology to advantage their production and business. In the current strong competitive condition , price for bid is lower than that before, so that, to assure incomes as well as profits SHODEX’s board of management always try their best to search and expand market and modern their manage system as well In the year 2006 SHODEX is changing into joint-stock company under the Decision No.1368 by Ministry of construction dated 05/07/2005.This will be then remarkable year with strong changes of the company, mobilizes much more source of investment capital, encouraging the staff’s ability, raising productivity that mean the standard of living of the all company staff is improve 5. The main features of the company’s accounting system 5.1. Accounting system Song Hong construction development and import-export company organized its accounting apparatuses as concentrated mode, periodly at the end of the month accounting clerk gethers and makes generalble table, transfers to the financial department all the original vouchers to record onto the auditing accounts book. In order to motivate important function of the manufacturing management of the company, the accounting system has been organized scientifically, reasonably, operates effectively, supply information in-time, exactly and adequately. Besides accounting books system, SHODEX has applied accounting software Business Accounting KTDN 2002 . Therefore, the accounting numeric data is recorded in both books and disks, assures accuracy, adequately of the accounting information whenever need comparing or supplying to board of managers Accounting organization of SHODEX is showed on the below diagram (Appendix ) Looking at the diagram, we can see there are six functional accountants in accounting department: 01 chief accountant, 01 deputy department accountant, 04 functional accounting clerks and 01 cashier These clerks have their own function as detail follow: - chief accountant: manages in general accounting system of the company, reports to the director for all of financial accounting tasks, controls general accounting tasks, supervises all parts of the accounting tasks, supervises the work of accounting clerks and their routine record keeping functions, manages in general all costs to make financial report and provide to the management to make decisions - Department deputy accountant: is payable accountant has tasks such as: supervise money transactions through banks, expenditures and incomes payment for customers, bank and National budget… - Goods and materials accountant is in charge of supervising and generlising information relate to in-put and out-put materials , inventories - Assets, tools and equipments accountant supervise increase or decrease of the items, calculating and ad equating depreciate aids to cost generalizing accounting - Payroll accounting: monthly calculating payable salaries for employees, distributing cost of payable life insurance to generalize expenditures for calculating cost-price - Expenditures and incomes cost-price general accountant does the rest bookkeeping that the other parts haven’t done, collect, expenditures, calculates cost-price, verifies results, supervises numeric data from other department , supplies for closing books, makes reports and sends to the Corporation - Cashier is the person manages all amount of cash of the company, bases on regular receivement , payment orders to receive , pay and record on cash fund book - Board of financial accounting units: are on duty of supervising and calculating in detail materials, wages, money payable, generalize expenditures arise at the beginning of contracts, projects. Summarize numeric data then send to financial department of the company as well as explain clearly and reasonably all the link data assure that financial information is served adequately and completely ۩ The general situation of applying accounting policies in the company SHODEX’s accounting system is pursuant to Decision 1141/Q§- btc- C§KT dated 1/11/1995 of the financial ministry and pursuant to the Decision Q§ 4/Q§/BXD of the Ministry of construction about issuing the new accounting system for construction enterprises The new accounting system has been applied SHODEX as follows: - Fiscal year: begins on the first of January to the thirty one of December every year - Type of currency: Viet Nam dong - Rules and methods of money exchange: receive and pay foreign currency calculate based on the current exchange rate issued by Viet Nam State Bank - Fixed assets: accounting method + account for fix assets: actual statistic + depreciation: straight-line depreciation - Inventories: + calculate inventories : the perpetual method + rules of calculating inventories: actual inventories - System of accounting is opened pursuant to accounting principles, accounting standards, the corporation drives and constructs detail account, regarding it organization and management characteristic as a construction enterprise 5.2. Features of accounting task The accounting form: “General journal” the general journal is a general accounting book which records transactions in chronological order. This journal records accounting entries which will eventually be recorded in the general ledger The figures in the general journal are posting to the general ledger The books system used in this form: + General journal + Special journal + General ledger + Subsidiary ledger cards Method of recording: (Appendix ) Every day based on original documents to recorded on General journal in chronological order. Daily or periodically based on figures recorded on General journal to record into the General Ledger which correspond to the credit entries - Specialties, which need calculating in detail are recorded both in general journal and subsidiary books - In case, the company opens special journals in addition, accountants daily base upon on original documents to record business events into subsidiary specialty journals, after that, every 3, 5, 10 days or at the end of every month (depend on the amount of the events ) generalizes from specialty books to record into ledger with correspondence accounts - At the end of the month or quarter accountants make the balance sheet based upon on the legers - At the end of the month or quarter accountants make general detailed sheet based upon on detailed accounting data, these figures are compared with ones in the ledger - After comparing figures in ledger and detailed general sheet, accountants make financial report According to “General journal” form the company opens these types of books: Acct Books Account No General books 621, 622, 627, 151, 141… Detail books 111, 112, 152, 153, 331, 131, 141, 154, 621, 622, 623, 627 General detail books 154, 511, 131, 141 The company calculates inventory under the perpetual method and sales tax under deduction method Microcomputer system applied in accounting task (Appendix ) SHODEX has also applied the accounting software KTDN 2002. The software is written based on Visual Basic 6.0 language combined with making report tool Crystal reports 8.5, multiple choice databases between Microsoft access and SQL server. The KTDN 2002 accounting software runs well on Windows, Win XP, Win 2000 with toolbar is written in Vietnamese language, friend-user buttons. About bookkeeping, the KTDN 2002 accounting software printed out detailed books as well as generalizes financial statements, management pursuant to regular form issued by Ministry of Finance. Supervises, reflects value added tax pursuant to latest accounting system . Adapts to bookkeeping and financial management, especially aid highly to users’ tasks. The KTDN 2002 accounting software also help the managers exchanging financial information through internal network, users are able to exchange information with other distant units and reverse Based on the regulations, on the content and method of establishing financial statement the company prepares and uses these reporting forms: Balance sheets form B01- DN Income statement form B02- DN Notes to the financial statement form B09- DN Each financial statement are prepared 4 copies and sent at the end of each quarter (end of third or sixth or ninth or twelfth month: 01 copy is forwarded to the statistic department, 01 copy is forwarded to tax dept of Ha noi, 01 copy is forwarded to financial dept, 01 copy is forwarded to kept by the company). Besides, every month the chief accountant also prepares management statements for internal, used by managers II- THE MAIN FEATURES OF ACCOUNTING FOR PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT -EXPORT COMPANY 1. Payroll accounting 1.1 . Contents of payroll acounting The company’s salary fund include employees payable for the real time they at work,when they out of work or go on recruit, extra-time allowances… 1.2. Forms of paying salary in Song Hong construction development and import-export company At present, SHODEX applies the mode salary by the real time per month under the under the Prime Minister's Decree 118/2005 dated September 15 th The mode of payroll accounting in shodex as following details: Based upon on Time cards, contracts, delivery records, payroll of the execution units, payroll sheets, accounting clerk supervises and calculate, again and prepare, payroll sheet and distributes salary. Payroll accounting clerk post accounts: * With labor hire from outside (numeric data extract from B1+B2 Steal Unit-Appendix ) Dr 622-direct labor expenses 9 843 600 Dr 627-factory overhead expenses 1 200 000 Cr 334.2-payable to employees 11 043 600 Dr 334.2-payable to employees 11 043 600 Cr111.1-cash on hand 11 043 600 * With labor on the list (numeric data extract from Ha Noi Conservatory project- Appendix ) Dr 622- direct labor expenses 84 150 000 Dr 627-factory overhead expenses 23 456 000 Dr 641-selling expenses 10 800 000 Dr 642- General and administration expenses 22 500 000 Cr 334.1- Payable to employees 140 906 000 Dr 334.1- Payable to employees 140 906 000 Cr 111.1- Cash on hand 140 906 000 - When record deductions from salaries and employees incomes such as life insurance, health insurance, trade union fees Dr 334.1- payable to employees 3 014 050 Cr 338.3- social insurance payable 1 678 375 Cr 338.4- health insurance payable 335 675 Cr 338.2- trade union fees 1000 000 -When record advances: Dr 141- advances 500 000 Cr 111.1- cash on hand 500 000 Dr.3341- payable to employees 500 000 Cr 141-advances 500 000 - At the end of the accounting period allocate the direct labor expenses by cost centre: Dr 154- work in process 763 809 280 Cr 622- direct labor expenses 763 809 280 2. Accounting for salary deductions in the company 2.1. Contents of deductions from employees’s salaries in the company - Social insurance : based upon on Government Decision, the company withholding 20% from employees’ salaries. 15% count for factory overhead expenses, the rest 5% abstract from employees’ incomes - Health insurance : based on Government Decision, the company withholdings 3% from employees’saleries. 2% count for factory overhead expenses , the rest 1% deduct from employees’ incomes - Trade union fees : the company pays 2% to the authorities this amount from employees’ salaries and factory overhead expenses * Methods of payroll accounting : - With direct labor the company pays salary by product, calculate as follow: Salary per direct employee = days of work In month x unit price / work Detail: + days of work in month: based on time cards and payroll sheet making by the leader of each unit + unit price / work : based on the record of checking and taking over the buildings, contracts accounting clerk of the units calculate unit price as the follow formula: Total value of the contract Unit price/ work = Total work of the contract After finishing unit price for every labor, accounting clerks of the units make salaries payable sheet. At the end of month, accounting clerks of the units transfer time cards, contracts, records of checking and taking over buildings, salaries payable sheet of every execution unit to the company. Payroll accounting clerk of SHODEX then checks, calculates and prepares payroll sheet as well as contributes payroll sheet for construction work teams ۩ For example, the time card of B1+ B2 steel unit in September, 2005 No Work contents unit amount Unit price Total Technicians’ Signature 1 Producing and building steel polar kg 3527,6 650 2292940 2 Producing and building stair’s steel 1st, 2nd, 3rd floors kg 1239,2 650 805480 … … … … … … … Total amount 9847600 Total amount in written: nine million eight hundred fourty seven thousand and six Viet Nam dong Total work to execute the above contract is 243, so we can calculate as follow:  9.847.600 Unit price / work = 243 = 40 676,03 Vnd \ work The accounting clerk computing just forty thousand dong for direct worker payable , the odd number calculated for the leader and leader duty, after calculating work total ( follow the rate : two and the third with leader, one and the first with leader duty ) The accounting clerk calculates wages for every work-team: Total wages per work calculated follow unit price 40 000 / work is: 40.000 dong x 242 = 9 680 000 dong Amount of money for contract : 9 847 600 Money aid to the leader is: ( 9 847 600 – 9 680 000 ) x 2/3 = 163 600 x 2/3 = 109 000 dong Salary pays the leader = 15 x 40 000 + 109 000 dong = 709 000 dong Calculating the same as above for salary of leader duty, with other workers’ salaries accounting clerk used unit price per work formula For example, salary of Vu Van Thach worker in December is calculated as follow: Total work in month is 15 so that his salary is 40 000 x 15 work = 600 000 dong The accounting clerk does the same with the rest workers At the end of the month, economic clerk transfer time cards, contracts, record of checking and taking over the buildings , units’ wages check to the company. The company’s payroll accounting clerk checks and recalculates then prepares general payroll sheet and contribution payroll sheet for all of the construction work teams Accounting payroll clerk enters the accounts: Dr.622 : 9 847 600 Cr.334.2 : 9 847 600 The numeric data is automatically transferred to general journal ,detailed book acct No 622, ledger acct No 622 and subsidiary books * Payroll for management in SHODEX not include deductions from salaries ( life insurance, health insurance, trade union fees ). Monthly based upon on time cards, wages check for former of units the accounting clerk posts accounts: Dr.627- factory overhead expenses Cr.334.1- employee payable It is therefore, real salary of management clerks is calculated as follows: Real salary= hourly wages+ allowances+ (social insurance, health insurance, deductions from employees’ salary) social insurance, health insurance, deductions from employees’ salary = 5% x (basic salary + allowances) + 1% (basic salary + allowances) = 5% x ( 350.000 x coefficient of salary + allowances) + 1% ( 350.000 x coefficient of salary + allowances) For example, salary payment sheet of Music institute construction’s management in September 2005 (Appendix) Calculating real salary for Nguyen Le Phong manager of the project: - salary coefficient : 2.02 - basic salary : 350 x 2.02= 707 000 - other allowances : 5 8000 - salary by hour : 2 500 000 social insurance, health insurance, deductions from employees’salary = 5% x (350 000 x 2.02 +58 000)+ 1 % (350 000 x 2.02 + 58 000) = 38 250 + 7 650 = 45 900 Real salary pays Mr. Nguyen Le Phong = 2 500 000 + 58 000 – 45 900 = 2 512 100 dong Similarly, calculates for the rest employees. Generalize, then we have total salary sheet of all the managers of the project in September 2005 is: 22.608.900 dong. Due to the figure, payroll accounting clerk enter the computer accounts: Dr.627: 22.608.900 Cr 334.1: 22.608.900 2.2. Accounts in use Account 338: Other payable Account 111: Cash on hand Account 112: Cash in bank Account 138: Other receivable Account 333: Taxes and payable to state budget 2.3. Account book used in the company Ledger Book 3341, Ledger Book 3342, Ledger Book 3383 2.4. Accounting for salary deductions in the company Basing on the salary and social insurance allocation sheet, accountant records in general journal to deduct social insurance (15%), health insurance (2%), trade union fees (2%) in factory overhead, then accountant records on the account book 338 : Dr. 642 10 014 687 Cr. 3382 1 927 731 Cr. 3383 6 739 130 Cr. 3384 1 347 826 From the salary and social insurance allocation sheet, accountant deducts social insurance, health insurance, trade union fees from employees’s salaries and records on general journal Dr. 3341 2 695 652 Cr. 3383 2 246 377 Cr.3384 449 275 Payroll accountant makes salary and social insurance payment sheet and records on the general journal to compute social insurance payable employees Dr. 338.3 5 162 500 Cr. 334 5 162 500 When pays social insurance to employees, accountant records on the account book Dr. 334 5 162 500 Cr. 111 5 162 500 ( Flowchart of account 334, 338 (3382, 3383) – Appendix) PART III SOME CONSTRUCTIVE IDEAS TO BETTER THE ACOUNTING FOR PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARY IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY i-STRENGTHS AND WEAKNESSES OF ACCOUNTING FOR PAYROLL AND SALARY DEDUCTIONS IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY After my short time practising at accounting department of Song Hong construction and import-export company, I summarise strengths and weaknesses of accounting system are 1. Strengths Accounting department always supplys in-time financial accounting information, provides to the managers to make decisions about managing manufacturing activities. Accounting organizing in SHODEX has fast mixed into the latest national accounting system , assured the unique of the calculating methods, of economic targets among internal departments. Curent acccounting apparatus are under the Government State regulations. Therefore, SHODEX’S financial reports are made and delivered to the Government as well as to Song Hong construction Corporation punctually, accurately, liquidity. SHODEX has applied microcomputer system in accounting , step by step mechanize its accounting task. The microcomputer system is up to date, the accounting software with its special features suites to construction business activities Accounting form ”General Journal” which iused by SHODEX has many features adapt and convenient to practice bookkeeping on computer. Therefore, accounting tasks are done correctly, fast and as well as the amount of works decreased Accounting for payroll and deductions from employees’ salaries is done flexibly, suits to the company’s own features. Allowances is distributed under the Government State and the Corporation regulations SHODEX has applied a reasonable method of paying for employees, display the labors’work result. Calculating and paying salary fast, punctually meet the demands of the employees. All the tasks are applied under Government State regulations 2.Weakness Beside the strengths, the company still exists some weaknesses that needs to innovate in order to adapt to the acquire of the current business activities -About managing and using labor cost: Because the main feature of the construction branch is not stayble, it depends on the project palace so gethering labor’s information into the payroll accounting department as well as to administration department is very difficult, it is hard to combine between following the records and reality. Acounting department is only able to watch of quantity and skill of the labor on the records but has not have solution to catch the reality Time managing not tight, therefore waste of time and labor productivity - About the mode of payable emplyees in the company: Although, caculating salary by hour is plain, closes to the auditing accounts, it has not combined salary with the the result of each labor . Therefore, does not motivate the labor in making use of their time as well as productivity. Moreover, the company has not had a salary policy for recruiting staff, this will limit labor skill development. Payroll accountant prepares forms for labor remuneration lack of Social insurance leave slip form, this makes the source of information, which makes social insurance payment sheet, not adequately - About applying microcomputer system: Although SHODEX has applied a modern computer system in accounting department as well as others officces but there is no computer specialist in the company. Accounting clerks in SHODEX do well their task in records system but not yet on microcomputer system. Every time errors occur, all of the activities are stopped waiting for specialist from computer company come to fix them.That is waste of time and not safe because sometimes the nummeric data is lost or when some clerks try to fix errors by themselves. ii-SOME SOLUTIONS TO ENHANCE ACCOUNTING FOR PAYROLL AND SALARY DEDUCTIONS IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY Workers will work with mind at ease when they know they are paid reasonably. A good salary policy can attracted talented employees to the company as well as motivate their creative ability. From that fact, combine my knowledge achieved from my university and my practising period in Song Hong construction development and import-export company I bravely put forwads some solutions to the weaknesses of accounting for payroll and salary deductions as follow: - About managing and using labor cost: To avoid loose labor time and productivity the company needs to hihger its examine task in every dapartment . The company had better establish a board of salary reform, its task is checking labor quality, gethering related information in order to work out a payroll policy for whole of the company - About the mode of payable emplyees in the company: Monthly, the company should deduct an amount of money from basic salary fund for the employees with high work result. The company should work out a policy for recruiting staff. This is a long strategy that can not be omited. About the form of Social insurance leave slip, payroll accountant should prepare the suppleymentary form as follow: Entity:…….. No….. Department………. SOCIAL INSURANCE LEAVE SLIP Name….. Age… Health institu- tion Date Rea- son Total days allowed Doctor’s sign& seal Total actual days of leave Confirm by head of department Total from to A 1 B C 5 D This form will be sent included with social insurance payment sheet. - About applying microsystem computer: The accounting software with Vietnamese font, which company using, is good for internal transactions but it can not adapt to oversea business dealt, so that SHODEX should install a new version with more flexibility functions, for example: Fast accounting 2005, misa accounting software… Further more, to ensure safety of the nummeric data accounting department should backup disc in cases of error occurs. CONCLUSION Perhaps, no topic in the field of business is as pervasive as payroll. Usually, it is the largest single expense of most business and continuing management challenge in terms of cost control. In my short time practising at the accounting department of Song Hong construction development and import-export company I have had a chance to apprehend an organization in reality as well as more understand my topic. SHODEX not only organizes its managing system scientifically, reasonably but it also creative its own Corporate culture that motivate every employee’s ability and individual characteristic. That the strong foundation for SHODEX to develop steadily, raise living standard of the staff. One of the factors that brings SHODEX’s success in all of business fields is the important role of accounting system as well as payroll accounting task. Thanks to good payroll accounting part, employees truth in the company where they earn for their living. Finally, I would like to pay the talented staff of SHODEX my honor .Their efforts have helped me a lot in practicing and understanding the knowledge that I had been taught at my university. And my special thank to PhD. Pham Bich Chi whose advice is essential to complete this thesis. REFERENCE _______________________*******_______________________ Vietnamese accounting system Principles of accounting Some other documents write obout payroll topic Latest document issued by the finance department Documents supplied by Song Hong construction development and import-export company Nummeric data supplied by accounting department of SHODEX Financial Accounting text- book published by Ha Noi University of Business and Management ……… INDEX PREFFACE PART I GENERAL THEORY ON ACCOUNTING FOR PAYROLL AND DEDUCTIONS FOM EMPLOYEES’ SALARIES 1 I-BASIC FEATURES OF PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES 1 1.Concept, features and the useful of payroll and deductions from employees’ salaries 1 1.1.Concept on salary 1 1.2.Deductions form employees’ salary 1 1.2.1.Social insurance fund 1 1.2.2.Health insurancce fund 2 1.2.3.Trade fees 2 2.Payroll funds and payroll regulations 3 2.1.Payroll funds 3 2.2. Salary system 4 2.2.1.Salary by hours 4 2.2.2.Salary by product 5 2.2.3.Other types of salary 7 II-CONTENTS OF PAYROLL ACCOUNTING AND DEDUCTIONS FROM SALARY 7 1.Contents of payroll accounting 7 1.1.Vouchers in use 7 1.2.Acounts in use 8 1.3.Methods of payroll accounting 8 2.Contents of deductions from employees’ salary 9 2.1.Vouchers and accounts in use 9 2.2. Accounts in use 10 2.3.Method of accounting for deductions from employees’s salaries 10 PART II THE REALITY OF PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 15 I-AN OVERVIEW OF SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 15 1.The formation and development of the company 15 2.Functions and primary missions of the company 15 3.The main features of the framework of organization 18 4.The main features of the company’s business activities 20 5.The main features of the company’s accounting system 20 5.1.Accounting system 20 5.2.Features of accounting task 23 II-THE MAIN FEATURES OF PAYROLL ACCOUNTING AND DEDUCTIONS FROM EMPLOYEES’ SALARY IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 26 1.Payroll accounting 26 1.1.Contents of payroll acounting 26 1.2.Forms of paying salary 26 1.3.Vourchers used for computing payroll 1.4.Accounts used for computing payroll 1.5.Methods of computing payroll 2.Contents of deductions from emplyees’s salaries in the company 27 2.1.Contents of deductions from employees’s salaries in the company 27 2.2.Accounts used in the company 2.3.Book-keeping registers used in the company 2.4.Order of accounting for deductions from employees’s salaries in the company PART III SOME CONSTRUCTIVE IDEAS TO BETTER THE ACOUNTING FOR PAYROLL AND DEDUCTIONS FROM EMPLOYEES’ SALARIES IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY 32 I-GENERAL COMMENTS ON ACCOUNTING FOR PAYROLL AND DEDUCTIONS FROM EMPLOYEES’S SALARIES 32 II-SHORTCOMINGS AND CONTRUCTIVES IDEAS TO MAKE GOOD PAYROLL ACCOUNTING’S SHORTCOMINGS 33 1.Shortcomings 33 2.Contructive idears to make good accounting’s shortcomings for payroll and deductions from employees’ salaries 34 CONCLUSION REFERENCE PREFACE In any society, all of enterprises have to focus on improving quality of auditing the accounts. Accounting informations must reach the truth and accuracy, they are the basic foundation that the enterprise relys on in order to make the best decisions serve to the demands from the market , produces properties or practises business activitives in order to get the maximum profit in return. This takes to the result of improving and raising the labor’s living standard, one of the most important factors in doing business activities. Following the modern structure of the Government State, in the years gone by, Viet Namese enterprises consider accounting for payroll and salary deductions as one of the most important parts that can not be omited in their auditing the accounts task. This not only shows the effectiveness of the inputs but shows the fair of the social economic, ensures following the salary policy of the Government State, shows the benefit between enterprises and their labor, takes part in supplying information accurately and adequately, helps the enterprises in managing the manufacturing plan. After four years studying at Ha Noi University of Business and Management I am now making a graduate research based upon on my knowledge achieved from my university. My thesis is about “Accounting for payroll and salary deductions in Song Hong construction development and import-export company”, in details it includes these parts: PART I- GENERAL THEORY ON CCOUNTING FOR PAYROLL AND SALARY DEDUCTIONS PART II- THE REALITY OF ACCOUNTING FOR PAYROLL AND SALARY DEDUCTIONS IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY PART III- SOME RECOMMENDATIONS TO ENHANCE ACCOUNTING FOR PAYROLL AND SALARY DEDUCTIONS IN SONG HONG CONSTRUCTION DEVELOPMENT AND IMPORT-EXPORT COMPANY Based on the general theory on accounting for payroll and salary deductionds as well as taking a close look at payroll laws, my thesis focuses on auditing the accounts of payroll and salary deductions from in Song Hong Construction development and import-export company. By the reality of accounting task in the company, my composition has evaluated the strengths and weaknesses of the company and also bravely put forward some recommendations to enhance the task of accounting for payroll and salary deductions, takes part in raising the effectiveness of managing system, leads to the result of raising the company profit . The thesis has been writen with my knowledge acquired from my university along with the reality from the company. At any rate, the process can not avoid some mistakes in applying theory to practic, I will be glad to receive suggestions from professors and my friends so that I will be able to do well in later scientific topics. To complete my thesis I would like to give my special thank to PhD. Pham Bich Chi. And another important role that cannot be omited in my research is the staff of SHODEX’s company. Thanks to their kindly help I applied my knowledge in practice

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