Inventory accounting methods & inventory valuation in Vietnam

Inventory accounting is one of the important stages in the commercial enterprise model. The timely, complete and accurate reflection of the quantity and value of inventory will help businesses optimize profits and limit risks in production and business. Let’s learn about inventory accounting methods & inventory price calculation with Viet An tax agent in the article below.

Inventory Concept

To understand the methods of inventory accounting & calculating inventory prices, we first need to dive into the concept of inventory:

According to VAS 02 accounting standards, inventories are assets that fully meet the following 3 criteria:

• To be kept for sale during normal production and business periods;
• In the process of unfinished production and business;
• Raw materials, materials, tools and instruments for use in the process of production, business or provision of services.

System of inventory accounting methods & inventory valuation in Vietnam

There are 2 methods of inventory accounting:

• Regular declaration method:

End of period value = Value of end of period = Value of stock at the beginning of the period + Value of stock imported in the period – Value of stock output in the period

• Periodic inventory method:

Output value in the period = Outstanding value at the beginning of the period + Value of output at the end of the period – Value of output at the end of the period

Methods of costing goods issued in Vietnam

According to VAS 02, there are currently 3 methods of calculating the ex-warehouse price:

• Nominal Actual Price Method
• Weighted average method
• According to the fixed average unit price (average for the whole reserve period)
• According to the continuous average unit price
• First-in, first-out (FIFO) method

Nominal Actual Price Method

Based on the quantity of ex-warehousing in which lot and the actual unit price of that lot, the actual cost value of ex-warehousing materials shall be calculated

• Requirements: must track supplies according to each shipment both in kind and in value
• Advantages: the most accurate
• Cons: complicated in management
• Conditions of application: for enterprises with few types of materials and large value, each shipment can be identified

Weighted average method

• Weighted average method: the actual cost value of ex-warehousing materials is calculated on the basis of the quantity of ex-warehousing materials and the weighted average unit price.

Actual value of out-of-stock capital in the period = Number of goods exported in the period x Average unit price

• Fixed weighted average unit price = (Actual cost value of materials in stock at the beginning of the period + Actual cost value of materials imported in the period)/ (Number of materials in stock at the beginning of the period + Number of materials imported in the period)
• Continuous weighted average unit price = (Actual cost value of materials before the ith entry + Actual cost value of materials of the ith import)/ (Quantity of materials in stock before the ith entry + Quantity of materials of the ith entry)

The average unit price is calculated for each type of material

First-in, first-out method

This method is based on the assumption that which goods are imported first will be exported first, and the export unit price is equal to the import unit price. The value of inventory at the end of the period is calculated according to the unit price of the last imports.

Notes on the method of calculating the actual price of ex-warehousing goods

• It depends on which method is applied appropriately by the enterprise.
• Identify how methods affect businesses in volatile price conditions.

Above, Viet An tax agent has listed the methods of inventory accounting & inventory price calculation to readers. Hopefully, you in the profession will have more useful knowledge in calculating ex-warehousing prices as well as managing warehouses for businesses.