How to Account for Tools and Supplies Under Circular 200 – 2022 Update

Vũ Khôi

Author at Wotech Electronics Blog

Accounting for tools and supplies is considered one of the important parts of building capital and increasing a company's revenue. So what needs to be done to account for tools and supplies — recording their purchase and allocating their cost? Let's explore this with SimERP in the article below!

Accounting for Tools and Supplies Under Circular 200

Accounting for tools and supplies under Circular 200 uses Account 153, issued by the Ministry of Finance, to reflect the current value of the company's tools and instruments and the movements that increase or decrease them. Because tools and supplies are means of labor that do not meet the value and service-life criteria required for fixed assets, they are managed and accounted for like raw materials. The Ministry of Finance regulates this area clearly and specifically, with its own set of principles.

How to Account for Tools and Supplies

Accounting for Damaged, Missing, or Surplus Tools and Supplies

When an inventory check reveals a surplus, shortage, loss, or damage of tools and supplies, the accountant must act according to the cause or the handling decision of the competent authority, as follows:

If the surplus or shortage results from a mistake or from entries not yet recorded, additional entries or adjustments must be made in the accounting books.

If a shortage is discovered but the cause and the person at fault have not yet been determined at the time of the inventory check, record:

• Debit Account 138 – Other receivables (1381 – Assets awaiting resolution).

• Credit Account 153 – Tools and supplies.

Once a handling decision has been made: if the person responsible must compensate for the loss or damage, record:

• Debit Account 111 – Cash on hand.

• Debit Account 334 – Payables to employees.

• Debit Account 138 – Other receivables (1388) (Receivable for compensation from the person at fault).

• Debit Account 632 – Cost of goods sold (any remaining shortfall, loss, or damage of tools and supplies to be charged to the cost of goods sold).

• Credit Account 138 – Other receivables (1381).

If a surplus is discovered whose cause has not yet been determined and awaits resolution, record:

• Debit Account 153 – Tools and supplies.

• Credit Account 338 – Other payables (3381).

When the competent authority issues a handling decision, record:

• Debit Account 338 – Other payables (3381).

• Credit the relevant accounts.

Accounting for the Purchase of Tools and Supplies (CCDC)

Before VAT is included

• Debit Account 133 – Deductible VAT (input VAT) (1331).

• Credit Accounts 111, 112, 141, 331, etc. (total payment value).

– For tools and supplies purchased for the production or trading of goods and services subject to VAT calculated by the direct method, or for the production and trading of goods and services not subject to VAT, or serving institutional, welfare, or project activities, record:

• Debit Account 153 – Tools and supplies (total payment value).

• Credit Accounts 111, 112, 331, etc. (total payment value).

Where tools and supplies purchased and received into the warehouse qualify for a trade discount, record:

• Debit Accounts 111, 112, 331, etc.

• Credit Account 153 – Tools and supplies (the trade discount received).

• Credit Account 133 – Deductible VAT (1331).

Where purchased tools and supplies are discounted by the seller for not conforming to the specifications or quality stipulated in the contract, record the discount as:

• Debit Accounts 111, 112; or

• Debit Account 331 – Payables to suppliers.

• Credit Account 153 – Tools and supplies.

• Credit Account 133 – Deductible VAT (if applicable).

Accounting for tool and supply purchases that bypass the warehouse

• Debit Account 242 (TT200): value of tools and supplies (allocated over multiple periods)

• Debit Accounts 623, 627, 641, 642: value of tools and supplies (allocated in one installment and charged to production and business expenses)

• Debit Account 1331: deductible VAT (if applicable)

• Credit Accounts 111, 112, 331, etc.: total payment value

Accounting for Cost Allocation

If the value of tools and supplies, rotating packaging, or rental equipment relates to a single accounting period and is charged once to production and business expenses, record:

• Debit Accounts 623, 627, 641, 642.

• Credit Account 153 – Tools and supplies (1531, 1532).

If the value of tools and supplies, rotating packaging, or rental equipment relates to multiple accounting periods and is allocated gradually to production and business expenses, record:

• When issuing tools and supplies, rotating packaging, or rental equipment, record:

• Debit Account 242 – Prepaid expenses.

• Credit Account 153 – Tools and supplies.

• When allocating to production and business expenses for each accounting period, record:

• Debit Accounts 623, 627, 641, 642, etc.

• Credit Account 242 – Prepaid expenses.

– To record revenue from renting out tools and supplies, record:

• Debit Accounts 111, 112, 131, etc.

• Credit Account 511 – Revenue from sales and service provision (5113).

• Credit Account 3331 – VAT payable (33311).

– To record the return of rented tools and supplies, record:

• Debit Account 153 – Tools and supplies (1533).

• Credit Account 242 – Prepaid expenses (the remaining value not yet charged to expenses).

As shown, there are many ways to account for tools and supplies as well as other matters — you can do it manually, or better still, SimERP is an optimal solution for you to choose.

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