Normally, when costs are incurred, they will create assets

Normally, when costs are incurred, they will create assets.

accounting-services-in-vietnam2Costs which do not bring about future economic benefits will not create assets; or in other cases, no costs are incurred but assets are still created, such as contributed capital, allocated or donated assets.


26. Liabilities determine the current obligations of an enterprise when it receives an asset, participates in a commitment or is bound to legal obligations.

27. The settlement of current obligations may be effected in many ways, such as:

a/ Payment in cash;

b/ Payment with another asset;

c/ Provision of a service;

d/ Replacement of this obligation with another;

e/ Conversion of the liability obligation into owners’ equity.

28. Liabilities arise from past transactions and events, such as purchase of goods without payment, use of services without payment, borrowing, to merchandise warranty commitment, contractual obligation commitment, payables to employees, remittable taxes, and other payables.

Owners’ equity

accounting-services-in-vietnam129. Owners’ equity is reflected in the balance sheets, including investors’ capital, equity surplus, retained profits, funds, undistributed profits, exchange rate differences and differences from asset revaluation.

a/ Investors’ capital may be enterprise owners’ capital, contributed capital, equities, and the State’s capital.

b/ Equity surplus is the difference between the share par value and the actual issuance prices;

c/ Retained profits are after-tax profits retained for capital supplementation;

d/ Funds include reserve fund, stand-by fund, development investment fund;

e/ Undistributed profits are after-tax profits not yet distributed to owners or not yet deducted to set up funds;

f/ Exchange rate differences include:

+ Exchange rate difference arising in the construction investment process;

+ Exchange rate difference arising when enterprises in the country include the financial statements of their activities carried out abroad using accounting currency other than the accounting currency of the reporting enterprises.

g/ Difference from the asset revaluation is the difference between the book value of assets and the revalued value of assets under the State’s decisions, or when assets are contributed as joint-venture capital or shares.