ACCOUNTING FOR SALES, EXPENSES

AND PROFIT
CHAPTER 7
 • Presentating Fundamental Issues
Related to Revenue, Expenses, and
Business Results
• Processing revenue and expense
transactions and determining
business results using suitable
accounting accounts.
• Understanding the meaning and
implications of financial ratios in
evaluating business performance.

OBJECTIVES
CONTENTS

Concept, Recognition,
and Measurement of
Revenue and Expenses

Applying the Accounting

System to Record
Revenue and Expense
Transactions

Presentation of Revenue
and Expenses in
Financial Statements

Financial Ratios
 SECTION 1
Concept, Recognition,
and Measurement of
Revenue and
Expenses

4
CLASSIFICATION OF SALES AND OTHER INCOMES
SALES AND
OTHER
INCOME

OTHER
SALES
INCOMES

SALES OF SALES OF
GOODS SERVICES

FINANCIAL
INCOME
5
 DEFINITION OF
REVENUE (SALES)
Revenue is the total value of economic
benefits obtained by a business during an
accounting period:
➢ Generated from regular business
operations and other activities of the
enterprise.
➢ Contributes to increasing owner's
equity, but does not include capital
contributions from shareholders or 6
owners.
Recognition, and Measurement of Revenue
Revenue is the agreed-upon price between the buyer and seller,
excluding indirect taxes such as Value-Added Tax (VAT) (including
cases where VAT is paid using the direct method), Special
Consumption Tax (SCT), Export Tax, and Environmental Protection
Tax.
In cases where indirect taxes cannot be separated at the time of
the transaction, revenue may initially be recorded, including indirect
taxes. However, revenue must be periodically adjusted to deduct
the amount of indirect taxes payable.

7
In case of Instalment Sales
• Sales revenue is recorded based on the immediate selling price,
excluding deferred interest.
• Accounts receivable include both the principal amount and
deferred interest.
• Value-Added Tax (VAT) is calculated only on the immediate
selling price, not on deferred interest.
• Deferred interest is initially recorded as unearned revenue and
then allocated as financial income over the deferred payment
period.

8
 EXERCISE 1
1. The company purchases and immediately sells 200 units of goods:
• Selling price (excluding VAT): 43 million VND per unit
• Purchase price (excluding VAT): 41 million VND per unit
• The goods are subject to 10% VAT
• Payments are made in cash.
2. Sales date: 01/01/20X0
Immediate payment price (excluding VAT): 400 million VND
Installment payment price (excluding VAT, over 3 years): 460 million VND
VAT rate: 10%.
Requirement: Determine the amount of Revenue

9
Recognition Revenue from Sales of goods
A company recognizes revenue when all the following conditions
are met:
[Link] risks and rewards of ownership related to the product
or goods have been transferred to the buyer.
[Link] company no longer retains control over the goods as the
owner or has lost the ability to manage the goods.
[Link] can be measured reliably.
[Link] company has received or will receive economic benefits from
the sales transaction.
[Link] costs associated with the sales transaction can be
determined.

10
 EXERCISE 2
Determine the Revenue Recognition Timing for Each Transaction
1. Supermarket A sells goods and allows customers to return them within 10 days without
reason, provided the goods remain intact.
2. The company issues an invoice and ships goods from Ho Chi Minh City to Hanoi for
delivery to the customer under the shipping method.
3. Hoàng Nhân Company delivers goods to Hoàng Nghĩa Company at the buyer’s
warehouse. However, due to the personal relationship between the two directors, the
accountant of Hoàng Nhân is unaware of the selling price.
4. Hoàn Cầu Company delivers goods to Nhất Phương Company. According to the
contract, the goods will only be accepted after installation into a complete system and
stable operation, due to technical requirements. Hoàn Cầu has agreed to this
condition.

11
Sales deduction
Sales discounts
Sales returns
Sales allowances

12
Sales discounts
A Sale discount is a reduction granted to buyers for purchasing
products, goods, or services in large quantities or at high
values, based on the agreed trade discount terms specified in
the sales contract or other purchase agreements.

Example: The company sells goods to Customer A at a total selling

price (excluding VAT) of 100 million VND and a VAT rate of 10%.
The company has delivered the goods, and the buyer has accepted
the delivery and agreed to make payment. Since the buyer
purchased in large quantities, they are granted a trade discount of
2%, which is directly deducted from the invoice.
Requirement: Determine the net sales revenue for this transaction.

13
 Distinction from Payment Discounts
A payment discount is a reduction granted by the seller to the buyer for early payment of the
amount due.
➢ It is only related to accounts receivable collection and does not reduce sales revenue.
➢ Instead, it is recorded as an increase in financial expenses.

Example: Goods are issued from the warehouse and sold with immediate payment via a
bank account.
•Cost of goods sold (COGS): 200 million VND
•Selling price (excluding VAT): 250 million VND
•Since the payment is made immediately, the buyer is granted a 1% payment discount,
which is deducted directly from the total payment amount.
Requirements:
[Link] profit of this transaction?
[Link] discount amount in this transaction?
14
Sales allowances
A sales allowance is a reduction granted to the buyer due to
poor product quality, incorrect specifications, or outdated
market trends.

15
Sales returns
The sales return refers to the value of goods that have been
recognised as sold but are returned by the customer and
refused for payment.

16
 EXERCISE 3

On 12th Jan, the business dispatched goods to sell to customer A at a selling price of 200
million on credit. (the selling price is exclusive of VAT, the VAT rate is 10%). The amount of
cost of goods sold is 90 million.
On 15th Jan, the customer complained about the quality of the goods. The business agreed
to make:
- 10% Sales allowance.
- Accept the 20% returned goods.
Requirement: Determine the amount of net sales in each case and the amount of
sales deductions.

17
Financial incomes
Revenues from interests, copyrights, dividends, distributed income,
and other income from financial activities of enterprises, including :
- Interests: interests on loans, interests on cash in banks, on credit
sales, installment sales, earnings from investment bonds, notes,
discounts earned from purchasing goods, services
- Distributed dividends and earnings in stage after the date of
investment;
- Revenues from buying or selling activities of short or long-term
securities; Interest of transfer of capital when liquidating contributed
capital in joint venture, capital invested in associate companies, in
subsidiary companies and other capital investments;
- Revenues from other investment activities;
- Gains on exchange rates, including gains from selling foreign
currencies;
- Revenues from other financial activities. 18
Other income
Record other income, revenues not from operating activity of
business, including:
- Revenues from transferring, liquidating fixed assets;
- Difference between the fair value of assets divided from Business
cooperation contract is higher than the cost of capital investment in
assets under joint control;
- Different interest from revaluation of material, good, fixed assets
contributed in Joint venture Capital, interest in allied companies,
other long - term investments;
- Revenues from asset sales and lease operations;
- Taxes payable when selling goods or providing services, but later
reduced or returned (export tax is returned, VAT, special excise tax,
environmental protection tax payable is reduced later);
- Collecting contractual fine from customer;
19
Other income
- Collecting compensation of third parties in order to make up lost
assets (eg the collection of compensated insurance, compensation
for displacing business establishments and similar amounts);
- Collecting doubtful debts which have been written off;
- Collecting liabilities which creditors are not determined;
- Bonus from customers relating to consumption of good, products
services which are not included in sales (if any);
- Revenues in cash or in kind from gifts donated by organization
individuals;
- The value of unreturned promotional goods;
- Other Income besides above mentioned.

20
 DEFINITION OF EXPENSES
Expenses represent the total value of items that reduce
economic benefits during an accounting period through:
•Cash outflows,
•Asset deductions, or
•The incurrence of liabilities,
which result in a decrease in owner's equity, excluding
distributions to shareholders or owners.

21
 CLASSIFICATION OF EXPENSES
1. Classified by Function:
•Cost of Goods Sold (COGS)
•Selling Expenses
•General and Administrative Expenses
•Financial Expenses
2. Classified by Nature:
•Raw Material Costs
•Tools and Equipment Costs
•Depreciation Expenses
•Salaries and Wages
•Purchased Services
•Other Cash Expenses
3. Other Expenses:
•Expenses outside regular business operations.

22
 SECTION 2
Applying the
Accounting System to
Record Revenue and
Expense Transactions

23
 Accounting for Sales
Account 511
Debit Credit
• Payable indirect taxes (VAT, excise, export, ▪ Revenues from sales of products, goods, real
environmental protection); estates invested and service provision of
• Turnover from returned goods transferred at the end of enterprises performed in accounting period.
period;
• Discounts transferred at the end of period;
• Trade discounts transferred at the end of period;
• Transfer of net turnover to account 911 “Income
Summary”.

Account 511 does not have ending balance

24
 Accounting for Cost of goods sold
Account 632
Debit Credit
• Costs price of products, goods, services sold during ▪ Transferring cost price of products, goods, services
period. sold during period to account 911 “Income
• Provision for devaluation in inventory value (difference Summary’’
between allowances for decrease in inventory value ▪ Sales returns to be stored
planned for this year and redundancies of allowances ▪ Remission of provision for devaluation in inventory
planned for last year) value at fiscal year-end (negative difference between
provision planned for this year and that of last year)

Account 632 does not have ending balance

25
 Method of accounting for several major transactions
(1) For the products, goods, services, invested real estate subject to VAT, excise tax, export
tax, taxes, environment protection tax, accountants record turnover from sales and
service provision according to selling price without VAT, indirect taxes payable (details of
each type of tax) separated as soon as receipt of turnover (including VAT payable under
the direct method), record:
Dr 111, 112, 131, ... (total payment)
Cr 511 – (price not including VAT)
Cr 3331 - VAT output
Dr 632 Cost of goods sold
Cr 155, 156
 EXERCISE 4
On 12th Jan, the business dispatched goods to sell to customer A at a selling price of 200
million on credit. (the selling price is exclusive of VAT, the VAT rate is 10%). The amount
of cost of goods sold is 90 million.
Dr 131 220 mil
Cr 511 200 mil
Cr 33311 20 mil
Dr 632 90 mil
Cr 156 90 mil

27
 Method of accounting for several major transactions
In case sales allowances, and sale discounts are subject to VAT under the credit-invoice
method, and enterprises pay VAT under the credit-invoice method, record :
Dr 521 – Sales deductions
Dr 33311 – VAT output
Cr 111,112,131,...
Accounting for sales returns:
Dr 155, 156
Cr 632
Dr 521 – Sales deductions
Dr 33311 – VAT output
Cr 111,112,131,...
 Accounting for Sales deductions
Account 521
Debit Credit
• Trade discount accepted to settle for customers. ▪ At the end of account period, transferring the total
• Sales allowances agreed for buyers; trade discount, sales allowance, revenues of
• Revenues sales returns of which buyers are refunded sales returns to account 511 - “Revenue from
or which are deducted from accounts receivable of sales and service provisions” to determine net
customers about sold products, goods volume sales of the reported period.

Account 521 does not have ending balance

29
 EXERCISE 5
1. The enterprise sells goods to customer A, with a total selling price excluding VAT of 100
million VND and a VAT rate of 10%. The enterprise has delivered the goods to the buyer,
and the buyer has agreed to make the payment. Due to the large purchase volume, the
buyer is entitled to a 2% sales discount, which is directly deducted from the invoice. The
cost of goods sold is 40 million.
2. The enterprise grants a discount to customers if their total purchase volume reaches
200 million VND or more.
- April 17: The enterprise sold goods to customer A, with a selling price excluding VAT of
80 million VND.
- May 12: The enterprise sold goods to customer A, with a selling price excluding VAT of
130 million VND. Since the total purchase volume exceeded 200 million VND, the
customer was entitled to a 2% discount, which was directly deducted on the invoice
dated May 12.
- The cost of goods sold is 160 million.

30
3. In May 20X1, the enterprise delivered a batch of goods at the warehouse with a selling
price excluding VAT of 60 million VND and a VAT rate of 10%, and the payment had not yet
been received. The cost of goods sold (COGS) was 50 million VND.
In June 20X1, the customer complained about the poor quality of the goods, and both
parties agreed on the following resolution. A return of 30% of the batch's value, with the
amount deducted from the payment.
Requirement: journalise the transactions

31
 Accounting for Financial income
Account 515
Debit Credit
• VAT payable under direct method (if any) ▪ Revenues from financial activities incurred in the
• Transferring net revenues from financial activities into period.
account 911 “Income Summary”.

Account 515 does not have ending balance

32
 Accounting for Financial expenses
Account 635
Debit Credit
• Interests expenses of loan, of credit purchases, of ▪ Return of provision for business security price
financial lease; decrease, provision for loss from investment in
• Losses from selling foreign currency; other units (difference between provision planned
• Discounts for buyers; for this period and that of last year);
• Losses from liquidating, transferring investments; ▪ Items recorded a decrease of financing costs;
• Loss on exchange rates incurred in period; Losses on ▪ At end of account period, closing out total costs
exchange rates revaluated at fiscal year-end of incurred in period to determine trading results.
accounts derived from foreign currencies;
• Provision for decreases in business security price,
provision for loss from investment in other units;
• Expenses of other financial investment activities.

Account 635 does not have ending balance

33
 Method of accounting for several major transactions
(1) Upon receiving notice of the right to receive dividends, profits from investment activities,
record :
Dr 1388
Cr 515
(2) When selling or withdrawal of financial investments, record :
Dr 111, 112, 131…
Dr 635 (selling price < cost of investment)
Cr 121, 221, 222, 228
Cr 515 (selling price > cost of investment)
(3) When incurring costs relating to selling security activity, lending capital, foreign currency
sales, record:
Dr 635
Cr 111, 112, 141,...
(4) Accounting for provision for decreases in business security price, provision for loss
from investment in other units when financial statement is established ;
- In case provision in this period is bigger than that of last period, the difference shall be
appropriated additionally, record:
Dr 635
Cr 229
- In case provision in this period is smaller than that of last period, the difference shall be
returned, record:
Dr 229
Cr 635
(5) Discounts for buyers of goods, services which result from settlement before deadline
agreed in business contract, record:
Dr 635
Cr 131, 111, 112,...
(6) Settlement discount received from payment of purchase money before the deadline
accepted by sellers, record:
Dr 331
Cr 515
35
 EXERCISE 6
Journalise the transactions:
- The enterprise received bank deposit interest income of 3,000,000 VND, which was directly
credited to the company’s account.
- The enterprise transferred 8,000,000 VND as interest payment on a loan used for production
and business activities.
- The enterprise transferred 80,000,000 VND for payment; since the payment was made early,
the enterprise received a 2% payment discount on the amount paid.
- The enterprise successfully sold 20,000 short-term investment shares at a selling price of
45,000 VND per share, while the original cost per share was 40,000 VND. The total proceeds
were received via a bank deposit.
- The enterprise successfully sold 20,000 short-term investment shares at a selling price of
30,000 VND per share, while the original cost per share was 40,000 VND. The total proceeds
were received via bank deposit.
- The enterprise received payment from customer B via bank deposit. Since customer B made
an early payment, they were granted a 3% discount on the total payment amount. (Customer
B's outstanding debt was 300 million VND).
36
 Accounting for Selling expenses
Account 641
Debit Credit
• Costs incurred relating to process of selling products, ▪ Items reduced selling expense in the period;
goods, rendering services incurred in period. ▪ Transferring selling expenses to Dr 911 “Income
Summary” to calculate operating results in the
period.

Account 641 does not have ending balance

37
 Accounting for General administration expenses
Account 642
Debit Credit
• General administration expenses actually incurred in ▪ Items reduced general administration expenses;
period; ▪ Returning provision for bad debts, provisions for
• Provision for bad debts, provisions for payables payables (negative difference between provision
(positive difference between provision for this period for this period and unspent provision for last
and unspent provision for last period); period);
▪ Transferring general administration expenses to
account 911 “Income Summary”.

Account 642 does not have ending balance

38
 Method of accounting for several major transactions
(1) Computing salary, salary supplement, inter-shift meal expenses, computing and
appropriating social insurance, medical insurance, labor union fees, unemployment
insurance, other support ( life insurance, voluntary pension insurance) for employees
directly served for process of selling products, goods, and rendering services, record:
Dr 641, 642
Cr 334,338,...
(2) Value of materials, tools served for process of selling goods/ serving at administration
department, record:
Dr 641, 642
Cr 152, 153, 242
(3) Deducting depreciation of fixed assets of sale/ administration department,
record :
Dr 641, 642
Cr 214
(4) Outsource water and electricity expenses, information expenses (telephone, fax,...),
outsourced expenses for repairing fixed assets with inconsiderable values will be charged
directly to selling expenses/ administration expenses, record:
Dr 641, 642
Dr 133 – Deductible VAT
Cr 111, 112, 141, 331,...
(5) At end of period, closing out selling expenses/ administration expenses incurred to period
account 911 “Income Summary”, record:

Dr 911 - “Income Summary”.

Cr 641, 642

40
 EXERCISE 7
1. The company records salaries and related expenses amounting to:
- The salary is 400 million, which includes 250 million for the sales department and 150 million for the
administration department.
- Social, medical and unemployment insurance is 100 million, including 75 million for the sales
department and 25 million for the administration department.
2. The company dispatches materials worth 120 million for use in the selling department and 40 million
for administrative purposes.
3. For the period, the company depreciated fixed assets used in sales by 50 million and administration by
100 million.
4. The company records office rent for its sales departments, amounting to 40 million.
5. The company receives an electricity invoice of 33 million, which the administration department uses.
(the VAT rate is 10%).
6. The company buys a laptop valued at a price exclusive of VAT 20 million and pays in cash at the bank.
(The VAT rate is 10%). The laptop has been used in the sales department for 24 months starting this
month.
Requirement: Journalise the transactions.

41
 Accounting for Other income
Account 711
Debit Credit
• VAT payable (if any) computed under direct method on ▪ Other income incurred during period.
Other Income of business which pay VAT under direct
method.
• At end of account period, posting Other Income
generated during period to Account 911 “Income
Summary”

Account 711 does not have ending balance

42
 Accounting for Other expenses
Account 811
Debit Credit
• Other expenses incurred. ▪ At end of account period, posting total other
expenses incurred during period to Acc 911
“Income Summary”

Account 811 does not have ending balance

43
 Method of accounting for several major transactions
(1) Recording revenues from liquidating transferring fixed assets:
Dr 111,112,131 (total settlement price)
Cr 711
Cr 33311
(2) Recording a decrease in fixed assets used for production and business, now are transferred,
liquidated, record:
Dr 214 - Accumulated Depreciation
Dr 811 - Other expenses (Net book value)
Cr 211 - Tangible fixed assets (cost)
(3) Recording expenses incurred during period for transfer and liquidating operations of fixed
assets, records :
Dr 881 - Other expenses.
Dr 133 - Deductible VAT (1331) (If any)
Cr 111, 112, 141,...
(4) Recording amounts compensated by a third party (such as cash compensation insurance, compensation for
displacing business establishments ...), record :
Dr 111, 112,...
Cr 711 - Other Income
(5) Accounting for fines from economic contract breaches, administrative violations, records:
Dr 811 - Other expenses.
Cr 111, 112.
(6) When collecting doubtful debts that have been written off, record :
Dr 111, 112,...
Cr 711 - Other Income
(7) At the end of the period, accountants post Other Income generated to Account 911 “Income Summary.”
Dr 711- Other Income
Cr 911 - Income Summary
(8) At end of account period, transferring total other expenses incurred during period to determine operating
results, record:
Dr 911 - Income Summary
Cr 811 - Other expenses.

45
 EXERCISE 8
1. The company sold an old machine at a price exclusive of VAT of 220 million and received payment in
cash (the VAT rate is 10%). The machine's initial cost was 350 million. At the time of the liquidation,
the amount of accumulated depreciation was 300 million. The company paid 2,2 million in cash for
the machine's redecoration before the liquidation.
2. The company received a 2 million bank deposit for a fine for the breach of contract from the
customer.
3. The company paid the tax authority a 2 million bank deposit for the late payment penalty.
4. The company received a 300 million bank deposit from the written-off bad debt.

- Requirement: Journalise the transactions.

46
 Accounting for Income Tax expenses
Account 821
Debit Credit
• - Business income tax expenses currently incurred ▪ Current business income tax actually paid in year
during year; which is smaller than income tax expenses
temporarily payables, will be deducted from
current business income tax expenses recorded
during year;
▪ At end of account period, posting total expenses
incurred during period to Acc 911 “Income
Summary”

Account 821 does not have ending balance

47
 Method of accounting for several major transactions

(1) Quarterly, when determining income tax temporarily paid complying with business income tax
law, accountants record cement income tax temporarily paid for state Budget to business
income tax expenses, record:
Dr 821
Cr 3334
(2) When paying business income tax to the state Budget, record :
Dr 3334
Cr 111, 112,…
(3) At the end of the fiscal year, accountants based on business income tax payables under final
tax declaration or the sum payable notified by tax authorities:
Dr 821
Cr 3334
(4) At the end of the accounting period, transferring current income tax expenses, record:
Dr 911
Cr 821
 Accounting for Income summary
Account 911
Debit Credit
• Costs of products, goods, investment perpetration and ▪ Net revenues from products, goods, investment
services which were sold. properties and service sold in period;
• Costs of financial activities, income tax expenses and ▪ Revenues from financial activities, Other Income,
other expenses; and decrease record in business income tax
• Selling expenses and General administration expenses;
expenses; ▪ Losses transferred.
• Profits transferred

Account 911 does not have ending balance

49
 Method of accounting for several major transactions
(1) At the end of the account period, transferring net sales to Account “Determination of business
activity”, record:
Dr 511
Cr 911
(2) At the end of the account period, posting revenues from financial activities and Other Income,
record:
Dr 515
Dr 711
Cr 911
(3) At the end of the account period, transferring expenses of Cost of goods sold, record:
Dr 911
Cr 632
(4) At the end of the account period, transferring expenses of financial activities and other expenses,
record:
Dr 911
Cr 635
Cr 811
(5) At the end of the account period, posting selling expenses, General administration expenses
incurred during period as follows
Dr 911
Cr 641
Cr 642
(6) Transferring income in the period to undistributed post-tax profits:
- Transferring profits, record:
Dr 911 - Income Summary
Cr 421 – Retained Earnings
- Transferring losses, record :
Dr 421 - Retained Earnings
Cr 911 - Income Summary
 EXERCISE 9
1. The company sold goods at a price exclusive of VAT 600 million on credit. (The VAT rate is 10%).
The amount of COGS is 200 million.
2. The company received a 10 million bank deposit for a fine for the breach of contract from the
customer.
3. The company paid the tax authority a 3 million bank deposit for the late payment penalty.
4. The company received a 10 million bank deposit from the written-off bad debt.
5. The enterprise received bank deposit interest income of 10 million, which was directly credited to the
company’s account.
6. The enterprise made a 12 million bank deposit as interest payment on a loan used for production and
business activities.
7. The company records salaries and related expenses amounting to:
- The salary is 70 million, which includes 40 million for the sales department and 30 million for the
administration department.
- Social, medical and unemployment insurance is 10 million, including 6 million for the sales department
and 4 million for the administration department.

52
8. For the period, the company depreciated fixed assets used in sales by 5 million and
administration by 7 million.
9. The company records office rent for its administration departments, amounting to 20 million.
10. The company receives an electricity invoice of 22 million, which the administration department
uses. (the VAT rate is 10%).
11. At the end of the accounting period, all the revenue and expenses are transferred to the account
income summary, and then the profit or losses are determined. (Corporate Income tax rate is
20%)
Requirement: Journalise the transactions

53
 SECTION 3
Presentation of
Revenue and
Expenses in Financial
Statements

54
Revenue is reported in the Income Statement (Profit and Loss Statement) under various
categories. The key principles of revenue recognition in Vietnam are based on VAS 14 –
Revenue and Other Income.
• 1. Revenue from sales of goods and services (Code 01):
Recognized when:
• The company has transferred significant risks and rewards of
ownership.
• Revenue can be measured reliably.
• Economic benefits are expected to flow to the entity.
• 2. Revenue from financial activities (Code 21): Includes:
• Interest income from bank deposits, loans, or bonds.
• Dividends and distributed profits from investments.
• Gains from foreign exchange differences.
• 3. Other income (Code 31): Includes:
• Gains from asset disposals.
• Compensation and insurance claims.
• Other unusual revenues.

55
Expenses are reported in the Income Statement and classified into different categories
according to their nature.
1. Cost of goods sold (COGS) / Cost of services provided (Code 11):
• Direct costs associated with the production or purchase of goods and services.
• Includes raw material costs, labor costs, and depreciation related to production.
2. Selling expenses (Code 24):
• Costs related to sales activities such as advertising, marketing, sales commissions,
and promotional expenses.
3. General and administrative expenses (Code 25):
• Expenses incurred for company administration, including office rent, salaries of
administrative staff, and legal fees.
4. Financial expenses (Code 22):
• Interest expenses on loans and bonds.
• Foreign exchange losses.
• Losses from financial investments.
5. Other expenses (Code 32):
• Losses from asset disposals.
• Fines and penalties.
• Non-operating costs. 56
 Revenue Disclosure in the Notes to Financial Statements
Companies must clearly state:
•The method of recognizing revenue (e.g., based on VAS 14 - Revenue and Other Income).
•The conditions for recognizing revenue from the sale of goods, provision of services,
construction contracts, financial activities, and other income.
•The criteria for recording discounts, rebates, and returns affecting revenue.
The Notes should provide detailed revenue information, including:
[Link] from sales of goods and services
1. Separated by product/service categories if significant.
2. Disclosure of any major sales transactions affecting financial results.
[Link] from financial activities
1. Includes interest income, dividend income, foreign exchange gains, and investment
gains.
[Link] income
1. Includes gains from disposal of fixed assets, penalties received, and compensation from
insurance claims.
57
 Expense Disclosure in the Notes to Financial Statements

Companies must disclose:

•The basis for recognizing expenses (accrual principle, matching principle).
•The criteria for classifying costs into operating expenses, financial expenses, and other expenses.
•Any expense capitalization policies (e.g., how borrowing costs are allocated based on VAS 16 – Borrowing
Costs).
The Notes should provide a detailed categorization of expenses, including:
[Link] of Goods Sold (COGS) / Cost of Services Provided
1. Includes raw material costs, direct labor, and manufacturing overhead.
2. If significant, the company must explain major fluctuations compared to previous years.
[Link] Expenses
1. Includes advertising, marketing, promotional activities, and commission costs.
[Link] and Administrative Expenses
1. Includes office rent, salaries of administrative staff, and legal expenses.
[Link] Expenses
1. Includes interest expenses, foreign exchange losses, and losses from financial investments.
[Link] Expenses
1. Includes losses from fixed asset disposals, penalties paid, and non-operating losses. 58
 SECTION 4
Financial Ratios

59
60
THE END