What is production cost accounting? How to accumulate costs according to Circular 133 and Circular 99?

Production cost accounting Accounting is not just about recording raw materials, wages, and factory expenses. It also involves correctly determining the accounting system, cost aggregation objects, allocation methods, the value of work-in-progress, and the timing of transferring costs to finished goods or cost of goods sold.

For businesses applying Circular 133, Production costs are usually recorded directly in account 154. Meanwhile, according to Circular 99/2025/TT-BTC, Businesses use accounts 621, 622, and 627 to aggregate each item before transferring it to account 154. This article separates the two streams to help accountants minimize confusion when making journal entries and calculating costs.

What is production cost accounting?

Production cost accounting Work-in-process is the process of recording, collecting, and allocating costs incurred in the production of a product or the provision of a service. The results of this process are used to determine work-in-process costs and calculate the cost of finished products or services.

In essence, accountants need to perform three main tasks:

1. Determine whether the expense falls under production activities.
2. Link the expenditure to the correct cost recipient., For example, products, orders, contracts, processes, or workshops.
3. Dividing costs between finished goods and work-in-progress. at the end of the term.

Three concepts can be distinguished:

Concept	Content
Production costs incurred	Expenses incurred to produce a product or service during the period.
Work-in-process inventory costs	The portion of costs incurred but not yet related to completed products or work.
Cost of finished product	The total cost is determined for the volume of products and services completed.

Therefore, The total production costs incurred during the period do not automatically equal the total cost of finished products.. If there is work-in-progress remaining at the end of the period, the corresponding costs will continue to be tracked in account 154.

For example, electricity used for production machinery may be a production cost, while electricity for the sales department is not a production cost. Similarly, the wages of direct production workers are direct labor costs, while the salaries of sales staff are not production costs.

The nature and purpose of the expense are more important than the name on the invoice.

If you want to differentiate more broadly between cost categories in a business, you can refer to the article. What is cost accounting? The secret to effective business cost management.

Should businesses apply Circular 133 or Circular 99?

Circular 133 and Circular 99 are two different accounting regulations. Businesses need to base their decisions on which one. chosen accounting system, fiscal year, and applicable accounting policies to determine the appropriate accounting system and transfer flow.

Scope of application of Circular 133

Circular 133/2016/TT-BTC Issued to guide the accounting regime for small and medium-sized enterprises. According to this accounting flow, production costs are typically aggregated directly into... Account 154 – Cost of production and business in progress.

Businesses can open detailed accounts for account 154 as follows:

• Product.
• Order.
• Contract.
• Factory.
• Process.
• Expense item.

The important point is that it should not be assumed that all small and medium-sized enterprises (SMEs) must automatically apply Circular 133. Businesses need to check the accounting system they are currently using.

Scope of application of Circular 99

Circular 99/2025/TT-BTC Circular 99 is the new corporate accounting system of the Ministry of Finance, effective from January 1, 2026, and applicable to fiscal years beginning on or after this date. Circular 99 replaces Circular 200/2014/TT-BTC within the scope stipulated in the implementing provisions.

In the production cost accounting flow according to Circular 99:

• Account 621: Direct material costs.
• Account 622: Direct labor costs.
• Account 627: General manufacturing costs.
• Account 154: Work-in-progress production and business costs after aggregation and transfer.

The Ministry of Finance also confirmed that Circular 99 applies accordingly. fiscal year beginning on or after January 1, 2026. For example, a business with a fiscal year from October 1, 2025 to September 30, 2026, that has not yet switched to Circular 99 from January 1, 2026, will apply it from the fiscal year beginning October 1, 2026.

Table for selecting appropriate accounting flow

Criteria	Circular 133	Circular 99
Typical business group	SMEs apply the corresponding regime.	Businesses are adopting a new accounting system.
Direct materials	Collect directly into account 154	Through account 621
Direct labor	Collect directly into account 154	Through account 622
General manufacturing costs	Collect directly into account 154	Through account 627
End of term	Tracking on account 154	Transfer accounts 621, 622, and 627 to account 154.
Incomplete	Account 154	Account 154

Two streams should not be mixed in the same accounting entry. Before making an accounting entry, the accountant should check:

1. Which business group does this company belong to?
2. What accounting system is currently being used?
3. When does the current fiscal year begin?
4. What is the category of business accounts currently in use?
5. What are the internal accounting policies regarding the opening of detailed accounts?

Identify the cost accumulation objects and cost calculation objects.

Cost aggregation object It is where incurred expenses are received; and cost calculation object It is a product, service, or completed work for which the cost needs to be determined.

What could be the objects of cost aggregation?

Depending on the production model, businesses can aggregate costs as follows:

• Each product individually.
• Product group.
• Order.
• Contract.
• Factory.
• Process.
• Necklace.
• Production order.

How to choose cost aggregation objects

Four questions can be asked:

1. Is the expenditure directly attributable to any particular product?
2. Does the business have data on production output or completion levels?
3. Should businesses calculate costs based on products, orders, or contracts?
4. Does the documentation system and software provide consistent tracking for that object?

When is a cost aggregation object different from a cost calculation object?

For example, a business aggregates costs according to factory, However, a workshop produces two products, A and B. In this case, the workshop is the cost aggregation object, while A and B are the cost calculation objects. The workshop's shared costs must have a suitable method for allocation to each product.

Overly comprehensive tracking can prevent businesses from calculating the cost of each product; conversely, opening too many detailed codes increases the volume of reconciliation. Therefore, the detailed code for account 154 and the cost aggregation object should be established. before the document is generated.

What costs are included in the production cost?

Production costs typically include:

• Direct material costs.
• Direct labor costs.
• General production costs are allocated appropriately.

Not all expenses incurred at the factory are included in the cost of goods sold. Selling expenses, administrative expenses, and other expenses not related to the production process are not included in the cost of goods sold simply because they occurred in the same period.

Direct material cost

It may include:

• Main ingredient.
• Auxiliary materials.
• Accessory.
• Semi-finished products are purchased from external suppliers.
• Direct fuel use.
• Packaging constitutes part of the product if appropriate.
• Other materials are directly involved in product creation.

Materials used specifically for a particular product should be recorded directly for that product. Materials used in common require a basis for allocation.

If excess materials are returned to inventory, the corresponding expense must be treated as a suitable cost reduction. Recovered scrap materials of value should also be considered for reducing product costs in accordance with the nature of the transaction.

Direct labor costs

It may include:

• Wages for direct production workers.
• Allowances are linked to production work.
• Payroll deductions are the responsibility of the employer.
• Direct outsourcing of labor is permitted if there are sufficient grounds.

Supervisory salaries are typically classified as general manufacturing overheads. If an employee is involved in multiple production runs, the business needs a basis for allocation such as time sheets, production output, or actual time spent, rather than using an estimated rate without supporting documentation.

General manufacturing costs

Common expenses:

• Salary of a factory manager.
• Shared materials.
• Tools and equipment.
• Depreciation of machinery, equipment, and factory buildings.
• Electricity, water, and fuel are shared.
• Repair and maintenance.
• Outsourced services.
• Other expenses for workshop operations.

Which items are not included in the production cost?

Expenditure	Is this included in the cost?	The handling method requires attention.
Main raw materials	Yes, if it serves production.	Direct assembly
Shared supplies	Have	Allocation based on appropriate criteria
Direct labor wages	Have	Allocation if working with multiple objects
Manager's salary	Have	Usually included in general production costs.
Electrical appliances manufacturing	Have	Grouping/allocation by usage level
Cost of sales	Are not	Track sales costs by their nature.
Business management costs	Are not	Not included in production costs.
Financial costs	Are not	Not included in production costs.
Costs exceed normal levels.	Not default	They must be identified and dealt with separately.
Other period expenses	Not default	Determine the correct accounting period.

How are accounts TK 154, 621, 622, and 627 used?

Account 154 reflects work-in-progress production and business costs. According to Circular 133, production costs are usually accumulated directly in Account 154. Meanwhile, according to Circular 99/2025/TT-BTC, businesses can accumulate production costs through Accounts 621, 622, and 627 before transferring them to Account 154.

What is account 154 used for?

TK 154 – Work-in-progress production costs It is used to reflect and aggregate costs related to products, work, or services that are not completed at the end of the period.

In practice, account 154 can be used to:

• Gather all production costs incurred during the period.
• Track the costs of unfinished products, orders, jobs, or services.
• Receive expenses from accounts 621, 622, and 627 in the accounting flow according to Circular 99.
• Directly record production costs within the framework of Circular 133.
• Track costs in detail by product, order, workshop, or process depending on the company's cost management model.

Account 154 There may be a debit balance at the end of the period., This reflects the portion of work-in-progress production and business costs that have not yet been included in the cost of completed products, services, or work.

Note: The balance in account 154 is not the amount of money the business has not yet paid to suppliers. This is... work-in-progress production costs The data is being compiled and is awaiting processing according to the cost calculation procedure.

What is account 621 used for?

In the accounting flow according to Circular 99/2025/TT-BTC, TK 621 is used for aggregation. direct material cost arising from production activities.

Businesses can track costs in account 621 by cost object such as product, order, process, or appropriate costing object.

In principle, after direct material costs are collected, the appropriate portion will be processed and transferred to account 154 for cost calculation purposes.

Certain expenses exceeding normal levels need to be identified and handled separately according to regulations, instead of being automatically included in the product price.

Key features to remember:

• The collection of direct material costs.
• Track expenses by the entity responsible for the cost.
• At the end of the period, transfer the appropriate portion of the expenses to account 154.
• There are no ending balances for this account flow.

What is account 622 used for?

Account 622 is used in the Circular 99 flow to aggregate data. direct labor costs related to the production process.

Direct labor and wage costs, determined for each product, order, process, or appropriate cost object, can be aggregated in this account.

At the end of the period, the appropriate portion of the expenses is transferred to account 154 to continue serving the process of accumulating and calculating the cost of goods sold.

Businesses also need to differentiate between normal labor costs and those exceeding normal levels in order to handle them according to regulations.

Key features to remember:

• Compile salaries and direct labor costs.
• Track by product, order, or process.
• At the end of the period, transfer the appropriate amount to account 154.
• There are no ending balances for this account flow.

What is account 627 used for?

Account 627 is used in the Circular 99 flow to aggregate data. workshop service and management costs or general production costs related to the production process.

Unlike direct material and labor costs, which can be relatively clearly identified for each item, manufacturing overhead costs are usually related to multiple products or processes. Therefore, businesses need to determine appropriate allocation criteria for overhead costs.

At the end of the period, the appropriately allocated portion of general production costs will be transferred to account 154.

For Unallocated fixed manufacturing overhead costs, Businesses need to handle this separately according to regulations instead of automatically including it in the product price.

Key features to remember:

• Gathering costs for workshop maintenance and management.
• Distinguish between costs that can be recognized directly and shared costs.
• Allocate the appropriate portion of the expenses to account 154.
• There are no ending balances for this account flow.

What are the periods 1541, 1542, and 1547?

TK 1541, 1542 or 1547 is usually Detailed accounts are set up by the business or accounting software. These account codes are for the purpose of tracking expenses. It should not be assumed that these account codes have the same mandatory meaning for all businesses.

Depending on management needs, businesses can detail account 154 as follows:

• Expense item.
• Product.
• Order.
• Factory.
• Production process.
• Type of activity.

Therefore, when encountering codes like 1541, 1542, 1547, The accountant needs to check. The company's own chart of accounts and internal accounting policies. before determining the content of the complaint.

Do not set it as the default:

• Account 1541 always represents the cost of raw materials.
• Account 1542 is mandatory for labor costs.
• Account 1547 is always a general manufacturing cost.

The method of opening detailed accounts should be consistent with the accounting system currently applied by the business and the actual management requirements.

Distinguish between accounts 154, 621, 622, and 627.

Account	Content of the report	In which flow is it applied?	Is there an ending balance?	Is there a transfer?	Points of confusion
Account 154	Work-in-progress production costs	Circular 133 and is the account for receiving expenses after aggregation according to the flow of Circular 99.	There may be	Receive expenses transferred from cost aggregation accounts in the flow of Circular 99.	Not an outstanding debt.
TK 621	Direct material cost	Circular 99	Are not	Yes, transfer the appropriate amount to account 154.	Not all material costs are automatically considered direct costs.
TK 622	Direct labor costs	Circular 99	Are not	Yes, transfer the appropriate amount to account 154.	This does not correspond to the company's overall personnel costs.
TK 627	Workshop service and management costs/general production costs	Circular 99	Are not	Yes, allocate and transfer the appropriate portion to account 154.	It is necessary to distinguish between general production costs and business management costs.

Simply put: in the flow of Circular 99, Accounts 621, 622, and 627 are expense aggregation accounts categorized by group., then the appropriate costs are transferred back 154 to continue accumulating production costs and calculating the cost of goods sold. Meanwhile, according to Circular 133, production costs are usually accumulated directly into Account 154.

Note regarding scope of application: The choice of accounts and how to open them in detail depends on the accounting system the business is using, its production characteristics, and its accounting policies. One should not mechanically apply the chart of accounts used by one business to another.

From the function of each account, we can continue to explore further. How to account for each group of production costs and how to handle the process of gathering costs to calculate the cost of goods sold.

 

Methods for accounting for direct material costs.

Direct material costs must be recognized for the specific product, order, or process using the material.

Releasing raw materials from the warehouse for production.

According to Circular 133:

Debit Account 154 – Details by recipient

   Have account 152

According to Circular 99:

Debit Account 621 – Details by recipient

   Have account 152

The key point is that the delivery note must link the material to the corresponding product or production order.

Some cases require separate handling.

Excess materials are returned to the warehouse: The accumulated expenses for that item need to be recorded as a reduction.

Common materials: If it is not possible to directly identify an allocation for a specific product, a rational allocation criterion should be chosen.

Materials used in excess of normal levels: The entire excess amount should not be automatically included in the cost; the cause, standard, and nature of the excess must be determined before any action is taken.

How to account for direct labor costs.

Direct labor costs are expenses associated with the direct labor involved in producing a product or providing a service.

According to Circular 133

Debit account 154

   There are accounts 334, 338

According to Circular 99

Debit account 622

   There are accounts 334, 338

According to Circular 99, Account 622 is used to accumulate direct labor costs before transferring the appropriate portion to Account 154.

When allocating labor to multiple products, businesses need to consider factors such as:

• Timesheet.
• Production report.
• Real time.
• Production order.
• Acceptance report if the labor is outsourced.

Allocations should not be based solely on estimates without supporting documentation.

Methods for accounting for manufacturing overhead costs.

General manufacturing overhead costs are expenses incurred to support the operation of the workshop but cannot be, or do not need to be, directly recorded for each product immediately upon occurrence.

Salary of workshop manager

According to Circular 133:

Debit account 154

   There are accounts 334, 338

According to Circular 99:

Debit account 627

   There are accounts 334, 338

Depreciation of machinery and factory buildings

According to Circular 133:

Debit account 154

   There is account number 214.

According to Circular 99:

Debit account 627

   There is account number 214.

Allocation of tools and equipment

According to Circular 133:

Debit account 154

   Have account 242

According to Circular 99:

Debit account 627

   Have account 242

Electricity, water, and utilities are purchased from external suppliers.

If the conditions for deductible VAT are met, the tax portion is processed according to current tax regulations; the portion of production costs is aggregated according to the accounting system applied by the enterprise.

According to Circular 133:

Debit account 154

Debit the VAT account for deductible expenses (if eligible).

   There is an associated account.

According to Circular 99:

Debit account 627

Debit the VAT account for deductible expenses (if eligible).

   There is an associated account.

Allocation of manufacturing overhead costs

Exclusive costs can be aggregated directly. Shared costs must be allocated based on appropriate criteria.

Cost Type	Reference criteria
Electronics	Machine time
Manager's salary	Labor hours or labor costs
Factory depreciation	Area or capacity
Machine maintenance	Machine or production line used

It is not advisable to automatically allocate all costs based on revenue. The criteria must be well-founded and applied consistently, or have justification when changes are made.

According to Circular 99, the appropriately allocated portion of general production costs is transferred:

Debit account 154

   Have account 627

How are expenses exceeding normal levels accounted for?

Excessive direct material and labor costs, along with unallocated fixed manufacturing overheads, are not included in the value of the finished product or work-in-progress.

How to determine excess expenses

A fixed ratio should not be used for all businesses. Consider the following:

• Material consumption standards.
• Labor standards.
• Normal power output.
• Technological process.
• Actual output.
• Data from normal operating periods.
• Reasons for the machine stopping.
• Defective product report.
• Consumption report.

For example:

• High material waste due to incorrect handling.
• Overtime was incurred due to the need to rework the product.
• The plant is operating below its normal capacity.
• The machine was down for an extended period, but all fixed costs were still allocated.
• The number of defective products exceeds the allowed limit.

Accounting entries according to Circular 133

Since the costs are directly recorded in account 154, the portion not included in the inventory value can be disposed of as follows:

Debit account 632

   There is account number 154.

Accounting entries according to Circular 99

Direct materials exceeded the limit:

Debit account 632

   There is account 621.

Direct labor overrun:

Debit account 632

   There is account number 622.

Unallocated fixed manufacturing overhead costs:

Debit account 632

   Have account 627

Note: Recording an expense in account 632 does not guarantee that the expense will be considered deductible when determining corporate income tax. Accountants need to separate the following:

1. Can this expense be included in the inventory value/cost of goods sold?
2. Does the expenditure meet the conditions for being deductible for corporate income tax purposes?

Evaluation of work-in-progress at the end of the period

Work in progress These are products or tasks that have incurred costs but are not yet completed at the end of the period. The corresponding costs continue to be tracked in Account 154.

Why is it necessary to evaluate work-in-progress products?

Incomplete evaluation helps to:

• Do not transfer all costs to finished products.
• Avoid increasing the cost of finished products.
• Accurately reflect the remaining work on account 154.
• Ensure that data between periods is comparable.
• Determine the correct cost of goods sold when the product is sold.

Data to be collected

Accountants should have:

• Quantity of work-in-progress products.
• The process is currently underway.
• Level of completion.
• The raw materials have been brought in.
• Working hours.
• Time machine.
• The product is defective.
• Scrap metal.
• Inventory record.
• Confirmation from the production department.

Methods for evaluating work-in-progress inventory

According to direct material costs: This is appropriate when raw materials account for a large proportion and are introduced from the beginning of the process.

Based on equivalent completed output: This is suitable when there are many work-in-progress products and the business can determine the level of completion.

According to the planned budget or costs: This is suitable when the business has a reliable standards system and a relatively stable production process.

Signs of an unusual balance in account 154.

• The order has been completed, but there is still a balance remaining.
• The details code has a negative balance.
• The costs are outstanding over several periods, but there is no production.
• Work in progress is increasing rapidly while production remains stable.
• There is no inventory record.
• The product has been cancelled, but the costs have not yet been processed.
• The detailed ledger does not match the cost breakdown.

How to calculate the cost of finished products

The cost of a finished product is determined from the beginning work-in-process inventory, expenses incurred during the period, cost-reduction items, and ending work-in-process inventory.

Formula for calculating total cost

Total cost of finished products

= Beginning work-in-process inventory cost

+ Production costs incurred during the period

– Items that reduce production costs

– Ending work-in-process inventory costs

Unit cost

Unit cost

= Total cost of finished products

Number of finished products meeting standards

In there:

• Incomplete at the beginning of the period: Expenses carried over from the previous period.
• Amounts incurred during the period: raw materials, labor, and general manufacturing costs.
• Discount amount: Excess materials, scrap, compensation, or appropriate recoverable value.
• Incomplete at the end of the term: The cost of an unfinished product.
• Output completed: Number of products that meet the criteria for recognition.

Common errors include failing to deduct work-in-progress at the end of the period, not handling excess/scrap materials, allocating costs to defective products, or assigning all overhead costs to a single product type.

Accounting when a product or service is completed.

Finished products are moved into the warehouse.

When the product is completed, eligible for inventory, and the cost has been determined, the accountant transfers the corresponding expense from account 154 to account 155:

Debit Account 155

   There is account number 154.

The file typically includes:

• Warehouse receipt.
• Production report.
• Internal acceptance report.
• Cost calculation sheet.
• Verify the quality if applicable.

Finished products are sold directly without going through a warehouse.

Not all finished products are required to go through account 155. If the product is delivered directly to the customer, the accountant needs to handle it according to the nature of the transaction and the accounting system applied by the enterprise. The timing of recording the cost of goods sold must be consistent with the timing of recording the sales transaction.

Service completed

The cost of unfinished services continues to be tracked in account 154. When the service is completed, the cost is transferred to the cost of goods sold under appropriate recognition conditions.

Defective products and losses

When a defective product is received, the following steps should be taken:

1. Identify the cause.
2. Distinguish between within-registration and outside-registration portions.
3. Determine the salvage value.
4. Determine liability for compensation, if any.
5. Do not automatically include all losses in the price of a good product.

Examples of accounting for production costs and calculating the cost of goods sold.

For easier tracking, let's assume the business is a manufacturer. Product A in January 2026 and are currently applying Circular 133.

Input data

Item	Amount	Object	Document	How to handle it
Incomplete at the beginning of the period	20 million	Product A	Incomplete table	Carried over from the previous period
Raw materials are withdrawn from inventory.	100 million	A	Warehouse delivery note	Gather at 154
Workers' wages	50 million	A	Salary scale	Gather at 154
PX Manager Salary	15 million	PX A	Salary scale	Gather at 154
Machine depreciation	10 million	PX A	Depreciation schedule	Gather at 154
Electrolysis workshop	20 million	PX A	Electricity bill	Gather at 154
Excess materials are returned.	5 million	A	Re-entry form	Cut the cost
Incomplete at the end of the term	30 million	A	Inventory record	Retain over 154

Accounting according to Circular 133

1. Export raw materials

Debit Account 154: 100 million

   Account 152 has 100 million.

2. Record direct labor wages

Debit Account 154: 50 million

   Account 334 has 50 million.

3. Record the workshop manager's salary.

Debit Account 154: 15 million

   Account 334 has 15 million.

4. Record depreciation

Debit Account 154: 10 million

   Account 214 has 10 million.

5. Factory electrolysis recording

Debit Account 154: 20 million

   There is an account balance of 20 million.

6. Excess materials are returned to the warehouse.

Debit Account 152: 5 million

   Account 154 has 5 million.

Determine the total cost before calculating the work in progress.

Beginning balance: 20 million

+ Additional costs of 195 million

– Excess materials worth 5 million.

= 210 million

After identification Unfinished business at the end of the period: 30 million:

Cost of finished product

= 210 million – 30 million

= 180 million

If the business produces 1,000 products that meet the standards:

Unit cost

= 180 million / 1,000

= 180,000 VND/product

When finished products are ready for warehousing:

Debit Account 155: 180 million

   Account 154 has 180 million.

The ending balance of account 154 is still 30 million, This reflects the cost of work-in-progress. This is why the total cost incurred does not equate to the cost of the finished product.

What changes would occur if Circular 99 were implemented?

There's no need to rewrite the entire example. The original set flow changes as follows:

Expenditure	According to Circular 133	According to Circular 99
Direct materials	Account 154	TK 621
Direct labor	Account 154	TK 622
General manufacturing costs	Account 154	TK 627
Transfer	Do not use accounts 621, 622, and 627 unless you are using these accounts.	Debit 154 / Credit 621, 622, 627
Incomplete at the end of the term	Account 154	Account 154
finished product	Debit 155/Credit 154	Debit 155/Credit 154

Note: The example above only illustrates the process of cost aggregation and calculation. In practice, businesses need to base their calculations on the accounting system, accounting policies, supporting documents, and cost calculation methods currently in use.

Documents required when accounting for production costs.

The accounting entry must be supported by documentation proving the actual expenditure incurred, serving production purposes, and attributed to the correct recipient.

Material documents

• Contract.
• Order.
• Bill.
• Warehouse receipt.
• Warehouse release form.
• Production order.
• Material consumption standards.
• Record of excess or shortage of materials.
• Scrap metal record.

Labor documents

• Employment contract or subcontracting agreement.
• Timesheet.
• Production report.
• Payroll.
• Salary allocation table.
• Payment voucher.
• Minutes of acceptance of outsourced labor.

General manufacturing overhead cost voucher

• Electricity, water, and utility bills.
• Depreciation calculation sheet.
• Tool and equipment allocation table.
• Table of shared expense allocation.
• Repair and maintenance records.
• Machine shutdown report.
• The basis for selecting the allocation criteria.

Work in progress and finished goods documents

• Incomplete inventory report.
• Production report.
• Process report.
• Cost calculation sheet.
• Finished Goods Inventory Receipt.
• Defective product report.
• Acceptance report.

Businesses can refer to this for more information. Detailed instructions on how to manage accounting documents effectively and legally To standardize the process of collecting and storing records.

In the case where an employee makes payments on behalf of the company...

Cases where employees make advance payments to the company should be separated from advance payment transactions. The company should have internal regulations allowing employees to make payments on behalf of others, including purchase records, invoices bearing company information, documents proving employee payments to suppliers, reimbursement requests, and documents showing the company's reimbursement to the employee.

Regarding taxes, it is not advisable to conclude that an expense is definitely deductible or taxable simply because there is an invoice. Simultaneously, it is necessary to check the VAT regulations, non-cash payment conditions, and conditions for deductible expenses when calculating corporate income tax according to current regulations. The outline also notes that Decree 181/2025/ND-CP on VAT and current regulations on corporate income tax should be checked when handling this transaction.

Checklist for checking before closing the production cost books.

The ending balance of account 154 should reflect the costs of products, work, or services that have not yet been completed.

General Checklist

• The correct accounting system has been determined.
• Do not mix accounting entries from Circular 133 and Circular 99.
• Each expenditure has a designated recipient.
• Direct and shared costs are properly categorized.
• Shared funds have been allocated.
• The allocation criteria are well-founded.
• Selling and administrative expenses are not included in the cost of goods sold.
• The excess material has been returned.
• The scrap materials have been processed.
• The excess expenses have been separated.
• Work-in-progress inventory is available.
• Completed orders no longer have outstanding charges.
• There is no negative TK 154 code.
• Detailed cost breakdown sheet.
• The total detailed ledger matches the general ledger.
• The completed output matches the warehouse receipt.
• The ending balances can be explained by individual account.

Separate inspection according to Circular 133

• The costs are correctly recorded in account 154.
• Do not use accounts 621, 622, and 627 as the default if the business has not opened and implemented these accounts.
• Account 154 details are sufficient to distinguish between raw materials, labor, and overhead costs.

Separate inspection according to Circular 99

• Accounts 621, 622, and 627 have been transferred at the end of the period.
• The expense aggregation accounts no longer have a balance.
• Any amount exceeding the normal limit should not be transferred to account 154.
• The unallocated portion of fixed manufacturing overhead costs has been treated separately.

The balance of account 154 should not be adjusted with a single general entry simply to match the books. If there is a discrepancy, it is necessary to trace back to the supporting documents, the aggregation objects, and the allocation criteria.

Common mistakes when accounting for production costs.

Common errors often lie not in the debit/credit syntax but in the fact that Choosing the wrong accounting method, misclassifying expenses, or lacking a basis for allocation..

Error	Token	Affect	How to check/how to fix
Use accounts 621, 622, and 627 without checking the settings.	The journal entry is inconsistent with accounting policy.	Incorrect assembly flow	Determine the accounting method first.
Include all factory overhead costs in the cost price.	Unusual price increase	Incorrect inventory value	Reclassification by nature
Do not open details for account 154.	The cost cannot be determined for any particular product.	Difficult to determine the cost.	Open details by object
Do not attach documents to the product/order.	The file lacks supporting evidence.	Difficult to verify	Add production code/order
The allocation of overhead costs is unfounded.	Rate of change varies by period	Inconsistent pricing	Develop appropriate criteria
Do not dispose of excess/waste materials.	Costs cannot be reduced.	The cost is high.	Check the re-entry form and the recall record.
No incomplete evaluation	Account 154 does not reflect the truth.	Incorrect pricing	End-of-period inventory
Completed orders are still pending at 154	There is a balance even though the task has been completed.	Difficult to compare	Check the cost sheet and inventory records.
Incorporate extraordinary costs into a good product.	Prices have increased dramatically.	Incorrect classification	Determine the excess amount.
Do not compare the price list with the records.	Two different sets of data	Incorrect reporting	Detailed-to-summary comparison
Mixing accounting entries from Circular 133 and Circular 99	Some items go into account 154, some into accounts 621/622/627, which are not in accordance with policy.	Difficult to control	Identify an application flow.
There is an invoice, but the production records are missing.	Only input invoices	Lack of evidence	Add input/output slips, acceptance certificates, production orders, etc.

Which stage of the production costing process does Bizzi support?

Bizzi can be used in The process includes creating payment requests, approval, invoice collection, and document reconciliation.. The classification, allocation, and accounting of production costs remain the responsibility of the accountant according to the accounting system currently in effect.

In reality, the bottleneck before the closing date may not lie in the accountant knowing which journal entry to make, but rather in the fact that the supporting documents have not arrived in full or are scattered.

• The documents come from multiple departments.
• The invoice arrived late.
• The request for expenditure lacks approval.
• Payment documents are not attached to invoices.
• Accountants must perform a manual review before closing the books.
• It is difficult to track advances and reimbursements.

At this process level, Bizzi can provide support:

• Create a payment request.
• Set up the approval flow.
• Collect invoices and supporting documents.
• Supports invoice data extraction.
• Reconcile invoices against transactions.
• Manage spending limits.
• Track expenses by department.
• Support the advance payment and reimbursement process.
• Connect data with other systems within the supported range.

Businesses can refer to Digitize the expense creation and approval process with Bizzi Expense. If the current bottleneck lies in the process of proposing, approving, and compiling expense documents.

It is necessary to distinguish clearly: Bizzi is not a replacement for manufacturing accounting software and should not be construed as a tool for automatically calculating costs, valuing work-in-progress, automatically allocating manufacturing overhead, or automatically determining deductible expenses for tax purposes.

Frequently Asked Questions about Production Cost Accounting

Which accounts are used for accounting for production costs?

Follow the flow Circular 133, Production costs are typically grouped directly into... Account 154. According to Circular 99, Direct material costs, direct labor costs, and manufacturing overhead costs are respectively aggregated through Accounts 621, 622 and 627, then transfer to account 154. Businesses need to check the accounting system they are currently applying.

Does account 154 have a closing balance?

Have. The debit balance of account 154 may reflect the cost of unfinished products, work, or services. This is work-in-progress cost, not an amount the business has not yet paid.

What are the periods 1541, 1542, and 1547?

This is usually Detailed accounts are set up by the business or software., Therefore, there is no fixed meaning that applies to all businesses. Businesses can detail accounts by item, product, workshop, or type of activity. It is necessary to check the internal account catalog before concluding which item accounts 1541, 1542, or 1547 represent.

Does Circular 133 include accounts 621, 622, and 627?

It is not advisable to mechanically apply accounting flows 621, 622, and 627 to businesses that are accumulating costs using the default system of Circular 133. According to the business process outline, Circular 133 directly accumulates production costs into account 154; businesses need to check their accounting policies and actual account list.

Which account should electricity costs for production be recorded in?

If a business applies the regulations outlined in Circular 133, electricity costs for production are typically aggregated into... Account 154. According to Circular 99, if it is a common expense of the workshop, it is usually grouped into... TK 627, Then, allocate the appropriate amount to account 154. If electricity is used for multiple departments, a basis for allocation is required.

When should account 154 be transferred to account 155?

Once the product is completed, meets the warehousing requirements, and the business has determined a suitable cost, the corresponding expenses are transferred to account 155.

When should account 154 be transferred to account 632?

Depending on the nature of the transaction and the accounting system applied, account 154 may be transferred to cost of goods sold when completed products or services are directly recognized in the cost of goods sold, or when dealing with items not included in the inventory value according to regulations.

Are selling expenses included in the cost of goods sold?

Are not. Selling expenses are not part of the product creation process and therefore should not be included in the cost of production simply because they are incurred in the same period.

Is it permissible to allocate all manufacturing overhead costs to the product?

Not by default. Only the portion of production-related costs that are reasonably allocated should be included in the cost of goods sold. Unallocated fixed overhead costs must be treated separately according to applicable accounting regulations.

Conclude

Production cost accounting It should be viewed as a control chain from the moment a cost is incurred until the product is completed, rather than simply choosing a debit/credit account.

Before making a journal entry, the accountant should check... correct accounting procedures. This is particularly important given that Circular 99/2025/TT-BTC has been in effect since 2026 for the fiscal years within its scope of application. Subsequently, businesses need to correctly identify the relevant regulations. cost aggregation objects, cost items, and allocation criteria.

At the end of the period, not all incurred costs should be transferred to finished goods. Accountants need to evaluate work-in-progress, handle excess materials, scrap, and any excess expenses before determining the cost of goods sold. The cost of unfinished goods continues to be reflected in account 154.

For businesses with a large volume of production documents, the issue lies not only in the accounting entries but also in the process of... Invoices, payment requests, approvals, payment vouchers, and acceptance records are collected from various departments.. In that case, digitizing the request, approval, and document compilation processes can help accountants reduce the amount of manual verification work required before closing the books.

Bizzi could be considered at this process layer to provide support. Collecting documents, creating and approving expense requests, extracting invoice data, reconciling documents, and tracking expenses.; However, the determination of costs, valuation of work in progress, and final accounting still need to be carried out according to the accounting policies and practices of the enterprise.

Register to schedule a trial of the solution here: https://bizzi.vn/dang-ky-dung-thu/