MINISTRY OF FINANCE ACADEMY OF FINANCE ---------------------------------- Student: NGUYỄN THỊ HOA Group: CQ54/51.02 GRADUATION THESIS Topic: ACCOUNTING FOR PAYROLL AND PAYROLL DEDUCTIONS AT THIEN UNG SERVICES TRAINING COMPANY LIMITED Major : English for Finance and Accounting Student code : 165D2202010048 Supervisor : MSC. Cao Phuong Thao Ha Noi - 2020
Academy of Finance Graduation Thesis DECLARATION I guarantee that this thesis is my own work and it is my own experience in the training time. The data and results described in the thesis are exact and it originate from the actual situation of the practice company. Hanoi, 16th February, 2016 Student Nguyễn Thị Hoa Student Nguyen Thi Hoa i Group: CQ54/51.02
Academy of Finance Graduation Thesis ABSTRACT New In the current period, the trend of integration and globalization of the world economy takes place, enterprises in general are under pressure of competition by other country. Therefore, in order to increase the integration process and improve the efficiency of the production and business activities, businesses need to find effective working methods. The important goal of a business is to maximize profits. The profit earned by a business depends on both objective and subjective factors. Payroll regime is also an importance factors that company should focus on, so this thesis would make clear this issue. This study is about the regime of wages and bonuses at THIEN UNG SERVICE TRAINING COMPANY LIMITED. First, the main purposes are providing deep understanding about salaries, bonuses, insurances defines their theories and the important of paying salary for their employee and the necessary of the payroll accountant. Next, it will consider the applications, the achievements and limitations of payroll regime at THIEN UNG SERVICE TRAINING COMPANY LIMITED, as an illustration for the academic background. Finally, there are many proposals and solution for the company to improve their payroll accounting regime. In conclusion, this study would have a part in improving the regime of payment of salaries, wage, bonuses and insurances at the company. Hopefully, the adjustment could help company get a better payroll regime in the future, and it also would be a great reference for other company Student Nguyen Thi Hoa ii Group: CQ54/51.02
Academy of Finance Graduation Thesis ACKNOWLEDGEMENTS Firstly, I would like to express sincere thanks to Academy of Finance (AOF) for giving me opportunity to study and research my into educational reality I do not know how to express my appreciation to Ms. Cao Phuong Thao, my supervisor, who gives valuable advice, perceptive comments as well as her enthusiasm supports and careful supervision. I really appreciate all my lecturers at the Academy of Finance for their assistances, directions and encouragement, it is main factor for me to complete excellently the study of educational reality. I have furthermore to thank for the help of THIEN UNG SERVICES TRAINING COMPANY LIMITED and people in the company who give me opportunity to practices in the company in the pastime Especially, my friends from Foreign Languages also supported me in my thesis, I would like to thank them for all their support and suggestion. I also would like to give my thanks to my beloved family crating motivation for me to complete my graduation thesis. Finally, because of limitation of time and knowledge, my mistakes are unavoidable, so I wish to have more opportunities. I also wish to receive more contribution and suggestion to get a better project. Student Nguyen Thi Hoa iii Group: CQ54/51.02
Academy of Finance Graduation Thesis LIST OF TABLES Table 2.1: The table about allowance rate at Thien Ung service training company.34 Table 2.2: Timesheets...............................................................................................41 Table 2.3 Bonus payment table.................................................................................44 Table 2.4 Lunar new year bonus...............................................................................45 Table 2.5 Payroll.......................................................................................................47 Table 2.6: Distributing table of wages and social insurance.....................................51 Table 2.8 Payroll receipt...........................................................................................54 Table 2.9 General Ledger..........................................................................................55 Table 2.10 General Journal.......................................................................................56 Table 2.11: General ledger........................................................................................58 Table 2.12: The certificate of sick leave...................................................................61 Table 2.14 Social Insurance Payment.......................................................................62 Table 2.13 The list of employees proposing to be entitled the regime of sickness...63 Table 2.15: Distributing table of wages and social insurance...................................67 Table 2.16 General journal........................................................................................68 Table 2.17: General Ledger.......................................................................................69 Table2.18: General Ledger........................................................................................70 Table 2.19: General Ledger.......................................................................................71 Table 2.20 Detail book account................................................................................73 Table 2.21 Detail book account................................................................................75 Table 2.22 Detail book account................................................................................77 Table 2.23 Detail book account................................................................................79 Student Nguyen Thi Hoa iv Group: CQ54/51.02
Academy of Finance Graduation Thesis TABLE OF DIAGRAMS Diagram 1.1: Diagram of accounting payroll and payroll deductions recorded in the general journal form..................................................................................................18 Diagram 1.2: Diagram of accounting for payroll and payroll deductions recorded in the Journal ledger form.............................................................................................19 Diagram 1.3: Diagram of accounting for payroll and payroll deductions recorded in the Journal voucher form..........................................................................................20 Diagram 1.4: Diagram of accounting for payroll and payroll deductions recorded in21 Diagram 2.1: Diagram of general journal form........................................................31 Student Nguyen Thi Hoa v Group: CQ54/51.02
Academy of Finance Graduation Thesis TABLE OF CHARTS Chart 2.1: The organization of Thien Ung Training Service Company....................27 Chart 2.2: The chart of accounting system................................................................29 Student Nguyen Thi Hoa vi Group: CQ54/51.02
Academy of Finance Graduation Thesis TABLE OF CONTENT DECLARATION..............................................................................................i ABSTRACT.....................................................................................................ii ACKNOWLEDGEMENTS...........................................................................iii LIST OF TABLES.........................................................................................iv TABLE OF DIAGRAMS................................................................................v TABLE OF CHARTS....................................................................................vi TABLE OF CONTENT................................................................................vii REFERENCES...............................................................................................ix INTRODUCTION...........................................................................................1 1. Rationale of the study....................................................................................1 2. Aims of the study...........................................................................................2 3. Scope of the study.........................................................................................2 4. Methodology of the study..............................................................................2 5.Organization of the study...............................................................................3 CHAPTER 1: LITERATURE REVIEW......................................................4 1.1 Overview of Payroll and Payroll deductions...............................................4 1.1.1 Definitions................................................................................................4 1.1.2 Payroll methods........................................................................................8 1.2 Accounting for payroll and payroll deductions.........................................11 1.2.1 Definition and role of accounting for payroll, payroll deductions.........11 1.2.2 Accounting for payroll...........................................................................11 1.2.3 Accounting for Payroll deductions.........................................................13 1.3 Accounting books used..............................................................................17 1.3.1 General journal.......................................................................................17 1.3.2 Journal Ledger........................................................................................18 1.3.3 Journal Voucher......................................................................................19 Student Nguyen Thi Hoa vii Group: CQ54/51.02
Academy of Finance Graduation Thesis 1.3.4 General Journal Voucher........................................................................20 1.4 Factors influencing Salary and Salary deductions.................................22 1.4.1 Internal Factors.......................................................................................22 1.4.2 External Factors......................................................................................22 CHAPTER 2 THE STUDY...........................................................................24 2.1 Overview of Thien Ung Service Training Company Limited...................24 2.1.1 Establishment and development of Thien Ung Training Service Accounitng Company Limited........................................................................24 2.1.2 The main activities and the organizations of Thien Ung Training Service Accounting Company Limited........................................................................25 2.1.3 The features of accounting system of Thien Ung Service Training Company Limited............................................................................................29 2.2 The current situation of accounting for payroll and the payroll deduction at Thien Ung Service Training Company Limited..........................................33 2.2.1 The features of labor, payroll and payroll deduction at Thien Ung Service Training Company Limited................................................................33 2.2.2 Payment methods and salary calculating methods.................................36 2.2.3 Vouchers and accounts used...................................................................38 2.3 Accounting for salaries and bonuses.........................................................38 2.3.1The policy of accounting for salaries and bonuses..................................38 2.3.3 Accounting procedures...........................................................................40 2.3.4.Social insurance allowance for employees.............................................59 2.5. Accounting for payroll deduction.............................................................64 2.5.1 Social Insurance......................................................................................64 2.5.3 Unemployment Insurance.......................................................................64 2.5.6 Trade Union............................................................................................64 Student Nguyen Thi Hoa viii Group: CQ54/51.02
Academy of Finance Graduation Thesis CHAPTER 3 RECOMMENDATIONS.......................................................81 3.1 The evaluation of current situation of accounting for payroll and the payroll deductions at Thien Ung Service Training Company Limited...........81 3.1.1 Advantages.............................................................................................81 3.1.2 Disadvantages.........................................................................................82 3.1.3 Causes.....................................................................................................82 3.2 Suggestions to improve accounting for salary and salary deductions at Thien Ung Service Training Company Limited..............................................83 3.2.1 Improving a clear allowance and subsidy regime..................................83 3.2.2 Improving management policy..............................................................83 3.2.3 Improving training of manager and workers..........................................83 CONCLUSION..............................................................................................85 REFERENCES Student Nguyen Thi Hoa ix Group: CQ54/51.02
Academy of Finance Graduation Thesis INTRODUCTION 1. Rationale of the study. Labor is the most important input factors of every business. Improving labor productivity is the basic way to improve business efficiency and create reputation of businesses in competitive market. For enterprises, to survive and develop, they must find ways to improve production and business efficiency. Therefore, the management of wages and salary deductions must be paid attention. Other activities will not be effective, or even ineffective if this work will not be paid enough attention. In today's market economy, labor and salary management organization is an important content in the business management of enterprises, it is one of the most important factors that determine quantity and quality of goods and products. Payroll and payroll deductions for the employees always receive great concern because of its social-economic significance. For the employees, these payments are important because they could be their sole incomes, to support their whole families’ lives. For every business, it accumulates in the expense account that takes up a great proportion in total costs. It can be the driving force behind the increase of labor productivity, if it is paid basing on employee's productivity. Therefore, how to construct wage regime and how to select an appropriate payment form are very necessary. Payroll issue is not new, however there are some deficiencies which are need to adjust to get an effective work of paying salary, wage, bonus and insurance in enterprises. As the result, Enterprises could ensure that, their employee can get suitable salary, thus companies can save cost and increase profits. Understanding the paramount importance of the payroll accounting work in enterprises so in the process of practice as well as completing the subject of graduation, with the enthusiastic advices of my teacher - Ms Cao Phuong Thao and the support of financial accounting department's personnel, I decide to choose the subject: "Accounting for payroll and payroll deduction at Thien Ung service training company limited " as graduation thesis topic. Student Nguyen Thi Hoa 1 Group: CQ54/51.02
Academy of Finance Graduation Thesis 2. Aims of the study When studying “Accounting for payroll and payroll deduction”, there are three main objectives which I want to clarify. First, providing basic information to understand the concept of salary, payroll deductions, bonus and insurance. Second, the ways that enterprise use to made payment for their employee, taking the scenario at Thien Ung Service Training company limited as a case for study, and reviewing their advantages and disadvantages. Finally, it is to suggest possible solutions to improve the payroll accounting and the payroll related to insurance at 3. Scope of the study The study provides analysis and reviews the work of payroll accounting and payroll deduction at Thien Ung training service company limited. Research scope: research scope limited in Thien Ung training service company limited Time study: metrics used mainly are February 2019. 4. Methodology of the study. In order to finish graduation thesis, many methods are applied such as collecting and synthesizing data, analyzing by tables, diagrams and using mathematical. Firstly, Methods for collecting and synthesizing data include many ways to collect information and data supporting graduation thesis. For example, I work and contact the financial-accounting department of the Company to collect data about payroll accounting and payroll deduction in February 2019 of the Company. Besides, using many tools to get information about the situation of payroll accounting and payroll deduction in Vietnam such as: Internet, newspaper, financial news and many colleagues or studying many graduation theses and many related topics. Secondly, Comparison is another method. This is method that used to compare the similarities and differences of an issue. In reality, applying this method, I compare between theory and practices about payroll accounting and payroll deductions in the Thien Ung service training company limited, so finding out the deficiencies of the company. Thirdly, using analysis by table and diagrams is an efficient method. Student Nguyen Thi Hoa 2 Group: CQ54/51.02
Academy of Finance Graduation Thesis Finally, I use Mathematical method which using mathematical formulas to calculate the payments to the employees. 5.Organization of the study Chapter 1: Literature review Chapter 2: The current situation of accounting payroll and the payroll deduction to at Thien Ung service training company limited Chapter 3: Recommendations to improve payroll regime and payroll deduction at Thien Ung service training company limited Student Nguyen Thi Hoa 3 Group: CQ54/51.02
Academy of Finance Graduation Thesis CHAPTER 1: LITERATURE REVIEW 1.1 Overview of Payroll and Payroll deductions 1.1.1 Definitions Labor: is the consumption of labor force in reality. Labor is purposeful, conscious activities of people to create products to serve the needs of society life. Labor is the most typical and creative activity of man. The labor costs definition is the total cost of all labor used in a business. It is one of the most substantial operating costs. These are particularly important in any business which experience heavy human resource labor costs: construction, manufacturing, and other industries which have partially or non-automated operations. These costs include 2 main subcategories. The direct labor costs definition is summarized as the cost of labor which is used directly to make products. Meanwhile, the indirect labor costs definition is simply explained as the cost of labor which is used to support or make direct labor more efficient. Whenever a worker activity takes place, the enterprise must pay for all kinds of materials, attrition of tools and tools for production process and money paid to laborers. Labor costs are one of the three cost factors that make up the value of products made by businesses. High or low labor costs affect product costs. Therefore, in order to manage production costs well, firstly, it is necessary to strictly control labor expenses and to manage wages from two basic criteria: quantity and quality of labor. 1.1.1.1 Payroll Payroll is the total of all compensation a business must pay to its employees for a set period of time or on a given date. It is usually managed by the accounting or human resources department of a business; small-business payrolls may be handled directly by the owner or an associate. Increasingly, payroll is outsourced to specialized firms that handle paycheck processing, employee benefits and insurance, and accounting tasks such as tax withholding. Student Nguyen Thi Hoa 4 Group: CQ54/51.02
Academy of Finance Graduation Thesis Laborers, after using their labor power to create products, shall be paid a certain amount of wages. On the other hand, we see that labor is exchanged for wages. So labor can be considered a commodity, a special commodity. And wages are the prices of those special goods, labor goods. Because goods of labor need to be exchanged on the labor market on the basis of an agreement between the buyer and the seller, affected by the law of value, the law of supply and demand. Therefore, labor prices will vary according to the price of the constituent elements as well as the supply-demand relation of labor. Thus, when considering wages as the value of labor, this price will form based on an agreement between the employee and the employer. Payroll may increase or decrease depending on the supply and demand of labor goods. Thus, the price of wages often fluctuates but it must revolve around the value of labor power, as other common goods, it requires exactly of its value. On the other hand, the fluctuations in payroll must ensure the minimum living standards so that workers can survive and continue working. 1.1.1.2 Payroll deductions Payroll deductions are amounts withheld from an employee's payroll check, and these amounts are withheld by their employer. Among these deductions are insurance pension contributions, wage assignments, child support payments, taxes, and union and uniform dues. Deductions that are mandated are government taxes; however, all other deducted amounts are voluntary. No matter how many hours an employee has worked, payroll deductions must be withheld from payroll checks. In the event that no deductions are withheld, the employer becomes liable and responsible for any mandated amounts that were supposed to be withheld. When an employee's insurance deductions are not withheld, the employer becomes liable to pay the deductions or to cancel the employee's insurance policy. It is always an employer's responsibility to make sure any payroll deduction is withheld in a timely manner. Payroll deductions include: - Social Insurance Student Nguyen Thi Hoa 5 Group: CQ54/51.02
Academy of Finance Graduation Thesis - Health Insurance - Trade Union Fee - Unemployment Insurance. In conclusion, salaries paid to employees, along with deductions for social insurance, health insurance, unemployment insurance, trade union fee constitute labor costs in the total cost of production and business. In addition to the payroll and salary deductions, the company has also built bonus regime for individuals with achievements in production and business activities. Bonuses for stimulating employees in production and business activities include: emulation bonus, reward for improving product quality, saving materials and giving incentives for technical innovations, … 1.1.1.3 The roles, tasks and functions of accounting for payroll and payroll deductions The role of accounting for payroll and payroll deductions Payroll accountancy is one of the most essential accounting functions within an organization that demands unique set of skills for the management of payrolls of the company. Good accounting for payroll and payroll deductions helps the personnel management in disciplined manner. Also, it creates a basis for enterprises to pay insurance allowances reasonably. Well organized accounting for payroll and payroll deductions not only helps manage salaries strictly, ensuring paying salaries in accordance with policies, but also is a basis for calculating the allocation of labor costs and business costs properly. Tasks The payroll and payroll deductions tasks include the following basic tasks: -Organizing to record; reflecting and synthesizing data on the number of employees, time of labor results; calculating wages and deduction of salary amounts, allocating labor costs according to the subjects of labor use. Student Nguyen Thi Hoa 6 Group: CQ54/51.02
Academy of Finance Graduation Thesis -Instructing and checking accounting staff in production and business departments and departments to implement the initial records of labor and wages according to the proper regime and methods. -Monitoring the situation of payment of salaries, bonuses and allowances for employees. - Making reports on labor, wages, salary deductions, periodically labor situation analysis, situation of management and spending of salary fund, providing information on wage labor for the department management in time Payroll and payroll deductions is not only a noticable topic because it is an importance expenditure of the business but also a special concern for employees because this is their right. Moreover, workers use wages to stabilize their daily lives, serving their daily necessities. Functions -Function of measure of value, which is the basis for managing prices properly when prices fluctuate (including labor). - Function of encouraging employees: To ensure that workers work effectively and with high productivity, the principle of wage must be raised to increase economic benefits for employees, creating passion for the profession, promoting the spirit of creative work. Employees are willing to self-study to improve professional qualifications, science and technology, from which work effectively with the adequate salary. - Function of supervising employees: Helping the employer through paying wages, inspecting and monitoring workers who work according to their topics, ensuring the wages paid as effective as possible. - Labor administration function: The function of ensuring the role of the labor coordinator in a reasonable manner with the fair and satisfactory wage, the employee will voluntarily carry out the work assigned anywhere or anytime. Student Nguyen Thi Hoa 7 Group: CQ54/51.02
Academy of Finance Graduation Thesis 1.1.2 Payroll methods 1.1.2.1 Job-base salary Payroll by products based on products implies the payment of wages to employees based on the quantity and quality of completed work products. Formula Job - based Rate per = Unit of products x salary unit Job – based salary form including: + Salary form based on products directly produced by direct labor Salary paid to employees is calculated directly according to the number of finished products which reach quality standards. + Salary paid for indirect labor The salary is paid for indirect labors who have no physical association with the finished product or it’s impractical to trace the costs. So, this form still has several limitations. However, there is a clear link between the value of the job performed to the company and the level of pay when applying this form. So, it helps encourage employees to work harder and better to improve labor productivity as well as increase their salaries. However, It is complicated to administer and expensive to operate. This system is suitable to direct labors. And such a system is most effective in the circumstance where jobs are clearly defined. 1.1.1.2 Time-base salary This is a form of payment for employees based on working time, wage level and wage scale. This method is mainly applied to indirect workers, stable jobs or maybe even direct workers without product norms. Student Nguyen Thi Hoa 8 Group: CQ54/51.02
Academy of Finance Graduation Thesis In the enterprise, the payroll by time is applied to office staff such as administrative administration, labor organization, statistics, finance and accounting. Time-based payment is a form of compensation for employees based on their actual working time, occupations and professional and technical proficiency levels of employees. Each occupation specific job characteristics that apply different wage levels. Professional and technical proficiency divided into several wage scales, each salary level has a certain salary, which is the basis for payment of wages, wages over time can be divided. Time-based salary per month As salary paid to employees by month, the wage level is calculated over time is 1 month. Minium wage The actual number Wage paid in months = x of working days of The number of employees in month working days in month Time-based salary per week Wages are wages for employees based on weekly wage and number of working days in a month. Student Nguyen Thi Hoa 9 Group: CQ54/51.02
Academy of Finance Graduation Thesis Monthly salary Wage paid in weeks = x 12 52 weeks Time-based salary per day Hourly rates can be calculated directly to pay hourly rates or based on daily wage for overtime allowances for employees. = Daily wage Wage paid by hour The number of working hours in month as prescribed The disadvantage of payroll by time is too general, the military sometimes does not match the actual labor results of the employees. 1.1.2.3 Other form of payroll Payroll base on turnover is a form of payment / bonus whose income depends on the turnover achieved according to the sales target and the company's salary / bonus policy. Usually applied to sales staff ... There are many types of salary base on turnover + Personal salary and bonus + Group salary and bonus Student Nguyen Thi Hoa 10 Group: CQ54/51.02
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