Enterprise cost management plays a very important role in effective business operation and development. So Enterprise Cost Management what? Or what does the business management cost include? How to account for expenses? Let's learn with CoffeeHR the following article to better understand business expenses to optimize management costs for your organization!
Learn about business management costs
What is business administration cost?
According to the 2015 Accounting Law and Circular 200/2014/TT-BTC guiding the corporate accounting regime, we can understand that Enterprise Cost Management considered as the entire budget, expenses that an enterprise invests in the operation and management of business, production, administration and a number of other items of general nature of the whole enterprise.
To put it more simply, administrative costs are the expenses that an organization must pay to run its operations smoothly and efficiently. Therefore, the owners of the organizations need to manage this part of the business management costs well.
What does business administration cost include?
In order to manage the business well and be able to build an effective management plan with optimal costs, leaders need to have a clear understanding of the costs of business management.
So the cost of business administration will include the following factors:
- Management staff costs: This administrative expense is used to pay for the management staff of the enterprise, including salaries, bonuses, health insurance, and social insurance at all levels of departmental managers and board of directors.
- Cost of materials management: Expenses for materials used in business management activities such as equipment and machinery, stationery, materials to repair fixed accounts. This type of expense is recorded through account 6422.
- Cost of office supplies: Expenses used to pay for tools, equipment and office supplies such as notebooks, books, pens, etc. are recorded through account 6423.
- Asset depreciation expense: This expense reflects depreciation of fixed assets common to the business such as offices, machinery and equipment, structures, transmission materials, etc. and is recorded in account 6424.
- Taxes, charges and fees: expenses for license tax, land tax, other fees/charges stated in account 6425.
- Redundancy costs: Provision fees payable on production and business expenses are recorded through account 6426.
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Accounting principles in enterprise management expenses
Accordingly, managers must understand the accounting principles in Enterprise Cost Management. This account is used to record general administrative expenses of the entity, including:
- Salary expenses (salaries, remuneration for administrative officers, salaries, wages, allowances and payments of salary nature payable to employees, a number of other expenses);
- Insurance deductions social insurance, health insurance, trade union funds, unemployment insurance and other contributions according to the prescribed regime;
- Expenses for female employees according to the prescribed regime;
- Spending on costumes transaction and payment of labor protection according to regulations;
- Rewards for innovation initiatives, bonus for increasing labor productivity, bonus for saving materials and expenses, scientific research expenses;
- Cost of materials, stationery;
- Property expenses, such as: Depreciation of fixed assets, expenses for purchasing property insurance, expenses for purchasing tools and tools, expenses for maintenance and repair of assets, payment of rentals;
- Taxes, fees, charges, such as: court costs, judgment enforcement fees, land rents;
- Provisions bad receivables, provision for payables;
- Expenses for buying servicesi (electricity, water, telephone, fax, petrol, periodic medical examination and treatment for employees and medical expenses according to the prescribed regime, expenses for hiring domestic and foreign experts,...);
- Expenses in other currency (reception, external transactions, events, customer conferences, training expenses, staff training, business trip expenses, inspection, inspection, audit expenses, fines for breach of business contracts, etc.) due to objective reasons of force majeure, expenditures on fire prevention and fighting, defense and security, expenditures on environmental protection, expenditures on Party organizations and mass organizations in case the funding sources of these organizations are not enough to cover operating expenses according to the prescribed regime, expenses for paying domestic and foreign trade association fees, etc.).
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The administrative expenses of the enterprise must ensure compliance with the financial management regime for Vietnam Deposit Insurance. Account 642 is opened in detail according to each expense content according to regulations. At the end of the period, the company's administrative expenses are transferred to the debit side of Account 911 – Determination of business results.
Learn more: How are business expenses managed
Structure and contents of the 642 . account
Structure and contents of account 642 – Business administration expenses are covered Circular 200/2014/TT-BTC regulations:
| Account 642 – Business administration expenses | |
Debtor:
|
Yes Party:
|
Balance: Account 642 – Administration expenses have no ending balance.
Account 642 – Business administration expenses have 8 level 2 accounts.
- Account 6421 – Management staff expenses: Reflects payables to management staff, such as salaries, allowances, social insurance, health insurance, union dues, unemployment insurance of the Board of Directors, employees managers in departments and divisions of the enterprise.
- Account 6422 – Cost of management materials: Reflect the cost of exported materials used for business management such as stationery, materials used for repair of fixed assets, tools, tools, etc. (prices include tax, or excluding VAT).
- Account 6423 – Expenses for office supplies: Reflect the cost of tools and office supplies used for management work (prices include tax, or do not include VAT).
- Account 6424 – Depreciation expenses of fixed assets: Reflect the depreciation expense of fixed assets shared by the enterprise such as: Office buildings, warehouses, architectural objects, means of transport and transmission, management machinery and equipment used in offices, etc.
- Account 6425 – Taxes, fees and charges: Reflect the costs of taxes, fees and charges such as license tax, land rent, ... and other fees and charges.
- Account 6426 – Provision expenses: Reflects provisions for doubtful debts, provisions for payables included in the enterprise's production and business expenses.
- Account 6427 – Expenses for services purchased from outside: Reflect the costs of services purchased from outside serving the business management; expenses for the purchase and use of technical documents, patents, etc. (which do not meet the criteria for recognition of fixed assets) are calculated by the method of amortization into administrative expenses; rent of fixed assets, expenses paid to subcontractors.
- Account 6428 – Other monetary expenses: Reflecting other expenses under the general management of the enterprise, in addition to the above-mentioned expenses, such as expenses for conferences, receptions, business trips, transportation, expenses for female employees, etc.
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Accounting for business management expenses – account 642
Management staff expenses
- Dr 642 – Administration expenses (6421).
- There are accounts 334 and 338.
Cost of materials management
- Dr 642 – Administration expenses (6422)
- Dr 133 – Deductible VAT (1331) (If deducted)
- Cr 152 – Raw materials, materials
- There are accounts 111, 112, 142, 224, 331…
cost of office supplies
- Dr 642 – Administration expenses (6423)
- Dr 133 – Deductible VAT (1331)
- Cr 153 – Tools. tool
- There are accounts 111, 112, 331,. . .
Fixed asset depreciation expense
- Dr 642 – Administration expenses (6424)
- Cr 214 – Depreciation of fixed assets.
Taxes and related fees
- Dr 642 – Administration expenses (6425)
- Cr 333 – Taxes and other payables to the State.
Cost of hired services
- Dr 642 – Administration expenses (6428)
- Dr 133 – Deductible VAT (If tax deductible)
- There are accounts 111, 112, 331, 335,.
Contingency costs and other expenses
- Dr 642 – Administration expenses.
- Cr 352 – Provision for payables.
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How to effectively control business management costs
In order to control all kinds of business costs, leaders and managers of the organization need to understand the company structure as well as fully standardize the management process. As a result, you can optimize all kinds of business management costs to bring more profits to your organization.
To maximize profits, managers must perform two actions:
- Increase revenue
- Cut the cost
Therefore, in order to achieve an important key in their management, the company's management needs to clearly define the norms of corporate management costs. Accordingly, the norm of enterprise management expenses is the enterprise's regulation of the necessary cost levels for organizational management activities. Benefits of the costing process include:
- This is the basis to help companies make operating estimates, because to make a labor cost estimate, the number of labor hours must be specified, the cost of raw materials must have the specification of materials.
- Helps managers control the business activities of the organization, because normative costs are the standard and basis for evaluation.
- Provide managers with timely information to make decisions on product pricing, order acceptance or rejection, profitability analysis.
- Attach the responsibility of each employee to the economical use of resources.
Principles of building standard enterprise management cost norms:
The process of setting standards – Determining the cost of business management is an art task combined with science. It combines the thinking with the expertise of all those responsible for the price and quality of the product. First, we must seriously consider all the results that have been achieved. On that basis, according to the change of economic situation and characteristics of supply and demand, there are corresponding adjustments and supplements in technology.
The above are important information when it comes to Enterprise Cost Management. Hopefully, through CoffeeHR's article, leaders can understand the costs to easily optimize the process of operating and managing their businesses more effectively.
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