Instructions on How to Account for Account 335 – Payable Expenses

Learn about account 335 – What are payable expenses? Principles, content & accounting methods for account 335: Salary expenses, fixed asset repairs, interest payable…

I. Accounting principles for account 335 – Payable expenses

1. What is account 335 – Expenses payable?

Account 335 is used to reflect payables for goods and services received from sellers during the reporting period. But have not actually been paid due to lack of invoices or insufficient accounting documents and records to be recorded in production and business expenses of the reporting period. In addition, account 335 is also used to reflect:

• Amounts payable to employees such as leave pay during the period.
• Production and business expenses of the reporting period must be deducted in advance, such as:
  ➢ Expenses arising during the time the enterprise stops production seasonally;
  ➢ Interest expenses payable on loans must be deducted in advance in case of borrowing with interest paid later;
  ➢ Repair costs of fixed assets during the planning period, product warranty costs, and services purchased from outside to be provided.

2. Accounting principles for account 335 – Payable expenses

Accountants need to distinguish between payable expenses (also known as prepaid expenses or accrued expenses) and payable provisions reflected in account 352 to record and present the Financial Statements in accordance with the nature of each item, specifically:

• Amounts are current liabilities but the specific payment time is not yet determined or the payment time has been determined;
• Provisions for payables that are estimated but the amount to be paid is not yet determined with certainty (for example, provisions for product, goods, and construction warranty); payables for which the amount to be paid has been determined with certainty;
• When preparing financial statements, it is necessary to present provisions for payables separately from trade payables and other payables;
• When accounting for payable expenses into production and business expenses in the period, it must be done according to the principle of matching between revenue and expenses incurred in the period. To ensure that there is no sudden change in production and business expenses, it is reflected as payable provisions.

>> See more: How to account for account 331 – Payables to sellers.      

II. Regulations that must be followed in accounting for account 335 – Payable expenses

It should be noted that some pre-deducted amounts will not be reflected in account 335 but must be reflected as provisions for payables, such as:

• Major repair costs of fixed assets. Because major repairs are cyclical, enterprises are allowed to provision repair costs in advance for the reporting year or several subsequent years;
• Provision for warranty of products, goods, construction works;
• Other payable provisions (see more regulations in account 352).

In principle, when the payable expense must be settled with the actual expense incurred, the difference between the provision and the actual expense must be reversed.

Capitalization of interest in some cases is specified as follows:

• For separate loans for construction of fixed assets and investment real estate, interest is capitalized even when the construction period is < 12 months;
• For contractors, interest cannot be capitalized when borrowing to serve the construction and building of works and assets for customers, including cases of separate loans. For example, the case of a construction contractor borrowing money to construct a work for a customer.

III. Structure and content of account 335 – Payable expenses

Note : Account 335 – Expenses payable does not have a sub-account.

IV. Accounting methods for some major economic transactions

1. Advance deduction for production workers’ leave salary expenses:

Debit account 154 – Work in progress (according to Circular 133/2016/TT-BCT);
Debit account 622 – Direct labor costs (according to Circular 200/2014/TT-BTC);
Credit account 335 – Payable expenses.

2. When calculating the actual leave salary payable to production workers:
➤If the amount payable is greater than the amount deducted:

Debit account 154 – Unfinished production and business costs (according to Circular 133/2016/TT-BCT);
Debit account 622 – Direct labor costs (according to Circular 200/2014/TT-BTC);
Debit account 335 – Pre-deducted amount;
Credit account 334 – Total actual leave salary payable.

➤If the amount payable is less than the amount deducted:

Debit account 335 – Amount deducted in advance;
Credit account 334 – Total actual leave salary payable;
Credit account 154 – Unfinished production and business expenses (according to Circular 133/2016/TT-BCT);
Credit account 622 – Unfinished production and business expenses (according to Circular 200/2014/TT-BTC).

3. Advance deduction for production and business expenses when major repairs of fixed assets are expected to arise, record:

Debit accounts 241, 154, 642 (according to Circular 133/2016/TT-BCT);
Debit accounts 241, 623, 627, 641, 642 (according to Circular 200/2014/TT-BTC);
Credit account 335 – Expenses payable.

4. When the fixed asset repair work is completed and put into use, if the advance amount is higher than the actual cost incurred, record:

Debit account 335 – Payable expenses (the amount deducted in advance is greater than the incurred expenses);
Credit accounts 241, 154, 642 (according to Circular 133/2016/TT-BCT);
Credit accounts 241, 623, 627, 641, 642 (according to Circular 200/2014/TT-BTC).

5. Deduct in advance from production and business expenses the estimated expenses to be incurred during seasonal or planned work stoppages, record:

Debit account 154 – Unfinished production and business costs (according to Circular 133/2016/TT-BCT);
Debit accounts 623, 627 (according to Circular 200/2014/TT-BTC);
Credit account 335 – Payable expenses.

6. Actual costs incurred related to pre-accrued expenses, record:

➤ If the generated amount is greater than the pre-deducted amount: 

Debit account 154 – Unfinished production and business costs (according to Circular 133/2016/TT-BCT);
Debit accounts 623, 627 (according to Circular 200/2014/TT-BTC);
Debit account 335 – Pre-deducted amount;
Debit account 133 – Deductible VAT (if any);
Credit accounts 111, 112, 152, 153, 331, 334.

➤If the generated amount is less than the previously deducted amount:

Debit account 335 – Prepaid amount;
Debit account 133 – Deductible VAT (if any);
Credit accounts 111, 112, 152, 153, 331, 334;
Credit accounts 623, 627 (according to Circular 200/2014/TT-BTC);
Credit account 154 – Work in progress (according to Circular 133/2016/TT-BCT).

7. In case of interest payment after the end of the period, calculate the interest payable during the period, record:

Debit account 635 – Financial expenses (interest on loans for production and business);
Debit account 154, 241 (interest on loans calculated into unfinished business operations) (according to Circular 133/2016/TT-BCT);
Debit account 627, 241 (capitalized interest) (according to Circular 200/2014/TT-BTC);
Credit account 335 – Expenses payable.

8. In case an enterprise issues bonds at par value, if interest is paid later, each period the enterprise must calculate in advance the interest expense payable during the period into production and business expenses or capitalize, and record:

Debit account 154, 241 (interest calculated into unfinished business production costs) (according to Circular 133/2016/TT-BCT);
Debit account 627, 241 (capitalized interest) (according to Circular 200/2014/TT-BTC);
Debit account 635 – Financial expenses (if interest is calculated into financial expenses);
Credit account 335 – Expenses payable (bond interest payable during the period).

➤ At the end of the term, the enterprise pays the principal and interest to the bond buyer, recording:

Debit account 335 – Total bond interest;
Debit account 34311 – Face value;
Credit accounts 111, 112…

9. In case an enterprise issues discounted bonds, if interest is paid later (when the bond matures), each period the enterprise must calculate in advance the interest expense payable during the period into production and business expenses or capitalize, and record:

Debit accounts 154, 241 (loan interest calculated into unfinished production and business costs) (according to Circular 133/2016/TT-BCT);
Debit accounts 627, 241 (loan interest capitalized) (according to Circular 200/2014/TT-BTC);
Debit account 635 – Financial expenses (if loan interest is calculated into financial expenses);
Credit account 335 – Expenses payable (bond interest payable during the period);
Credit account 34312 – Bond discount (PB amount during the period).

➤ At the end of the term, the enterprise pays the principal and interest to the bond buyer, recording:

Debit account 335 – Total bond interest;
Debit account 34311 – Face value;
Credit accounts 111, 112….

V. Some related questions about account 335 – Expenses payable