How to account for sales revenue and service provision – Account 511

Answer: What is account 511, accounting diagram of account 511, structure of account 511, instructions on how to account for account 511 for sales revenue and service provision.

I. What is account 511?

Account 511 is used to reflect the sales revenue and service provision of an enterprise in an accounting period, including revenue from selling goods, products and providing services to the parent company or subsidiaries in the same group.

II. Structure and content of revenue account reflection – 511

1. Conditions for recording revenue from sales and service provision

• Sales revenue is only recognized when the following conditions are simultaneously met:
  >> The enterprise recognizes revenue when it has transferred most of the risks and benefits related to the ownership of the products and goods to the buyer;
  >> The enterprise no longer holds the right to control and manage the goods as the owner;
  >> Revenue is determined with relative certainty. If the contract stipulates that the buyer has the right to return the purchased products and goods under specific conditions, the enterprise only recognizes revenue when those conditions no longer exist and the buyer is not entitled to return the products and goods (except in the case of returning goods in the form of exchanging for other goods);
  >> The enterprise has or will receive benefits from the sales transaction;
  >> The costs related to the sales transaction are determined.
• Revenue from the provision of services is only recognized when the following conditions are simultaneously met:
  >> Revenue is determined with relative certainty. If the contract stipulates that the buyer has the right to return the purchased service under specific conditions, the enterprise only recognizes revenue when those conditions no longer exist and the buyer is not entitled to return the service provided;
  >> The enterprise has or will receive economic benefits from the service provision transaction;
  >> The costs related to completing the service provision transaction can be determined.
• Sales revenue and service provision revenue are not recorded when:
  >> Delivering goods, materials, semi-finished products to outside processing parties, goods sent for sale in the form of consignment or agent sale (not yet determined as sold);
  >> Amount received from selling trial production products;
  >> Financial revenue and other income.

2. Structure of account 511 – Sales revenue and service provision

• Debit side:
  >> Indirect taxes payable (VAT, special consumption tax, export tax, environmental protection tax);
  >> Trade discounts, rebates, returned goods arising during the period;
  >> Transfer of operating revenue during the period to the account determining business results.
• Credit: Revenue from sales of products, goods, investment real estate and provision of services during the period.

Note:  Account 511 has no ending balance.

3. Accounting diagram of account 511 

4. Level 2 account of account 511 – Sales revenue and service provision

• Account 5111 – Sales revenue: This account reflects the revenue and net revenue of the quantity of goods determined to have been sold in an accounting period of the enterprise. Mainly used for the business of trading goods, materials, food, etc.;
• Account 5112 – Revenue from sales of finished products: This account reflects the revenue and net revenue of the volume of products (finished products, semi-finished products) determined to have been sold in an accounting period of the enterprise. Mainly used for material production industries such as: industry, agriculture, forestry and fishery, construction and installation…;
• Account 5113 – Service revenue: This account reflects the revenue and net revenue of the volume of services completed, provided to customers and determined for sale in an accounting period. Mainly used for service businesses such as: transportation, post, tourism services, education services, public services, science and technology, accounting services, etc.;
• Account 5114 – Subsidy revenue: This account is used to reflect revenue from state subsidies when enterprises provide products, goods and services at the request of the state;
• Account 5117 – Revenue from investment real estate business: This account is used to reflect revenue from leasing investment real estate; selling and liquidating investment real estate;
• Account 5118 – Other revenue: This account is used to reflect other revenue such as revenue from selling materials, scrap, transferring tools and equipment, etc.;

Note: According to Circular 133/2016/TT-BTC for small and medium enterprises, there are only 4 level 2 accounts: accounts: 5111/5112/5113/5118.

III. How to account for sales revenue and service provision account 511

1. Revenue from the volume of products (finished products, semi-finished products), goods and services that have been determined to be sold in the accounting period

• For products, goods, services, investment real estate subject to VAT, special consumption tax, export tax or environmental protection tax, accounting reflects the sales revenue and service provision at the selling price excluding tax and reflects in detail indirect taxes (if any) when recording revenue (applicable to both direct declaration methods):
    Debit accounts 111, 112, 131… (total payment value);
    Credit account 511 – Sales revenue and service provision (excluding tax);
    Credit account 333 – Taxes and amounts payable to the state.
• In case the tax payable cannot be separated immediately, record revenue including tax payable. Then periodically determine tax payable and reduce revenue:
    Debit account 511 – Sales revenue and service provision;
    Credit account 333 – Taxes and amounts payable to the state.

2. In case sales revenue and service provision arise in foreign currency

• In case of foreign currency, accountants must determine the actual transaction exchange rate at the time of revenue generation to convert it into the accounting currency in the revenue account;
• In case of receiving advance payment from customers in foreign currency, the accountant must determine the actual transaction exchange rate at the time of receiving the advance payment to convert it into the currency corresponding to the advance revenue.

3. For barter transactions of dissimilar goods

• When exporting products or goods in exchange for materials, goods or other fixed assets, accounting reflects sales revenue at the fair value of the assets received after adjusting for additional amounts collected or paid to the exchanger. In case the fair value of the assets received cannot be determined, it will be determined at the fair value of the assets exchanged after adjusting for additional amounts collected or paid.
  >> Record revenue:
         Debit account 131 – Accounts receivable from customers (total payment value);
         Credit account 511 – Sales revenue and service provision (excluding tax);
         Credit account 333 – Taxes and amounts payable to the state.
  >> Then record the cost of goods exchanged:
         Debit account 632 – Cost of goods sold;
         Credit accounts 155, 156.
• When receiving materials, goods, and fixed assets in exchange, the accountant reflects the value of the exchanged assets:
    Debit account 152, 153, 156, 211… (price excluding tax);
    Debit account 133 – Deductible VAT (if any);
    Credit account 131 – Receivables from customers (total payment value).
• In case of collecting additional money because the fair value of the exchanged asset is greater than the fair value of the asset received from the exchange, when receiving the money, record:
    Debit account 111, 112 (additional amount collected);
    Credit account 131 – Accounts receivable from customers.
• In case additional money must be paid because the fair value of the exchanged asset is less than the fair value of the asset received from the exchange, when paying, record:
    Debit account 131 – Accounts receivable from customers;
    Credit account 111, 112 (additional amount paid).

4. In case of selling goods by installment payment

• When selling goods on installment or deferred payment, sales revenue will be reflected at the cash price excluding tax:
    Debit account 131 – Accounts receivable from customers;
    Credit account 515 – Sales revenue and service provision (cash price excluding tax);
    Credit account 333 – Taxes and amounts payable to the state;
    Credit account 3387 – Unrealized revenue (the difference between the total amount according to the deferred payment or installment price and the cash price).
• Periodically record interest revenue arising from deferred and installment sales:
    Debit account 3387 – Unrealized revenue;
    Credit account 515 – Financial activity revenue (deferred and installment interest).

5. In case of selling products, goods with accompanying replacement products, goods, equipment

• Accounting reflects the cost of products, goods sold and the value of products, goods, spare parts and equipment:
    Debit account 632 – Cost of goods sold;
    Credit account 153, 155, 156.
• Record revenue from sales of products, goods and products, goods, equipment and spare parts:
    Debit account 111, 112, 131;
    Credit account 511 – Revenue from sales of goods and provision of services;
    Credit account 333 – Taxes and amounts payable to the state.

6. Revenue generated from incentive programs for traditional customers

➤ When providing a program for traditional customers, revenue is recorded on the total amount collected minus the unrealized revenue which is the fair value of goods and services provided for free or the amount of discounts and rebates for customers:
  Debit account 112, 131;
  Credit account 511 – Sales revenue and service provision;
  Credit account 3387 – Unrealized revenue;
  Credit account 333 – Taxes and amounts payable to the state.

➤ When the program expires, if the customer does not meet the conditions for enjoying the incentive, the seller does not incur the obligation to pay the customer, the unrealized revenue will be transferred to sales revenue and service provision:
  Debit account 3387 – Unrealized revenue;
  Credit account 511 – Sales revenue and service provision.

➤ When customers meet all program conditions to enjoy incentives, unrealized revenue will be handled as follows:

• In case the seller directly supplies to the buyer, the unrealized revenue is recorded as sales revenue, service provision at the time of fulfilling the obligation to the customer (delivering goods, services for free or discounted to the customer):
    Debit account 3387 – Unrealized revenue;
    Credit account 511 – Sales revenue and service provision.
• In case the third party is the supplier of goods, services or discounts to customers, the following will be done:
  >> In case the enterprise is an agent of a third party, the difference between unrealized revenue and the amount payable to the third party will be recorded as sales revenue and service provision when the payment obligation to the third party arises:
         Debit account 3387 – Unrealized revenue;
        Credit account 511 – Sales revenue and service provision (difference between unrealized revenue and the amount paid to the third party (agent commission));
         Credit account 111, 112 (amount paid to the third party).
  >> In case the enterprise is not an agent of a third party, all unrealized revenue will be recorded as sales revenue and service provision when the payment obligation to the third party arises and recorded in cost of goods sold:
         Debit account 3387 – Unrealized revenue;
         Credit account 511 – Sales revenue and service provision.
         At the same time, record cost of goods sold as the amount payable to a third party:
         Debit account 632 – Cost of goods sold;
         Credit account 112, 331.

7. Cases of leasing fixed assets and investment real estate activities

Accountants must reflect revenue in accordance with the fixed asset leasing service and investment real estate activities completed during the period. When issuing invoices to record revenue from fixed asset leasing service and investment real estate activities, record:
  Debit account 131 – Accounts receivable from customers (if not received immediately);
  Debit account 111, 112 (if received immediately);
  Credit account 511 – Revenue from sales and provision of services;
  Credit account 3331 – VAT payable.

8. Cases of collecting money in advance for multiple periods for leasing fixed assets and investment real estate activities

• When receiving advance payment, record:
    Debit account 111, 112 (total amount received in advance);
    Credit account 3387 – Unrealized revenue (price excluding VAT);
    Credit account 3331 – VAT payable.
• Periodically determine and transfer revenue of the accounting period:
    Debit account 3387 – Unrealized revenue;
    Credit account 511 – Sales and service revenue (5113, 5117).
• Amount to be refunded to customers if the contract for leasing fixed assets and leasing investment real estate is not continued or the implementation period is shorter than the period for which the money was collected in advance (if any):
    Debit account 3387 – Unrealized revenue (price excluding VAT);
    Debit account 3331 – VAT payable (amount to be refunded to the lessee for VAT of the asset leasing activity not performed);
    Credit account 111, 112 (total amount to be refunded).

9. In case of selling through agents selling at the right price and receiving commission

➤ Accountant at the delivery unit for the agent:

• Prepare a delivery note for products and goods delivered to agents, record:
    Debit account 157 – Goods sent for sale;
    Credit account 155, 156.
• When the goods delivered to the agent have been sold, the accountant bases on the list of sales invoices prepared and sent by the commission agent to reflect the sales revenue at the selling price excluding VAT:
    Debit account 111, 112, 131 (total payment value);
    Credit account 511 – Sales revenue and service provision;
    Credit account 3331 – VAT payable (33311).
    Record the cost of goods sold:
    Debit account 632 – Cost of goods sold;
    Credit account 157 – Goods sent for sale.
• Commission amount payable to agents, record:
    Debit account 641 – Sales expenses (commission fee excluding VAT);
    Debit account 133 – Deductible VAT (1331);
    Credit account 111, 112, 131.

➤ Accountant at the dealer receives commission for selling goods at the right price:

• Upon receipt of goods, the enterprise shall track and record information on the total value of goods received for sale to agents for commission in the financial statement explanation.
• When the agent has sold the goods, based on the VAT invoice or sales invoice and related documents, the accountant records the sales amount that the agent must pay to the delivery party:
    Debit account 111, 112, 131;
    Credit account 331 – Payable to seller (total payment price).
• Periodically determine the sales commission revenue that the agent receives:
    Debit account 331 – Payable to sellers;
    Credit account 511 – Sales revenue and service provision;
    Credit account 3331 – VAT payable (if any).
• When paying for sales to the delivery party, record:
    Debit account 331 – Payable to seller;
    Credit account 111, 112.

10. For products, goods and services sold to dependent accounting units within the enterprise

a.) In case revenue is not recorded internally within the enterprise, revenue is only recorded when sold to outside parties:

➤ Accounting at the selling unit:

• Accountants create internal delivery and transportation vouchers or VAT invoices when exporting products, goods and services to dependent internal accounting units:
    Debit account 136 – Internal receivables (cost price); Credit account
    155, 156;
    Credit account 333 – Taxes and amounts payable to the state. 
• When products and goods have been consumed by internal dependent units, record revenue and cost of goods sold:
  >> Reflect cost of goods sold:
         Debit account 632 – Cost of goods sold;
         Credit account 136 – Internal receivables.
  >> Record revenue:
         Debit account 136 – Internal receivables;
         Credit account 511 – Revenue from sales and service provision.

➤ Accounting at the purchasing unit:

• Based on relevant documents when receiving products, goods and services transferred from dependent accounting units within the enterprise, record:
    Debit account 155, 156 (cost price);
    Debit account 133 – Deductible VAT (if any);
    Credit account 336 – Internal payables.
• When selling products, goods and services to outside parties, accountants record revenue and cost of goods as normal sales;
• In case the dependent accounting unit is not allowed to account for the after-tax business results, it must transfer revenue and cost of goods sold to the superior unit:
  >> Transfer cost of goods sold:
         Debit account 336 – Internal payables;
         Credit account 632 – Cost of goods sold.
  >> Transfer revenue:
         Debit account 511 – Sales revenue and service provision;
         Credit account 336 – Internal payables.

b.) In case of recording sales revenue for internal dependent accounting units, record:
  Debit account 136 – Internal receivables;
  Credit account 511 – Sales revenue and service provision (details of internal sales transactions);
  Credit account 333 – Taxes and amounts payable to the state;
  Record cost of goods sold as normal sales transactions.

11. For goods processing activities

➤ The accountant at the processing delivery unit records as follows:

• When releasing goods from the warehouse for processing:
    Debit account 154 – Unfinished production and business costs;
    Credit accounts 152, 156.
• Record the cost of processing goods and deductible VAT:
    Debit account 154 – Cost of production and business in progress;
    Debit account 133 – Deductible VAT (if any).
    Credit account 111, 112, 331.
• When receiving finished goods sent for processing and storing in warehouse, record:
    Debit account 152, 156;
    Credit account 154 – Unfinished production and business costs.

➤ The accountant at the processing unit records the accounting as follows:

• Upon receiving goods for processing, the enterprise shall monitor and record information on the value of materials and goods received for processing in the financial statement notes;
• When determining the revenue from processing, record:
    Debit accounts 111, 112, 131;
    Credit account 511 – Sales revenue and service provision;
    Credit account 3331 – VAT payable.

12. Accounting for construction contract revenue

• In case the construction contract stipulates that the contractor is paid according to the reliably estimated planned progress, the accountant shall base on the revenue recognition documents corresponding to the completed work (not invoices) determined by the contractor at the time of preparing the financial statement:
    Debit account 337 – Payment according to the planned progress in the contract;
    Credit account 511 – Revenue from sales and provision of services (5111).
• Reflecting the amount customers must pay based on VAT invoices made according to the planned progress in the contract, record:
    Debit account 131 – Customer receivables;
    Credit account 337 – Payment according to the planned progress of the construction contract; Credit account 3331 – VAT payable.
• When customers pay or make an advance, record:
    Debit account 111, 112;
    Credit account 131 – Customer receivables.
• In case the construction contract stipulates that the contractor is paid according to the value of the work performed that is reliably determined and confirmed by the customer, the accountant must issue a VAT invoice based on the value of the completed work confirmed by the customer, recording:
    Debit account 111, 112, 131;
    Credit account 511 – Sales revenue and service provision (5111);
    Credit account 3331 – VAT payable.
• When completing the contract on schedule or exceeding some specific targets in the contract, the customer rewards and pays the contractor more, record:
    Debit account 111, 112, 131;
    Credit account 511 – Sales revenue and service provision (5111);
    Credit account 3331 – VAT payable.
• Compensation received by customers or other parties to compensate for delays, errors, changes in contract performance, recorded as:
    Debit accounts 111, 112, 131;
    Credit account 511 – Sales revenue and service provision (5111);
    Credit account 3331 – VAT payable (if any).
• When receiving payment for completed work volume or advance payment from customers, record:
    Debit account 111, 112; 
    Credit account 131 – Customer receivables.

13. Accounting for revenue from state subsidies and subsidies for enterprises

• When the state announces subsidies and price supports for enterprises, record:
    Debit account 333 – Taxes and amounts payable to the state (3339);
    Credit account 511 – Sales revenue and service provision (5114).
• When the enterprise receives money from the state budget, record:
    Debit account 111,112;
    Credit account 333 – Taxes and amounts payable to the state (3339).

14. Accounting for sale and liquidation of investment real estate

• When selling investment real estate, record revenue: 
    Debit accounts 111, 112, 131 (total payment value);
    Credit account 5117 – Investment real estate business revenue; 
    Credit account 3331 – VAT (33311).
• At the same time, record the cost of investment real estate:
    Debit account 632 – Cost of goods sold (remaining value of real estate); 
    Debit account 214 – Accumulated depreciation (2147 if any);
    Credit account 217 – Investment real estate (original cost of real estate).

15. In case of paying salary to employees and other laborers in products and goods

Accountants must record revenue for products and goods as normal sales transactions:
  Debit account 334 – Payable to employees (total payment value);
  Credit account 511 – Sales revenue and service provision;
  Credit account 3331 – VAT (33311).

16. In case of using products and goods as gifts for employees, it is covered by the reward and welfare fund.

Accountants record revenue as normal sales transactions: 
  Debit account 353 – Bonus and welfare fund (total payment price);
  Credit account 511 – Sales and service revenue;
  Credit account 3331 – VAT (33311).

17. At the end of the accounting period, transfer the revenue from returned goods, sales discounts and trade discounts arising during the period to deduct from actual revenue to determine net revenue.
  Debit account 511 – Sales revenue and service provision; Credit
  account 521 – Revenue deductions.

18. At the end of the accounting period, transfer net revenue to account 911 – determine business results
  Debit account 511 – Sales revenue and service provision;
  Credit account 911 – Determine business results.

IV. Frequently asked questions about account 511 – Sales and service revenue