How to account for Financial Activity Revenue – Account 515

What is account 515? Principles, structure & how to account for account 515 – revenue from financial activities? There are specific examples. Let’s find out now with fdiinvietnam.com!

I. What is account 515? Accounting principles for account 515

1. What is account 515 – Financial activity revenue?

This account is to reflect the revenue from interest, royalties, profits, distributed dividends and other financial operating revenue of the enterprise.

2. Accounting principles for account 515 – Financial activity revenue

Accounting principles for account 515 include:

• Interest on bank deposits, loan interest, interest from deferred payment, installment payment, interest on investment in bonds, treasury bills, payment discounts received when purchasing goods;
  ➣ Interest on loans, interest from deferred payment, installment payment: This revenue is only recorded when it is certain to be received and the principal of the loan or the principal receivable is not classified as overdue and requires a provision;
  ➣ Interest received from investing in stocks, bonds, treasury bills, only the interest portion of the periods in which the enterprise buys back these investments is recorded as revenue arising in the period, and the investment interest received from the accumulated investment interest before the enterprise buys back that investment is recorded as a decrease in the original price of that investment in stocks, bonds;
• When investors receive stock dividends, investors only track the number of additional shares on the financial statement notes, do not record the value of the shares received, do not record financial revenue and do not record the increase in the value of the investment in the company;
• Income from short-term and long-term securities trading, capital transfer interest when liquidating joint venture capital contributions, investments in subsidiaries, associated companies, and other capital investments: revenue is recorded as the difference between the selling price and the cost price, the cost price is the book value and is determined by the weighted average method, and the selling price is calculated according to the fair value of the amount received. In the case of securities trading in the form of stock swaps, the value of the received shares is calculated according to the fair value on the exchange date as follows:
  ➣ For shares received that are listed on the market, the fair value of the shares is the closing price listed on the stock market on the exchange date. In case the stock market does not trade on the exchange date, the fair value of the shares is the closing price of the previous trading session adjacent to the exchange date;
  ➣ For shares received that are not listed on the UPCOM exchange, the fair value of the shares is the closing price announced on the UPCOM exchange on the exchange date. On the exchange date on the UPCOM exchange that is not traded, the fair value of the shares is the closing price of the previous trading session adjacent to the exchange date;
  ➢ For shares received that are not listed on the UPCOM exchange, the fair value of the shares is agreed upon between the parties or taken from the book value at the time of exchange or the book value at the end of the previous quarter adjacent to the exchange date, the book value of the shares is calculated according to the formula:

  Book value of stock

  =

  Total equity

  :

  Number of shares at the time of exchange

• Income from other investment activities;
• Income from other investment activities;
• Exchange rate gains include gains from selling foreign currency: Revenue from foreign currency trading is the difference between the buying rate and the selling rate;
• Other financial revenue.

II. Structure and content of financial activity revenue account 515

1. Structure of account 515 – Revenue from financial activities

➤ Debit side accounting

• Accounting for VAT payable under direct method (if any);
• Transfer from financial activity revenue account 515 to account 911 – business results.

>> See more: Calculating VAT by direct method.

➤ Credit side accounting

• The amount of interest, profits and dividends distributed by the enterprise;
• Profits from the sale of investments between parent companies and subsidiaries, joint ventures and associated companies;
• Payment discount on the amount received due to purchase;
• Exchange rate difference profit when selling foreign currency;
• Interest accrued during the period as interest on loans;
• Exchange rate gains due to year-end revaluation of foreign currency-denominated monetary items;
• Carryover and reallocation of exchange rates of basic construction activities, the period before the activity is included in the financial operating revenue of the previous year;
• Other financial revenue arising during the period.

Note :

• The financial activity revenue account has no ending balance;
• The financial activity revenue account does not have a sub-account.

2. Accounting diagram of account 515 – Financial activity revenue

III. How to account for account 515 – Revenue from financial activities

➤ Reflects dividend revenue and profits distributed in cash from investment capital contribution activities

• Receive notification of dividends and profits shared from investment activities:
  Debit account 138…;
  Credit account 515.
• If the distributed profit dividend includes the accumulated investment interest before the investment was repurchased, the accountant must allocate this interest amount:
  Debit account 138: Total dividends and profits received;
  Credit 121, 221, 222, 2288: Dividends and profits accumulated before the enterprise repurchased the investment;
  Credit account 515: Dividends and profits in periods after the enterprise purchased the investment.

➤ Periodically, the loan interest is definitely collected, including bond interest, deposit interest, late payment interest, installment payment.
       Debit account 138;
       Debit account 121,128: If the periodic loan interest is entered into the principal;
       Credit account 515.

• The original receivable is not considered a bad debt, it is necessary to set up a provision, or the debt is irrecoverable, not subject to debt suspension or debt extension:
  ➣ There must be debt confirmation and debt repayment commitment from the debt recipient;
  ➣ Other evidence, if any.

➤ Transfer or recover financial investments
       Debit account 111,112,131;
       Debit account 635: sell at a loss;
       Credit account 121,221,222,228;
       Credit account 515: sell at a profit.

➤ In case of stock exchange
      Debit account 121,128: Shares received at fair value;
      Debit account 635: Difference in fair value of shares received is smaller than the book value of shares exchanged;
      Credit account 121,228: Shares exchanged at book value;
      Credit account 515: Difference in fair value of shares received is larger than the book value of shares exchanged.

➤ Selling foreign currency
      Debit account 111, 112: Actual exchange rate;
      Debit account 635: Actual exchange rate difference is smaller than recorded exchange rate;
      Credit account 111, 112: Recorded exchange rate;
      Credit account 515: Actual exchange rate difference is larger than recorded exchange rate.

➤ Purchase of materials, goods, fixed assets and services, pay expenses in foreign currency. If the exchange rate at the time of occurrence is greater than the exchange rate on the book,
      Debit account 152,156,211: actual exchange rate;
      Credit account 111,112: recorded exchange rate;
      Credit account 515: the difference between the actual exchange rate and the recorded exchange rate.

➤ Pay for purchases in foreign currency. If the exchange rate on the accounting book of accounts 111,112 is lower than the exchange rate of the accounts payable:
      Debit account 331…;
      Credit account 515;
      Credit account 111,112.

➤ Collect receivables in foreign currency. If the actual exchange rate at the time of collection is higher than the accounting exchange rate,
      Debit account 111,112;
      Credit account 515;
      Credit account 131.

➤ Sales by installment payment method record revenue at the cash price, the difference between the installment payment price and the cash price is recorded in account 3387
      Debit account 111,112,131;
      Credit account 511 ;
      Credit account 3387;
      Credit account 3331.

➤ Periodically determine the transfer of revenue from deferred interest payments to 
      Debit account 3387;
      Credit account 515. 

➤ Periodically determine and transfer interest on loans or bonds purchased with interest received in advance.
      Debit account 3387;
      Credit account 515.

➤ Payment discount amount received for purchasing goods
      Debit account 331;
      Credit account 515.

➤ At the end of the year, when handling exchange rate differences when re-evaluating the balance of foreign currency items, transfer all the exchange rate difference profits from the revaluation to
      Debit account 413;
      Credit account 515.

➤ Transfer financial activity revenue and determine business results
      Debit account 515;
      Credit account 911.

IV. Specific example of accounting for account 515

Example 1: On May 20, 2021, Company X imported a shipment of 5 computers at a price of 600usd/unit with an exchange rate of 23,150. On May 30, 2021, Company X paid at an exchange rate of 23,050. 
       Debit account 331: 600usd x 23,150;
       Credit account 112: 600usd x 23,050;
       Credit account 515: 600usd x 100.

Example 2: On May 30, 2021, company A withdrew 200 USD to sell in cash, the actual bank purchase rate at the time of occurrence was 22,040 VND/USD, the exchange rate on the accounting book was 22,000 VND/USD.
       Debit account 1111: 4,408,000 (200 USD x 22,040);
       Credit account 1112: 4,400,000 (200 USD x 22,000);
       Credit account 515: 8,000.

Example 3: Enterprise A purchases goods from enterprise B for 10,000,000 VND. Enterprise A is entitled to a 1.5% payment discount on the payment price and pays in cash.
       Debit account 331: 10,000,000 VND;
       Credit account 515: 150,000 VND;
       Credit account 111: 9,850,000 VND.

V. Frequently asked questions about TK 515