Selling costs are an important factor in corporate financial management. Understanding and effectively managing these costs helps businesses improve their competitiveness and increase profits. Below are detailed instructions on selling costs, how to account for selling costs and optimize costs for maximum efficiency. Let's find out with 1C Vietnam!

1. What is cost of sales?

According to Clause 1, Article 91 of Circular 200/2014/TT-BTC, selling costs are actual expenses incurred in the process of selling products, goods or providing services. These costs may include advertising costs, sales commissions, warranty costs, storage costs, packaging and transportation costs.

In simpler terms, selling costs are all expenses related to getting products to customers. Optimizing selling costs helps businesses improve competitiveness and optimize profits.

2. What are the components of selling costs?

According to Clause 2, Article 91 of Circular 200/2014/TT-BTC, selling expenses are recorded and reflected through Account 641, including:

• Employee costs: Including salaries, allowances, social insurance, health insurance, and other expenses related to sales staff.
• Material and packaging costs: Costs for packaging materials, storage and transportation of products.
• Cost of tools and supplies: Includes tools and supplies used in the product consumption process.
• Fixed Asset Depreciation Expense: Depreciation expense of fixed assets such as warehouses, means of transport and measuring equipment.
• Warranty costs: Costs for product and goods warranty (except construction works).
• Outsourcing costs: Costs of outsourcing services for sales, such as warehouse and yard rentals and agent commissions.
• Other cash costs: Other costs incurred during the sales process such as hospitality and advertising costs.

3. The simplest formula for calculating cost of sales

To calculate the cost of sales, you can use the following simple formula:

Cost of sales = Employee costs + Depreciation costs + Tool costs + Warranty costs + Packaging costs + Other costs

Example:

Suppose a business manufactures and distributes air purifiers. Here are the selling expenses incurred in a month:

• Sales staff cost: 40 million VND (including salary and allowances for sales team)
• Packaging and packing cost: 15 million VND (including costs for boxes, bags and packing materials)
• Shipping cost: 12 million VND (cost of delivering goods to customers)
• Advertising and promotion costs: VND 8 million (including costs for online advertising and media campaigns)
• Product warranty cost: 5 million VND (cost for product warranty service)

Apply the formula to calculate cost of sales:

Selling expenses = 40 million VND + 15 million VND + 12 million VND + 8 million VND + 5 million VND = 80 million VND

So, the total cost of sales for the business in the month is 80 million VND.

4. Detailed instructions on accounting for sales expenses by transaction

Below are detailed instructions on how to account for sales expenses, classified by type of sales expenses and how to record the corresponding accounting entries:

4.1 Cost of staff performing the sales process

This cost includes salaries, allowances, social insurance, health insurance and other benefits for sales staff.

Accounting:

• Debit account 641 – Sales expenses
• There are accounts 334 – Payable to employees
• There are accounts 338 - Other payables (if any)

4.2 Value of tools and materials used in the sales process

This cost includes the cost of packaging, storage materials and tools necessary for the sales process.

Accounting:

• Debit account 641 – Sales expenses
• There are accounts 152 – Raw materials, materials
• There are accounts 153 – Tools and instruments
• There are accounts 242 - Prepaid expenses (if materials are used in many periods)

4.3 Depreciation of fixed assets of sales department

Depreciation of fixed assets used in the sales department such as warehouses, stores and vehicles.

Accounting:

• Debit account 641 – Sales expenses
• Credit account 214 – Depreciation of fixed assets

4.4 Cost of outsourced services for sales

Includes costs for electricity, water, communications and minor fixed asset repair services.

Accounting:

• Debit account 641 – Sales expenses
• Debit account 133 – Deductible VAT (if any)
• There are accounts 111 – Cash
• There are accounts 112 – Bank deposits
• Credit account 141 – Short-term receivables
• There are accounts 331 – Payable to sellers

4.5 Repair costs of fixed assets for sales

In case of advance provision for major repair costs of fixed assets:

• When pre-deducting repair costs:
  • Debit account 641 – Sales expenses
  • Credit account 335 - Expenses payable (if repairs have been performed but have not been accepted or there is no invoice)
  • Credit account 352 - Provision for payables (deducted in advance for periodic maintenance)
• When actual repair costs arise:
  • Debit accounts 335, 352
  • Debit account 133 – Deductible VAT
  • There are accounts 331, 241, 111, 112, 152, ...

In case of one-time major repair costs:

• Debit account 641 – Sales expenses
• Credit account 242 – Prepaid expenses (expenses allocated for each period)

4.6 Product and goods warranty costs

Accounting:

• When setting up warranty reserves:
  • Debit account 641 – Sales expenses
  • Credit account 352 – Provision for payables
• End of accounting period:
  • If the provision for payables increases:
    • Debit account 641 – Sales expenses
    • Credit account 352 – Provision for payables
  • If the provision for payables decreases:
    • Debit account 352 – Provision for payables
    • Credit account 641 – Sales expenses

4.7 Promotion and advertising costs

Accounting:

• When exporting promotional goods without conditions:
  • Debit account 641 – Sales expenses
  • There are accounts 155, 156
• When exporting promotional goods with conditions (discount on sales):
  • Debit account 632 – Cost of goods sold
  • There are accounts 155, 156
• When receiving promotional goods from the manufacturer:
  • Debit account 156 – Goods (at fair value)
  • Credit account 711 - Other income

4.8 Products and goods for internal consumption for sales activities

Accounting:

• Debit account 641 – Sales expenses
• There are accounts 155, 156 (cost of goods)
• If VAT must be declared:
  • Debit account 133 – Deductible VAT
  • Credit account 3331 – VAT payable

4.9 Products and goods used for gifts

Accounting:

• When giving gifts to outside customers:
  • Debit account 641 – Sales expenses
  • There are accounts 152, 153, 155, 156
• When giving gifts to employees (reward fund):
  • Debit account 353 – Reward and welfare fund
  • Credit account 511 – Sales revenue and service provision
  • Credit account 3331 – VAT payable
  • Debit account 632 – Cost of goods sold
  • There are accounts 152, 153, 155, 156

4.10 Sales commission payable by the agent

Accounting:

• Debit account 641 – Sales expenses
• Debit account 133 – Deductible VAT
• Credit account 131 – Accounts receivable from customers

Accurate cost of sales accounting not only helps control costs but also supports businesses in making appropriate business decisions.

5. How to optimize sales costs?

One of the optimal sales strategies for businesses is to apply modern software such as 1C:ERP. This is a comprehensive business management solution, developed on a low-code technology platform, providing many useful management subsystems.

1C:ERP integrates many accounting and financial modules, allowing businesses to automate accounting entries for sales costs, thereby minimizing errors in recording and calculating, while saving time and resources for the accounting team.

• Accounting entries such as employee costs, fixed asset depreciation and outsourced service costs are made accurately and quickly, helping businesses control costs more effectively.
• Monitor costs over time and by item, allowing for cost comparison and analysis.

• Overall assessment of the financial situation of the business, including its ability to operate and generate profits.
• Provide management reports and the ability to design reports to suit business needs.
• Automatically synthesize data and create tax reports and financial reports, helping businesses submit reports promptly and accurately.

6. The difference between selling expenses and business management expenses

In corporate financial management, it is important to clearly distinguish between selling expenses and administrative expenses because each type of expense has a different impact on financial statements as well as management strategies. Below is a detailed comparison table between selling expenses and administrative expenses:

7. Frequently asked questions about selling expenses

When managing sales costs, businesses often have many concerns and questions. Below are some frequently asked questions about sales costs and detailed answers to help businesses better understand this issue:

7.1 What are the regulations on sales costs that businesses need to know?

According to Circular 200/2014/TT-BTC, selling expenses are classified into level 2 accounts of account 641 such as employee costs, material costs, tool costs and warranty costs.

7.2 Are administrative costs sales costs?

Administrative expenses are not selling expenses. Administrative expenses are related to the general operations of the business, while selling expenses are directly related to generating revenue.

7.3 Are business license fees considered sales expenses?

Business license fee is a business management fee, not a sales cost.

Understanding the difference and allocation between selling expenses and business management expenses is very important to optimize finances and improve management efficiency. To support businesses in managing costs as well as optimizing financial processes, 1C Vietnam provides a comprehensive 1C:ERP solution with detailed financial analysis and reporting capabilities. Contact us for more information and advice on the most suitable solution for your business.