Profit and loss transfer: Detailed instructions from A to Z

Explain profit and loss carryforward

Profit and loss transfer is an annual accounting activity that takes place at the end of the accounting period. This is the process by which an enterprise transfers net profit (profit) or loss data of one accounting period to the next accounting period. This data is recorded in the 911 account, helping businesses track business performance over periods.

Profit and loss transfer acts as a bridge between accounting periods, helping businesses:

• Evaluate business efficiency: Profit and loss conversion is an effective tool to help businesses accurately evaluate operating efficiency, thereby making the right business decisions.
• Compliance with legal regulations: According to accounting laws, businesses are required to carry forward profits and losses. This not only ensures the accuracy of financial reports but also helps businesses avoid possible legal and financial risks.
• Basis for preparing financial statements: Profit and loss results are important inputs for calculation and reflection in financial reports such as Business Results Report, Balance Sheet and Cash Flow Report. currency transfer.
• Serving management: Information on profit and loss after transfer provides a comprehensive view of the financial situation of the enterprise, helping managers make effective management decisions.

How to account for profit and loss at the beginning and end of the year 

Accounting for profit and loss transfer at the beginning of the year

Account used to transfer profit and loss: Account 421 - Undistributed after-tax profits: 

• Account 4211: Undistributed after-tax profit of the previous year
• Account 4212: Undistributed profits this year

When transferring profit or loss, the accountant will record the previous year's profit or loss balance in account 4212. This balance will represent the business results of the entire previous year and will be used as a starting point for Calculate next year's profit

• In case Account 4212 has a Debit balance, it means the Enterprise lost money last year:  

Debit Account 4212 (This year's undistributed profits)

Credit Account 4211 (Undistributed after-tax profits of the previous year)

• In case Account 4212 has a credit balance, it means that the Enterprise's profit last year:  

Credit: Account 4212 (Undistributed profits this year)

Debit Account 4211 (Undistributed after-tax profits of the previous year)

Accounting for year-end profit and loss transfer

Before transferring profit and loss, periodic accounting is necessary to accurately determine the undistributed after-tax profit of the enterprise. 

Below are some commonly used period-end closing entries:

• Carryover of net sales and service revenue

Debit Account 511 – Revenue from sales and service provision

Credit: Account 911 – Determination of business performance results

• Carrying forward cost of goods sold:

Debit Account 911 – Determination of business results

Credit Account 632 – Cost of goods sold

• Carryover of financial revenue and other income:

Debit Account 515 – Revenue from financial activities

Debit Account 711 – Other income

Credit: Account 911 – Determination of business results

• Carryover of financial and other costs:

Debit Account 911 – Determination of business results

Credit Account 635 – Financial expenses

Credit: Account 811 – Other expenses

• Transfer of selling expenses:

Debit Account 911 – Determination of business results

Credit Account 641 – Selling expenses

• Transfer of business management costs:

Debit Account 911 – Determination of business results

Credit Account 642 – Selling expenses

• Carry forward of current corporate income tax expenses

Debit Account 911 – Determination of business results

Credit Account 8211 – Current corporate income tax expenses

• Transferring business results during the period into undistributed after-tax profits:

+ When transferring profits, record:

Debit Account 911 – Determination of business results

Credit: Account 421 – Undistributed after-tax profits

+ Carrying forward losses, record:

Debit Account 421 – Undistributed after-tax profits

Credit: Account 911 – Determination of business results

Some notes when carrying out profit and loss transfer

• Correctly apply accounting regulations: Carry out transfers in accordance with the provisions of accounting law, guiding circulars and current accounting standards. At the same time, always update changes in accounting regulations to ensure accurate accounting.
• Check accuracy: After transferring, it is necessary to compare to ensure that the Debit balance is equal to the Credit balance of the 911 account. Furthermore, it is necessary to ensure that all calculations of revenue, expenses, and taxes was done correctly and without errors.  
• Clearly classify income and expenses: Classify income and expenses into the correct account types and make sure nothing is double-recorded. 
• Handling of adjustments: Adjustments arising after the end of the year must be considered and adjusted before preparing financial statements.
• Full storage of documents: Full storage of accounting documents related to the transfer process to serve for future inspection and comparison. 
• Using accounting software: Choose appropriate software: Use specialized accounting software to support the conversion process, minimize errors and increase work efficiency.

Apply Viindoo Accounting software to transfer profit and loss more easily

Viindoo Accounting is a powerful online accounting software solution that supports businesses in effective financial management. One of Viindoo's outstanding features is the ability to automate the profit and loss conversion process, helping to save time and minimize the risk of errors compared to manual methods.

Why should you use Viindoo to transfer profit and loss?

• Display full information about accounting operations: Viindoo Accounting fully displays important financial information such as ledgers, debts, invoices, bank transactions, helping businesses have an overview of their situation. financial form.
• Automation: Viindoo Accounting sets up automatic accounting rules, eliminating the risk of errors caused by manual data entry, and provides search tools to help users easily retrieve accounting information.
• Accuracy: Viindoo Accounting is built based on Vietnamese Accounting standards
• Multi-dimensional reporting, instant updates: Viindoo Accounting provides an instant, multi-dimensional reporting system for each user level, helping business leaders capture financial fluctuation trends over months and periods. , year,...
• Full integration with other Viindoo Applications: Viindoo Accounting deeply integrates with other applications in the Viindoo ecosystem: Viindoo Sales, Viindoo Inventory, Viindoo Expenses,... When applications are connected, information will be automatically synchronized, helping to eliminate manual data entry tasks, reduce errors and save significant time.

When profit and loss transfer accuracy not only ensures the transparency of financial reports but is also an important basis for making investment and development decisions for businesses. Viindoo Accounting, with intelligent automation features and providing detailed analytical reports, helps businesses have an overview of their financial situation, thereby devising more effective business strategies. If your business needs more information about Viindoo Accounting, do not hesitate to contact us via hotline 0225 730 9838 for detailed advice.