Cost accounting in commercial businesses from 2025 onwards is no longer simply about recording the cost of goods sold, but has become a "vital tool" that determines profit margins and tax compliance. Even a small discrepancy in the classification of purchasing costs, selling expenses, or e-commerce platform fees can lead to inflated cost of goods sold, reduced profits, and the risk of expense disallowance during tax settlement. Based on the latest regulations of the Corporate Income Tax Law 2025, Circular 99/2025/TT-BTC, and practical experience in implementing cost accounting for commercial, retail, and e-commerce businesses, this article will help you understand the true nature of cost accounting, properly record each transaction, and build an effective cost control strategy.
What is cost accounting?
Cost accounting is an important branch of management accounting and financial accounting, focusing on the collection, classification, recording, and allocation of expenses incurred in the course of business operations. In commercial enterprises, cost accounting not only tracks the cost of goods sold but also closely controls operating expenses from the purchasing stage to the point where goods reach the consumer.
How important is cost accounting?
In a business, cost accounting plays the following important roles:
- Organize and control the entire cost structure of the business: Cost accounting is responsible for identifying, categorizing, and tracking each type of expense incurred, such as direct costs, operating costs, selling expenses, or departmental costs. This allows businesses to see the overall cost picture, effectively control cash flow, and accurately determine which areas are generating real profit.
- Determining the cost of goods sold and establishing a reasonable selling price: By measuring the input costs of each resource used, cost accounting helps businesses accurately and completely calculate the cost of goods sold. This data is an important basis for managers to set appropriate selling prices, ensuring both competitiveness in the market and maintaining sustainable profit margins.
- Supporting management and mitigating operational risks: Detailed cost reports are provided promptly to each level of management, enabling businesses to proactively identify operational inefficiencies. This allows managers to adjust processes, optimize costs, reduce losses, and improve resource utilization efficiency.
- Foundation for long-term strategic planning: Cost accounting data not only reflects the current situation but also offers valuable insights into long-term trends. Based on this foundation, management can develop sound cost allocation strategies, select appropriate investment directions, and define sustainable development goals for the business.
Cost accounting in commercial enterprises
Unlike manufacturing businesses (which must calculate the cost of direct materials, direct labor, and manufacturing overhead to determine the cost of goods sold), cost accounting in commercial businesses focuses on the cost of goods sold and circulation costs.
- Manufacturing businesses: Focus on accounts 621, 622, and 627.
- Commercial enterprises: Focus on account 156 (goods), account 641 (selling expenses), and account 642 (administrative expenses).
Value chain and cost stream
The flow of cost accounting is closely linked to the chain of activities:
- Purchasing phase: Incurs purchase price, input transportation costs, and cargo insurance fees.
- Storage phase: Costs include warehouse rental, storage, and depreciation of warehouse equipment.
- Sales phase: Advertising costs, commissions, packaging, and outbound shipping (Logistics).
Only when costs are properly classified according to their nature and purpose can businesses accurately account for them, effectively control them, and make appropriate management decisions. This is precisely why cost classification in commercial enterprises plays a fundamental role in the entire cost accounting system.
Classification of costs in commercial businesses
To implement effective cost accounting, businesses need to classify costs in a systematic way.
Classification by function
- Cost of Goods Sold (COGS): Includes the net purchase price shown on the invoice plus non-refundable taxes (import tax, excise tax) and direct procurement costs.
- Selling expenses (Account 641): This is the most volatile expense group in 2025, including livestreaming costs, e-commerce platform fees, sales consultant salaries, and shipping costs for customers.
- Business management expenses (Account 642): General expenses such as office staff salaries, office rent, and office supplies.
Classification based on the nature of variability
In business management, cost accounting is divided into:
- Fixed Costs: Items that do not change with sales in the short term (e.g., fixed rent).
- Variable Costs: These increase or decrease proportionally with the volume of goods sold (e.g., packaging fees, bank transaction fees).
- Mixed costs: These include both fixed and variable components (for example, sales staff salaries, which consist of a base salary plus commission).
Cost classification is only truly valuable when it is linked to specific accounting procedures for each accounting account. After clearly identifying the nature of each cost group in a commercial enterprise, the next and crucial step is to accurately, completely, and consistently account for each transaction, ensuring that accounting data truthfully reflects costs and profits and complies with tax regulations. The following section will provide detailed guidance on how to account for costs in practice, closely following common situations arising in commercial enterprises today.
Detailed Cost Accounting Guide
Below are the practical cost accounting tasks that accountants need to master:
Cost accounting for purchases (Account 1562)
When expenses related to the purchase of goods (transportation, loading and unloading, insurance, etc.) are incurred, the accountant records them as follows:
- Debit Account 1562: Costs of purchasing goods.
- Debit Account 1331: Input VAT (if any).
- Accounts 111, 112, and 331 represent the total payment amount.
Note: At the end of the period, the accountant must allocate the purchase costs to goods sold during the period and remaining inventory using the following formula:
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Allocation cost = [(Beginning inventory cost + Costs incurred during the period) / (Beginning inventory value + Value of goods purchased during the period)] x Value of goods sold |
When expenses related to the purchase of goods (transportation, loading and unloading, insurance, etc.) are incurred, the accountant records them as follows:
- Debit Account 1562: Costs of purchasing goods.
- Debit Account 1331: Input VAT (if any).
- Accounts 111, 112, and 331 represent the total payment amount.
Note: At the end of the period, the accountant must allocate the purchase costs to the goods sold during the period and the remaining inventory according to the formula.
Cost of goods sold accounting (Account 641)
In the digital age, cost accounting accounts for a significant portion of sales accounting:
- Marketing expenses: Account for Facebook and Google advertising fees based on electronic invoices.
- Labor costs: Salaries and insurance for sales staff and delivery drivers employed by the company.
- Outsourced service costs: Storage fees at third-party warehouses (3PL).
Business Management Cost Accounting (Account 642)
Focus on the following:
- Depreciation of fixed assets used by the management department.
- Provisions (such as provisions for inventory devaluation and provisions for bad debts) are an important part of cost accounting to ensure the prudence of financial reporting.
Mastering cost accounting procedures not only helps accountants accurately record expenses but also provides a solid foundation for businesses to develop effective cost control and optimization strategies, thereby increasing profits and optimizing resources in business operations.
Cost control and optimization strategy
To effectively control costs and optimize profits, businesses need to implement specific strategies, from break-even analysis and activity-based cost management models to tax cost optimization. These steps will help transform accounting data into strategic decision-making tools, reduce waste, and increase resource efficiency.
Break-even analysis
Use data from cost accounting to determine the minimum sales volume required to cover all fixed and variable costs. This helps businesses decide whether or not to implement deep discount programs.
Activity-based costing model
Instead of allocating overhead costs based on revenue, the ABC method allocates them based on “cost drivers.” For example, warehousing costs can be allocated based on the actual space occupied by each product code (SKU).
Optimizing corporate income tax costs.
From October 1st, 2025, actual expenses incurred related to business operations will only be considered deductible expenses when:
- All required electronic invoices and documents are available.
- For invoices exceeding 20 million VND (or the new threshold under the 2025 law), non-cash payment documentation is required.
- Not subject to spending limits (such as interest expense for businesses with related-party transactions).
While implementing cost analysis and optimization strategies offers significant benefits to businesses, the practical application of cost accounting still carries many potential errors. Identifying common mistakes and how to correct them will help businesses maximize cost control strategies while avoiding unnecessary waste and risks.
Common mistakes
During the cost accounting process, many accountants often make mistakes:
- Combining costs: Including all transportation costs in the cost of goods sold without separating input (Account 1562) and output (Account 641) transportation costs. This distorts the gross profit figure.
- Lack of advance payment documentation: Cash expenditures without invoices but not reimbursed according to regulations can lead to the risk of expenses being disallowed during tax settlement.
- Missing hidden costs: Particularly costs related to natural loss or damage during storage that are not recorded in a timely manner.
Conclude
Cost accounting is not just about recording and classifying expenses; it's also a strategic tool that helps commercial businesses control profits, optimize resources, and minimize financial risks. Mastering accounting principles, applying cost optimization strategies, and avoiding common mistakes will help businesses maintain sustainable business performance in a volatile market.
If your business is looking for an in-depth cost management solution, Contact us now Contact MAN – Master Accountant Network for support and advice on implementing accurate, efficient, and optimal cost accounting for your business.
Contact information MAN – Master Accountant Network
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Content production by: Mr. Le Hoang Tuyen – Founder & CEO MAN – Master Accountant Network, Vietnamese CPA Auditor with over 30 years of experience in Accounting, Auditing and Financial Consulting.
Frequently Asked Questions about Cost Accounting
Where should the cost of transporting purchased goods to the warehouse be accounted for?
Record the transaction in account 1562 (Cost of goods purchased) to constitute the original cost of inventory.
Are sales commissions paid to individuals who are not engaged in business considered reasonable expenses?
Yes, if there is a brokerage contract, payment documents, and the business deducts personal income tax (10%) before payment.
Why do trading companies need to allocate procurement costs?
To ensure the matching principle in accounting, only expenses corresponding to the quantity of goods sold should be included in the expenses for the period; the remainder must be included in the value of inventory.
MAN Editorial Board – Master Accountant Network
