Accounting for commercial vehicle insurance plays a crucial role in financial management for businesses. To optimize costs and comply with legal regulations, accurately recording insurance premiums is essential. This article provides a detailed guide on how to account for commercial vehicle insurance, helping you understand the process and avoid common mistakes.
Various types of commercial vehicle insurance
Types of Commercial Vehicle Insurance
Mandatory Civil Liability Insurance
This insurance is mandatory for all commercial vehicle owners. It compensates third parties for property damage and injuries in the event of an accident caused by your vehicle. Operating a vehicle without this insurance will result in administrative penalties.
Personal Accident Insurance for Persons on Board
This insurance protects individuals on board the vehicle, including the driver and passengers, in case of an accident. The premium and insured amount will be agreed upon in the contract between the vehicle owner and the insurance company.
Vehicle Physical Damage Insurance
Vehicle physical damage insurance compensates for damage caused by accidents, collisions, or theft of accessories. The insurance premium is typically based on the vehicle’s value.
Comprehensive Vehicle Insurance
Comprehensive vehicle insurance is voluntary insurance that protects the vehicle from collisions, paint scratches, dents, or fire. The insurance will cover the full cost of repair or restoration if these incidents occur due to the vehicle owner’s fault.
Civil Liability Insurance for Goods in Transit
This type of insurance protects transported goods from damage or loss. The insurance company will be responsible for compensation according to the contract between the vehicle owner and the shipper.
Guide to Accounting for Commercial Vehicle Insurance Premiums
Accounting methods for commercial vehicle insurance premiums
In case of significant insurance expenses:
- Debit Account 142 (Prepaid Expenses): Record the insurance expense.
- Debit Account 1331 (Deductible Input VAT): Record input VAT.
- Credit Account 331 (Payables to Suppliers): Record the amount payable to the insurance company.
In case of non-significant insurance expenses:
- Debit Account 154 (Work in Progress) or Account 642 (Business Administration Expenses): Record the insurance expense.
- Debit Account 1331 (Deductible Input VAT): Record input VAT.
- Credit Account 331 (Payables to Suppliers) or Account 1111 (Cash on Hand): Record the payment amount.
Accounting for Vehicle Purchase and Related Expenses
Other accounting entries for vehicle purchase
Accounting for vehicle purchase: Debit Account 211 – Credit Account 1331, 331/112.
Accounting for registration tax: Debit Account 211 – Credit Account 3339. Upon payment: Debit Account 3339 – Credit Account 1111.
Accounting for vehicle registration fee: Debit Account 211 – Credit Account 3339. Upon payment: Debit Account 3339 – Credit Account 111.
Accounting for other fees and charges: Debit Account 211, 1331 – Credit Account 111, 112.
Accounting for taxes (import): Debit Account 211 – Credit Account 3332, 3333. Upon payment: Debit Account 3332, 3333 – Credit Account 111/121.
Accounting for Vehicle Purchase Below and Above 1.6 Billion VND
Accounting for vehicle purchases under and over 1.6 billion VND
For vehicles priced above 1.6 billion VND (excluding VAT) used for transporting passengers with 9 seats or fewer (excluding transport, tourism, hotel vehicles, etc.), the input VAT corresponding to the portion exceeding 1.6 billion VND is not deductible, and the corresponding depreciation portion is also not included in eligible expenses when calculating corporate income tax. Vehicles used for passenger and goods transport, tourism, etc., are fully deductible for input VAT.
Conclusion
Accounting for commercial vehicle insurance and related transactions must be performed accurately to ensure legal compliance and effective financial management. Mastering the regulations and accounting methods will help transport businesses operate stably and develop sustainably.
