How to reflect security for applications, contracts and warranty obligations in accounting

Does your company participate in government procurement? We will tell accountants how to correctly reflect the security of applications, contracts and warranty obligations in accounting.

We have described in detail what security of application and security of contract execution are, as well as how these concepts differ, here.

For an accountant, all of the above concepts are similar, because any security payment is not an expense, but only a temporary freezing of the company’s money for a certain period. And in most cases, these funds will be returned back.

Securing an application at an electronic auction

Companies participating in electronic auctions, as a rule, have a special account, which is opened for them by an authorized bank (the list of banks can be found in the order of the Government of the Russian Federation dated July 13, 2018 No. 1451-r, which is regularly updated).

The application collateral is blocked in a special account at the end of the acceptance of applications on the electronic platform (ETP). The ETP operator sends a request to the bank, and if there are enough funds in the special account, the bank blocks the required amount. Unfreezing will occur when the ETP transmits the relevant information to the bank. All participants who submitted bids but lost the auction will have their money unfrozen within one business day. To the winner of the auction - after the conclusion of the contract.

In addition, if the organization becomes the winner of the auction, ETP will charge a fee for its services. The fee is also charged from a special account.

The TenderPlan service will help you fully automate and customize your system for working with tenders.

In accounting, the amounts of funds transferred to a special account are taken into account in account 55. It is rational to open sub-accounts for it: “Free funds”, “Blocked funds”. Funds blocked by the operator must also be accounted for in off-balance sheet account 009.

The postings will be as follows:

• D 55 “Free funds” K 51 - money was transferred to a special account;
• D 55 “Blocked funds” K 55 “Free funds” - the amount of the security payment is blocked;
• D 009 - the amount of the application security is reflected;
• D 55 “Free funds” K 55 “Blocked funds” - the amount is unblocked on the personal account;
• K 009 - the amount of the application security is written off from accounting.

When withdrawing funds back to the organization’s current account, we make the following entry:

• D 51 K 55 “Free funds” - money was transferred to the current account.

If ETP has withheld a fee for services, we reflect it as follows:

• D 76 K 55 “Blocked funds” - ETP remuneration withheld.
• D 91-2 K 76 - expenses for ETP services are reflected.

Expenses must be documented. The following must be received from the ETP: an act of provision of services and an invoice or UPD. If documents are transmitted electronically, they must be signed with an electronic digital signature.

There are cases when the application security will not be returned to the organization. In particular, if the organization:

• evaded (refused) from concluding a contract;
• did not provide (provided in violation of the conditions) security for the performance of the contract before its conclusion;
• rejected 3 applications in 2 parts on one ETP during one quarter of the calendar year.

Then the organization’s accountant, based on the decision of the Federal Antimonopoly Service, can write off these funds for other expenses:

• D 91-2 K 55 “Blocked funds” - the security payment is withheld by the ETP operator and transferred to the customer.

Read about how to avoid being included in the register of unscrupulous suppliers here.

Interest may accrue on funds in a special account. They are recorded in accounting like any interest on deposits - as part of other income.

On the interest accrual date, the accountant will make the following entries:

• D 76 K 91-1 - interest accrued on a special account
• D 55 “Free funds” K 76 - interest went to a special account.

Costs of providing electronic trading

In a broad sense, ensuring participation in bidding on electronic platforms is not limited only to the security payment as such. The company bears the necessary costs, without which participation in the auction is impossible. They must be reflected correctly in accounting, also guided by the norms of the Tax Code of the Russian Federation.

Let's look at the most common correspondence accounts. Services of an electronic platform as costs associated with the preparation of tenders can be deducted for VAT for tax purposes if there is an invoice and the provisions of Art. 172 of the Tax Code of the Russian Federation. Based on bank documents, acts and invoices from the electronic operator, accounting entries are made:

• Dt 76 (60) Kt 55 – the electronic platform withdrew the amount for services.
• Dt 26 (20, 44, etc.) Kt 76 (60) – amount of electronic services. sites (excluding VAT).
• Dt 19 Kt 76 (60) – VAT is recorded on the amount of electronic services. sites.

For income tax purposes, organizers classify such expenses as other expenses related to production and sales, by type (Article 264 of the Tax Code of the Russian Federation). An entry is made in the BU : Dt 91-2 Kt 60 (76) .

A bank guarantee, as one of the types of tender security, is of a paid nature. The commission is reflected by postings:

• Dt 91-2 Kt 76 (60) – fixed bank commission.
• Dt 76 (60) Kt 51 – bank commission paid from the current account.

On a note! Making a security payment is not taken into account for tax purposes, in income and expenses in calculating the base for income tax, VAT until the winner is determined. Then he can receive a VAT deduction if the amount is an advance payment (payment) for participation in the competition and the subject of the auction was the conclusion of an agreement. A similar principle applies when calculating income tax.

The acquisition of digital signature is reflected according to Dt 97, from the credit of accounts payable to suppliers. In this case, the media, disk, if it is highlighted in the documentation, is immediately written off as expenses - Dt 20,26, 44, etc. Kt 60 (76). The electronic key, certificate, and the cost of warranty service are written off evenly over the entire period that the key will be used (usually a year) - Dt 20,26,44, etc. Kt 97.

How to take into account for tax purposes under the simplified tax system the costs of remuneration for the operator of the auction and electronic trading platform and payment for services for documentary support of participation in procurement?

Main

1. Accounting for the opportunity to participate in electronic trading and deposits is carried out on account 76 or on account 55, using subaccounts.
2. The use of account 55 is exceptional when it comes to government procurement in accordance with Federal Law No. 44.
3. To strengthen control over the movement of funds, use off-balance sheet account 009.
4. Other costs that ensure participation in trading are taken into account by standard accounting entries, in accordance with the recommendations for the use of the Chart of Accounts, taking into account the provisions of the Tax Code of the Russian Federation.
5. Accounting entries depend on the stage at which the application is located, the results of the auction, and the form of securing participation in it.

Securing an application under a bank guarantee

If an organization does not want to use its own money to secure the application, it can use a bank guarantee.

We described in detail the procedure and conditions for obtaining a bank guarantee here.

The service of providing a guarantee by the bank is paid. We record the bank commission in accounting as follows:

• D 91-2 K 76 - reflects the bank commission for providing a guarantee;
• D 76 K 51 - commission paid from the company’s current account.

If an organization, for example, refuses to conclude a contract, then the bank will pay the amount of security for the application to the customer. And the organization will have a debt to the bank in the amount of the application security.

The postings will be as follows:

• D 91-2 K 76 (Customer) - the debt to secure the application is reflected;
• D 76 (Customer) K 76 (Bank) - internal posting: the debt to the customer is repaid by the bank;
• D 76 (Bank) K 51 - the debt to the bank in the amount of the security deposit has been repaid.

If the debt to the bank is not repaid on time, the bank will charge and write off interest for the use of funds. Postings in the organization's accounting:

• D 91-2 K 76 (Bank) - interest accrued for overdue payments;
• D 76 (Bank) K 51 - interest paid to the bank.

We approve the rules for accounting for bank guarantees in accounting policies

The accounting policy should establish the rules of mutual settlement with the guarantor in relation to issued collateral. The methodology for accounting for expenses and borrowings on loans is also approved in accordance with PBU 15/2008. There are several options: costs are taken into account as part of other expenses or recognized evenly as additional costs for loans and borrowings (clauses 7, 8 of PBU 15/2008). Accounting is possible only during the period of validity of the guarantee agreement with the bank.

The cost allocation methodology does not affect the accounting records. Prepare the following wiring:

• Dt 91.2 Kt 76 - the commission to the guarantor is taken into account (full or partial);
• Dt 76 Kt 51 - commissions are listed.

If you took out a bank guarantee to secure a government contract, consider commission costs as part of ordinary or other expenses. Postings for recording security obligations in public procurement are no different from accounting for any other guarantee option.

About the author of this article

Alexandra ZadorozhnevaAccountant, project expert Practicing accountant. I have been working since the beginning of my studies at the university. I have experience in both commerce and budgeting. From 2006 to 2012 she worked as an accountant-cashier and personnel officer. From 2012 to the present - chief accountant in a budgetary institution. In addition to direct accounting, I am involved in purchasing and economic planning activities. I have been writing feature articles for specialized publications for 4 years.

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• 2022.02.28 Procurement controlInstructions for drawing up a report on purchases from SMP and SONO according to 44-FZ
• 2022.02.25 Procurement control How the Treasury authorizes transactions with funds of treasury support participants from 2022
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Enforcing the contract

The contract security amount is transferred to the customer's account. The period for returning the security payment must be specified in the contract, but cannot be more than 30 days from the date of fulfillment of obligations (no more than 15 days if the supplier (performer) is a SME).

In accounting, the amount of collateral is reflected in account 76 (as part of accounts receivable) and in off-balance sheet account 009.

The postings will be as follows:

• D 76 K 51 - the security payment is transferred to the customer’s bank account;
• D 009 - the amount of security issued is recorded in the accounting records;
• D 51 K 76 - the customer returned the security deposit;
• By 009 - the amount of the security deposit is written off from accounting.

The organization can also pay to ensure the execution of the contract not only with its own funds, but also provide a bank guarantee. Payment transactions for bank services will be the same as we described in the previous section.

The organization may incur expenses if the security payment is offset against a fine or penalty for improper performance of the contract.

The amounts of sanctions awarded by a court or recognized by an organization are reflected in accounting as follows:

D 91-2 K 76-2 - reflects a penalty (fine) for violation of obligations under the contract.

You can find out how to recover damages from the customer upon termination of the contract here.

Registering a bank guarantee in budget accounting

Accounting procedures for public sector employees differ from commercial transactions. Firstly, the accounting of bank guarantees in the accounting of a budgetary institution depends on the form of provision:

• in the form of funds to a current account - we use account 304 01 under KFO 3, since these are funds at temporary disposal;
• in the form of a document from the guarantor bank - we use off-balance sheet account 10 “Securing the fulfillment of obligations.”

Budget customers are required to submit requirements for securing applications and contracts when conducting electronic competitions and auctions. The executor sends security in the form of funds for temporary disposal or in the form of documentary evidence from the guarantor bank. Accounting for warranty obligations in the budget is carried out in accordance with instruction 157n dated December 1, 2010 (clause 351 of the instructions). To record cash guarantee funds, off-balance sheet accounts are not used (letter of the Ministry of Finance No. 02-07-07/31342 dated July 27, 2014).

Accounting records are generated on the day the guarantee is provided. The amount is always equal to the obligations insured by the guarantor bank. As soon as the insurance expires, the accountant writes off the security from the 10th off-balance sheet account. Here are the main entries for accounting for a bank guarantee in a budget institution:

Ensuring warranty obligations

The customer may require a guarantee from the supplier (performer) (except for the purchase of machinery and equipment, when the guarantee payment is mandatory).

A warranty obligation (LO) is a kind of insurance for the customer against dishonest behavior of the supplier (performer) during the warranty period. GO is provided after the contract is concluded, but before the acceptance document is signed. In a normal situation, the customer will return the GO after the end of the warranty period.

The exact deadline for the return of civil defense is not regulated by law. True, the Ministry of Finance believes that the period for returning civil defense security is similar to the period for returning contract security. That is, no more than 30 days from the date of expiration of the warranty period (no more than 15 days for SMEs).

The guarantee can also be provided in cash or a bank guarantee. The procedure for recording in accounting is similar to the procedure for recording security for the performance of a contract.

Two types of entries to reflect the commission on a bank guarantee when purchasing property

The supplier of expensive equipment or the seller of the building may make it a mandatory condition when concluding an agreement with the buyer that there is a bank guarantee. In the buyer's accounting, the guarantor's remuneration will be recognized as an expense. However, the accounting for this expense will be different depending on the moment at which it was made: before the purchased property is registered or after it. In each case, a different set of accounting entries is applied to reflect the commission for issuing a bank guarantee.

1. The guarantor's remuneration was paid before the acquired property was reflected in the accounting accounts.

What entries are used to record a bank guarantee from the principal in such a situation? The amount of remuneration to the guarantor is included in the cost of the acquired asset, since this expense is directly related to its acquisition (clause 6 of PBU 5/01 “Accounting for inventories”, clause 8 of PBU 6/01 “Accounting for fixed assets”).

For such a case, the following set of transactions is used:

The specified accounting scheme reflects the transactions for payment of the bank guarantee and for its reflection in accounts payable until the transfer of money by the principal.

PJSC "Modern Technologies" plans to purchase an office building worth RUB 150,364,199. from Real Estate+ LLC. As security for obligations, the buyer provided the seller with a bank guarantee.

Warranty conditions:

• remuneration to the bank (4% of the transaction amount) - 6,014,568 rubles. (RUB 150,364,199 × 4%);
• Warranty period - 1 month;
• The procedure for paying the commission is the entire amount at a time.

PJSC Modern Technologies paid the commission and purchased the property from the seller. The following entries were made in accounting:

We talk about the nuances of tax accounting for a bank guarantee in this article.

1. The guarantee is issued after the value of the asset has been generated.

Here, accounting standards do not allow the amount of the guarantor's remuneration to be taken into account in the initial cost of the asset. Once the accounting value of the property has been formed, it is not allowed to change it.

In such a situation, other expenses are recognized and postings are made:

The situation is dangerous if the remuneration to the guarantor, paid before the initial cost of the asset is formed, is taken into account as part of other expenses. This will cause a distortion in the amount of property tax, which is calculated according to accounting data. Considering that from 2022 the value of movable property is excluded from the tax base, the unlawful write-off of remuneration to the guarantor as part of other expenses will distort the property tax base if the buyer purchased real estate.

Terms for returning contract security under 44-FZ

The law does not provide for a specific period during which the return of contract security under 44-FZ must be executed. It is established by the government customer and is recorded both in the text of the government contract and in the documentation sent to the competition or auction (Clause 27, Article 34 of the Law on Public Procurement).

The customer may specify in the contract the need to return funds no later than 30 days after the obligations are fully or partially fulfilled and a written application is received from the contractor.

Typically, a refund is made after the contractor/performer has fully fulfilled its obligations under the government contract.

The fact that the contract has been completed is said after it is signed:

• certificate of completion;
• certificate of services rendered;
• packing list.

From the moment they are signed, the countdown begins for the customer to transfer the monetary guarantee. The supplier (contractor) is not relieved of its warranty obligations, but the requirement for security does not apply to them. The customer has no right to withhold the security amount during the guarantee period.

In addition, the legislation allows the supplier to receive a proportionate part of the money contributed depending on the volume of work performed under the contract (Clause 7, Article 96 of Law 44-FZ). It is possible to return funds on the basis of a written request before fulfillment of obligations in full, before signing the final documents.

How to deposit

This is not difficult to do; let’s look at the whole process using the example of how to deposit an application security on Sberbank-AST.

Step 1. Go to the platform website.

Step 2. In the “Participants” section, enter the “Details” subsection.

Step 3. Fill out the payment order. Details are always provided on the trading platform where the auction takes place.

Step 4. Fill out a payment order in the mobile bank using the specified details and pay or apply with a payment order to any bank.

If you are wondering how to submit an application security for an RTS tender, NEP or other platforms, then the procedure will be similar. Only the details change; each site has its own.

IMPORTANT!

When conducting other types of bidding (competition, closed procedures, request for quotations and proposals), the supplier transfers money to the customer (or an authorized organization), providing a payment order or bank guarantee as part of the application.

Obtaining guarantees: registration with the beneficiary

To reflect the received bank guarantee in the beneficiary's accounting, a separate off-balance sheet account 008 is provided. The cost of the guarantee cannot be accepted into balance sheet accounts.

Upon receipt, reflect the amount on account 008 “Securities for obligations and payments received” by debit operation. It is necessary to provide analytical accounting for each collateral received. The write-off of the bank guarantee upon full fulfillment of obligations should be reflected in the credit turnover on account 008.

Accounting for a bank guarantee received: