Phantom cash on the balance sheet - a time bomb at tax finalization

The balance sheet shows several billion dong of cash on hand, yet the company safe is almost empty. This is phantom cash, a common problem in small and medium-sized companies, especially family-run businesses. Nobody asks about it for years - until a tax audit or an investor's due diligence. At that point, a figure on account 111 that seemed harmless can lead to back taxes, late payment interest and penalties across several years.

Where does phantom cash come from?

A book cash balance larger than the cash actually held is usually the result of many transactions recorded contrary to their substance, accumulating over time. Common causes in practice:

• The owner withdraws cash for personal use without any document and without recording a receivable.
• Real expenses are paid in cash without an invoice, so the accountant never records them and the cash stays on the books.
• Revenue is recorded as collected in cash when the customer has not paid yet, or paid into a manager's personal account.
• Capital contributions are recorded as paid in cash when members have not contributed, or have contributed only part.
• Long-running bookkeeping errors because cash is never counted and reconciled regularly.

Why it is a time bomb

Phantom cash is not a single violation; it signals that the accounting records do not truthfully reflect the company's finances. The Law on Accounting No. 88/2015/QH13 requires a physical count of assets, including cash, at least at the end of each annual accounting period (Article 40) and prohibits forging or falsifying accounting documents (Article 13). On the tax side, the typical consequences are:

A point that is easily missed: under item c3 of Article 9.1(c) of Decree 320/2025/ND-CP, if a company has recorded an expense for a purchase of VND 5 million or more but then pays it in cash, it must reduce the expense in the period in which the cash payment is made, even if that period is already under an inspection or audit decision. Phantom cash is often "explained" with cash payment vouchers, and those very vouchers create new risk.

In addition, when a company holds a large cash balance while also borrowing from a bank and paying interest, tax inspectors commonly question why the loan was needed and where that cash really is.

A safe way to defuse it

1. Count the cash physically with the cashier, the accountant and an authorized manager present; prepare count minutes and determine the difference.
2. Trace the difference year by year: reconcile the cash book with bank statements, customer balances and capital contribution records to find the original transactions.
3. Re-record by substance: cash withdrawn by the owner becomes a receivable from that individual, backed by an agreement and repayment plan; uncollected revenue goes back to trade receivables; unpaid capital is shown at the amount actually contributed and handled under enterprise law; expenses without valid documents are not treated as deductible.
4. Assess the tax impact for each year and file supplementary returns where needed. Article 12.5 of Law 108/2025/QH15 allows supplementary filing within 5 years, provided it happens before the tax authority announces an inspection or audit decision.
5. Put controls in place: regular cash counts, a cash-on-hand limit, bank transfers for every payment of VND 5 million or more, and a clear separation of personal and company finances. It is also a good moment to review your chart of accounts under the new enterprise accounting regime in Circular 99/2025/TT-BTC, which applies to financial years starting on or after 1 January 2026.

Illustrative example: Company A shows a cash balance of VND 3.2 billion, but the physical count finds only VND 150 million. Tracing shows that about VND 2 billion was withdrawn over three years by the director, who is also the owner, and the rest relates to expenses without invoices. The company records a receivable from the owner with a repayment agreement, books the uninvoiced expenses as non-deductible, and reviews the affected tax finalizations before closing the year.

How Kaizen can help

Cleaning up phantom cash requires both accounting skill and a clear view of how the tax authority will read every adjusting entry. The Kaizen team, with more than 17 years of Big4 experience, helps companies trace the differences, design the accounting treatment and assess the tax impact before any adjustment is made. Start with a free tax health check to see how safe your cash balance really is.