Versions Compared

Old Version 18

changes.mady.by.user P Sawkins (Unlicensed)

Saved on

compared with

New Version 19

changes.mady.by.user P Sawkins (Unlicensed)

Saved on

Key

  • This line was added.
  • This line was removed.
  • Formatting was changed.

...

Note

to use Landed costing configurations are required

The typical scenario is as follows:

  1. A number of products are to be imported from an overseas country from a number of suppliers
    1. Therefore there are multiple purchase orders each with multiple lines on them
  2. Costs are then incurred
    1. A shipping company is engaged - and will cost money
    2. Transport is arranged in the foreign country, travelling to your country and then within your country to your dock
    3. Export and import fees and duty may apply
  3. The product is then shipped
  4. The product arrives in your store and is placed into stock
  5. Some of this product may be used or sold
  6. The final charges are presented to you by your suppliers (and not by item or PO)

Because of the timing of the final charges being presented we need to:

  1. Use estimated values in order to receipt the stock to store and arrive at an approximate cost
  2. Update the cost once the actuals have been received

Set the Purchase Order to use Landed Costing

...

  1. The system will use the calculated average cost for stock value journals - see Purchase Order for Perishable Goods from PO to Goods Receipt
  2. The Journals created are at the bottom of this page

...

Note

 Note: The $ of the stock placed into Assets will be greater than the amount to be paid to the stock supplier.  The balance is placed into a clearing account (see Maintain GL Control Accounts ) until later cleared out when the actual payments/ invoices are linked to the landed cost calculation

Once product is receipted the estimated calculations have been used and cannot be changed.

...

Note

 If you do not update the estimate with actuals you will have a balance in the GL Control Account "Landed Cost Clearing Account"

From the Purchase Order for Perishable Goods from PO to Goods Receipt - open the estimate

Select an invoice to link to and select the line/s on the invoice to use - allocate the amounts to use

...

Note

If the stock level at the time of applying the actuals is below the quantity of stock on the PO line

  1. The stock Average cost will be set to the Average cost for the PO Line Actuals
  2. The remainder will be journaled to the Maintain GL Control Accounts Account "Landed Cost Expense" account
    1. This is to avoid stock average costs being artificially inflated due to insufficient stock at time of entering actuals - see example below

To illustrate

  1. A product was out of stock
  2. Say 100 units of a product was purchased for $100 with $100 total landed costs
    1. The Estimated Landed Cost is $2.00 ea
    2. When the PO is received - the average cost is set to $2
    3. Stock value has increased by $200 = 100 items x $2
  3. Then 50 are sold and shipped to customers - leaving 50 in stock
  4. When the Actuals are linked to Invoices it is found that Landed costs were $150 in total ($1.50 each)
    1. The Actual Landed Cost is $2.50 ea
    2. Stock value increase should have been $250
  5. When the Landed Cost is finalised - the average cost is set to $2.50 (an increase of $0.50)
    1. Stock value increases by $25 = $0.50 x 50 items
    2. $25 is not allocated to stock value (if it was then the average cost would have to be increased to $3.00 each item)
      1. $25 is allocated to the "Landed Cost Expense Account"

...

Gliffy
nameLanded costing flow
 

The typical scenario is as follows:

  1. A number of products are to be imported from an overseas country from a number of suppliers
    1. Therefore there are multiple purchase orders each with multiple lines on them
  2. Costs are then incurred
    1. A shipping company is engaged - and will cost money
    2. Transport is arranged in the foreign country, travelling to your country and then within your country to your dock
    3. Export and import fees and duty may apply
  3. The product is then shipped
  4. The product arrives in your store and is placed into stock
  5. Some of this product may be used or sold
  6. The final charges are presented to you

Because of the timing of the final charges being presented we need to:

  1. Use estimated values in order to receipt the stock to store and arrive at an approximate cost
  2. Update the cost once the actuals have been received.

Accounting Journals

Journals for receipt of Stock item with locked estimateDebitCreditEstimate of $20 costs
Stock on Hand - assets120 Increase in stock value
Trade Creditors Liabilities 100Amount paid to stock supplier
Landed cost clearing account - liabilities 20Total allocated other costs for these items based on the estimate
Totals120120 
    
Stock Supplier InvoiceDrCrPayment to supplier for stock
Trade Creditors - Liabilities 100 
Goods Received not Invoiced100  
Total100100 
    
CR Invoice Journal for a cost paid (customs) = must be linked to landed cost clearing accountDrCrPayment of $25 costs
Trade Creditors - Liabilities 25 
Landed cost clearing account25  
Totals2525 
    
Once a journal line is linked to a landed cost account   
    
    
    
Adjustment journal required once actuals are associatedDrCrAdjustment of stock from $20 estimate to $25 Actual
Landed Cost Expenses To Stock - Expense Account 25Expense account tracking landed costs in separate account
Landed cost clearing account - liabilities20 Clear the clearing account of the estimate value
Stock on Hand - Assets - Credit5 Update the stock on hand with the increase (Decrease) in value required
Totals2525

Result = Stock increases $5 (now $25 more than paid to stock supplier)

and Landed Cost Clearing account = 0

Landed cost expense account = Actual = $25

    
Adjustment Journal if Actuals are used prior to stock receiptDrCrWhen $25 actuals are known prior to receipt of stock
Stock on Hand - assets125 Increase in stock value
Trade Creditors Liabilities 100Amount to be paid to stock supplier
Landed cost expenses to stock - expense account 25Expense account tracking landed costs in separate account
Totals125125

Result = Stock increases $25 more than paid to stock supplier

Landed cost expense account = Actual = $25

GL Control Accounts for Landed Costing

Control accounts in Maintain GL Control Accounts

  1. Landed Cost clearing account 
    1. Filled with values when stock is receipted using estimated costs
    2. Cleared once known costs are allocated
  2. Landed Cost Expense account
    1. Tracks all costs that have been added to stock as part of an actual landed cost update

...