Table of contents

Summary

The landed costing screen is used to enter all the costs that are related to items that are arriving from overseas that you are allowed to add to the value of the item.

There are two stages used because actual costs are often not known until after the products have been receipted into store. Refer to the flow diagram for more details.

Estimated stage = costs are estimated and the product can be reciepted and the average cost adjusted using the estimated costs
Actual stage = actual costs are compared with the costs used in the estimate and the average costs are then adjusted to suit.

Note you can use Manage Shipments incoming to track the containers arriving and count by container.

Note to use Landed costing configurations are required in Maintain GL Control for "Landed Cost Clearing Account" and "Landed Cost Expense Account" and Lookups "ChargeType"s

On the Purchase Order

Set the flag

The landed cost Estimate

Select purchase order that will require landed cost adjustment
Provide a name

Entering the Charges

Enter Type of charge
1. Charges are setup at Administration > configuration > Lookups > "ChargeType"
enter Method of apportioning the charge
1. By weight will look at the weight of each item and allocate by weight and is useful for shipping or air freight that is charged by weight
2. By Dollar value uses the dollar value on the purchase order
3. By volume uses the article volume
4. Manual enables you to manually allocate the charges across all related lines
Description - add a note to so you can remember what this charge was intended to cover

View the Estimated charges by Purchase Order Line

Action Button: Calculate and show Apportions

1. Review calculations
  1. Manual values need to be entered in the grid - the remainder will show until you have allocated all the expected cost
2. Each line will show the purchase order value, the landed costs being added and the final cost ea. This will then be used to update the average cost

Set the Estimate Ready to Use

When you have completed the estimate then Action Button: Set Estimate Ready to use

Receiving Stock

Stock can only be received if the Landed Cost Estimate has been set to "Ready to Use"

Receive stock as normal

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

Landed Cost Estimate recalculates based on counts before stock journals created

When the stock is counted the landed cost allocation is updated and recalculated before the Stock Journals are created

If less stock than was expected is counted during receipt - then the average cost of all items will increase
If more stock than than was expected is counted during receipt - then the average cost of all items will decrease

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 ) 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.

Later updating the estimate to Actuals

Once actual costs for shipping, customs, inspections etc have arrived it is time to enter the actuals.

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 a cost estimate line to Link to actual payments made
1. Choose the supplier that you paid (or you have an invoice for)
2. Choose from a list of invoices / payments from that supplier
  1. Note that the list of invoices is filtered by (1) those against a GL account flagged as a Landed Cost Account that have not yet been associated with a landed cost
3. Determine the amount to use for this landed cost calculation (you can change this later)
Add additional payments there were more costs than contained in the estimate
Action Button: Calculate Actual Average costs
1. Review calculations and adjust manual allocations in the grid
Use status when ready to apply
1. Application will then compare the estimated landed costs with the actual landed costs
  1. Where changes are to be made
    1. The average cost of the article will be adjusted to the new average cost
    2. Journals will be written including clearing out any balance in the clearing account
The status will then move to Actual used.

Landed costing diagram of the flow.

The typical scenario is as follows:

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
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
The product is then shipped
The product arrives in your store and is placed into stock
Some of this product may be used or sold
The final charges are presented to you

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

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

Accounting Journals

Journals for receipt of Stock item with locked estimate	Debit	Credit	Estimate of $20 costs
Stock on Hand - assets	120		Increase in stock value
Trade Creditors Liabilities		100	Amount paid to stock supplier
Landed cost clearing account - liabilities		20	Total allocated other costs for these items based on the estimate
Totals	120	120

Stock Supplier Invoice	Dr	Cr	Payment to supplier for stock
Trade Creditors - Liabilities		100
Goods Received not Invoiced	100
Total	100	100

CR Invoice Journal for a cost paid (customs) - no changes required	Dr	Cr	Payment of $25 costs
Trade Creditors - Liabilities		25
General Cheque Account - Assets	25
Totals	25	25

Adjustment journal required once actuals are associated	Dr	Cr	Adjustment of stock from $20 estimate to $25 Actual
Landed Cost Expenses To Stock - Expense Account		25	Expense account tracking landed costs in separate account
Landed cost clearing account - liabilities	20		Clear the clearing account of the estimate value
Stock on Hand - Assets - Credit	5		Update the stock on hand with the increase (Decrease) in value required
Totals	25	25	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 receipt	Dr	Cr	When $25 actuals are known prior to receipt of stock
Stock on Hand - assets	125		Increase in stock value
Trade Creditors Liabilities		100	Amount to be paid to stock supplier
Landed cost expenses to stock - expense account		25	Expense account tracking landed costs in separate account
Totals	125	125	Result = Stock increases $25 more than paid to stock supplier Landed cost expense account = Actual = $25

GL Control Accounts for Landed Costing

So two new control accounts have been added to Maintain GL Control

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