Allocating bank charges to inventory items’ costs?

I have purchased several inventory items from a supplier in another country. The bank charges associated with the transaction are fairly high, and I’d like to recover those costs through my pricing of the inventory items. What would be the best way to do this? The options I’ve thought of are:

  1. Treat it just like a freight-in charge. But there’s no purchase invoice from the bank… I’m not quite sure about the details on this one.
  2. Add line items for each of the bank charges to the purchase invoice, then add matching items with contra charges against the Bank charges account. This would be much the same as the method described by @Brucanna here, but using the Bank charges account instead of a new clearing account.
  3. Leave the bank charges completely separate from the purchase invoice and the inventory items, and just take them into account when setting my sale prices for the inventory items.

Option 2 sounds the best to me, but I’d welcome any criticisms of the above, or suggestions for alternative approaches.

Following your numbering system:

  1. Freight-in charges can be entered manually. You don’t need to have a purchase invoice. You can do so on a payment form or by proper editing of an imported statement. See the Guide: So this option is definitely workable.

  2. Assuming you are referring to adding both bank charges and contra charges to the purchase invoice, this is not appropriate, because both will be entered against the supplier’s subaccount of Accounts payable. And, by entering both charges and contra charges on the same purchase invoice, they will just cancel themselves out. Instead, the bank charges need to be recorded as being paid to the bank in a separate transaction. That is how the example you linked explains it: separate invoices for each entity that charges you for something. Remember, just because you post something to a bank charges expense account does not mean you have recorded the bank as the payee.

  3. This is acceptable, but does not result in bank charges being reflected in your cost of goods. Some accountants would say that is preferable. Others might disagree. There may also be local regulations governing what can be considered in cost of goods. But that’s not a procedural question.

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Thanks @Tut. Yes, I see now that I can just use the payment that I’ve imported from my bank statement, without needing a purchase invoice.

I didn’t explain myself very clearly for option 2. I was planning to record the payment to the bank with the line on the imported statement, debiting the Bank charges account:

Then, on my purchase invoice, I would do as described in the guide linked above, using a Freight-in charge and a contra charge, but instead of using a clearing account I would use the Bank charges account.

What wasn’t clear to me until I worked this test case through is that there doesn’t seem to be any option I could use instead of Freight-in in the Item column that would allow me to select the Inventory on hand account. I see now that this is how (I presume) Manager knows to distribute those costs across the inventory items in the invoice, and so it does what I need it to do here.

Looking at the inventory items everything seems to have worked, with the costs appropriately distributed:

Does this look like a good method?

I think in essence all I am doing differently from the guide linked above is to use the Freight-in item for a bank charge, not freight costs, and to use the Bank charges account instead of a custom clearing account.

My accountant confirmed that in principle there is nothing wrong with costing in bank charges to the purchase price of inventory.