Hi. I have been trying to find a way to allocate my demurrage expense to a specific product. I need to keep record of whom I paid and increase the inventory cost at the same time. How should I do that. Please help.
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You can’t show both increased cost of product and expenses under the chart of accounts as the ONE expense can’t be in two places.
If you increase the cost of the product, then when the product is sold, that expense is then transferred to “expenses” as part of Cost of Goods Sold
That is impossible to achieve as previously stated - you can’t have ONE expense accounted for in two separate places. You can’t credit the suppliers accounts payable once and debit the product cost once as well as debit the expense account once - otherwise one credit = two debits
To follow the logic of your point would mean, that the costs (say 100) could be add to the product cost (say 500 to become 600) as well as being shown as an expense of 100.
Therefore the P&L receives one debit for 100 when the suppliers invoice is processed and then receives a second debit for 100 when the product (500 + 100) is sold. Accounting is called double entry, not double expensing.
If however, you are referring to the process of adding Freight-In to inventory items, then yes that process has slightly changed following the updates but not to the extent that you remember correctly
Why do you think they cannot be part of inventory costs, @raJ? They are just as much part of the cost of goods as if they were paid to the manufacturer of a product you place into inventory. The cost of inventory should represent all your costs to place the items into stock ready for sale to a customer. If you manufactured products for sale, you would include raw material costs, taxes paid on materials, direct labor costs, and a proportional cost of overhead allocable to the direct labor. Without any of those things, you would not have an item to sell.
That really depends on:
Q1 - do you want them reflected in the product cost price or not,
Q2 - if yes, which of those costs are directly relevant to the product cost
Q3 - how manageable is it to track and allocate those cost.
The impact/efficiency on your internal administration system needs to be considered, no point in chasing every possible Freight-in cost if you need to employ more staff to process them. Based on the items listed - equipment rental and handling labour could be expensed as “Inventory Handling Charges”.
If your inventory has high turnover, then the need to allocate the costs becomes less significant as the timing difference between purchase and sale is minimal. Without knowing the practicalities of your business or without more specific examples it hard to comment further.
Please re-read the above responses which outline that that is impossible and as you have already stated “I understand and agree with all you said”, so why are you asking again.
That really depends on what costs should be considered as Freight-in costs of the product and which are variable costs. Freight-in costs are clearly identifiable as relating to the product and would be included in the product cost via the Freight-in feature whereas variable costs aren’t so clearly identifiable as relating to the product and therefore would be expensed.
Take note - Freight-in costs can’t be expensed as well and expensed costs can’t be Freight-in’s as well. Once you have come to terms with this - then read this guide
Then when you have “specific” examples with which you need assistance - please ask
PS: as an aside, it is noted in your balance sheet screenshot under the TEST PRINT BUTTON topic you are showing a Starting Balance Equity balance under the Equity section. That account indicates that there is a problem with your Starting Balances. - Please don’t respond to this comment in this topic.