In the Manager, there is option to purchase goods and make goods receipt to manage the inventory. I’m nonplussed how to manage the inventory inputs for the goods imported under an L/C. We have below scenario:
For the imported items, we have created inventory items. Then, we opened an account with L/C number as receivable under ASSET. In that account, we have made proper entries of all expenses like payment to bank against L/C value, Custom Duties, Transportation, Forwarder exp, etc.Now, the goods were cleared and in our warehouse. I would like to know how to offset the L/C expenses against input of the imported items in the inventory with corresponding value of each.
I am not sure if we are doing the right way and how to put these items in the inventory. It’s clear that goods receipt is not the proper way to rceive the imported items because then there remains the question how to offset the imported cost with the corresponding value of each item. May be someone can help to guide us for a possible solution or is there any other method to deal with the imported items to manage them as inventory items?
@Tut First, reply to your question, what I am referring to as L/C number? L/C here means Letter of Credit and “number” is the number (or reference) allotted by the bank for the “Letter of Credit”. We open Letter of Credit (L/C) to buy goods from supplier usually located in a different country. When a L/C is opened, we open a chart of Account with L/C number as Receivable under Assets. Here, we post all the expenses incurred in relation with this account like the goods value, freight, L/C opening cost, Customs duty, Forwarder charges, etc. For each L/C, we open a different account referenced with L/C number as receivable under Assets, as aforesaid.
After the goods arrive in our warehouse, we don’t have clue how to receive those goods under “Goods Receipt”.
As regards set up of inventory, to our best belief, we have done it correctly. We are already using the Inventory items successfully for goods receipt, delivery note, production, sale/purchase. We guess, each day, we are increasingly becoming conversant with the inventory and how its work and “manager” as we go along to use the unbelievable Manager. However, we just can’t find a method to make “goods receipt” for inventory items not bought from a supplier but imported under an account created as receivable account under ASSETS.
Could be, you may suggest, to open the L/C account as supplier instead of receivable account. Treating the expenses in that account as Advance Payment. Then, the imported goods can be received using “Goods Receipt” with corresponding value equated to offset the total import cost so as to make the total balance in that account as “ZERO” (or adjusted)
@sonicgroup, your situation is too complex for discussion in this forum. Letters of credit take many different forms around the world. In many situations, the issuance of a letter of credit is not entered as an accounting transaction at all. It can be a guarantee of funds availability, a loan accompanied by a deposit to a dedicated bank account, or other things. You need to consult a local accountant and follow her advice on how to handle it in your chart of accounts.
Speaking in general terms, it is usually a bad idea to add an account to your chart of accounts for a single project, shipment, loan, or anything else. You will be stuck with that account on your balance sheet forever, because Manager will not let you delete an account that has had transactions posted to it.
You might investigate the use of special accounts: Manager Guides.
You might not want to use them at all. Goods receipts are optional. If you decide to use them, they must be in conjunction with either purchase invoices or payments. They may not work at all if you are trying to use them in conjunction with some scheme you dreamed up on your own. That’s why I suggest speaking with a local accountant. Manager’s functions are fairly standard accounting operations.
If you don’t use goods receipts, inventory is presumed to be in hand as soon as the purchase is entered. If you do use them, you must create a goods receipt before Manager considers it to be on hand. See Manager Guides.