Inventory
Hi When determining the markup price per unit, I will take into account the total cost per unit (i.e. unit cost + freight cost + local charges) 1. On MYOB, when entering a purchase (item), th...
Forum Discussion
Hi Mike_James and CloverQ
Thanks for the info.
Is this a common practice in Australia to include the landed cost in the inventory when preparing financial report?
I understand this practice is good for calculating the business margin but can be done manually.
If we have a project based for 5 years, and allocate all the expenses and income to the "Job", I think the results will be same whether or not landed cost is allocated in inventory. Now , how accurate is the Job reporting??
With exeption of preparing financial report for a particular year, if land cost is in the inventory and there's a lot of inventory, the margin will be greater.
Correct if Im wrong
Thanks
Thierry
Hi Thierry888 , in accordance with generally accepted accounting principles and standard accounting practice, inventories should be valued at the cost of bringing them to their current state, therefore landed costs included. Your purchase of inventory for a long-term job may be upfront, and consumed over the life of the job, so if the landed costs were expensed in year 1, the profit for that year would be under-stated.
Job reporting is as accurate as the principles/processes behind it.
Hi Mike_James
Thanks for your help.
Currently, the landed cost It was under "service" , allocated to appropriate charge account;. and then linked to a "Job"
I am going to set the landed cost as item.
Regarding landed cost for Item, should I tick :
1. I buy this item -- under what account
2. I sell this item -- under what account
3. I inventory this item -- under what account
Thanks
Thierry
Hi Mike_James
Further to below, landed costs will be itemised to inventory, how to know the value of landed cost as it is also separately displayed on the financial accounts
Thanks
Thierry
Hi Thierry888 , are you following the set-up i the link that I posted? If so then you will have the following:
- your items as usual
- your inward freight cost accounts in the GL as usual
- a new account next to these called "transfer costs to inventory" or similar
- a new item called Landed costs, I buy this item is ticked, and the new account above selected
Then for a typical purchase:
- work out the full cost of the item/s (separately, eg on paper, excel, whatever), with landed costs apportioned by value or your preferred method
- enter the inventory at the fully-costed unit price
- add a line at the end, with a quantity of -1, and the price being the sum of all costs added in your costing
This purchase should then total to the amount you owe the supplier. Stock is then correctly valued, and gross margins are accurate.
The freight accounts continue to accumulate the inwards costs, and the new account shows how much of that has been taken up in inventory.