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Inbound Freight Costs

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To start, we would like to include the inbound freight cost in our inventory value. We have looked into adding a pricing condition on the Info Record for the freight, but it books the offset against a clearing account. Our freight processing is handled by a 3rd party, so it is not feasible for us to use the clearing account.

 

Ideally, the accounting treatment would work in the following manner:

 

DR     Inventory                    105

CR         GR/IR (AP)                         100

CR         Standard Freight Expense    5

 

 

Actual Freight Costs are not linked to the individual purchases, so they would be independent of this:

 

DR     Actual Freight Expense     5

CR          Accounts Payable               5

 

Ideally, the "Actual Freight Expense" and the "Standard Freight Expense" would both equal the same amount, but in the event that they are not we consider the difference is a Variance on the P&L.

 

 

We would consider setting the freight cost on an individual material level, a rate for each vendor, or even a rate (% material cost) for the plant as a whole.


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