Hi I will try to answer your questions
You can get a quick overview of the Landed Cost Voucher and how to use it, view this video.
Freight cost can be setup under Direct Costs and type needs to be Expenses Included in Valuation
This is how LCV works
-
When you create a Purchase Receipt or Purchase Invoice for the Original Goods, let us say 1000 nos of Item at $200/nos which is $200,000 for 1000 nos of Item 1, the Stock is Debited by $200,000 and Supplier is credited by the same amount. ( I am ignoring the temporary account of Stock Received but not billed for this discussion). At this point the valuation of each product is $200
-
When you add the Freight Costs incurred to procure these goods, either through Purchase Tax and Charges Table (type = Total and Valuation
) or through a LCV, the Freight Cost is added to Item’s valuation.
Let us assume that the Freight cost incurred to procure 1000 nos is $8000, i.e $8/nos. When you add this to the Item valuation through one of the two methods described above, the Freight Charge Account (type=`Expenses Included in Valuation) is Credited and the valuation of Stock is Debited (increased).
The Entries for the Purchase now looks like this
Stock------------(200,000+8000=208,000) Dr
Creditor----------(200,000) Cr
Freight Cost------(8,000)Cr
- When you enter Purchase Invoice for the Freight Cost, assuming that the Supplier for Freight is different from the Goods Suppliers, JV looks like this
Creditor------8,000 Cr
Freight Cost–8,000 Dr
You need to enter this Purchase Invoice if the Supplier is different and want to keep track of Outstanding and Payments.
If the Freight cost is charged by the goods supplier themselves, add it in the Pruchase Tax and Charges table in the Original Invoice and make sure the type is set to Total and Valuation
. In this method the Dr and Cr to Freight cost will be posted in the original Purchase Invoice.
Now if you notice the Freight Cost Ledger is getting cancelled out at the end (8000 Dr and Cr). This means that the Freight Cost is getting transferred to the Stock Account (Item’s valuation), which is the intent of adding a Landed Cost Voucher.
Note I am not considering VAT in Purchase, assuming that it is refundable or you get some credit against it. So VAT will not be considered in Landed Cost.
The valuation of each item in above case is now $208,000/1000nos = $208/nos
- When you make a Sale of this product, the COGS will be equal to the new valuation of the Product. Let us say you sell 500 nos at $300/nos = $150,000,assume 5% VAT on sale
COGS = $208 x 500nos = $104,000
JV will look like
Debtor—$157,500 Dr
Stock----$104,000 Cr
COGS----$104,000 Dr
Sales----$150,000 Cr
VAT------$7,500 Cr
Gross Profit = Sales -COGS = $150,000-$104,000 = $46,000
The video I quoted above explains all of this.
Hope this helps.