I’ve been testing Landed Cost Vouchers and found problems in the way dollars are posted to the GL. In some cases liabilities are overstated, in others inventory is understated and I have not found a way to get around these problems so far.
I tested three scenarios, all for a $100 item, with a $10 shipping charge and a $15 third party charge. The $10 and $15 charges were posted to the “expenses included in valuation” account.
The $10 shipping charge was entered at different times during the three tests.
- added during purchase order entry
- added during purchase receipt entry
- added during purchase invoice entry
In all scenarios, the $15 third party charge was entered with a Landed Cost Voucher after purchase invoice entry. Below is the list of transactions entered for all three tests.
landed cost voucher
shippers purchase invoice
Tests 1 & 3 both overstated liabilities. Everything looked fine after the purchase invoice was submitted, but the LCV changed the $10 credit that had been posted to the “expenses included in valuation” account to the $15 LCV charge and a new credit for $10 was posted to the “inventory received not billed” account. Additionally, AP trade still showed a $110 credit, so your potential liability is now $120, when it should be $110.
When the LCV is submitted, if a new credit of $15 was posted to the “expenses included in valuation” account rather than “moving” the $10 credit to the “inventory received not billed” account, these postings would be fine.
Test 2 understated inventory. The purchase receipt looked fine, but the $10 charge added to the purchase invoice did not hit the inventory account. It showed a debit of $100, but should have been $110. The LCV posted fine and debited the $15 to inventory, so it then showed a debit of $115, but should have been $125. The delivery note credited inventory the full $125, so inventory is now short $10.
If the purchase invoice posted a $10 credit, then a $10 debit to the “expenses included in valuation” account, then posted the $10 credit the inventory account, these postings would be fine.
Is there a correct way of adding landed costs to receipts that does not result in these problems?
I apologize for the long post.