Overview

This article will explain what Landed Cost Vouchers are, how to create and use them, and their impact on stock valuation and profitability.

What do you mean by the term “Landed Cost”?

Landed Cost is the total cost incurred to bring a product to its final destination, ready for sale. It includes:

• Purchase Price: The cost of the item itself.

• Shipping Costs: Freight charges for transporting the item.

• Customs Duties: Taxes imposed by customs authorities.

• Insurance: Costs to insure the item during transit.

• Other Fees: Currency conversion fees, handling charges, etc.

For example, if you import a washing machine, the landed cost would include the purchase price, shipping fees, customs duties, and any other expenses incurred to get the item to your warehouse.

What is a Landed Cost Voucher?

A Landed Cost Voucher is a tool used to allocate additional costs (such as shipping, customs duties, and insurance) to the purchase of items. These vouchers help businesses accurately calculate the total landed cost of items and adjust their stock valuation accordingly.

Why Use Landed Cost Vouchers?

• Accurate Stock Valuation: By including additional costs in the item’s valuation, businesses can ensure that their inventory is valued correctly.

• Improved Profitability Analysis: Understanding the true cost of items helps businesses set appropriate selling prices and analyze profitability.

• Compliance: Properly accounting for customs duties and taxes ensures compliance with financial and legal requirements.

How to Create a Landed Cost Voucher

Creating a Landed Cost Voucher in iVendNext is a straightforward process. Here’s a step-by-step guide:

1. Prerequisites

Before creating a Landed Cost Voucher, ensure you have the following:

• Purchase Receipt or Purchase Invoice: This is the original document for the receipt of goods.

• Purchase Invoice for Additional Costs: This includes invoices for freight, insurance, customs duties, etc.

2. Accessing the Landed Cost Voucher Section

Navigate to Home > Stock > Tools > Landed Cost Voucher to access the Landed Cost Voucher section.

3. Creating a New Landed Cost Voucher

1. Click on the Add Landed Cost Voucher button to open the creation screen.

2. Select Receipt Document Type: Choose whether the voucher is linked to a Purchase Invoice or Purchase Receipt.

3. Select the Specific Invoice or Receipt: The supplier name and grand total will be fetched automatically.

4. Fetch Item Details: Click on the Get Items from Purchase Receipts button to fetch the item details from the selected document.

5. Distribute Charges: Choose whether to distribute charges based on quantity or amount.

• Quantity: Charges are distributed based on the quantity of items.

• Amount: Charges are distributed based on the total value of items.

6. Enter Additional Costs: In the Taxes and Charges table, enter the expense account and the amount for additional costs (e.g., freight, insurance, customs duties).

7. Save and Submit: Click Save to create the voucher. Once reviewed, click Submit to finalize it.

How Landed Cost Vouchers Impact Stock Valuation

When a Landed Cost Voucher is submitted, it updates the valuation rate of the items, which impacts the stock valuation. Here’s how it works:

1. Recalculating Valuation Rate

The system recalculates the valuation rate of the items based on the new landed cost. For example:

• If the original purchase price of an item was $100 and additional costs (shipping, customs, etc.) amount to $20, the new valuation rate will be $120.

2. Updating General Ledger Entries

If you are using Perpetual Inventory, the system will post general ledger entries to correct the stock-in-hand balance:

• Debit: The corresponding warehouse account is debited (increased) to reflect the additional costs.

• Credit: The expense account mentioned in the Taxes and Charges table is credited (decreased).

3. Adjusting Cost of Goods Sold (CoGS)

If items have already been sold, the Cost of Goods Sold (CoGS) value was booked based on the old valuation rate. The system will repost general ledger entries for all future outgoing entries of the associated items to correct the CoGS value.

Practical Example of Using Landed Cost Vouchers

Scenario: Importing Electronics

Imagine you import electronics from a supplier in another country. Here’s how you would use a Landed Cost Voucher:

1. Purchase Receipt: You receive the goods and create a Purchase Receipt for the items with a total cost of $10,000.

2. Additional Costs: Later, you receive invoices for shipping ($500), customs duties ($300), and insurance ($200).

3. Create Landed Cost Voucher: You create a Landed Cost Voucher and allocate the additional costs ($1,000) to the items.

4. Recalculate Valuation Rate: The system updates the valuation rate of the items to reflect the total landed cost of $11,000.

5. Impact on Stock Valuation: The stock value is adjusted to $11,000, ensuring accurate financial reporting and profitability analysis.

Key Benefits of Using Landed Cost Vouchers

• Accurate Cost Tracking: Landed Cost Vouchers ensure that all additional costs are tracked and allocated correctly.

• Improved Financial Reporting: By including all costs in the item’s valuation, businesses can generate more accurate financial statements.

• Better Decision-Making: Understanding the true cost of items helps businesses make informed pricing and purchasing decisions.

Important Points to Remember

• Distribute Charges Wisely: Choose whether to distribute charges based on quantity or amount, depending on what makes the most sense for your business.

• Timely Submission: Submit Landed Cost Vouchers as soon as additional costs are known to ensure accurate stock valuation.

• Impact on Profitability: Landed costs directly impact the profitability of items, so ensure all relevant costs are included.