Accounting for Inventory at the docks

Vickyb

Hi

Hopefully somebody can help!

I have just started a new role and we currently have stock which is held at the docks for us by our supplier, we pay for these goods up front and receipt them in to our stock when received on the premises and the system we use calculates the unmatched invoice accrual.

Our buyer wants us to use the system facility that will allow us to receipt the goods in full so that users can see the stock levels we have at the docks, but if we do this the system will include this stock in the month end stock valuation.

I am unsure on the account practice of accounting for goods that are not actually in our possession? Can we account for these if we have paid for them upfront but are just held off site?

We do have a storage charge in our contract with the supplier but they have never acted on it as we are one of their biggest customers.

Any advise would be appreciated

Thanks :001_smile:

PGM

Vickyb wrote: »

Hi

we pay for these goods up front and receipt them in to our stock when received on the premises

I am unsure on the account practice of accounting for goods that are not actually in our possession?

If you pay for 10k of goods, but its at the docks; how do you currently account for that 10k?

Because you say you're not recording stock until it's received? So there'd be a 10k hole in your accounts if you're not recording it some way, either as stock not received or prepaying the cost.

Maybe you should be recording it at the docks, another point though, I'd check who's liability it is if any of the stock at the docks was damaged a stolen, and if it is yours, does your insurance cover it.

Vickyb

We currectly account for it in the stock accrual of unmatched invoices as the system matches purchase orders to invoices so the outstanding items not received on any order will be included with this.

oakley

"We currectly account for it in the stock accrual of unmatched invoices as the system matches purchase orders to invoices so the outstanding items not received on any order will be included with this." - This accrual type (GRNI) usually only accrues received goods, these stocks at the docks would not be received in your system so would have no accrual (GRNI)

I think PGM is stating that if you have paid in advance for these you will have a prepayment (Cr Cash Dr Prepayments) so there is some accounting at month end.

I am also in agreement with PGM with regards to who has liabilty for the stock when at the docks, if terms of supply are EXW then the liabailty will be your companies (but not sure this would change the way I would account for it much, although auditors may disagree)

I believe the correct accounting would be to include these stocks in transit in your accounts at month end (Cr GRNI Dr Stock) this could then show in your system stock holiding provided you had this info booked in time, otherwise just an accounting adjustment (you may want to watch the values as the prepayment/GRNI may also need to be netted)

It is also perfectly acceptable to have a stock value in your accounts even though you do not have the stock on site, eg you may have consignment stock at a customer who comsumes it as needed and produces a weekly/monthly usage report to be billed against.

Even though the Stock at the Docks would show on your system, it would be important to know if this would be available for sale and dispatch to a customer resaonably quickly (unless this is not important in your organisation)

Oakley