accounting treatment for demurrage chargesaccounting treatment for demurrage charges

Replied 02 June 2011, all exps incured up to the premises/godwn/works, dr to related expenditure a/c in case of raw material to to inward freight a/c, in the case of fiexd assets dr to fixed asstets a/c or other case in concernd a/c, prerna Such charges may include: Amortization of deferred charges; taxes other than income; debt discount and expense; nonshipping operations expense; organization and preoperating expense and other miscellaneous deferred charges; as well as doubtful notes and accounts receivable. (ii) Sufficient records shall be maintained to fully describe and account for all aspects of each item reported in this account, and when a firm commitment is made to dispose of an operating business segment, a provision for anticipated gain or loss to be realized in the subsequent period from disposal of assets and winding down of operations of the discontinued segment shall be taken into income in the year the contractor makes the decision. A custom duty has to be paid to release the containers, and then they are taken to the warehouse where the goods are unloaded/loaded. Steps to reduce stock of slow moving and non-moving items of stores: 1. uuid:ff0e6f4e-fee4-467a-bfa5-8cefbe95fa6c Therefore, under this method, the prices of the last batch (lot) are used for pricing the issues, until it is exhausted. endobj Good units absorb the cost of shortage due to normal reasons. pwc:industries/transport_and_logistics It is added with the cost of purchase as it is directly attributable to procurement of material. U S Sharma This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. 2017-11-23T11:43:52.000Z (iv) If ODS is accrued at substantially different rates developed by the contractor applicable to any year in which final rates have not been agreed to, the difference between the ODS accruals based on billing rates established by MARAD and the ODS accruals based on the contractor's rates shall be disclosed in appropriate footnotes to the balance sheet and to the income statement. Replied 07 June 2011, it willbe capitalised AS 2 STATES all the exp incurred to bring the asset to current position and location is 2 b capitalised , without y=this exp CUSTOMS wil not leave the goods, kamal gupta To complicate matters further, fees are applied on a per container as well as on a per-day basis after a designated free time. <>/MediaBox[0 0 612 792]/Parent 105 0 R/Resources<>/Font<>/ProcSet[/PDF/Text]>>/Rotate 0/Tabs/S/Type/Page>> Items under this category are reviewed periodically and get the second priority. If not, they can negotiate for additional laytime with the port authority citing special cargo needs. Contact your CA for more details. (3) 650 Other Shipping Operations Revenue. Hence, the port or the shipping carrier should be over-cautious in calculating the Demurrage days. <>/MediaBox[0 0 612 792]/Parent 105 0 R/Resources<>/Font<>/ProcSet[/PDF/Text/ImageC]/XObject<>>>/Rotate 0/Tabs/S/Type/Page>> Revenue shall be accounted for to facilitate reporting the source of revenue by trade route or service area. Items under this category are strictly controlled by setting re-order level. Also, both the importer and the shipping carrier should judiciously read the Charter Contract to chalk out all the grey areas. (i) Minimising interruption in production process: Material Control system ensures that no activity, particularly production, suffers from interruption for want of materials and stores. The cost principle at FAR 31.205-15(b) states that costs incurred in connection with, or related to, the mischarging of costs on Government contracts are unallowable Sometimes, it may be reintroduced into the process as raw material. *. This Standard applies to all inventories, except: (a) [deleted] (b) financial instruments (see IAS 32 . (a) Accounts Defined. The function of ensuring that sufficient goods are retained in stock to meet all requirements without carrying unnecessarily large stocks. It is used to estimate cost and profit. It is the document prepared by the engineering or planning department. Fixation of the various stock levels and checking of actual balances in hand with these levels assist the store keeper in maintaining stocks within limits and in initiating purchase requisitions for correct quantity at the appropriate time. It is a document asking Store-keeper to issue materials to the consuming department. Click here to Login / Register, 5 Days Practical Workshop on ITR U (Updated Return), India's largest network for finance professionals, As per my view it should not be capitalised but I want to know a reference. 1.1 Capitalization of costs chapter overview. (ii) The products should be delivered to customers at the time only when they want. Start now! It is prepared by the production or other consuming department. By calculating the stock holding of various items in terms of numbers of days/months of consumption as a percentage. For the FOB shipping point, the sale occurs at the shipping point, and the buyer is responsible for the freight costs to the destination. If the amount of refund on returning the container is less than the amount paid, then, only the short fall is added with the cost of purchase. In this case, the seller will not book any delivery expense in its books. <>/MediaBox[0 0 612 792]/Parent 105 0 R/Resources<>/Font<>/ProcSet[/PDF/Text]>>/Rotate 0/Tabs/S/Type/Page>> These charges are mentioned in the quotation, if not ask for them. Find the route with a summary of potential impact, differences with previous GAAPs and examples of industry specific areas like freight services, transportation costs, and many more. (i) Cash discount: Cash discount is not deducted from the purchase price. Time for which demurrage will be charged: 10 days. HW[6~S!1#.Hsi,lCX(. Stock verification is done at appropriate interval of time without prior notice. The loss arising out of obsolete materials is an abnormal loss and it does not form part of the cost of manufacture. Stock discrepancies are likely to be brought to the notice and corrected much earlier than under the annual stock-taking system. SA , While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any. when it is a spare part or component of a machinery used in manufacture and that machinery become obsolete. Account. 3. 5 Days Practical Workshop on ITR U (Updated Return), India's largest network for finance professionals. On the buyers side, the transaction is classified as a freight-in and includes all costs from the shipping point to the destination. No. (ii) Subaccounts shall be grouped by classifications such as: Vessels; terminals; cargo equipment; office furniture and fixtures; and nonshipping assets. Some of the factors that affect freight expense include: Some shipping companies include a fuel cost component in the freight cost pricing model. revenue Demurrage refers to the damages that are payable to the owner of a ship, to make up for lost time when his ship is not returned to service on the date it was supposed to be. The goods transfer from the seller to the buyer after the goods have been placed on the delivery truck or ship. (b) Purpose of Income and Expense Accounts. 2. (b) The use of the method during the period of rising prices does not reflect undue high profit in the income statement. Physical stocks can be counted and book balances can be adjusted as and when desired without waiting for the entire stock-taking to be done. endobj The price that is charged by a carrier for sending out cargo from the source location to the destination location. Email me at this address if my answer is selected or commented on: Email me if my answer is selected or commented on, negative international critique with respect to IAS2, positive and negative critique with respect to the standard of ias 2. 134 0 obj Detention charges/fines imposed for non-compliance of rule or law by any statutory authority. 10 0 obj Do you know how to get from IAS 18 to IFRS 15? It is suitable in times of falling price since the material cost charged to production will be high while the replacement cost of materials will be low. Based on the demand, production process starts and the requirement for raw materials is sent to the purchase department for purchase. Demurrage charged on the shipment may vary on the type of container being used, i.e., dry container, refrigerated container, a chassis, or any other equipment that the shipping line owns or leases.For conventional shipping lines/port authorities, the number of free days allowed ranges somewhere between three to seven, after which Demurrage is levied. Do you know how to get from IAS 18 to IFRS 15? pwc:services/audit_and_assurance/ifrs_reporting (f) Making corrective entries wherever required and Those fees currently range from $60 to $150 per day, according to shippers and their trade associations. endobj Post the release of consignment, from the yard and taken to the warehouse. 6.3 Accounting for VAT on related transport services. Consumption Average Re-order Period), = ROL + ROQ (Min. P1)kO fQbI98l PPt{2o%h"wSU.+m%+~/f>X?,H2z#9|EbzstO8$x~^=cg48fP14 NXpG The movement of stores items can be watched more closely by the stores auditor so that chances of obsolescence buying are reduced. It is useful in arriving historical cost only. The objective of inventory control is to make a balance between sufficient stock and over-stock. WebThe objective of this Standard is to prescribe the accounting treatment for inventories. (ii) B Category of items comprises of about 20% of the total items of material handled by stores. 2017-08-10T12:27:18.000-04:00 The standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. 28 0 obj Demurrage - The penalty charged for exceeding the free days allowed for storage of loaded containers at the yard is called Demurrage. Deducted from the source location to the buyer after the goods have been placed the... Cash discount is not deducted from the source location to the consuming.... Out all the grey areas controlled by setting re-order level also, both the importer and shipping! 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