What is the Bangladesh standard on Audit(BSA-300) ? Describes in details

corporate practice bd

Landed cost refers to the total cost of acquiring a product, including not only its purchase price but also additional costs incurred in getting the product to its final destination, such as transportation, customs duties, taxes, insurance, and handling fees. When it comes to accounting treatment for the landed cost of raw materials, there are specific steps to follow:

1. Initial Recognition of Raw Materials Purchase:

    Record the initial purchase of raw materials at their invoice cost. This includes the cost of the materials themselves as well as any other directly attributable costs, like import duties, customs fees, and transportation costs directly related to bringing the raw materials to the company's location.

   Debit: Raw Materials Inventory Credit: Accounts Payable or Cash

2. Landed Cost Allocation: 

   Calculate the total landed cost by summing up the invoice cost and all additional costs associated with acquiring the raw materials. This could involve transportation costs, customs duties, tariffs, insurance, and other related expenses.

3. Allocating Landed Cost to Raw Materials: 

   Allocate the total landed cost to the raw materials inventory. This helps in accurately reflecting the true cost of the inventory on hand.

   Debit: Raw Materials Inventory (increase by the allocated landed cost) Credit: Accounts Payable or Cash (decrease by the additional costs initially recorded)

4. Inventory Valuation: 

   The landed cost allocated to raw materials will influence the valuation of the inventory on the balance sheet. This valuation can be critical for financial reporting and cost of goods sold calculations.

5. Expense Recognition:

    Depending on the nature of the additional costs included in the landed cost (such as customs duties, taxes, and handling fees), you might need to recognize certain expenses in the period they were incurred. These would be recorded in appropriate expense accounts, such as "Customs Duties Expense" or "Transportation Expenses".

Remember that accounting practices can vary depending on the company's location, industry, and specific circumstances. It's always advisable to consult with a qualified accountant or financial professional to ensure that you're following the correct accounting treatment for landed costs of raw materials according to the applicable accounting standards and regulations.

Accounting treatment for Landed cost of Raw Materials

Practical Example-01

 

SL NO	Particulars	Debit	Credit
01.	LC Charge & Commission
	Transit R/C LC-296723230190	125845
	Shahjalal Islami Bank Ltd. CD-2944		125845
	To record LC Charge & commission for R/C LC-30190 dt. 18.06.2023
02.	EDF  Loan creation $215480.91@107.50 dt.24 .07.2023
	Transit R/C LC-296723230190	59351768
	EDF-141-7450, RC-LC-30190 SJIBL		59351768
	To record EDF  Loan creation $215480.91@107.50 dt.24 .07.2023 under import R/C LC- NO.296723230190
03.	Carrier for Raw Cotton Carrying Fare from Chattogram to Factory office
	Transit R/C LC-296723230190	376000
	New J.S. Carrier (Carrying)-RC-S.C.		376000
	Amount payable to M/S. New J.S Carrier for Raw Cotton Carrying Fare from Chattagram to ABC company Factory LC No.30190 dt.18.06.23( Bales Raw Cotton) 04 Container @ Tk.40,000.00
04	Clearing bill of Raw Cotton from Chattoaram port
	Transit R/C LC-296723230190	359000
	Silver Syndicate S.C		359000
05	Insurance premium for Raw Cotton LC open LC-296723230129
	Transit R/C LC-296723230190	134828
	Prime Insurance Company Limited-S.C Amount payable for insurance premium for Raw Cotton LC open LC-296723230190dt.18.06.23 Cover note No.PICL/HO/MC-1244/06/2023. Bill date 18.06.23		134828