Raw Materials & Other Consumables (Store in Transit):
Raw Materials & Other Consumables (Store in Transit) are inventory items that are currently being transported and have not yet been received by the company. These items are recorded on the balance sheet under the inventory section but are often specifically categorized to reflect their status in transit.
Reporting Raw Materials & Other Consumables (Store in Transit) on the Balance Sheet:
These items are part of the Inventory category in the Current Assets section. They represent goods that the company has purchased but are still a route to the company’s facilities.
Example Balance Sheet Presentation
ABC Corporation Balance Sheet (Partial)
ASSETS
Current Assets:
Cash and Cash Equivalents $50,000
Accounts Receivable $75,000
Inventory:
Raw Materials $30,000
Work in Process $20,000
Finished Goods $40,000
Raw Materials & Other Consumables
(Store in Transit) $15,000
Prepaid Expenses $10,000
Total Current Assets $240,000
Accounting for Raw Materials & Other Consumables (Store in Transit):
Proper accounting for these items ensures that the inventory is accurately reflected on the balance sheet, even if the goods have not yet physically arrived at the company's premises.
Journal Entries
Recording Purchase of Raw Materials in Transit
When raw materials are purchased and are in transit, the company should recognize the inventory and a corresponding liability if the terms are FOB shipping point (meaning the buyer takes ownership when the goods are shipped).
Example:01.ABC Corporation purchases $15,000 worth of raw materials that are in transit.
Date Account Debit Credit
2024-05-21
Raw Materials & Other Consumables
(Store in Transit) $15,000
Accounts Payable $15,000
Receiving the Raw Materials When the raw materials are received, the company can transfer the amount from "Store in Transit" to the regular raw materials inventory account.
Example:02. ABC Corporation receives the $15,000 worth of raw materials that were in transit.
Journal Entry:
Date Account Debit Credit
2024-06-01
Raw Materials $15,000
Raw Materials & Other Consumables
(Store in Transit) $15,000
Conclusion:
Raw Materials & Other Consumables (Store in Transit) are an important component of a company’s inventory that need to be accurately reflected on the balance sheet. Proper accounting and management of these items ensure accurate financial reporting, efficient supply chain management, and effective financial planning. By keeping precise records and understanding the terms and status of inventory in transit, a company can better manage its resources and maintain operational efficiency.