Landed Cost Expense Distribution

A landed cost is the total price of a product once it has arrived at the buyer's door.


The landed cost includes:

  • the original price of the product
  • all transportation fees
  • customs
  • duties
  • tax
  • insurance
  • currency conversion
  • crating
  • handling
  • payment fees and any other costs outside our direct inventory purchase cost.


These costs are typically applied by handling or fulfilment services under their own invoice, which then needs to be allocated to the correct purchase invoices. Expenses can also be allocated in this way to Assemblies and Stock Transfers.


Landed Costs can also be allocated via the Additional Costs section of a Purchase order or a Manual Journal. 


NOTE: Journal entries for Cost of Goods Sold, including purchase costs and landed costs, are generated upon the authorisation of the sale ship tab. The effective date of the COGS journal will be the ship authorisation date.

Upon the authorisation of the sale shipping tab, a single COGS journal will be created from the PO invoice, Manual Journal tab and any landed costs allocated from separate invoices.

However, if landed costs were added after the item was shipped, then a second COGS journal will be added later. The effective date will be the landed cost authorisation.


Prerequisites


Table of Contents


Allocate Landed Costs to a Purchase using Additional Costs

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DEAR allows you to choose whether or not you allocate additional costs to a product's COGS during a purchase. These costs will increase the stock on hand value of your inventory. 


To allocate additional costs to products on a purchase order, make sure that the account specified for the additional cost is the same as the inventory account for the products. 


NOTE: The landed cost will be distributed based on the total amount of each product included in the PO and will not be based on the weight or unit of the product. The landed cost is not divided equally, but allocated proportionally, based on each invoice line cost to the total invoice amount.

To allocate costs based on product Quantity, Weight, Volume, or choose manual allocation of costs, see Allocate Landed Costs to a Purchase using a Manual Journal.



To exclude additional costs from a product's cost, simply set the account for those lines to an expense account that is separate from the account used for the products. 



Allocate Landed Costs to a Purchase using a Manual Journal

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Manual journals can be used to allocate expenses to products during Purchases. You can find the Manual Journals tab on the purchase screen. Allocated expenses will increase the stock on hand value of your inventory. To capitalise a manual journal expense, the debit account should be set to the inventory account.


In the Type field, you can select from the dropdown menu how the manual journal expense will be distributed among the purchase order products. The available options are:

  • Cost: The landed cost will be allocated proportionally based on each invoice line cost.
  • Quantity: The landed cost will be allocated proportionally based on the total quantity of products in the purchase order. 
  • Weight: The landed cost will be allocated proportionally based on the weight of the products in the purchase order. Ensure product weight and dimensions are properly configured for all products before selecting this option. 
  • Volume: The landed cost will be allocated proportionally based on the volume of the products in the purchase order. Ensure product weight and dimensions are properly configured for all products before selecting this option. 
  • Manually: Allows landed costs to be manually added to each line as the user requires. See below for more details.


If Type: Manual is selected, you will see the option to View more. Save the journal and click View more to display the purchase order invoice lines. 


Allocate the manual journal amount to the invoice lines as required. Authorise the manual journal to finish. 




Allocate Landed Costs to a Purchase from a separate invoice

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Costs for a purchase are often applied by handling or fulfilment services under their own invoice, rather than as an additional cost at the time of purchase. These costs can be allocated to a purchase as shown below. 


To allocate landed costs to an invoice:

  1. Navigate to Purchases → New → Simple Purchase. (NOTE: Service Purchase cannot be used to allocate landed costs).
  2. Select Blind Receipt in the document header. 
  3. Enter the landed cost invoice details.
  4. Enter the costs in the Additional Costs panel. In this case, the costs include insurance of $150 and shipping of $350.
  5.  Click Authorise.
  6. Click the Expenses button which has now appeared.
  7. Select an expense to distribute.
  8. Click the +Allocation button and select the purchase invoice you want to distribute these expenses to. You can also choose to distribute expenses to stock transfers, assemblies and production runs. You can choose a single task or multiple tasks. You can either:
    • manually type in the cost you want to allocate to each invoice
    • or click Auto-allocate to have the system do it for you. Allocated costs are calculated proportionally based on the invoice cost.
  9. Save.

NOTE: The landed cost will be distributed based on the total amount of each product included in the PO and will not be based on the weight or unit of the product. The landed cost is not divided equally, but allocated proportionally, based on each invoice line cost to the total invoice amount. A planned DEAR update will expand the available options for cost distribution. 


We can now see that links to the invoices have been created. Click the link to go to the relevant purchase order invoice.
The allocated expenses can be viewed by clicking the Manual Journals tab of the linked documents.

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