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How to treat Goods in Transit at month end

Hi

i have two items in transit at month end and i have included them in my stock valuation at month end. As these items are abnormally high value they are making my stock figure look abnormally high.

I have posted the invoice from the vendor in the month that i am closing but invoiced the customer in the next month.

Do i make an accrual in the month i am closing for the sales invoice so that the purchase and sales are both in the correct month, but what is confusing is that the goods are still going to be shown as in transit.

Can anyone help me with this .

Thank you in advance !

KB

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14th Mar 2012 12:52

Why have you posted them as a receipt to stock?
This seems wrong. Reverse that posting and you will have the answer

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By kb
14th Mar 2012 13:12

Receipt to stock

 

Hi

i have included it as a receipt to stock as it was goods in transit at the end of the month,

So are you saying it should not be goods in transit and take the goods off the stock valuation?

Thank you for your help.

KB

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14th Mar 2012 13:13

Sorry Democratus

I have to disagree.  If the contract for the purchase means that the OP has taken title to or responsibility for the goods then they are, as he has correctly surmised, goods in transit and should appear as stock, regardless of their value.  The fact that he has not yet sold them has no bearing on the situation.

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By alattax
14th Mar 2012 13:18

Who are the goods in transit to?

You say you have accounted for the purchase invoice so they are either in transit to you or you have already received them. At this stage, having accepted the purchase invoice as due they are correctly in your stock.

I am guessing that you mean that the goods are in transit to your customer. When you sell them, evidenced by the date on the sales invoice, the items are no longer stock even if they are still in transit to your customer.

If the stock items are on consignment or approval, look to the terms of the contract.

But generally, at a period end, a purchase of items for resale will turn out to be either in stock, or sold and excluded from stock, you have to judge by the contract terms and conditions which is the correct case.

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14th Mar 2012 15:45

In Transit

I assume the goods are in transit to you - if not please ignore everything that follows.

You've posted the invoice from the vendor (supplier) in the closing month so have accepted ownership of the goods and correctly added them to your stock.

You have no further entries to make.

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14th Mar 2012 15:54

Ah! Richard and alattax

Ah! perhaps i have misunderstood the OP.

You both make valid points, I hadn't thought that the title had transferred in Richard's scenario or the alternative of it being GIT to the customer as alattax said.

 

OP has 3 scenarios, depending on the particular circumstances one of these is right.(or there's more which we haven't thought of!)

Perhaps the OP could enlighten us.

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14th Mar 2012 16:10

Are they 'Direct deliveries'

From Supplier to Customer?

In which case you should have both the Purchase and the Sale in the same month.

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By kb
16th Mar 2012 13:05

Thank you guys!

Appreciate all the replies and definately got me thinking all scenario's.

The goods were in transit to my company, we had received the invoice from the vendor and had not sold/shipped the goods to the customer in the closing month.

So going by the replies i dont need to do anything else.

Thank you again, one less confusion in my mind!!

Kay

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By kb
16th Mar 2012 14:01

oh one more question!

so everyone agrees that  in the closing month i have posted the purchase invoice for the goods in transit and the goods are in stock, so nil effect on the cost of goods,

But now is my next question , now in the next month i will have made the sale of the goods that were in transit. But no purchase invoice, as i posted it in the previous month so my profit for the month is going to be inflated for the next month?  But am i right in saying that my stock will decrease, so in effect the net gain is my correct profit for the month. Does anyone understand what i am saying?!!  :-)

 

Kay

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By alattax
16th Mar 2012 15:08

Yes, absolutely right.

When a sale is made stock will decrease which is why cut off at period end is so important.

The accounting matching concept is not to match purchases with sales, but purchases with stock in, and sales with stock out. As you say the profit is made on sale, by matching the sale price with the decrease in stock at cost, the difference being (hopefully) profit. 

 

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20th Mar 2012 14:35

Goods in Transit

This is related to Invoicing- Date of invoice is your tax date and that is the most important to remember.

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By 525252
20th Mar 2012 14:37

GIT

 oh my lord please save the accountancy profession !!!!!

basic first chapter stuff 

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20th Mar 2012 14:51

Goods in Transit

Without the basics you wil be lost in Accountancy profession and that is the main reason find it difficult in their Journal entries.

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23rd Mar 2012 09:10

give the OP a break

We have no idea what level of training this person has had and at least he/she had the good sense to ask a question. That's what the forum is for.

 

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16th Feb 2015 15:57

GIT treatment in purchase and sales

Hi friends,

Please help me to pass the accounting entries for following month end transactions:

A. Goods sold worth of $300 on 31st Dec to ABC Co. on credit for 15 days.

B. Purchase invoice worth of $200 received on 31st Dec from XYZ.

In both cases goods are in transit.

 

 

 

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