Easy question.... sorry if it has been asked before
When a product is sold on a website, with a separate specific charge for delivery, is the delivery cost included in sales revenue or offset against the delivery cost incurred?
My belief is that where there is a separate identifiable recharge of the delivery expense, then it is not sales revenue.
Is there anything in FRS102 that specifically addresses this? (I have read section 23 & cannot see anything).
Replies (6)
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My belief is that where there is a separate identifiable recharge of the delivery expense, then it is not sales revenue.
But is it a "recharge of the delivery expense" though? What I always see as a retail customer is usually a flat rate charge which almost certainly doesn't exactly match the charges that the retailer incurs.
No idea what FRS102 says but, to me, it's all turnover.
Does a retailer offering "free" P&P deduct their delivery charges from turnover?
Always shudder when I see someone wanting to "net off" part of the turnover to an expense. Usually always ends up in being wrong.
Agree with David's point that it's not a recharge, just a charge to customers.
For management reporting, I'd show income and expense together (but not netted off) to show the extent to which income covers costs.
And following that, on a statutory basis, I'd report turnover that matches management accounts, so your delivery charges are either a credit within cost of sales or as other operating income. I slightly favour the latter.
Netting off client disbursements in the fashion you've described would be all well and good; but these are your own delivery expenses you're describing.
Even where itemised, delivery expenses are liable to output VAT (or potentially so, in so far as the VAT treatment would follow the VAT treatment of the goods being transported). And it wouldn't make much sense to CR any such delivery charge (upon which output VAT had been charged) to a P&L expense account.
Oooer, perhaps I've just made an argument for MTD.
I vote sales.
You might have a case if you charged the exact cost of postage and packing to the customer but nobody can be bothered to do that.
Is there anything in FRS102 that specifically addresses this? (I have read section 23 & cannot see anything).
2.52 An entity shall not offset assets and liabilities, or income and expenses, unless required or permitted by an FRS.
As nowhere says you can offset such income against expenses, you can't.