Quote:
Originally Posted by
nztx
Good point Ferg - but for in transit to be starring in closing inventory then the debit
for prepaid costs must be included in COGS figures as well
How does this change the view of things ?
Reduce COGS as well as adjust the Opening & Closing inventories along the way ?
or do the two contra off ?
The journal entry for inventory in transit is:Debit Inventory in Transit
. Credit Overseas Accounts Payable (notice the high overseas payables balance, which is a strategic shift in procurement policies)
Some of those creditors may have been paid resulting in an additional:Debit Overseas Accounts Payable
. Credit Cash
None of this impacts COGS. To calculate inventory days and/or stock turn reduce the opening and closing balances by the value of inventory in transit, but do not change your COGS numbers.