Goods In Transit: Movement And Balance

When merchandise purchases are made in the same place where it is located, its value is charged directly to the General Merchandise, Purchases or Warehouse accounts, according to the procedure to be followed, because at the time of carrying out the operation, the acquisition price and the value of the expenses incurred by the merchandise are immediately known until their arrival to the warehouse.

On the other hand, when merchandise purchases are made in other places at the buyer's risk and expense, there is the problem of not immediately knowing their cost. total, but until they have been received and the value of all the expenses incurred is added to their value, from the point of shipment to that of their destination, that is, the warehouse of the deal.

When this happens, upon receipt of the invoice and the documents that cover a certain shipment of goods, their value should not be charged to the accounts of General merchandise, Purchases or Warehouse, because its total cost is not known, but in a special account that receives the name of Merchandise in transit or on the way.

Movement and balance of the Goods in transit account. In the Merchandise in transit account, purchases of merchandise made in other places that come in way at the buyer's risk and expense and, in addition, all the expenses that they originate, from the point of shipment to that of their destination.

SEE EXAMPLE 1

The balance of this account is debit and represents the value of the goods that are still on the way. It is presented in the Balance Sheet in the Current Assets group.

In order to see more clearly the movement of the previous account, a practical example related to Goods in transit is presented below.

1. July 1st. Invoice and documents are received that protect the goods sent by our supplier.
Mexicana, S. A., from Guadalajara, Jal., At our expense and risk, amounting to $ 1,500,000.00, to pay commercial cash. 2. July 4th. Invoice 648526 from Ferrocarriles Nacionales, S. A., for freight of the goods sent by The
Mexicana, S. A., whose value of $ 25,000.00 was paid by check.
3. July 5th. Invoice 02612 from Transportes Infante, for carriage of the goods sent by La Mexicana,
S. A., whose value amounting to $ 10,000.00 was paid by check.
4. July 5th. Today the goods sent by La Mexicana, S. TO. ' '
5. July 30. To settle our account to La Mexicana, S. A., a money order was purchased from Banco del País, S. A., by
$ 1,725,000.00, on which he charged us a commission of $ 40.00 plus 15% value added tax; both the value of the draft, the commission and the tax were paid by check with a charge to the same bank.

SEE EXAMPLE 2

When the merchandise arrives at the warehouse, its total cost must be determined in order to transfer it to the General Merchandise, Purchases or Warehouse 391 account; in our case, the total cost was formed like this:

Invoice from La Mexicana, S. TO. $ 1,500,000.00 Invoice from Ferrocarriles Nacionales, S. TO. 25 000.00
Infante Transport Invoice 10 000.00
Total cost $ 1,535,000.00

The entry to transfer the total cost to the General Merchandise, Purchases or Warehouse account is 392: 1 as follows:

SEE EXAMPLE 3

SEE EXAMPLE 4