07 March 2012
you may book your purchase on the basis of bill of lading (Shipped on Borad) date which is an evidence that the overseas supplier has cleared the goods from him factory, necessary customs clearance is over and handed over the goods to the carrier for exportation to India. You can ask him to courier a set of non negotiable documents along with a copy of B/L which clearly states date of shipped on board with issued by the shipping line. If i is possible ask for a clean on board bill of loading.
28 July 2024
In accounting for international trade transactions, the timing of when to book the purchase can be influenced by several factors, including the terms of the contract, the receipt of goods, and the customs documentation. Let's analyze the situation step-by-step.
### **Understanding the Terms and Dates:**
1. **Order Date:** January 1, 2012 2. **Goods Shipped:** January 17, 2012 3. **Bill of Entry Date (Customs Document):** January 17, 2012 4. **Goods Received by X Ltd:** February 15, 2012
### **Key Accounting Principles:**
1. **Recognition of Purchase:** According to generally accepted accounting principles (GAAP) and international accounting standards (e.g., IFRS), purchases should be recognized when the risks and rewards of ownership are transferred, which is often when the goods are physically received.
2. **Customs and Documentation:** The Bill of Entry and customs clearance are significant for recognizing the purchase because they determine the legal importation and the liability for customs duties.
### **Accounting Treatment:**
1. **Date of Receipt of Goods:** Generally, purchases should be recognized when the goods are physically received. Therefore, **X Ltd should book the purchase on February 15, 2012**, which is the date when the goods are taken possession of.
2. **Recognition and Recording:** - **Purchase Entry:** Record the purchase in the books of X Ltd on February 15, 2012, as the actual date of receipt of goods. - **Customs Duties:** Customs duties and other import-related costs should be recognized as part of the cost of inventory or the purchase cost on the date when they are incurred or when the goods are cleared.
3. **Inventory and Expense:** The purchase cost, including CIF (Cost, Insurance, Freight), should be included in the inventory valuation. The inventory should be updated as of February 15, 2012.
4. **Accounting Entries:** - **On Receiving the Goods (Feb 15, 2012):** ``` Dr. Inventory (Cost + CIF) Cr. Accounts Payable (Amount Payable to Y Ltd) ```
- **When Customs Duties are Paid (if applicable):** ``` Dr. Inventory (Customs Duties, if any) Cr. Cash/Bank (Amount Paid) ```
- **At the Time of Import:** ``` Dr. Import Duty Receivable (if applicable) Cr. Customs Duty Payable (if applicable) ```
### **Summary:**
For X Ltd, the purchase should be booked on the date when the goods are physically received, which is February 15, 2012. This reflects the transfer of risks and rewards associated with the purchase. The Bill of Entry date and the shipping date are crucial for customs and regulatory purposes but do not determine the exact timing for accounting recognition of the purchase in the company's books.
CAclubindia
