FREIGHT COST TO BE EXPENSED OR PART OF PURCHASE

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This discussion clarifies how to account for freight costs incurred when purchasing materials. It's generally accepted that freight inward should be included as part of the purchase cost and affect inventory valuation. While it can be treated as a direct expense, accounting standards like AS-2 recommend incorporating it into the inventory cost for accurate valuation.

RAKESH

RAKESH (Querist)
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26 July 2021 FREIGHT COST INCURRED ON PURCHING OF MATERIAL IS TREATED AS EXPENSE OR TO BE INCLUDED IN THE VALUE OF PURCHASE .

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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26 July 2021 Freight payment can be treated as expenses

CA Altamush Zafar

CA Altamush Zafar (Expert)
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26 July 2021 It is to be included in the value of purchase. It is part of inventory cost.

CMA Poornima Madhava

CMA Poornima Madhava (Expert)
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26 July 2021 It can be included in the cost of purchase.

RAKESH

RAKESH (Querist)
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01 August 2021 @Seetha raman Sir .If the freight is treated as expense .Is this a direct expense or indirect exp. And I need to keep the inventory value affected in tally .pls

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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01 August 2021 Keep it as direct expenses.

RAKESH

RAKESH (Querist)
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01 August 2021 In tally it is asking that inventory value should be affected - yes /No.

CMA Poornima Madhava

CMA Poornima Madhava (Expert)
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01 August 2021 If you want to treat it as a part of inventory cost, select Yes. If you want to disclose it as a separate expense, select no.

CA Altamush Zafar

CA Altamush Zafar (Expert)
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01 August 2021 As per AS-2 Inventory valuation freight inward is a part of Purchase Cost.
Do accordingly.