Regards,

This would have to happen on Purchase Orders so that stock gets the landed cost added. Purchase Orders are created as usual, but as landed costs (shipping, VAT, etc.) are incurred, the following mechanism connects them to the PO.

The Landed Costs for a PO are displayed in a popup window (similar to the the window that opens when clicking on an 'Order' link in the 'Customer Transactions' window). This window will have multiple lines to display each individual Landed Cost, 1 per line.

A “show Landed Costs” button will be added to the PO screen. This opens the Landed Costs popup window described above. An “Add Landed Cost Entry” button would be enabled. Landed Cost Entries would be special line items to enter landed costs information. There can be more than 1 “Landed Cost” entries, to address the needs specified by psonon:
“Yes, this is a concept foreign to those who have no use for it. It is far more a management tool than a "bookkeeping for tax purposes" general ledger entry. And there is far more than just shipping, there is VAT (I have businesses in China and the UK, as well as the US and VAT is a fact of life in the UK, as duty can be, also.) There are also costs such as drayage from port to warehouse and demurrage on the time the container is sitting on your property.
All of these need to calculated as costs of the particular item, not expenses down the COA, in order to tell what you are really making (and give a realistic markup / gross profit) per item. “
Landed Cost Entries would be recorded in a separate table. Each row in that table would have the following indexes:
* Landed Cost ID (a unique ID for the entry)
* PO ID (to connect the LC entry to the Purchase Order)

Each Landed Cost table row would also have the following user visible fields:
* Description (type: simple text)
* Amount (type: currency)
* Currency Type
* Date
* Type (dropdown, to select the type of allocation; quoting MaxPhotoBiker:
“However, in order to keep it very flexible, I would suggest FA offers three different options as how to calculate the cost proportion:
Based on:
a) item value (as you suggested)
b) item quantity
c) number of invoice lines (e. g.: 4 lines, then every line receives 1/4th of the landed cost)
d) weight (suggested by ctisystems)
e) manual (suggested by apmuthu)
* A “Linked Invoice” field to point to another invoice/PO, if that particular Landed Cost came from a separate invoice (there will need to be some back end code to make sure that a linked invoice doesn't end up being counted twice, once as “Cost of Goods Sold”, and once for the landed cost).

All line items on an invoice will have a Landed Costs button that opens the Landed Costs popup window.  When the popup is opened from a Line Item, the Landed Costs entries will have a check box next to them. The user can check any and all Landed Cost entries that apply to that line item. When the popup window is closed (via a “Save” button), the system will link each selected Landed Cost entry with the Line Item.

This gives a (hopefully) easy to use interface to enter multiple landed costs data per invoice, and select which line items are included in each Landed Cost.

The Landed Costs calculation would work like this (remember, I'm not a programmer) Lets say there are 10 line items (1 - 10), and 3 Landed Cost entries (a, b, and c). The calculation gets the “Landed Cost amount” and the “Allocation Type” from landed cost entry (a), then it finds all of the  line items from the invoice that have “landed cost line item (a)” enabled, and it allocates the landed cost for each line item. If “landed cost line item (a)” is allocated by number of lines, and 4 of the 10 regular line items have landed cost line item (a) enabled, then it allocates 25% of the “Landed Cost amount” to each line.
Then the calculation gets the “Landed Cost amount” and the “Allocation Type” from landed cost line item (b), then it finds all of the regular line items from the PO that have “landed cost line item (b)” enabled, and it allocates the landed cost for each line item. If “landed cost line item (b)” is allocated by weight, and 3 of the 10 regular line items have landed cost line item (b) enabled, then it sums the weight of the line items from the PO that have “landed cost line item (b)” enabled, and allocates  “Landed Cost amount” to each line based on it's percentage of the total weight.

And so on...

The programmers can figure out the calculations for the various types of Landed Costs, where the calculations get stored, and how to link the various records.

Regards.

I found a solution for me, it`s called "webERP", it makes it very easy to calculate and include the landed costs. One can create "shipments", and then include one or several Purchase Orders into this shipment. Simple, straight to the point, does what it promises.

Besides for my own purpose I´m a reseller and I now offer webERP hosting to my customers. Therefore, I have a demo installation, and if you are interested, just feel free to check it out. It´s a full version, you can try whatever you want. The login details are given on the login page:

https://www.justcorebusiness.com/demo/webERP/

Maybe this could also be "food for thought" for the FA guys. There is simply no alternative for the concept of Landed Costs, if you claim to be offering a professional accounting software.

Hi All,
I would just like to express an opinion on "landed Cost".
According to most accounting standards, incoming Inventory should be valued at "landed cost"
itemized landed cost is the correct way to handle inventory from the “GAAP” perspective. Additionally, IRS Publication 538 states that "For merchandise purchased during the year, cost means the invoice price minus appropriate discounts plus transportation or other charges incurred in acquiring the goods. It can also include other costs that have to be capitalized under the uniform capitalization rules of section 263A of the Internal Revenue Code."

"Landed Cost" is the legally correct way to account for inventory and is also the best method for management purposes.
many commercial software packages now include some way to handle this issue.

for frontaccounting, when entering a supplier / service provider invoice, or making a payment by direct journal entry It should be possible to apportion it on a line by line basis between an expense account (for non "landed costs" invoice Items and a "cost of goods sold" Suspense account until the goods arrive.
On receipt of the goods received note, the balance of that suspense account is allocated according to the preferred method (weight, volume, quantity etc.) to each line of goods on the GRN.
Dimensions would also be a good way to keep track of all items related to a particular order for audit purposes.

Finally!

As the guy who started the thread, there are a lot of apples being mixed with the oranges in this thread.

Landed cost is somehow getting mixed with Inventory Valuation. There are basically 3 methods of inventory valuation, First In - First Out (FIFO), Last In - First Out (LIFO) and Replacement Cost. As mentioned above, these are recognized by the IRS, and you can only change from on to another once every, I think, 5 or 7 years, in order to stop people from gaming the system during times of steep price changes.

Landed cost is well stated above, although some do allocate shipping based on weight, rather than a flat percentage across the invoice. memory chips have hardly any weight, but high value. But their actual percentage of a load of electronics could be 50%, while their weight is 2%.

Landed cost requires keeping a PO open until all related costs are received. As stated above, unless special costs such as VAT, GST, etc. in some countries must be broken out, everything goes to COGS or Inventory Value, including inbound shipping that many incorrectly call an expense.

Earlier versions of Peachtree and the more expensive Sage and other accounting packages allow posting the inventory, so the goods show in stock, but not FINALIZING the PO until all related costs are shown. For my UK operation it can be several weeks before getting an invoice from DHL for VAT and their processing fees. I'm sure others have a similar experience.

The point I'm trying to make here is simply related to Landed Cost.

How you decide to bring that into your Inventory Valuation, as far as average cost, FIFO, LIFO, etc. is an entirely different subject. My personal choice has always been Replacement Cost, but this can show a higher bottom line at year end.

Ideally, the accounting should use an Average Cost for COGS, considering the entire history of costs for that item, but show the FIFO, LIFO, RC value in Assets. They truly are two different fruits.

We can only hope and wish that FrontAccounting will one day include this essential feature.

"Landed Cost" is the legally correct way to account for inventory and is also the best method for management purposes.
many commercial software packages now include some way to handle this issue.

for frontaccounting, when entering a supplier / service provider invoice, or making a payment by direct journal entry It should be possible to apportion it on a line by line basis between an expense account (for non "landed costs" invoice Items and a "cost of goods sold" Suspense account until the goods arrive.
On receipt of the goods received note, the balance of that suspense account is allocated according to the preferred method (weight, volume, quantity etc.) to each line of goods on the GRN.
Dimensions would also be a good way to keep track of all items related to a particular order for audit purposes.

The "N-1" approach was to alleviate the need to manually compute the balance if the total was entered and only one line had the new field blank.

What´s the business meaning behind this approach?

What proportion goes to each line?

To me it looks like that in this approach, the order of items would matter. Frankly, I don´t see the business application, but I might be wrong and I´d appreciate you could explain it a bit more detailed.

To implement what you are suggesting, for each line in the PO there should be one additional field, something like "additional costs". Then, when receiving the goods, the sum of purchase amount and additional costs would be posted. Actually, I could see both systems working hand in hand at the same time. So if some costs could be related to only one or some of all purchased products, your approach would make sense. All other costs that are related to the entire purchase order would be distributed according to the system I described above.

thank you very much for your comment, it is great to see that FA is indeed an actively developed product, with the community actually having an influence. Great stuff, thank you very much.

Regarding your questions, I´d like to throw in my two cents. As I mentioned, I am neither a programmer nor an accountant, but based on my work experience I believe I can contribute a bit here. Please allow me a few comments.

I basically agree, proportioning the costs based on item values is probably the most widely used procedure. However, in order to keep it very flexible, I would suggest FA offers three different options as how to calculate the cost proportion:

Based on:
a) item value (as you suggested)
b) item quantity
c) number of invoice lines (e. g.: 4 lines, then every line receives 1/4th of the landed cost)

From my point of view this could be very easily implemented in one and the same function, something like this:

Function CostAllocationPercentagePerInvoiceLine()

If method ="item value" then
return line_value/ total_value

else

If method ="item quantity" then
return line_quantity/ total_quantity

else

If method="invoice_lines" then
return 1/total_number_of_invoice_lines

End If
End If
End If
End Function

You are precisely describing the problem. My thought is this: The process of converting costs to "landed costs", i. e. stock value, should happen as late as possible, because this is when most information is available. Also order quantities might differ from shipped quantities, and costs should be calculated based on the real stock. That's why I would suggest to do this cost allocation just in the very moment when receiving the goods into the warehouse. I could see one of the following scenarios:

a) Simplest solution: Add landed costs as one lump sum
When receiving goods into the warehouse (i. e. receiving the Purchase Order (PO)), FA could offer one single field where the user types in the total amount of all additional costs (same currency as the PO). In this case, these costs need to be calculated externally, this would typically happen in Excel. This would be a great improvement already.
It might happen that for example the shipping company did not yet provide the invoice for this particular invoice. In this case, an estimated value could be used. All the accountant would need to do is to post any difference between estimated and real invoice amount as expense (or income). That´s not "perfect", but much better than not incorporating the costs at all. And of course, that´s perfectly legal (at least in the countries I know, but one always needs to check locally).
Next to the field with the amount there should be a pull down menu that offers the different options as how to distribute the costs (by value, quantity or item line).

b) Keeping record of the different costs
In a more elaborate version FA could offer a separate page when receiving the goods, where all details about the costs being incorporated into stock value could be stored, e. g.:

Supplier, Invoice number, Invoice date, Description (e. g. shipment, or customs), and amount

The impact on stock value would obviously be the same, but this way it would be easier later to figure out what was posted into stock value. This could be extraordinarily helpful for example when a company is being audited, or simply if somebody wants to verify later if all was done properly.

On top of this, I would even recommend allowing to choose the currency for every invoice, and store the used exchange rate in the database.

Again, that's just my personal thoughts on this topic.

Thanks again for considering all this.

we are all aware that this is a free open source project, so everything we get is a nice gift, but if we could express some wishes i also would like a more efficient way to handle the Landing Costs

FrontAccounting is pretty much community driven application, so topics like that have quite big influence on FA development .

I think the most apprioprate way to distribute landed costs is assigning them in proportion to item values in invoice, but another problem is where and how this mechanism  should be implemented in FA? Some costs which should be handled as landed costs (e.g. shipment) are often documented on separate invoice issued by another company. How you would see the mechanism which would allow landing costs distribution in this case?

Janusz