Nominal Codes for Postage/Carriage

Discussion in 'Accounts & Finance' started by Spapro, Mar 19, 2011.

  1. Spapro

    Spapro UKBF Newcomer Free Member

    Posts: 234 Likes: 19
    Hi,

    We charge our customers carriage (where we can for offline orders) and send our goods out by either next day courier or royal mail 1st class recorded for small items.

    Which nominal codes in Sage should we be using for the following:

    1. Carriage (sales) we charge our customers ?
    2. Next Day Courier (cost) we pay for our next day courier for sending out goods we have sold ?
    3. Royal Mail Postage (cost) we pay for sending out goods we have sold ?

    Think we have got a bit confused with the above and want to get it right so carriage/postage costs are reported correctly on our profit and loss report.

    Thanks in advance.
    Posted: Mar 19, 2011 By: Spapro Member since: Nov 21, 2009
    #1
  2. talkinpeace

    talkinpeace UKBF Newcomer Free Member

    Posts: 877 Likes: 142
    4*** for income
    5*** for costs
    Posted: Mar 20, 2011 By: talkinpeace Member since: Jan 3, 2009
    #2
  3. johndon68

    johndon68 UKBF Ace Full Member - Verified Business

    Posts: 2,697 Likes: 516
    The defaults are, for carriage you charge your customers, 4905. For carriage you are charged for sending goods, 5100.

    John
    Posted: Mar 20, 2011 By: johndon68 Member since: Nov 2, 2009
    #3
  4. Spapro

    Spapro UKBF Newcomer Free Member

    Posts: 234 Likes: 19
    This is confusing me a little as this will put Carriage we are charged for sending goods (if we put it against 5100) against 'Purchase Charges' on our profit and loss report which looks like this:

    Sales
    Product Sales
    Other Sales

    Purchase
    Purchase
    Purchase Costs (inc. 5100 which will include Carriage for sending goods ?)

    = Gross Profit

    Overheads

    = Net Profit

    We were thinking the carriage for sending goods should go against 7501 ie. Postage overhead ?

    Happy to go with 5100 for Carriage for sending goods if this is where it should go but as I say above just seems odd this would put it against 'Purchase Costs' on the P&L report ?
    Last edited: Mar 20, 2011
    Posted: Mar 20, 2011 By: Spapro Member since: Nov 21, 2009
    #4
  5. Spapro

    Spapro UKBF Newcomer Free Member

    Posts: 234 Likes: 19
    Also, we pay carriage on smaller purchases with our supplier which already goes against 5100 so again this makes it seem odd we would lump Carriage on sending goods into the same nominal code 5100 ?
    Posted: Mar 20, 2011 By: Spapro Member since: Nov 21, 2009
    #5
  6. Scalloway

    Scalloway UKBF Legend Free Member

    Posts: 6,646 Likes: 1,615
    Carriage on sending goods is a cost of sale. Putting your cost in there will match it against the income from carriage recharged in 4905. You do not have to use 5100 if it is already in use for something else. Create a new code in the 5XXX range to keep carriage costs separate.

    7501 is an overhead account, not for direct costs . Use it for carriage unconnected with direct sales, eg getting a new piece of equipment delivered.
    Posted: Mar 20, 2011 By: Scalloway Member since: Jun 6, 2010
    #6
  7. David Griffiths

    David Griffiths UKBF Legend Moderator

    Posts: 10,287 Likes: 3,266
    My view is that it is a selling cost, not a cost of sales. In the context of a profit and loss account, cost of sales means the costs of purchasing or manufacturing goods that have been sold - i.e. purchases as adjusted for stock.

    Carriage inwards is a cost of sales, as it is part of the cost of getting the goods to your premises for sale. That is why code 5100 is in the same range as materials. In practice, I wouldn't even split the carriage cost from the cost of the goods and would post it all to 5000

    Carriage outwards is different and is treated as an overhead, in the same way as other selling costs such as advertising, sales salaries, commissions etc. I'd post it to something like 7501.
    Posted: Mar 21, 2011 By: David Griffiths Member since: Jun 21, 2008
    #7
  8. talkinpeace

    talkinpeace UKBF Newcomer Free Member

    Posts: 877 Likes: 142
    but carriage outwards for an internet business is an integral part of the sale - and a lot of ebay sellers quote post included prices so it is definitely not an overhead - its part of the cost of the item being sold

    post is only an overhead if it is optional to the item being sold
    if the sale cannot be made without the post, its COS
    Posted: Mar 21, 2011 By: talkinpeace Member since: Jan 3, 2009
    #8
  9. Spapro

    Spapro UKBF Newcomer Free Member

    Posts: 234 Likes: 19
    Thanks for your responses, the range of opinion I guess shows our dilemma ?

    Checked and in last years accountant produced end of year accounts this all went against 5100.

    I think we will break this out for clarity and keep incoming supplier carriage charges on 5100 and create something new on say 5105 for outgoing carriage/postage.

    This keeps 7501 for just general office postage/stamps etc.

    The outgoing carriage does feel like a cost of sale as we wouldn't make a sale/satisfy a sale without paying for outgoing carriage and if our sales increase/decrease then generally the outgoing carriage will increase/decrease pro rata (ish).
    Posted: Mar 21, 2011 By: Spapro Member since: Nov 21, 2009
    #9
  10. VIK007

    VIK007 UKBF Newcomer Free Member

    Posts: 61 Likes: 0
    Interesting thread...

    I have come across the same problem... As a online company I import so my purchases go to 5000-5005

    Then import clearance, duty etc go to purchase charges 5100-5105.

    But outbound postage has been set to 5100 as carriage so when looking at p&l my cost of sales seem weird.

    Therefore is it a good idea to move outbound carriage from purchase charges to the direct expenses section? So 6000 range near sales advertising etc?
    Posted: Nov 13, 2013 By: VIK007 Member since: Mar 3, 2008
    #10
  11. johndon68

    johndon68 UKBF Ace Full Member - Verified Business

    Posts: 2,697 Likes: 516
    What you charge your customer for the shipping would go to 4905, what you actually pay would go, as stated earlier in the thread so something like 7501.

    John
    Posted: Nov 13, 2013 By: johndon68 Member since: Nov 2, 2009
    #11
  12. VIK007

    VIK007 UKBF Newcomer Free Member

    Posts: 61 Likes: 0
    Hi,

    If we charge free postage ..(obviously postage is never actually free) so I thought it would be a direct cost..when a item sells, postage does occur therefore direct.

    So that is why I thought the 6xxx range? if a item doesn't sell I won't incur postage costs..

    Where as in the 7xxx range it will fall into overheads, which I thought were costs that occur no matter what.

    Well your thoughts?
    Posted: Nov 13, 2013 By: VIK007 Member since: Mar 3, 2008
    #12
  13. johndon68

    johndon68 UKBF Ace Full Member - Verified Business

    Posts: 2,697 Likes: 516
    As you'll have seen from the thread there are differing opinions on this - the main thing is to choose a code and then stick with it.

    John
    Posted: Nov 13, 2013 By: johndon68 Member since: Nov 2, 2009
    #13